SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-----------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Event Reported):
January 18, 2000 (January 14, 2000)
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TELIGENT, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware
(State or other jurisdiction of incorporation or organization)
000-23387 54-18665620
- ------------------------ -------------------------------------
(Commission File Number) (IRS Employer Identification No.)
8065 Leesburg Pike
Suite 400
Vienna, Virginia 22182
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code (703) 762-5100
<PAGE>
Item 1. Changes in Control of Registrant.
On June 1, 1999, Liberty Media Corporation, a Delaware corporation
("Liberty Media") and The Associated Group, Inc., a Delaware corporation
("Associated"), announced that they had entered into a definitive merger
agreement, dated as of May 28, 1999 and amended and restated as of October 28,
1999, pursuant to which the Liberty Media Group acquired Associated. The
merger occurred on January 14, 2000. Prior to the merger, Associated held all
the outstanding Series B-1 common stock of the Registrant, which in accordance
with its terms, was entitled to elect a majority of the directors of the
Registrant. As a result of the merger, the Series B-1 common stock held by
Associated was converted into a like number of shares of Class A common stock.
Alex J. Mandl, Liberty Media, Telcom-DTS Investors, L.L.C.
("Telcom"), and Microwave Services, Inc. ("MSI"), entered into a Stockholders
Agreement dated as of January 13, 2000. The Stockholders Agreement provides
that the parties will vote their shares so that the Board of Directors of the
Registrant shall consist of eight directors, of which three directors will be
nominees of Liberty Media and two directors will be nominees of Telcom. The
other three directors will be Alex J. Mandl for so long as Alex J. Mandl is
Chief Executive Officer, one director nominated by Nippon Telegraph and
Telephone Corporation ("NTT"), the holder of the Registrant's Series B-3
common stock, for so long as the holders of Series B-3 common stock are
entitled to designate a director, and one director nominated by Hicks, Muse,
Tate & Furst, its affiliates and their officers, directors, partners and
employees and their families for so long as such group holds a specified
amount of shares of Series A preferred stock or shares of common stock issued
upon conversion thereof. In the event that Alex J. Mandl is no longer a
director, NTT is no longer entitled to designate a director or the HMTF
Holders are no longer entitled to designate a director, the replacement for
such director will be an Additional Designee (as defined in the Stockholders
Agreement) not affiliated with any of the parties to the Stockholders
Agreement or their respective affiliates who is mutually acceptable to each of
the directors designated by MSI and Telcom and one other director. The
Stockholders Agreement terminates on the earlier of the following: (i) the
consummation of a merger transaction in which all of the outstanding shares of
Class A common stock of the Registrant are acquired by any party, (ii)
September 30, 2001 and (iii) September 30, 2000 (in the case of a written
agreement between MSI and Telcom prior to such date, providing that the
Stockholders Agreement shall be terminated as of September 30, 2000).
The following persons are currently directors of the Registrant:
Robert R. Bennett, David J. Berkman, Thomas O. Hicks, Gary S. Howard, Alex J.
Mandl, Tetsuro Mikami, Dr. Rajendra Singh, and Neera Singh.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Exhibits
10.1 Stockholders Agreement, dated as of January 13, 2000.
10.2 Stock Purchase Agreement, dated as of November 4, 1999,
between the Issuer and the Purchasers (as defined in the Stock
Purchase Agreement) named on Schedule I thereto, relating to
the purchase and sale of 7-3/4% Series A Convertible Preferred
Stock of Teligent, Inc.
10.3 Registration Rights Agreement, dated as of November 4,
1999, between the Issuer and each of the Initial Holders (as
defined in the Registration Rights Agreement).
10.4 Certificate of Designation of the Powers, Preferences and
Relative, Participating, Optional and Other Special Rights of
7-3/4% Cumulative Convertible Preferred Stock and
Qualifications, Limitations and Restrictions Thereof.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TELIGENT, INC.
Dated: January 18, 2000 By: /s/ Abraham L. Morris
----------------------------
Name: Abraham L. Morris
Title: Senior Vice President,
Chief Financial Officer, and
Treasurer
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT, dated as of January 13,
2000 (this "Stockholders Agreement"), by and among Alex J.
Mandl ("Mr. Mandl"), Liberty Media Corporation, a Delaware
corporation ("Liberty Media") (solely for purposes of Section
2(b)), Telcom-DTS Investors, L.L.C., a Delaware limited
liability company ("Telcom") and, as of the Effective Time,
as defined below, Microwave Services, Inc., a Delaware
corporation ("MSI").
WHEREAS, Teligent, Inc., a Delaware corporation
(the "Company"), Telcom, the members of Telcom, Digital
Services Corporation, a Virginia corporation ("DSC"), MSI,
and the Associated Group, Inc., a Delaware corporation
("AGI"), are parties to an agreement (the "Registration
Rights Agreement") dated as of September 29, 1997, providing
for certain rights and obligations of Telcom, DSC, MSI and
AGI relating to their ownership interests in the Company;
WHEREAS, on June 1, 1999, Liberty Media and AGI
announced that they had signed a definitive merger Agreement,
dated as of May 28, 1999 (the "Merger Agreement"), pursuant
to which, among other things, AGI will be acquired in a
stock-for-stock merger with a subsidiary of AT&T Corp. (the
"Merger") and MSI will become an indirect wholly owned
subsidiary of Liberty AGI, Inc. a Delaware corporation
("LAGI");
WHEREAS, LAGI is an affiliate of Liberty, and, as
of the Effective Time, MSI will be an Affiliate (as defined
below) of Liberty;
WHEREAS, as contemplated by the Merger Agreement,
immediately prior to the Effective Time, two of the current
five representatives of MSI on the Board of Directors (the
"Board") of the Company will resign and MSI, as the sole
holder of Class B-Series 1 Common Stock of the Company, will
fill the resulting vacancies with two persons selected by
Liberty Media (the "Liberty Nominees"); and
WHEREAS, the parties hereto desire to establish
certain arrangements regarding the governance of the Company
at and after the effective time (the "Effective Time") of the
Merger.
NOW, THEREFORE, in consideration of the foregoing
and the mutual covenants and agreements contained herein, and
intending to be legally bound hereby, the parties hereby
agree as follows:
<PAGE>
2
Section 1. Definitions. Capitalized terms used
herein and not otherwise defined shall have the meanings
ascribed to them in the Registration Rights Agreement.
(a) "Independent Person" means a person who, prior
to and as of the time of such person's initial nomination and
election or appointment as a director of the Company, and at
all times during such person's incumbency as a director, does
not have any substantial business or other financial
relationship (other than de minimis shareholdings in the
Company, Telcom and/or MSI and their respective Affiliates)
with any of the parties or their respective Affiliates. For
purposes of this definition, such nominee may be a board
member with Mr. Mandl on the boards of other companies, and
such relationship shall not, in and of itself, be considered
a "substantial business relationship."
(b) "Additional Designee" shall be a person elected
or appointed to fill a vacancy on the Board that results from
an event described in Section 3(g) below, which person at the
time of his or her initial nomination and election or
appointment meets the following requirements: such person is
an Independent Person who is acceptable to each of (i) the
Telcom Designees on the Board, (ii) the MSI Designees on the
Board and (iii) at least one other director. As provided
under Section 3(b) below, there may be more than one
Additional Designee on the Board at any time.
(c) "Liberty Designees" means three persons
designated from time to time by MSI.
(d) "Telcom Designees" means two persons designated
from time to time by Telcom. So long as Telcom, by virtue of
its beneficial ownership of Series B-2 common stock of the
Company, is entitled to designate one director, such Series
B-2 director shall be one of the two Telcom Designees.
(e) "Designees" means the Additional Designees, the
Liberty Designees and the Telcom Designees.
(f) "Affiliate" means, with respect to any
specified person, any other person that, directly or
indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, the person
specified. Notwithstanding the foregoing, the parties hereto
understand and agree that neither AT&T Corp. nor any
subsidiary of AT&T Corp. that is not a member of the Liberty
Media Group shall be deemed to be an Affiliate of any person
that is a member of the Liberty Media Group, except that,
<PAGE>
3
for purposes of the definition of Independent Person and for
purposes of Section 5(b), AT&T Corp. and its subsidiaries
shall be deemed to be Affiliates of MSI for so long as AT&T
Corp. directly or indirectly owns more than 50% of the voting
stock of MSI. For purposes of this definition, Liberty Media
Group shall include, without limitation, Liberty Media, LAGI
and, following the Effective Time, MSI.
(g) "Stockholder" means each of Telcom, MSI and Mr.
Mandl.
Section 2. Composition of the Board.
(a) The parties hereto agree that each of the
following events (the occurrence of each of which shall be
mutually conditioned upon the occurrence of the others) shall
occur or become effective immediately after the Effective
Time:
(i) two of the five representatives of MSI on the
Board (including the MSI representative appointed to the
Board in connection with the closing of the sale of the
Company's 7 3/4% convertible preferred stock (the "Company
Preferred Stock"), but excluding the Liberty Nominees), shall
resign;
(ii) the Board shall adopt resolutions reducing the
size of the Board to eight and filling the remaining vacancy
on the Board created by the resignations described in clause
(i) above with a Telcom Designee;
(iii) all of the Class B-Series 1 Common Stock of
the Company will convert into Class A Common Stock of the
Company;
(iv) MSI will become party to this Agreement; and
(v) Telcom, on behalf of itself and DSC, will waive
compliance with Section 2(c)(i) of the Registration Rights
Agreement.
(b) The parties hereto agree to take and cause
their respective Affiliates and designated representatives on
the Board to take all action within its or their collective
control and power necessary to ensure that, if the Effective
Time occurs, the events described in Section 2(a) above occur
immediately thereafter. Without limiting the generality of
the foregoing, Liberty Media covenants and agrees to cause
MSI to become a party hereto at the Effective Time by
executing and delivering a
<PAGE>
4
counterpart of this Stockholders Agreement to the other
parties.
(c) Telcom hereby acknowledges and agrees, on
behalf of itself and DSC, that the occurrence of the events
contemplated by Section 2(a) of this Stockholders Agreement
will satisfy the requirements of Section 2 of the
Registration Rights Agreement, as such requirements relate to
the transactions contemplated by the Merger Agreement.
Section 3. Covenants.
The Stockholders shall, and shall cause their
respective Affiliates and their designated representatives on
the Board to, from and after the Effective Time, take all
action within their collective control and power (including,
without limitation, (i) convening meetings of the Company's
Board of Directors, and (ii) if necessary, the voting shares
of Company common stock owned directly or indirectly by such
Stockholder or by an Affiliate thereof) necessary to ensure
that:
(a) the size of the Board shall be eight members;
(b) the Stockholders and their Affiliates comply
with the provisions of Section 8 of the November 1997
Agreement (as defined in Section 6 below), provided that, if
Mr. Mandl is no longer Chief Executive Officer of the
Company, the Stockholders shall, and shall cause their
respective Affiliates and their designated representatives on
the Board to, take all action within their collective control
and power necessary to ensure that the person selected as
Chief Executive Officer of the Company meets the requirements
for an Additional Designee;
(c) each of MSI and Telcom nominates their
respective Designees and the Stockholders vote, and cause
their respective Affiliates to vote, to elect the Designees
as, and to cause the Designees to be, Directors of the
Company in accordance herewith at all times following, the
Effective Time, and such Designees are not removed as
Directors unless the Stockholder who nominated any such
Designee ("Nominator") determines he/she should be removed
(in which case he/she shall be removed and replaced by a new
Designee by the Nominator);
(d) each of the Designees shall continue to be
nominated and elected as a director of the Company and to be
a director of the Company until the Termination Date;
<PAGE>
5
(e) any vacancy in the seat on the Board held by a
Designee, which vacancy occurs subsequent to the Effective
Time, shall be filled by the respective Nominator with
another Designee immediately;
(f) as soon as practicable after the Effective
Time, the Company's Certificate of Incorporation shall be
amended to add the following proviso to the end of the last
sentence of Article Sixth thereof:
"; provided further, that stockholders shall be
entitled to act by written consent in accordance with
Section 228 of the DGCL without regard to any of the
foregoing restrictions in order to implement or enforce
the provisions of the Stockholders Agreement dated as of
January , 2000, by and among Alex J. Mandl, Liberty
Media Corporation, Microwave Services, Inc. and
Telcom-DTS Investors, L.L.C.";
(g) in the event that any of the following events
occur: (i) the beneficial owner of the Class B-Series 3
Common Stock is no longer entitled to designate a Series B-3
director; (ii) the investors in the Company Preferred Stock
who are entitled to designate a director (the "HMTF
Director") are no longer entitled to designate the HMTF
Director; (iii) Mr. Mandl is no longer a member of the Board;
or (iv) an Additional Designee resigns or is removed, then,
in each such case, the resulting director vacancy shall be
filled with a person that meets the requirements for an
Additional Designee within 30 days of the Stockholders'
obtaining knowledge of such vacancy; and
(h) no action is taken which would have the effect
of eliminating, limiting, restricting, avoiding or otherwise
modifying the effect of any provision contained herein.
Section 4. No Inconsistent Agreements. Each
Stockholder hereby covenants and agrees that neither it nor
any of its Affiliates shall enter into any voting agreement
or grant a proxy or power of attorney with respect to the
shares of voting stock of the Company it beneficially owns
which is inconsistent with this Stockholders Agreement. Each
party hereby represents and warrants that this Stockholders
Agreement:
(a) has been duly authorized, executed and
delivered by such party; and
(b) is a binding obligation of such party,
enforceable against such party in accordance with its terms
<PAGE>
6
and does not require the consent of any person not a party
hereto to be effective to bind such party and the shares of
the Company common stock held by such party or any Affiliate
hereof.
Section 5. Transfer of Shares. (a) Except as set
forth in (b) below and subject to the provisions of Section
10 below, each Stockholder and its Affiliates shall be free
to sell and otherwise transfer any and all of their shares of
Company stock free and clear of any obligations set forth
herein; provided, however, that in the case of a transfer of
all of the remaining shares of Company stock owned by a
Stockholder and its Affiliates, such Stockholder shall no
longer be a party hereunder.
(b) Notwithstanding the foregoing sentence, (i)
Telcom agrees that this Stockholders Agreement and the rights
and obligations hereunder shall attach to each of the shares
of voting stock of the Company it beneficially owns and shall
be binding upon any Affiliates of Telcom to which legal or
beneficial ownership shall pass whether by sale, transfer or
operation of law and (ii) MSI (upon its becoming a signatory
hereto) agrees that this Stockholders Agreement and the
rights and obligations hereunder shall attach to each of the
shares of voting stock of the Company it beneficially owns
and shall be binding upon any Affiliate of MSI to which legal
or beneficial ownership shall pass whether by sale, transfer
or operation of law (provided that beneficial ownership of
such shares shall not be deemed to pass as a result of a
change in ownership of MSI if after such change MSI continues
to be the record owner of such shares and is a member of the
Liberty Media Group).
Section 6. Information and Consultation Rights. The
parties hereby agree that for the term of this Agreement, so
long as MSI (upon its becoming a signatory hereto) and
Telcom, respectively, remain a party hereto and are in
compliance with the provisions hereof, the Company will (a)
use reasonable efforts to provide regular information to,
consult with and obtain the advice of each of their
Designees, respectively, in connection with ordinary
decisions of the Board of Directors and (b) have Consultation
(as such term is defined in the Stockholders' Agreement dated
November 26, 1997 among the Company, MSI, Telcom, NTTA&T
Investment Inc. and NTT ("November 1997 Agreement") with each
of MSI and Telcom for any Consultation Event (as such term is
defined in the November 1997 Agreement).
Section 7. Effectiveness; Termination. Except as
otherwise expressly provided herein and except for
<PAGE>
7
Sections 2(b) and 2(c) and this Section 7, which shall become
effective upon execution and delivery hereof, this
Stockholders Agreement shall become effective as of the
Effective Time. This Stockholders Agreement shall terminate
at the close of business on the earliest of (i) the
consummation of a merger transaction in which all of the
outstanding shares of Common Stock of the Company are
acquired by any party, (ii) September 30, 2001, (iii)
September 30, 2000 (in the case of a written agreement
between MSI and Telcom prior to such date, providing that
this Stockholders Agreement shall be terminated as of
September 30, 2000) and (iv) the date on which the Merger
Agreement is terminated if the Merger is not consummated,
provided that if this Stockholders Agreement is terminated
pursuant to this clause (iv), this Stockholders Agreement
shall become effective again if Liberty Media or any of its
Affiliates and AGI or any of its Affiliates thereafter and
prior to the occurrence of an event specified in (i), (ii) or
(iii) above, enter into any Agreement similar to the Merger
Agreement (the earliest of (i), (ii), (iii) or (iv), the
"Termination Date").
Section 8. Notices. All notices, requests, claims,
demands and other communications under this Stockholders
Agreement shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt)
by delivery in person, by facsimile (transmission confirmed),
by courier service or by registered or certified mail
(postage prepaid, return receipt requested) to the respective
parties at the following addresses (or at such other address
for a party as shall be specified in a notice given in
accordance with this Section 8):
if to Mr. Mandl
c/o Teligent, Inc.
8065 Leesburg Pike
Vienna, VA 22182
Telecopier No.: (703) 762-5222;
with a copy to
Teligent, Inc.
8065 Leesburg Pike
Vienna, VA 22182
Telecopier No.: (703) 762-5227
Attention: General Counsel;
<PAGE>
8
if to MSI or Liberty Media
Liberty Media Corporation
9197 South Peoria Street
Englewood, CO 80112
Telecopier No.: (720) 875-5382
Attention: General Counsel;
if to Telecom
Telecom Ventures, L.L.C.
211 North Union Street, Suite 300
Alexandria, VA 22314
Telecopier No.: (703) 706-3801
Attention: President and General Counsel.
Section 9. Severability. If any term or other
provision of this Stockholders Agreement is invalid, illegal
or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this
Stockholders Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance
of this Stockholders Agreement 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 Stockholders Agreement so as to effect
the original intent of the parties as closely as possible in
a mutually acceptable manner in order that the transactions
contemplated by this Stockholders Agreement be consummated as
originally contemplated to the fullest extent possible.
Section 10. Entire Agreement; Assignment. This
Stockholders Agreement constitutes the entire agreement among
the parties with respect to the subject matter hereof and
supersedes all prior agreements and undertakings, both
written and oral, among the parties, or any of them, with
respect to the subject matter hereof; provided, however, the
parties expressly agree that the terms and conditions of the
November 1997 Agreement are in no manner amended, modified or
waived by this Stockholders Agreement. Expect as expressly
set forth herein, the provisions of the Registration Rights
Agreement shall not be amended, modified or waived by this
Stockholders Agreement. This Stockholders Agreement and all
of the rights, interests and obligations under this
Stockholders Agreement may only be assigned by MSI or Telcom,
respectively, in connection with a transfer by MSI or Telcom,
respectively, of all, but not less than all, of the shares of
voting stock of the Company held by the transferor at the
time of such transfer to the
<PAGE>
9
transferee; provided, that in connection with any such
transfer, MSI or Telcom, as applicable, shall require such
transferee to unconditionally agree in writing to become a
"party" and a "Stockholder" for purposes of this Stockholders
Agreement and to be bound by the terms and conditions hereof;
provided, further, that such shares of voting stock of the
Company being transferred must represent in the aggregate no
less than 25% of the voting stock of the Company beneficially
owned by MSI or Telcom, as applicable, as of the Effective
Time (as adjusted for stock splits, stock dividends, reverse
stock splits and similar events). Notwithstanding the
foregoing or any other provisions of this Stockholders
Agreement, in no event shall any transferee acquiring shares
from a Stockholder in connection with a bona fide public
offering or a Rule 144 sale become or be required to become a
party hereto or bound hereby. Any purported assignment in
violation of this Section 10 shall be void.
Section 11. Parties in Interest; Certain Events.
Expect as specifically set forth in Section 4 and 10 this
Stockholders Agreement shall be binding upon and inure solely
to the benefit of each party hereto, and nothing in this
Stockholders Agreement, express or implied, is intended to or
shall confer upon any other person any right, benefit or
remedy of any nature whatsoever under or by a reason of this
Stockholders Agreement.
Section 12. Specific Performance. The parties
hereto agree that irreparable damage would occur in the event
any provision of this Stockholders Agreement were not
performed in accordance with the terms hereof and that the
parties shall be entitled to specific performance of the
terms hereof, in addition to any other remedy at law or
equity.
Section 13. Governing Law. This Stockholders
Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without regard to any
principles of conflicts of laws of such State.
Section 14. Consent to Jurisdiction. (a) Subject to
Section 18 hereof, each party hereby irrevocably submits to
the exclusive jurisdiction of the courts of the State of
Delaware and to the jurisdiction of the United States
District Court for the State of Delaware, for the purpose of
any action or proceeding arising out of or relating to this
Stockholders Agreement, and each party hereby irrevocably
agrees that all claims in respect of such action or
proceeding shall be heard and determined exclusively in any
Delaware state or federal court. Each party agrees that a
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10
final judgment in any action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit
on the judgment or in any other manner provided by law.
(b) Each party irrevocably consents to the service
of the summons and complaint and any other process in any
other action or proceeding relating to the transactions
contemplated by this Stockholders Agreement, on behalf of
itself or its property, by personal delivery of copies of
such process to such party. Nothing in this Section 14 shall
affect the right of any party to serve legal process in any
other manner permitted by law.
Section 15. Headings. The descriptive headings
contained in this Stockholders Agreement are included for
convenience of reference only and shall not affect in any way
the meaning or interpretation of this Stockholders Agreement.
Section 16. Amendments. This Stockholders Agreement
may be amended or modified, and the terms and conditions
hereof may be waived, only by a written instrument signed by
the parties hereto or, in the case of a waiver, by each party
waiving compliance.
Section 17. Counterparts. This Stockholders
Agreement may be executed and delivered (including by
facsimile transmission) in one or more counterparts, and by
the different parties hereto in separate counterparts, each
of which when executed and delivered shall be deemed to be an
original but all of which taken together shall constitute one
and the same agreement.
Section 18. WAIVER OF JURY TRIAL. EACH PARTY HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT
OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS STOCKHOLDERS
AGREEMENT OR THE ACTIONS OF THE PARTIES IN THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE AND ENFORCEMENT THEREOF.
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IN WITNESS WHEREOF, each of the parties hereto has
executed or caused this Stockholders Agreement to be
executed as of the date first written above by its
respective officers thereunto duly authorized:
ALEX J. MANDL,
by /s/ Alex J. Mandl
--------------------------------
Alex J. Mandl
TELCOM-DTS INVESTORS, L.L.C.,
by /s/ Rajuka Singh
--------------------------------
Name: Rajuka Singh
Title: CEO and Chairman of the
Board
LIBERTY MEDIA CORPORATION,
(for purposes of Section 2(b) only)
by /s/ Charles Y. Tanabe
--------------------------------
Name: Charles Y. Tanabe
Title: Senior Vice President
As of the Effective Time: MICROWAVE
SERVICES, INC.,
by /s/ Charles Y. Tanabe
--------------------------------
Name: Charles Y. Tanabe
Title: Senior Vice President
============================================================
STOCK PURCHASE AGREEMENT
BY AND AMONG
TELIGENT, INC.
AND
THE PURCHASERS LISTED ON SCHEDULE I HERETO
------------------
Dated as of
November 4, 1999
------------------
============================================================
<PAGE>
This STOCK PURCHASE AGREEMENT is dated as of
November 4, 1999 (this "Agreement"), by and among Teligent,
Inc., a Delaware corporation (the "Company"), and each of the
purchasers listed on Schedule I hereto (individually, a
"Purchaser" and collectively, the "Purchasers").
WHEREAS, the Company proposes, subject to the terms
and conditions set forth herein, to issue and sell to the
several Purchasers 500,000 Shares of its 7-3/4% Series A
Convertible Preferred Stock, liquidation preference $1,000
per share, par value $0.01 per share (the "Series A Preferred
Stock"); and
WHEREAS, the Purchasers desire, subject to the
terms and conditions set forth herein, to purchase such
Series A Preferred Stock from the Company;
NOW, THEREFORE, the parties hereto, intending to be
legally bound, hereby agree as follows.
ARTICLE I
DEFINITIONS
(a) As used in this Agreement, the following terms
shall have the following meanings:
"Affiliate" means, with respect to any Person, any
other Person directly or indirectly controlling, controlled
by, or under direct or indirect common control with, such
Person. For the purposes of this definition and the
definition of "HMTF Purchaser", "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
"controlling" and "controlled" have meanings correlative to
the foregoing.
"Applicable Law" means (a) any United States
federal, state, local or foreign law, statute, rule,
regulation, order, writ, injunction, judgment, decree or
permit of any Governmental Authority and (b) any rule or
listing requirement of any applicable national stock exchange
or listing requirement of any national stock exchange or
Commission recognized trading market on which securities
issued by the Company or any of the Subsidiaries are listed
or quoted.
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"Business Day" means any day other than a Saturday,
a Sunday, the day after Thanksgiving or a day when banks in
The City of New York are authorized by Applicable Law to be
closed.
"Capital Stock" means (i) with respect to any
Person that is a corporation, any and all shares, interests,
participations, rights or other equivalents (however
designated) of corporate stock and (ii) with respect to any
other Person, any and all partnership or other equity
interests of such Person.
"Certificate of Designation" means the Certificate
of Designation of the Powers, Preferences and Relative,
Participating, Optional and Other Special Rights and
Qualifications, Limitations and Restrictions thereof relating
to the Series A Preferred Stock, in the form attached hereto
as Exhibit A.
"Commission" means the United States Securities and
Exchange Commission.
"Commission Filings" means all reports,
registration statements and other filings filed by the
Company with the Commission (and all notes, exhibits and
schedules thereto and documents incorporated by reference
therein).
"Common Stock" means the Class A common stock, par
value $0.01 per share, of the Company.
"Contract" means any contract, lease, loan
agreement, mortgage, security agreement, trust indenture,
note, bond, or other agreement (whether written or oral) or
instrument.
"Conversion Shares" means the shares of Common
Stock issuable upon the conversion of the Series A Preferred
Stock in accordance with the terms of the Certificate of
Designation.
"Equity Documents" means this Agreement, the
Registration Rights Agreement, the Certificate of Designation
and the Management Rights Agreement.
"Exchange Act" means the Securities Exchange Act of
1934, and the rules and regulations of the Commission
promulgated thereunder.
"GAAP" means United States generally accepted
accounting principles, consistently applied.
<PAGE>
3
"Governmental Authority" means (i) any foreign,
Federal, state or local court or governmental or regulatory
agency or authority, (ii) any arbitration board, tribunal or
mediator and (iii) any national stock exchange or Commission
recognized trading market on which securities issued by the
Company or any of the Subsidiaries are listed or quoted.
"HMTF" means Hicks, Muse, Tate & Furst
Incorporated, a Texas corporation.
"HMTF Funds" means both HMTF Equity Fund IV, L.P.
and HMTF Private Equity Fund IV, L.P.
"HMTF Group" means HMTF and its Affiliates and
their respective officers, directors, partners, members,
stockholders and employees (and members of their respective
families and trusts for the primary benefit of such family
members), and HMTF Purchaser and its Affiliates.
"HMTF Purchaser" means any one or more of the
following: (i) HMTF-IV Acquisition Corp. (but only for so
long as it is controlled by a member of the HMTF Group), (ii)
HM4 Teligent Qualified Fund, LLC (but only for so long as it
is controlled by HMTF Equity Fund IV (1999), L.P. or another
member of the HMTF Group), (iii) HM4 Teligent Private Fund,
LLC (but only for so long as it is controlled by HMTF Private
Equity Fund IV (1999), L.P. or another member of the HMTF
Group), (iv) HM PG-IV Teligent, LLC ( but only for so long as
it is controlled by Hicks, Muse PG-IV (1999), C.V. or another
member of the HMTF Group), (v) HM 4- SBS Teligent
Coinvestors, LLC (but only for so long as it is controlled by
HM 4-SBS (1999) Coinvestors, L.P. or another member of the
HMTF Group), (vi) HM 4-EQ Teligent Coinvestors, LLC (but only
for so long as it is controlled by HM 4-EQ (1999)
Coinvestors, L.P. or another member of the HMTF Group), and
(vii) HM NE Teligent, LLC (but only for so long as it is
controlled by HM New Economy, L.P. or another member of the
HMTF Group).
"HMTF Shares" means the HMTF Issued Series A
Preferred Shares held by members of the HMTF Group plus the
shares of Common Stock issued to and held by members of the
HMTF Group upon conversion of the HMTF Issued Series A
Preferred Shares.
"HSR Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and applicable rules
and regulations.
<PAGE>
4
"Lien" means any mortgage, pledge, lien, security
interest, claim, restriction, charge or encumbrance of any
kind.
"Material Adverse Effect" means a material adverse
effect on the condition (financial or otherwise), business,
assets or results of operations of the Company and the
Subsidiaries, taken as a whole.
"Microsoft" means Microsoft Corporation, a
Washington corporation.
"Olympus Funds" means Olympus Growth Fund III, L.P.
and Olympus Executive Fund, L.P.
"Permitted Transferee" means, with respect to any
Purchaser, or any Permitted Transferee of any Purchaser, (i)
any Purchaser Affiliate of such Purchaser that is not a
holder of common stock of the Company on the date hereof or
an affiliate of such holder; and (ii) any person that is a
member of the HMTF Group and any person investing, directly
or indirectly, in or in parallel with any member of the HMTF
Group; provided, however, that each Permitted Transferee must
agree in writing pursuant to a Permitted Transferee
Agreement, in accordance with the provisions of Section 6.5,
to be bound by the terms, and subject to the conditions, of
this Agreement to the same extent, and in the same manner, as
the transferring Purchaser prior to the transfer of any
Shares to such Permitted Transferee; and provided, further,
that the transfer of Shares from such Purchaser to such
Permitted Transferee is in compliance with all applicable
securities laws.
"Person" means any individual, partnership,
corporation, limited liability company, joint venture,
association, joint-stock company, trust, unincorporated
organization, government or agency or political subdivision
thereof, or other entity.
"Purchaser Affiliate" means (a) any direct or
indirect holder of any equity interests or securities in any
Purchaser (whether limited or general partners, members,
stockholders or otherwise), (b) any Affiliate of any
Purchaser or (c) any director, officer, employee,
representative or agent of (i) such Purchaser, (ii) any
Affiliate of such Purchaser or (iii) any holder of equity
interests or securities referred to in clause (a) above.
"Registration Rights Agreement" means the
Registration Rights Agreement, to be dated as of the Closing
<PAGE>
5
Date, to be entered into by and among the Company and the
Purchasers, in the form attached hereto as Exhibit B.
"Securities Act" means the Securities Act of 1933,
and the rules and regulations of the Commission promulgated
thereunder.
"Series A Preferred Stock" has the meaning set
forth in the first recital to this Agreement. The Series A
Preferred Stock has the designation, powers, preferences and
rights, and qualifications, limitations and restrictions
thereof set forth in the Certificate of Designation.
"Shares" means the shares of Series A Preferred
Stock to be issued and sold by the Company to the Purchasers
pursuant to Section 2.1 hereof.
"subsidiary" means, with respect to any Person (i)
a corporation a majority of whose capital stock with voting
power, under ordinary circumstances, to elect directors is at
the time, directly or indirectly, owned by such Person, by a
subsidiary of such Person, or by such Person and one or more
subsidiaries of such Person, (ii) a partnership in which such
Person or a subsidiary of such Person is, at the date of
determination, a general partner of such partnership and has
the power to direct the policies and management of such
partnership or (iii) any other Person (other than a
corporation) in which such Person, a subsidiary of such
Person or such Person and one or more subsidiaries of such
Person, directly or indirectly, at the date of determination
thereof, has (A) at least a majority ownership interest or
(B) the power to elect or direct the election of the
directors or other governing body of such Person.
"Subsidiary" means a subsidiary of the Company.
"Transactions" means the transactions contemplated
by this Agreement.
(b) As used in this Agreement, the following
terms shall have the meanings given thereto in the Sections
set forth opposite such terms:
Term Section
Agreement Preamble
Class B Common Stock 3.2(a)
Class B-Series 1 Common Stock 3.2(a)
Class B-Series 2 Common Stock 3.2(a)
Class B-Series 3 Common Stock 3.2(a)
<PAGE>
6
Term Section
Closing 2.2
Closing Date 2.2
Company Preamble
DGCL 3.2(d)
HMTF Director 5.2
HMTF Issued Series A Preferred Shares 5.2
Indemnified Party 8.1(c)
indemnified person 8.1(b)
Indemnifying Party 8.1(c)
Information 3.7
Issuance 2.1
Losses 8.1(b)
Management Rights Agreement 2.2(d)
Notices 8.2
Permitted Transferee Agreement 6.5
Projections 3.7
Purchaser; Purchasers Preamble
Purchase Price 2.1
Share Transfer 6.5
Supplying Purchasers 8.18
ARTICLE II
SALE AND PURCHASE
SECTION 2.1. Agreement to Sell and to Purchase;
Purchase Price. On the Closing Date, and upon the terms and
subject to the conditions set forth in this Agreement, the
Company shall issue and sell to each Purchaser, and each
Purchaser, severally and not jointly, shall purchase and
accept from the Company, such number of Shares as is set
forth opposite such Purchaser's name on Schedule I hereto
(the "Issuance"), for a purchase price, payable by wire
transfer of immediately available funds to a bank account or
bank accounts designated by the Company described in Section
2.2(a)(i), equal to $1,000 per Share (the "Purchase Price").
SECTION 2.2. Closing. The closing of the Issuance
to each Purchaser (the "Closing") shall take place on a date
to be specified by the Company and such Purchaser, which
shall be no later than the later of (A) the 2nd Business Day
after the date as of which all of the conditions set forth in
Article VII hereof shall have been satisfied as to the
purchase by the HMTF Purchaser and the purchase by the
Olympus Funds (or, to the extent permitted, waived by the
party or parties entitled to the benefit
<PAGE>
7
thereof) and (B) 15 Business Days after the date hereof or at
such other time and date as the parties hereto shall agree in
writing (such date and time, the "Closing Date"), at the
offices of Cravath, Swaine & Moore, located at 825 Eighth
Avenue, New York, New York 10019 or at such other place as
the parties hereto shall agree in writing. At such time as a
Purchaser and the Company shall have satisfied all the
conditions set forth in Article VII, if the Company elects,
such Purchaser and the Company shall close separately on such
date (it being understood that the timing of the closing with
respect to the HMTF Purchaser shall be governed solely by the
preceding sentence, without giving effect to the matters
therein relating to the Olympus Funds).
At the Closing with respect to each Purchaser:
(a) Such Purchaser shall deliver:
(i) against delivery of a certificate or
certificates representing the Shares being purchased by
such Purchaser pursuant to Section 2.1, an amount equal
to the aggregate Purchase Price of such Shares via wire
transfer of immediately available funds to such bank
account as the Company shall designate not later than
two Business Days prior to the Closing Date; and
(ii) a copy of the Registration Rights Agreement
executed by such Purchaser.
(b) The Company shall deliver to such Purchaser:
(i) against payment of the Purchase Price therefor,
a certificate or certificates representing the Shares
being purchased by such Purchaser pursuant to Section
2.1, which shall be in definitive form and registered in
the name of such Purchaser or its nominee or designee
and in a single certificate or in such other
denominations as such Purchaser shall request not later
than two Business Days prior to the Closing Date;
(ii) an opinion of counsel to the Company, dated
the Closing Date, covering such matters as are
customarily covered by such opinions, in form and
substance reasonably acceptable to the Purchasers;
(iii) an officer's certificate of the Company as
contemplated by Section 7.2(g);
(iv) a certificate of the secretary of the Company
covering such matters as are customarily covered by
<PAGE>
8
such certificates, in form and substance reasonably
acceptable to the Purchasers;
(v) a long-form good standing certificate of the
Company issued by the Secretary of State of the State of
Delaware; and
(vi) a copy of the Registration Rights Agreement
executed by the Company.
(c) The Company shall deliver to each Purchaser (or
its designee) a transaction fee equal to 2% of the Purchase
Price of the Shares purchased by such Purchaser, in
immediately available funds by wire transfer to an account
designated by such Purchaser at least two Business Days prior
to the Closing Date.
(d) The Company shall deliver to each of the HMTF
Funds and the Olympus Funds a letter in the form of Exhibit
C-1 and C-2, respectively, executed by the Company (the
"Management Rights Agreement").
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company hereby represents and warrants to each
Purchaser on the date hereof and on and as of the Closing
Date as follows:
SECTION 3.1. Organization and Standing. Each of the
Company and the material domestic Subsidiaries is duly
incorporated, validly existing and in good standing under the
laws of its state of incorporation and has all requisite
corporate power and authority to own its properties and
assets and to carry on its business as it is now being
conducted and as proposed to be conducted. Each of the
Company and the material domestic Subsidiaries is duly
qualified to transact business as a foreign corporation and
is in good standing in each jurisdiction in which the
character of the properties owned or leased by it or the
nature of its business makes such qualification necessary,
except for any such failures to so qualify or be in good
standing that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. The
Company has delivered to Purchaser true and complete copies
of the Company's Certificate of Incorporation, as amended to
date, and By-laws, as in effect on the date hereof.
<PAGE>
9
SECTION 3.2. Capital Stock. (a) As of the date of
this Agreement, the authorized Capital Stock of the Company
consists solely of (i) 200,000,000 shares of Common Stock, of
which 9,685,232 shares are issued and outstanding, (ii)
65,000,000 shares of Class B common stock, par value $0.01
per share (the "Class B Common Stock"), consisting of three
Series: (A) 30,000,000 shares of Class B Common Stock
designated as Series 1 (the "Class B-Series 1 Common Stock"),
(B) 25,000,000 shares of Class B Common Stock designated as
Series 2 (the "Class B-Series 2 Common Stock") and (C)
10,000,000 shares of Class B Common Stock designated as
Series 3 (the "Class B-Series 3 Common Stock"), of which
21,436,689 shares of Class B-Series 1 Common Stock,
17,206,210 shares of Class B-Series 2 Common Stock and
5,783,400 shares of Class B-Series 3 Common Stock are issued
and outstanding, and (iii) 10,000,000 shares of preferred
stock, par value $0.01 per share, of which, prior to the
issuance of the Shares on the Closing Date as contemplated by
this Agreement, no shares have been designated and no shares
are issued or outstanding. Each share of Capital Stock of the
Company that will be issued and outstanding immediately
following the Closing, including without limitation the
Shares, will be duly authorized and validly issued and fully
paid and nonassessable, and the issuance thereof will not
have been subject to any preemptive rights or made in
violation of any Applicable Law.
(b) Except as set forth on Schedule 3.2, as of the
date of this Agreement, there are (i) no outstanding options,
warrants, agreements, conversion rights, exchange rights,
preemptive rights or other rights (whether contingent or not)
to subscribe for, purchase or acquire any issued or unissued
shares of Capital Stock of the Company or any Subsidiary, and
(ii) no restrictions upon, or Contracts or understandings of
the Company or any Subsidiary, or, to the knowledge of the
Company, Contracts or understandings of any other Person,
with respect to, the voting or transfer of any shares of
Capital Stock of the Company or any Subsidiary.
(c) The Conversion Shares have been duly authorized
and adequately reserved in contemplation of the conversion of
the Series A Preferred Stock and, when issued and delivered
in accordance with the terms of the Certificate of
Designation, will have been validly issued and will be fully
paid and nonassessable, and the issuance thereof will not
have been subject to any preemptive rights or made in
violation of any Applicable Law.
(d) The holders of the Series A Preferred Stock
will, upon issuance thereof, have the rights set forth in
<PAGE>
10
the Certificate of Designation (subject to the limitations
and qualifications set forth therein and under the General
Corporation Law of the State of Delaware (the "DGCL")).
SECTION 3.3. Authorization; Enforceability. The
Company has the power and authority to execute, deliver and
perform its obligations under each of the Equity Documents,
and has taken all action necessary to authorize the
execution, delivery and performance by it of each of such
Equity Documents and to consummate the Issuance. No other
corporate or stockholder proceeding on the part of the
Company is necessary for such authorization, execution,
delivery and consummation. The Company has duly executed and
delivered this Agreement and, at the Closing, the Company
will have duly executed and delivered each of the other
Equity Documents to be executed and delivered at or prior to
Closing. This Agreement constitutes, and each of the other
Equity Documents, when executed and delivered by the Company,
will constitute, a legal, valid and binding obligation of the
Company.
SECTION 3.4. No Violation; Consents. (a) The
execution, delivery and performance by the Company of each of
the Equity Documents and the consummation by the Company of
the Issuance do not and will not contravene any Applicable
Law, except for any such contravention that would not,
individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect. Except as set forth on
Schedule 3.4(a), the execution, delivery and performance by
the Company of each of the Equity Documents and the
consummation of the Issuance (i) will not (A) violate, result
in a breach of or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right
of termination, cancelation or acceleration) under any
Contract to which the Company is a party or by which the
Company is bound or to which any of its assets is subject, or
(B) result in the creation or imposition of any Lien upon any
of the assets of the Company, except for any such violations,
breaches, defaults or Liens that would not, individually or
in the aggregate, reasonably be expected to have a Material
Adverse Effect and (ii) will not conflict with or violate any
provision of the certificate of incorporation or bylaws or
other governing documents of the Company.
(b) Except for (i) the filings by the Company, if
any, required by the HSR Act, (ii) applicable filings, if
any, required by applicable federal and state securities laws
and (iii) filing of the Certificate of Designation with the
Secretary of State of the State of Delaware, in each case,
which shall be made (or are not required to be made)
<PAGE>
11
on or prior to the Closing Date, no consent, authorization or
order of, or filing or registration with, any Governmental
Authority or other Person is required to be obtained or made
by the Company for the execution, delivery and performance of
this Agreement or the consummation by the Company of the
Issuance, or for the execution, delivery and performance by
the Company of the Registration Rights Agreement, except
where the failure to obtain such consents, authorizations or
orders, or make such filings or registrations, would not,
individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect or a material adverse effect
on the ability of the Company to consummate the transactions
contemplated hereby.
SECTION 3.5. Commission Filings; Financial State
ments. (a) The Company has filed all reports, registration
statements and other filings, together with any amendments or
supplements required to be made with respect thereto, that it
has been required to file with the Commission under the
Securities Act and the Exchange Act. As of the respective
dates of their filing with the Commission, the Commission
Filings complied in all material respects with the applicable
provisions of the Securities Act and the Exchange Act and did
not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or
necessary to make the statements made therein, in the light
of the circumstances under which they were made, not
misleading.
(b) Each of the historical consolidated financial
statements of the Company (including any related notes or
schedules) included in the Commission Filings was prepared in
accordance with GAAP (except as may be disclosed therein),
and complied in all material respects with the rules and
regulations of the Commission. Such financial statements
fairly present the consolidated financial position of the
Company and the Subsidiaries as of the dates thereof and the
consolidated results of operations, cash flows and changes in
stockholders' equity for the periods then ended (subject, in
the case of the unaudited interim financial statements, to
normal, recurring year-end audit adjustments). Except as set
forth or reflected in the Commission Filings filed prior to
the date hereof, the Company does not have any liabilities or
obligations of any nature (whether accrued, absolute,
contingent, unasserted or otherwise) that individually or in
the aggregate would be expected to have a Material Adverse
Effect.
SECTION 3.6. Private Offering. Based, in part, on
the Purchasers' representations in Section 4.2, the offer and
sale of the Shares is exempt from the registration and
<PAGE>
12
prospectus delivery requirements of the Securities Act.
Neither the Company, nor anyone acting on behalf of it, has
offered or sold or will offer or sell any securities, or has
taken or will take any other action (including, without
limitation, any offering of any securities of the Company
under circumstances that would require, under the Securities
Act, the integration of such offering with the offering and
sale of the Shares), which would subject the Issuance to the
registration provisions of the Securities Act.
SECTION 3.7. Provided Information. To the
knowledge of the Company, all written information (excluding
information of a general economic nature and financial
projections) concerning the Company and the Transactions (the
"Information") that has been or will be prepared by or on
behalf of the Company or any of the Company's authorized
representatives and that has been made or will be made
available to the Purchasers or any of their authorized
representatives in connection with the Issuance, when taken
as a whole, was or will be, at the time made available,
correct in all material respects and did not or will not, at
the time made available, contain any untrue statement of a
material fact or omit to state a material fact necessary in
order to make the statements contained therein not misleading
in light of the circumstances under which such statements are
made. All financial projections concerning the Company and
the Issuance (the "Projections") that have been prepared by
or on behalf of the Company or any of the Company's
authorized representatives and that have been or will be made
available to the Purchasers or any of their authorized
representatives in connection with the Issuance have been,
and at the time made available will be, reasonably prepared
on a basis reflecting the best currently available estimates
and judgments of the Company's management as to the future
financial performance of the Company and the individual
business segments thereof.
SECTION 3.8. Material Adverse Change. Except as
disclosed in the Commission Filings, since June 30, 1999,
there has not been any event, occurrence or development of a
state of circumstances or facts that has had, or could have
reasonably been expected to have, (i) a Material Adverse
Effect or (ii) a material adverse effect on the ability of
the Company to perform its obligations under this Agreement.
SECTION 3.9. Litigation. There are not any
(a) outstanding judgments against or affecting the Company or
any of the Subsidiaries, (b) proceedings pending or, to the
knowledge of the Company, threatened against or affecting the
Company or any of the Subsidiaries or (c) investigations by
any Governmental Authority that are,
<PAGE>
13
to the knowledge of the Company, pending or threatened
against or affecting the Company or any of the Subsidiaries
that (i) in any manner challenge or seek to prevent, enjoin,
alter or materially delay the Issuance or (ii) if resolved
adversely to the Company or any Subsidiary, would have,
individually or in the aggregate, a Material Adverse Effect.
SECTION 3.10. Permits and Licenses. The Company and
the Subsidiaries have obtained all governmental permits,
licenses, franchises and authorizations required for the
Company and the Subsidiaries to conduct their respective
businesses as currently conducted, except for those of which
the failure to obtain would not have a Material Adverse
Effect.
SECTION 3.11. Intellectual Property, etc. Schedule
3.11 sets forth a true and complete list of all patents,
patent applications, trademarks, trade names, service marks
and registered copyrights and make work rights and
applications therefor, if any, owned by or licensed to the
Company. All patents, patent applications, trademarks, mask
works, service marks and copyrights of the Company have been
duly applied for or registered and filed with or issued by
each appropriate governmental entity in the jurisdictions
indicated on Schedule 3.11, all necessary affidavits of
continuing use have been filed and all necessary maintenance
fees have been paid to continue all such rights in effect.
The Company owns or is licensed or otherwise has the right to
use, without payment to any other person except for fees set
forth in Schedule 3.11, all intellectual property used in or
necessary for the Company's business, as presently conducted
and as proposed to be conducted. The Company's ownership
and/or use of intellectual property in its business, as
presently conducted and as proposed to be conducted does not
conflict with, or result in any violation of, or default
(with or without notice or lapse of time, or both) under, or
give rise to a right of termination, cancelation or
acceleration of any obligation or result in any loss of a
material benefit under or the creation of any Lien in or upon
any of the properties or assets of the Company under, any
contract between the Company and any person or any other
intellectual property rights of any other person, except for
any such conflict, violation, default, right of termination,
cancelation, acceleration, loss of material benefit or
creation of any Lien which would not have a Material Adverse
Effect.
<PAGE>
14
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASERS
Each Purchaser severally as to itself only, and not
jointly, hereby represents and warrants to the Company as of
the date hereof and as of the Closing Date as follows:
SECTION 4.1. Organization; Authorization;
Enforceability. Such Purchaser is duly organized, validly
existing and in good standing under the laws of the
jurisdiction of its organization and has all requisite power
and authority to own its properties and assets and to carry
on its business as it is now being conducted and as currently
proposed to be conducted. Such Purchaser has the power to
execute, deliver and perform its obligations under each of
the Equity Documents to which it is a party and has taken all
action necessary to authorize the execution, delivery and
performance by it of such Equity Documents and to consummate
the transactions contemplated hereby and thereby. No other
proceedings on the part of such Purchaser are necessary for
such authorization, execution, delivery and consummation.
Such Purchaser has duly executed and delivered this Agreement
and, at the Closing, such Purchaser will have duly executed
and delivered each of the other Equity Documents to be
executed and delivered at or prior to Closing. This Agreement
constitutes, and each of the other Equity Documents to which
such Purchaser is a party, when executed and delivered by
such Purchaser, will constitute, a legal, valid and binding
obligation of such Purchaser.
SECTION 4.2. Private Placement. (a) Such Purchaser
understands that (i) the offering and sale of the Shares in
the Issuance by the Company is intended to be exempt from
registration under the Securities Act pursuant to Section
4(2) thereof and (ii) there is no existing public or other
market for the Shares.
(b) Such Purchaser (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
Shares and is capable of bearing the economic risks of such
investment.
(c) Such Purchaser is acquiring the Shares to be
acquired hereunder (and will acquire the Conversion Shares)
for its own account (or for accounts over which it exercises
investment authority), for investment and not with a view to
<PAGE>
15
the public resale or distribution thereof, in violation of
any securities law.
(d) Such Purchaser understands that the Shares will
be issued in a transaction exempt from the registration or
qualification requirements of the Securities Act and
applicable state securities laws, and that such securities
must be held indefinitely unless a subsequent disposition
thereof is registered or qualified under the Securities Act
and such laws or is exempt from such registration or
qualification.
(e) Such Purchaser (A) has been furnished with or
has had full access to all of the information that it
considers necessary or appropriate to make an informed
investment decision with respect to the Shares and that it
has requested from the Company, (B) has had an opportunity to
discuss with management of the Company the intended business
and financial affairs of the Company and to obtain
information (to the extent the Company possessed such
information or could acquire it without unreasonable effort
or expense) necessary to verify any information furnished to
it or to which it had access and (C) can bear the economic
risk of (x) an investment in the Shares indefinitely and (y)
a total loss in respect of such investment, has such
knowledge and experience in business and financial matters so
as to enable it to understand and evaluate the risks of and
form an investment decision with respect to its investment in
the Shares and to protect its own interest in connection with
such investment.
SECTION 4.3. No Violation; Consents. (a) The
execution, delivery and performance by such Purchaser of each
of the Equity Documents to which it is a party and the
consummation of the Transactions do not and will not
contravene any Applicable Law, except for such contraventions
as would not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the ability of
such Purchaser to timely perform its obligations under this
Agreement. The execution, delivery and performance by such
Purchaser of each of the Equity Documents to which it is a
party and the consummation of the Transactions contemplated
therein (i) will not (A) violate, result in a breach of or
constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination,
cancelation or acceleration) under any Contract to which such
Purchaser is party or by which such Purchaser is bound or to
which any of its assets is subject, or (B) result in the
creation or imposition of any Lien upon any of the assets of
such Purchaser, except for any such violations, breaches,
<PAGE>
16
defaults or Liens that would not, individually or in the
aggregate, reasonably be expected to have a material adverse
effect on the ability of such Purchaser to timely perform its
obligations under this Agreement, and (ii) will not conflict
with or violate any provision of the certificate of
incorporation or bylaws or other governing documents of such
Purchaser.
(b) Except for (i) the filings by the Purchaser, if
any, required by the HSR Act, and (ii) applicable filings, if
any, with the Commission pursuant to the Exchange Act, in
each case, which shall be made (or are not required to be
made) on or prior to the Closing Date, no consent,
authorization or order of, or filing or registration with,
any Governmental Authority or other Person is required to be
obtained or made by such Purchaser for the execution,
delivery and performance of any of the Equity Documents to
which it is a party or the consummation of any of the
transactions contemplated therein, except where the failure
to obtain such consents, authorizations or orders, or make
such filings or registrations, would not, individually or in
the aggregate, reasonably be expected to have a material
adverse effect on the ability of such Purchaser to timely
perform its obligations under this Agreement.
SECTION 4.4. No Litigation. There are not any (a)
outstanding judgments against or affecting the Purchaser or
any of its subsidiaries, (b) proceedings pending or, to the
knowledge of the Purchaser, threatened against or affecting
the Purchaser or any of its subsidiaries or (c)
investigations by any Governmental Authority that are, to the
knowledge of the Purchaser, pending or threatened against or
affecting the Purchaser or any of its subsidiaries that, in
any case, individually or in the aggregate, would reasonably
be expected to have a material adverse effect on the ability
of such Purchaser to timely perform its obligations under
this Agreement.
SECTION 4.5. HMTF Purchaser. Each HMTF Purchaser is
controlled by a member of the HMTF Group (excluding the HMTF
Purchasers for purposes of this sentence from the definition
of HMTF Group).
<PAGE>
17
ARTICLE V
COVENANTS OF THE COMPANY
SECTION 5.1. Operation of Business. From the date
hereof until the Closing Date, the Company shall, and shall
cause each of the Subsidiaries to:
(i) operate its business in all material respects
in the ordinary course and in compliance with Applicable
Laws;
(ii) not adopt any amendment to its charter or
bylaws or comparable organizational documents;
(iii) not split, combine or reclassify any shares
of the Company's Capital Stock;
(iv) not declare or pay any dividend or
distribution (whether in cash, stock or property) in
respect of its Capital Stock or increase the number of
shares subject to the Company's stock incentive and
option plan;
(v) not 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 Company set forth in Article III
becoming untrue or (B) any of the conditions to the
obligations of Purchaser set forth in Section 7.2 not
being satisfied or (C) the triggering of any of the
anti-dilution adjustments contained in the Certificate
of Designation for the Series A Preferred Stock (had
such Certificate been in effect); or
(vi) enter into any agreement or commitment to do
any of the foregoing.
SECTION 5.2. HMTF Director. The Company shall cause
to be elected to the Company's Board of Directors one person
designated by the holders of a majority of the then
outstanding HMTF Shares (the "HMTF Director"), for so long as
members of the HMTF Group own any combination of the shares
of Series A Preferred Shares issued to members of the HMTF
Group on the Closing Date (the "HMTF Issued Series A
Preferred Shares") and Common Stock issued upon conversion of
HMTF Issued Series A Preferred Shares which, taken together,
would represent, if all HMTF Issued Series A Preferred Shares
were converted, an amount of Common Stock issuable upon
conversion of 50% or more of the HMTF Issued Series A
Preferred Shares; provided, however, that the right
<PAGE>
18
to designate the HMTF Director under this Section 5.2 shall
be suspended at any time that members of the HMTF Group own
at least 100 shares of Series A Preferred Stock and have the
right to elect a person to the Board of Directors under the
terms of the Series A Preferred Stock set forth in the
Certificate of Designation. In the event the holders of a
majority of the then outstanding HMTF Shares are entitled
under this Section 5.2 to designate the HMTF Director for
election to the Company's Board of Directors and elect to
have the Board of Directors appoint the HMTF Director, they
shall so notify the Company in writing and the Company shall
(a) increase the size of the Board of Directors by one and
fill the vacancy created thereby by electing the HMTF
Director and (b) in connection with the meeting of
stockholders of the Company next following such election,
nominate such HMTF Director for election as director by the
stockholders and use its commercially reasonable efforts to
cause the HMTF Director to be so elected. If the holders of a
majority of the then outstanding HMTF Shares are entitled
under this Section 5.2 to designate the HMTF Director for
election to the Company's Board of Directors and a vacancy
shall exist in the office of a HMTF Director, the holders of
a majority of the then outstanding HMTF Shares shall be
entitled to designate a successor and the Board of Directors
shall elect such successor and, in connection with the
meeting of stockholders of the Company next following such
election, nominate such successor for election as director by
the stockholders and use its commercially reasonable efforts
to cause the successor to be elected.
SECTION 5.3. Access to Books and Records. (a) The
Company shall afford to each of the Purchasers and the
Purchasers' accountants, counsel and representatives full
access during normal business hours throughout the period
prior to the Closing Date (or the earlier termination of this
Agreement pursuant to Section 8.4) to all its properties,
books, Contracts, commitments and records (including, but not
limited to, tax returns) and, during such period, shall, upon
request, furnish promptly to each of the Purchasers (i) a
copy of each report, schedule and other document filed or
received by any of them pursuant to the requirements of
Federal or state securities laws and (ii) all other
information concerning its business, properties and personnel
as the Purchasers may reasonably request, provided that no
investigation or receipt of information pursuant to this
Section 5.3 shall affect any representation or warranty of
the Company or the conditions to the obligations of the
Purchasers.
(b) The Company shall supplement the Information
and the Projections from time to time until the Closing Date
<PAGE>
19
so that the representations and warranties in Section 3.7
shall remain correct, but no such supplement shall be given
effect for purposes of determining whether the Company has
breached any representations or warranties for purposes of
Section 7.2 and Section 8.1.
SECTION 5.4. Agreement to Take Necessary and
Desirable Actions. The Company shall (a) subject to the
satisfaction of the conditions set forth in Section 7.1,
execute and deliver the Equity Documents and such other
documents, certificates, agreements and other writings and
(b) take such other actions, in each case, as may be
necessary or reasonably requested by any of the Purchasers in
order to consummate or implement the Issuance in accordance
with the terms of this Agreement.
SECTION 5.5. Compliance with Conditions;
Commercially Reasonable Efforts. The Company shall use all
commercially reasonable efforts to cause all conditions
precedent to the obligations of the Company and the
Purchasers to be satisfied. Upon the terms and subject to the
conditions of this Agreement, the Company will use all
commercially reasonable efforts to take, or cause to be
taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable consistent with Applicable Law
to consummate and make effective in the most expeditious
manner practicable the Issuance in accordance with the terms
of this Agreement.
SECTION 5.6. HSR Act Notification. To the extent
required by the HSR Act, the Company shall, to the extent it
has not already done so, (a) use all commercially reasonable
efforts to file or cause to be filed, as promptly as
practicable after the execution and delivery of this
Agreement, with the United States Federal Trade Commission
and the Antitrust Division of the United States Department of
Justice, all reports and other documents required to be filed
by it under the HSR Act concerning the transactions
contemplated hereby and (b) use all commercially reasonable
efforts to promptly comply with or cause to be complied with
any requests by the United States Federal Trade Commission or
the Antitrust Division of the United States Department of
Justice for additional information concerning such
transactions, in each case so that the waiting period
applicable to this Agreement and the transactions
contemplated hereby under the HSR Act shall expire as soon as
practicable after the execution and delivery of this
Agreement. The Company agrees to request, and to cooperate
with the Purchasers in requesting, early termination of any
applicable waiting period under the HSR Act.
<PAGE>
20
SECTION 5.7. Consents and Approvals. The Company
(a) shall use all commercially reasonable efforts to obtain
all necessary consents, waivers, authorizations and approvals
of all Governmental Authorities and of all other Persons
required in connection with the execution, delivery and
performance of the Equity Documents or the consummation of
the Issuance and (b) shall diligently assist and cooperate
with the Purchasers in preparing and filing all documents
required to be submitted by the Purchasers to any
Governmental Authority in connection with the Issuance (which
assistance and cooperation shall include, without limitation,
timely furnishing to the Purchasers all information
concerning the Company and the Subsidiaries that counsel to
the Purchasers reasonably determines is required to be
included in such documents or would be helpful in obtaining
any such required consent, waiver, authorization or
approval).
SECTION 5.8. Reservation of Shares. The Company
shall:
(i) cause to be authorized and reserve and keep
available at all times during which any of the Shares
remain outstanding, free from preemptive rights, out of
its treasury stock or authorized but unissued shares of
Capital Stock, or both, solely for the purpose of
effecting the conversion of the Shares pursuant to the
terms of the Certificate of Designation, sufficient
shares of Common Stock to provide for the issuance of
the maximum number of shares issuable upon conversion of
outstanding Shares;
(ii) issue and cause the transfer agent to deliver
such shares of Common Stock as required upon conversion
of the Shares, and take all actions necessary to ensure
that all such shares will, when issued and paid for
pursuant to the conversion of the Shares, be duly and
validly issued, fully paid and nonassessable; and
(iii) if any shares of Common Stock reserved for
the purpose of issuance upon conversion of the Shares
require registration with or approval of any
Governmental Authority under any Applicable Law before
such shares may be validly issued or delivered, secure
such registration or approval, as the case may be, and
maintain such registration or approval in effect so long
as so required.
SECTION 5.9. Use of Proceeds. The Company shall use
the proceeds from the Issuance for payment of expenses
<PAGE>
21
incurred in connection with the Transactions and for general
corporate purposes.
SECTION 5.10. Filing of Certificate of Designation.
Prior to the Issuance, the Company shall file the Certificate
of Designation with the Secretary of State of the State of
Delaware pursuant to Section 151(g) of the DGCL.
SECTION 5.11. Listing of Shares. The Company shall
use all commercially reasonable efforts to cause the shares
of Common Stock issuable upon conversion of the Shares to be
listed or otherwise eligible for trading on the NASDAQ
National Market System or other national securities exchange.
SECTION 5.12. Periodic Information. For so long as
the Shares or any Conversion Shares are outstanding the
Company shall file all reports required to be filed by the
Company under Section 13 or 15(d) of the Exchange Act and
shall provide the holders of the Shares and the Conversion
Shares and prospective purchasers of such shares with the
information specified in Rule 144A(d) under the Securities
Act.
SECTION 5.13. Legends. So long as applicable, each
certificate representing any portion of the Shares or shares
of Common Stock issuable upon conversion of the Shares shall
be stamped or otherwise imprinted with a legend in the
following form (in addition to any legend required under
applicable state securities laws):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") OR THE SECURITIES LAWS OF
ANY STATE OF THE UNITED STATES. SUCH SHARES MAY NOT BE
OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OTHER THAN PURSUANT TO AN EXEMPTION FROM
SUCH REGISTRATION REQUIREMENTS.
After the above requirement for a legend is no longer
applicable because the Shares are freely transferable under
the Securities Act, the Company shall remove such legend upon
request from a holder of such Shares, if outside counsel for
such holder reasonably determines that the transfer of such
Shares is no longer restricted by the Securities Act and
outside counsel for the Company reasonably concurs in such
determination.
<PAGE>
22
ARTICLE VI
COVENANTS OF THE PURCHASERS
SECTION 6.1. Agreement to Take Necessary and
Desirable Actions. Each Purchaser shall (a) subject to the
satisfaction of the conditions set forth in Section 7.2,
execute and deliver each of the Equity Documents to which it
is a party and such other documents, certificates, agreements
and other writings and (b) take such other actions as may be
reasonably necessary, desirable or requested by the Company
in order to consummate or implement the Issuance to such
Purchaser in accordance with the terms of this Agreement.
SECTION 6.2. Compliance with Conditions;
Commercially Reasonable Efforts. Each Purchaser will use all
commercially reasonable efforts to cause all of the
obligations imposed upon it in this Agreement to be duly
complied with, and to cause all conditions precedent to the
obligations of the Company and the Purchasers to be
satisfied. Upon the terms and subject to the conditions of
this Agreement, each Purchaser will use all commercially
reasonable efforts to take, or cause to be taken, all action,
and to do, or cause to be done, all things necessary, proper
or advisable consistent with applicable law to consummate and
make effective in the most expeditious manner practicable the
Issuance to such Purchaser in accordance with the terms of
this Agreement.
SECTION 6.3. HSR Act Notification. To the extent
required by the HSR Act, each Purchaser shall, if it has not
already done so, (a) use all commercially reasonable efforts
to file or cause to be filed, as promptly as practicable
after the execution and delivery of this Agreement, with the
United States Federal Trade Commission and the Antitrust
Division of the United States Department of Justice, all
reports and other documents required to be filed by it under
the HSR Act concerning the transactions contemplated hereby
and (b) use all commercially reasonable efforts to promptly
comply with or cause to be complied with any requests by the
United States Federal Trade Commission or the Antitrust
Division of the United States Department of Justice for
additional information concerning such transactions in each
case so that the waiting period applicable to this Agreement
and the transactions contemplated hereby under the HSR Act
shall expire as soon as practicable after the execution and
delivery of this Agreement. Purchaser agrees to request, and
to cooperate with the Company in requesting, early
termination of any applicable waiting period under the HSR
Act.
<PAGE>
23
SECTION 6.4. Consents and Approvals. Each Purchaser
(a) shall use all commercially reasonable efforts to obtain
all necessary consents, waivers, authorizations and approvals
of all Governmental Authorities other than as expressly set
forth in Section 6.3 regarding the HSR Act, and of all other
Persons required in connection with the execution, delivery
and performance of this Agreement or the consummation of the
Issuance to such Purchaser and (b) shall diligently assist
and cooperate with the Company in preparing and filing all
documents required to be submitted by the Company to any
Governmental Authority in connection with such Transactions
(which assistance and cooperation shall include, without
limitation, timely furnishing to the Company all information
concerning such Purchaser that counsel to the Company
reasonably determines is required to be included in such
documents or would be helpful in obtaining any such required
consent, waiver, authorization or approval).
SECTION 6.5. Restrictions on Transfer. No Purchaser
shall sell, assign, transfer, pledge, hypothecate, deposit in
a voting trust or otherwise dispose of any portion of the
Shares (any such disposition, a "Share Transfer"), other than
(a) to a Permitted Transferee of such Purchaser that has
agreed in writing (each, a "Permitted Transferee Agreement")
to be bound by the terms and provisions of this Section 6.5
to the same extent that the transferring Purchaser would be
bound if it beneficially owned the Shares transferred to such
Permitted Transferee or (b)(i) in any transaction in
compliance with Rule 144 under the Securities Act or any
successor rule or regulation, (ii) in a transaction exempt
from the registration requirements of the Securities Act or
(iii) pursuant to a registration statement. Each Purchaser
shall promptly notify the Company of any Share Transfer to a
Permitted Transferee of such Purchaser, which notification
shall include a Permitted Transferee Agreement executed by
each Permitted Transferee of such Purchaser to whom any
Shares have been transferred.
ARTICLE VII
CONDITIONS PRECEDENT TO CLOSING
SECTION 7.1. Conditions to the Company's
Obligations. The obligations of the Company with respect to a
Purchaser hereunder required to be performed on the
<PAGE>
24
Closing Date shall be subject to the satisfaction or waiver,
at or prior to the Closing, of the following conditions:
(a) The representations and warranties of such
Purchaser contained in this Agreement shall have been true
and correct when made and, in addition, shall be repeated and
true and correct in all material respects on and as of the
Closing Date with the same force and effect as though made on
and as of the Closing Date.
(b) Such Purchaser shall have performed in all
material respects all obligations and agreements, and
complied in all material respects with all covenants
contained in this Agreement to be performed and complied with
by such Purchaser at or prior to the Closing Date.
(c) Any applicable waiting period under the HSR Act
with respect to the purchase by such Purchaser shall have
expired or been terminated.
SECTION 7.2. Conditions to Each Purchaser's
Obligations. The obligations of a Purchaser hereunder
required to be performed on the Closing Date shall be subject
to the satisfaction or waiver, at or prior to the Closing, of
the following conditions:
(a) The representations and warranties of the
Company contained in this Agreement (i) shall have been true
and correct when made and (ii) shall be (A) in the case of
representations and warranties that are qualified as to
materiality or Material Adverse Effect, true and correct and
(B) in all other cases, true and correct in all material
respects, in the case of clauses (A) and (B), as of the
Closing Date with the same force and effect as though made on
and as of the Closing Date.
(b) The Company shall have performed in all
material respects all of its obligations, agreements and
covenants contained in this Agreement to be performed and
complied with at or prior to the Closing Date.
(c) The Company shall have entered into the
Registration Rights Agreement.
(d) The Company shall have filed the Certificate of
Designation with the Secretary of State of the State of
Delaware.
(e) Any applicable waiting period under the HSR Act
with respect to the purchase by such Purchaser shall have
expired or been terminated.
<PAGE>
25
(f) With respect to the Closing of the purchase by
Microsoft, the earlier of (x) December 15, 1999, or (y) the
expiration or other termination of the waiting period under
the HSR Act with respect to the filing under the HSR Act by
the HMTF Purchaser, shall have occurred prior to or
simultaneously with such Closing; and with respect to the
Closing of the purchase by DB, the purchase by the HMTF
Purchaser shall have occurred prior to or simultaneously with
such Closing.
(g) The Company shall have delivered to such
Purchaser a certificate executed by it or on its behalf by a
duly authorized representative, dated the Closing Date, to
the effect that each of the conditions specified in paragraph
(a) through (e) of this Section 7.2 has been satisfied.
(h) No provision of any Applicable Law, injunction,
order or decree of any Governmental Entity shall be in effect
which has the effect of making the Transactions illegal or
shall otherwise restrain or prohibit the consummation of the
Transactions.
(i) Such Purchaser shall have received an opinion
of counsel to the Company, dated the Closing Date, and
addressed to such Purchaser, in form and substance reasonably
acceptable to the Purchaser.
(j) Such Purchaser shall have received certificates
representing the Shares purchased by such Purchaser
concurrently with the Company's receipt of the Purchase Price
for such Shares.
(k) with respect to the HMTF Purchaser and the
Olympus Funds only, the Company shall have delivered to the
HMTF Purchaser and the Olympus Funds a Management Rights
Agreement executed by the Company and addressed to the HMTF
Funds and the Olympus Growth Fund III, L.P., respectively.
(l) there shall not have occurred (i) any event,
circumstance, condition, fact, effect or other matter which
has had or could reasonably be expected to have a material
adverse effect (x) on the business, assets, financial
condition, prospects, or results of operations of the Company
and the Subsidiaries taken as a whole or (y) on the ability
of the Company and the Subsidiaries to perform on a timely
basis any material obligation under this Agreement or to
consummate the Issuance contemplated hereby; or (ii) any
material disruption of or material adverse change in
financial, banking or capital market conditions that would
<PAGE>
26
reasonably be expected to materially impair the Company's
ability to obtain financing on reasonable terms.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. Indemnification. (a) All
representations, warranties, covenants and agreements
contained in this Agreement shall survive the Closing for 18
months (except (i) covenants and agreements that are required
to be performed after the Closing Date and (ii) the last
sentence of Section 3.2(a), which shall survive
indefinitely). Notwithstanding the foregoing, with respect to
claims asserted pursuant to this Section 8.1 before the
expiration of the applicable representation, warranty,
covenant or agreement, such claims shall survive until the
date they are finally adjudicated or otherwise resolved.
(b) The Company agrees to indemnify and hold
harmless each Purchaser and each Purchaser Affiliate (each an
"indemnified person"), from and against (and to reimburse
each indemnified person as the same are incurred) any and all
losses (including, but not limited to, impairment of the
value of the Shares as of the date such loss first becomes
known, but excluding consequential damages), claims, damages,
liabilities, costs and expenses (collectively, "Losses") to
which any indemnified person may become subject or which any
indemnified person may incur based upon, arising out of, or
in connection with (i) a breach of any representation,
warranty or covenant of this Agreement by the Company or (ii)
any claim, litigation, investigation or proceeding brought by
or on behalf of any Person other than the Company relating to
the Issuance, and to reimburse each indemnified person upon
demand for any reasonable legal or other reasonable out of
pocket expenses incurred in connection with investigating or
defending any of the foregoing, provided the maximum amount
indemnifiable to each Purchaser (and its successors or
assigns) under clause (i) shall not exceed the purchase price
of the Shares purchased by such Purchaser.
(c) If a Person entitled to indemnity hereunder (an
"Indemnified Party") asserts that the Company (the
"Indemnifying Party") has become obligated to the Indemnified
Party pursuant to Section 8.1(b), or if any suit, action,
investigation, claim or proceeding is begun, made or
instituted as a result of which the Indemnifying Party may
become obligated to the Indemnified Party hereunder, the
Indemnified Party shall notify the
<PAGE>
27
Indemnifying Party promptly and shall cooperate with the
Indemnifying Party, at the Indemnifying Party's expense, to
the extent reasonably necessary for the resolution of such
claim or in the defense of such suit, action or proceedings,
including making available any information, documents and
things in the possession of the Indemnified Party.
Notwithstanding the foregoing notice requirement, the right
to indemnification hereunder shall not be affected by any
failure to give, or delay in giving, notice unless, and only
to the extent that, the rights and remedies of the
Indemnifying Party shall have been materially prejudiced as a
result of such failure or delay.
(d) In fulfilling its obligations under this
Section 8.1, after the Indemnifying Party has provided each
Indemnified Party with a written notice of its acceptance of
liability under this Section 8.1, as between such Indemnified
Party and the Indemnifying Party, the Indemnifying Party
shall have the right to investigate, defend, settle or
otherwise handle, with the aforesaid cooperation, any claim,
suit, action or proceeding brought by a third party in such
manner as the Indemnifying Party may in its sole discretion
reasonably deem appropriate; provided, that (i) counsel
retained by the Indemnifying Party is reasonably satisfactory
to the Indemnified Party and (ii) the Indemnifying Party will
not consent to any settlement or entry of judgment imposing
any obligations on any other party hereto other than
financial obligations for which such party will be
indemnified hereunder, unless such party has consented in
writing to such settlement or judgment (which consent may be
given or withheld in its sole discretion) and (iii) the
Indemnifying Party will not consent to any settlement or
entry of judgment unless, in connection therewith, the
Indemnifying Party obtains a full and unconditional release
of the Indemnified Party from all liability with respect to
such suit, action, investigation claim or proceeding.
Notwithstanding the Indemnifying Party's election to assume
the defense or investigation of such claim, action or
proceeding, the Indemnified Party shall have the right to
employ separate counsel and to participate in the defense or
investigation of such claim, action or proceeding, which
participation shall be at the expense of the Indemnifying
Party, if (i) on the advice of counsel to the Indemnified
Party use of counsel of the Indemnifying Party's choice could
reasonably be expected to give rise to a material conflict of
interest, (ii) the Indemnifying Party shall not have employed
counsel reasonably satisfactory to the Indemnified Party to
represent the Indemnified Party within a reasonable time
after notice of the assertion of any such claim or
institution of any such action or proceeding, (iii) if the
<PAGE>
28
Indemnifying Party shall authorize the Indemnified Party to
employ separate counsel at the Indemnifying Party's expense
or (iv) such action shall seek relief other than monetary
damages against the Indemnified Party.
(e) The Company and the Purchasers agree that any
payment of Losses made hereunder will be treated by the
parties on their tax returns as an adjustment to the Purchase
Price. If, notwithstanding such treatment by the parties, a
final determination (which shall include the form 870-AD or
successor form) with respect to the Indemnified Party or any
of its affiliates causes any such payment not to be treated
as an adjustment to Purchase Price, then the Indemnifying
Party shall indemnify the Indemnified Party for any taxes
payable by the Indemnified Party or any subsidiary by reason
of the receipt of such payment (including any payments under
this 8.1(e)), determined at an assumed marginal tax rate
equal to the highest marginal tax rate then in effect for
corporate taxpayers in the relevant jurisdiction.
SECTION 8.2. Notices. All notices, demands,
requests, consents, approvals or other communications
(collectively, "Notices") required or permitted to be given
hereunder or which are given with respect to this Agreement
shall be in writing and shall be personally served, delivered
by reputable air courier service with charges prepaid, or
transmitted by hand delivery, telegram, telex or facsimile,
addressed as set forth below, or to such other address as
such party shall have specified most recently by written
notice. Notice shall be deemed given on the date of service
or transmission if personally served or transmitted by
telegram, telex or facsimile. Notice otherwise sent as
provided herein shall be deemed given on the next business
day following delivery of such notice to a reputable air
courier service.
To the Company:
Teligent, Inc.
8065 Leesburg Pike
Suite 400
Vienna, VA 22182
Attn: General Counsel
Telephone: (703) 762-5100
Fax: (703) 762-5227
<PAGE>
29
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attn: Robert Rosenman
Telephone: (212) 474-1300
Fax: (212) 474-3700
To the Purchasers:
To the address specified below for each Purchaser.
(as to matters relating to the HMTF Group)
To the appropriate member of the HMTF Group
c/o Hicks, Muse, Tate & Furst Incorporated
1325 Avenue of the Americas
25th Floor
New York, NY 10019
Attn: Michael Levitt
Telephone: (212) 424-1400
Fax: (212) 424-1450
with a copy to:
Vinson & Elkins, L.L.P.
1325 Avenue of the Americas, 17th Floor
New York, NY 10019
Attn: Eric S. Shube
Telephone: (917) 206-8005
Fax: (917) 206-8100
(as to matters relating to Microsoft Corporation)
One Microsoft Way
Building 8/ 2126
Redmond, WA 98052
Attn: Gregory B. Maffei, Senior Vice
President and Chief Financial Officer
Telephone: (425) 882-8080
Fax: (425) 936-2625
With copies to:
Microsoft Corporation
One Microsoft Way
Office 8S/2056
Redmond, WA 98052-6399
<PAGE>
30
Attn: Robert A. Eshelman, General Counsel,
Finance and Operations
Telephone: (425) 882-8080
Fax: (425) 936-7329
and
Preston, Gates & Ellis,
LLP 701 5th Avenue Suite
5000 Seattle, WA 98104
Attn: Richard B. Dodd
Telephone: (206) 623-7580
Fax: (206) 623-7022
(as to matters relating to Chase Equity
Associates, L.P.)
Chase Manhattan Bank
270 Park Avenue
40th Floor
New York, NY 10017
Attn: Catherine Crowley
Telephone: (212) 270-5015
Fax: (212) 270-7473
(as to matters relating to DB Capital
Investing, L.P.)
White & Case LLP
1155 6th Avenue
New York, NY 10036
Attn: William F. Wynne, Jr.
Telephone: (212) 819-8316
Fax: (212) 354-8113
(as to matters relating to Olympus Growth Fund III,
L.P. and Olympus Executive Fund, L.P. )
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, NY 10019
Attn: Richard A. Stenberg
Telephone: (212) 259-6280
Fax: (212) 259-6333
SECTION 8.3. Governing Law. This Agreement shall be
governed by, interpreted under, and construed in accordance
with the laws of the State of New York, regardless of the
laws that might otherwise govern under applicable principles
of conflicts of law thereof.
<PAGE>
31
SECTION 8.4. Termination. (a) This Agreement may be
terminated as between the Company and any Purchaser (i) at
any time prior to the Closing Date by mutual written
agreement of the Company and such Purchaser, (ii) if the
Closing shall not have occurred on or prior to December 30,
1999, by either the Company or such Purchaser, at any time
after December 30, 1999, provided that the right to terminate
this Agreement under this Section 8.4(a)(ii) shall not be
available to any party whose failure to fulfill any
obligation under this Agreement was the cause of or resulted
in the failure of the Closing to occur on or before such
date, (iii) if any Governmental Authority shall have issued a
nonappealable final order, decree or ruling or taken any
other action having the effect of permanently restraining,
enjoining or otherwise prohibiting the transactions
contemplated by this Agreement, by either the Company or such
Purchaser, (iv) if either the Company or such Purchaser shall
have breached any of its material obligations under this
Agreement, by the non-breaching party, or (v) if an event
described in Section 7.2(l) shall have occurred, by such
Purchaser. Any party desiring to terminate this Agreement
pursuant to clauses 8.4(a)(ii), (iii), (iv) or (v) shall
promptly give notice of such termination to the other party.
(b) If this Agreement is terminated as between the
Company and a Purchaser, as permitted by Section 8.4(a), such
termination shall be without liability of any party (or any
stockholder, director, officer, partner, employee, agent,
consultant or representative of such party) to any other
party to this Agreement; provided that if such termination
shall result from the willful (a) failure of any 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 any party hereto of any
representation or warranty contained herein, such failing or
breaching party shall be fully liable for any and all losses
(excluding consequential damages) incurred or suffered by the
other party as a result of such failure or breach. The
provisions of Sections 8.2, 8.3, this Section 8.4, Sections
8.5, 8.8, 8.10, 8.11, 8.12, 8.13, 8.14, 8.16, 8.17, 8.18 and
8.20 shall survive any termination hereof pursuant to Section
8.4(a).
SECTION 8.5. Entire Agreement. As between the
Company and each Purchaser this Agreement and the Equity
Documents (including all agreements entered into pursuant
hereto and thereto and all certificates and instruments
delivered pursuant hereto and thereto) constitute the entire
agreement of the parties with respect to the subject matter
hereof and supersede all prior and contemporaneous
<PAGE>
32
agreements, representations, understandings, negotiations and
discussions between the parties, whether oral or written,
with respect to the subject matter hereof.
SECTION 8.6. Modifications and Amendments. No
amendment, modification or termination of this Agreement as
between the Company and a Purchaser shall be binding unless
executed in writing by the Company and such Purchaser
intending to be bound thereby.
SECTION 8.7. Waivers and Extensions. Any party to
this Agreement may waive any condition, right, breach or
default that such party has the right to waive, provided that
such waiver will not be effective against the waiving party
unless it is in writing, is signed by such party, and
specifically refers to this Agreement. Waivers may be made in
advance or after the right waived has arisen or the breach or
default waived has occurred. Any waiver may be conditional.
No waiver of any breach of any agreement or provision herein
contained shall be deemed a waiver of any preceding or
succeeding breach thereof nor of any other agreement or
provision herein contained. No waiver or extension of time
for performance of any obligations or acts shall be deemed a
waiver or extension of the time for performance of any other
obligations or acts.
SECTION 8.8. Titles and Headings. Titles and
headings of sections of this Agreement are for convenience
only and shall not affect the construction of any provision
of this Agreement.
SECTION 8.9. Exhibits and Schedules. Each of the
exhibits and schedules referred to herein and attached hereto
is an integral part of this Agreement and is incorporated
herein by reference.
SECTION 8.10. Expenses. All costs and expenses
incurred in connection with this Agreement shall be paid by
the party incurring such cost or expense; provided, however,
that (a) the Company shall pay the filing fee payable in
respect of any HSR filing, and (b) if this Agreement is
terminated with respect to any Purchaser for any reason other
than a breach by such Purchaser and other than a failure of
the condition set forth in Section 7.2(l)(ii) to be
satisfied, then (without limiting any party's right to
recover damages pursuant to Section 8.4(b)) the Company shall
reimburse such Purchaser for such Purchaser's reasonable
out-of-pocket costs and expenses incurred in connection with
this Agreement.
<PAGE>
33
SECTION 8.11. Press Releases and Public
Announcements. All public announcements or disclosures
relating to the Issuance or this Agreement shall be made only
if mutually agreed upon by the Company and the Purchasers,
except to the extent such disclosure is, in the opinion of
counsel, required by law or by regulation of any applicable
national stock exchange or Commission recognized trading
market; provided that (a) any such required disclosure shall
only be made, to the extent consistent with law and
regulation of any applicable national stock exchange or
Commission recognized trading market, after consultation with
each Purchaser and (b) no such announcement or disclosure
(except as required by law or by regulation of any applicable
national stock exchange or Commission recognized trading
market) shall identify any Purchaser without such Purchaser's
prior consent.
SECTION 8.12. Assignment; No Third Party
Beneficiaries. This Agreement and the rights, duties and
obligations hereunder may not be assigned or delegated by the
Company without the prior written consent of the Purchasers,
and may not assigned or delegated by any Purchaser without
the Company's prior written consent except that each
Purchaser may assign any or all of its rights and obligations
under this Agreement to any one or more of its Affiliates.
Any assignment or delegation of rights, duties or obligations
hereunder made by the Company without the prior written
consent of the Purchasers, shall be void and of no effect.
This Agreement and the provisions hereof shall be binding
upon and shall inure to the benefit of each of the parties
and their respective successors and permitted assigns. This
Agreement is not intended to confer any rights or benefits on
any Persons other than the parties hereto, except as
expressly set forth in Section 5.2, Section 8.1, this Section
8.12 or Section 8.20.
SECTION 8.13. Severability. This Agreement shall be
deemed severable, and the invalidity or unenforceability of
any term or provision hereof shall not affect the validity or
enforceability of this Agreement or of any other term or
provision hereof. Furthermore, in lieu of any such invalid or
unenforceable term or provision, the parties hereto intend
that there shall be added as a part of this Agreement a
provision as similar in terms to such invalid or
unenforceable provision as may be possible and be valid and
enforceable.
SECTION 8.14. Counterparts. This Agreement may be
executed in counterparts, each of which shall be deemed an
original, but all of which taken together shall constitute
one and the same instrument.
<PAGE>
34
SECTION 8.15. Further Assurances. As between the
Company and a Purchaser, each party hereto, upon the request
of any other party hereto, shall do all such further acts and
execute, acknowledge and deliver all such further instruments
and documents as may be necessary or desirable to carry out
the transactions contemplated by this Agreement, including,
in the case of the Company, such acts, instruments and
documents as may be necessary or desirable to convey and
transfer to each Purchaser the Shares to be purchased by it
hereunder.
SECTION 8.16. Remedies Cumulative. The remedies
provided herein shall be cumulative and shall not preclude
the assertion by any party hereto of any other rights or the
seeking of any remedies against the other party hereto.
SECTION 8.17. Several Liability of the Purchasers.
Nothing in this Agreement (including, without limitation,
Article VI) shall be construed to impose on any Purchaser any
liability for any action or failure to act of any other
Purchaser, including any breach of this Agreement by any such
other Purchaser.
SECTION 8.18. No Duty to Other Purchasers. Each
Purchaser confirms with each other Purchaser that such
Purchaser has conducted its own due diligence in connection
with its investment in the Shares and the other Purchasers
may therefore have information different from, or additional
to, the information possessed by such Purchaser. In addition,
although certain of such other Purchasers (the "Supplying
Purchasers") may have shared information received by them
(including information contained in third party reports
prepared for such other Purchasers) with such Purchaser, no
representation or warranty is being made with respect to such
information by any Supplying Purchaser or any such third
party. Nothing in this Section 8.18 is meant to limit any
duty, obligation or liability the Company may have to any
Purchaser under this Agreement or otherwise.
SECTION 8.19. Specific Performance. The parties
hereto agree that the remedy at law for any breach of this
Agreement may be inadequate, and that as between the Company
and a Purchaser 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 a 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 as between the Company and
a Purchaser, or prevent any violation hereof, and, to the
extent permitted by applicable as between the
<PAGE>
35
Company and a Purchaser law, each party waives any objection
to the imposition of such relief.
SECTION 8.20. No Purchaser Affiliate Liability. No
Purchaser Affiliate shall have any liability or obligation of
any nature whatsoever in connection with or under this
Agreement or the transactions contemplated hereby, and the
Company hereby waives and releases all claims of any such
liability and obligation, it being understood that no such
Person or entity (other than Purchaser) shall be liable for
or in respect of this Agreement with the transactions
contemplated hereby.
<PAGE>
36
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement as of the date first above written.
TELIGENT, INC.,
by /s/ Alex Mandl
-------------------------------
Name: Alex Mandl
Title: Chairman and Chief
Executive Officer
HMTF-IV ACQUISITION CORP.,
by /s/ Jack D. Furst
-------------------------------
Name: Jack D. Furst
Title: Authorized Representative
MICROSOFT CORPORATION,
by /s/ Gregory B. Maffei
-------------------------------
Name: Gregory B. Maffei
Title: Senior Vice President
and Chief Financial Officer
CHASE EQUITY ASSOCIATES, L.P.,
BY: CHASE CAPITAL PARTNERS,
its General Partner
by /s/ Michael R. Hannon
-------------------------------
Name: Michael R. Hannon
Title: General Partner
<PAGE>
37
DB CAPITAL INVESTORS, L.P.,
BY: DB CAPITAL PARTNERS, L.P.,
its General Partner
By: DB CAPITAL PARTNERS, INC.,
by /s/ Frank Schiff
-------------------------------
Name: Frank Schiff
Title: Managing Director
OLYMPUS GROWTH FUND III, L.P.,
BY: OGP III, LLC
by /s/ Louis J. Mischianti
-------------------------------
Name: Louis J. Mischianti
Title: Member
OLYMPUS EXECUTIVE FUND, L.P.,
BY: OEF, L.P., its general partner
By: LJM L.L.C., its general partner
by /s/ Louis J. Mischianti
-------------------------------
Name: Louis J. Mischianti
Title: Managing Member
<PAGE>
SCHEDULE I
Purchaser Number of Shares
HMTF-IV Acquisition Corp. 200,000
Microsoft Corporation 200,000
Chase Equity Associates, L.P. 50,000
DB Capital Investors, L.P. 25,000
Olympus Growth Fund III, L.P. 24,750
Olympus Executive Fund, L.P. 250
This REGISTRATION RIGHTS AGREEMENT
(the "Agreement"), is made as of
December 3, 1999, by and among Teligent,
Inc. a Delaware corporation, (the
"Company") and the security holders
listed on Schedule I to this Agreement.
WHEREAS, the Company and the Initial Holders (as
herein defined) (or certain Affiliates of the Initial
Holders) entered into a Stock Purchase Agreement dated
November 4, 1999 (the "Stock Purchase Agreement");
WHEREAS, it is a condition precedent to the closing
of the transactions contemplated in the Stock Purchase
Agreement that the parties hereto execute and deliver this
Agreement;
NOW THEREFORE, in consideration of the premises,
mutual promises and covenants contained in this Agreement and
intending to be legally bound, the parties hereto hereby
agree as follows:
ARTICLE I
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:
"Chase Holders" means the Initial Chase Holders and
any direct or indirect transferee of any Registrable
Securities held by the Initial Chase Holders.
"Commission" means the Securities and Exchange
Commission.
"Demand Registration" means a registration under
the Securities Act requested in accordance with Section 2.01.
"DB Holders" means the Initial DB Holders and any
direct or indirect transferee of any Registrable Securities
held by the Initial DB Holders.
"HMTF Holders" means the Initial HMTF Holders and
any direct or indirect transferee of any Registrable
Securities held by the Initial HMTF Holders.
<PAGE>
2
"Holders" means the collective reference to the
HMTF Holders, the Microsoft Holders, the Chase Holders, the
DB Holders and the Olympus Holders.
"Initial Chase Holders" means Chase Capital
Partners, a New York General Partnership, or any of its
Affiliates that it controls (including without limitation
Chase Equity Associates, L.P.)
"Initial DB Holders" means DB Capital
Investors, L.P.
"Initial HMTF Holders" means HM4 Teligent Qualified
Fund, LLC; HM4 Teligent Private Fund, LLC; HM PG-IV Teligent,
LLC; HM 4-SBS Teligent Coinvestors, LLC, HM 4-EQ Teligent
Coinvestors, LLC and HMTF Bridge Teligent, LLC.
"Initial Holders" means the collective reference to
the Initial HMTF Holders, the Initial Microsoft Holders, the
Initial Chase Holders, the Initial DB Holders and the Initial
Olympus Holders.
"Initial Microsoft Holders" means Microsoft
Corporation.
"Initial Olympus Holders" means Olympus Growth Fund
III, L.P. and Olympus Executive Fund, L.P.
"Initial Shelf Registration" has the meaning set
forth in Section 2.03(a).
"Microsoft Holders" means the Initial Microsoft
Holders and any direct or indirect transferee of any
Registrable Securities held by the Initial Microsoft Holders.
"Olympus Holders" means the Initial Olympus Holders
and any direct or indirect transferee of any Registrable
Securities held by the Initial Olympus Holders.
"Piggyback Registration" has the meaning set forth
in Section 2.02.
"Registrable Common Stock" means the shares of
Common Stock issued upon conversion of the Registrable Series
A Preferred Stock, plus any additional shares of Common Stock
issued in respect thereof in connection with any stock split,
stock dividend or similar event with respect to the Common
Stock.
<PAGE>
3
"Registrable Series A Preferred Stock" means the
Series A Preferred Stock purchased pursuant to the Stock
Purchase Agreement, plus any additional shares of Series A
Preferred Stock issued in respect thereof in connection with
any stock split, stock dividend or similar event with respect
to the Series A Preferred Stock.
"Registrable Securities" means (a) the Registrable
Series A Preferred Stock, (b) the Registrable Common Stock
and (c) any securities of the Company or any successor entity
into which Registrable Common Stock or Registrable Series A
Preferred Stock may hereafter be converted or changed. As to
any particular Registrable Securities, such securities shall
cease to be Registrable Securities when (i) a registration
statement with respect to the sale of such securities shall
have become effective under the Securities Act and such
securities shall have been disposed of under such
registration statement, (ii) such securities shall have been
transferred pursuant to Rule 144, (iii) such securities shall
have been otherwise transferred or disposed of, and new
certificates therefor not bearing a legend restricting
further transfer shall have been delivered by the Company,
and subsequent transfer or disposition of them shall not
require their registration or qualification under the
Securities Act or any similar state law then in force, or
(iv) such securities shall have ceased to be outstanding.
"Requesting Holders" means the Holders requesting a
Demand Registration, and shall include parties deemed
"Requesting Holders" pursuant to Sections 2.01(a)(v)-(vii).
"Rule 144" means Rule 144 (or any successor rule of
similar effect) promulgated under the Securities Act.
"Second Shelf Registration" has the meaning set
forth in Section 2.03(b).
"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 Agreement, and references to
the parties shall mean the parties to the Stock Purchase
Agreement.
<PAGE>
4
ARTICLE II
Registration Rights
SECTION 2.01. Demand Registration. (a)(i) Holders
of a majority of the Registrable Securities held by the HMTF
Holders may make up to three written requests for a Demand
Registration of all or any part of the Registrable Securities
held by such HMTF Holders; provided, that (A) each such
Demand Registration by the HMTF Holders must be in respect of
Registrable Securities with a fair market value of at least
$50,000,000, and (B) the HMTF Holders shall not be entitled
to a Demand Registration if, during the 120 days preceding
such request, either the HMTF Holders had requested a Demand
Registration (unless such Demand Registration was preempted
pursuant to Section 2.01(e)), or the HMTF Holders were given
the opportunity to participate in a Piggyback Registration in
accordance with Section 2.02 and either (1) failed to notify
the Company of a desire to participate in such Piggyback
Registration or (2) notified the Company of a desire to
participate in such Piggyback Registration and were able to
sell in such Piggyback Registration at least 80% of the
Registrable Securities requested by the HMTF Holders to be
included in such Piggyback Registration.
(ii) Holders of a majority of the Registrable
Securities held by the Microsoft Holders may make up to three
written requests for a Demand Registration of all or any part
of the Registrable Securities held by such Microsoft Holders;
provided, that (A) each such Demand Registration by the
Microsoft Holders must be in respect of Registrable
Securities with a fair market value of at least $50,000,000,
and (B) the Microsoft Holders shall not be entitled to a
Demand Registration if, during the 120 days preceding such
request, either the Microsoft Holders had requested a Demand
Registration (unless such Demand Registration was preempted
pursuant to Section 2.01(e)), or the Microsoft Holders were
given the opportunity to participate in a Piggyback
Registration in accordance with Section 2.02 and either (1)
failed to notify the Company of a desire to participate in
such Piggyback Registration or (2) notified the Company of a
desire to participate in such Piggyback Registration and were
able to sell in such Piggyback Registration at least 80% of
the Registrable Securities requested by the Microsoft Holders
to be included in such Piggyback Registration.
(iii) Holders of a majority of the Registrable
Securities held by the Chase Holders, the DB Holders and the
<PAGE>
5
Olympus Holders may make one written request for a Demand
Registration of all or any part of the Registrable Securities
held by such Chase Holders, DB Holders and Olympus Holders.
Any such Demand Registration pursuant to this Section
2.01(a)(iii) must be in respect of Registrable Securities
with a fair market value of at least $75,000,000; provided,
that such Requesting Holders shall not be entitled to
exercise a Demand Registration if, during the 120 days
preceding such request, such Requesting Holders were given
the opportunity to participate in a Piggyback Registration in
accordance with Section 2.02 and either (1) holders of a
majority of the Registrable Securities held by such
Requesting Holders failed to notify the Company of a desire
to participate in such Piggyback Registration or (2) such
Requesting Holders notified the Company of a desire to
participate in such Piggyback Registration and were able to
sell in such Piggyback Registration at least 80% of the
Registrable Securities requested by the Chase Holders, the DB
Holders and the Olympus Holders, respectively, to be included
in such Piggyback Registration.
(iv) Any request for a Demand Registration will
specify the aggregate number of shares of Registrable
Securities proposed to be sold by the Requesting Holders 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 Agreement or the inability of the
Requesting Holders to reach agreement with the Underwriters
for the proposed sale on price or other 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 Company is in compliance in all material
respects with its obligations under this Agreement), then,
subject to Section 2.01(b), such Demand Registration shall be
deemed to have been effected (provided that (i) if, the
Demand Registration does not become effective because a
material adverse change has occurred, or is reasonably likely
to occur, in the condition (financial or otherwise),
business, assets or results of operations of the Company and
its subsidiaries taken as a whole subsequent to the date of
the written request made by the Requesting Holders or (ii)
if, after the Demand Registration has become effective, an
offering of Registrable Securities pursuant to a registration
is interfered with by any stop order, injunction, or other
order or requirement of the Commission or other governmental
agency or court then the Demand Registration shall not be
deemed to have been effected and will not count as a Demand
Registration).
<PAGE>
6
(v) Upon receipt of any request for a Demand
Registration by holders of a majority of the Registrable
Securities held by the HMTF Holders, the Company shall
promptly (but in any event within ten (10) days) give written
notice of such proposed Demand Registration to all other HMTF
Holders, and all such HMTF Holders shall have the right,
exercisable by written notice to the Company within twenty
(20) days of their receipt of the Company's notice, to elect
to include in such Demand Registration such portion of their
Registrable Securities as they may request. All such HMTF
Holders requesting to have their Registrable Securities
included in a Demand Registration in accordance with the
preceding sentence shall be deemed to be "Requesting Holders"
for purposes of this Section 2.01.
(vi) Upon receipt of any request for a Demand
Registration by holders of a majority of the Registrable
Securities held by the Microsoft Holders, the Company shall
promptly (but in any event within ten (10) days) give written
notice of such proposed Demand Registration to all other
Microsoft Holders, and all such Microsoft Holders shall have
the right, exercisable by written notice to the Company
within twenty (20) days of their receipt of the Company's
notice, to elect to include in such Demand Registration such
portion of their Registrable Securities as they may request.
All such Microsoft Holders requesting to have their
Registrable Securities included in a Demand Registration in
accordance with the preceding sentence shall be deemed to be
"Requesting Holders" for purposes of this Section 2.01.
(vii) Upon receipt of any request for a Demand
Registration by holders of a majority of the Registrable
Securities held by the Chase Holders, DB Holders and Olympus
Holders, the Company shall promptly (but in any event within
ten (10) days) give written notice of such proposed Demand
Registration to all other Chase Holders, DB Holders and
Olympus Holders, and all such Holders shall have the right,
exercisable by written notice to the Company within twenty
(20) days of their receipt of the Company's notice, to elect
to include in such Demand Registration such portion of their
Registrable Securities as they may request. All such Holders
requesting to have their Registrable Securities included in a
Demand Registration in accordance with the preceding sentence
shall be deemed to be "Requesting Holders" for purposes of
this Section 2.01.
(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
<PAGE>
7
HMTF Holders, the Microsoft Holders or the Chase Holders, the
DB Holders and the Olympus Holders, as the case may be, may
reacquire such Demand Registration (such that the with drawal
or failure to pursue a request will not count as a Demand
Registration hereunder) if the Selling Holders reimburse the
Company for any and all Registration Expenses incurred by the
Company in connection with such request for a Demand
Registration.
(c) If the Requesting Holders so elect, the
offering of such Registrable Securities pursuant to such
Demand Registration shall be in the form of a "firm commit
ment" underwritten offering. A majority in interest of the
Requesting Holders shall have the right to select the
managing Underwriters and any additional investment bankers
and managers to be used in connection with any offering under
this Section 2.01, subject to the Company's approval, which
approval shall not be unreasonably withheld.
(d) The Requesting Holders will inform the Company
of the time and manner of any disposition of Registrable
Common Stock, and agree to reasonably cooperate with the
Company in effecting the disposition of the Registrable
Common Stock in a manner that does not unreason ably disrupt
the public trading market for the Common Stock; provided,
however, that the Holders' only right to a shelf registration
statement shall be pursuant to Section 2.03.
(e) The Company will have the right to preempt any
Demand Registration with a primary registration by delivering
written notice (within five business days after the Company
has received a request for such Demand Registration) of such
intention to the Selling Holder indicating that the Company
has identified a specific business need and use for the
proceeds of the sale of such securities and the Company 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 Company's preemption of a requested Demand
Registration, such requested registration will not count as
the Holders' Demand 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 Company
may exercise the right to preempt only twice in any 360-day
period; provided that during any 360-day period the Company
shall use its reasonable best efforts to permit a period of
at least
<PAGE>
8
120 consecutive days during which the Selling Holders may
effect a Demand Registration.
(f) Priority on Demand Registrations. No securi
ties to be sold for the account of any Person (including the
Company) other than a Requesting Holder shall be included in
a Demand Registration unless the managing Underwriter or
Underwriters shall advise the Company and the Requesting
Holders in writing that the inclusion of such securities will
not materially and adversely affect the price of the offering
(a "Material Adverse Effect"). Furthermore, in the event the
managing Underwriter or Underwriters shall advise the Company
or the Requesting Holders that even after exclusion of all
securities of other Persons (including the Company) pursuant
to the immediately preceding sentence, the amount of
Registrable Securities proposed to be included in such Demand
Registration by Requesting Holders is suffi ciently large to
cause a Material Adverse Effect, the Registrable Securities
of the Requesting Holders to be included in such Demand
Registration shall equal the number of shares which the
Company and the Requesting Holders are so advised can be sold
in such offering without a Material Adverse Effect and such
shares shall be allocated pro rata among the Requesting
Holders on the basis of the number of Registrable Securities
requested to be included in such registration by each such
Requesting Holder; provided, however, that if any Registrable
Securities requested to be registered pursuant to a Demand
Registration under Section 2.01 are excluded from
registration hereunder, then the Holder(s) having shares
excluded ("Excluded Holders") shall have the right to
withdraw all, or any part, of their shares from such
registration.
SECTION 2.02. Piggyback Registration. (a) If the
Company 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,
except as provided for in Section 2.03, pursuant to Rule 415
(or any substitute form or rule, respectively, that may be
adopted by the Commission)), the Company shall give written
notice of such proposed filing to the Holders at the address
set forth in the share register of the Company as soon as
reasonably practicable (but in no event less than 15 days
before the anticipated filing date), undertaking to provide
each Holder the opportunity to register on the same terms and
conditions such number of shares of Registrable Common Stock
as such Holder may request (a "Piggyback Registra tion").
Each Holder will have seven business days after receipt of
any such notice to notify the Company as to whether it wishes
to participate in a Piggyback Registration
<PAGE>
9
(which notice shall not be deemed to be a request for a
Demand Registration); provided that should a Holder fail to
provide timely notice to the Company, such Holder will
forfeit any rights to participate in the Piggyback Registra
tion with respect to such proposed offering other than as
described in Sections 2.01(a)(v)-(vii), as applicable. In the
event that the registration statement is filed on behalf of a
Person other than the Company, the Company will use its best
efforts to have the shares of Registrable Common Stock that
the Holders wish to sell included in the registration
statement. If the Company or the Person for whose account
such offering is being made shall determine in its sole
discretion not to register or to delay the proposed offering,
the Company 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 Common Stock 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 Common Stock for the same period as the delay in
respect of the proposed offering. As between the Company and
the Selling Holders, the Company shall be entitled to select
the Underwriters in connection with any Piggyback
Registration.
(b) Priority on Piggyback Registrations. If the
Registrable Securities requested to be included in the
Piggyback Registration by any Holder differ from the type of
securities proposed to be registered by the Company and the
managing Underwriter advises the Company that due to such
differences the inclusion of such Registrable Securities
would cause a Material Adverse Effect, then (i) the number of
such Holders' Registrable Securities to be included in the
Piggyback Registration shall be reduced to an amount which,
in the opinion of the managing Underwriter, would eliminate
such Material Adverse Effect or (ii) if no such reduction
would, in the opinion of the managing Underwriter, eliminate
such Material Adverse Effect, then the Company shall have the
right to exclude all such Registrable Securities from such
Piggyback Registration, provided, that no other securities of
such type are included and offered for the account of any
other Person in such Piggyback Registration. Any partial
reduction in number of Registrable Securities of any Holder
to be included in the Piggyback Registration pursuant to
clause (i) of the immediately preceding sentence shall be
effected pro rata based on the ratio which such Holder's
requested shares bears to the total number of shares
requested to be included in such Piggyback Registration by
all Persons other than the Company who have the contractual
right to request that their
<PAGE>
10
shares be included in such registration statement and who
have requested that their shares be included. If the
Registrable Securities requested to be included in the
registration statement are of the same type as the securities
being registered by the Company and the managing Underwriter
advises the Company that the inclusion of such Registrable
Securities would cause a Material Adverse Effect, the Company
will be obligated to include in such registration statement,
as to each Holder only a portion of the shares such Holder
has requested be registered equal to the ratio which such
Holder's requested shares bears to the total number of shares
requested to be included in such registration statement by
all Persons (other than the Person or Persons initiating such
registration request) who have the contractual right to
request that their shares be included in such registration
statement and who have requested their shares be included. If
the Company initiated the registration, then the Company may
include all of its securities in such registration statement
before any such Holder's requested shares are included. If
another security holder initiated the registration, then the
Company may not include any of its securities in such
registration statement unless all Registrable Securities
requested to be included in the registration statement by all
Holders are included in such registration statement. If as a
result of the provisions of this Section 2.02(b) any Holder
shall not be entitled to include all Registrable Securities
in a registration that such Holder has requested to be so
included, such Holder may withdraw such Holder's request to
include Registrable Securities in such registration statement
prior to its effectiveness.
Section 2.03 Shelf Registration. (a) Holders of a
majority of the Registrable Securities may, at any time after
the first anniversary of the Closing Date (the "First
Anniversary"), make a written request that the Company effect
a shelf registration of a portion of the Registrable
Securities held by such Holders (the "Initial Shelf Regis
tration") pursuant to Rule 415; provided, that a Holder will
be entitled to include in the Initial Shelf Registration no
more than 25% of the Registrable Securities held by such
Holder. Upon receipt of a request for the Initial Shelf
Registration, the Company shall promptly (but in any event
within 10 days) give written notice of the proposed Initial
Shelf Registration to all other Holders, and each such other
Holders shall have the right to include in the Initial Shelf
Registration up to 25% of the Registrable Securities held by
such Holder.
(b) From and after the fifth anniversary of the
Closing Date (the "Fifth Anniversary"), Holders of a
<PAGE>
11
majority of the Registrable Securities may make a written
request that the Company effect a shelf registration pursuant
to Rule 415 of all or a portion of the Registrable Securities
held by such Holders (the "Second Shelf Registration"). Upon
receipt of a written request for the Second Shelf
Registration, the Company shall promptly (but in any event
within ten (10) days) give written notice of the proposed
Second Shelf Registration to all other Holders, and all such
other Holders shall have the right to include in the Second
Shelf Registration all or a portion of the Registrable
Securities held by such Holder.
ARTICLE III
Registration Procedures
SECTION 3.01. Filings; Information. In connec tion
with the registration of Registrable Securities pursuant to
Section 2.01, Section 2.02 and Section 2.03 hereof, the
Company 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 Company will expeditiously prepare and file
with the Commission a registration statement on any form for
which the Company then qualifies and which counsel for the
Company shall deem appropriate and available for the sale of
the Registrable Securities to be registered there under 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 (i)
with respect to any Demand Registration or Piggyback
Registration, for such period, not to exceed 60 days, as may
be reasonably necessary to effect the sale of such securi
ties, (ii) with respect to the Initial Shelf Registration,
until the earlier of the sale of all Registrable Securities
thereunder and the Fifth Anniversary and (iii) with respect
to the Second Shelf Registration, until the earlier of the
sale of all Registrable Securities thereunder and the end of
the 36th calendar month from the time the Second Shelf
Registration becomes effective; provided that if the Company
shall furnish to the Selling Holder a certificate signed by
the Company's Chairman, President or any Vice-President
stating that the Company's Board of Directors has determined
in good faith that it would be detrimental or otherwise dis
advantageous to the Company 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 informa
tion 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 Company, the Company 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 the Company shall use its reasonable best
efforts to permit a period of at least 120 consecutive days
during which the Company will make a registration statement
available under this Agreement; 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 Company's fiscal year, and (ii) the Securities Act
requires the Company to include audited financials as of the
end of such fiscal year, the Company 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) Anything in this Agreement to the contrary
notwithstanding, it is understood and agreed that the Company
shall not be required to keep any shelf registration
effective or useable for offers and sales of the Registrable
Securities, file a post effective amendment to a shelf
registration statement or prospectus supplement or to
supplement or amend any registration statement, if the
Company is then involved in discussions concerning, or
otherwise engaged in, any material financing or investment,
acquisition or divestiture transaction or other material
business purpose if the Company determines in good faith that
the making of such a filing, supplement or amendment at such
time would interfere with such transaction or purpose. The
Company shall promptly give the Holders of Registrable
Securities written notice of such postponement containing a
general statement of the reasons for such postponement and an
approximation of the anticipated delay. Upon receipt by a
Holder of Registrable Securities of notice of an event of the
kind described in this Section 3.01(b), such Holder shall
forthwith discontinue such Holder's disposition of
Registrable Securities until such Holder's receipt of notice
from the Company that such disposition may continue and of
any supplemented or amended prospectus indicated in such
notice. The Company shall use its reasonable best efforts to
permit sales of Registrable Securities on such shelf
registration statement for at least 120 days during any 360-
day period.
<PAGE>
12
(c) The Company 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.
(d) After the filing of the registration statement,
the Company will promptly notify the Selling Holders of any
stop order issued or, to the Company'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.
(e) The Company will use its commercially reason
able 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; keep each such registration or
qualification (or exemption therefrom) effective during the
period in which such registration statement is required to be
kept effective; and do any and all other acts and things
which may be reasonably necessary or advisable to enable each
Selling Holder to consummate the disposition of the
Registrable Securities owned by such Selling Holder in such
jurisdictions; provided that the Company 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(e), (ii) subject itself to taxation in
any such jurisdiction or (iii) consent to general service of
process in any such jurisdiction.
(f) The Company 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
<PAGE>
13
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 of the occurrence of
any event of the kind described in the preceding sentence,
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 Company, the Selling Holders will deliver to the
Company 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 Company shall
give such notice, the Company 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 Company shall make
available to the Selling Holders such supplemented or amended
prospectus.
(g) The Company will enter into customary
agreements (including an underwriting agreement in customary
form) and take such other actions as are required in order to
expedite or facilitate the sale of such Registrable
Securities.
(h) At the request of any Underwriter in connection
with an underwritten offering the Company 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 Company's independent public accountants
covering such customary matters as the managing Underwriter
may reasonably request.
(i) If requested by the managing Underwriter or any
Selling Holder, the Company shall promptly incorporate in a
prospectus supplement or post effective amendment such
information as the managing Underwriter or any Selling Holder
reasonably requests to be included therein, including without
limitation, with respect to the Registrable Securities being
sold by such Selling Holder, the purchase price being paid
therefor by the Underwriters and with respect to any other
terms of the underwritten offering of the Registrable
Securities to be sold in such offering, and promptly make all
required filings of such prospectus supplement or post
effective amendment.
<PAGE>
14
(j) The Company shall promptly make available for
inspection by any Selling Holder or Underwriter participating
in any disposition pursuant to any registration statement,
and any attorney, accountant or other agent or representative
retained by any such Selling Holder or Underwriter
(collectively, the "Inspectors"), all financial and other
records, pertinent corporate documents and properties of the
Company (collectively, the "Records"), as shall be reasonably
necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers, directors
and employees to supply all information requested by any such
Inspector in connection with such registration statement;
provided, however, that unless the disclosure of such Records
is necessary to avoid or correct a misstatement or omission
in the registration statement or the release of such Records
is ordered pursuant to a subpoena or other order from a court
of competent jurisdiction, the Company shall not be required
to provide any information under this subparagraph (j) if (A)
the Company believes, after consultation with counsel for the
Company, that to do so would cause the Company to forfeit an
attorney-client privilege that was applicable to such
information or (B) if either (1) the Company has requested
and been granted from the Commission confidential treatment
of such information contained in any filing with the
Commission or documents provided supplementally or otherwise
or (2) the Company reasonably determines in good faith that
such Records are confidential and so notifies the Inspectors
in writing unless prior to furnishing any such information
with respect to (A) or (B) such Holder of Registrable
Securities requesting such information agrees to enter into a
confidentiality agreement in customary form and subject to
customary exceptions; provided further, however, that each
Holder of Registrable Securities agrees that it will, upon
learning that disclosure of such Records is sought in a court
of competent jurisdiction, give notice to the Company and
allow the Company, at its expense, to undertake appropriate
action and to prevent disclosure of the Records deemed
confidential.
(k) The Company shall cause the Registrable
Securities included in any registration statement to be (A)
listed on each securities exchange, if any, on which similar
securities issued by the Company are then listed, or (B)
authorized to be quoted and/or listed (to the extent
applicable) on the Nasdaq National Market if the Registrable
Securities so qualify.
(l) The Company shall provide a CUSIP number for
the Registrable Securities included in any registration
<PAGE>
15
statement not later than the effective date of such
registration statement.
(m) The Company shall cooperate with each Selling
Holder and each Underwriter participating in the disposition
of such Registrable Securities and their respective counsel
in connection with any filings required to be made with the
National Association of Securities Dealers, Inc.
(n) The Company shall during the period when the
prospectus is required to be delivered under the Securities
Act, promptly file all documents required to be filed with
the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act.
(o) The Company 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.
(p) The Company will use its commercially
reasonable efforts to cause all such Registrable Common Stock
and, in the event of a public offering of Series A Preferred
Stock, the Series A Preferred Stock (subject to applicable
listing requirements) 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.
The Company may require Selling Holders promptly to
furnish in writing to the Company such information regarding
such Selling Holders, the plan of distribution of the
Registrable Securities and other information as the Company
may from time to time reasonably request or as may be legally
required in connection with such registration.
SECTION 3.02. Registration Expenses. In connection
with any Registration effected hereunder, the Company 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
<PAGE>
16
connection with the listing or quotation of the Registrable
Securities, (v) fees and expenses of counsel to the Company
and the reasonable fees and expenses of independent certified
public accountants for the Company (including fees and
expenses associated with the special audits or the delivery
of comfort letters), (vi) the reasonable fees and expenses of
any additional experts retained by the Company in connection
with such registration and (vii) all roadshow costs and
expenses not paid by the Underwriters.
ARTICLE IV
Indemnification and Contribution
SECTION 4.01. Indemnification by the Company. The
Company 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 reason able 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 Company shall have furnished any
amendments or supplements thereto) or any preliminary
prospectus, or caused by any omission or alleged omission to
state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages or liabilities
are caused by or based upon any information furnished in
writing to the Company by or on behalf of such Selling Holder
expressly for use therein or by the Selling Holder's failure
to deliver a copy of the registration statement or prospectus
or any amendments or supplements thereto after the Company
has furnished the Selling Holder with copies of the same;
provided, however, that the Company shall have no obligation
to indemnify under this sentence to the extent any such
losses, claims, damages or liabilities have been finally and
non-appealably determined by a court to have resulted from
such Selling Holder's willful misconduct or gross negligence.
The Company 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, except insofar as
<PAGE>
17
such losses, claims, damages or liabilities are caused by or
based upon any information furnished in writing to the
Company by or on behalf of such Underwriter expressly for use
therein or by the Underwriter's failure to deliver a copy of
the registration statement or prospectus or any amendments or
supplements thereto after the Company has furnished the
Underwriter with copies of the same; provided, however, that
the Company shall have no obligation to indemnify under this
sentence to the extent any such losses, claims, damages or
liabilities have been finally and non-appealably determined
by a court to have resulted from any such Underwriter's
willful misconduct or gross negligence.
SECTION 4.02. Indemnification by Selling Holders.
Each Selling Holder agrees to indemnify and hold harmless the
Company, its officers and directors, and each Person, if any,
which controls the Company within the meaning of either
Section 15 of the Securities Act or Section 20 of the
Exchange Act to the same extent as the foregoing indemnity
from the Company to 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 substan tially the
same basis as that of the indemnification of the Company
provided in this Section 4.02, 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 such Selling Holder's liability
under this Section 4.02 shall be limited to an amount equal
to the net proceeds (after deducting the underwriting
discount and expenses) received by such Selling Holder from
the sale of such Registrable Securities by such Selling
Holder.
SECTION 4.03. Conduct of Indemnification
Proceedings. In case any proceeding (including any govern
mental 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
<PAGE>
18
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.
SECTION 4.04. Contribution. If the indemnifica tion
provided for in this Article IV 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 pro portion 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 Company, 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
<PAGE>
19
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 Company 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 IV, 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.
ARTICLE V
Miscellaneous
SECTION 5.01. Participation in Underwritten
Registrations. No Person may participate in any under written
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
<PAGE>
20
terms of such underwriting arrangements and this Agreement
and (c) furnishes in writing to the Company such information
regarding such Person, the plan of distribution of the
Registrable Securities and other information as the Company
may from time to time request or as may be legally required
in connection with such registration; provided, however, that
no such Person shall be required to make any representations
or warranties in connection with any such registration other
than representations and warranties as to (i) such Person's
ownership of his or its Registrable Securities to be sold or
transferred free and clear of all liens, claims and
encumbrances, (ii) such Person's power and authority to
effect such transfer and (iii) such matters pertaining to
compliance with securities laws as may be reasonably
requested; provided further, however, that the obligation of
such Person to indemnify pursuant to any such underwriting
agreements shall be several, not joint and several, among
such Persons selling Registrable Securities, and the
liability of each such Person will be in proportion to, and
provided further that such liability will be limited to, the
net amount received by such Person from the sale of such
Person's Registrable Securities pursuant to such
registration.
SECTION 5.02. Rule 144. The Company 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 any Holder, the Company will deliver to such
Holder 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
Company (whether for the account of the Company or otherwise)
not to offer, sell, contract to sell or otherwise dispose of
any Registrable Securities, or any securities convertible
into or exchangeable or exercisable for such securities,
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 120-day period (or such
lesser period as the lead or managing underwriters may
require) beginning on, the effective date of the registration
statement for such underwritten offering (or, in the case of
an offering
<PAGE>
21
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 November 30,
2014, or such earlier time as there shall no longer be any
Registrable Securities; provided, however, that if all shares
of Series A Preferred Stock outstanding on such date shall
not have been redeemed in full in accordance with Section 10
of the Certificate of Designations, this Agreement shall
remain in full force and effect with respect to such shares
(and the shares of Common Stock issuable upon the conversion
of such shares) until such time as such shares have been so
redeemed in full.
SECTION 5.05. Amendments, Waivers, Etc. This
Agreement may not be amended, waived or otherwise modified or
terminated except by an instrument in writing signed by the
Company and (i) Holders of at least 50% of the Registrable
Securities then held by all HMTF Holders, if the amendment is
to be effective against the HMTF Holders, (ii) Holders of at
least 50% of the Registrable Securities then held by all
Microsoft Holders, if the amendment is to be effective
against the Microsoft Holders, (iii) Holders of at least 50%
of the Registrable Securities then held by all Chase Holders,
if the amendment is to be effective against the Chase
Holders, (iv) Holders of at least 50% of the Registrable
Securities then held by all DB Holders, if the amendment is
to be effective against the DB Holders, and (v) Holders of at
least 50% of the Registrable Securities then held by all
Olympus Holders, if the amendment is to be effective against
the Olympus Holders.
SECTION 5.06. Counterparts. This Agreement may be
executed in one or more counterparts, all of which shall be
considered one and the same agreement. Each party need not
sign the same counterpart.
SECTION 5.07. Entire Agreement. This Agreement (i)
constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof.
SECTION 5.08. Governing Law. This Agreement shall
be governed by, and construed in accordance with, the laws of
the State of New York regardless of the laws that might
otherwise govern under applicable principles of conflicts of
law thereof.
<PAGE>
22
SECTION 5.09. Assignment of Registration Rights.
Each Holder of the Registrable Securities may assign all or
any part of its rights under this Agreement to any person to
whom such Holder sells, transfers or assigns such Regis
trable Securities. In the event that the Holder shall assign
its rights pursuant to this Agreement in connection with the
transfer of less than all its Registrable Securities, the
Holder shall also retain his rights with respect to its
remaining Registrable Securities.
IN WITNESS WHEREOF, the Company and each Initial
Holder has caused this Agreement to be signed on its behalf
by its officer thereunto duly authorized as of the date first
written above.
TELIGENT, INC.,
by /s/ Alex Mandl
----------------------------
Name: Alex Mandl
Title: Chairman and Chief
Executive Officer
HM4 TELIGENT QUALIFIED FUND, LLC,
by /s/ David W. Knickel
------------------------
Name: David W. Knickel
Title: Vice President
HM4 TELIGENT PRIVATE FUND, LLC,
by /s/ David W. Knickel
------------------------
Name: David W. Knickel
Title: Vice President
HM PG-IV TELIGENT, LLC,
by /s/ David W. Knickel
------------------------
Name: David W. Knickel
Title: Vice President
<PAGE>
23
HM 4-SBS TELIGENT COINVESTORS, LLC,
by /s/ David W. Knickel
------------------------
Name: David W. Knickel
Title: Vice President
HM 4-EQ TELIGENT COINVESTORS, LLC,
by /s/ David W. Knickel
------------------------
Name: David W. Knickel
Title: Vice President
HMTF BRIDGE TELIGENT, LLC,
by/s/ David W. Knickel
------------------------
Name: David W. Knickel
Title: Vice President
MICROSOFT CORPORATION,
by /s/ Robert A. Eshelman
------------------------
Name: Robert A. Eshelman
Title: Assistant Secretary
CHASE EQUITY ASSOCIATES, L.P.,
by CHASE CAPITAL PARTNERS,
its General Partner
by /s/ Michael R. Hannon
------------------------
Name: Michael R. Hannon
Title: General Partner
<PAGE>
24
DB CAPITAL INVESTORS, L.P.,
by DB CAPITAL PARTNERS, L.P.,
its General Partner
by DB CAPITAL PARTNERS, INC.,
by /s/ Tyler Zachem
------------------------
Name: Tyler Zachem
Title: Managing Director
OLYMPUS GROWTH FUND III, L.P.,
by OGP III, LLC
by /s/ Louis J. Mischianti
--------------------------
Name: Louis J. Mischianti
Title: Member
OLYMPUS EXECUTIVE FUND, L.P.,
by OEF, L.P., its general partner
by LJM L.L.C., its general partner
by /s/ Louis J. Mischianti
--------------------------
Name: Louis J. Mischianti
Title: Managing Member
<PAGE>
SCHEDULE I
Purchase Price
Purchasers Number of Shares of the Shares
- ---------- ---------------- -------------
HM4 Teligent Qualified Fund, LLC 136,207 $ 136,207,000
HM4 Teligent Private Fund, LLC 965 $ 965,000
HM 4-SBS Teligent Coinvestors, LLC 3,350 $ 3,350,000
HM PG-IV Teligent, LLC 7,252 $ 7,252,000
HM 4-EQ Teligent Coinvestors, LLC 2,226 $ 2,226,000
HMTF Bridge Teligent, LLC 50,000 $ 50,000,000
Microsoft Corporation 200,000 $ 200,000,000
Chase Equity Associates, L.P. 50,000 $ 50,000,000
DB Capital Investors, L.P. 25,000 $ 25,000,000
Olympus Growth Fund III, L.P. 24,750 $ 24,750,000
Olympus Executive Fund, L.P. 250 $ 250,000
TELIGENT, INC.
CERTIFICATE OF DESIGNATION OF THE POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL
AND OTHER SPECIAL RIGHTS OF 7-3/4% CUMULATIVE
CONVERTIBLE PREFERRED STOCK AND
QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS THEREOF
7-3/4% Series A Convertible
Preferred Stock due 2014
Teligent, Inc., a company organized and existing
under the General Corporation Law of the State of Delaware
(the "Company"), certifies that pursuant to the authority
contained in its Certificate of Incorporation (the
"Certificate of Incorporation") and its By-laws (the
"By-laws"), and in accordance with Section 151 of the General
Corporation Law of the State of Delaware, the board of
directors of the Company (the "Board of Directors") at a
meeting duly called and held on November 3, 1999, duly
approved and adopted the following resolution, which
resolution remains in full force and effect on the date
hereof:
RESOLVED, that pursuant to the authority vested in
the Board of Directors by the Certificate of Incorporation
and By-laws, the Board of Directors does hereby create,
authorize and provide for the issue of a series of Preferred
Stock having the following designation, voting powers,
preferences and relative, participating, optional and other
special rights:
Certain capitalized terms used herein are defined
in Section 16.
1. Number and Designation. The Company shall have a
series of Preferred Stock, which shall be designated as its
7-3/4% Series A Convertible Preferred Stock due 2014 (the
"Series A Preferred Stock"), par value $0.01 per share, with
500,000 shares initially authorized and, subject to the
limitations set forth herein, such number of additional
shares as are authorized from time to time by resolution of
the Board of Directors for payment of dividends and other
payments (including Special Payments) on the Series A
Preferred Stock in accordance with, and subject to the
limitations set forth in, Section 11 hereof. Unless otherwise
specified, references herein to any "Section" refer to the
Section number specified in this Certificate of Designation.
<PAGE>
2
2. Issuance. The Company may issue up to 500,000
shares of Series A Preferred Stock in accordance with the
Purchase Agreement, and may issue additional shares of Series
A Preferred Stock as dividends and other payments on the
Series A Preferred Stock as may be determined from time to
time by the Board of Directors (or any authorized committee
thereof) in accordance with Section 11.
3. Registered Form; Liquidation Preference;
Registrar. Certificates for shares of Series A Preferred
Stock shall be issuable only in registered form and only with
an initial liquidation preference of $1,000 per share. The
Company shall serve as initial Registrar and Transfer Agent
(the "Registrar") for the Series A Preferred Stock.
4. Registration; Transfer. Shares of the Series A
Preferred Stock have not been registered under the Securities
Act of 1933 (the "Securities Act") and may not be resold,
pledged or otherwise transferred prior to the date when they
may be resold pursuant to Rule 144 under the Securities Act
other than (i) to the Company, (ii) pursuant to an exemption
from registration under the Securities Act or (iii) pursuant
to an effective registration statement under the Securities
Act, in each case in accordance with any applicable
securities laws of any state of the United States. Until such
time as it is no longer required pursuant to the Securities
Act, certificates evidencing the Series A Preferred Stock
shall contain a legend (the "Restrictive Legend") evidencing
the foregoing restrictions in substantially the form set
forth on the form of Series A Preferred Stock attached hereto
as Exhibit A.
5. Paying Agent and Conversion Agent. (a) The
Company shall maintain (i) an office or agency where shares
of Series A Preferred Stock may be presented for payment (the
"Paying Agent"), (ii) an office or agency where shares of
Series A Preferred Stock may be presented for conversion (the
"Conversion Agent"), and (iii) a Registrar, which shall be an
office or an agency where shares of Series A Preferred Stock
may be presented for transfer. The Company may appoint the
Registrar, the Paying Agent and the Conversion Agent and may
appoint one or more additional paying agents and one or more
additional conversion agents in such other locations as it
shall determine. The term "Paying Agent" includes any
additional paying agent, and the term "Conversion Agent"
includes any additional conversion agent. The Company may
change any Paying Agent or Conversion Agent without prior
notice to any holder. The Company shall notify the Registrar
of the name and address of any Paying
<PAGE>
3
Agent or Conversion Agent appointed by the Company. If the
Company fails to appoint or maintain another entity as Paying
Agent or Conversion Agent, the Registrar shall act as such.
Notwithstanding the foregoing, the Company or any of its
Affiliates may act as Paying Agent, Registrar, coregistrar or
Conversion Agent.
(b) Neither the Company nor the Registrar shall be
required (A) to issue, countersign or register the transfer
of or exchange any share of Series A Preferred Stock during a
period beginning at the opening of business 15 days before
any Redemption Date (as defined under Section 10(d)) and
ending at the close of business on such Redemption Date or
(B) to register the transfer of or exchange any share of
Series A Preferred Stock so selected for redemption.
(c) If shares of Series A Preferred Stock are
issued upon the transfer, exchange or replacement of shares
of Series A Preferred Stock bearing the Restricted Shares
Legend, or if a request is made to remove such Restricted
Shares Legend on shares of Series A Preferred Stock, the
shares of Series A Preferred Stock so issued shall bear the
Restricted Shares Legend, or the Restricted Shares Legend
shall not be removed, as the case may be, unless the holders
of such shares shall request such Legend be removed, and
outside counsel for such holders reasonably determines that
the transfer of such shares is no longer restricted by the
Securities Act and outside counsel for the Company reasonably
concurs in such determination.
(d) Each holder of a share of Series A Preferred
Stock agrees to indemnify the Company and the Registrar
against any liability that may result from the transfer,
exchange or assignment by such holder of such holder's share
of Series A Preferred Stock in violation of any provision of
this Certificate of Designation and/or applicable Federal or
state securities law; provided, however, that such indemnity
shall not apply to acts of wilful misconduct or gross
negligence on the part of the Company or the Registrar, as
the case may be.
(e) Payments (whether in cash or in shares of
Series A Preferred Stock) due on the shares of Series A
Preferred Stock shall be payable at the office or agency of
the Company maintained for such purpose in The City of New
York and at any other office or agency maintained by the
Company for such purpose. If any such payment is in cash, it
shall be payable by United States dollar check drawn on, or
wire transfer (provided that appropriate wire
<PAGE>
4
instructions have been received by the Registrar at least 15
days prior to the applicable date of payment) to a United
States dollar account maintained by the holder with, a bank
located in New York City; provided that at the option of the
Company payment of dividends in cash may be made by check
mailed to the address of the person entitled thereto as such
address shall appear in the Series A Preferred Share
Register.
6. Dividend Rights. The Company shall pay, and the
holders of the shares of Series A Preferred Stock shall be
entitled to receive, cumulative dividends from the date of
initial issuance of such shares of Series A Preferred Stock
at a rate of 7-3/4% per annum on the amount of the then
effective Liquidation Preference of the shares of Series A
Preferred Stock. Dividends will be computed on the basis of a
360 day year of twelve 30 day months and, in accordance with
Section 11, will be payable by (A) cash, (B) delivery of
shares of Series A Preferred Stock, or (C) any combination of
the foregoing. Dividends will be payable quarterly in arrears
on February 28, May 31, August 31 and November 30 of each
year (each a "Dividend Payment Date"), commencing February
28, 2000, for so long as any shares of Series A Preferred
Stock are outstanding; provided, however, that if such date
is not a Business Day, then the Dividend Payment Date shall
be the next Business Day. The Company may elect not to
declare dividend payments on any Dividend Payment Date;
provided, however, that dividends on shares of the Series A
Preferred Stock will accrue whether or not the Company has
earnings or profits, whether or not there are funds legally
available for the payment of such dividends and whether or
not dividends are declared. Dividends, whether declared or
undeclared, will accumulate to the extent they are not paid
on the Dividend Payment Date for the period to which they
relate. The Company will take all actions required or
permitted under the General Corporation Law of the State of
Delaware to permit the payment of dividends on the shares of
Series A Preferred Stock. Arrearages of unpaid dividends,
whether declared or undeclared ("Accumulated Dividends"),
will not themselves bear interest but will be added to the
Liquidation Preference of the Series A Preferred Stock in
accordance with the following sentence, and dividends will
accrue thereafter on the full amount of the Liquidation
Preference as so increased. If any dividend payable on any
Dividend Payment Date is not declared and paid in full on
such Dividend Payment Date, the amount so payable, to the
extent not paid, shall be added to the then effective
Liquidation Preference on such Dividend Payment Date.
<PAGE>
5
7. Payment of Dividend; Mechanics of Payment;
Dividend Rights Preserved. (a) Dividends on any share of
Series A Preferred Stock that are payable, and are punctually
paid or duly provided for, on any Dividend Payment Date shall
be paid in arrears to the person in whose name such share of
Series A Preferred Stock (or one or more predecessor shares
of Series A Preferred Stock) is registered at the close of
business on the next preceding February 15, May 15, August 15
and November 15 (each, together with any record date
established for the payment of Accumulated Dividends, a
"Dividend Record Date").
(b) Unless full cumulative dividends on all
outstanding shares of Series A Preferred Stock for all past
dividend periods shall have been declared and paid, or
declared and a sufficient sum for the payment thereof set
apart, then:
(i) no dividend (other than (A) with respect to
Junior Shares or Parity Shares, a dividend payable
solely in any Junior Shares or Parity Shares,
respectively, or (B) with respect to Parity Shares, a
partial dividend paid pro rata on such Parity Shares and
the shares of Series A Preferred Stock) shall be
declared or paid upon, or any sum set apart for the
payment of dividends upon, any Junior Shares or Parity
Shares, respectively;
(ii) no other distribution shall be declared or
made upon, or any sum set apart for the payment of any
distribution upon, any Junior Shares or Parity Shares,
other than a distribution consisting solely of Junior
Shares or Parity Shares, respectively;
(iii) no Junior Shares or Parity Shares or any
warrants, rights, calls or options (other than any
cashless exercises of options or buybacks of options or
restricted stock from present or former employees,
directors or consultants) exercisable for or convertible
into any Parity Share or Junior Share shall be
purchased, redeemed or otherwise acquired (other than in
exchange for other Junior Shares or Parity Shares,
respectively and other than any conversion of Class B
Common Stock of the Company into Class A Common Stock of
the Company) by the Company or any of its subsidiaries;
and
(iv) no monies shall be paid into or set apart or
made available for a sinking or other like fund for the
purchase, redemption or other acquisition of any Junior
<PAGE>
6
Shares or Parity Shares or any warrants, rights, calls
or options exercisable for or convertible into any
Parity Shares or Junior Shares by the Company or any of
its subsidiaries (other than any cashless exercises of
options or option buybacks).
Except as provided in Section 13, holders of Series
A Preferred Stock will not be entitled to any dividends,
whether payable in cash, property or stock, in excess of the
full cumulative dividends as herein described.
(c) The Company will notify the Registrar and make
a public announcement no later than the close of business on
the tenth Business Day prior to the Record Date for each
dividend as to whether it will pay such dividend and, if so,
the form of consideration it will use to make such payment.
(d) Any Accumulated Dividends on any share of
Series A Preferred Stock may be paid, subject to Section 11,
by the Company in any lawful manner (which shall include the
establishment of a record date not more than 45 days prior to
the payment thereof) not inconsistent with the requirements
of any national stock exchange or Commission recognized
trading market on which the shares of Series A Preferred
Stock may be listed or admitted to trading, and upon such
notice (which shall precede the record date by at least ten
Business Days) as may be required by such exchange or trading
market, if, after notice given by the Company to the
Registrar of the proposed payment pursuant to this clause
(d), such manner of payment shall be deemed practicable by
the Registrar. Each payment of Accumulated Dividends made in
compliance with Section 11 shall automatically reduce the
then-effective Liquidation Preference by an amount equal to
such payment; provided, however, that the Liquidation
Preference shall not be reduced below $1,000 per share.
(e) Subject to the foregoing provisions of this
Section 7, each share of Series A Preferred Stock delivered
under this Certificate of Designation upon registration of
transfer of or in exchange for or in lieu of any other share
of Series A Preferred Stock shall carry the rights to
dividends accumulated and unpaid, and to accrue, that were
carried by such other shares of Series A Preferred Stock.
(f) The holder of record of a share of Series A
Preferred Stock at the close of business on a Dividend Record
Date with respect to the payment of dividends on the shares
of Series A Preferred Stock will be entitled to
<PAGE>
7
receive such dividends with respect to such share of Series A
Preferred Stock on the corresponding Dividend Payment Date,
notwithstanding the conversion of such share after such
Dividend Record Date and prior to such Dividend Payment Date.
8. Voting Rights. (a) The holders of record of
shares of Series A Preferred Stock shall not be entitled to
any voting rights except as hereinafter provided in this
Section 8 or as otherwise provided by law.
(b) The holders of record of shares of Series A
Preferred Stock shall be entitled to vote on all matters that
the holders of the Company's Common Stock are entitled to
vote upon.
(c) In addition to the voting rights set forth
above, the approval of the holders of at least a majority of
the then Outstanding shares of Series A Preferred Stock
voting or consenting, as the case may be, as one class, will
be required for the Company to:
(i) amend the Certificate of Incorporation, this
Certificate of Designation or the By-Laws so as to (A)
affect adversely the rights, preferences (including,
without limitation, liquidation preferences, conversion
price, dividend rate and Optional Redemption
provisions), privileges or voting rights of holders of
the shares of Series A Preferred Stock, or (B) increase
or decrease the number of authorized shares of Series A
Preferred Stock;
(ii) 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, except as
expressly provided in Section 14;
(iii) enter into, or permit any of its subsidiaries
to enter into, any agreement that would impose material
restrictions on the Company's ability to honor the
exercise of any rights of the holders of the Series A
Preferred Stock;
(iv) authorize or create, modify the terms of or
increase the authorized amount of any Senior Shares;
(v) issue any shares of Series A Preferred Stock
other than (a) pursuant to the terms of the Purchase
<PAGE>
8
Agreement as in effect on the Closing Date, and (b)
shares issued in payment of dividends on the Series A
Preferred Stock as contemplated in Section 6, Section 7
or Section 13 hereof;
(vi) commence or effect any tender or exchange
offer made by the Company or any Subsidiary for all or
any portion of the Common Stock; or
(vii) issue shares of Parity Stock in excess of
$500,000,000 liquidation preference at the time of
issuance;
provided, that so long as DB Capital Investors, L.P. ("DB")
or any Affiliate transferee of DB holds shares of Series A
Preferred Stock, DB or such transferee shall not vote any of
such shares with respect to transactions described in clauses
(c)(ii), (c)(iii) and (c)(vi) above until such time as the
Financial Services Modernization Act of 1999 becomes
effective or legal restrictions with respect to the voting by
a bank with respect to such transactions are otherwise
removed;
provided, further, that so long as Chase Equity Associates,
L.P. ("Chase") or any Affiliate transferee of Chase holds
shares of Series A Preferred Stock, then Chase or such
transferee shall not vote any of such shares with respect to
transactions described in clauses (c)(ii), (c)(iii) and
(c)(vi) above until such time as the Financial Services
Modernization Act of 1999 becomes effective or legal
restrictions with respect to the voting by a bank with
respect to such transactions are otherwise removed.
(d) For so long as members of the HMTF Group own
(x) at least 100 shares of Series A Preferred Stock and (y)
any combination of the shares of Series A Preferred Stock
issued to members of the HMTF Group on the Closing Date under
the Purchase Agreement (the "HMTF Issued Series A Preferred
Shares") and shares of Common Stock issued upon conversion of
HMTF Issued Series A Preferred Shares which, taken together,
would represent (if all HMTF Issued Series A Preferred Shares
were converted) an amount of Common Stock issuable upon
conversion of 50% or more of the HMTF Issued Series A
Preferred Shares, the HMTF Holders, voting as a single class,
shall be entitled to elect one 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
HMTF Holders called as hereinafter provided. At any time
after voting power to elect such director shall have become
vested and be continuing in the
<PAGE>
9
HMTF Holders pursuant to this paragraph, or if a vacancy
shall exist in the office of a director elected by the HMTF
Holders at a time when the HMTF Holders are entitled to elect
a director pursuant to this paragraph, a proper officer of
the Company may, and upon the written request of the holders
of record of at least twenty-five percent (25%) of the HMTF
Issued Series A Preferred Shares held by the HMTF Holders
then outstanding addressed to the Secretary of the Company
shall, call a special meeting of the HMTF Holders for the
purpose of electing the director that such holders are
entitled to elect. If such meeting shall not be called by a
proper officer of the Company within twenty (20) days after
personal service of said written request upon the Secretary
of the Company, or within twenty (20) days after mailing the
same within the United States by certified mail, addressed to
the Secretary of the Company at its principal executive
offices, then the holders of at least twenty-five percent
(25%) of the HMTF Issued Series A Preferred Shares held by
the HMTF Holders may designate in writing one of their number
to call such meeting at the expense of the Company, and such
meeting may be called by the person so designated upon the
notice required for the annual meeting of stockholders of the
Company and shall be held at the place for holding the annual
meetings of stockholders. As used herein, (i) "HMTF Group"
means Hicks, Muse, Tate & Furst Incorporated, a Texas
corporation, and its Affiliates and their respective
officers, directors, partners, members, stockholders and
employees (and members of their respective families and
trusts for the primary benefit of such family members) and
HM4 Teligent Qualified Fund, LLC; HM4 Teligent Private Fund,
LLC; HM PG-IV Teligent, LLC; HM 4-SBS Teligent Coinvestors,
LLC, HM 4-EQ Teligent Coinvestors, LLC and HM NE Teligent,
LLC and their respective Affiliates; provided, however, that
(1) HM4 Teligent Qualified Fund, LLC shall only constitute a
member of the HMTF Group for so long as it is controlled by
HMTF Equity Fund IV (1999), L.P. or another member of the
HMTF Group, (2) HM4 Teligent Private Fund, LLC shall only
constitute a member of the HMTF Group for so long as it is
controlled by HMTF Private Equity Fund IV (1999), L.P. or
another member of the HMTF Group, (3) HM PG-IV Teligent, LLC
shall only constitute a member of the HMTF Group for so long
as it is controlled by Hicks, Muse PG-IV (1999), C.V. or
another member of the HMTF Group, (4) HM 4- SBS Teligent
Coinvestors, LLC shall only constitute a member of the HMTF
Group for so long as it is controlled by HM 4- SBS (1999)
Coinvestors, L.P. or another member of the HMTF Group, (5) HM
4-EQ Teligent Coinvestors, LLC shall only constitute a member
of the HMTF Group for so long as it is controlled by HM 4-EQ
(1999) Coinvestors, L.P. or another member of the HMTF Group
and (6) HM NE Teligent, LLC shall
<PAGE>
10
only constitute a member of the HMTF Group for so long as it
is controlled by HM New Economy, L.P. or another member of
the HMTF Group and (ii) "HMTF Holders" means members of the
HMTF Group that are the holders of all or a portion of the
HMTF Issued Series A Preferred Shares or the Common Stock
into which such HMTF Issued Series A Preferred Shares are
converted. Any action permitted or required to be taken by
the HMTF Holders pursuant to this Section 8(d) may be taken
(1) at any annual or special meeting of stockholders or at a
special meeting of the HMTF Holders, or (2) without a
meeting, without prior notice, and without a vote if a
consent or consents in writing, setting forth the action so
taken, shall be signed by the HMTF Holders having not less
than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all
shares held by the HMTF Holders entitled to vote thereon were
present and voted and shall be delivered to the Company by
delivery to its address listed in Section 8.2 of the Purchase
Agreement.
(e) In exercising the voting rights set forth in
Section 8(b), each share of Series A Preferred Stock shall be
entitled to vote on an as-converted basis with the holders of
the Company's Common Stock. In exercising the voting rights
set forth in Section 8(d), each HMTF Issued Series A
Preferred Share held by a member of the HMTF Group shall be
entitled to vote on an as-converted basis with the other HMTF
Issued Series A Preferred Shares and shares of Common Stock
held by members of the HMTF Group and into which HMTF Issued
Series A Preferred Shares have been converted, voting as a
single class. In exercising the other voting rights set forth
in this Section 8, each share of Series A Preferred Stock
entitled to vote shall have one vote per share, except that
when any other series of preferred stock shall have the right
to vote with the Series A Preferred Stock as a single class
on any matter, then the Series A Preferred Stock and such
other series of preferred stock shall have with respect to
such matters one vote per $1,000 of the aggregate liquidation
preference of all shares of Series A Preferred Stock and all
shares of such other series of preferred stock. Except as
otherwise required by applicable law or as set forth herein,
the shares of Series A Preferred Stock shall not have any
relative, partici pating, optional or other special voting
rights and powers and the consent of the holders thereof
shall not be required for the taking of any corporate action.
9. Ranking. (a) The shares of Series A Preferred
Stock will, with respect to dividend rights and rights on
liquidation, winding-up and dissolution, rank
<PAGE>
11
(i) senior to all shares of Common Stock (whether issued in
one or more classes) and to each other class of capital stock
or series of Preferred Stock of the Company, the terms of
which do not expressly provide that it ranks senior to or on
a parity with the shares of Series A Preferred Stock as to
dividend rights and rights on liquidation, winding-up and
dissolution of the Company (collectively referred to,
together with all shares of Common Stock (whether issued in
one or more classes) of the Company, as "Junior Shares");
(ii) on a parity with additional shares of Series A Preferred
Stock issued by the Company and each other class of capital
stock or series of Preferred Stock of the Company issued by
the Company in compliance with Section 8, the terms of which
expressly provide that such class or series will rank on a
parity with the shares of Series A Preferred Stock as to
dividend rights and rights on liquidation, winding-up and
dissolution of the Company (collectively referred to as
"Parity Shares"); and (iii) junior to each class of capital
stock or series of Preferred Stock of the Company issued by
the Company in compliance with Section 8, the terms of which
expressly provide that such class or series will rank senior
to the shares of Series A Preferred Stock as to dividend
rights and rights upon liquidation, winding-up and
dissolution of the Company (collectively referred to as
"Senior Shares").
(b) No dividend whatsoever shall be declared or
paid upon, or any sum set apart for the payment of dividends
upon, any outstanding shares of Series A Preferred Stock with
respect to any dividend period unless all dividends for all
preceding dividend periods have been declared and paid, or
declared and a sufficient sum set apart for the payment of
such dividends, upon all outstanding Senior Shares.
(c) In the event of any liquidation, dissolution or
winding-up of the Company, whether voluntary or involuntary,
the holders of the shares of Series A Preferred Stock then
Outstanding shall be entitled to receive, prior and in
preference to any distribution of any of the assets of the
Company to the holders of shares of Common Stock or Junior
Shares by reason of their ownership thereof, an amount equal
to the then effective Liquidation Preference, plus an amount
equal to all dividends accrued and unpaid thereon from the
last Dividend Payment Date to the date fixed for liquidation,
dissolution or winding-up. If upon the occurrence of such
event the assets of the Company shall be insufficient to
permit the payment to such holders of the full preferential
amount and all liquidating payments on all Parity Securities,
the entire assets of the Company legally available for
distribution shall be distributed among the
<PAGE>
12
holders of the shares of Series A Preferred Stock and the
holders of all Parity Shares ratably in accordance with the
respective amounts that would be payable on such shares of
Series A Preferred Stock and any such Parity Securities if
all amounts payable thereon were paid in full. After payment
of the full preferential amount (and, if applicable, an
amount equal to a pro rata dividend to the holders of
Outstanding shares of Series A Preferred Stock), such holders
shall not be entitled to any further participation in any
distribution of assets of the Company.
10. Redemption. (a) The shares of Series A
Preferred Stock may be redeemed at any time commencing on or
after November 30, 2004 (or earlier, in accordance with the
provisions of Section 13(e) if a Change of Control Date shall
have occurred, but only as to shares of Series A Preferred
Stock with respect to which the Remarketing Option has been
elected), in whole or from time to time in part, at the
election of the Company (an "Optional Redemption"), at a
redemption price (the "Redemption Price") payable in cash
equal to 100% (or, in the case of shares of Series A
Preferred Stock with respect to which the Remarketing Option
has been elected, if the Change of Control Date occurs prior
to November 30, 2004, 101%) of the then effective Liquidation
Preference plus accrued and unpaid dividends thereon from the
last Dividend Payment Date to the date of redemption (the
"Optional Redemption Date").
(b) Shares of Series A Preferred Stock (if not
earlier redeemed or converted) shall be mandatorily redeemed
by the Company on November 30, 2014 (the "Mandatory
Redemption Date"; provided, however, that if such date is not
a Business Day, then the Mandatory Redemption Date shall be
the next Business Day), at a Redemption Price per share in
cash equal to the then effective Liquidation Preference, plus
accrued and unpaid dividends thereon from the last Dividend
Payment Date to the Mandatory Redemption Date.
(c) In the event of a redemption of fewer than all
the shares of Series A Preferred Stock, the shares of Series
A Preferred Stock will be chosen for redemption by the
Registrar from the Outstanding shares of Series A Preferred
Stock not previously called for redemption, pro rata or by
lot or by such other method as the Registrar shall deem fair
and appropriate; provided, that the Company may redeem (an
"Odd-lot Redemption") all shares held by holders of fewer
than 100 shares of Series A Preferred Stock (or by holders
that would hold fewer than 100 shares of Series A Preferred
Stock following such redemption) prior to its redemption of
other shares of Series A Preferred Stock;
<PAGE>
13
provided, further, that the Company may not redeem a portion
of any share without redeeming the entire share. If fewer
than all the shares of Series A Preferred Stock represented
by any share certificate are so to be redeemed, (i) the
Company shall issue a new certificate for the shares not
redeemed and (ii) if any shares represented thereby are
converted before termination of the conversion right with
respect to such shares, such converted shares shall be deemed
(so far as may be) to be the shares represented by such share
certificate that was selected for redemption. Shares of
Series A Preferred Stock that have been converted during a
selection of shares of Series A Preferred Stock to be
redeemed shall be treated by the Registrar as outstanding for
the purpose of such selection but not for the purpose of the
payment of the Redemption Price.
(d) In the event the Company elects to effect an
Optional Redemption, the Company shall (i) make a public
announcement of the redemption and (ii) give a redemption
notice (the "Redemption Notice") to the holders not fewer
than 30 days nor more than 60 days before the redemption date
(the "Redemption Date"). Whenever a Redemption Notice is
required to be delivered to the holders, such notice shall
provide the information set forth below and be given by first
class mail, postage prepaid to each holder of shares of
Series A Preferred Stock to be redeemed, at such holder's
address appearing in the Series A Preferred Share Register.
All Redemption Notices shall identify the shares of Series A
Preferred Stock to be redeemed (including CUSIP number) and
shall state:
(i) the Redemption Date;
(ii) the applicable Redemption Price;
(iii) if fewer than all the outstanding shares of
Series A Preferred Stock are to be redeemed, the
identification (and, in the case of partial redemption,
the certificate number, the total number of shares
represented thereby and the number of such shares being
redeemed on the Redemption Date) of the particular
shares of Series A Preferred Stock to be redeemed;
(iv) that on the Redemption Date the Redemption
Price, together with all accrued and unpaid dividends
from the last Dividend Payment Date to the Redemption
Date, will become due and payable upon each such share
of Series A Preferred Stock to be redeemed and that
dividends thereon will cease to accrue on and after said
date;
<PAGE>
14
(v) the conversion price (and, if applicable, the
amount of cash payable on conversion pursuant to Section
12(d)(xii)), the date on which the right to convert
shares of Series A Preferred Stock to be redeemed will
terminate and the place or places where such shares of
Series A Preferred Stock may be surrendered for
conversion; and
(vi) the place or places where such shares of
Series A Preferred Stock are to be surrendered for
payment of the Redemption Price and the other amounts
which are then payable.
The Redemption Notice shall be given by the Company
or, at the Company's request, by the Registrar in the name
and at the expense of the Company; provided that if the
Company so requests, it shall provide the Registrar adequate
time, as reasonably determined by the Registrar, to deliver
such notices in a timely fashion.
(e) Prior to any Redemption Date, the Company shall
deposit with the Registrar or with a Paying Agent (or, if the
Company is acting as its own Paying Agent, segregate and hold
in trust) an amount of consideration sufficient to pay the
Redemption Price of all the shares of Series A Preferred
Stock that are to be redeemed on that date plus all accrued
and unpaid dividends thereon from the last Dividend Payment
Date to the Redemption Date. If any share of Series A
Preferred Stock called for redemption is converted, any
consideration deposited with the Registrar or with any Paying
Agent or so segregated and held in trust for the redemption
of such share of Series A Preferred Stock shall be paid or
delivered to the Company upon Company Order or, if then held
by the Company, shall be discharged from such trust.
(f) Notice of redemption having been given as
aforesaid, the shares of Series A Preferred Stock so to be
redeemed shall, on the Redemption Date, become due and
payable at the Redemption Price therein specified plus all
accrued and unpaid dividends thereon from the last Dividend
Payment Date to the Redemption Date, and from and after such
date (unless the Company shall default in the payment of the
Redemption Price and accrued but unpaid dividends) dividends
on such shares of Series A Preferred Stock shall cease to
accrue and such shares shall cease to be convertible into
shares of Common Stock. Upon surrender of any such shares of
Series A Preferred Stock for redemption in accordance with
said notice, such shares of Series A Preferred Stock shall be
redeemed by the Company at the applicable
<PAGE>
15
Redemption Price, together with all accrued and unpaid
dividends thereon from the last Dividend Payment Date to the
Redemption Date. If any share of Series A Preferred Stock
called for redemption shall not be so paid upon surrender
thereof for redemption, the Redemption Price thereof, and all
accrued and unpaid dividends thereon from the last Dividend
Payment Date to the Redemption Date, shall, until paid, bear
interest from the Redemption Date at the dividend rate
payable on the shares of Series A Preferred Stock.
(h) Any certificate that represents more than one
share of Series A Preferred Stock and is to be redeemed only
in part shall be surrendered at any office or agency of the
Company designated for that purpose (with, if the Company or
the Registrar so requires, due endorsement by, or a written
instrument of transfer in form satisfactory to the Company
and the Registrar duly executed by, the holder thereof or his
attorney duly authorized in writing), and the Company shall
execute, and the Registrar shall countersign and deliver to
the holder of such share of Series A Preferred Stock without
service charge, a new Series A Preferred Stock certificate or
certificates, representing any number of shares of Series A
Preferred Stock as requested by such holder, in aggregate
amount equal to and in exchange for the number of shares not
redeemed and represented by the Series A Preferred Stock
certificate so surrendered.
(i) If a share of Series A Preferred Stock is
redeemed subsequent to a Dividend Record Date with respect to
any Dividend Payment Date and on or prior to such Dividend
Payment Date, then any Accumulated Dividends will be paid to
the person in whose name such share of Series A Preferred
Stock is registered at the close of business on such Dividend
Record Date.
11. Method of Payments. (a) The Company shall make
any dividend payments with respect to any period (i) prior to
November 30, 2004, by delivery of shares of Series A
Preferred Stock and (ii) after November 30, 2004, at the
election of the Company (x) in cash, (y) by delivery of
shares of Series A Preferred Stock or (z) through any
combination of the foregoing.
(b) No fractional shares of Series A Preferred
Stock will be delivered to the holders, but the Company will
instead pay a cash adjustment to each holder that would
otherwise be entitled to a fraction of a share of such Series
A Preferred Stock. The amount of such cash adjustment will be
determined based on the then effective Liquidation
Preference.
<PAGE>
16
(c) Any portion of any payment on or in respect of
the shares of Series A Preferred Stock in satisfaction of the
Accumulated Dividends will be paid in additional shares of
Series A Preferred Stock.
12. Conversion. (a) Subject to and upon compliance
with the provisions of this Certificate of Designation, at
the option of the holder thereof, any share of Series A
Preferred Stock may be converted at any time into a number of
fully paid and nonassessable shares of Common Stock
(calculated as to each conversion to the nearest 1/100 of a
share) equal to the then effective Liquidation Preference
thereof plus accrued and unpaid dividends to the date of
conversion divided by the Conversion Price in effect at the
time of conversion. Such conversion right shall expire at the
close of business on the Business Day next preceding the
Mandatory Redemption Date. In case a share of Series A
Preferred Stock is called for redemption, such conversion
right in respect of the share so called shall expire at the
close of business on the Business Day next preceding the
Redemption Date, unless the Company defaults in making the
payment due upon redemption.
The Conversion Price shall be initially $57.50 per
share of Common Stock. The Conversion Price shall be adjusted
in certain instances as provided in Section 12(d) and Section
12(e).
(b) In order to exercise the conversion privilege,
the holder of any share of Series A Preferred Stock to be
converted shall surrender the certificate for such share,
duly endorsed or assigned to the Company or in blank, at any
office or agency of the Company maintained for that purpose,
accompanied by written notice to the Company at such office
or agency that the holder elects to convert such share or, if
fewer than all the shares of Series A Preferred Stock
represented by a single share certificate are to be
converted, the number of shares represented thereby to be
converted.
Shares of Series A Preferred Stock shall be deemed
to have been converted immediately prior to the close of
business on the day of surrender of such shares for
conversion in accordance with the foregoing provisions, and
at such time the rights of the holders of such shares as
holders shall cease, and the person or persons entitled to
receive the shares of Common Stock issuable upon conversion
shall be treated for all purposes as the record holder or
holders of such shares of Common Stock at such time. As
promptly as practicable on or after the conversion date, the
<PAGE>
17
Company shall issue and shall deliver at such office or
agency a certificate or certificates for the number of full
shares of Common Stock issuable upon conversion, together
with payment in lieu of any fraction of a share, as provided
in Section 12(c).
In the case of any conversion of fewer than all the
shares of Series A Preferred Stock evidenced by a
certificate, upon such conversion the Company shall execute
and the Registrar shall countersign and deliver to the holder
thereof, at the expense of the Company, a new certificate or
certificates representing the number of unconverted shares of
Series A Preferred Stock.
(c) No fractional shares of Common Stock shall be
issued upon the conversion of a share of Series A Preferred
Stock. If more than one share of Series A Preferred Stock
shall be surrendered for conversion at one time by the same
holder, the number of full shares of Common Stock which shall
be issuable upon conversion thereof shall be computed on the
basis of the aggregate number of shares of Series A Preferred
Stock so surrendered. Instead of any fractional shares of
Common Stock which would otherwise be issuable upon
conversion of any share of Series A Preferred Stock, the
Company shall pay a cash adjustment in respect of such
fraction in an amount equal to the same fraction of the
closing price (as defined in Section 12(d)(vii)) per Common
Share at the close of business on the Business Day prior to
the day of conversion.
(d) The Conversion Price shall be adjusted from
time to time by the Company as follows:
(i) If the Company shall hereafter pay a dividend
or make a distribution to all holders of the outstanding
shares of Common Stock in shares of Common Stock, the
Conversion Price in effect at the opening of business on
the date following the date fixed for the determination
of shareholders entitled to receive such dividend or
other distribution shall be reduced by multiplying such
Conversion Price by a fraction of that the numerator
shall be the number of shares of Common Stock
outstanding at the close of business on the Common Stock
Record Date (as defined in Section 12(d)(vii)) fixed for
such determination and the denominator shall be the sum
of such number of shares and the total number of shares
constituting such dividend or other distribution, such
reduction to become effective immediately after the
opening of business on the day following the Common
Stock Record
<PAGE>
18
Date. If any dividend or distribution of the type
described in this Section 12(d)(i) is declared but not
so paid or made, the Conversion Price shall again be
adjusted to the Conversion Price which would then be in
effect if such dividend or distribution had not been
declared.
(ii) If the Company shall offer or issue rights or
warrants to all holders of its outstanding shares of
Common Stock entitling them to subscribe for or purchase
shares of Common Stock at a price per share less than
the Current Market Price (as defined in Section
12(d)(vii)) on the Common Stock Record Date fixed for
the determination of shareholders entitled to receive
such rights or warrants, the Conversion Price shall be
adjusted so that the same shall equal the price
determined by multiplying the Conversion Price in effect
at the opening of business on the date after such Common
Stock Record Date by a fraction of which the numerator
shall be the number of shares of Common Stock
outstanding at the close of business on the Common Stock
Record Date plus the number of shares of Common Stock
which the aggregate offering price of the total number
of shares of Common Stock subject to such rights or
warrants would purchase at such Current Market Price and
of which the denominator shall be the number of shares
of Common Stock outstanding at the close of business on
the Common Stock Record Date plus the total number of
additional shares of Common Stock subject to such rights
or warrants for subscription or purchase. Such
adjustment shall become effective immediately after the
opening of business on the day following the Common
Stock Record Date fixed for determination of
shareholders entitled to purchase or receive such rights
or warrants. To the extent that shares of Common Stock
are not delivered pursuant to such rights or warrants,
upon the expiration or termination of such rights or
warrants the Conversion Price shall again be adjusted to
be the Conversion Price which would then be in effect
had the adjustments made upon the issuance of such
rights or warrants been made on the basis of delivery of
only the number of shares of Common Stock actually
delivered. If such rights or warrants are not so issued,
the Conversion Price shall again be adjusted to be the
Conversion Price which would then be in effect if such
date fixed for the determination of shareholders
entitled to receive such rights or warrants had not been
fixed. In determining whether any rights or warrants
entitle the holders to subscribe for or purchase shares
of Common
<PAGE>
19
Stock at less than such Current Market Price, and in
determining the aggregate offering price of such shares
of Common Stock, there shall be taken into account (x)
any consideration received for such rights or warrants,
with the value of such consideration and the amount of
such exercise or subscription price, if other than cash,
to be determined by the Board of Directors and (y) the
amount of any exercise price or subscription price
required to be paid upon exercise of such warrants or
rights.
(iii) If the outstanding shares of Common Stock
shall be subdivided into a greater number of shares of
Common Stock, the Conversion Price in effect at the
opening of business on the day following the day upon
which such subdivision becomes effective shall be
proportionately reduced, and, conversely, if the
outstanding shares of Common Stock shall be combined
into a smaller number of shares of Common Stock, the
Conversion Price in effect at the opening of business on
the day following the day upon which such combina tion
becomes effective shall be proportionately increased,
such reduction or increase, as the case may be, to
become effective immediately after the opening of
business on the day following the day upon which such
subdivision or combination becomes effective.
(iv) If the Company shall, by dividend or other
wise, distribute to all holders of its shares of Common
Stock any class of capital stock of the Company (other
than any dividends or distributions to which Section
12(d)(i) applies) or evidences of its indebt edness,
cash or other assets (including securities, but
excluding any rights or warrants of a type referred to
in Section 12(d)(ii) and dividends and distributions
paid exclusively in cash and excluding any capital
stock, evidences of indebtedness, cash or assets
distributed upon a merger or consolidation to which
Section 12(e) applies) (the foregoing hereinafter in
this Section 12(d)(iv) called the "Distributed
Securities"), then, in each such case, the Conversion
Price shall be reduced so that the same shall be equal
to the price determined by multiplying the Conversion
Price in effect immediately prior to the close of
business on the Common Stock Record Date (as defined in
Section 12(d)(vii)) with respect to such distribution by
a fraction of which the numerator shall be the Current
Market Price (determined as provided in Section
12(d)(vii)) on such date less the fair market value (as
determined by the Board of Directors, whose
<PAGE>
20
good faith determination shall be conclusive and
described in a resolution of the Board of Directors) on
such date of the portion of the Distributed Securities
so distributed applicable to one share of Common Stock
and the denominator shall be such Current Market Price,
such reduction to become effective immediately prior to
the opening of business on the day following the Common
Stock Record Date; provided, however, that, in the event
the then fair market value (as so determined) of the
portion of the Distributed Securities so distrib uted
applicable to one share of Common Stock is equal to or
greater than the Current Market Price on the Common
Stock Record Date, in lieu of the foregoing adjustment,
adequate provision shall be made so that each holder of
shares of Series A Preferred Stock shall have the right
to receive upon conversion of a share of Series A
Preferred Stock (or any portion thereof) the amount of
Distributed Securities such holder would have received
had such holder converted such share of Series A
Preferred Stock (or portion thereof) immediately prior
to such Common Stock Record Date. If such dividend or
distribution is not so paid or made, the Conversion
Price shall again be adjusted to be the Conversion Price
which would then be in effect if such dividend or
distribution had not been declared. If the Board of
Directors determines the fair market value of any
distribution for purposes of this Section 12(d)(iv) by
reference to the actual or when issued trading market
for any securities constituting all or part of such
distribution, it must in doing so consider the prices in
such market over the same period used in computing the
Current Market Price pursuant to Section 12(d)(vii) to
the extent possible.
Rights or warrants distributed by the Company to
all holders of shares of Common Stock entitling the
holders thereof to subscribe for or purchase shares of
the Company's capital stock (either initially or under
certain circumstances), which rights or warrants, until
the occurrence of a specified event or events ("Dilution
Trigger Event"): (A) are deemed to be transferred with
such shares of Common Stock; (B) are not exercisable;
and (C) are also issued in respect of future issuances
of shares of Common Stock, shall be deemed not to have
been distributed for purposes of this Section 12(d)(iv)
(and no adjustment to the Conversion Price under this
Section 12(d)(iv) shall be required) until the
occurrence of the earliest Dilution Trigger Event,
whereupon such rights and warrants shall be deemed to
have been distributed and an appropriate
<PAGE>
21
adjustment to the Conversion Price under this Section
12(d)(iv) shall be made. If any such rights or warrants,
including any such existing rights or warrants
distributed prior to the first issuance of shares of
Series A Preferred Stock, are subject to subsequent
events, upon the occurrence of each of which such rights
or warrants shall become exercisable to purchase
different securities, evidences of indebtedness or other
assets, then the occurrence of each such event shall be
deemed to be such date of issuance and record date with
respect to new rights or warrants (and a termination or
expiration of the existing rights or warrants, without
exercise by the holder thereof). In addition, in the
event of any distribution (or deemed distribution) of
rights or warrants, or any Dilution Trigger Event with
respect thereto, that was counted for purposes of
calculating a distribution amount for which an
adjustment to the Conversion Price under this Section
12(d) was made, (1) in the case of any such rights or
warrants which shall all have been redeemed or
repurchased without exercise by any holders thereof, the
Conversion Price shall be readjusted upon such final
redemption or repurchase to give effect to such
distribution or Dilution Trigger Event, as the case may
be, as though it were a cash distribution, equal to the
per share redemption or repurchase price received by a
holder or holders of shares of Common Stock with respect
to such rights or warrants (assuming such holder had
retained such rights or warrants), made to all holders
of shares of Common Stock as of the date of such
redemption or repurchase, and (2) in the case of such
rights or warrants which shall have expired or been
terminated without exercise by any holders thereof, the
Conversion Price shall be readjusted as if such rights
and warrants had not been issued.
Notwithstanding any other provision of this Section
12(d)(iv) to the contrary, rights, warrants, evidences
of indebtedness, other securities, cash or other assets
(including, without limitation, any rights distributed
pursuant to any shareholder rights plan) shall be deemed
not to have been distributed for purposes of this
Section 12(d)(iv) if the Company makes proper provision
so that each holder of shares of Series A Preferred
Stock who converts a share of Series A Preferred Stock
(or any portion thereof) after the date fixed for
determination of shareholders entitled to receive such
distribution shall be entitled to receive upon such
conversion, in addition to the shares
<PAGE>
22
of Common Stock issuable upon such conversion, the
amount and kind of such distributions that such holder
would have been entitled to receive if such holder had,
immediately prior to such determination date, converted
such share of Series A Preferred Stock into a share of
Common Stock.
For purposes of this Section 12(d)(iv) and Sections
12(d)(i) and (ii), any dividend or distribu tion to
which this Section 12(d)(iv) is applicable that also
includes shares of Common Stock, or rights or warrants
to subscribe for or purchase shares of Common Stock to
which Section 12(d)(ii) applies (or both), shall be
deemed instead to be (A) a dividend or distribution of
the evidences of indebtedness, assets, shares of capital
stock, rights or warrants other than such shares of
Common Stock or rights or warrants to which Section
12(d)(ii) applies (and any Conversion Price reduction
required by this Section 12(d)(iv) with respect to such
dividend or distribution shall then be made) immediately
followed by (B) a dividend or distribution of such
shares of Common Stock or such rights or warrants (and
any further Conversion Price reduction required by
Sections 12(d)(i) or 12(d)(ii) with respect to such
dividend or distribution shall then be made), except
that (1) the Common Stock Record Date of such dividend
or distribution shall be substituted as "the date fixed
for the determination of stockholders entitled to
receive such dividend or other distribution", "the
Common Stock Record Date fixed for such determination"
and "the Common Stock Record Date" within the meaning of
Section 12(d)(i) and as "the date fixed for the
determination of shareholders entitled to receive such
rights or warrants", "the Common Stock Record Date fixed
for the determination of the share holders entitled to
receive such rights or warrants" and "such Common Stock
Record Date" for purposes of Section 12(d)(ii), and (2)
any shares of Common Stock included in such dividend or
distribution shall not be deemed "outstanding at the
close of business on the date fixed for such
determination" for the purposes of Section 12(d)(i).
(v) If the Company shall, by dividend or other
wise, distribute to all holders of its shares of Common
Stock cash (excluding any cash that is distributed upon
a merger or consolidation to which Section 12(e) applies
or as part of a distribution referred to in Section
12(d)(iv)) in an aggregate amount that, combined
together with (A) the aggregate amount of any
<PAGE>
23
other such distributions to all holders of its shares of
Common Stock made exclusively in cash within the 12
months preceding the date of payment of such distribu
tion, and in respect of which no adjustment pursuant to
this Section 12(d)(v) has been made, and (B) the
aggregate of any cash plus the fair market value (as
determined by the Board of Directors, whose good faith
determination shall be conclusive and described in a
resolution of the Board of Directors) of consideration
payable in respect of any tender offer by the Company
for all or any portion of the shares of Common Stock
concluded within the 12 months preceding the date of
payment of such distribution, and in respect of which no
adjustment pursuant to Section 12(d)(vi) has been made,
exceeds 5% of the net income of the Company reported for
the 12 month period ending with the fiscal quarter next
preceding such payment (the "12 Month Net Income"),
then, and in each such case, immediately after the close
of business on such date, the Conversion Price shall be
reduced so that the same shall equal the price
determined by multiplying the Conversion Price in effect
immediately prior to the close of business on such
Common Stock Record Date by a fraction (1) the numerator
of which shall be equal to the Current Market Price on
the Common Stock Record Date less an amount equal to the
quotient of (x) the excess of such combined amount over
such 5% of the 12 Month Net Income and (y) the number of
shares of Common Stock outstanding on the Common Stock
Record Date and (2) the denominator of which shall be
equal to the Current Market Price on such Common Stock
Record Date; provided, however, that, if the portion of
the cash so distributed applicable to one share of
Common Stock is equal to or greater than the Current
Market Price of the shares of Common Stock on the Common
Stock Record Date, in lieu of the foregoing adjustment,
adequate provision shall be made so that each holder of
shares of Series A Preferred Stock shall have the right
to receive upon conversion of a shares of Series A
Preferred Stock (or any portion thereof) the amount of
cash such holder would have received had such holder
converted such share of Series A Preferred Stock (or
portion thereof) immediately prior to such Common Stock
Record Date. If such dividend or distribution is not so
paid or made, the Conversion Price shall again be
adjusted to be the Conversion Price which would then be
in effect if such dividend or distribution had not been
declared. Any cash distribution to holders of shares of
Common Stock as to which the Company makes the election
permitted by Section 12(d)(xii) and as to
<PAGE>
24
which the Company has complied with the requirements of
such Section 12(d)(xii) shall be treated as not having
been made for all purposes of this Section 12(d)(v).
(vi) If a tender offer made by the Company or any
of its subsidiaries for all or any portion of the Common
Stock expires and such tender offer (as amended upon the
expiration thereof) requires the payment to shareholders
(based on the acceptance (up to any maximum specified in
the terms of the tender offer) of Purchased Shares) of
an aggregate consideration having a fair market value
(as determined by the Board of Directors, whose good
faith determination shall be conclusive and described in
a resolution of the Board of Directors) that, combined
together with (A) the aggregate of the cash plus the
fair market value (as determined by the Board of
Directors, whose good faith determination shall be
conclusive and described in a resolution of the Board of
Directors), as of the expiration of such tender offer,
of consideration payable in respect of any other tender
offers, by the Company or any of its subsidiaries for
all or any portion of the shares of Common Stock
expiring within the 12 months preceding the expiration
of such tender offer and in respect of which no
adjustment pursuant to this Section 12(d)(vi) has been
made and (B) the aggre gate amount of any distributions
to all holders of the Common Stock made exclusively in
cash within 12 months preceding the expiration of such
tender offer and in respect of which no adjustment
pursuant to Section 12(d)(v) has been made, exceeds 5%
of the 12 Month Net Income (determined as of the last
time (the "Expiration Time") tenders could have been
made pursuant to such tender offer (as it may be
amended)) times the number of shares of Common Stock
outstanding (including any tendered shares) at the
Expiration Time, then, and in each such case,
immediately prior to the opening of business on the day
after the date of the Expiration Time, the Conversion
Price shall be adjusted so that the same shall equal the
price determined by multiplying the Conversion Price in
effect immediately prior to the close of business on the
date of the Expiration Time by a fraction of which the
numerator shall be the number of shares of Common Stock
outstanding (including any tendered shares) at the
Expiration Time multiplied by the Current Market Price
of the shares of Common Stock on the trading day next
succeeding the Expiration Time and the denominator shall
be the sum of (x) the fair market value (determined as
aforesaid) of the aggregate
<PAGE>
25
consideration payable to shareholders based on the
acceptance (up to any maximum specified in the terms of
the tender offer) of all shares validly tendered and not
withdrawn as of the Expiration Time (the shares deemed
so accepted, up to any such maximum, being referred to
as the "Purchased Shares") and (y) the product of the
number of shares of Common Stock outstanding (less any
Purchased Shares) at the Expiration Time and the Current
Market Price of the shares of Common Stock on the
trading day next succeeding the Expiration Time, such
reduction (if any) to become effective immediately prior
to the opening of business on the day following the
Expiration Time. If the Company is obligated to purchase
shares pursuant to any such tender offer, but the
Company is permanently prevented by applicable law from
effecting any such purchases or all such purchases are
rescinded, the Conversion Price shall again be adjusted
to be the Conversion Price which would then be in effect
if such tender offer had not been made. If the
application of this Section 12(d)(vi) to any tender
offer would result in an increase in the Conversion
Price, no adjustment shall be made for such tender offer
under this Section 12(d)(vi).
(vii) For purposes of this Section 12(d), the
following terms shall have the meaning indicated:
"closing price" with respect to any securities on
any day means the closing price as of 4:00 p.m. Eastern
Time on such day or any earlier final closing on such
day or, if no such sale takes place on such day, the
average of the reported high and low prices on such day,
in each case on the Nasdaq National Market, or the New
York Stock Exchange, as applicable, or, if such security
is not listed or admitted to trading on such national
market or exchange, on the national stock exchange or
Commission recognized trading market in the United
States on which such security is quoted or listed or
admitted to trading, or, if not quoted or listed or
admitted to trading on any national stock exchange or
Commission recognized trading market in the United
States, the average of the high and low prices of such
security on the over-the-counter market on the day in
question as reported by the National Quotation Bureau
Incorporated or a similar generally accepted reporting
service in the United States, or, if not so available,
in such manner as furnished by any New York Stock
Exchange member firm selected from time to time by the
Board of Directors for that purpose, or a price
<PAGE>
26
determined in good faith by the Board of Directors,
whose determination shall be conclusive and described in
a resolution of the Board of Directors.
"Common Stock Record Date" means, with respect to
any dividend, distribution or other transaction or event
in which the holders of Common Stock have the right to
receive any cash, securities or other property or in
which the Common Stock (or other applicable security) is
exchanged for or converted into any combination of cash,
securities or other property, the date fixed for
determination of shareholders entitled to receive such
cash, securities or other property (whether such date is
fixed by the Board of Directors or by statute, contract
or otherwise).
"Current Market Price" means the average of the
daily closing prices per share of Common Stock for the
10 consecutive trading days immediately prior to the
date in question; provided, however, that (A) if the
"ex" date (as hereinafter defined) for any event (other
than the issuance or distribution requiring such
computation) that requires an adjustment to the
Conversion Price pursuant to Section 12(d)(i), (ii),
(iii), (iv), (v) or (vi) occurs during such 10 consecu
tive trading days, the closing price for each trading
day prior to the "ex" date for such other event shall be
adjusted by multiplying such closing price by the same
fraction by which the Conversion Price is so required to
be adjusted as a result of such other event, (B) if the
"ex" date for any event (other than the issuance or
distribution requiring such computa tion) that requires
an adjustment to the Conversion Price pursuant to
Section 12(d)(i), (ii), (iii), (iv), (v) or (vi) occurs
on or after the "ex" date for the issuance or
distribution requiring such computation and prior to the
day in question, the closing price for each trading day
on and after the "ex" date for such other event shall be
adjusted by multiplying such closing price by the
reciprocal of the fraction by which the Conversion Price
is so required to be adjusted as a result of such other
event and (C) if the "ex" date for the issuance or
distribution requiring such computation is prior to the
day in question, after taking into account any
adjustment required pursuant to clause (A) or (B) of
this proviso, the closing price for each trading day on
or after such "ex" date shall be adjusted by adding
thereto the amount of any cash and the fair market value
(as determined by the Board of Directors in a manner
consistent with any good faith
<PAGE>
27
determination of such value for purposes of Section
12(d)(iv) or (v), whose good faith determination shall
be conclusive and described in a resolution of the Board
of Directors) of the evidences of indebtedness, shares
of capital stock or assets being distributed applicable
to one share of Common Stock as of the close of business
on the day before such "ex" date. For purposes of any
computation under Section 12(d)(vi), the Current Market
Price on any date shall be deemed to be the average of
the daily closing prices per share of Common Stock for
such day and the next two succeeding trading days;
provided, however, that, if the "ex" date for any event
(other than the tender offer requiring such computation)
that requires an adjustment to the Conversion Price
pursuant to Section 12(d)(i), (ii), (iii), (iv), (v) or
(vi) occurs on or after the Expiration Time for the
tender or exchange offer requiring such computation and
prior to the day in question, the closing price for each
trading day on and after the "ex" date for such other
event shall be adjusted by multiplying such closing
price by the reciprocal of the fraction by which the
Conversion Price is so required to be adjusted as a
result of such other event. For purposes of this
paragraph, the term "ex" date (1) when used with respect
to any issuance or distribution, means the first date on
which the shares of Common Stock trade regular way on
the relevant exchange or in the relevant market from
which the closing price was obtained without the right
to receive such issuance or distribution, (2) when used
with respect to any subdivision or combination of shares
of Common Stock, means the first date on which the
shares of Common Stock trade regular way on such
exchange or in such market after the time at which such
subdivision or combination becomes effective and (3)
when used with respect to any tender or exchange offer
means the first date on which the shares of Common Stock
trade regular way on such exchange or in such market
after the Expiration Time of such offer. Notwithstanding
the foregoing, whenever successive adjustments to the
Conversion Price are called for pursuant to this Section
12(d), such adjustments shall be made to the Current
Market Price as may be necessary or appropriate to
effectuate the intent of this Section 12(d) and to avoid
unjust or inequitable results, as determined in good
faith by the Board of Directors.
"fair market value" means the amount which a
willing buyer would pay a willing seller in an arm's-
length transaction.
<PAGE>
28
(viii) No adjustment in the Conversion Price shall
be required unless such adjustment would require an
increase or decrease of at least 1% in such price;
provided, however, that any adjustments which by reason
of this Section 12(d)(viii) are not required to be made
shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this
Section 12 shall be made by the Company and shall be
made to the nearest cent. No adjustment need be made for
a change in the par value or no par value of the Common
Stock.
(ix) Whenever the Conversion Price is adjusted as
herein provided, the Company shall promptly file with
the Registrar an Officers' Certificate setting forth the
Conversion Price after such adjustment and setting forth
a brief statement of the facts requiring such
adjustment. Promptly after delivery of such certifi
cate, the Company shall prepare a notice of such
adjustment of the Conversion Price setting forth the
adjusted Conversion Price and the date on which each
adjustment becomes effective and shall mail such notice
of such adjustment of the Conversion Price to each
holder of shares of Series A Preferred Stock at such
holder's last address appearing on the register of
holders maintained for that purpose within 20 days of
the effective date of such adjustment. Failure to
deliver such notice shall not affect the legality or
validity of any such adjustment.
(x) In any case in which this Section 12(d)
provides that an adjustment shall become effective
immediately after a Common Stock Record Date for an
event, the Company may defer until the occurrence of
such event issuing to the holder of any share of Series
A Preferred Stock converted after such Common Stock
Record Date and before the occurrence of such event the
additional shares of Common Stock issuable upon such
conversion by reason of the adjustment required by such
event over and above the shares of Common Stock issu
able upon such conversion before giving effect to such
adjustment.
(xi) For purposes of this Section 12(d), the number
of shares of Common Stock at any time outstanding shall
not include shares held in the treasury of the Company.
The Company shall not pay any dividend or make any
distribution on shares of Common Stock held in the
treasury of the Company.
<PAGE>
29
(xii) In lieu of making any adjustment to the
Conversion Price pursuant to Section 12(d)(v), the
Company may elect to reserve an amount of cash for
distribution to the holders of shares of Series A
Preferred Stock upon the conversion of the shares of
Series A Preferred Stock so that any such holder
converting shares of Series A Preferred Stock will
receive upon such conversion, in addition to the shares
of Common Stock and other items to which such holder is
entitled, the full amount of cash which such holder
would have received if such holder had, immediately
prior to the Common Stock Record Date for such
distribution of cash, converted its shares of Series A
Preferred Stock into shares of Common Stock, together
with any interest accrued with respect to such amount,
in accordance with this Section 12(d)(xii). The Company
may make such election by providing an Officers'
Certificate to the Registrar to such effect on or prior
to the payment date for any such distribution and
depositing with the Registrar on or prior to such date
an amount of cash equal to the aggregate amount that the
holders of shares of Series A Preferred Stock would have
received if such holders had, immediately prior to the
Common Stock Record Date for such distribution,
converted all the shares of Series A Preferred Stock
into shares of Common Stock. Any such funds so deposited
by the Company with the Registrar shall be invested by
the Registrar in unconditional U.S. Government
obligations with a maturity not more than three months
from the date of issuance. Upon conversion of shares of
Series A Preferred Stock by a holder thereof, such
holder shall be entitled to receive, in addition to the
shares of Common Stock issuable upon conversion, an
amount of cash equal to the amount such holder would
have received if such holder had, immediately prior to
the Common Stock Record Date for such distribution,
converted its shares of Series A Preferred Stock into
shares of Common Stock, along with such holder's pro
rata share of any accrued interest earned as a
consequence of the investment of such funds. Promptly
after making an election pursuant to this Section
12(d)(xii), the Company shall give or shall cause to be
given notice to all holders of shares of Series A
Preferred Stock of such election, which notice shall
state the amount of cash per share of Series A Preferred
Stock such holders shall be entitled to receive (without
giving effect to any interest that may become payable)
upon conversion of the shares of Series
<PAGE>
30
A Preferred Stock as a consequence of the Company having
made such election.
(e) Subject to Section 13, in case of any
consolidation of the Company with, or merger of the Company
into, any other corporation, or in case of any merger of
another corporation into the Company (other than a merger
that does not result in any reclassification, conversion,
exchange or cancelation of outstanding shares of Common Stock
of the Company), or in case of any sale, conveyance or
transfer of all or substantially all the assets of the
Company, the holder of each share of Series A Preferred Stock
shall have the right thereafter, during the period such share
of Series A Preferred Stock shall be convertible as specified
in Section 12(a), to convert such share of Series A Preferred
Stock into the kind and amount of securities, cash and other
property receivable upon such consolidation, merger,
conveyance or transfer by a holder of the number of shares of
shares of Common Stock of the Company into which such share
of Series A Preferred Stock might have been converted
immediately prior to such consolidation, merger, conveyance
or transfer, assuming such holder of shares of Common Stock
of the Company failed to exercise his rights of election, if
any, as to the kind or amount of securities, cash and other
property receivable upon such consolidation, merger,
conveyance or transfer (provided that, if the kind or amount
of securities, cash and other property receivable upon such
consolidation, merger, conveyance or transfer is not the same
for each Common Share of the Company in respect of which such
rights of election shall not have been exercised
("nonelecting share"), then for the purpose of this Section
12 the kind and amount of securities, cash and other property
receivable upon such consolidation, merger, conveyance or
transfer by each nonelecting share shall be deemed to be the
kind and amount so receivable per share by a plurality of the
nonelecting shares). Such securities shall provide for
adjustments which, for events subsequent to the effective
date of the triggering event, shall be as nearly equivalent
as may be practicable to the adjustments provided for in this
Section 12. The above provisions of this Section 12 shall
similarly apply to successive consolidations, mergers,
conveyances or transfers.
(f) In case:
(i) the Company shall declare a dividend (or any
other distribution) on its Common Stock payable
otherwise than in cash out of its earned surplus; or
<PAGE>
31
(ii) the Company shall authorize the granting to
all holders of its shares of Common Stock of rights or
warrants to subscribe for or purchase any shares of
capital stock of any class or of any other rights; or
(iii) of any reclassification of the Common Stock
(other than a subdivision or combination of the
Company's outstanding shares of Common Stock), or of any
consolidation or merger to which the Company is a party
and for which approval of any shareholders of the
Company is required, or the sale, conveyance or transfer
of all or substantially all the assets of the Company;
or
(iv) of the voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then the Company shall cause to be filed with the Registrar
and at each office or agency maintained for the purpose of
conversion of shares of Series A Preferred Stock, and shall
cause to be mailed to all holders at their last addresses as
they shall appear in the shares of Series A Preferred Stock
Register, at least 20 Business Days (or 10 Business Days in
any case specified in clause (i) or (ii) above) prior to the
applicable date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of
such dividend, distribution, rights or warrants, or, if a
record is not to be taken, the date as of which the holders
of shares of Common Stock of record to be entitled to such
dividend, distribution, rights or warrants are to be
determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up is expected to become effective,
and the date as of which it is expected that holders of
shares of Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities, cash or
other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up. Failure to give the notice
required by this Section 12(f) or any defect therein shall
not affect the legality or validity of any dividend,
distribution, right, warrant, reclassification,
consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up, or the vote upon any such action.
(g) The Company shall at all times reserve and keep
available, free from preemptive rights, out of its authorized
but unissued shares of Common Stock, for the purpose of
effecting the conversion of shares of Series A Preferred
Stock, the full number of shares of Common Stock
<PAGE>
32
then issuable upon the conversion of all outstanding shares
of Series A Preferred Stock.
(h) The Company will pay any and all taxes that may
be payable in respect of the issue or delivery of shares of
Common Stock on conversion of shares of Series A Preferred
Stock pursuant hereto. The Company shall not, however, be
required to pay any tax which may be payable in respect of
any transfer involved in the issue and delivery of shares of
Common Stock in a name other than that of the holder of the
share of Series A Preferred Stock or shares of Series A
Preferred Stock to be converted, and no such issue or
delivery shall be made unless and until the Person requesting
such issue has paid to the Company the amount of any such
tax, or has established to the satisfaction of the Company
that such tax has been paid or is not payable.
13. Change of Control. (a) If a Change of Control
shall have occurred (the time and date of such occurrence
being a "Change of Control Date"), the Company shall cause to
be filed with the Registrar and at each office or agency
maintained for the purpose of conversion of shares of Series
A Preferred Stock, and shall cause to be mailed to all
holders at their last addresses as they shall appear in the
Series A Preferred Stock Register, in any case within 10 days
after the Change of Control Date, a notice stating (1) the
Change of Control Date, (2) the fact that holders shall have
the right to either (a) continue to hold their shares of
Series A Preferred Stock (or the shares of preferred stock
issued in respect thereof pursuant to Section 14) (the "Hold
Option"), (b) convert their shares of Series A Preferred
Stock (including shares received as a Special Payment (as
defined below)) in accordance with Section 12 and, if the
Change of Control Date occurs prior to November 30, 2004,
receive the Special Payment on such shares (the "Conversion
Option") or (c) elect the Remarketing Option (as defined
below), (3) the relevant circumstances and facts regarding
such Change of Control and (4) the instructions that such
holder must follow in order to exercise the rights identified
above.
(b) Within 30 days after delivery by the Company of
the notice described in Section 13(a), each holder of shares
of Series A Preferred Stock (or the shares of preferred stock
issued in respect thereof pursuant to Section 14) who wishes
to exercise the Hold Option, the Conversion Option or the
Remarketing Option must submit written notice (a "COC
Response Notice") to the Company setting forth the option
such holder wishes to elect (and if
<PAGE>
33
no option is selected within such 30 day period such holder
shall be deemed to have selected the Hold Option).
(c) If the Hold Option is selected with respect to
a share of Series A Preferred Stock, or if no notice from a
holder is received by the date referred to in the preceding
paragraph, such holder shall be deemed to have elected to
waive such holder's right to receive the Special Payment with
respect to such Change of Control and such share of Series A
Preferred Stock (or the shares of preferred stock issued in
respect thereof pursuant to Section 14) shall remain
outstanding in accordance with its current terms.
(d) If the Conversion Option is selected with
respect to a share of Series A Preferred Stock, the holder of
such share of Series A Preferred Stock shall be deemed to
have elected to convert such share in accordance with Section
12 and, if the Change of Control Date occurs prior to
November 30, 2004, the Company shall pay, and such holder
shall be entitled to receive, in respect of such share of
Series A Preferred Stock as to which the Conversion Option
has been selected, shares of Series A Preferred Stock with a
Liquidation Preference equal to the product of (x) the Share
Factor with respect to such share of Series A Preferred Stock
and (y) the Aggregate Special Payment Amount (the "Special
Payment"). Such Special Payment shall accrue as of the Change
of Control Date (if the Change of Control Date is prior to
November 30, 2004) whether or not the Company has earnings or
profits, whether or not there are funds legally available for
the payment of such dividend and whether or not such dividend
is declared and shall be in all respects identical to any
other dividend declared or accrued on the Series A Preferred
Stock (except as set forth above) and all provisions of this
Certificate of Designation applicable to dividends shall
apply to such Special Payment (except as set forth above).
(e) If the Remarketing Option is selected with
respect to a share of Series A Preferred Stock, such holder
shall be deemed to have elected to waive such holder's right
to receive the Special Payment with respect to such Change of
Control (except under the circumstances set forth in Section
13(f) below) and the Company shall thereafter have the option
(the "Remarketing Option") to either (a) have such share
redeemed in accordance with the optional redemp tion
procedures set forth in Section 10 (except that (i), if the
Change of Control Date occurs prior to November 30, 2004, the
Redemption Price shall be 101% of the Liquidation Preference
of such share plus accrued and unpaid dividends
<PAGE>
34
from the last Dividend Payment Date to the Redemption Date
and (ii) such procedures shall apply only to the holders so
electing the Remarketing Option) or (b) remarket such share
for the account of such holder and, if the net proceeds to
such holder of such remarketing are less than an amount in
cash equal to 101% of the Liquidation Preference of such
share plus accrued and unpaid dividends thereon from the last
Dividend Payment Date to the date payment in full is received
by such holder in respect of such share (the "Remarketing
Price"), the Company shall issue to and sell for the account
of such holder a sufficient number of shares of Common Stock
to make up such shortfall; i.e., such that the holder
receives a net amount in cash in respect of such share of
Series A Preferred Stock as to which the Remarketing Option
has been selected which, when taken together with the net
proceeds received by such holder in such remarketing is equal
to the Remarketing Price. Written notice of the election by
the Company to either redeem or remarket such share shall be
provided to such holder within 75 days after receipt of a COC
Response Notice specifying the Remarketing Option.
(f) In order to accomplish the remarketing, the
Company shall take all actions that may be necessary,
including without limitation, preparing and filing a
registration statement under the Securities Act of 1933, and
shall pay all expenses (including without limitation,
underwriting discounts) associated with the remarketing and
issuance and shall provide customary indemnification for the
benefit of the holder against securities law liabilities in
connection therewith. If the Remarketing Option has been
selected and the Company has not elected to redeem such
share, payment of the full Remarketing Price in respect of
the remarketed share shall be made at a single settlement
against surrender of the share. Such settlement shall take
place as soon as reasonably practicable. If such settlement
does not take place within 180 days after the date of the
Company's written notice pursuant to paragraph (e) above, the
Company shall give written notice to the Holders that have
elected the Remarketing Option that such 180 day period has
elapsed and such Holders shall have the option, for a period
of 10 business days following the giving of such notice, of
electing (i) the Conversion Option and, if the Change of
Control Date occurs prior to November 30, 2004, receiving the
Special Payment calculated as if such Holder had originally
elected the Conversion Option (instead of the Remarketing
Option) or (ii) the Hold Option.
(g) The Company shall have the right to institute
reasonable procedures in order to implement this Section 13
<PAGE>
35
and, to the extent reasonably practicable, will make proper
provision prior to the Change of Control Date to ensure that
the holders of shares of Series A Preferred Stock will be
entitled to receive the benefits intended to be afforded by
this Section 13. Nothing in this Section 13 shall affect the
rights of the holders of Series A Preferred Stock set forth
in Section 14 hereof.
14. Consolidation, Merger, Conveyance or Trans fer.
Without the vote or consent of the holders of a majority of
the then Outstanding shares of Series A Preferred Stock, the
Company may not 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 unless (i)
if the Company is the surviving or continuing person, the
Series A Preferred Stock shall remain outstanding without any
amendment that would adversely affect the preferences, rights
or powers of the Series A Preferred Stock, (ii) if the
Company is not the surviving or continuing person, (a) the
entity formed by such consolida tion or merger or to which
such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made (in any such case, the
"resulting entity") is a corporation organized and existing
under the laws of Bermuda, the United States or any State
thereof or the District of Columbia; and (b) the shares of
Series A Preferred Stock are converted into or exchanged for
and become shares of such resulting entity, having in respect
of such resulting entity the same (or more favorable) powers,
preferences and relative, participating, optional or other
special rights that the shares of Series A Preferred Stock
had immediately prior to such transaction; and (iii) the
Company shall have delivered to the Registrar an Officers'
Certificate and an opinion of counsel, reasonably
satisfactory in form and content, each stating that such
consolidation, merger, conveyance or transfer complies with
this Section 14 and that all conditions precedent herein
provided for relating to such transaction have been complied
with.
15. SEC Reports; Reports by Company. So long as any
shares of Series A Preferred Stock are outstanding, the
Company shall file with the SEC and, within 15 days after it
files them with the SEC, with the Registrar and, if
requested, furnish to each holder of shares of Series A
Preferred Stock all annual and quarterly reports and the
information, documents, and other reports that the Company is
required to file with the SEC pursuant to Section 13(a) or
15(d) of the Exchange Act ("SEC Reports"). In the event the
Company is not required or shall cease to be required to
<PAGE>
36
file SEC Reports, pursuant to the Exchange Act, the Company
will nevertheless file such reports with the SEC (unless the
SEC will not accept such a filing). Whether or not required
by the Exchange Act to file SEC Reports with the SEC, so long
as any shares of Series A Preferred Stock are Outstanding,
the Company will furnish or cause to be furnished copies of
the SEC Reports to the holders of shares of Series A
Preferred Stock at the time the Company is required to make
such information available to the Registrar and to
prospective investors who request it in writing.
16. Definitions. For purposes of this Certificate
of Designation, the following terms shall have the meaning
set forth below:
"Accumulated Dividends" has the meaning set forth
in Section 6.
"Affiliate" means, with respect to any Person, any
other Person directly or indirectly controlling, controlled
by, or under direct or indirect common control with, such
Person. For the purposes of this definition and the
definition of "HMTF Group", "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 "controlling" and "controlled" have
meanings correlative to the foregoing.
"Aggregate Change of Control Date Accreted Value"
means the product obtained by multiplying (x) the Change of
Control Date Accreted Value by (y) the number of shares of
Series A Preferred Stock Outstanding as of the Change of
Control Date without giving effect to the conversion of
shares of Series A Preferred Stock pursuant to the Conversion
Option.
"Aggregate Five Year Accreted Value" means the
product obtained by multiplying (x) the Five Year Accreted
Value by (y) the number of shares of Series A Preferred Stock
Outstanding as of the Change of Control Date without giving
effect to the conversion of shares of Series A Preferred
Stock pursuant to the Conversion Option.
"Aggregate Special Payment Amount" means the
difference between (x) the Aggregate Five Year Accreted Value
and (y) the Aggregate Change of Control Date Accreted Value.
<PAGE>
37
"Associated Group" means The Associated Group,
Inc., a Delaware corporation.
"Average Market Value" of the Common Stock means
the arithmetic average of the Current Market Value of the
shares of Common Stock for the ten trading days ending on the
fifth Business Day prior to (i) in the case of the payment of
any dividend, the Record Date for such dividend and (ii) in
the case of any other payment, the date of such payment.
"Board of Directors" has the meaning set forth in
the Recitals .
"Business Day" means each Monday, Tuesday,
Wednesday, Thursday and Friday which is not a day on which
banking institutions in The City of New York are authorized
or obligated by law or executive order to be closed.
"By-laws" has the meaning set forth in the
Recitals.
"COC Response Notice" has the meaning set forth in
Section 13(b).
"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 Closing Date or issued after the Closing
Date, and any and all rights (other than any evidence of
indebtedness), warrants or options exchangeable for or
convertible into such capital stock.
"Certificate of Incorporation" has the meaning set
forth in the recitals.
"Change of Control" means the occurrence of any of
the following events: (a) any "person" or "group" (as such
terms are used in Sections 13(d) and 14(d) of the Exchange
Act) (other than (x) any such group if each member of such
group, together with its Affiliates, owns less than 50% of
the total Voting Capital Stock of the Company and (y) until
the earlier of the termination of the Liberty Merger Agree
ment and consummation of the Liberty Merger, Associated
Group)) is or becomes the "beneficial owner" (as defined in
Rule 13d-3 and 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
<PAGE>
38
the passage of time), directly or indirectly, of more than
50% of the total Voting Capital Stock of the Company or (b)
the Company 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 Company, in any such event pursuant
to a transaction in which the holders of the outstanding
Voting Capital Stock of the Company immediately prior to such
transaction hold less than 50% of the outstanding Voting
Capital Stock of the surviving or transferee company or its
parent company immediately after such transaction or
immediately after such transaction any "person" or "group"
(as such terms are used in Sections 13(d) and 14(d) of the
Exchange Act), (other than (x) any such group if each member
of such group, together with its Affiliates, owns less than
50% of the total Voting Capital Stock of the Company and (y)
until the earlier of the termination of the Liberty Merger
Agreement and consummation of the Liberty Merger, Associated
Group) is the "beneficial owner" (as defined in Rules 13d-3
and 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 Capital Stock of the surviving or transferee company
or its parent company 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 Company
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 or (d) any
transaction subject to Rule 13e-3 under the Exchange Act if
following such Rule 13e-3 transaction a person or group (as
such terms are used in Section 13(d) and 14(d) of the
Exchange Act) owns more than 50% of the total Voting Capital
Stock of the Company.
"Change of Control Date" has the meaning set forth
in Section 13(a).
"Change of Control Date Accreted Value" means with
respect to each $1,000 of original Liquidation Preference,
the value that $1,000 would accrete to between the Closing
<PAGE>
39
Date and the Change of Control Date, compounded quarterly at
an annual rate of 7-3/4%.
"Change of Control Obligation" has the meaning set
forth in Section 13(a).
"Closing Date" means any Closing Date under the
Purchase Agreement.
"closing price" has the meaning set forth in
Section 12(d)(vii).
"Common Stock Record Date" has the meaning set
forth in Section 12(d)(vii).
"Common Stock" means the Class A common stock of
the Company, par value $.01 per share.
"Company" has the meaning set forth in the
Recitals.
"Company Order" means a written request or order
signed in the name of the Company by its Chairman of the
Board, its President or a Vice President and by its
Treasurer, an Assistant Treasurer, its Secretary or an
Assistant Secretary.
"Conversion Agent" has the meaning set forth in
Section 5(a).
"Conversion Option" has the meaning set forth in
Section 13(a).
"Conversion Price" means the price at which shares
of Common Stock shall be delivered upon conversion.
"Current Market Value" of the Common Stock means
the average of the high and low sale prices of the shares of
Common Stock as reported on the Nasdaq National Market or any
national stock exchange or Commission recognized trading
market in the United States upon which the shares of Common
Stock are then listed or admitted to trading, for the trading
day in question.
"Current Market Price" has the meaning set forth in
Section 12(d)(vii).
"DB" has the meaning set forth in Section 8(c).
<PAGE>
40
"Dilution Trigger Event" has the meaning set forth
in Section 12(d)(iv).
"Distributed Securities" has the meaning set forth
in Section 12(d)(iv).
"Dividend Payment Date" has the meaning set forth
in Section 6.
"Dividend Record Date" has the meaning set forth in
Section 7(a).
"Expiration Time" has the meaning set forth in
Section 12(d)(vi).
"fair market value" has the meaning set forth in
Section 12(d)(vii).
"Five Year Accreted Value" means with respect to
each $1,000 of original Liquidation Preference, $1,467.843.
"HMTF Group" has the meaning set forth in Section
8(d).
"HMTF Holders" has the meaning set forth in Section
8(d).
"HMTF Issued Series A Preferred Shares" has the
meaning set forth in Section 8(d).
"Hold Option" has the meaning set forth in Section
13(a).
"Junior Shares" has the meaning set forth in
Section 9(a).
"Liberty Merger" means the consummation of the
merger as contemplated by the Liberty Merger Agreement, as it
may be amended from time to time.
"Liberty Merger Agreement" means the Amended and
Restated Agreement and Plan of Merger, dated as of October
28, 1999, among AT&T Corp., A-Group Merger Corp., Liberty
Media Corporation and the Associated Group, Inc. as it may be
amended from time to time.
"Liquidation Preference" means an amount equal to
$1,000 per share of Series A Preferred Stock, subject to
change in accordance with Section 6 and Section 7 hereof,
including, without limitation, Accumulated Dividends.
<PAGE>
41
"Mandatory Redemption Date" has the meaning set
forth in Section 10(b); provided, however, that if such date
shall not be a Business Day, then such date shall be the next
Business Day.
"nonelecting share" has the meaning set forth in
Section 12(e).
"Odd-lot Redemption" has the meaning set forth in
Section 10(c).
"Officers' Certificate" means a certificate of the
Company signed in the name of the Company by its Chairman of
the Board, its President or a Vice President and by its
Treasurer, an Assistant Treasurer, its Secretary or an
Assistant Secretary.
"Optional Redemption" has the meaning set forth in
Section 10(a).
"Optional Redemption Date" has the meaning set
forth in Section 10(a).
"Outstanding" means when used with respect to
shares of Series A Preferred Stock, as of the date of
determination, all shares of Series A Preferred Stock
theretofore authenticated and delivered under this
Certificate of Designation, except (a) shares of Series A
Preferred Stock theretofore converted into shares of Common
Stock in accordance with Section 12 and shares of Series A
Preferred Stock theretofore canceled by the Registrar or
delivered to the Registrar for cancelation; (b) shares of
Series A Preferred Stock for whose payment or redemption
money in the necessary amount has been theretofore deposited
with the Registrar or any Paying Agent (other than the
Company) in trust or set aside and segregated in trust by the
Company (if the Company shall act as its own Paying Agent)
for the holders of such shares of Series A Preferred Stock;
provided that, if such shares of Series A Preferred Stock are
to be redeemed, notice of such redemption has been duly given
pursuant to this Certificate of Designation or provision
therefor satisfactory to the Registrar has been made; and (c)
shares of Series A Preferred Stock (x) that are mutilated,
destroyed, lost or stolen which the Company has decided to
pay or (y) in exchange for or in lieu of which other shares
of Series A Preferred Stock have been authenticated and
delivered pursuant to this Certificate of Designation;
provided, however, that, in determining whether the holders
of the shares of Series A Preferred Stock have given any
request, demand, authorization, direction, notice,
<PAGE>
42
consent or waiver or taken any other action hereunder, shares
of Series A Preferred Stock owned by the Company or any other
obligor upon the shares of Series A Preferred Stock or any
Affiliate of the Company or of such other obligor shall be
disregarded and deemed not to be Outstanding, except that, in
determining whether the Registrar shall be protected in
relying upon any such request, demand, authorization,
direction, notice, consent, waiver or other action, only
shares of Series A Preferred Stock which the Registrar has
actual knowledge of being so owned shall be so disregarded.
Shares of Series A Preferred Stock so owned which have been
pledged in good faith may be regarded as Outstanding if the
pledgee establishes to the satisfaction of the Registrar the
pledgee's right so to act with respect to such shares of
Series A Preferred Stock and that the pledgee is not the
Company or any other obligor upon the shares of Series A
Preferred Stock or any Affiliate of the Company or of such
other obligor.
"Parity Shares" has the meaning set forth in
Section 9(a).
"Paying Agent" has the meaning set forth in Section
5(a).
"Person" means an individual, partnership,
corporation, limited liability company, business trust, joint
stock company, trust, unincorporated association, joint
venture, governmental authority or other entity of whatever
nature.
"Preferred Stock" means, with respect to any
person, any and all shares, interests, participations or
other equivalents (however designated, whether voting or
non-voting) of such person's preferred or preference stock,
whether now outstanding or issued after the date hereof,
including all series and classes of such preferred or
preference stock.
"Purchase Agreement" means the Stock Purchase
Agreement dated as of November 4, 1999, among the Company and
the Purchasers named therein, as it may be amended from time
to time.
"Purchased Shares" has the meaning set forth in
Section 12(d)(vi).
"Redemption Date" has the meaning set forth in
Section 10(f).
<PAGE>
43
"Redemption Notice" has the meaning set forth in
Section 10(f).
"Redemption Price" has the meaning set forth in
Section 10(e).
"Registrar" has the meaning set forth in Section 3.
"Registration Rights Agreement" means the
Registration Rights Agreement dated as of December 3, 1999,
among the Company and the Purchasers.
"Remarketing Option" has the meaning set forth in
Section 13(e).
"Restricted Shares Legend" has the meaning set
forth in Section 4(a).
"resulting entity" has the meaning set forth in
Section 14.
"SEC" means the Securities and Exchange Commission,
as from time to time constituted, created under the
Securities Exchange Act of 1934, or, if at any time after the
adoption of this Certificate of Designation such commission
is not existing and performing the duties now assigned to it,
then the body performing such duties at such time.
"SEC Reports" has the meaning set forth in Section
15.
"Securities Act" has the meaning set forth in
Section 4(a).
"Senior Shares" has the meaning set forth in
Section 9(a).
"Series A Preferred Stock" has the meaning set
forth in Section 1.
"Share Factor" means with respect to each share of
Series A Preferred Stock, a fraction, the numerator of which
is the Liquidation Preference of such share as of the Change
of Control Date, without giving effect to the Special
Payment, and the denominator of which is the aggregate
Liquidation Preference of all outstanding shares of Series A
Preferred Stock as of the Change of Control Date, without
giving effect to the Special Payment.
<PAGE>
44
"Special Payment" has the meaning set forth in
Section 13.
"Voting Capital Stock" means with respect to any
Person, securities of any class or classes of Capital Stock
in such Person ordinarily entitling the holders thereof
(whether at all times or at the times that such class of
Capital Stock has voting power by reason of the happening of
any contingency) to vote in the election of members of the
board of directors or comparable governing body of such
Person.
IN WITNESS WHEREOF, the Company has caused this
Certificate of Designation to be duly executed by Laurence E.
Harris, Senior Vice President and General Counsel of the
Company, this 3rd day of December, 1999.
TELIGENT, INC.,
by /s/ Laurence E. Harris
---------------------------
Name: Laurence E. Harris
Title: Senior Vice
President and
General Counsel
<PAGE>
EXHIBIT A
FACE OF SECURITY
Restricted Legend "THESE SECURITIES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF
ANY STATE OR OTHER JURISDICTION, AND, UNLESS SO REGISTERED,
THEY MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED EXCEPT PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE ACT AND APPLICABLE
SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION."
<PAGE>
2
Number of Shares
Number: ____ ____ Shares
CUSIP NO.: [ ]
7-3/4% Series A Convertible Preferred Stock
due 2014
of
TELIGENT, INC.
TELIGENT, INC., a company organized under the laws
of Delaware (the "Company"), hereby certifies that [HOLDER]
(the "Holder") is the registered owner of fully paid and
non-assessable preference securities of the Company
designated the 7-3/4% Series A Convertible Preferred Stock
due 2014, par value U.S.$0.01 and initial liquidation
preference U.S.$1,000 per share (the "Preferred Stock"). The
shares of Preferred Stock are transferable on the books and
records of the Registrar, in person or by a duly authorized
attorney, upon surrender of this certificate duly endorsed
and in proper form for transfer. The designation, rights,
privileges, restrictions, preferences and other terms and
provisions of the Preferred Stock represented hereby are
issued and shall in all respects be subject to the provisions
of the Certificate of Designation of the Company dated
November [ ], 1999, as the same may be amended from time to
time in accordance with its terms (the "Preferred Stock
Certificate of Designation"). Capitalized terms used herein
but not defined shall have the meaning given them in the
Preferred Stock Certificate of Designation. The Company will
provide a copy of the Preferred Stock Certificate of
Designation to a Holder without charge upon written request
to the Company at its principal place of business.
Reference is hereby made to select provisions of
the Preferred Stock set forth on the reverse hereof, and to
the Preferred Stock Certificate of Designation, which select
provisions and the Preferred Stock Certificate of Designation
shall for all purposes have the same effect as if set forth
at this place.
<PAGE>
3
Upon receipt of this certificate, the Holder is
bound by the Preferred Stock Certificate of Designation and
is entitled to the benefits thereunder.
Unless the Transfer Agent's valid counter-signature
appears hereon, the shares of Preferred Stock evidenced
hereby shall not be entitled to any benefit under the
Preferred Stock Certificate of Designation or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has executed this
certificate as of the date set forth below.
TELIGENT, INC.,
by /s/
----------------------------
Name:
Title:
[Seal]
by
----------------------------
Name:
Title:
Dated:
COUNTERSIGNED AND REGISTERED
[ ]
as Transfer Agent,
by
-----------------------
Authorized Signatory
Dated:
<PAGE>
REVERSE OF SECURITY
TELIGENT, INC.
Series A 7-3/4% Convertible Preferred Stock
due 2014
Dividends on each share of Preferred Stock shall be
payable at a rate per annum set forth on the face hereof or
as provided in the Preferred Stock Certificate of Desig
nation. Subject to the limitations set forth in Section 11 of
the Preferred Stock Certificate of Designation, dividends may
be paid, at the option of the Company, in cash or in shares
of Preferred Stock of the Company or a combination of cash
and shares of Preferred Stock of the Company.
The shares of Preferred Stock shall be redeemable
as provided in the Preferred Stock Certificate of Designa
tion. The shares of Preferred Stock shall be convertible into
the Company's Common Stock in the manner and according to the
terms set forth in the Preferred Stock Certification of
Designation.
The Company shall furnish to any Holder upon
request and without charge, a copy of the voting rights
preferences, limitations and special rights of the shares of
each class or series authorized to be issued by the Company
so far as they have been fixed and determined and the
authority of the Board of Directors to fix and determine the
designations, voting rights, preferences, limitations and
special rights of the class and series of shares of the
Company.
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and
transfers the shares of Preferred Stock evidenced hereby to:
(Insert assignee's social security or tax identification
number)
(Insert address and zip code of assignee)
and irrevocably appoints:
agent to transfer the shares of Preferred Stock evidenced
hereby on the books of the Transfer Agent and Registrar. The
agent may substitute another to act for him or her.
Date:
Signature:
(Sign exactly as your name appears on the other side of this
Convertible Preferred Stock Certificate)
Signature Guarantee:______________________________*****
- --------
* Signature must be guaranteed by an "eligible guarantor institution"
(i.e., a bank, stockbroker, savings and loan association or credit union)
meeting the requirements of the Registrar, which requirements include
membership or participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Registrar in addition to, or in substitution for, STAMP, all
in accordance with the Securities Exchange Act of 1934.
<PAGE>
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Preferred Stock)
The undersigned hereby irrevocably elects to convert (the
"Conversion") _________ shares of 7-3/4% Series A Convertible
Preferred Stock due 2014 (the "Preferred Stock"), represented
by stock certificate No(s). ______________ (the "Preferred
Stock Certificates") into shares of common stock, par value
U.S. $.01 per share ("Common Stock"), of Teligent, Inc. (the
"Company") according to the conditions of the Certificate of
Designation establishing the terms of the Preferred Stock
(the "Preferred Stock Certificate of Designation"), as of the
date written below. If shares are to be issued in the name of
a person other than the undersigned, the undersigned will pay
all transfer taxes payable with respect thereto and is
delivering herewith such certificates. No fee will be charged
to the holder for any conversion, except for transfer taxes,
if any. A copy of each Preferred Stock Certificate is
attached hereto (or evidence of loss, theft or destruction
thereof).*
The undersigned represents and warrants that all offers and
sales by the undersigned of the shares of Common Stock
issuable to the undersigned upon conversion of the Preferred
Stock shall be made pursuant to registration of the Common
Stock under the Securities Act of 1933 (the "Act"), or
pursuant to an exemption from registration under the Act.
Capitalized terms used but not defined herein shall have the
meanings ascribed thereto in or pursuant to the Preferred
Stock Certificate of Designation.
Date of Conversion:
Applicable Conversion Price:
Number of shares of Preferred Stock to be
Converted:
Number of shares of Common Stock to be Issued:
Signature:
Name:
Address:
Fax No.:
<PAGE>
2
* The Company is not required to issue shares of Common
Stock until the original Preferred Stock Certificate(s) (or
evidence of loss, theft or destruction thereof) to be
converted are received by the Company or its Transfer Agent.
The Company shall issue and deliver shares of Common Stock to
an overnight courier not later than three business days
following receipt of the original Preferred Stock
Certificate(s) to be converted.
** Address where shares of Common Stock and any other
payments or certificates shall be sent by the Company.
