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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. __)
MCI COMMUNICATIONS CORPORATION
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(Name of Issuer)
Common Stock
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(Title of Class of Securities)
552673105
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(CUSIP Number)
Colin R. Green
Secretary and Chief Legal Advisor
British Telecommunications plc
BT Centre
81 Newgate Street
London EC1A 7AJ, England
Telephone: 011-44-71-356-5000
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
Copy to:
Albert F. Lilley, Esq.
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, N.Y. 10005
Telephone: (212) 530-5754
September 30, 1994
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(Date of Event Which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(b)(3) or (4), check the following box / /.
Check the following box if a fee is being paid with the statement /X/.
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SCHEDULE 13D
CUSIP NO.: 552673105
(1) NAME OF REPORTING PERSON: British Telecommunications plc
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON:
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) / /
(b) / /
(3) SEC USE ONLY
(4) SOURCE OF FUNDS: WC
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM
2(d) or 2(e) / /
(6) CITIZENSHIP OR PLACE OF ORGANIZATION: England and Wales
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH:
(7) SOLE VOTING POWER:
135,998,932 shares of Class A Common Stock, and upon
conversion thereof, 135,998,932 shares of Common Stock
(8) SHARED VOTING POWER:
N/A
(9) SOLE DISPOSITIVE POWER:
135,998,932 shares of Class A Common Stock, and upon
conversion thereof, 135,998,932 shares of Common Stock
(10) SHARED DISPOSITIVE POWER:
N/A
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
135,998,932 shares of Class A Common Stock, and upon
conversion thereof, 135,998,932 shares of Common Stock
(12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES / /
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):
100% of Class A Common Stock. If the Class A Common Stock
converts to Common Stock, approximately 20% of the Common
Stock.
(14) TYPE OF REPORTING PERSON: CO
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ITEM 1. SECURITY AND ISSUER.
The class of equity securities to which this Statement on Schedule 13D
relates is the common stock, par value $.10 per share (the "Common Stock"), of
MCI Communications Corporation, a Delaware corporation (the "Company"), with
its principal executive offices located at 1801 Pennsylvania Avenue, N.W.,
Washington, D.C. 20006.
ITEM 2. IDENTITY AND BACKGROUND.
This Statement is being filed by British Telecommunications plc, a public
limited company incorporated under the laws of England and Wales (the
"Reporting Person"). The principal executive offices of the Reporting Person
are located at BT Centre, 81 Newgate Street, London EC1A 7AJ, England. The
Reporting Person's principal businesses are as a principal supplier of domestic
and international telecommunications services and equipment in the United
Kingdom.
The Reporting Person is the record owner of 135,998,932 shares of Class A
Common Stock, par value $0.10 per share (the "Class A Common Stock"), of the
Company, which it acquired on September 30, 1994 (the "Closing Date") at the
closing (the "Closing") under the Investment Agreement (as defined below). In
addition, subject to the terms and conditions of the Investment Agreement, the
Reporting Person may purchase from the Company, at a cash price of $32.00 per
share, all but not less than all of that number of additional shares of Class A
Common Stock equal to 25% of the aggregate number of shares of Common Stock
actually issued between September 20, 1994 and the Closing Date pursuant to the
exercise of options to acquire shares of Common Stock granted, issued or
otherwise existing prior to August 4, 1993 pursuant to the Company's employee
benefit plans. The Class A Common Stock, which can only be issued to the
Reporting Person and its affiliates, is equivalent on a per share basis to the
existing Common Stock in all respects other than voting rights and conversion
rights. Except with respect to the election of directors and certain consent
rights summarized herein, and except as may otherwise be required by law, the
shares of Class A Common Stock will be entitled to one vote per share and will
vote together with the Common Stock as a single class on any matter submitted
to a vote of the holders of Common Stock. The holders of Class A Common Stock
will vote separately as a class for directors and will generally elect a number
of directors (the "Class A Directors") that is roughly proportionate to the
aggregate voting power of the Company's voting securities represented by the
Class A Common Stock. The Investment Agreement provides that, other than in
connection with the election of directors, any proposal to eliminate cumulative
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voting for the election of directors, matters on which the Class A Common Stock
is entitled to a class vote and business combinations proposed by the Reporting
Person, the Reporting Person is required, subject to certain exceptions, to
vote its securities of the Company at the option of the Company, either (a) in
the same proportion as the securities owned by other stockholders of the
Company are voted on the applicable matter or (b) at the Reporting Person's
discretion. The Reporting Person is not entitled to convert the Class A Common
Stock at its discretion; however, the Class A Common Stock is subject to
automatic conversion into Common Stock upon certain events as set forth in the
Certificate of Incorporation of the Company. Because of this conversion
feature, regulations pursuant to which this Statement is filed require that the
Class A Common Stock acquired by the Reporting Person be treated as Common
Stock for the purposes of this Statement.
Shares of Class A Common Stock will automatically convert into shares of
Common Stock if: (a) such shares are transferred by the Reporting Person to
any third party (but only with respect to those shares transferred); (b) the
Reporting Person's Outstanding Interest (as defined in the Investment Agreement
and as determined in accordance with the provisions of the Investment
Agreement) is less than 10% (or 15% if the Reporting Person has sold in the
aggregate voting securities of the Company representing more than 25% of the
largest number of voting securities owned by the Reporting Person); (c) if
either the Company or the Reporting Person no longer holds its interest in the
Company through which the Joint Venture (as defined below) will be conducted,
subject to certain exceptions; or (d) there is any judicial determination that
the Reporting Person has materially breached the transfer, standstill or voting
provisions of the Investment Agreement or if the Reporting Person is found to
have engaged in certain activities relating to the core business of the Company
in the Americas (subject to certain exceptions). The "Joint Venture" means a
company formed by the Company and the Reporting Person to provide enhanced and
value-added telecommunication services between two or more countries and
international telecommunications-related outsourcing.
Information regarding the directors and executive officers of the Reporting
Person is set forth on Schedule I attached hereto, which Schedule is hereby
incorporated by reference. Except as set forth on Schedule I, all of the
directors and executive officers of the Reporting Person are citizens of the
United Kingdom.
During the last five years, neither the Reporting Person nor, to the best
knowledge of the Reporting Person, any person named in Schedule I attached
hereto has been (a) convicted in a criminal proceeding (excluding traffic
violations or similar
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misdemeanors) or (b) a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to,
federal or state securities laws or finding any violation with respect to such
laws.
On January 31, 1994, the Reporting Person and the Company entered into the
Amended and Restated Investment Agreement (the "Investment Agreement") (a copy
of which is attached as Exhibit 1 hereto and incorporated by reference herein)
pursuant to which the Reporting Person agreed to purchase from the Company at
the Closing shares of Class A Common Stock representing approximately 20% of
the aggregate number of shares of Common Stock and Class A Common Stock
outstanding after giving effect to such issuance. At the Closing, the
Reporting Person purchased 108,525,956 shares of Class A Common Stock at a
purchase price of $3,522,281,949 and acquired 27,472,976 shares of Class A
Common Stock in exchange for 27,472,976 shares of Common Stock. The Reporting
Person acquired such shares of Common Stock upon the automatic conversion of
Series D Convertible Preferred Stock, par value $0.10 per share ("Series D
Preferred Stock") of the Company, on June 15, 1994 pursuant to the terms
thereof. The Reporting Person acquired the Series D Preferred Stock in
exchange for Series C Convertible Preferred Stock, par value $0.10 per share
("Series C Preferred Stock"), of the Company on June 23, 1993. The Reporting
Person purchased the Series C Preferred Stock from the Company on June 2, 1993
for an aggregate cash purchase price of $829,683,875.
Under U.S. law, the Federal Communications Commission (the "FCC") may act to
limit the level of total non-U.S. ownership, whether direct or indirect, in the
Company to not more than 25% of its capital stock (owned of record or voted by
aliens). However, the FCC has issued an order granting the Company's and the
Reporting Person's petition that aggregate foreign ownership of up to 28% of
the Company's capital stock would be permissible under the Communications Act
of 1934, as amended (the "Communications Act"). The Company may be required to
repurchase or redeem shares of its equity capital from time to time as
necessary to insure that the 28% benchmark is not exceeded. The Company has
agreed in the Investment Agreement that, to the fullest extent possible, any
such repurchases or redemptions will be made first from non-U.S. persons or
entities other than the Reporting Person. Under its Restated Certificate of
Incorporation, the Company has the right to redeem outstanding shares of its
stock if its Board of Directors determines such redemption is necessary to
prevent the loss or secure the renewal or reinstatement of any license or
franchise from any governmental agency held by the Company.
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Pursuant to the terms of the Restated Certificate of Incorporation of the
Company, the Class A Common Stock will vote separately as a class for directors
and will generally elect a number of Class A Directors based upon the
percentage of aggregate voting power of all voting securities of the Company
which the Class A Common Stock represents. The Reporting Person is currently
entitled to elect up to 3 members to the Board of Directors of the Company.
The Investment Agreement provides that if no shares of Class A Common Stock are
outstanding, then, subject to certain exceptions, the Reporting Person will be
entitled to designate a number of nominees (the "BT Nominees") in connection
with each election of directors of the Company such that the number of BT
Nominees serving on the Board of Directors equals the product of the
Outstanding Voting Interest (as defined in the Investment Agreement) times the
number of directors then constituting the whole Board of Directors.
Notwithstanding the foregoing, while Section 310(b) of the Communications Act
("Section 310(b)") remains in effect, under no circumstances will the number of
BT Nominees serving on the Board of Directors exceed the maximum percentage of
the total directors of the Company permitted under Section 310(b) (which is
currently equal to 25%). For so long as the Board of Directors includes any
Class A Directors or BT Nominees, each committee of the Board of Directors
(other than the nominating committee) will include a number of Class A
Directors or BT Nominees, as applicable, (rounded to the nearest whole number,
but in no event less than one such Class A Director or BT Nominee) equivalent
to the proportion of Class A Directors or BT Nominees, as applicable, then
serving on the Board of Directors.
The Investment Agreement provides that in the event that no shares of Class
A Common Stock are outstanding, then so long as neither the Outstanding
Interest is less than 10% nor certain other events specified in the Investment
Agreement have occurred, the Company will not take any of the following actions
without the consent of the Reporting Person: (a) issue any series or class of
capital stock having either more than one vote per share other than pursuant to
the Company's Rights Plan (as defined in the Investment Agreement) or any
successor thereto, or a class vote on any matter, except to the extent such
class vote is required by the Delaware General Corporation Law or to the extent
that the holders of any series of preferred stock have the right, voting
separately as a class, to elect a number of directors of the Company upon the
occurrence of a default in the payment of dividends or redemption price; (b)
adopt any stockholder rights plan (other than a stockholder rights plan that is
substantially similar to the Rights Plan as in effect on the Closing), or any
other plan or arrangement that could reasonably be expected to disadvantage any
stockholder on the basis of the size of its shareholding, or amend, modify or
terminate the Rights Plan (other than in connection with the
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redemption or exchange of the Rights (as defined in the Investment Agreement)
in accordance with the Rights Plan or any successor thereto and other than any
amendment of the Rights Plan made in order that the execution of a definitive
agreement providing for a business combination or the consummation thereof
would not result in the Rights becoming exercisable if at the time of such
amendment the Company would otherwise be entitled to redeem the Rights, its
Restated Certificate of Incorporation and the Investment Agreement) if in
either case the Reporting Person or any of its affiliates would be adversely
affected in relation to their position under the Rights Plan as in effect on
the Closing Date; or (c) amend the Restated Certificate of Incorporation or
By-laws of the Company so as to affect adversely the rights of the Reporting
Person and its affiliates under the Investment Agreement.
Pursuant to the Restated Certificate of Incorporation of the Company, the
consent or affirmative vote of the holders of a majority of the outstanding
shares of Class A Common Stock (currently only the Reporting Person) voting
separately as a class, will be needed for the Company to: (a) amend its
Restated Certificate of Incorporation so as to affect adversely the rights of
holders of shares of Class A Common Stock; (b) effect any Business Combination
(as defined in the Restated Certificate of Incorporation) prior to the fourth
anniversary of the Closing Date; (c) issue any supervoting capital stock of the
Company; (d) adopt or amend any stockholders rights plan that would adversely
affect the Reporting Person in relation to its position upon the Closing; (e)
issue certain voting securities of the Company (excluding grants and issuances
under employee benefit plans and programs and certain other issuances)
exceeding, after giving effect to such issuances, 10% of the outstanding voting
securities of the Company in any single or related series of transactions or
15% of the outstanding voting securities of the Company over a rolling
three-year period; (f) issue certain voting securities of the Company to, and
certain transactions with, a more-than 5% stockholder of the Company (other
than the Reporting Person); (g) engage in any single or related series of
acquisitions exceeding 20% of the Company's market capitalization; (h) engage
in any single or related series of acquisitions of a non-core business
exceeding 5% of the Company's market capitalization; (i) dispose or encumber
assets with a fair market value exceeding 15% of the total fair market value of
the Company's assets (other than a sale of all or substantially all of the
assets of the Company); (j) borrow so as to cause the Company's ratio of
consolidated debt-to-total capitalization to exceed 65%; and (k) make any
extraordinary cash dividend or distribution exceeding 5% of the Company's
market capitalization.
Under the Investment Agreement, for so long as the Outstanding Interest is
at least 10%, the Reporting Person will
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have the right, subject to certain restrictions, to maintain its proportionate
ownership of the Company's voting securities through the exercise of certain
purchase rights in respect of new issuances of voting securities of the Company
and options, warrants and other securities convertible into or exchangeable for
such voting securities. The Reporting Person also has registration rights
pursuant to a Registration Rights Agreement between the Company and the
Reporting Person dated September 30, 1994 (a copy of which is attached as
Exhibit 2 hereto and incorporated by reference herein) covering sales of any
Common Stock of the Company acquired by the Reporting Person. The Investment
Agreement contains certain restrictions on the Reporting Person's right to
transfer equity securities of the Company. During the period ending four years
after Closing, the Reporting Person will generally be prohibited from
transferring any equity securities of the Company to any person, subject to
limited exceptions. Thereafter, any sale by the Reporting Person of equity
securities of the Company to a third party would be subject to a right of first
refusal procedure specified in the Investment Agreement.
Under the Investment Agreement, during the ten-year period following the
Closing, the Reporting Person is prohibited from acquiring additional equity of
the Company if such acquisition would result in the Reporting Person
beneficially owning more than 20% of the outstanding voting securities of the
Company. This standstill period is subject to early termination in certain
circumstances. Additionally, the Investment Agreement generally provides that,
following the expiration of such standstill period, the Reporting Person, so
long as its Outstanding Interest is at least 10%, may not: (a) take any action
that could result in less than a majority of the directors of the Company being
independent directors; (b) acquire any equity of the Company if the Reporting
Person would as a result own in excess of 35% of the outstanding voting
securities of the Company (or 30% if Section 310(b), or any successor thereto
is not in effect) except, among other exceptions, pursuant to a Business
Combination that has been approved by a majority of the Company's independent
directors and a majority of the Company's stockholders other than the Reporting
Person, or pursuant to a tender or exchange offer that has been recommended by
a majority of the Company's independent directors and accepted by a majority of
stockholders other than the Reporting Person; or (c) engage in certain other
transactions with the Company without the approval of a majority of the
independent directors. The post-standstill provisions described in clauses (a)
and (b) of the preceding sentence terminate upon the occurrence of specified
third party tender or exchange offers for the capital stock of the Company or
stock purchases.
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The Restated Certificate of Incorporation of the Company provides that
during the first four years following the Closing, so long as any shares of
Class A Common Stock remain outstanding, the Rights may not be redeemed by the
Company without the approval of 75% in voting power of all outstanding voting
securities of the Company (including the Class A Common Stock) voting together
as a single class. Since the Reporting Person currently owns approximately 20%
of the outstanding voting securities of the Company, unless the shares of Class
A Common Stock are converted into Common Stock, stockholder approval of the
redemption of the Rights during the four years following the Closing would be
difficult to obtain without the consent of the Reporting Person. Moreover, the
Reporting Person in its capacity as the holder of Class A Common Stock is
entitled to a consent right with respect to a Business Combination involving
the Company during the first four years following the Closing.
The Investment Agreement provides that, during the period ending seven years
after the Closing, the Company may not solicit a third party acquisition of the
Company, although the Board of Directors is permitted to, among other actions,
provide information to and engage in negotiations with a third party who has
made an unsolicited proposal if such action is required by the Board of
Directors to discharge its fiduciary duties or to comply with the requirements
of the Federal securities laws. In addition, between the seventh and the tenth
anniversaries of the Closing, the Company must provide the Reporting Person
with 60 days prior notice if the Board of Directors decides to solicit a third
party acquisition of the Company unless such action is taken in response to an
unsolicited acquisition proposal by a third party and in order to discharge the
Board of Directors' fiduciary duty, in which case such notice may only be
provided to the Reporting Person as soon as practicable. The foregoing
provisions will terminate if the shares of Class A Common Stock are no longer
outstanding or if the Board of Directors determines to pursue a sale of the
Company after the fourth anniversary of the Closing in accordance with certain
auction procedures specified in the Investment Agreement.
The Investment Agreement provides that, except as provided therein, during
the period from the fourth anniversary of the Closing through the tenth
anniversary of the Closing, so long as any shares of Class A Common Stock
remain outstanding, the Company may not, without the prior consent of the
Reporting Person, redeem the Rights or agree to or effect any Business
Combination involving the Company unless the Company follows certain auction
procedures specified in the Investment Agreement in connection with an
acquisition proposal for all of the outstanding shares of Common Stock
(including shares issuable upon conversion of the shares of Class A Common
Stock). Such auction procedures could require, among other things, that the
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Company conduct an auction for the sale of the Company on commercially
reasonable terms over a period of no less than seven months notwithstanding
that such procedures may not attract the highest bid for the Company based upon
the facts and circumstances at that time. Under certain circumstances, even if
the auction procedures are no longer applicable due to the conversion of the
Class A Common Stock, if the Board of Directors decides to sell the Company
during the period ending ten years after the Closing it must, among other
things, provide the Reporting Person a reasonable opportunity to submit an
acquisition proposal. These auction procedures provide the Reporting Person
with a meaningful opportunity to bid for the Company in light of the foreign
ownership provisions of Section 310(b). If Section 310(b) is repealed, the
auction period need only be 30 business days. Moreover, the Company may not
continue an auction in connection with a sale of the Company if, among other
things: (a) the Reporting Person is not prepared to submit an acquisition
proposal that exceeds the consideration that another bidder is prepared to pay
for the Company and certain other conditions are satisfied; or (b) the
Company's independent directors are advised in writing by counsel that, in
light of the then current regulatory, competitive and political environment,
such counsel believes that the Reporting Person will not obtain FCC approval to
acquire the Company and the Company's independent directors determine that no
good faith purpose could reasonably be served by providing the Reporting Person
with a continued opportunity to seek such approval.
The Investment Agreement, as amended by the First Amendment, dated as of
September 29, 1994, to the Investment Agreement (as so amended, the "Investment
Agreement"), between the Reporting Person and the Company (a copy of which is
attached as Exhibit 3 hereto and incorporated by reference herein), provides
that, if, pursuant to certain arbitration procedures, the Company is found to
have engaged in certain activities relating to the core business of the
Reporting Person outside the Americas, then, subject to certain exceptions, the
Reporting Person will no longer be subject to the standstill, voting and stock
provisions of the Investment Agreement (other than the provisions relating to
the post- standstill period). However, the Company will not be subject to such
loss of rights if the Company engages in the core business of the Reporting
Person in any of the states located in the European Economic Area subsequent to
the fifth anniversary of the Closing Date. Similarly, if, pursuant to certain
arbitration procedures specified in the Investment Agreement, the Reporting
Person is found to have engaged in certain activities relating to the core
business of the Company in the Americas, then, subject to certain exceptions,
the Class A Common Stock will automatically convert into Common Stock resulting
in a related loss of rights of the Reporting
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Person including its consent rights and its right to designate nominees for
election to the Board of Directors.
The foregoing is only a summary of certain provisions of the agreements
referred to and is subject to the terms of the agreements themselves which are
incorporated herein by reference and are attached hereto as exhibits.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The Reporting Person purchased 108,525,956 shares of the Class A Common
Stock on September 30, 1994, at a purchase price of $3,522,281,949 and acquired
27,472,976 shares of Class A Common Stock in exchange for 27,472,976 shares of
Common Stock. The payment of the $3,522,281,949 purchase price was made from
the proceeds of the liquidation of a substantial portion of the Reporting
Person's portfolio of short term investments. The Reporting Person acquired
such shares of Common Stock upon the automatic conversion of Series D
Convertible Preferred Stock on June 15, 1994 pursuant to the terms thereof.
The Reporting Person acquired the Series D Preferred Stock in exchange for
Series C Convertible Preferred Stock on June 23, 1993. The Reporting Person
purchased the Series C Preferred Stock from the Company on June 2, 1993 for an
aggregate cash purchase price of $829,683,875. The payment of the $829,683,875
purchase price was made from the proceeds of the liquidation of a portion of
the Reporting Person's portfolio of short term investments.
ITEM 4. PURPOSE OF TRANSACTION.
The Reporting Person acquired the Class A Common Stock for investment.
Except as otherwise described herein, the Reporting Person has no plan or
proposal with respect to the Company which relates to or would result in any of
the matters listed in Items 4(a) - (j) of Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) The Reporting Person owns of record 135,998,932 shares of Class A Common
Stock, representing all of the issued and outstanding Class A Common
Stock. Each share of Class A Common Stock converts automatically upon the
occurrence of certain events specified herein into one share of Common
Stock. If all of the Class A Common Stock owned by the Reporting Person
is converted into Common Stock, the Reporting Person would own
approximately 20% of the then outstanding Common Stock (as of the
Closing).
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Except for information set forth in this Item 5 and Item 6, the Reporting
Person and, to the best knowledge of the Reporting Person, none of the
executive officers and directors of the Reporting Person, beneficially owns
any shares of Common Stock of the Company.
(b) Subject to the restrictions contained in the Investment Agreement, the
Reporting Person presently has the power to vote, direct the voting of,
dispose of and direct the disposition of the Class A Common Stock owned by
it.
(c) The transactions by which the Reporting Person acquired the Class A Common
Stock owned by them is described in Item 2 and Item 3 hereof. Except as
aforesaid, the Reporting Person and, to the best knowledge of the
Reporting Person, none of the executive officers and directors of the
Reporting Person, has effected any transactions in the Common Stock during
the past 60 days.
(d) The Reporting Person has the sole right to receive or the power to direct
the receipt of dividends from, or the proceeds from the sale of, the Class
A Common Stock owned by it.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
The Reporting Person has designated two persons, Alfred T. Mockett and
Michael L. Hepher, as Class A Directors of the Company. Each such Class A
Director is entitled to receive options (which are not presently exercisable)
to purchase shares of the Company's Common Stock pursuant to the Company's 1988
Directors' Stock Option Plan. Mr. Hepher is a director and executive officer
of the Reporting Person. The Reporting Person presently intends to enter into
an agreement with the Class A Directors elected by the Reporting Person, and
anticipates that pursuant to such agreement, such Class A Director will agree
to hold any options received under the Company's 1988 Directors' Stock Option
Plan for the benefit of the Reporting Person, to exercise any such stock option
only pursuant to the instructions of the Reporting Person and to transfer any
shares of Common Stock received pursuant to the exercise of such options to the
Reporting Person. The Reporting Person also anticipates that it will agree to
indemnify each such Class A Director for any losses incurred in connection with
holding or exercising such options or transferring such shares of Common Stock.
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Except as set forth in this Item 6 or Item 2 hereof, neither the Reporting
Person nor any other person referred to in Schedule I attached hereto has any
contracts, arrangements, understandings or relationships (legal or otherwise)
with any person with respect to any securities of the Company, including, but
not limited to, transfer or voting of any of the securities, finder's fees,
joint ventures, loan or option arrangements, puts or calls, guarantees or
profits, division of profits or loss, or the giving or withholding of proxies.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
1. Amended and Restated Investment Agreement, dated as of January 31, 1994,
between the Reporting Person and the Company, amending and restating the
Investment Agreement, dated as of August 4, 1993, between the Reporting
Person and the Company.
2. Registration Rights Agreement, dated as of September 30, 1994, between the
Reporting Person and the Company.
3. First Amendment, dated as of September 29, 1994, to the Investment
Agreement, between the Reporting Person and the Company.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
October 11, 1994
By: /s/ Stephen J. Prior
---------------------------
Name: Stephen J. Prior
Title: Assistant Secretary
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SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF THE REPORTING PERSON
The names, present principal occupations and business addresses of the
directors and executive officers of the Reporting Person are set forth below.
If no address is given, the director's or executive officer's business address
is that of the Reporting Person. Unless otherwise indicated, each occupation
set forth opposite an individual's name refers to the Reporting Person. Each
of the named individuals is a citizen of the United Kingdom.
NAME AND
BUSINESS ADDRESS PRINCIPAL OCCUPATION
- ----------------- --------------------
Sir Iain Vallance Chairman
BT Centre
81 Newgate Street
London EC1A 7AJ
England
M Argent, CBE Company Director
BT Centre
81 Newgate Street
London EC1A 7AJ
England
M Bett, CBE Company Director
BT Centre
81 Newgate Street
London EC1A 7AJ
England
M L Hepher Group Managing Director
BT Centre
81 Newgate Street
London EC1A 7AJ
England
Dr. A W Rudge, OBE Managing Director,
BT Centre Development and
81 Newgate Street Procurement
London EC1A 7AJ
England
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NAME AND
BUSINESS ADDRESS PRINCIPAL OCCUPATION
- ---------------- --------------------
P G Bosonnet Company Director
BT Centre
81 Newgate Street
London EC1A 7AJ
England
Mrs. Yve Newbold Solicitor and Company
Hanson plc Secretary of Hanson
1 Grosvenor Place plc
London SW1X 7JH
England
Sir David Scholey, CBE Chairman of
S G Warburg Group plc S G Warburg Group plc
1 Finsbury Avenue
London EC2N 2PA
England
The Rt. Hon Lord Tebbit, CH Company Director
House of Lords
London SW1
England
Sir Ewen Fergusson Chairman of
Chairman's Office Coutts & Co.
Coutts & Co.
440 Strand
London WC2R 0QS
England
J K Oates Deputy Chairman and
Marks and Spencer plc Managing Director of
Michael House Marks and Spencer plc
Baker Street
London W1A 1DN
England
R P Brace Group Finance
BT Centre Director
81 Newgate Street
London EC1A 7AJ
England
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<PAGE> 17
EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
1. Amended and Restated Investment Agreement, dated as of
January 31, 1994, between the Reporting Person and the Company,
amending and restating the Investment Agreement, dated as of
August 4, 1993, between the Reporting Person and the Company.
2. Registration Rights Agreement, dated as of September 30, 1994,
between the Reporting Person and the Company.
3. First Amendment, dated as of September 29, 1994, to the Investment
Agreement, between the Reporting Person and the Company.
16
<PAGE> 1
EXHIBIT 1
AMENDED AND RESTATED INVESTMENT AGREEMENT
DATED AS OF JANUARY 31, 1994
BETWEEN
BRITISH TELECOMMUNICATIONS PLC
AND
MCI COMMUNICATIONS CORPORATION
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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SECTION 1. DEFINITIONS................................................................ 1
1.1. Defined Terms................................................................. 1
1.2. Beneficial Ownership.......................................................... 8
1.3. Securities Outstanding........................................................ 8
SECTION 2. PURCHASE AND SALE OF CLASS A COMMON STOCK.................................. 8
2.1. Purchase and Sale of Class A Common Stock..................................... 8
2.2. Closing Date.................................................................. 10
2.3. Exchange of Shares............................................................ 10
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................. 10
3.1. Existence; Power.............................................................. 10
3.2. Authority..................................................................... 10
3.3. Compliance with Laws.......................................................... 10
3.4. No Conflict................................................................... 11
3.5. Validity of Shares............................................................ 11
3.6. Capital Stock................................................................. 11
3.7. Reports and Financial Statements.............................................. 11
3.8. Absence of Certain Changes or Events.......................................... 11
3.9. Offering of Shares............................................................ 12
3.10. Section 203................................................................... 12
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BT....................................... 12
4.1. Existence; Power.............................................................. 12
4.2. Authority..................................................................... 12
4.3. Compliance with Laws.......................................................... 12
4.4. No Conflict................................................................... 12
4.5. Nature of Purchase............................................................ 12
4.6. Accredited Investor........................................................... 13
4.7. Access to Information......................................................... 13
4.8. Ownership of Securities of the Company........................................ 13
SECTION 5. RESTRICTIONS ON TRANSFER; REGISTRATION RIGHTS.............................. 13
5.1. Restrictions on Transfer...................................................... 13
5.2. Legends....................................................................... 14
5.3. Right of First Refusal........................................................ 15
5.4. Reorganization, Reclassification, Merger, Consolidation or Disposition of
Assets........................................................................ 18
5.5. Registration Rights........................................................... 18
SECTION 6. EQUITY PURCHASE RIGHTS..................................................... 18
6.1. Voting Equity Purchase Rights................................................. 18
6.2. Limitations................................................................... 21
6.3. Adjustments................................................................... 21
6.4. Other Permitted Purchases..................................................... 22
SECTION 7. STANDSTILL................................................................. 22
7.1. Restriction on Acquisition by BT of Company Securities........................ 22
7.2. Restrictions on Permitted Acquisition......................................... 23
7.3. Other Restrictions............................................................ 23
7.4. Post-Standstill Period........................................................ 24
SECTION 8. COVENANTS OF BT AND THE COMPANY............................................ 26
8.1. Antitrust Filings............................................................. 26
8.2. Compliance with Antitrust or Competition Laws, Exon-Florio and the
Communications Act............................................................ 26
</TABLE>
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<TABLE>
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8.3. Public Announcements.......................................................... 26
8.4. Further Assurances............................................................ 26
8.5. Cooperation................................................................... 26
8.6. Exon-Florio................................................................... 26
8.7. Agreements With Respect to AAP, Clear and Belize.............................. 27
SECTION 9. COVENANTS OF THE COMPANY................................................... 27
9.1. Pre-Closing Covenants......................................................... 27
9.2. Repurchases................................................................... 29
9.3. Access to Information......................................................... 29
9.4. No Shopping................................................................... 29
9.5. Business Combinations......................................................... 30
9.6. Core Business of the Company.................................................. 32
9.7. Board of Directors............................................................ 32
9.8. Maintenance of BT's Share Ownership........................................... 35
9.9. Termination................................................................... 38
9.10. Approval of Certain Matters................................................... 38
9.11. Continuance of Certain Rights................................................. 39
9.12. Release of Rights and Obligations............................................. 40
9.13. FCC Licenses.................................................................. 45
9.14. Notice of Breach.............................................................. 45
SECTION 10. COVENANTS OF BT........................................................... 45
10.1. Pre-Closing Covenants......................................................... 45
10.2. Notice of Acquisition Proposals............................................... 46
10.3. Voting of Shares.............................................................. 46
10.4. Notice of Changes to Outstanding Interest..................................... 47
SECTION 11. CONDITIONS TO BT'S OBLIGATIONS............................................ 47
11.1. Representations and Warranties................................................ 47
11.2. Agreements and Conditions..................................................... 47
11.3. Governmental Approvals........................................................ 48
11.4. Purchase of Shares Not Enjoined............................................... 48
11.5. Stockholder Approval.......................................................... 48
11.6. Other Agreements.............................................................. 48
11.7. Non-U.S. Ownership Certificate................................................ 48
11.8. Rights Plan................................................................... 48
11.9. Section 203................................................................... 48
11.10. NASDAQ Notification........................................................... 48
11.11. Number of Shares to be Delivered.............................................. 48
SECTION 12. CONDITIONS TO THE COMPANY'S OBLIGATIONS................................... 49
12.1. Representations and Warranties................................................ 49
12.2. Agreements and Conditions..................................................... 49
12.3. Governmental Approvals........................................................ 49
12.4. Sale of Shares Not Enjoined................................................... 49
12.5. Stockholder Approval.......................................................... 49
12.6. Other Agreements.............................................................. 49
12.7. NASD Approval................................................................. 49
12.8. Foreign Ownership Limitation.................................................. 49
SECTION 13. TERMINATION............................................................... 49
13.1. Termination................................................................... 49
13.2. Effect of Termination......................................................... 50
SECTION 14. MISCELLANEOUS............................................................. 50
</TABLE>
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14.1. Notices....................................................................... 50
14.2. Expenses...................................................................... 51
14.3. Restrictive Trade Practices Act............................................... 51
14.4. Amendment and Restatement; Effectiveness of Representations, Warranties and
Agreements.................................................................... 51
14.5. Benefits; Assignment.......................................................... 52
14.6. Entire Agreement; Amendment and Waiver........................................ 52
14.7. Headings...................................................................... 52
14.8. Governing Law................................................................. 52
14.9. Remedies...................................................................... 52
14.10. SUBMISSION TO JURISDICTION; WAIVERS........................................... 53
14.11. Severability.................................................................. 53
14.12. Counterparts.................................................................. 53
EXHIBITS
Exhibit A -- Form of Certificate of Amendment..................................... A-1
Exhibit B -- Form of By-Law Amendments............................................ B-1
Exhibit C -- Form of Rights Agreement............................................. C-1
Exhibit D -- Form of Registration Rights Agreement................................ D-1
</TABLE>
iii
<PAGE> 5
INVESTMENT AGREEMENT
AMENDED AND RESTATED INVESTMENT AGREEMENT, dated as of January 31, 1994
(this "Agreement"), between BRITISH TELECOMMUNICATIONS plc, a public limited
company incorporated under the laws of England and Wales ("BT"), and MCI
COMMUNICATIONS CORPORATION, a Delaware corporation (the "Company"), amending and
restating the Investment Agreement, dated as of August 4, 1993, between BT and
the Company (the "Original Investment Agreement").
WITNESSETH:
WHEREAS, on August 4, 1993, BT and the Company entered into the Original
Investment Agreement, pursuant to which BT and the Company agreed, among other
things, that the Company would sell to BT, and BT would purchase from the
Company, certain shares of stock of the Company, all pursuant to certain terms
and conditions; and
WHEREAS, BT and the Company have agreed to certain amendments to the
Original Investment Agreement and wish to amend and restate the Original
Investment Agreement in its entirety.
Now THEREFORE, in consideration of the foregoing and the mutual promises
contained herein, the parties hereto agree as follows:
SECTION 1. DEFINITIONS
1.1. Defined Terms. As used in this Agreement, the following terms shall
have the following meanings:
"Acquisition Proposal" shall mean any tender offer or exchange offer
or proposal (including, without limitation, any proposal or offer to
stockholders of the Company) with respect to a Business Combination or a
sale of 10% or more of the outstanding Voting Securities (excluding the
Transactions).
"Affiliate" shall mean, as applied to a specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such
specified Person and, for purposes of Section 7 hereof, Affiliate shall
also mean any Associate.
"Americas" shall mean North, Central and South America and the
Caribbean region, and, notwithstanding the foregoing, expressly including
all of the United States and all of its territories and possessions as of
August 4, 1993 wherever located.
"Antitrust Division" shall mean the Antitrust Division of the United
States Department of Justice or its successor.
"Associate" shall mean, when used to indicate a relationship with any
Person, a corporation or organization of which such Person is, directly or
indirectly, the beneficial owner of 20% or more of any class of voting
securities, provided that, with respect to a corporation or organization
that would otherwise be an Associate as of August 4, 1993, such percentage
shall be 23% or more and such percentage shall be applied with reference to
all outstanding voting securities, provided further that the applicable
percentage shall be 10% or more and such percentage shall be applied with
reference to any class of voting securities if such corporation or
organization holds Voting Securities in order to circumvent the purposes of
this Agreement.
"BT Nominees" shall have the meaning set forth in Section 9.7 of this
Agreement.
"BT North America Agreement" shall mean the Amended and Restated Stock
Purchase Agreement, dated as of December 3, 1993, by and among the Company,
MCI Telecommunications, Inc., a Delaware corporation and a wholly owned
subsidiary of the Company, BT and BT North America Inc., a Delaware
corporation and an indirect wholly owned subsidiary of BT.
"Business Combination" shall mean a merger or consolidation in which
the Company is a constituent corporation and pursuant to which the Common
Stock is exchanged for cash, securities or other property or a sale of all
or substantially all of the assets of the Company and its Subsidiaries
taken as a whole, provided that neither (i) a merger or consolidation in
which the beneficial ownership of the capital stock of the Company or of
the sole surviving corporation of the transaction (or of the ultimate
1
<PAGE> 6
parent of the Company or of such sole surviving corporation) immediately
after the consummation of such transaction is substantially the same as the
beneficial ownership of the Company's capital stock immediately prior to
the consummation thereof nor (ii) at any time that shares of Class A Common
Stock are outstanding, a merger in which the Company is the surviving
corporation, in which all shares of the Common Stock outstanding
immediately prior to the consummation of such merger remain outstanding
immediately after the consummation thereof and the only change in the
capital stock of the Company resulting from such merger is the issuance of
shares of capital stock pursuant thereto, and in connection with which no
consent or affirmative vote of the holders of Class A Common Stock would be
required under the Certificate of Incorporation (as amended by the
Certificate of Amendment), shall be deemed a Business Combination.
"Business Day" shall mean any day that is not a Saturday, a Sunday, a
bank holiday or any other day on which commercial banking institutions in
New York, New York or London, England are not generally open for business.
"By-Law Amendments" shall have the meaning set forth in Section 9.1 of
this Agreement.
"CFIUS" shall mean the Committee on Foreign Investment in the United
States.
"Certificate of Amendment" shall mean the Certificate of Amendment to
the Certificate of Incorporation, substantially in the form of Exhibit A
hereto, which certificate is to be filed with the Secretary of State of the
State of Delaware pursuant to Section 9.1(e) of this Agreement.
"Certificate of Designation" shall mean the Certificate of Designation
relating to the Preferred Stock, filed with the Secretary of State of the
State of Delaware on June 25, 1993.
"Certificate of Incorporation" shall mean the Restated Certificate of
Incorporation of the Company as the same may be hereafter amended or
supplemented.
"Class A Common Stock" shall mean the Class A Common Stock, par value
$.10 per share, of the Company as designated in the Certificate of
Amendment.
"Class A Directors" shall mean the directors of the Company elected by
the holders of Class A Common Stock (either alone or together with the
holders of any Class A Preferred Stock (as defined in the Certificate of
Amendment)).
"Closing" shall have the meaning set forth in Section 2.2 of this
Agreement.
"Closing Date" shall have the meaning set forth in Section 2.2 of this
Agreement.
"Closing Foreign Ownership Limitation" shall mean the aggregate
percentage of the capital stock of the Company Owned of Record or Voted by
Non-U.S. Persons or Entities that is 1/10th of 1% less than the Foreign
Ownership Limitation.
"Common Shares" shall mean shares of the Class A Common Stock and the
Common Stock.
"Common Stock" shall mean the Common Stock, par value $.10 per share,
of the Company.
"Communications Act" shall mean the Communications Act of 1934, as
amended, or any successor thereto. Any reference to a particular section of
the Communications Act shall refer to such section as the same may be
hereafter renumbered or otherwise amended.
"Constating Documents" shall mean as to any Person the certificate of
incorporation and by-laws or other organizational or governing documents of
such Person.
"Conversion Shares" shall mean the shares of the Common Stock issued
or issuable upon the conversion of the Preferred Shares in accordance with
the terms of the Preferred Stock or the shares of Class A Common Stock
issued in exchange for such shares of Common Stock pursuant to Section 2.3
of this Agreement.
"Core Business", for purposes of this Agreement, shall mean all
telecommunications and other electronic information services and equipment
for the provision of such services, as they exist on the date of this
Agreement or hereafter exist, including, without limitation, all forms of
telecommunications access and egress (landline and wireless), and
value-added consumer and business services generated through or as a result
of underlying telecommunications services using all technology (voice, data
and
2
<PAGE> 7
image) and physical transport, network intelligence, and software
applications, and including, without limitation, (i) information
processing, (ii) systems integration and outsourcing, (iii) transaction
processing and (iv) cable television.
"Current Market Value" shall mean, with respect to any security, the
average of the daily closing prices on the NASDAQ Stock Market (or such
principal exchange on which such security may be listed) for such security
for the 20 consecutive trading days commencing on the 22nd trading day
prior to the date with respect to which the Current Market Value is being
determined. The closing price for each day shall be the closing price, if
reported, or, if the closing price is not reported, the average of the
closing bid and asked prices as reported by NASDAQ or a similar source
selected from time to time by the Company for the purpose. In the event
such closing prices are unavailable, the Current Market Value shall be the
Fair Market Value of such security established by a Determination of the
Independent Directors. Notwithstanding anything to the contrary contained
herein, the Independent Directors shall establish the Current Market Value
of the Class A Common Stock to be equal to the Current Market Value of the
Common Stock and shall establish the Current Market Value of any options,
warrants, rights or other securities convertible into or exercisable for
Class A Common Stock to be equal to the Current Market Value of options,
warrants, rights or other securities convertible into or exercisable for
Common Stock upon the same terms and otherwise containing the same terms as
such options, warrants, rights or other securities convertible into or
exercisable for Class A Common Stock.
"DGCL" shall mean the General Corporation Law of the State of
Delaware.
"Determination of the Independent Directors" shall mean, with respect
to any matter, a determination made in good faith, on the basis of such
relevant factors as the Independent Directors consider, in their reasonable
judgment, appropriate, by the vote of a majority of the Independent
Directors present at a meeting of the Independent Directors called for such
purpose, a quorum being present (or at a meeting of the Board of Directors
of the Company if a quorum of the Independent Directors is present at such
meeting), or without a meeting if a majority of all Independent Directors
consent thereto in writing. For these purposes, a majority of all
Independent Directors, acting at a meeting duly assembled, shall constitute
a quorum for the making of any such determination at such meeting.
"EC Commission" shall mean the Commission of the European Communities.
"Employee Shares" shall have the meaning set forth in Section 6.1
hereof.
"Employee Stock Plan" shall mean the Company's Employee Stock Option
Plan, Directors' Stock Option Plan, Employee Stock Purchase Plan, Employee
Stock Ownership Plan and any other past, current or future employee stock
ownership, thrift, savings, stock bonus, stock purchase, restricted stock
or stock option plan or similar arrangement, or any grantor trust
established to fund any such plan or otherwise for the benefit of employees
or directors, pursuant to which employees or directors of the Company or
any of its Subsidiaries may acquire Equity. Any rights of an employee or
director to purchase Equity under the Employee Stock Purchase Plan, the
Employee Stock Ownership Plan or any similar plans shall be deemed a right
to acquire Equity for all purposes hereunder.
"Equity" shall mean any and all shares of capital stock of the
Company, securities of the Company convertible into such shares, and
options, warrants or other rights to acquire such shares.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of
the SEC thereunder, all as the same shall be in effect from time to time.
"Exon-Florio" shall mean sec.721 of the Defense Production Act of
1950, as amended, and the rules promulgated thereunder.
"Existing Options" shall have the meaning set forth in Section 2.1 of
this Agreement.
"FCC" shall mean the Federal Communications Commission or its
successor.
3
<PAGE> 8
"FCC Order" shall mean either:
(i) A written order or other determination from the staff of the
FCC (either in the first instance or upon review, reconsideration or
other action subsequent to an order or other determination of the staff)
either approving the consummation of the transactions contemplated by
this Agreement or stating that no such approval is required (or, in the
case of such review, reconsideration or other subsequent action, a
written order or other determination to the effect set forth above or
affirming or upholding, or having the effect of affirming or upholding,
whether by dismissing or denying a petition for reconsideration or
terminating the consideration thereof or otherwise, a previous order or
determination to the effect set forth in this paragraph (i)), which
order or determination shall no longer be subject to further
administrative review by the FCC; or,
(ii) A written or other determination from the FCC itself (either
in the first instance or upon review, reconsideration or other action
subsequent to an order or other determination of the staff of the FCC)
either approving the consummation of the transactions contemplated by
this Agreement or stating that no such approval is required (or, in the
case of such review, reconsideration or other action subsequent to an
order or determination of the staff of the FCC, a written order or other
determination from the FCC itself to the effect set forth above or
affirming, upholding or having the effect of affirming or upholding,
whether by dismissing or denying a petition for reconsideration or
application for review or terminating the consideration thereof or
otherwise, an order or other determination of the staff of the FCC to
the effect set forth in paragraph (i)).
For purposes of this definition, an order or other determination of the
staff shall be deemed no longer subject to further administrative review by
the FCC:
(x) If no petition for reconsideration or application for review by
the FCC of the order or determination of the staff has been filed within
30 days after the date of public notice of the order or determination,
as such 30-day period is computed and as such date is defined in
sections 1.104 and 1.4, as applicable, of the FCC's rules, and the FCC
has not initiated review of the order or determination of the staff on
its own motion within 40 days after the date of public notice of the
order or determination, as such 40-day period is computed and as such
date is defined in sections 1.117 and 1.4 of the FCC's rules, or
(y) If any such petition for reconsideration or application for
review has been filed, or, if the FCC has initiated review of the order
or determination of the staff on its own motion, the FCC itself has
issued a written order or other determination or taken other action to
the effect set forth in paragraph (ii) above.
"FTC" shall mean the Federal Trade Commission or its successor.
"Fair Market Value" shall mean, as to any shares or other property,
the cash price at which a willing seller would sell and a willing buyer
would buy such shares or property in an arms'-length negotiated transaction
without time constraints.
"Fixed Shares" shall have the meaning set forth in Section 2.1 of this
Agreement.
"Foreign Ownership Limitation" shall mean the maximum aggregate
percentage of the capital stock of the Company that may be Owned of Record
or Voted by Non-U.S. Persons or Entities under Section 310(b)(4) of the
Communications Act.
"Foreign Ownership Restrictions" shall mean any applicable
restrictions of a Governmental Authority on foreign ownership or control of
the Company or its securities the breach of which, or non-compliance with
which, could result in the loss, or failure to secure the renewal or
reinstatement, of any license or franchise of any Governmental Authority
held by the Company or any of its Subsidiaries to conduct any portion of
the business of the Company or such Subsidiary.
"Governmental Authority" shall mean any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government.
4
<PAGE> 9
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the rules promulgated thereunder.
"Independent Directors" shall have the meaning set forth in Section
9.7 of this Agreement.
"Interest Rate" shall mean the interest rate per annum publicly
announced by Citibank, N.A. as its "Prime Rate" as in effect from time to
time.
"Maintenance Shares" shall mean such Voting Equity of the Company as
BT or any of its Affiliates may from time to time acquire subsequent to the
Closing pursuant to the terms of this Agreement (excluding any Shares
purchased subsequent to the Closing) in order to maintain a level of
beneficial ownership of Voting Securities equating to an Outstanding
Interest of up to 20%.
"Market Capitalization" shall mean the aggregate of the Current Market
Value, on a fully diluted basis, of the outstanding Equity of the Company.
"Merger Control Regulation" shall mean EC Council Regulation 4064/89.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASDAQ" shall mean the electronic inter-dealer quotation system
operated by NASDAQ, Inc.
"Newco" shall mean the international joint venture between BT and the
Company to be formed and established and governed and operated in
accordance with the Newco Agreement.
"Newco Agreement" shall mean the Joint Venture Agreement, dated August
4, 1993, by and among BT, Moorgate (Twelve) Limited, a company incorporated
in England and Wales and a wholly owned subsidiary of BT, the Company, MCI
Ventures Corporation, a Delaware corporation and a wholly owned subsidiary
of the Company, and Newco.
"Newco Triggering Events" shall mean the occurrence of any of the
following: (i) the Company or any of its Affiliates has exercised its right
to require BT or any of its Affiliates to purchase the Company's direct or
indirect interest in Newco pursuant to Clause 26 of the Newco Agreement,
(ii) the Company or any of its Affiliates has exercised its right to
require BT or any of its Affiliates to sell to the Company or any of its
Affiliates BT's direct or indirect interest in Newco pursuant Clause 30 of
the Newco Agreement, provided that such exercise shall be deemed not to be
a Newco Triggering Event (other than for purposes of Sections 9.12(i) and
9.12(j)) until such time as the shares of Class A Common Stock are
automatically converted into shares of Common Stock in connection therewith
pursuant to section 4(b)(9)(ii) of the Certificate of Incorporation (as
amended by the Certificate of Amendment) by reason of the occurrence of an
event described in section 4(b)(11)(vi)(F) of the Certificate of
Incorporation (as amended by the Certificate of Amendment) unless if
immediately prior to the time of such exercise no shares of Class A Common
Stock are outstanding, (iii) the Company or any of its Affiliates has
transferred the Company's direct or indirect interest in Newco to a third
party in accordance with Clause 25.8 or 25.9 of the Newco Agreement or BT
or any of its Affiliates acquired the Company's direct or indirect interest
in Newco pursuant to Clauses 25.6 and 25.7 or Clause 25.9 of the Newco
Agreement in connection with a proposed transfer of the Company's direct or
indirect interest in Newco, (iv) BT or any of its Affiliates has
transferred BT's direct or indirect interest in Newco to a third party in
accordance with Clause 25.8 or 25.9 of the Newco Agreement or the Company
or any of its Affiliates has acquired BT's direct or indirect interest in
Newco pursuant to Clauses 25.6 and 25.7 or Clause 25.9 of the Newco
Agreement in connection with a proposed transfer of BT's direct or indirect
interest in Newco or (v) BT or any of its Affiliates has exercised its
right to require the Company or any of its Affiliates to sell to BT or any
of its Affiliates the Company's direct or indirect interest in Newco
pursuant to Clause 30 of the Newco Agreement, provided that such exercise
as a result of a material breach by the Company pursuant to Clause 29.1(a)
of the Newco Agreement shall be deemed not to be a Newco Triggering Event
(other than for purposes of Sections 9.12(i) and 9.12(j)) until such time
as the shares of Class A Common Stock are automatically converted into
shares of Common Stock in connection therewith pursuant to section
4(b)(9)(ii) of the Certificate of Incorporation (as amended by the
Certificate of Amendment) by reason of the occurrence of an event described
in section 4(b)(11)(vi)(D) of the Certificate of Incorporation (as amended
by the Certificate of Amend-
5
<PAGE> 10
ment) unless if immediately prior to the time of such exercise no shares of
Class A Common Stock are outstanding.
"Non-Core Business" shall mean any business that is not a Core
Business of the Company.
"Non-U.S. Ownership Certificate" shall have the meaning set forth in
Section 11.7 of this Agreement.
"Non-U.S. Persons or Entities" shall mean any foreign government or
the representative thereof, any alien or the representative of any alien or
any corporation organized under the laws of any foreign country, as those
terms are used in 47 U.S.C. sec. 310(b).
"Optional Shares" shall have the meaning set forth in Section 2.1 of
this Agreement.
"Outstanding Interest" shall mean the percentage of the aggregate
voting power of the outstanding Voting Securities (other than voting power
with respect to the election of directors or a class vote on specified
matters) represented by the Voting Securities beneficially owned by BT or
any of its Affiliates, provided that, for purposes of calculating such
percentage, Uncounted Shares shall be deemed not to be outstanding Voting
Securities, provided, however, that the foregoing proviso shall not apply
if the Outstanding Interest has become, or to the extent that, without the
benefit of such proviso, the Outstanding Interest would be, less than
7 1/2%.
"Outstanding Voting Interest" shall mean the percentage of the
aggregate voting power of the outstanding Voting Securities (other than
voting power with respect to the election of directors or a class vote on
specified matters) represented by the Voting Securities beneficially owned
by BT or any of its Affiliates, provided that, for purposes of calculating
the Outstanding Voting Interest, BT shall not be deemed to beneficially own
any Voting Securities that are not then outstanding.
"Owned of Record or Voted by" shall have the meaning used in 47 U.S.C.
sec. 310(b)(4) and interpretations thereof by the FCC.
"Permitted Offering" shall have the meaning set forth in Section 5.1
of this Agreement.
"Person" shall mean an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint
venture, Governmental Authority or other entity of whatever nature.
"Preferred Shares" shall mean the 13,736.488 (Thirteen Thousand Seven
Hundred Thirty-Six Point Four Hundred Eighty-Eight) shares of the Preferred
Stock issued by the Company to BT pursuant to the Preferred Stock Exchange
Agreement dated as of June 24, 1993 between BT and the Company.
"Preferred Stock" shall mean that series of Preferred Stock, par value
$0.10 per share, of the Company designated as the Series D Convertible
Preferred Stock, whose powers, preferences and rights and qualifications,
limitations and restrictions are set forth in the Certificate of
Designation.
"Proposals" shall have the meaning set forth in Section 9.1 of this
Agreement.
"Proxy Statement" shall have the meaning set forth in Section 9.1 of
this Agreement.
"RTPA" shall mean the Restrictive Trade Practices Act 1976.
"Redemption Provision" shall mean Section 9 of the Certificate of
Incorporation as amended by the Certificate of Amendment or any similar
provision under any amendment thereto.
"Registration Rights Agreement" shall have the meaning set forth in
Section 5.5 of this Agreement.
"Requirement of Law" shall mean as to any Person, any law, treaty,
rule or regulation of any Governmental Authority applicable to such Person
or any of its property or to which such Person or any of its property is
subject.
"Rights" shall mean any rights issued or distributed to stockholders
pursuant to the Rights Plan or any successor plan thereto.
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<PAGE> 11
"Rights Plan" shall mean the Rights Agreement, substantially in the
form of Exhibit C hereto, to be adopted by the Company pursuant to Section
9.1(e) of this Agreement, as the same may be amended from time to time. For
purposes of this Agreement, any rights plan adopted by the Company
subsequent to the termination of the Rights Plan or the expiration,
redemption or exchange of the Rights shall be a successor plan, and a
successor plan shall include such successor plan as the same may be amended
from time to time.
"SEC" shall mean the Securities and Exchange Commission or its
successor.
"Sale Notice" shall have the meaning set forth in Section 9.5 of this
Agreement.
"Section 9.2 Shares" shall mean any shares of Common Stock that the
Company is obligated to use its best efforts to repurchase under Section
9.2 to the extent that such shares have not been so repurchased.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar Federal statute, and the rules and regulations of the SEC
thereunder, all as the same shall be in effect from time to time.
"Shares" shall mean the Fixed Shares, the Optional Shares and the
Additional Optional Shares, and any shares of Common Stock issued upon the
conversion of such shares in accordance with the terms of the Class A
Common Stock.
"Small Offering" shall have the meaning set forth in Section 6.2 of
this Agreement.
"Small Offering Shares" shall have the meaning set forth in Section
6.1 of this Agreement.
"Stockholders' Meeting" shall have the meaning set forth in Section
9.1 of this Agreement.
"Subsidiary" shall mean, with respect to any Person, any corporation
or other entity of which at least a majority of the voting power of the
voting equity securities or equity interest is owned, directly or
indirectly, by such Person.
"Transactions" shall mean the transactions contemplated by this
Agreement, the Newco Agreement and the BT North America Agreement.
"Transfer" shall have the meaning set forth in Section 5.1 of this
Agreement.
"Uncounted Shares" shall mean (i) capital stock subject to purchase
rights under Section 6.1 to the extent that the purchase rights provided
under Section 6.1 in respect thereof are not yet exercisable, including,
without limitation, Small Offering Shares, (ii) Employee Shares issued
after August 4, 1993, to the extent that the purchase rights provided under
Section 6.1 in respect thereof became exercisable and neither BT nor any of
its Affiliates shall have elected to exercise the purchase rights provided
under Section 2.1(b), 2.1(d) or 6.1 in respect thereof, provided, however,
that if after the issuance of any such Employee Shares BT or any of its
Affiliates shall have purchased Voting Securities from any Person other
than the Company, then each such share so purchased shall reduce the number
of Uncounted Shares attributable to the issuance of Employee Shares (but
not to less than zero) in an amount equal to the number of Employee Shares
that would be required on the date of such purchase to be issued in order
to enable BT to purchase one share pursuant to BT's purchase rights under
Section 6.1, (iii) Section 9.2 Shares and (iv) any capital stock subject to
purchase rights under Section 6.1 to the extent that either (x) the time
period during which BT has been provided the opportunity to deliver notice
of its irrevocable commitment to purchase Voting Equity pursuant to its
purchase rights provided under Section 6.1 in respect of such capital stock
shall not have expired or (y) BT shall have delivered notice of its
irrevocable commitment to purchase Voting Equity pursuant to its purchase
rights provided under Section 6.1 in respect of such capital stock, but
such commitment to purchase Voting Equity shall not yet have been
consummated, provided that such capital stock shall not be deemed Uncounted
Shares to the extent that the Company's obligation to issue and sell Voting
Equity to BT in respect thereof shall have been terminated pursuant to
Section 6.1(b).
"Voting Equity" shall mean any and all Voting Securities, securities
of the Company convertible into Voting Securities, and options, warrants or
other rights to acquire Voting Securities.
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<PAGE> 12
"Voting Securities" shall mean the Common Stock, the Class A Common
Stock, any Class A Preferred Stock (as defined in the Certificate of
Amendment) and any other securities of the Company having voting power
under ordinary circumstances with respect to the election of directors of
the Company.
1.2. Beneficial Ownership. Unless otherwise provided in this Agreement, a
Person shall be deemed to "beneficially own" any securities in accordance with
the provisions of Rule 13d-3 under the Exchange Act, provided that (except with
respect to Sections 7.1 and 7.4) capital stock of the Company underlying any
options, warrants, rights or other securities convertible into or exercisable
for such capital stock shall not be deemed to be beneficially owned by any
Person if the applicable conversion price or exercise price, as the case may be,
of such option, warrant, right or other security is more than the Current Market
Value of the underlying capital stock.
1.3. Securities Outstanding. In determining the number or other amount
outstanding of any securities of the Company, securities owned by the Company or
any of its Subsidiaries shall be deemed to be not outstanding.
SECTION 2. PURCHASE AND SALE OF CLASS A COMMON STOCK
2.1. Purchase and Sale of Class A Common Stock. (a) On the terms and
subject to the conditions of this Agreement, the Company shall, on the Closing
Date, issue and sell to BT, and BT shall purchase from the Company, subject to
Sections 2.1(b) and 2.1(c), 106,752,106 shares of the Class A Common Stock (the
"Fixed Shares") at a price per share such that the average price per share of
the aggregate of the Fixed Shares and the shares of Common Stock issuable upon
the conversion of the Preferred Shares which, in the case of shares of Common
Stock issuable upon conversion of the Preferred Shares, shall be deemed to equal
the aggregate purchase price paid by BT for the Preferred Shares divided by the
number of shares of Common Stock issuable upon conversion of the Preferred
Shares shall be $32.00 per share. The delivery of the Fixed Shares at the
Closing shall be against BT's payment to the account designated by the Company
of immediately available funds in the amount of the purchase price therefor.
(b) If any shares of Common Stock are issued by the Company subsequent to
July 28, 1993 and on or prior to the seventh Business Day prior to the Closing
pursuant to the exercise of options or any other rights to acquire Equity
granted, issued or otherwise existing prior to August 4, 1993, pursuant to
Employee Stock Plans ("Existing Options"), then on the terms and subject to the
conditions of this Agreement, at the option of BT, the Company shall, on the
Closing Date, issue and sell to BT, and BT, if it so elects, shall, subject to
Section 2.1(c), purchase from the Company, at a price of $32.00 per share, all
but not less than all of that number of shares of Class A Common Stock (the
"Optional Shares") equal to 25% of the aggregate number of shares of Common
Stock issued subsequent to July 28, 1993 and on or prior to the seventh Business
Day prior to the Closing pursuant to the exercise of Existing Options, provided
that the Company shall be entitled to reduce the number of Fixed Shares or
Optional Shares to be issued to BT to the extent that as a result of such
issuance BT would otherwise become the beneficial owner of in excess of 20% of
the outstanding Common Shares (excluding Section 9.2 Shares), as of the seventh
Business Day prior to the Closing, after giving effect to the shares of Class A
Common Stock to be issued to BT on the Closing Date. The Company shall give
written notice to BT of the number of such shares issued during such period
pursuant to Existing Options on the seventh Business Day prior to the Closing,
and prior thereto, upon the request of BT, shall from time to time provide BT
promptly with information as to the number of shares of Common Stock issued by
the Company between July 28, 1993 and the date of such request. BT shall, if it
elects to purchase the Optional Shares pursuant hereto, give notice to the
Company of its irrevocable commitment to purchase the Optional Shares, if any,
at the Closing no later than five Business Days prior to the Closing Date. The
delivery of the Optional Shares at the Closing shall be against BT's payment to
the account designated by the Company of immediately available funds in the
amount of the purchase price therefor.
(c) Notwithstanding the foregoing, the number of Shares to be issued to BT
at the Closing shall be reduced, but only to the extent necessary, so that the
aggregate percentage of the outstanding capital stock of the Company represented
by all shares of such capital stock Owned of Record or Voted by BT, after giving
effect to the shares otherwise to be issued to BT on the Closing Date, together
with all other capital stock Owned of Record or Voted by Non-U.S. Persons or
Entities as set forth in the survey conducted in connection with the
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<PAGE> 13
Non-U.S. Ownership Certificate (or as otherwise known to the Company), does not
exceed the Closing Foreign Ownership Limitation. If (x) the number of Shares
otherwise to have been issued at Closing has been reduced pursuant to Section
2.1(b) or this Section 2.1(c), (i) the number of Optional Shares shall be
reduced first (but to no less than zero) before there is any reduction in the
number of Fixed Shares and (ii) to the extent that the number of Fixed Shares
issued at the Closing has been reduced, the price per share of the Fixed Shares
purchased at the Closing shall be increased so that the average price per share
of the aggregate of the Fixed Shares so purchased and the shares of Common Stock
issuable upon the conversion of the Preferred Shares shall be $32.00 per share
and (y) the number of Shares otherwise to have been issued at the Closing has
been reduced pursuant to this Section 2.1(c), then no more than one year
following the Closing, the Company shall issue and sell to BT, at a price of
$32.00 per share, and BT shall purchase, the number of Shares reduced pursuant
to the first sentence of this Section 2.1(c), provided that the Company shall
not be obligated to issue and sell a number of Shares under this clause (y) that
would result in BT beneficially owning in excess of 20% of the then outstanding
Common Shares (excluding Section 9.2 Shares). Without limiting the foregoing,
promptly following such time as the Company may acquire actual knowledge of
facts or circumstances that would cause it to reduce the number of Shares to be
issued at the Closing pursuant to this Section 2.1(c), the Company shall use its
best efforts to obtain an FCC Order to permit the Company to issue to BT the
number of Shares reduced pursuant to the first sentence of this Section 2.1(c)
without exceeding the Foreign Ownership Limitation. The Company shall take such
steps as shall be reasonably necessary to ensure that BT, within one year of the
Closing, shall be permitted to acquire the number of Shares reduced pursuant to
this Section 2.1(c) without exceeding the Foreign Ownership Limitation.
(d) If any shares of Common Stock are issued by the Company following the
seventh Business Day prior to the Closing and on or prior to the Closing Date
pursuant to the exercise of Existing Options, then on the terms and subject to
the conditions of this Agreement, at the sole option of BT, the Company shall
issue and sell to BT, and BT, if it so elects, shall, subject to the provisions
hereof, purchase from the Company, at a price of $32.00 per share, all but not
less than all of that number of shares of Class A Common Stock (the "Additional
Optional Shares") equal to 25% of the aggregate number of shares of Common Stock
issued following the seventh Business Day prior to the Closing and on or prior
to the Closing Date pursuant to the exercise of Existing Options, provided that
the Company shall be entitled to reduce the number of Additional Optional Shares
to be issued to BT to the extent that as a result of such issuance BT would
otherwise become the beneficial owner of in excess of 20% of the outstanding
Common Shares (excluding Section 9.2 Shares) after giving effect to any such
issuance of Additional Optional Shares. The Company shall give written notice to
BT of the number of such shares issued during such period pursuant to Existing
Options as promptly as practicable following the Closing. BT shall give notice
to the Company of its irrevocable commitment to purchase the Additional Optional
Shares, if any, no later than five Business Days following such written notice
to BT, provided that if BT shall not have responded to such written notice
within such time period and BT shall have previously elected to purchase
Optional Shares, if any, pursuant to Section 2.1(b), then BT's election to
purchase such Optional Shares shall be deemed also to be its irrevocable
commitment to purchase the Additional Optional Shares, if any. The purchase, if
any, by BT of the Additional Optional Shares shall be consummated within ten
Business Days of BT's exercise of its option to purchase the Additional Optional
Shares, if any (or, in the case of a deemed election to purchase such shares,
within 15 Business Days of the Company's written notice to BT). The delivery of
the Additional Optional Shares shall be against BT's payment to the account
designated by the Company of immediately available funds in the amount of the
purchase price therefor. Notwithstanding the foregoing, the number of Additional
Optional Shares to be issued to BT at such closing shall be reduced, but only to
the extent necessary, so that the aggregate percentage of the outstanding
capital stock of the Company represented by all shares of such capital stock
Owned of Record or Voted by BT, after giving effect to the Additional Optional
Shares otherwise to be purchased by BT at such closing, together with all other
capital stock Owned of Record or Voted by Non-U.S. Persons or Entities as set
forth in the survey conducted in connection with the Non-U.S. Ownership
Certificate (or as otherwise known to the Company), does not exceed the Closing
Foreign Ownership Limitation. If the number of Additional Optional Shares issued
at such closing has been reduced pursuant to the preceding sentence, no more
than one year following such closing, the Company shall, upon reasonable notice
to BT, issue and sell to BT, at a price of $32.00 per share, and BT shall
purchase, the number of Additional Optional Shares reduced under the preceding
sentence,
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<PAGE> 14
provided that the Company shall not be obligated to issue and sell a number of
Additional Optional Shares under this Section 2.1(d) that would result in BT
beneficially owning in excess of 20% of the then outstanding Common Shares
(excluding Section 9.2 Shares). The Company shall take such steps as shall
reasonably be necessary to ensure that BT, within such one-year period, shall be
permitted to acquire the number of Additional Optional Shares reduced under the
second preceding sentence without exceeding the Foreign Ownership Limitation.
(e) Notwithstanding anything to the contrary contained in this Section 2.1,
the purchase price and number of Fixed Shares, Optional Shares and Additional
Optional Shares to be purchased by BT hereunder shall be adjusted to reflect any
stock split, stock dividend, or other combination or reclassification of the
Company's capital stock during the time from August 4, 1993, until the Closing
Date.
2.2. Closing Date. (a) The closing (the "Closing") of the purchase and
sale of the Fixed Shares and the Optional Shares, if any, provided for in
Section 2.1 shall take place at the offices of Simpson Thacher & Bartlett, 425
Lexington Avenue, New York, New York on the tenth Business Day following the
satisfaction of all of the conditions to each party's obligations set forth in
Sections 11 and 12 (or, with respect to any condition not satisfied, the waiver
thereof by the party for whose benefit the condition exists) or at such other
place and date as the parties may mutually agree. The date and time of such
Closing are herein referred to as the "Closing Date".
(b) The closing of the purchase and sale of the Additional Optional Shares,
if any, provided for in Section 2.1(d) shall take place at the offices of
Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, New York within the
time period set forth in Section 2.1(d) or at such other place and date as the
parties may mutually agree.
2.3. Exchange of Shares. If prior to the Closing the Preferred Shares
shall have been converted into shares of Common Stock pursuant to the terms set
forth in the Certificate of Designation, then immediately prior to the Closing,
upon the surrender to the Company of either the certificates formerly
representing the Preferred Shares so converted or the certificates for the
shares of Common Stock issued upon such conversion, as the case may be, the
Company shall issue to BT one share of Class A Common Stock for each such share
of Common Stock.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to BT that:
3.1. Existence; Power. The Company has been duly incorporated and is
validly existing and in good standing as a corporation under the laws of the
State of Delaware, and has all necessary corporate power and authority to
transact in all material respects all business conducted by it, to enter into
this Agreement and, subject to approval by the stockholders of the Company at
the Stockholders' Meeting and to the filing of the Certificate of Amendment with
the Secretary of State of the State of Delaware, to issue and sell the Shares
and to carry out the provisions of this Agreement.
3.2. Authority. Each of the Original Investment Agreement and this
Agreement has been duly authorized by all necessary corporate action on the part
of the Company and duly executed and delivered by the Company and constitutes a
legal, valid and binding agreement of the Company, enforceable against it in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors generally, by general equity principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) or by an implied covenant of good faith and fair dealing.
3.3. Compliance with Laws. Except for applicable requirements under the
Communications Act, state communications laws, the Exchange Act, state
securities or blue sky laws, foreign competition or antitrust laws, Exon-Florio,
regulations promulgated by or in respect of the Department of Defense and the
NASDAQ Stock Market and the expiration or termination of the waiting period
under the HSR Act, no consent, approval or authorization of, or filing,
registration, qualification, declaration or designation with, any Governmental
Authority is required on the part of the Company as a condition to the valid
execution and delivery of this Agreement and, subject to approval by the
stockholders of the Company at the Stockholders' Meeting and to the filing of
the Certificate of Amendment with the Secretary of State of the State of
Delaware, the valid issue and sale of the Shares in the manner contemplated by
this Agreement, except where
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<PAGE> 15
the absence of any such consent, approval or authorization of, or the failure to
make any such filing, registration, qualification, declaration or designation
with any Governmental Authority would not have a material adverse effect on the
Company and its Subsidiaries taken as a whole or the Shares or materially impair
the Company's ability to consummate the transactions contemplated hereby.
3.4. No Conflict. Subject to applicable requirements under the
Communications Act, state communications laws, the Exchange Act, state
securities or blue sky laws, foreign competition or antitrust laws, Exon-Florio,
regulations promulgated by or in respect of the Department of Defense and the
NASDAQ Stock Market and the expiration or termination of the waiting period
under the HSR Act, and except as set forth on Schedule 3.4 hereto, the
execution, delivery and, subject to the approval of the Proposals by the
stockholders of the Company and the filing of the Certificate of Amendment with
the Secretary of State of the State of Delaware, performance by the Company of
this Agreement and the issue and sale of the Shares will not (i) conflict with
the Constating Documents of the Company, (ii) conflict with, result in a breach
of, or constitute a default under, any loan or credit agreement, indenture,
mortgage, note or other agreement or instrument affecting the Company or to
which the Company or any of its Subsidiaries or Affiliates is a party or by
which any of their respective properties or assets are or may be bound, (iii)
violate any Requirement of Law applicable to the Company or (iv) violate any
order, judgment or decree of any court or other Governmental Authority or any
determination of an arbitrator, except where any such conflict, breach or
default under clause (ii) or any such violation under clauses (iii) or (iv)
would not have a material adverse effect on the Company and its Subsidiaries
taken as a whole or the Shares or materially impair the Company's ability to
consummate the transactions contemplated herein.
3.5. Validity of Shares. Subject to the approval of the Proposals by the
stockholders of the Company at the Stockholders' Meeting and to the filing of
the Certificate of Amendment with the Secretary of State of the State of
Delaware, the issuance of the Shares has been duly authorized by all necessary
corporate action on the part of the Company, and, when the Shares are issued and
delivered against payment therefor at the Closing, the Shares will be validly
issued, fully paid and nonassessable shares of capital stock of the Company.
3.6. Capital Stock. As of July 28, 1993, the authorized capital stock of
the Company consists of (a) 800,000,000 shares of Common Stock, of which
536,900,329 shares are outstanding and (b) 20,000,000 shares of preferred stock,
par value $0.10 per share, of which 13,736.488 (Thirteen Thousand Seven Hundred
Thirty-Six Point Four Hundred Eighty-Eight) shares of the Preferred Stock are
outstanding. All outstanding shares of capital stock are duly authorized,
validly issued, fully paid and nonassessable, and no class of capital stock is
entitled to preemptive rights. There are outstanding as of July 28, 1993 no
options, warrants or other rights to acquire capital stock from the Company
other than (x) options representing in the aggregate the right to purchase
56,051,108 shares of Common Stock, (y) rights under the Company's Employee Stock
Purchase Plan permitting the purchase of up to an aggregate of 8,604,963 shares
of Common Stock and (z) shares of Preferred Stock convertible into an aggregate
of 27,472,976 shares of Common Stock.
3.7. Reports and Financial Statements. The Company has filed all reports
required to be filed with the SEC since January 1, 1992 (collectively, including
all exhibits thereto, the "SEC Reports"). None of such SEC Reports, as of their
respective dates (as amended through August 4, 1993), contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each of the financial
statements (including the related notes) included in the SEC Reports presents
fairly, in all material respects, the consolidated financial position and
consolidated results of operations and cash flows of the Company and its
subsidiaries as of the respective dates or for the respective periods set forth
therein, all in conformity with generally accepted accounting principles
consistently applied during the periods involved, except as otherwise noted
therein, and subject, in the case of the unaudited interim financial statements,
to normal year-end adjustments and any other adjustments described therein. All
of such SEC Reports, as of their respective dates (as amended through August 4,
1993), complied in all material respects with the requirements of the Exchange
Act.
3.8. Absence of Certain Changes or Events. During the period since
December 31, 1992 (the date of the Company's last audited consolidated financial
statements), there has not been any material adverse change in the business,
financial condition or results of operations of the Company and its subsidiaries
taken as a whole other than as a result of changes in general business
conditions, legal or regulatory changes affecting
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<PAGE> 16
the U.S. telecommunications industry generally, or actions by a competitor of
the Company in the U.S. telecommunications industry.
3.9. Offering of Shares. Neither the Company, directly or indirectly, nor
any agent on its behalf has offered or will offer the Shares or any similar
securities or has solicited or will solicit an offer to acquire the Shares or
any similar securities from any Person so as to require registration of the
issuance and sale of the Shares to be sold to BT under the circumstances
contemplated by this Agreement under the provisions of Section 5 of the
Securities Act.
3.10. Section 203. The Board of Directors of the Company has taken
appropriate action so that the provisions of Section 203 of the DGCL restricting
"business combinations" with "interested stockholders" (each as defined in such
Section 203) will not, prior to the termination of this Agreement pursuant to
Section 13.1, apply to BT or any Person who as of August 4, 1993, was an
Affiliate of BT.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BT
BT represents and warrants to the Company that:
4.1. Existence; Power. BT has been duly incorporated under the laws of
England and Wales, having all power and authority under its Memorandum and
Articles of Association to transact in all material respects all business
conducted by it, to enter into this Agreement, to purchase the Shares and to
carry out the provisions of this Agreement.
4.2. Authority. Each of the Original Investment Agreement and this
Agreement has been duly authorized by all necessary corporate action on the part
of BT and duly executed and delivered by BT and constitutes a legal, valid and
binding agreement of BT, enforceable against it in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting
creditors generally, by general equity principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law) or by an
implied covenant of good faith and fair dealing.
4.3. Compliance with Laws. Except for applicable requirements under the
Communications Act, state communications laws, the Exchange Act, state
securities or blue sky laws, foreign competition or antitrust laws, Exon-Florio,
regulations promulgated by or in respect of the Department of Defense and the
NASDAQ Stock Market and the expiration or termination of the waiting period
under the HSR Act, no consent, approval or authorization of, or filing,
registration, qualification, declaration or designation with, any Governmental
Authority is required on the part of BT as a condition to the valid execution
and delivery of this Agreement and the purchase of the Shares in the manner
contemplated by this Agreement, except where the absence of any such consent,
approval or authorization of, or the failure to make any such filing,
registration, qualification, declaration or designation with any Governmental
Authority would not have a material adverse effect on BT and its Subsidiaries
taken as a whole or its ability to consummate the transactions contemplated
hereby.
4.4. No Conflict. Subject to applicable requirements under the
Communications Act, state communications laws, the Exchange Act, state
securities or blue sky laws, foreign competition or antitrust laws, Exon-Florio,
regulations promulgated by or in respect of the Department of Defense and the
NASDAQ Stock Market and the expiration or termination of the waiting period
under the HSR Act, and except as set forth on Schedule 4.4 hereto, the
execution, delivery and performance by BT of this Agreement and the purchase of
the Shares will not (i) conflict with the Constating Documents of BT, (ii)
conflict with, result in a breach of, or constitute a default under, any loan or
credit agreement, indenture, mortgage, note or other agreement or instrument
affecting BT or to which BT or any of its Subsidiaries or Affiliates is a party
or by which any of their respective properties or assets are or may be bound,
(iii) violate any Requirement of Law applicable to BT or (iv) violate any order,
judgment or decree of any court or other Governmental Authority or any
determination of an arbitrator, except where any such conflict, breach or
default under clause (ii) or any such violation under clauses (iii) or (iv)
would not have a material adverse effect on BT and its Subsidiaries taken as a
whole or its ability to consummate the transactions contemplated hereby.
4.5. Nature of Purchase. BT is purchasing the Shares and the Conversion
Shares for its own account for investment, not as a nominee or agent, and not
with a view to the resale or distribution of the Shares or the Conversion Shares
or any part thereof, and BT has no present intention of selling, granting any
participation in, or otherwise distributing the same. By executing this
Agreement, BT further represents that there is no
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<PAGE> 17
contract, undertaking, agreement or arrangement with any Person for resale in
connection with a distribution to any Person with respect to any of the Shares
or the Conversion Shares. BT acknowledges that the offering of the Shares and
the Conversion Shares pursuant to this Agreement will not be registered under
the Securities Act or any state securities or blue sky law, on the grounds that
the offering and sale of the Shares and the Conversion Shares contemplated by
this Agreement are exempt from registration pursuant to exceptions available
under such laws, and that the Company's reliance upon such exemptions is
predicated upon BT's representations set forth in this Agreement. BT
acknowledges and understands that the Shares and the Conversion Shares must be
held for an indefinite period of time unless the Shares and/or the Conversion
Shares, as the case may be, are subsequently registered under the Securities Act
and/or applicable state securities or blue sky laws or an exemption from such
registration is available.
4.6. Accredited Investor. BT is an "accredited investor" within the
meaning of Regulation D promulgated under the Securities Act.
4.7. Access to Information. The Company has made available to BT the
opportunity to ask questions of, and receive answers from, and conduct due
diligence meetings with management of the Company, and BT has had the
opportunity to obtain any additional information necessary to verify the
accuracy of the information provided to BT by the Company and in order for it to
make an informed investment decision with respect to its investment in the
Shares to the extent that the Company possessed such information or could have
acquired it without unreasonable effort or expense.
4.8. Ownership of Securities of the Company. Except for the Preferred
Shares or the Conversion Shares, as the case may be, and such rights as may be
conferred on BT under this Agreement, BT does not, directly or indirectly,
beneficially own any Equity.
SECTION 5. RESTRICTIONS ON TRANSFER; REGISTRATION RIGHTS
5.1. Restrictions on Transfer. (a) BT covenants and agrees with the
Company that, prior to the fourth anniversary of the Closing Date, neither BT
nor any of its Affiliates will, directly or indirectly, offer, sell, transfer,
assign, pledge, hypothecate or otherwise dispose of the beneficial ownership of
(any such act, a "Transfer") any Equity except for, and subject in each case to
compliance with all applicable Requirements of Law and the receipt of any
necessary governmental approvals, (i) a Transfer by BT to a wholly owned direct
or indirect subsidiary of BT, provided that prior to such Transfer each such
transferee consents in writing with the Company to be bound by the restrictions
on transfer set forth in this Section 5.1 and assumes all other rights and
obligations of BT under this Agreement and the Registration Rights Agreement,
provided further that BT (A) shall remain liable for the performance by any such
subsidiary of its obligations under this Agreement, (B) shall act as agent for
any and all such subsidiaries in connection with the receipt or giving of any
and all notices under this Agreement and (C) shall not cause or permit any such
subsidiary to be other than a wholly owned direct or indirect subsidiary of BT,
(ii) a Transfer to the Company or to a wholly owned direct or indirect
subsidiary of the Company pursuant to a self-tender offer or otherwise, (iii) a
Transfer pursuant to a merger or consolidation in which the Company is a
constituent corporation and (iv) provided that the Company has waived its right
of first refusal set forth in Section 5.3 (except with respect to clause (y)(1)
below), a Transfer pursuant to (x) prior to the repeal of Section 10 of the
Certificate of Incorporation as in effect on August 4, 1993, a "Tender Offer"
(as defined in paragraph (g)(9) of such Section 10), which was not induced
directly or indirectly by BT or any of its Affiliates, conforming with the
provisions of paragraphs (d) and (e) of such Section 10 or meeting the
requirements set forth in the proviso to paragraph (g)(2)(i) of such Section 10
pursuant to which the Person consummating such Tender Offer would not be deemed
to be a "Substantial Stockholder" or (y) subsequent to the date of the repeal of
such Section 10, a bona fide third party tender offer or exchange offer, which
was not induced directly or indirectly by BT or any of its Affiliates, (1) that
is recommended by the Board of Directors of the Company, (2) in connection with
which a final non-appealable court order has declared the Rights Plan or any
successor plan thereto invalid and required the redemption of the Rights or (3)
except as contemplated by the preceding clause (2), commenced subsequent to the
date that the Rights Plan or any successor plan thereto is terminated or the
Rights redeemed and all conditions to such offer (other than with respect to the
number of shares tendered) shall have been satisfied or waived, provided that,
in the case of clause (2) or (3), the Board of Directors of BT, upon the advice
of legal counsel and financial advisors, reasonably believes in good faith,
taking into account the conditions of such offer, that such tender offer will
13
<PAGE> 18
result in shares being purchased (without the extension of the scheduled
expiration date and without giving effect to shares that might be tendered by BT
or any of its Affiliates). The certificate or certificates representing any such
Equity transferred as provided above shall bear the legend or legends described
in Section 5.2 to the extent required by such Section 5.2.
(b) From and including the fourth anniversary of the Closing Date so long
as the Outstanding Interest is at least 5%, neither BT nor any of its Affiliates
will, directly or indirectly, Transfer any Equity except for, and in each case
in compliance with all applicable Requirements of Law and the receipt of any
necessary governmental approvals, (i) a Transfer permitted pursuant to Section
5.1(a), (ii) a Transfer by BT or any of its Affiliates in bona fide open market
"brokers' transactions" as permitted by the provisions of Rule 144 under the
Securities Act or in a bona fide underwritten public offering pursuant to the
Registration Rights Agreement (a "Permitted Offering"), provided that in the
case of a Permitted Offering the Company has waived its right of first refusal
set forth in Section 5.3, and provided further that BT or its Affiliate, as the
case may be, will take all reasonable steps to assure that, in connection with
any such open market transactions or Permitted Offering, Transfers shall not be
made to any Person or "group" (as defined in Section 13(d) of the Exchange Act)
that would, following such Transfer, beneficially own more than 5% of the
outstanding Voting Securities (determined pursuant to the provisions of
Regulation 13D under the Exchange Act, except that a Person shall be deemed to
be the beneficial owner of a security if that Person has the right to acquire
beneficial ownership of such security without regard to the 60-day provision in
Rule 13d3(d)(1)(i)), provided, however, that BT shall be permitted to transfer
Equity in a Permitted Offering, directly or indirectly, to a Person eligible to
file a statement on Schedule 13G under the Exchange Act pursuant to Rule
13d-1(b) under the Exchange Act notwithstanding that such Person would,
following such Transfer, beneficially own more than 5% of the outstanding Voting
Securities (as determined as provided above) if the failure of BT to transfer,
directly or indirectly, to such Person would adversely affect such Permitted
Offering in the reasonable good faith judgment of the managing underwriter,
(iii) a Transfer by BT pursuant to a dividend or other distribution or rights
offering to the shareholders of BT pursuant to which all shareholders of BT have
the right (except as may be otherwise prohibited by applicable law) to receive
their pro rata portion of the Equity owned by BT, provided that the Company has
waived its right of first refusal set forth in Section 5.3, (iv) a Transfer by
BT or any of its Affiliates in a privately negotiated transaction if the
transferee, or any "group" (as defined in Section 13(d) of the Exchange Act) of
which the transferee is a member, would not, following such Transfer,
beneficially own more than 5% of the outstanding Voting Securities (determined
pursuant to the provisions of Regulation 13D under the Exchange Act, except that
a Person shall be deemed to be the beneficial owner of a security if that Person
has the right to acquire beneficial ownership of such security without regard to
the 60-day provision in Rule 13d-3(d)(1)(i)), provided that the Company has
waived its right of first refusal set forth in Section 5.3 and (v) a Transfer by
BT or any of its Affiliates of all Equity of the Company then beneficially owned
by it (without giving effect to the proviso contained in Section 1.2) as a
single block in a privately negotiated transaction if BT or its Affiliate, as
the case may be, transfers such Equity without the benefits and burdens of this
Agreement (other than the benefits and burdens of the Registration Rights
Agreement, which may be assigned to, and assumed by, the transferee), provided
that the Company has waived its right of first refusal set forth in Section 5.3.
The certificate or certificates representing any such Equity transferred as
provided above (other than pursuant to clause (ii) in the preceding sentence)
shall bear the legend or legends described in Section 5.2 to the extent required
by such Section 5.2.
(c) No Transfer of any Equity in violation of this Section 5 shall be made
or recorded on the books of the Company and any such Transfer shall be void and
of no effect.
(d) Subject to the provisions of the Registration Rights Agreement, the
expenses incurred by the transferor and/or transferee in connection with any
Transfer permitted under this Section 5.1 shall be borne by the purchaser and/or
seller party to such sale.
5.2. Legends. (a) (i) Upon original issuance thereof (or, in the case of
the Preferred Shares, upon the exchange of certificates therefor), and until
such time as the same is no longer required hereunder or under the applicable
requirements of the Securities Act or applicable state securities or blue sky
laws, any certificate issued representing any of the Shares, the Preferred
Shares, the Conversion Shares or any Maintenance
14
<PAGE> 19
Shares (including, without limitation, all certificates issued upon transfer or
in exchange thereof or in substitution therefor) shall bear the following
legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THEY ARE SO
REGISTERED OR UNLESS AN EXEMPTION FROM REGISTRATION IS
AVAILABLE. SUCH SHARES MAY ONLY BE TRANSFERRED PURSUANT TO
THE PROVISIONS OF SECTION 5 OF A CERTAIN AGREEMENT DATED
AS OF JANUARY 31, 1994 BETWEEN BRITISH TELECOMMUNICATIONS
PLC AND MCI COMMUNICATIONS CORPORATION (THE "COMPANY"),
COPIES OF WHICH AGREEMENT ARE ON FILE AT THE PRINCIPAL
OFFICE OF THE COMPANY."
(b) The certificates representing the Shares, the Preferred Shares, the
Conversion Shares or any Maintenance Shares (including, without limitation, any
certificate issued upon transfer or in exchange thereof or in substitution
therefor) shall also bear any legend required under any applicable state
securities or blue sky laws.
(c) The Company may make a notation on its records or give instructions to
any transfer agents or registrars for the Preferred Stock, the Class A Common
Stock or the Common Stock in order to implement the restrictions on transfer set
forth in this Section 5.
(d) BT shall submit any and all certificates representing Equity
beneficially owned by BT or any of its Affiliates to the Company so that the
legend or legends required by this Section 5.2 may be placed thereon.
Until such time as the same is no longer required hereunder, all
certificates representing any Equity beneficially owned by BT or any of its
Affiliates that is neither a Share, a Preferred Share, a Conversion Share or a
Maintenance Share (including, without limitation, any certificate issued upon
transfer or in exchange thereof or in substitution therefor) shall bear the
following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE
TRANSFERRED PURSUANT TO THE PROVISIONS OF SECTION 5 OF A
CERTAIN AGREEMENT DATED AS OF JANUARY 31, 1994 BETWEEN
BRITISH TELECOMMUNICATIONS PLC AND MCI COMMUNICATIONS
CORPORATION (THE "COMPANY"), COPIES OF WHICH AGREEMENT ARE
ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY."
(e) In connection with any Transfer of Equity, the transferor shall provide
the Company with such customary certificates, opinions and other documents as
the Company may reasonably request to assure that such Transfer complies fully
with applicable securities and other laws.
(f) The Company shall not incur any liability for any delay in recognizing
any Transfer of Equity if the Company in good faith reasonably believes that
such Transfer may have been or would be in violation in any material respect of
the provisions of the Securities Act, applicable state securities or blue sky
laws, or this Agreement.
(g) After such time as any of the legends described by this Section 5.2 are
no longer required on any certificate or certificates representing the Shares,
the Preferred Shares, the Conversion Shares or any Maintenance Shares, upon the
request of BT, the Company will cause such certificate or certificates to be
exchanged for a certificate or certificates that do not bear such legend.
5.3. Right of First Refusal. (a) Prior to any Transfer described in
clause (iv) of Section 5.1(a) (other than with respect to clause (y)(1)
thereof), any Permitted Offering described in clause (ii) of Section 5.1(b), any
dividend or other distribution or rights offering described in clause (iii) of
Section 5.1(b) or any privately negotiated transaction described in either
clause (iv) or (v) of Section 5.1(b), BT shall
15
<PAGE> 20
deliver a written notice (the "Offer Notice") to the Company, which Offer Notice
shall specify (i) the number or amount and description of the Equity to be sold
or otherwise transferred, (ii) the Offer Price (as defined below) and (iii) in
the case of a privately negotiated transaction, any other proposed terms of the
Transfer, the identity of the proposed transferee and, if the proposed
transferee would (following such Transfer) beneficially own more than 5% of the
outstanding Voting Securities (determined pursuant to the provisions of
Regulation 13D under the Exchange Act, except that a Person shall be deemed to
be the beneficial owner of a security if that Person has the right to acquire
beneficial ownership of such security without regard to the 60-day provision in
Rule 13d-3(d)(1)(i)), any other information, to BT's best knowledge after
reasonable inquiries, with respect to the proposed transferee or the proposed
transaction that would be required to be disclosed if a Schedule 13D under the
Exchange Act were to be filed on behalf of such proposed transferee. The Offer
Notice shall constitute an irrevocable offer to the Company or its designee, for
the period of time described below, to purchase such securities upon the same
terms specified in the Offer Notice, subject to Section 5.3(c) and as otherwise
set forth in Section 5.3(a). BT shall deliver the Offer Notice either with
respect to a bona fide specific transaction on the specified terms or with
respect to its intention to consummate a Permitted Offering, provided that, if
applicable, such Offer Notice in connection with a privately negotiated
transaction described in clause (v) of Section 5.1(b) shall, in order to be
valid hereunder, have been preceded by the notice required by Section 5.3(b).
For purposes of this Section 5.3, "Offer Price" shall be defined to mean on a
per share or other amount of Equity basis (i) in the case of a third party
tender offer or exchange offer, the tender offer or exchange offer price per
share taking into account any provisions thereof with respect to proration and
any proposed second step or "backend" transaction, (ii) in the case of a
Permitted Offering or a dividend or other distribution or rights offering to the
shareholders of BT, the Current Market Value per share or other amount of Equity
as of the date that the election notice by the Company hereinafter described is
delivered, less, in the case of a Permitted Offering, the cost and expenses,
including underwriting commissions, reasonably expected to be incurred by BT and
any of its Affiliates in connection with such Permitted Offering on a per share
or other amount of Equity basis and (iii) in the case of a privately negotiated
transaction, the proposed sales price per share or other amount of Equity. The
Company may elect to purchase all, but not less than all (except in the case of
a Permitted Offering, in which case the Company may elect to purchase all or any
portion), of the securities at the Offer Price (or, if the Offer Price includes
property other than cash, the equivalent in cash of such Offer Price) and upon
the terms and conditions specified in the Offer Notice, provided that, if the
Company elects to purchase less than all of the offered securities in connection
with a Permitted Offering, the number of shares or other amount of such offered
securities that the Company has elected to purchase shall be subject to a
reduction (determined by the managing underwriter after consultation with a
financial advisor selected by BT) to the extent the managing underwriter (after
consultation with BT's financial advisor) determines that the full number of
shares or other amount of such offered securities that the Company has elected
to purchase would so reduce the number of shares or other amount of Equity to be
sold pursuant to the Permitted Offering so as to have an adverse effect on such
offering as contemplated by BT (including the price at which BT proposes to sell
such securities), provided further that if the managing underwriter determines
that the number of shares or other amount of such offered securities that the
Company has elected to purchase hereunder should be reduced in accordance with
the criteria set forth in the preceding proviso in this sentence, then the
Company shall be given the opportunity to make a further election either (i) to
purchase the number of shares or other amount of such offered securities as so
reduced (or, at the Company's sole option, a lesser number of shares or other
amount of such offered securities), (ii) to purchase all of such offered
securities or (iii) to withdraw its earlier election and to be released from any
obligation to purchase any of such offered securities, provided that such
election shall be made within five Business Days of notice to the Company of the
managing underwriter's determination. If the Company elects to purchase the
offered securities, it shall give notice to BT within 60 days of its receipt of
the Offer Notice (or (A) in the case of a third party tender offer or exchange
offer, not later than three Business Days prior to the expiration date of such
offer, provided that all conditions to such offer (other than with respect to
the number of shares tendered) shall have been satisfied or waived and the Offer
Notice shall have been provided at least ten Business Days prior to the
expiration date of such offer or (B) in the case of a privately negotiated
transaction described in clause (v) of Section 5.1(b), within a period of 120
days) of its election, which shall constitute a binding obligation, subject to
standard terms and conditions for a stock purchase contract between an issuer
and a significant stockholder, to purchase the
16
<PAGE> 21
offered securities, which notice shall include the date set for the closing of
such purchase, which date shall be no later than 90 days following the delivery
of such election notice. Notwithstanding the foregoing, such time periods shall
not be deemed to commence with respect to, and the Company shall not be
obligated to respond to, any purported notice that does not comply in all
material respects with the requirements of this Section 5.3(a), which purported
notice shall not be deemed to be an Offer Notice for purposes of this Agreement
and shall be null and void under this Agreement, provided that if such purported
notice is actually received by the Company and the Company does not within five
Business Days of such receipt notify BT that such purported notice does not
comply in all material respects with such requirements, such purported notice
shall be deemed not to be defective in any material respect with regard to such
requirements. The Company may assign its rights to purchase under this Section
5.3 to any Person. If the Company does not respond to the Offer Notice within
the required response time period or elects not to purchase the offered
securities, BT or its Affiliate, as the case may be, shall be free to complete
the proposed Transfer (to the same proposed transferee, in the case of privately
negotiated transaction) on terms no less favorable to BT or its Affiliate, as
the case may be, than those set forth in the Offer Notice, provided that (x)
such Transfer is closed within 90 days of the latest of (A) the expiration of
the foregoing required response time period, or (B) the receipt by BT of the
foregoing election notice by the Company, or, in the case of a Permitted
Offering, within 60 days of the declaration by the SEC of the effectiveness of a
registration statement filed with the SEC pursuant to the Registration Rights
Agreement and (y) the price at which the securities are transferred must be
equal to or higher than the Offer Price (except in the case of a Permitted
Offering, in which case the price at which the securities are sold may be equal
to, higher than or less than the Offer Price), provided, however, that such
periods within which such Transfer must be closed shall be extended to the
extent necessary to obtain required governmental approvals and BT shall use its
best efforts to obtain such approvals, provided further that the terms and
conditions of the Transfer other than the financial terms thereof (and, in the
case of a privately negotiated transaction, other than the identity of the
proposed transferee) may be varied in non-material respects from those set forth
in the Offer Notice if BT gives notice to the Company of the nature of such
variations at least five Business Days prior to the consummation of the
Transfer, provided that compliance with such five Business Day period shall not
operate to terminate any of BT's rights under this Section 5.3.
(b) Notwithstanding anything to the contrary contained in Section 5.3(a),
in the case of a privately negotiated transaction described in clause (v) of
Section 5.1(b), BT shall provide the Company with at least two months written
notice (measured from the date of the most recent such notice) prior to the
delivery of the Offer Notice with respect thereto of BT's bona fide intention to
undertake such a transaction (with such additional information as BT can
reasonably provide as to the type of sale and such information as would
otherwise be required under clause (iii) of the first sentence of Section 5.3(a)
to the extent and when known), provided that BT may not provide more than one
such advance notice in any two-month period. If the Company waives or does not
exercise timely its right of first refusal in connection with such a
transaction, the Company shall take such necessary actions in relation to the
Rights Plan to permit the consummation of such transaction by BT or its
Affiliate, as the case may be, so as not to result in the Rights thereby
becoming exercisable. In connection with such transaction, BT covenants and
agrees (i) if the Company so requests, to cooperate with the Company in
proposing and having the stockholders of the Company approve an amendment to the
Certificate of Incorporation, to be effective following the consummation of such
transaction, that eliminates cumulative voting for the election of directors of
the Company and (ii) to cause its designees on the Board of Directors of the
Company to resign immediately upon the closing of such transaction. If
cumulative voting has not been so eliminated, such transaction shall not be
effective as provided in Section 5.1(c) unless the transferee has agreed for a
period of at least ten years, on terms and conditions reasonably satisfactory to
the Company, to distribute all of the votes it is entitled to cast in any
election of directors of the Company (whether at an annual or special meeting of
stockholders or by written consent in lieu of a meeting or otherwise and whether
it is so entitled to cast such votes as a result of ownership or other control
of capital stock or by proxy or otherwise) equally among the number of directors
to be elected to the Board of Directors of the Company (whether or not nominees
of the Board of Directors).
(c) If (i) the consideration specified in the Offer Notice consists of, or
includes, consideration other than cash or a publicly traded security for which
a closing market price is published for each Business Day, or (ii) any property
other than Equity of the Company is proposed to be transferred in connection
with the
17
<PAGE> 22
transaction to which the Offer Notice relates, then the price payable by the
Company under this Section 5.3 for the Equity being transferred shall be the
Fair Market Value of the consideration in the case of clause (i) and the
Determination of the Independent Directors of the Fair Market Value of the
consideration determined to be properly allocable to the Equity in the case of
clause (ii). In the case of a Permitted Offering, BT shall provide the Company
with a good faith estimate of the costs and expenses, including underwriting
commissions, reasonably expected to be incurred by BT and any of its Affiliates
in connection with such Permitted Offering, provided, however, that, if the
Company in good faith disputes such estimate, the amount of the costs and
expenses, including underwriting commissions, reasonably expected to be incurred
by BT and any of its Affiliates in connection with such Permitted Offering shall
be established by a Determination of the Independent Directors, which
determination shall be conclusive on the parties. Notwithstanding anything to
the contrary contained in this Section 5.3, the time periods applicable to an
election by the Company to purchase the offered securities set forth in Section
5.3(a) shall not be deemed to commence until the Determinations of the
Independent Directors under this Section 5.3(c) have been made, provided that,
in the case of a third party tender offer or exchange offer, in no event shall
any such election be permitted later than 24 hours prior to the latest time by
which Equity must be tendered in order to be accepted pursuant to such offer or
to qualify for any proration applicable to such offer if all conditions to such
offer (other than the number of shares tendered) have been satisfied or waived.
The Company agrees to use its best efforts to cause the Determinations of the
Independent Directors under this Section 5.3(c) to be made as promptly as
practicable but in no event later than 15 Business Days after the receipt by the
Company of the Offer Notice.
5.4. Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets. The provisions of this Section 5 shall apply, to the
full extent set forth herein with respect to the Equity of the Company, to any
and all Equity or other securities of the Company or any successor or assign of
the Company (whether by merger, consolidation, sale of assets or otherwise) that
may be issued in respect of, in exchange for, or in substitution of such Equity,
including, without limitation, in connection with any stock dividends, splits,
reverse splits, combinations, reclassifications, recapitalizations, mergers,
consolidations and the like occurring after August 4, 1993.
5.5. Registration Rights. At or prior to the Closing, the Company and BT
shall enter into the agreement (the "Registration Rights Agreement") providing
for registration rights with respect to shares of Common Stock issued or
issuable upon the conversion of any shares of Class A Common Stock and, to the
extent necessary, certain other shares of Common Stock owned by BT to the extent
provided under such agreement, substantially in the form attached hereto as
Exhibit D. The registration rights provided to BT under the Registration Rights
Agreement shall not be transferrable to any Person other than a transferee to
which BT has transferred Equity pursuant to either (A) clause (i) of the first
sentence of Section 5.1(a) or (B) clause (v) of the first sentence of Section
5.1(b). Reasonably promptly after August 4, 1993, the Company and BT shall enter
into a registration rights agreement with respect to shares of Common Stock
issued or issuable upon the conversion of the Preferred Shares or the Conversion
Shares, as the case may be, on mutually agreeable terms and conditions based
substantially on the form attached hereto as Exhibit D, provided that BT shall
only be entitled to one demand registration thereunder.
SECTION 6. EQUITY PURCHASE RIGHTS
6.1. Voting Equity Purchase Rights. (a) Subject to Section 6.2(d), from
the Closing Date and for so long as the Outstanding Interest is at least 10%, if
the Company issues or proposes to issue for cash or any other consideration
(excluding (i) pursuant to the terms of presently outstanding Preferred Stock,
(ii) grants of any options or any other rights to acquire Voting Securities
pursuant to Employee Stock Plans, (iii) upon the exercise or exchange of any
Rights, (iv) issuances of shares of Common Stock upon the conversion or exercise
of any options, warrants, rights or other securities convertible into or
exercisable for Common Stock that are outstanding as of the Closing Date to the
extent that an equal number of outstanding shares of Common Stock are purchased
by the Company in accordance with Section 6.1(d), (v) upon the conversion or
exercise of any options, warrants, rights or other securities convertible into
or exercisable for Voting Securities the issuance of which was subject to the
provisions of this Section 6.1, (vi) in a Small Offering, (vii) the reissuance
of Voting Securities purchased by the Company subsequent to the Closing Date and
(viii) issuances of Voting Equity to BT or any of its Affiliates any Voting
Equity, BT shall have the right (to
18
<PAGE> 23
the extent permitted by applicable Requirements of Law, and exercisable in whole
or in part as set forth in this Section 6.1) to acquire from the Company a
number of shares or other amount of such Voting Equity, subject to Section
6.1(c), equal to the sum of (A) the result of (1) the Outstanding Interest prior
to giving effect to the consummation of such issuance and any acquisition by BT
pursuant hereto times the number of shares or other amount of such Voting Equity
issued or to be issued to Persons other than BT or any of its Affiliates,
divided by (2) one minus the Outstanding Interest, plus (B) if applicable, the
number of shares or other amount of Voting Equity described in Section
6.1(e)(v).
(b) Except as otherwise provided in this Section 6, unless the Company has
elected to repurchase outstanding shares of Common Stock in accordance with the
provisions of Section 6.1(d), (i) the Company shall give written notice to BT of
any issuance or proposed issuance of Voting Equity in respect of which BT is
entitled to purchase rights under this Section 6.1 no later than the date of any
such issuance, which notice shall set forth the terms and conditions of such
issuance, (ii) BT shall, if it elects to acquire any Voting Equity as provided
in this Section 6.1, give notice to the Company of its irrevocable commitment to
purchase such Voting Equity (including, without limitation, the Voting Equity
described in clause (B) in the preceding sentence) as promptly as reasonably
practicable but in no event more than 15 Business Days following such written
notice to BT and (iii) if BT so elects to acquire any Voting Equity as so
provided, such acquisition shall be consummated (except as hereinafter provided)
within 30 days of such exercise (but not in any event prior to the issuance by
the Company of the Voting Equity that gave rise to BT's purchase right
hereunder), at a price and on other terms and conditions equal to the price paid
and the other terms and conditions pertaining to the other issuances of Voting
Equity (but if BT purchases such Voting Equity on a date later than 15 days
after the consummation of such other issuances (whether because of a delay in
obtaining required governmental approvals or otherwise), together with interest
at the Interest Rate as of the date of such other issuances compounded annually
from the date that is 15 days after the date of the consummation of such other
issuances to the date of BT's purchase), except as otherwise provided in this
Section 6.1. If the consummation of BT's acquisition of Voting Equity pursuant
to this Section 6.1(b) shall not have occurred within 30 days of BT's exercise
of its purchase right hereunder (or as of such later date that the securities
that gave rise to BT's purchase right are issued by the Company) as provided in
the preceding sentence (other than due to a good faith delay in obtaining
required government approvals, a temporary injunction enjoining BT's purchase of
such Voting Equity or other delays not due to BT's bad faith or conditions
within BT's control), then the Company's obligation to issue and sell such
Voting Equity to BT under this Section 6 shall terminate without further
liability.
(c) So long as any shares of Class A Common Stock remain outstanding, with
respect to that portion of the Outstanding Interest represented by shares of
Class A Common Stock (or other Equity that is convertible into, or otherwise
having the right to acquire, shares of Class A Common Stock) beneficially owned
by BT, (i) if the Voting Equity issued or proposed to be issued in respect of
which BT is entitled to a purchase right under this Section 6.1 consists of
shares of Common Stock, BT's right to acquire Voting Equity under Section 6.1(a)
shall be the right to acquire the number of shares of Class A Common Stock
determined in all other respects in accordance with the provisions of Section
6.1(a) (except to the extent subject to clause (ii) of this sentence), (ii) if
the Voting Equity issued or proposed to be issued in respect of which BT is
entitled to a purchase right under this Section 6.1 consists of securities of
the Company convertible into shares of Common Stock or options, warrants or
other rights to acquire shares of Common Stock (collectively, "Option
Securities"), BT's right to acquire Voting Equity under Section 6.1(a) shall be
the right to acquire Voting Equity convertible into shares of Class A Common
Stock or options, warrants or other rights to acquire shares of Class A Common
Stock, in each case upon the same terms as the Option Securities issued or
proposed to be issued by the Company and otherwise containing the same terms as
such Option Securities (except to the extent set forth in clause (iii)) and
(iii) if the Voting Equity issued or proposed to be issued in respect of which
BT is entitled to a purchase right under this Section 6.1 consists of Voting
Securities other than shares of Common Stock (whether or not Option Securities),
BT's right to acquire Voting Equity under Section 6.1(a) shall be the right to
acquire the number of shares or other amount (determined in accordance with the
provisions of Section 6.1(a)) of a separate series of such Voting Securities,
which series shall have (x) the right (together with the Class A Common Stock)
to elect directors of the Company as set forth in the Certificate of Amendment
with respect to the Class A Common Stock, voting together with the Class A
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<PAGE> 24
Common Stock as a single class and (y) terms providing for automatic conversion
or exchange into the voting equity that gave rise to BT's right to acquire under
this clause (iii) in the event that no shares of Class A Common Stock remain
outstanding and such other terms as will effect the purposes of this clause (c)
that are consistent with the terms that distinguish Class A Common Stock from
the Common Stock.
(d) (i) For purposes of determining the number of Common Shares that BT
otherwise has the right to acquire in accordance with this Section 6.1 in
connection with the issuance by the Company of shares of Common Stock upon the
conversion or exercise of any options, warrants, rights or other securities
convertible into or exercisable for shares of Common Stock that are outstanding
as of the Closing Date, the number of shares of Common Stock deemed issued by
the Company pursuant to such conversion or exercise shall be reduced, on a share
for share basis, to the extent that the Company elects to purchase a number of
outstanding shares of Common Stock through open market purchases or otherwise up
to the number of shares of Common Stock issued.
(ii) All repurchases of outstanding shares of Common Stock pursuant to this
Section 6.1(d) shall be consummated within 90 days after the time that BT would
otherwise be entitled to purchase rights under this Section 6.1 with respect to
the shares of Common Stock to which such repurchases relate. To the extent that
the Company has not consummated any such repurchases within such 90-day period,
BT shall be entitled to a purchase right under this Section 6.1 as of the
expiration of such time period with respect to the number of shares of Common
Stock that were not so repurchased within such period, and the Company shall
give written notice to BT promptly after the expiration of such 90-day period,
which notice shall state the number of shares of Common Stock that were not
repurchased within such time period and include the terms and conditions of the
issuance of Voting Equity in respect of which BT is then entitled to purchase
rights under this Section 6.1 as otherwise provided under this Section 6.1.
(e) Notwithstanding the foregoing:
(i) The purchase price of any Common Shares by BT pursuant to this
Section 6.1 in connection with any issuance of shares of Common Stock after
the Closing upon the exercise or conversion of options, warrants, rights or
other securities that were outstanding on the Closing Date shall be the per
share equivalent to the Current Market Value of the Common Shares as of the
date of BT's purchase of such Common Shares, except as otherwise provided
in Section 6.1(e)(ii);
(ii) The purchase price of any Voting Securities acquired by BT
pursuant to this Section 6.1 after the Closing Date in connection with any
issuance of Voting Securities upon the exercise of options or any other
Voting Securities or rights to acquire Voting Securities granted or issued
pursuant to Employee Stock Plans shall be the per share equivalent to the
Current Market Value of the Voting Equity so granted or issued as of the
end of the calendar quarter that gives rise to the exercisability of BT's
purchase right under Section 6.1(e)(iv);
(iii) If the Company issues or proposes to issue any Voting Equity in
respect of which BT is entitled to a purchase right under this Section 6.1
for consideration other than cash (or partly for cash and partly for
consideration other than cash), the purchase price of any Voting Equity by
BT in connection with its purchase right with respect thereto pursuant to
this Section 6.1 shall be the cash price per share or other amount
equivalent to the value per share or other amount of the consideration
obtained or to be obtained in the issuances of such Voting Equity
established by a Determination of the Independent Directors, which
determination shall be conclusive on the parties;
(iv) BT's right to purchase Voting Equity pursuant to this Section 6.1
in connection with any issuance of Voting Securities upon the exercise of
options or any other Voting Securities or rights to acquire Voting
Securities granted or issued pursuant to Employee Stock Plans (whether
granted or issued before, on or after the Closing Date) (the "Employee
Shares") shall only be exercisable within 45 days (or such longer period as
may be necessary to obtain required governmental approvals) after the end
of each calendar quarter in which the aggregate number of Employee Shares
issued (aggregated together with Employee Shares issued in preceding
calendar quarters that have not yet given rise to the exercisability of
BT's purchase right under this Section 6.1(e)(iv)) was at least 1% of the
total outstanding Voting Securities, at which time BT shall be entitled to
acquire a number of shares or other
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amount of Voting Equity in respect of all such issuances of Employee
Shares, and the Company shall advise BT in writing of the number of
Employee Shares issued during each calendar quarter no later than 30 days
after the end of such calendar quarter;
(v) If there have been issuances of Voting Equity in respect of which
BT has a purchase right under this Section 6.1 in Small Offerings as to
which BT's rights to acquire Voting Equity hereunder have not yet become
exercisable (the "Small Offering Shares"), then, as of and in connection
with the immediately following issuance of Voting Equity of the same class
that is subject to the purchase rights of this Section 6.1, BT shall also
have a right to acquire (on the same terms and conditions applicable herein
to such issuance, including, without limitation, price) additional shares
or other amounts of a class of Voting Equity equal to the number of shares
or other amounts BT would have been entitled to acquire at the time or
times of issuance of the Small Offering Shares but for the inapplicability
of its purchase rights to such issuances; and
(vi) To the extent that, after BT's election to acquire Voting Equity
pursuant to its purchase right under Section 6.1(a), the number of shares
or other amount of Voting Equity to be issued to Persons other than BT and
any of its Affiliates that gave rise to BT's purchase right under this
Section 6 shall be reduced (whether at the discretion of the Company or
otherwise), then the number of shares or other amount of Voting Equity that
BT has the right to acquire under Section 6.1(a) shall be reduced pro rata
and BT's election shall be deemed to have been its irrevocable commitment
to purchase such reduced number of shares or other amount of such Voting
Equity.
6.2. Limitations. (a) Notwithstanding anything to the contrary contained
in this Section 6, BT shall not be entitled to purchase any securities pursuant
to Section 6.1(i) unless and until the Company actually issues the securities
that gave rise to BT's purchase right under Section 6.1 (and the Company may in
its sole discretion elect at any time to abandon any such issuance) or (ii) in
connection with any pro rata stock split, stock dividend or other combination or
reclassification of any capital stock of the Company.
(b) Notwithstanding anything to the contrary contained in this Section 6,
BT shall not be entitled to purchase any securities pursuant to Section 6.1 in
connection with the issuance for consideration other than cash (or partly for
cash and partly for consideration other than cash) of a number of shares or
other amounts of Voting Equity representing less than 1% of the total number of
shares of capital stock of the Company outstanding as of the date of such
issuance (a "Small Offering"), except as otherwise provided in Section
6.1(e)(v), unless the Company elects to otherwise provide BT with Voting Equity
purchase rights in connection therewith on the terms and conditions set forth in
Section 6.1(b).
(c) If at any time, because of Foreign Ownership Restrictions, BT is not
permitted to exercise or enforce any purchase right under Section 6.1, then BT
shall be entitled to exercise or enforce any such purchase right at such time
that such exercise or enforcement would not breach any then existing Foreign
Ownership Restrictions.
(d) Notwithstanding anything to the contrary contained in this Section 6,
in the event that the percentage of the outstanding Voting Securities
beneficially owned by BT and its Affiliates exceeds the higher of 20% or the
percentage of the outstanding Voting Securities that BT beneficially owned
immediately following the Closing, then BT shall only be entitled to purchase
rights under Section 6.1 to the extent necessary to maintain such higher
percentage, provided that in calculating such entitlement any issuance of Voting
Equity that gives rise to purchase rights under Section 6.1 that is convertible
into or exchangeable for Voting Securities shall be assumed to be so converted
or exchanged.
6.3. Adjustments. Notwithstanding anything to the contrary contained in
this Section 6, upon any purchase of Voting Equity by BT pursuant to Section 6.1
on a later date than the issuance of securities that gave rise to BT's purchase
right under Section 6.1, (x) the purchase price shall be adjusted by subtracting
therefrom the Fair Market Value (as established by a Determination of the
Independent Directors) of any dividend or distribution received in respect of
such Voting Equity after the date of such issuance and prior to the purchase by
BT hereunder, (y) the purchase price and number of shares or amount to be
purchased shall be adjusted to reflect any stock split, stock dividend, or other
combination or reclassification of the Company's capital stock during such time
and (z) BT shall be entitled to exercise any rights to purchase additional
Voting
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Equity (other than the Rights) available to all holders of Voting Equity
proportionately ("distributed rights") that it would have been entitled to
exercise if it had been the owner of the Voting Equity purchased by BT hereunder
on the record date for the distribution of such distributed rights, unless BT
shall have failed to irrevocably commit to exercise such distributed rights on
the last day for the exercise thereof in accordance with their terms or, if
earlier, the date of the purchase by BT hereunder, at the stated exercise price
thereof together with interest thereon at the Interest Rate as of the last date
that such distributed rights would have been exercisable but for the provisions
of this clause (z), compounded annually for the period, if any, from the date 30
days after the last day that such distributed rights would have been exercisable
but for the provisions of this clause (z) to the date of exercise.
6.4. Other Permitted Purchases. BT and its Affiliates shall not purchase
additional Equity (whether from the Company pursuant to this Agreement or
otherwise) if the aggregate percentage of the outstanding capital stock of the
Company represented by all shares of such capital stock Owned of Record or Voted
by BT and its Affiliates, together with all other capital stock Owned of Record
or Voted by Non-U.S. Persons or Entities as set forth in the survey conducted in
connection with the Non-U.S. Ownership Certificate (or as otherwise known to
BT), after giving effect to such purchase by BT or any of its Affiliates, would
exceed the then existing Foreign Ownership Limitation, provided that BT shall be
entitled to purchase additional Equity at such time that such purchase would not
breach any then existing Foreign Ownership Restrictions or the provisions of
this Agreement and, if BT is precluded hereby from purchasing additional Equity
at such time that the Voting Securities beneficially owned by BT and its
Affiliates represent in the aggregate less than 20% of all Voting Securities
outstanding, then the Company shall consult in good faith with BT to consider
reasonable alternatives to permit BT to purchase additional Equity up to 20% of
all Voting Securities outstanding. BT shall provide the Company with written
notice not less than two Business Days prior to any purchase of Equity from any
Person other than the Company and the Company, if it responds to BT within two
Business Days of receiving such notice, shall have the right to sell such Equity
to BT directly before BT or any of its Affiliates purchases such Equity in the
market or otherwise, at the price to be paid by BT or any of its Affiliates
therefor in the market or otherwise.
SECTION 7. STANDSTILL
7.1. Restriction on Acquisition by BT of Company Securities. BT covenants
and agrees with the Company that, from August 4, 1993, until the tenth
anniversary of the Closing Date, neither BT nor any of its Affiliates will
acquire directly or indirectly the beneficial ownership of any additional Equity
of the Company such that the Voting Securities beneficially owned by BT and its
Affiliates would represent in the aggregate more than 20% of all Voting
Securities outstanding unless, and then only to the extent permitted by the then
existing Foreign Ownership Limitation and any other Requirements of Law (other
than such Requirements of Law the violation of which would not have an adverse
effect on the Company), (i) there is a judicial determination (other than in an
ex parte proceeding) that the Company has materially breached its obligations
under either Section 9.4(a) (other than the Company's failure to have given
timely any required notice thereunder, unless BT has been materially adversely
affected by such failure) or Section 9.5, provided further that such restriction
on acquisitions shall be reinstated (at the higher of (A) 20% or (B) one-tenth
of one percent more than the percentage of all Voting Securities outstanding
represented by Voting Securities beneficially owned by BT and its Affiliates at
the time of such reinstatement) if such judicial determination is subsequently
reversed, or (ii) there is a final non-appealable court order, judgment or
decree declaring the Rights Plan or any successor plan thereto invalid and
either (x) in connection therewith a third party not affiliated with BT or any
of its Affiliates had commenced a bona fide tender offer or exchange offer,
which was not induced directly or indirectly by BT or any of its Affiliates, for
at least 20% of the outstanding shares of capital stock of the Company or (y) a
third party not affiliated with BT or any of its Affiliates shall have acquired
beneficial ownership of at least 10% of the outstanding shares of capital stock
of the Company, which acquisition was not induced directly or indirectly by BT
or any of its Affiliates, and shall have filed a Schedule 13D under the Exchange
Act with the SEC that sets forth a present intent that is other than passive in
all material respects, provided that an acquisition for investment purposes only
shall be deemed passive, provided further that, if the foregoing tender offer or
exchange offer referred to in clause (x) shall have been terminated without BT
having made a bona fide Acquisition Proposal or if the foregoing third party
referred to
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in clause (y) shall have reduced its beneficial ownership of the outstanding
shares of capital stock of the Company to below 10% without BT having made a
bona fide Acquisition Proposal, then the restrictions on acquisition set forth
in this Section 7.1 shall be reinstated at the higher of (A) 20% or (B)
one-tenth of one percent more than the percentage of all Voting Securities
outstanding represented by Voting Securities beneficially owned by BT and its
Affiliates at the time of such reinstatement. BT shall provide the Company with
ten days' prior written notice of any alleged violation by the Company of its
obligations under Section 9.4(a) or Section 9.5, specifying in reasonable detail
the nature of BT's objections, and provide the Company an opportunity to cure
such objections within such ten-day period prior to seeking the judicial
determination described in clause (i) of the preceding sentence, provided that
such violation is reasonably capable of being cured. If, after having followed
such procedures, BT has applied for such a judicial determination, the Company
shall reasonably cooperate with BT in seeking an expedited judicial resolution
of the question of whether the Company has committed a violation described in
such clause (i). Neither BT nor any of its Affiliates shall be deemed in
violation of the foregoing 20% (or such higher percentage) limitation if their
beneficial ownership of Voting Securities exceeds such limitation solely as a
result of (x) an acquisition of Voting Securities by the Company that, by
reducing the number of Voting Securities outstanding, increases the
proportionate number of Voting Securities beneficially owned by BT and its
Affiliates in the aggregate to more than 20% (or such higher percentage) of the
Voting Securities outstanding or (y) purchases of Voting Equity by BT under
Section 2 or 6 or pursuant to the exercise or conversion of such Voting Equity,
provided that in each case such limitation shall be deemed crossed if BT or any
of its Affiliates thereafter becomes the beneficial owner of any additional
Voting Securities (other than pursuant to purchases of Voting Equity by BT under
Section 2 or 6) unless upon the consummation of the acquisition of such
additional Voting Securities BT and its Affiliates do not beneficially own in
the aggregate more than 20% (or such higher percentage) of the Voting Securities
outstanding.
7.2. Restrictions on Permitted Acquisition. Notwithstanding anything to
the contrary contained in Section 7.1, (a) if the restrictions on acquisition by
BT and its Affiliates of additional Equity set forth in Section 7.1 are
terminated pursuant to clause (ii) of the first sentence of Section 7.1 or
clause (b) of this Section 7.2 and the third party referred to in such clause
(ii) or such clause (b) has commenced a tender offer or exchange offer for all
of the outstanding Common Shares, then during the pendency of such tender offer
or exchange offer BT and its Affiliates may only acquire any additional shares
of Common Stock pursuant to a tender offer or exchange offer for all of the
outstanding shares of Common Stock, and (b) if the Rights Plan (or the successor
plan thereto) has been terminated or the Rights redeemed other than as
contemplated in clause (ii)(x) of the first sentence of Section 7.1, then,
following the commencement of a bona fide tender offer or exchange offer by a
third party for at least the higher of 20% of the outstanding shares of capital
stock of the Company or the then existing Outstanding Voting Interest, the
obligations of BT and its Affiliates under Section 7.1 shall terminate upon the
earlier of (A) such time as the Board of Directors of the Company resolves that
a sale of the Company would be in the best interests of the stockholders of the
Company or (B) such time as the Independent Directors, pursuant to a
Determination of the Independent Directors, upon the advice of outside legal
counsel and independent financial advisors, reasonably conclude in good faith,
taking into account the conditions of such tender offer or exchange offer, that
such offer will result in Common Shares being purchased or exchanged, as the
case may be (without the extension of the scheduled expiration date and without
giving effect to Common Shares that might be tendered by BT or any of its
Affiliates), provided that the Independent Directors will undertake to consider
such matter promptly following the request of BT.
7.3. Other Restrictions. From the Closing Date until the tenth
anniversary of the Closing Date, neither BT nor any of its Affiliates shall seek
to have the Company waive, amend or modify any of the restrictions contained in
this Agreement, the Certificate of Incorporation or the by-laws of the Company,
make any Acquisition Proposal or proposal with respect to a Business
Combination, take any initiatives involving the Company that would otherwise
require the Company to make a public announcement, make any public comment or
proposal with respect to any Acquisition Proposal, become a member of a "group"
within the meaning of Section 13(d) of the Exchange Act (other than a group
composed solely of BT and any of its wholly owned direct or indirect
subsidiaries), enter into any discussions, negotiations, arrangements or
understandings with any third party with respect to any of the foregoing or
otherwise seek to control or
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influence the Company, in all cases except as expressly contemplated by this
Agreement, including, without limitation, in connection with a permitted
transfer of the Equity held by BT or any of its Affiliates or in connection with
BT's participation in the auction procedures set forth in Section 9.5, provided
that, in the event the shares of Class A Common Stock have automatically
converted into shares of Common Stock pursuant to section 4(b)(9)(ii) of the
Certificate of Incorporation (as amended by the Certificate of Amendment) by
reason of the occurrence of an event described in either section 4(b)(11)(vi)(D)
or 4(b)(11)(vi)(F) of the Certificate of Incorporation (as amended by the
Certificate of Amendment), then BT shall thereafter be entitled to make a tender
offer or exchange offer for all the outstanding shares of Common Stock. The
obligations of BT and its Affiliates under this Section 7.3 shall terminate at
such time as the obligations of BT and its Affiliates under Section 7.1
terminate.
7.4. Post-Standstill Period. (a) Following the expiration of the period
ending on the tenth anniversary of the Closing Date (unless the restrictions set
forth in Section 7.1 have been terminated pursuant to the provision of Section
7.1 or 7.2 and not reinstated prior to the tenth anniversary of the Closing Date
due to the occurrence of one of the events described in the first sentence of
Section 7.1), then for as long as the Outstanding Interest is at least 10% BT
covenants and agrees with the Company that:
(i) Neither BT nor any of its Affiliates shall take any action or
cause any action to be taken that could result in less than a majority of
the directors of the Company being Independent Directors;
(ii) Neither BT nor any of its Affiliates shall acquire the beneficial
ownership of any Equity to the extent that, after such acquisition, BT and
its Affiliates would beneficially own Voting Securities representing in
excess of 35% of all Voting Securities outstanding (or 30% if Section
310(b) of the Communications Act has been repealed or otherwise would not
in the reasonable judgment of BT affect in any material respect the
consummation of an Acquisition Proposal by BT), except (A) pursuant to a
Business Combination that has been approved pursuant to a Determination of
the Independent Directors and by a majority of the stockholders other than
BT and its Affiliates, (B) pursuant to a tender offer or exchange offer
that has been recommended pursuant to a Determination of the Independent
Directors and accepted by a majority of the stockholders other than BT and
its Affiliates, provided that, in the event the shares of Class A Common
Stock have automatically converted into shares of Common Stock pursuant to
section 4(b)(9)(ii) of the Certificate of Incorporation (as amended by the
Certificate of Amendment) by reason of the occurrence of an event described
in either section 4(b)(11)(vi)(D) or 4(b)(11)(vi)(F) of the Certificate of
Incorporation (as amended by the Certificate of Amendment), then this
clause (B) shall be deemed satisfied if BT has consummated a tender offer
or exchange offer for all outstanding Voting Securities, (C) pursuant to a
transaction that occurs within one year of the date of termination of a
tender offer or exchange offer by BT or any of its Affiliates that
satisfied the requirements of clause (B), or (D) if prior to such
acquisition BT and its Affiliates own at least 90% of each class of the
outstanding capital stock of the Company, provided, that BT and its
Affiliates shall not be deemed to beneficially own Voting Securities in
excess of the applicable threshold percentage for purposes of this clause
(ii) if their beneficial ownership of Voting Securities exceeds the
applicable threshold solely as a result of an acquisition of Voting
Securities by the Company that, by reducing the number of Voting Securities
outstanding, increases the proportionate number of Voting Securities
beneficially owned by BT and its Affiliates to more than the applicable
threshold, provided that in each case such limitation shall be deemed
crossed if BT or any of its Affiliates thereafter becomes the beneficial
owner of any additional Voting Securities unless upon the consummation of
the acquisition of additional Voting Securities BT and its Affiliates do
not beneficially own in the aggregate more than the applicable percentage.
(iii) Neither BT nor any of its Affiliates shall take any action that
could result in the Company, directly or indirectly, engaging in any of the
following actions without the approval of a majority of the Independent
Directors:
(A) The acquisition or redemption of capital stock of the Company
during any one-year period in excess of 1% of the shares of capital
stock outstanding at the beginning of such one-year period;
(B) The acquisition or redemption of any Equity beneficially owned
by BT and its Affiliates, other than as expressly permitted in this
Agreement;
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(C) The issuance or transfer of any Equity to BT or any of its
Affiliates, other than as expressly permitted in this Agreement;
(D) A sale, lease, exchange, pledge, transfer or other disposition
(in one transaction or a series of transactions) in which BT or any of
its Affiliates has a material interest or a loan, advance, guarantee,
pledge or other arrangement in which BT or any of its Affiliates would
receive, directly or indirectly, a financial benefit, other than, in
each case, only to the extent of its proportionate interest as a
stockholder or to the extent expressly permitted in this Agreement;
(E) The redemption of the Rights; or
(F) Any amendment of, or waiver under, any agreement between BT or
any of its Affiliates, on the one hand, and the Company or any of its
Affiliates, on the other hand, including, without limitation, this
Agreement, or any amendment of the Certificate of Incorporation or the
by-laws of the Company.
The foregoing restrictions shall not apply, however, to the extent that the
Company engages in the actions described in clauses (A) through (C)
pursuant to a transaction in which all stockholders are participating in
proportion to their interests as stockholders.
(b) The obligations of BT, if any, set forth in clauses (i) and (ii) of
Section 7.4(a) shall terminate in the event that there is a final non-appealable
court order, judgment or decree declaring the Rights Plan or any successor plan
thereto invalid and either (x) in connection therewith a third party not
affiliated with BT or any of its Affiliates had commenced a bona fide tender
offer or exchange offer, which was not induced directly or indirectly by BT or
any of its Affiliates, for at least 30% of the outstanding shares of capital
stock of the Company (or 35% if Section 310(b) of the Communications Act has
been repealed or otherwise would not in the reasonable judgment of BT affect in
any material respect the consummation of an Acquisition Proposal by BT) or (y) a
third party not affiliated with BT or any of its Affiliates shall have acquired
beneficial ownership of at least 20% of the outstanding shares of capital stock
of the Company, which acquisition was not induced directly or indirectly by BT
or any of its Affiliates, and shall have filed a Schedule 13D under the Exchange
Act with the SEC that sets forth a present intent that is other than passive in
all material respects, provided that an acquisition for investment purposes only
shall be deemed passive, provided further that, if the foregoing tender offer or
exchange offer referred to in clause (x) shall have been terminated without BT
having made a bona fide Acquisition Proposal or if the foregoing third party
referred to in clause (y) shall have reduced its beneficial ownership of the
outstanding shares of capital stock to below 20%, then the provisions of clauses
(i) and (ii) of Section 7.4(a) shall be reinstated.
(c) Notwithstanding anything to the contrary contained in Section 7.4(a),
(a) if the obligations of BT set forth in clauses (i) and (ii) of Section
7.4(a), if any, shall terminate pursuant to clause (x) of the first sentence of
Section 7.4(b) or clause (b) of this sentence and the third party referred to in
such clause (x) or such clause (b) has commenced a tender offer or exchange
offer for all of the outstanding Common Shares, then during the pendency of such
tender offer BT and its Affiliates may only acquire additional shares of Common
Stock pursuant to a tender offer or exchange offer for all of the outstanding
shares of Common Stock, and (b) if the Rights Plan (or the successor plan
thereto) has been terminated or the Rights redeemed other than as contemplated
in clause (x) of the first sentence of Section 7.4(b), then upon the
commencement of a bona fide tender offer or exchange offer by a third party not
affiliated with BT or any of its Affiliates, which was not induced directly or
indirectly by BT or any of its Affiliates, for at least 30% (or 35% if Section
310(b) of the Communications Act has been repealed or otherwise would not in the
reasonable judgment of BT affect in any material respect the consummation of an
Acquisition Proposal by BT) of the outstanding shares of capital stock of the
Company, the obligations of BT set forth in clauses (i) and (ii) of Section
7.4(a) shall terminate following the earlier of (A) such time as the Board of
Directors of the Company resolves that a sale of the Company would be in the
best interests of the stockholders of the Company or (B) such time as the
Independent Directors, pursuant to a Determination of the Independent Directors,
upon the advice of outside legal counsel and independent financial advisors,
reasonably conclude in good faith, taking into account the conditions of such
tender offer or exchange offer, that such offer will result in Common Shares
being purchased or exchanged, as the case may be (without the extension of the
scheduled expiration date and without giving effect to Common Shares that might
be tendered by BT or any of its
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Affiliates), provided that the Independent Directors will undertake to consider
such matter promptly following the request of BT.
SECTION 8. COVENANTS OF BT AND THE COMPANY
8.1. Antitrust Filings. The Company and BT agree to make all necessary
filings in connection with the Transactions under the HSR Act, the Fair Trading
Act 1973, the RTPA, the Merger Control Regulation or the provisions of Council
Regulation 17/62 as promptly as practicable after August 4, 1993, and to use
their best efforts to furnish or cause to be furnished, as promptly as
practicable, all information and documents requested under each of such laws and
shall otherwise cooperate with the applicable Governmental Authority in order to
obtain any required regulatory approvals in as expeditious a manner as possible.
8.2. Compliance with Antitrust or Competition Laws, Exon-Florio and the
Communications Act. Each of the Company and BT shall use its best efforts to
resolve such objections, if any, as the Antitrust Division, the FTC, the EC
Commission, the Office of Fair Trading, the Secretary of State for Trade and
Industry, the Monopolies and Mergers Commission, CFIUS or the FCC may assert
with respect to this Agreement and the transactions contemplated herein under
applicable antitrust or competition laws, Exon-Florio or the Communications Act,
respectively. In the event that a suit is instituted by any Person or
Governmental Authority challenging this Agreement and the transactions
contemplated herein as violative of applicable antitrust or competition laws or
the Communications Act, each of the Company and BT shall use its best efforts to
resist or resolve such suit. Notwithstanding the foregoing, (i) in connection
with any such objections of, or suit instituted by, the Antitrust Division, the
FTC, the EC Commission, the Office of Fair Trading, the Secretary of State for
Trade and Industry or the Monopolies and Mergers Commission, or the FCC, neither
BT nor the Company shall be required to provide any undertakings or comply with
any condition that, in their respective reasonable opinion, would materially
diminish, taken as a whole, BT's or the Company's, respectively, rights or
protections (with respect to its investment, in the case of BT) under this
Agreement, the Certificate of Amendment and the By-Law Amendments or materially
and adversely affect their business taken as a whole, provided that the
protections provided to BT under Section 9.12(c) shall be deemed not to be
material to BT for purposes hereof and Section 11.3.
8.3. Public Announcements. BT and the Company will agree upon the timing
and content of the initial press release to be issued relating to the execution
of the definitive agreements with respect to the Transactions, and will not make
any public announcement thereof prior to reaching such agreement unless required
to do so by applicable Requirement of Law or the rules of the NASDAQ Stock
Market. To the extent reasonably requested by either party, each party will
thereafter consult with and provide reasonable cooperation to the other in
connection with the issuance of further press releases or other public documents
describing the Transactions.
8.4. Further Assurances. Each party shall execute and deliver such
additional instruments and other documents and shall take such further actions
as may be necessary or appropriate to effectuate, carry out and comply with all
of the terms of this Agreement and the transactions contemplated hereby,
including, without limitation, making application as soon as practicable
hereafter for all consents and approvals required in connection with the
Transactions and diligently pursuing the receipt of such consents and approvals
in good faith thereafter.
8.5. Cooperation. The Company and BT each agree to cooperate with the
other in the preparation and filing of all forms, notifications, reports and
information, if any, required or reasonably deemed advisable pursuant to any
Requirement of Law or the rules of the NASDAQ Stock Market in connection with
the transactions contemplated herein and, subject to the provisions of Section
8.2, to use their respective good faith efforts jointly to agree on a method to
overcome any objections by any Governmental Authority to any such transactions.
If the condition set forth in Section 12.7 cannot be satisfied, the Company and
BT each agree to consult in good faith with respect to alternative agreements
that would provide each of the parties with the rights provided to such party
herein and in the Certificate of Amendment and the By-Law Amendments.
8.6. Exon-Florio. The Company and BT agree to file voluntary notification
under Exon-Florio and to use their best efforts to furnish or cause to be
furnished, as promptly as practicable, all information and
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documents necessary for such voluntary notification and all further information
and documents requested pursuant to Exon-Florio.
8.7. Agreements With Respect to AAP, Clear and Belize. (a) Following
August 4, 1993, the Company and BT will negotiate in good faith with respect to,
and will use commercially reasonable efforts to enter into, agreements, on terms
mutually acceptable, pursuant to which BT (or an Affiliate thereof) will acquire
the equity interest of the Company (or an Affiliate thereof) in AAP
Telecommunications Pty Ltd, a corporation organized under the laws of Australia,
and the equity interest of the Company (or an Affiliate thereof) in Clear
Communications Limited, a corporation organized under the laws of New Zealand,
provided that the execution of such agreements shall not be a condition to the
Closing.
(b) Following August 4, 1993, the Company and BT will negotiate in good
faith with respect to, and will use commercially reasonably efforts to enter
into, an agreement, on terms mutually acceptable, pursuant to which the Company
(or an Affiliate thereof) will acquire the equity interest of BT (or an
Affiliate thereof) in Belize Telecommunications Limited, a corporation organized
under the laws of Belize, provided that the execution of such agreements shall
not be a condition to the Closing.
SECTION 9. COVENANTS OF THE COMPANY
9.1. Pre-Closing Covenants.
(a) Access to Information. From the date of this Agreement until the
Closing, the Company will, and will cause its Subsidiaries and its and their
directors, officers, employees and agents to, afford to BT and its advisors,
officers, employees and agents reasonable access at all reasonable times to its
officers, employees, agents, properties, books, records and contracts and will
furnish to BT and its advisors all financial, operating and other data and
information as BT or its advisors may reasonably request in connection with the
transactions contemplated herein, unless and to the extent that, in connection
with a federal government contract, an agency of the federal government or a
contractor requires the Company or any Subsidiary to restrict access to any
properties or information reasonably related to such contract on the basis of
applicable laws and regulations with respect to national security matters and
unless and to the extent that other Requirements of Law require the Company to
restrict access to any properties or information. BT will cause any information
received in connection with the Transactions to be held in confidence in
accordance with and subject to the terms of the Confidentiality Agreement
previously entered into between BT and the Company.
(b) Conduct of the Business. During the period from August 4, 1993 to the
Closing Date, the Company will, and will cause its Subsidiaries to, conduct
their respective businesses in the ordinary and normal course thereof, except as
otherwise contemplated or permitted by this Agreement, the Newco Agreement, the
BT North America Agreement or the other agreements contemplated hereby and
thereby, provided that any transaction that would not require the consent or
affirmative vote of the holders of Class A Common Stock, voting separately as a
class, following the Closing shall be deemed to be in the ordinary course for
purposes of this Agreement, provided, however, that, notwithstanding the
foregoing, the Company shall consult with BT in good faith prior to undertaking
any action that could reasonably be viewed as outside the ordinary course.
(c) No Shopping. From August 4, 1993 until the Closing Date, the Company
agrees that neither the Company nor any of its Subsidiaries nor any of the
respective officers and directors of the Company or any of its Subsidiaries
shall, and the Company shall direct and use its best efforts to cause its
employees, agents and representatives (including, without limitation, any
investment banker, attorney or accountant retained by the Company or any of its
Subsidiaries) not to, initiate, solicit or encourage, directly or indirectly,
any inquiries or the making of any Acquisition Proposal or, except to the extent
legally required for the discharge by the Board of Directors of the Company of
its fiduciary duties or to comply with requirements of Rule 14e-2 under the
Exchange Act with regard to a tender offer or exchange offer, engage in any
negotiations concerning or provide any confidential information or data to, or
have any discussions with, any Person relating to an Acquisition Proposal, or
otherwise facilitate any effort or attempt to make or implement an Acquisition
Proposal. The Company will notify BT immediately if any such inquiries or
proposals are received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated or continued with, the
Company, or if the Board of Directors of the Company has undertaken to engage in
any negotiations
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concerning or provide any confidential information or data to, or have any
discussions with, any Person relating to an Acquisition Proposal.
(d) Stockholders' Meeting. (i) Subject to Section 9.1(d)(ii), as promptly
as reasonably practicable after August 4, 1993, the Company shall prepare and
file with the SEC pursuant to the Exchange Act and, as promptly as practicable
after the receipt of comments from the SEC staff with respect thereto and to any
required or appropriate amendments thereto, shall mail to the stockholders
entitled to vote thereon a proxy statement (as amended or supplemented, the
"Proxy Statement") in connection with the Stockholders' Meeting to consider
proposals (the "Proposals") concerning (x) the approval of this Agreement and
the transactions contemplated herein, including, without limitation, the
issuance and sale of the Shares, (y) the adoption of the Certificate of
Amendment (provided that, at the election of the Company, the Board of Directors
also may approve and submit to the stockholders of the Company a separate
amendment to the Certificate of Incorporation, to be effective immediately
following the Stockholders' Meeting and until the filing of the Certificate of
Amendment, containing a provision for redemption of the Common Stock, similar in
concept and objective to the Redemption Provision, to be applicable during such
interim period) and (z) the approval of the adoption by the Board of Directors
of the Company of the Rights Plan. The Proxy Statement shall contain the
recommendation of the Board of Directors of the Company that the stockholders
approve the Proposals, unless otherwise legally required for the discharge by
the Board of Directors of its fiduciary duties. The Company shall notify BT
promptly of the receipt by it of any comments from the SEC or its staff and of
any request by the SEC for amendments or supplements to the Proxy Statement or
for additional information and will supply BT with copies of all correspondence
between the Company and its representatives, on the one hand, and the SEC or the
members of its staff or any other governmental officials, on the other hand,
with respect to the Proxy Statement.
(ii) The Company will take, in accordance with applicable law, the
Certificate of Incorporation and its by-laws, all action necessary to convene as
soon as reasonably practicable a meeting of its stockholders entitled to vote
thereon to consider and vote upon the Proposals (the "Stockholders' Meeting").
(iii) The Proxy Statement, as of the date thereof and as of the date of the
Stockholders' Meeting, will not include an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they will
be made, not misleading, provided, however, that the foregoing shall not apply
to any investment bank's fairness opinion included therein or to the extent that
any such untrue statement of a material fact or omission to state a material
fact was made by the Company in reliance upon and in conformity with written
information concerning BT furnished to the Company by BT specifically for use in
the Proxy Statement. The Proxy Statement shall not be filed, and no amendment or
supplement to the Proxy Statement will be made, by the Company without
consultation with BT and its counsel.
(iv) The Company shall promptly advise BT if the Board of Directors of the
Company determines to withdraw or modify in a manner adverse to BT its
recommendation to approve the Proposals.
(e) Charter and By-Law Amendments. On or before the Closing Date,
following the approval of the Proposals by the stockholders of the Company at
the Stockholders' Meeting, the Company will cause the Certificate of Amendment,
substantially in the form of Exhibit A attached hereto, to be filed with the
Secretary of State of the State of Delaware, and the Board of Directors of the
Company will cause the amendments to the by-laws of the Company, substantially
in the form of Exhibit B attached hereto (the "By-Law Amendments"), and the
Rights Plan, substantially in the form of Exhibit C hereto, to be adopted;
provided, however, that nothing contained in this Agreement shall require such
Certificate of Amendment to be filed on behalf of or by the Company or such
amendments to the by-laws or such Rights Plan to be adopted by the Board of
Directors of the Company prior to the time that all conditions set forth in
Sections 11 and 12 (other than those related to such filing or such adoptions)
have been satisfied or waived. The Company covenants and agrees that, on or
before the Closing Date, it shall not cause any amendment to be made to the
Certificate of Incorporation other than the amendments set forth in the
Certificate of the Amendment and the additional amendment described in clause
(y) of the first sentence of Section 9.1(d)(i) and the Board of Directors of the
Company shall not cause any amendments to be made to the by-laws of the Company
other than the By-Law Amendments, in either case without the prior consent of
BT.
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(f) Observer. From August 4, 1993 until the Closing, the Company agrees
that BT shall be entitled to designate an observer to attend meetings of the
Board of Directors of the Company; provided, however, that such observer shall
be excluded from such meetings at all times during which the Board of Directors
is discussing or considering any of the Transactions or any matter related
thereto, any transaction competing with or in the alternative to the
Transactions, and any other matter for which the attendance of such observer
would not be in the best interests of the stockholders as determined by the
Chairman of the Board. The Company shall provide such observer with the same
notice of meetings of the Board of Directors of the Company as that provided to
directors.
(g) Issuances of Derivative Securities. The Company covenants and agrees
that from August 4, 1993, until the Closing Date it will not issue any options,
warrants, rights or other securities convertible into or exercisable for shares
of Common Stock (other than (w) pursuant to the terms of the Preferred Stock,
(x) grants or issuances pursuant to Employee Stock Plans, (y) the reissuance of
Voting Securities purchased by the Company subsequent to August 4, 1993, or (z)
pursuant to this Agreement) in excess of 10% of the aggregate number of shares
of Common Stock outstanding as of August 4, 1993, calculated after giving effect
to any such issuance.
9.2. Repurchases. If any shares of Common Stock are issued by the Company
between July 28, 1993 and the Closing (other than shares of Common Stock
described in Section 2.1(b) or 2.1(d) issued pursuant to the exercise of
Existing Options or the reissuance of shares of Common Stock purchased by the
Company subsequent to July 28, 1993), the Company will, to the extent legally
permissible, use its best efforts to repurchase a number of shares of Common
Stock equal to the number of such shares issued between July 28, 1993 and the
Closing (to the extent that such issuances exceed the number of shares of Common
Stock otherwise repurchased during such period) as soon as reasonably
practicable following the Closing; provided, that such repurchases shall be made
only to the extent that the Company reasonably believes that they will not have
a material effect on the market price of the Common Stock.
9.3. Access to Information. After the Closing and for so long as (i) the
Outstanding Interest is at least 10% and (ii) neither (x) any of the Newco
Triggering Events has occurred nor (y) the shares of Class A Common Stock shall
have automatically converted into shares of Common Stock pursuant to section
4(b)(9)(ii) of the Certificate of Incorporation (as amended by the Certificate
of Amendment) by reason of the occurrence of an event described in section
4(b)(11)(vi)(E) of the Certificate of Incorporation (as amended by the
Certificate of Amendment), the Company will permit representatives of BT at
their expense to visit and inspect all properties, books and records of the
Company and its subsidiaries and to discuss the affairs, finances and accounts
of the Company with the principal officers of the Company, its attorneys and
auditors, all at such reasonable times and as often as may reasonably be
requested in order to enable BT to reasonably monitor its investment in the
Company, and, to the extent applicable, to provide such other access and
information as may be reasonably required to enable BT to account for its
investment in the Company on the equity method and otherwise to comply with
applicable requirements of U.S. and U.K. securities laws, generally accepted
accounting principles and requirements of governmental authorities, subject to
reasonable and appropriate confidentiality agreements pursuant to which any such
information received or otherwise obtained shall be held in confidence and
subject to the terms of any confidentiality agreements with third parties to
which the Company or any of its Subsidiaries is subject, unless and to the
extent that, in connection with a federal government contract, an agency of the
federal government or a contractor requires the Company or any of its
Subsidiaries to restrict access to any properties or information reasonably
related to such contract on the basis of applicable laws and regulations with
respect to national security matters and unless and to the extent that other
Requirements of Law require the Company to restrict access to any properties or
information.
9.4. No Shopping. (a) From the Closing until the seventh anniversary of
the Closing Date so long as any shares of Class A Common Stock remain
outstanding, the Company agrees that neither the Company nor any of its
Subsidiaries nor any of the respective officers and directors of the Company or
any of its Subsidiaries shall, and the Company shall direct and use its best
efforts to cause its employees, agents and representatives (including, without
limitation, any investment banker, attorney or accountant retained by the
Company or any of its Subsidiaries) not to, initiate, solicit or encourage,
directly or indirectly, any inquiries or the making of
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any Acquisition Proposal or, except to the extent legally required for the
discharge by the Board of Directors of the Company of its fiduciary duties or to
comply with the requirements of Rule 14e-2 under the Exchange Act with regard to
a tender offer or exchange offer, engage in any negotiations concerning or
provide any confidential information or data to, or have any discussions with,
any Person relating to an Acquisition Proposal, or otherwise facilitate any
effort or attempt to make or implement an Acquisition Proposal. The Company will
notify BT immediately if any such inquiries or proposals are received by, any
such information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with, the Company, or if the Board of
Directors of the Company shall have determined that in order to discharge the
Board of Directors' fiduciary duties the Company is engaging in any negotiations
concerning or providing any confidential information or data to, or having any
discussions with, any Person relating to an Acquisition Proposal.
(b) From and after the expiration of the period described in Section 9.4(a)
until the tenth anniversary of the Closing Date so long as any shares of Class A
Common Stock remain outstanding, the Company will provide BT with at least 60
days prior written notice if at any time during such period the Board of
Directors of the Company decides to initiate, solicit or encourage, directly or
indirectly, any inquiries or the making of any Acquisition Proposal or to engage
in any negotiations concerning or provide any confidential information or data
to, or have any discussions with, any Person relating to an Acquisition
Proposal, provided that if the Board of Directors of the Company shall have
determined to engage in any such actions in response to an unsolicited
Acquisition Proposal by a third party in order to discharge the Board of
Directors' fiduciary duty, then the Company shall be relieved from the 60-day
notice period and such notice shall be provided to BT as soon as reasonably
practicable following such determination.
(c) If the Company delivers a Sale Notice to BT in accordance with the
provisions of Section 9.5(a), then the provisions of this Section 9.4 and
Section 9.5(d) shall be void and of no further force and effect and all further
obligations of the Company and its officers, directors, employees, agents and
representatives under this Section 9.4 shall terminate without further
liability.
9.5. Business Combinations. (a) Auction Period. From and including the
fourth anniversary of the Closing Date until the tenth anniversary of the
Closing Date so long as any shares of Class A Common Stock remain outstanding,
if the Board of Directors of the Company decides to sell the Company (including
any such decision by the Board of Directors to sell the Company that is made
prior to the fourth anniversary of the Closing Date if such sale is reasonably
expected to be effected subsequent to such fourth anniversary), whether pursuant
to a third party tender offer or exchange offer or a Business Combination, then
the Company shall give BT written notice of such decision (the "Sale Notice")
and shall follow the auction procedures specified in Section 9.5(c) if the Board
of Directors of BT, within ten Business Days thereafter (30 days if Section
310(b) of the Communications Act has not been repealed, unless an unsolicited
tender offer or exchange offer has been commenced), provides the Board of
Directors of the Company written notice of a good faith intention to submit a
bona fide Acquisition Proposal for all the outstanding Voting Securities,
provided that the Company shall be under no obligation hereunder to sell the
Company and may terminate such auction at any time. If, following the conclusion
or termination of such auction procedures, the Board of Directors of the Company
abandons its effort to sell the Company, then at such time the provisions of
Section 9.4 shall be reinstated.
(b) From and including the fourth anniversary of the Closing Date until the
tenth anniversary of the Closing Date so long as any shares of Class A Common
Stock remain outstanding, the Company shall not, without the consent of BT,
redeem the Rights or agree to or effect any Business Combination, except such
consent shall not be required in connection with an Acquisition Proposal for all
of the outstanding shares of Common Stock (and all shares of Common Stock
issuable upon the conversion of the outstanding shares of Class A Common Stock)
in which all stockholders are permitted to participate on an equal basis,
provided that the Company has not breached in any material respect its
obligations under Section 9.5(c).
(c) Auction Procedures. Except as otherwise provided in Section 9.5(a),
unless otherwise consented to by BT any sale of the Company described in Section
9.5(a) shall be pursuant to an auction upon commercially reasonable terms as
established by a Determination of the Independent Directors, provided that at
BT's request the Independent Directors or the investment bankers designated by
the Independent Directors
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shall discuss with investment bankers designated by BT the procedures to be
followed in such auction. The time between the commencement of the auction and
the execution of a definitive agreement for such sale of the Company shall be at
least six months, provided that if Section 310(b) of the Communications Act has
been repealed or otherwise would not in the reasonable judgment of BT affect in
any material respect the consummation of an Acquisition Proposal by BT, such
minimum time period shall be reduced to 21 Business Days. The time between BT's
receipt of the Sale Notice and the execution of such definitive agreement shall
be at least seven months, provided that if Section 310(b) of the Communications
Act has been repealed or otherwise would not the reasonable judgment of BT
affect in any material respect the consummation of an Acquisition Proposal by
BT, such minimum time period shall be reduced to 30 Business Days. If Section
310(b) of the Communications Act remains in effect, then in connection with any
such auction, the Company shall use its best efforts to assist BT in obtaining
approval from the FCC to consummate an Acquisition Proposal. Notwithstanding the
foregoing, the Company shall have no obligation hereunder to be subject to the
foregoing auction procedures (x) if the Company delivers to BT a notice setting
forth the terms and conditions of a definitive agreement or a bona fide letter
of intent providing for a Business Combination that the Company is prepared to
execute with a third party and (A) BT fails within 15 Business Days thereafter
to deliver to the Company a resolution of the Board of Directors of BT setting
forth its good faith intention, subject to the restrictions set forth in Section
310(b) of the Communications Act, to submit a bona fide Acquisition Proposal
containing a per share financial consideration to be received by the
stockholders of the Company that, upon the reasonable advice of BT's financial
advisor, exceeds the per share consideration offered by such third party and (B)
following such failure to deliver such resolution, there is a Determination of
the Independent Directors that continuing the auction would not be in the best
interests of the stockholders of the Company, provided that the provisions of
this Section 9.5 shall be reinstated in the event that the Company fails to
execute such agreement or fails to consummate such Business Combination, or (y)
following such time as the Independent Directors are advised in writing by FCC
counsel selected by the Independent Directors (which shall not be FCC counsel
that advised the Company in connection with effecting the transactions
contemplated herein) that such counsel believes that BT's request to obtain
approval from the FCC to consummate an Acquisition Proposal will not be granted
in light of the then current regulatory, competitive and political environment,
and believes such failure to obtain such FCC approval would not be overturned by
a court of competent jurisdiction, and, on the basis of such written advice,
there is a Determination of the Independent Directors that no good faith purpose
could reasonably be served by providing BT with a continued opportunity to seek
such approval to purchase the Company.
(d) Third Party Tender Offers. From the Closing Date until the fourth
anniversary of the Closing Date, so long as any shares of Class A Common Stock
remain outstanding, the Board of Directors of the Company shall not, without the
consent of BT, except to the extent legally required for the discharge by the
Board of Directors of the Company of its fiduciary duties or to comply with
requirements of Rule 14e-2 under the Exchange Act with regard to a tender offer
or exchange offer, recommend acceptance of any third party tender offer. From
and including the fourth anniversary of the Closing Date until the tenth
anniversary of the Closing Date so long as any shares of Class A Common Stock
remain outstanding, the Board of Directors of the Company shall not, without the
consent of BT, except to the extent legally required for the discharge by the
Board of Directors of the Company of its fiduciary duties or to comply with
requirements of Rule 14e-2 under the Exchange Act with regard to a tender offer
or exchange offer, recommend acceptance of any third party tender offer, except
in connection with an Acquisition Proposal for all of the outstanding shares of
Common Stock (and all shares of Common Stock issuable upon the conversion of the
outstanding shares of Class A Common Stock) in which all stockholders are
permitted to participate on an equal basis, provided that the Company has not
breached in any material respect its obligations under Section 9.5(c).
(e) Tag-Along Rights. The Board of Directors of the Company will not
approve any transaction that otherwise requires the approval of the Board of
Directors in which any stockholder may sell its shares of capital stock of the
Company unless BT and its Affiliates are provided the same right to sell in such
transaction, subject to the receipt of all necessary consents and approvals, all
of their shares of capital stock of the Company for the same price and upon the
same terms and conditions applicable to such holder or holders of capital stock
generally.
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(f) Waiver. BT acknowledges that the procedures and provisions set forth
in this Section 9.5 have been bargained for by the parties and provide BT with
valuable rights. In consideration thereof, BT hereby waives on behalf of itself
and each of its Affiliates, and agrees that neither it nor any Affiliate shall
hereafter exercise, any dissenters', appraisal or comparable rights that may be
available to it at law or in equity in connection with any sale of the Company
conducted in accordance with the provisions of this Section 9.5 for so long as
such provisions are effective as stated herein.
9.6. Core Business of the Company. So long as shares of Class A Common
Stock remain outstanding, in the event that (i) the Company acquires any
businesses or assets or investments in a Non-Core Business in the course of a
bona fide transaction the principal purpose of which is the acquisition of a
Core Business and (ii) such acquisition or investment was not subject to the
consent or affirmative vote of the holders of Class A Common Stock, voting as a
separate class, as provided in the Certificate of Incorporation (as amended by
the Certificate of Amendment), unless BT otherwise consents, the Company shall
dispose of a portion of any such Non-Core Business to the extent that the
portion of the cost of such acquisition or investment allocable to such Non-Core
Business exceeds 5% of the Market Capitalization of the Company at the time of
such acquisition or investment as promptly as practicable consistent with good
commercial practices in light of industry customs.
9.7. Board of Directors. From the Closing Date and thereafter so long as
(i) the Outstanding Interest is at least 10%, (ii) neither (x) any of the Newco
Triggering Events shall have occurred nor (y) the shares of Class A Common Stock
shall have automatically converted into shares of Common Stock pursuant to
section 4(b)(9)(ii) of the Certificate of Incorporation (as amended by the
Certificate of Amendment) by reason of the occurrence of an event described in
section 4(b)(11)(vi)(E) of the Certificate of Incorporation (as amended by the
Certificate of Amendment) and (iii) BT has not materially breached, or ceased to
be subject to (other than as provided under the terms of this Agreement), its
obligations under Section 7.4(a)(i) or 10.3:
(a) The Board of Directors shall not take any action that would cause
the number of directors of the Company (including the Class A Directors, if
any) to be other than 15, unless BT consents thereto.
(b) In connection with each election of directors of the Company, the
Board of Directors of the Company will nominate in accordance with the
Company's procedures for the nomination of directors as provided in its
by-laws, and to the extent permissible in accordance with applicable legal
requirements, individuals as follows:
(i) Independent Directors. A majority of the directors of the
Company so nominated will be individuals who satisfy the criteria set
forth below (the "Independent Directors") and who shall for each
election held after the Closing Date be nominated by a nominating
committee of the Board of Directors of the Company (the "Nominating
Committee") established to determine whether prospective nominees meet
the criteria set forth below. The Nominating Committee shall be
comprised of the Chief Executive Officer of the Company (who shall act
as chairman of such committee) and at least four other directors, each
of whom shall be an Independent Director. Independent Directors are
directors who, and future qualified nominees shall each be, a person who
is a U.S. citizen and:
(v) is free from any relationship that, in the opinion of the
Nominating Committee, would interfere with the exercise of
independent judgment as a member of the Board of Directors of the
Company,
(w) is not an Affiliate of the Company or BT or an officer of
the Company or any of its Subsidiaries or an officer or director of
BT or any of its Subsidiaries,
(x) is not a former officer of the Company, BT or any of their
respective Subsidiaries who is receiving a pension or deferred
compensation payments from any such entity,
(y) does not, in addition to such person's role as a director of
the Company, also act on a regular basis as an individual or
representative of an organization serving as a professional advisor,
legal counsel or consultant to management of the Company or BT or any
of their
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respective Subsidiaries if, in the opinion of the Nominating
Committee, such relationship is material to the Company, BT, the
organization represented or such person and
(z) does not represent, and is not a member of the immediate
family of a person who does not satisfy the requirements of clauses
(v), (w), (x) or (y) above.
A person who has been or is a partner, officer or director of an
organization that has customary commercial, industrial, banking or
underwriting relationships with the Company, BT or any of their
respective Subsidiaries that are carried on in the ordinary course of
business on an arms'-length basis and who otherwise satisfies the
requirements of clauses (v) through (z) above may qualify as an
Independent Director unless, in the opinion of the Nominating Committee,
such person is not independent of the management of the Company or BT or
any of their respective Subsidiaries or the relationship would interfere
with the exercise of independent judgment as a member of the Board of
Directors of the Company. A person who otherwise satisfies the
requirements of clauses (v) through (z) above and who, in addition to
fulfilling the customary director's role, also provides additional
services directly for the Board of Directors of the Company and is
separately compensated therefor, would nonetheless qualify as an
Independent Director.
The Nominating Committee shall provide BT with the opportunity to
interview the proposed nominee and the right to advise the Nominating
Committee as to whether BT believes that any person proposed as an
Independent Director lacks one or more of the qualifications referred to
in the foregoing list, and the Nominating Committee shall in good faith
consider such advice. To effectuate the foregoing, the Nominating
Committee shall advise BT of the proposed nomination of each Independent
Director at least 20 Business Days prior to the nomination thereof,
together with information in reasonable detail as to the identity and
background of such person.
Notwithstanding anything to the contrary contained in this Section
9.7(b)(i), each director of the Company as of August 4, 1993, who is not
an executive officer of the Company shall be deemed to be an Independent
Director for purposes of this Agreement.
(ii) Other Directors. There shall be no restrictions on the
remaining nominees (other than the BT Nominees) for election as director
other than that such nominees (other than the BT Nominees and nominees
for Class A Director) be U.S. citizens and other than as may be provided
by the by-laws of the Company and applicable law.
(c) If no shares of Class A Common Stock are outstanding, BT shall
have the right to designate that number of qualified nominees (the "BT
Nominees") in connection with each election of directors of the Company
that is equal to the product (rounded to the nearest whole number if such
product is not a whole number), of (x) the Outstanding Voting Interest
times (y) the number of directors to be elected at such election, provided
that, at any time that the Outstanding Voting Interest is from and
including 15% to and including 20%, then in calculating such number of
nominees the multiplier set forth in clause (x) shall be deemed to be 20%
in lieu of the then Outstanding Voting Interest, provided further that BT
shall have no right to designate any nominee such that, if such nominee
were elected, designees of BT serving on the Board of Directors of the
Company would constitute more than that number of directors that is equal
to the product (rounded to the nearest whole number if such product is not
a whole number), of (x) the Outstanding Voting Interest (or 20% as set
forth in the preceding proviso) times (y) the number of directors then
constituting the whole Board of Directors, and provided further that while
Section 310(b) of the Communications Act remains in effect, under no
circumstances shall BT or any of its Affiliates have the right to designate
nominees such that designees of BT would constitute more than the maximum
percentage of the total directors of the Company permitted under such
Section 310(b) and under no circumstances shall the number of designees of
BT serving on the Board of Directors of the Company be more than the
maximum percentage of the total directors of the Company permitted under
such Section 310(b). If the outstanding shares of Class A Common Stock
shall have converted into shares of Common Stock pursuant to section
4(b)(9)(ii) of the Certificate of Incorporation (as amended by the
Certificate of Amendment) by reason of the occurrence of an event described
in section 4(b)(11)(vi)(B) of the Certificate of Incorporation (as amended
by the Certificate of Amendment), then immediately following such
conversion BT shall have the right to designate that
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number of qualified BT Nominees to fill that number of the vacancies on the
Board of Directors of the Company thereby created that is equal to the
product (rounded to the nearest whole number if such product is not a whole
number), of (x) the Outstanding Voting Interest (or 20% as set forth above)
times (y) 15 or such other total number of directors to which BT shall have
consented pursuant to Section 9.7(a). In case of any vacancy occurring
among the BT Nominees serving on the Board of Directors (unless such
vacancy results from action taken in accordance with the last sentence of
this Section 9.7(c)), BT shall have the right to designate a qualified BT
Nominee for appointment as a successor to hold office for the unexpired
term of the BT Nominee whose place shall be vacant. If (i) the Outstanding
Interest is no longer at least 10% or (ii) either (x) any of the Newco
Triggering Events shall have occurred or (y) the shares of Class A Common
Stock shall have automatically converted into shares of Common Stock
pursuant to section 4(b)(9)(ii) of the Certificate of Incorporation (as
amended by the Certificate of Amendment) by reason of the occurrence of an
event described in section 4(b)(11)(vi)(E) of the Certificate of
Incorporation (as amended by the Certificate of Amendment), then, subject
to the provisions of Section 9.11, BT shall cause its designees on the
Board of Directors of the Company to resign.
(d) Each committee of the Board of Directors of the Company (other
than the Nominating Committee) shall, subject to any requirements under the
Exchange Act or applicable to securities, or the issuance of securities,
traded on the NASDAQ Stock Market or Requirements of Law, include (x) if
shares of Class A Common Stock remain outstanding, a number of Class A
Directors (rounded to the nearest whole number, but in no event less than
one such Class A Director) equivalent to the proportion of Class A
Directors then serving on the whole Board of Directors or (y) at such time
that no shares of Class A Common Stock remain outstanding but BT has the
right to designate at least one director under Section 9.7(c), a number of
BT Nominees (rounded to the nearest whole number, but in no event less than
one such BT Nominee) equivalent to the proportion of BT Nominees then
serving on the whole Board of Directors. Subject to the foregoing, the
board of directors shall have the power at any time to fill vacancies in,
to change the membership of or to discharge any committee.
(e) The Board of Directors of the Company shall follow the following
procedures:
(i) Meetings. The Board of Directors shall hold at least six
regularly scheduled meetings per year at such times as may from time to
time be fixed by resolution of the Board of Directors, and no notice
(other than the resolution) need be given as to a regularly scheduled
meeting. Special meetings of the Board of Directors may be held at any
time upon the call of the Chairman of the Board or at least two
directors, by oral, telephonic, telegraphic or facsimile notice duly
given or sent at least one hour, or by written notice sent by express
mail at least one day, before the meeting to each director, provided
that all such notices to directors located outside the United States
shall be given or sent orally or by telephone, telegraph or facsimile
transmission. Reasonable efforts shall be made to ensure that each
director actually receives timely notice of any such special meeting. An
annual meeting of the Board of Directors shall be held without notice
immediately following the annual meeting of stockholders of the Company.
(ii) Agenda. A reasonably detailed agenda shall be supplied to
each director reasonably in advance of each meeting of the Board of
Directors, together with other appropriate documentation with respect to
agenda items calling for Board action, to inform adequately directors
regarding matters to come before the Board. Any director wishing to
place a matter on the agenda for any meeting of the Board of Directors
may do so by communicating with the Chairman of the Board sufficiently
in advance of the meeting of the Board of Directors so as to permit
timely dissemination to all directors of information with respect to the
agenda items.
(iii) Powers of the Board. The Board of Directors shall reserve to
itself the power to approve transactions that are of a type customarily
subject to board approval as a matter of good corporate practice for
public companies in the United States, and shall not delegate to any
committee of the Board or to any officers of the Company the authority
to conduct business in any manner that would circumvent, or deprive BT
or any of its Affiliates of the protection of, this Agreement. In no
event will the Board establish an executive committee, or any committee
performing functions comparable
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to those customarily performed by executive committees of boards of
directors of public companies in the United States, without the prior
consent of BT. All committees of the Board will report to and be
accountable to the Board. The Board of Directors shall establish, in
cooperation with the Chief Executive Officer of the Company, a schedule
for Board of Directors' review or action, as appropriate, with respect
to matters which shall typically come before the Board of Directors,
including, but not limited to:
(1) Annual business plans (including capital expenditures
and operating budgets);
(2) Major collaborative arrangements with third parties not
in the ordinary and normal course of business as
theretofore conducted; and
(3) Appointments of officers.
(iv) Security Clearance. To the extent that, in connection with a
federal government contract, an agency of the federal government or a
contractor requires the Company to restrict access to any properties or
information reasonably related to such contract on the basis of
applicable laws and regulations with respect to national security
matters and to the extent that other Requirements of Law require the
Company to restrict access to any properties or information and, in
accordance with such restrictions, access to certain properties or
information may not be given to any director without appropriate
security clearance, such director will not be given access to such
properties or information and may not participate in Board deliberations
in which such information or restricted information with respect to such
properties is disclosed.
(v) Confidentiality Agreements. In the event that either (A) BT or
any of its Affiliates has exercised its right to require the Company or
any of its Affiliates to sell to BT or any of its Affiliates the
Company's direct or indirect interest in Newco pursuant to Clause 30 of
the Newco Agreement as a result of a material breach by the Company or
any of its Affiliates pursuant to Clause 29.1(a) of the Newco Agreement
or (B) the Company or any of its Affiliates has exercised its right to
require BT or any of its Affiliates to sell to the Company or any of its
Affiliates BT's direct or indirect interest in Newco pursuant to the
terms of the Newco Agreement, then (x) BT shall cause the Class A
Directors or the BT Nominees, as the case may be, to comply with such
conditions as may reasonably be imposed with respect to their service on
the Board of Directors by a Determination of the Independent Directors,
taking into account the competitive and prospective competitive
relationship between the Company and BT and such other factors as are
then deemed relevant and (y) BT agrees that it will not exercise its
rights as a holder of Class A Common Stock in respect of any consent or
affirmative vote, voting separately as a class, with respect to any
matters under the Certificate of Incorporation (as amended by the
Certificate of Amendment) or its consent rights under this Agreement, as
the case may be, for the principal purpose of adversely affecting the
Company as a competitor.
9.8. Maintenance of BT's Share Ownership. Except as provided otherwise
below, from the Closing Date and thereafter so long as the Outstanding Interest
is at least 10% and the Foreign Ownership Limitation remains in effect:
(a) Issuances of Capital Stock. After the Closing Date the Company
shall, to the extent practicable, use its best efforts not to issue any
shares of capital stock to Non-U.S. Persons or Entities if, after giving
effect to such issuance, the total number of shares of capital stock of the
Company Owned of Record or Voted by Non-U.S. Persons or Entities, including
BT and its Affiliates, would exceed 5% less than the Foreign Ownership
Limitation, provided, however, that such restriction on the issuance of
capital stock shall not apply to (i) issuances of Employee Shares, (ii)
issuances of shares of capital stock upon the conversion or exercise of any
other options, warrants, rights or other securities convertible into or
exchangeable for shares of capital stock that are outstanding as of the
Closing Date, (iii) transfers of ownership by operation of law, (iv)
issuances to BT and its Affiliates or (v) issuances of capital stock to
Non-U.S. Persons or Entities in connection with a public offering or
private placement of Equity pursuant to which the Company reasonably
believes, after consultation with BT, that the aggregate percentage of the
capital stock of the Company Owned of Record or Voted by Non-U.S. Persons
or
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Entities will be lower immediately subsequent to such public offering or
private placement, as the case may be, than such aggregate percentage was
prior to such public offering or private placement.
(b) Reasonable Steps to Maintain Ownership.
(i) Actions by Company. The Company will not, without BT's consent,
take any action which would proximately result in BT and its Affiliates not
being permitted, under existing law or regulation, to maintain their
ownership of Voting Equity at the then current Outstanding Interest and,
except as otherwise provided in Section 9.8(c), will take such steps as are
reasonably necessary to maintain the ownership of Voting Equity by BT and
its Affiliates at the then current Outstanding Interest in the event such
level of ownership is threatened under existing law or regulation
(including, without limitation, using reasonable efforts to oppose any
regulatory initiative, state or federal, to obtain a reduction in the level
of ownership by BT and its Affiliates) to the extent, in each case, that
the detriment to the Company of not taking any such action, or the cost to
or the burdens imposed on the Company as a result of taking any such steps,
are not determined to be unreasonable in a Determination of the Independent
Directors. Without limiting the foregoing provisions of this paragraph (i),
the Company shall not in any event be required to affix to its stock
certificates legends limiting transfers thereof to Non-U.S. Persons or
Entities.
(ii) Other Limitations. In the event that at any time the maximum
aggregate amount of capital stock that may be held by Non-U.S. Persons or
Entities under applicable state or local laws or regulations is less than
the Foreign Ownership Limitation (and less than the amount of capital stock
in the Company then held by BT and its Affiliates), the Company will not
redeem any Common Shares held by BT or its Affiliates pursuant to the
Redemption Provision and the Company and BT will in good faith promptly
attempt to agree upon the means by which the Company can comply with such
laws and regulations, taking into account the relative benefits and
detriments thereof to the Company and to BT, provided that, notwithstanding
the foregoing, the Company may, after consultation in good faith with BT to
consider alternatives to such redemption, redeem Common Shares held by BT
or its Affiliates if the failure to redeem such shares would have a
material adverse effect on the Company and its Subsidiaries taken as a
whole as established by a Determination of the Independent Directors.
(c) Redemptions.
(i) General. The Company will not redeem or repurchase outstanding
shares of its capital stock held by Persons other than BT and its
Affiliates if as a result thereof, to the knowledge of the Company, shares
held by BT and its Affiliates would also be required to be redeemed or
repurchased, unless (1) required to do so by applicable Requirement of Law,
(2) such redemption or repurchase affects all stockholders proportionately
or (3) BT consents thereto. Prior to any such redemption, the Company shall
consult in good faith with BT to consider alternatives to such redemption.
(ii) Redemption of Non-BT Securities First. If at any time after
August 4, 1993, the Company should invoke its right to redeem capital stock
under the Redemption Provision, to the fullest extent legally permissible
in the good faith judgment of the Company, the Company shall first
designate for redemption securities other than Common Shares held by BT and
its Affiliates before designating for redemption any Common Shares held by
BT and its Affiliates.
(iii) Redemption of Capital Stock Before Shares. Any capital stock
acquired by BT or any of its Affiliates other than the Shares and the
Conversion Shares shall, to the extent practicable and legally permissible,
be redeemed prior to the redemption of any Shares or Conversion Shares.
(iv) Purchase Price. If the Company redeems any shares of capital
stock held by BT or any of its Affiliates pursuant to the Redemption
Provision:
(A) within two years after the Closing, the redemption price of any
Shares or Conversion Shares redeemed shall be equal to the greater of
(1) the "current market value" as determined in accordance with the
Redemption Provision and (2) an amount equal to the purchase price
therefor, together with interest thereon (calculated on the basis of a
365 or 366 day year and actual days elapsed) at the Interest Rate as of
the date of such redemption compounded annually from the date of
purchase of the Shares or the Conversion Shares, as the case may be,
until the date of redemption;
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(B) more than two years but less than ten years after the Closing,
the redemption price of any Shares or Conversion Shares redeemed shall
be equal to the greater of (1) the "current market value" as determined
in accordance with the Redemption Provision and (2) an amount equal to
the purchase price therefor, plus an amount equal to interest thereon
accrued through the date two years after the Closing calculated in
accordance with clause (2) of subparagraph (A) above;
(C) less than ten years after the Closing, the redemption price of
any Maintenance Shares redeemed shall be equal to the greater of (1) the
"current market value" as determined in accordance with the Redemption
Provision and (2) the purchase price paid by BT for such Maintenance
Shares;
(D) less than ten years after the Closing, the redemption price of
any capital stock (other than Shares, Conversion Shares or Maintenance
Shares) redeemed shall be equal to the "current market value" as
determined in accordance with the Redemption Provision; and
(E) ten years or more after the Closing, the redemption price of
all shares of capital stock redeemed shall be equal to the "current
market value" as determined in accordance with the Redemption Provision.
For purposes of this Section 9.8(b)(iv), the purchase price of any Shares,
Conversion Shares or Maintenance Shares, shall be deemed adjusted from time
to time by subtracting therefrom the Fair Market Value (as established by a
Determination of the Independent Directors) of any dividend or distribution
received in respect of such Shares, Conversion Shares or Maintenance Shares
prior to the redemption thereof. As used in this Section 9.8(b)(iv),
"current market value" shall mean the "Current Market Value" as defined in
the Redemption Provision.
(v) Payment in Cash. The redemption price referred to herein shall,
to the extent legally permissible, be paid to BT or to its Affiliate, as
the case may be, in cash.
(vi) Repurchase of Redeemed Shares. If the Company redeems any shares
of capital stock held by BT or any of its Affiliates pursuant to the
Redemption Provision, and within two years thereafter any change in
circumstance would permit BT or such Affiliate, as the case may be, to
regain its ownership of such shares, immediately upon such change in
circumstance BT or such Affiliate, as the case may be, shall have the right
to repurchase from the Company, and the Company shall have the right to
require BT or such Affiliate, as the case may be, to repurchase from the
Company, any shares so redeemed, at a purchase price per share equal to the
redemption price paid, together with interest thereon at the Interest Rate
as of the date of redemption compounded annually from the date of
redemption to the date of repurchase, provided that upon such change in
circumstances BT or such Affiliate, as the case may be, shall be obligated
to repurchase such shares from the Company at the earliest practicable
opportunity prior to acquiring any shares of the Company from any third
party. If the Company has redeemed any Shares or Conversion Shares from BT
or any of its Affiliates, and BT or any of its Affiliates then repurchases
shares from the Company pursuant to this paragraph (vi), such repurchased
shares shall be deemed to be "Shares" or "Conversion Shares", respectively
for purposes of this Agreement.
Upon any such purchase of shares of capital stock by BT or any of its
Affiliates pursuant to this Section 9.8(b)(vi), (x) the purchase price
shall be adjusted by subtracting therefrom the Fair Market Value (as
established by a Determination of the Independent Directors) of any
dividend or distribution otherwise payable in respect of such shares after
the above-mentioned redemption and prior to the purchase by BT or any of
its Affiliates hereunder and (y) the purchase price and number of shares of
capital stock to be purchased shall be adjusted to reflect any stock split,
stock dividend, or other combination or reclassification of the Company's
capital stock during such time.
If the Company shall have redeemed any shares of capital stock held by
BT or any of its Affiliates pursuant to the Redemption Provision, then from
time to time during the next two years thereafter, at BT's request, the
Company shall at the Company's expense conduct a sampling in order to
determine the percentage of outstanding capital stock of the Company that
is Owned of Record or Voted by Non-U.S. Persons or Entities, calculated in
a manner to determine compliance with Section 310(b) of the Communications
Act, and shall provide other reasonable cooperation to BT in enabling BT to
determine
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the percentage of outstanding capital stock of the Company that is Owned of
Record or Voted by Non-U.S. Persons or Entities, provided that the Company
shall not be obligated to perform more than one such sampling in any
calendar year.
9.9. Termination. If at any time the Outstanding Interest or Outstanding
Voting Interest is less than the percentage specified in any provision in this
Agreement as a condition to the applicability of any covenants contained
therein, the Company's obligations and the rights of BT and its Affiliates with
respect to all covenants set forth in such provision of this Agreement shall
thereupon irrevocably terminate and shall not be reinstated, provided, however,
that if the Outstanding Interest or Outstanding Voting Interest, as the case may
be, has become less than the specified percentage as aforesaid solely as a
result of an acquisition of Voting Securities beneficially owned by BT or any of
its Affiliates by the Company pursuant to the Redemption Provision, and if BT or
its Affiliate shall have within two years of any redemption of shares of capital
stock held by BT or any of its Affiliates pursuant to the Redemption Provision
repurchased from the Company any shares so redeemed pursuant to Section
9.8(b)(vi) such that solely as a result of such repurchase the Outstanding
Interest or Outstanding Voting Interest, as the case may be, is equal to or
greater than the percentage specified in any provision in this Agreement so
terminated as a condition to the applicability of any covenants contained
herein, then the Company's obligations and the rights of BT and its Affiliates
with respect to the covenants set forth in such provision of this Agreement that
had previously been terminated pursuant to this Section 9.9 shall thereupon,
subject to the provisions of this Agreement, the Certificate of Amendment and
the By-Law Amendments, be reinstated.
9.10. Approval of Certain Matters. (a) In the event that no shares of
Class A Common Stock are outstanding as a result of the occurrence of any of the
Newco Triggering Events or in the event of the Loss of BT Rights pursuant to
Section 9.12(a), then so long as neither (i) the Outstanding Interest is less
than 10%, (ii) BT and its Affiliates shall have transferred (other than to
wholly owned direct or indirect Subsidiaries of BT) in the aggregate Voting
Securities representing more than 25% of the largest amount in voting power of
Voting Securities at any time beneficially owned by BT and any of its Affiliates
(adjusted for stock splits, stock dividends and other combinations or
reclassifications of the Voting Securities) and the Outstanding Interest is less
than 15% nor (iii) an event described in section 4(b)(11)(vi)(E)(i) of the
Certificate of Incorporation (as amended by the Certificate of Amendment) shall
have occurred, the Company agrees not to take, and the Company shall not
directly or indirectly engage in, any of the following actions without the
consent of BT:
(i) The issuance of any series or class of capital stock having either
(x) more than one vote per share (other than pursuant to the Rights Plan
(or any successor thereto)) or (y) a class vote on any matter, except to
the extent required by Delaware corporate law or to the extent that the
holders of any series of preferred stock have the right, voting separately
as a class, to elect a number of directors of the Company upon the
occurrence of a default in the payment of dividends or redemption price;
(ii) (A) The adoption of any stockholder rights plan, or any other
plan or arrangement that could reasonably be expected to disadvantage any
stockholder on the basis of the size of its shareholding, such that BT or
any of its Affiliates would be adversely affected in relation to their
position under the Rights Plan as in effect on the Closing Date, provided
that the adoption of a stockholder rights plan that is substantially
similar to the Rights Plan as in effect on the Closing Date (without regard
to the provisions of the Certificate of Incorporation or this Agreement)
shall be deemed not to affect BT and its Affiliates adversely in relation
to their position under the Rights Plan as in effect on the Closing Date;
(B) The amendment, modification or termination of the Rights Plan (but
excluding the redemption or exchange of the Rights in accordance with the
Rights Plan or any successor thereto and excluding any amendment of the
Rights Plan made in order that the execution of a definitive agreement
providing for a Business Combination or the consummation of the
transactions contemplated thereby would not result in the Rights thereby
becoming exercisable), if such action would adversely affect the rights of
BT and its Affiliates in relation to their position under the Rights Plan
as in effect on the Closing Date (without regard to the provisions of the
Certificate of Incorporation or this Agreement), provided that the
amendment of the Rights Plan or any successor thereto to extend the
expiration date or amend the
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exercise price thereof shall be deemed not to affect BT and its Affiliates
adversely in relation to their position under the Rights Plan as in effect
on the Closing Date; or
(iii) The amendment of the Certificate of Incorporation so as to
affect adversely the rights of BT and its Affiliates under this Agreement;
provided, however, that nothing in this Section 9.10(a) shall require any
consent of BT in order for the Company to enforce its rights under this
Agreement, the Newco Agreement or any related agreement, for any
transaction effected in accordance with the Certificate of Incorporation,
for any other transaction between or in respect of the Company or any of
its Affiliates, on the one hand, and BT or any of its Affiliates, on the
other hand, or in connection with any action pursuant to a Requirement of
Law.
(b) So long as neither (i) the Outstanding Interest is less than 10% nor
(ii) BT and its Affiliates shall have transferred (other than to wholly owned
direct or indirect Subsidiaries of BT) in the aggregate Voting Securities
representing more than 25% of the largest amount in voting power of Voting
Securities at any time beneficially owned by BT and any of its Affiliates
(adjusted for stock splits, stock dividends and other combinations or
reclassifications of the Voting Securities) and the Outstanding Interest is less
than 15%, the Company agrees not to amend or to cause the amendment of the
by-laws of the Company so as to affect adversely the rights of BT and its
Affiliates under this Agreement.
9.11. Continuance of Certain Rights. Notwithstanding anything to the
contrary contained herein, in the event that no shares of Class A Common Stock
are outstanding as a result of the automatic conversion of the Class A Common
Stock pursuant to section 4(b)(9)(ii) of the Certificate of Incorporation (as
amended by the Certificate of Amendment) by reason of the occurrence of an event
described in section 4(b)(11)(vi)(C) of the Certificate of Incorporation (as
amended by the Certificate of Amendment) (other than a conversion arising from a
breach by BT or any of its Affiliates of its obligations to the Company or any
of its Affiliates that gave rise to a right to transfer the Company's direct or
indirect interest in Newco pursuant to Clause 25.2(a) of the Newco Agreement or
a right to require the sale of BT's direct or indirect interest in Newco to the
Company or any of its Affiliates pursuant to Clause 26.2(a) of the Newco
Agreement), then, so long as the Outstanding Voting Interest is at least 15%,
the following provisions shall apply:
(a) Subject to the discharge by the Board of Directors of the Company
of its fiduciary duties and Requirements of Law, BT shall be entitled to
designate qualified BT Nominees in accordance with the provisions of the
first sentence of Section 9.7(c) unless a majority of the Board of
Directors (excluding for such purpose any remaining Class A Directors and
all designees of BT and including a majority of the Independent Directors)
shall determine in their sole discretion that the service by designees of
BT on the Board of Directors of the Company would not be in the best
interests of the Company taking into account, among other factors,
conditions that could reasonably be imposed upon the BT Nominees and their
willingness to accept such conditions, the competitive and prospective
competitive relationship between the Company and BT, the circumstances of
the applicable Newco Triggering Event, the opportunity to insure the
confidentiality of competitive or similar matters that may come before the
directors and such other factors as the Board of Directors and the
Independent Directors, as the case may be, shall deem relevant, provided,
however, whenever a determination is made by the Board of Directors,
whether in connection with the nomination of directors or otherwise, to the
effect that the service of any designees of BT on the Board of Directors
would not be in the best interests of the Company taking into account the
foregoing factors, then BT shall not thereafter be entitled to designate
directors hereunder and BT shall cause any BT Nominees then serving on the
Board of Directors to resign.
(b) If BT Nominees are serving on the Board, (i) the BT Nominees shall
remain subject to Sections 9.7(e)(iv) and 9.7(e)(v) and (ii) the BT
Nominees shall be excluded from that portion of any meeting to discuss
their continued service on the Board pursuant to the determination
contemplated by Section 9.11(a).
(c) Subject to applicable Requirements of Law, the extent of the right
of representatives of BT to visit and inspect any properties, books and
records of the Company and its Subsidiaries and to discuss the affairs,
finances and accounts of the Company with the principal officers of the
Company, its attorneys and auditors shall be established in a Determination
of the Independent Directors by balancing the
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detriment to the Company of any such access (taking into account, among
other factors, the competitive and prospective competitive relationship
between BT and the Company, the circumstances of the applicable Newco
Triggering Event, the opportunity to insure the confidentiality of matters
that may thereby become known to BT and its representatives and such other
factors as the Independent Directors deem relevant) and the benefits to or
the burdens imposed on BT as a result of being permitted or denied any such
access (including without limitation, any resultant loss of BT's ability to
account for its investment in the Company on the equity method), and the
reasonable requirements to enable BT to account for its investment in the
Company on the equity method and otherwise to comply with applicable
requirements of U.S. and U.K. securities laws, and generally accepted
accounting principles, provided that representatives of BT shall be
afforded a reasonable opportunity to discuss the foregoing factors (and any
other factors that BT may consider relevant to such determination) with the
Independent Directors.
(d) Until the tenth anniversary of the Closing Date, if the Board of
Directors of the Company decides to sell the Company, then the Company
shall provide BT with, or in connection therewith shall have provided BT
with, in the reasonable judgment of the Independent Directors, a reasonable
opportunity to submit an Acquisition Proposal in accordance with commercial
practice and in the event that the Board of Directors decides to sell the
Company pursuant to an auction, such auction shall be conducted on
commercially reasonable terms as established in a Determination of the
Independent Directors and BT shall be entitled to participate in such
auction on the same terms and conditions as any other prospective bidder.
(e) The Company agrees not to take, and the Company shall not directly
or indirectly engage in any of the following actions without the consent of
BT: (x) any single or related series of sales, transfers or other
dispositions or encumbrances of assets having a Fair Market Value in excess
of 15% of the aggregate Fair Market Value (established in a Determination
of the Independent Directors) of all of the assets of the Company and its
Subsidiaries taken as a whole at the time that the Company executes a
definitive agreement to effect such disposition or encumbrance, provided
that a sale of all or substantially all of the assets of the Company shall
not be deemed a disposition or encumbrance for purposes of this clause (x);
or (y) the declaration of any extraordinary cash dividends or other
distribution to holders of any class or classes, and/or any series thereof,
of capital stock of the Company in excess of 5% of the Market
Capitalization of the Company at the time of such dividend or other
distribution; provided, however, that nothing in clause (x) or clause (y)
shall require any consent of BT in order for the Company to enforce its
rights under this Agreement, the Newco Agreement or any related agreement,
for any transaction effected in accordance with the Certificate of
Incorporation, for any other transaction between or in respect of the
Company or any of its Affiliates, on the one hand, and BT or any of its
Affiliates, on the other hand, or in connection with any action pursuant to
a Requirement of Law.
9.12. Release of Rights and Obligations. (a) Except as otherwise provided
in Section 9.12(b), subsequent to the Closing, in the event that BT or any of
its Affiliates engages directly or indirectly in the Core Business of the
Company in the Americas or transfers or provides sales and marketing support,
technology or customer traffic in connection with any Person engaged in the Core
Business of the Company in the Americas or holds or acquires an interest in any
Person who is engaged in the Core Business of the Company in the Americas as a
partner, shareholder, principal or in any other capacity of ownership or control
(such activities, whether or not engaged in the Americas, are collectively
referred to as being "Engaged in the Core Business of the Company"), then, as
provided in the Certificate of Incorporation (as amended by the Certificate of
Amendment), any outstanding shares of Class A Common Stock shall be subject to
conversion into shares of Common Stock in accordance with section 4(b)(9)(ii) of
the Certificate of Incorporation (as amended by the Certificate of Amendment) by
reason of the occurrence of an event described in section 4(b)(11)(vi)(E)(ii) of
the Certificate of Incorporation (as amended by the Certificate of Amendment),
Sections 9.3 through 9.7 of this Agreement (except for the last sentence of
Section 9.7(c)) shall become void and of no further force and effect (such
consequences are collectively referred to herein as the "Loss of BT Rights") and
all further obligations of the Company and BT or any of their respective
Affiliates or their respective officers or directors with respect to any
obligation thereunder shall terminate without further liability, in each case
pursuant to a determination in accordance with the arbitration procedures set
forth in Section 9.12(e) or 9.12(f).
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(b) Notwithstanding anything contained in Section 9.12(a), BT shall not be
subject to the Loss of BT Rights under Section 9.12(a) from:
(i) acquiring or owning, directly or indirectly, for investment
purposes, securities of any Person not principally Engaged in the Core
Business of the Company (or if such Person is principally Engaged in the
Core Business of the Company, less than 10% of its Core Business revenues
are derived within the Americas) if such Person is a publicly traded
company and BT and its Affiliates own less than 5% of the voting securities
of such Person, provided that such investment does not exceed 0.5% of BT's
total consolidated assets;
(ii) correspondent relationships in the ordinary course of business
and the activities listed on Schedule 9.12;
(iii) any activity undertaken by BT or Affiliates pursuant to
Requirements of Law if the failure to comply with such Requirement of Law
would contravene in any material respect the license granted to BT on 22nd
June 1984 under the Telecommunications Act 1984, as from time to time
amended, or would otherwise have a material adverse effect on the business
or results of operations of BT;
(iv) a transaction whereby, directly or indirectly, control of (by
merger, tender offer or otherwise), or all or substantially all of the
assets of, any Person Engaged in the Core Business of the Company in the
Americas are transferred to BT or any of its Affiliates, provided that (x)
less than 20% of such Person's consolidated revenues are derived from sales
in the Americas contributed by operations within the Core Business of the
Company and (y) BT, at the request of the Company, shall sell or cause the
sale of the subsidiary, division or other entity conducting such operations
in accordance with the procedures (the "First Offer Procedures") set forth
in Section 9.12(h), provided further that such subsidiary, division or
other entity shall not be required to be sold until such time as it
generates annual revenues of $25 million or more per year;
(v) any inadvertent condition or act (each an "Inadvertent Condition")
that would otherwise result in a Loss of BT Rights, including, without
limitation, any such condition or act that results solely from the actions
of any Person other than BT or its Affiliates or any activity undertaken
without the knowledge of any executive officer of BT, provided that, if BT
shall become aware of such Inadvertent Condition, it shall promptly give
written notice of such Inadvertent Condition to the Company and BT and the
Company shall negotiate in good faith to reach an agreement in writing with
respect to a cure for such Inadvertent Condition, provided further that,
unless otherwise agreed by BT and the Company in such written agreement,
within one year following the delivery of such notice, BT shall dispose of
the securities, assets or business that gave rise to such Inadvertent
Condition, provided that BT, at the request of the Company, shall sell or
cause the sale of such securities, assets or business in accordance with
the First Offer Procedures;
(vi) ownership of Newco and the activities contemplated by the Newco
Agreement and the "Related Agreements" (as defined in the Newco Agreement);
or
(vii) any activity undertaken with confirmation in writing by the
Company that such activity will not result in a Loss of BT Rights;
(c) Except as otherwise provided in Section 9.12(d), subsequent to the
Closing, in the event that the Company or any of its Affiliates engages directly
or indirectly in the Core Business of BT outside the Americas or transfers or
provides sales and marketing support, technology or customer traffic in
connection with any Person engaged in the Core Business of BT outside the
Americas or holds or acquires an interest in any Person who is engaged in the
Core Business of BT outside the Americas as a partner, shareholder, principal or
in any other capacity of ownership or control (such activities, whether or not
engaged in outside the Americas, are collectively referred to as being "Engaged
in the Core Business of BT"), then Sections 5.1, 5.3, 7.1, 7.2, 7.3, 10.2 and
10.3 of this Agreement shall become void and of no further force and effect
(such consequences are collectively referred to herein as the "Loss of Company
Rights") and all further obligations of the Company and BT or any of their
respective Affiliates or their respective officers or directors with respect to
any obligation thereunder shall terminate without further liability, provided
that any determination as to whether
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the Company has undertaken the foregoing activities shall be determined in
accordance with the arbitration procedures set forth in Section 9.12(e) and
9.12(f).
(d) Notwithstanding anything contained in Section 9.12(c), the Company
shall not be subject to the Loss of Company Rights under Section 9.12(c) from:
(i) acquiring or owning, directly or indirectly, for investment
purposes, securities of any Person not principally Engaged in the Core
Business of BT (or if it is principally Engaged in the Core Business of BT,
less than 10% of its Core Business revenues are derived outside the
Americas) if such Person is a publicly traded company and the Company and
its Affiliates own less than 5% of the voting securities of such Person,
provided that such investment does not exceed 0.5% of the Company's total
consolidated assets;
(ii) correspondent relationships in the ordinary course of business
and the activities listed on Schedule 9.12;
(iii) any activity undertaken by the Company or its Affiliates
pursuant to Requirements of Law if the failure to comply with such law
would have a material adverse effect on the business or results of
operations of the Company;
(iv) a transaction whereby, directly or indirectly, control of (by
merger, tender offer or otherwise), or all or substantially all of the
assets of, any Person Engaged in the Core Business of BT outside the
Americas are transferred to the Company or any of its Affiliates, provided
that (x) less than 20% of such Person's consolidated revenues are derived
from sales outside the Americas contributed by operations within the Core
Business of BT and (y) the Company, at the request of BT, shall sell or
cause the sale of the subsidiary, division or other entity conducting such
operations in accordance with the First Offer Procedures set forth in
Section 9.12(h), provided further that such subsidiary, division or other
entity shall not be required to be sold until such time as it generates
annual revenues of $25 million or more per year;
(v) any Inadvertent Condition that would otherwise result in a Loss of
Company Rights, including, without limitation, any such condition or act
that results solely from the actions of any Person other than the Company
or its Affiliates or any activity undertaken without the knowledge of any
executive officer of the Company, provided that, if the Company shall
become aware of such Inadvertent Condition, it shall promptly give written
notice of such Inadvertent Condition to BT and the Company and BT shall
negotiate in good faith to reach an agreement in writing with respect to a
cure for such Inadvertent Condition, provided further that, unless
otherwise agreed by the Company and BT in such written agreement, within
one year following the delivery of such notice, the Company shall dispose
of the securities, assets or business that gave rise to such Inadvertent
Condition, provided that the Company, at the request of BT, shall sell or
cause the sale of such securities, assets or business in accordance with
the First Offer Procedures;
(vi) ownership of Newco and the activities contemplated by the Newco
Agreement and the "Related Agreements" (as defined in the Newco Agreement);
or
(vii) any activity undertaken with confirmation in writing by BT that
such activity will not result in a Loss of Company Rights.
(e) In the event that either of the parties hereto (the "Investing Party")
is considering any activity that it believes the other party ("Subject Party)
may view as resulting in the loss of rights as specified in Section 9.12(a) or
9.12(c) as may be applicable (the "Loss of Rights"), then the Investing Party
may provide notice (the "Investing Notice") of such proposed activity to the
Subject Party and seek the Subject Party's consent to engaging in such activity.
If following good faith consultation the Subject Party fails to grant such
consent, then the Investing Party may within 30 days after delivery of the
Investing Notice initiate binding arbitration as to whether such activities
would result in the Loss of Rights as hereinafter provided pursuant to the
arbitration procedures set forth in Section 9.12(g) (the "Arbitration"). The
parties shall seek to conclude the Arbitration as promptly as practicable but in
no event shall the Arbitration be conducted more than 90 days subsequent to the
initiation of Arbitration. If the result of the Arbitration is that the
Investing Party would incur a Loss of Rights if it engaged in the activity being
considered, then the Investing Party shall be
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subject to a Loss of Rights, without the opportunity for cure, if it then goes
forward with such activities. Any determination by the Arbitration shall take
into account any proposed divestment by the Investing Party to an unaffiliated
third party, provided that (i) such divestment occurs as promptly as
commercially reasonable (but no more than one year following the activity or
investment that would otherwise lead to a Loss of Rights) and (ii) is conducted
in accordance with the First Offer Procedures.
(f) In the event that either party (the "Aggrieved Party") believes that
the other party (the "Active Party") has engaged in activities that would
subject such Active Party to a Loss of Rights, then the Aggrieved Party shall
notify the Active Party and the parties shall seek to resolve the matter to
their mutual satisfaction. If the parties cannot resolve the matter within 60
days, then either party can initiate Arbitration within 60 days thereafter as
provided in Section 9.12(g). The parties shall seek to conclude the Arbitration
as promptly as practicable but in no event shall such Arbitration be conducted
more than 90 days subsequent to the initiation of Arbitration. If the result of
the Arbitration is that the Active Party should be subject to a Loss of Rights,
then the Active Party shall be entitled to a one year cure period (if the
arbitrators believe that the activity is capable of cure) which cure shall be
effected by divestment pursuant to the First Offer Procedures, provided that the
Active Party shall not be entitled to a cure period, or shall be entitled to a
reduced cure period, at the discretion of the arbitrators, if the arbitrators
conclude that the Aggrieved Party's business, results of operations or prospects
were materially and adversely affected by the conduct of the Active Party or
that the Active Party engaged in activities that gave rise to the Arbitration in
willful disregard of the consequences.
(g) Arbitration under Section 9.12(e) or 9.12(f) shall proceed as herein
set forth:
(i) The Investing Party (which, for purposes of this clause (g) only,
will be deemed to also refer to any party that initiates Arbitration in
accordance with clause (f) above) shall give the Subject Party (which, for
purposes of this clause (g) only, will be deemed to also refer to the party
in any Arbitration initiated in accordance with clause (f) above that did
not initiate such Arbitration) a written notice which shall also contain,
in addition to the demand for arbitration, a clear statement of the issue
to be resolved by the Arbitration, the name and address of the arbitrator
selected by the Investing Party and the address to which all further papers
regarding the Arbitration are to be mailed or delivered.
(ii) The Subject Party shall deliver a written response to the
arbitration notice within 30 days following its actual receipt of such
notice. Such response shall contain a clear statement of its position
concerning the issue in dispute, the name and address of the arbitrator
selected by the Subject Party and the address to which all further papers
regarding the Arbitration are to be mailed or delivered. If the Subject
Party fails to designate its arbitrator within the time allowed, the
Investing Party may apply to the United States District Court for the
Southern District of New York (the "New York Court") for designation of the
second arbitrator. The application shall provide no less than five days'
notice to the Subject Party, before presentation to the New York Court. The
Subject Party may appoint the second arbitrator at any time prior to the
day the Court appoints the second arbitrator.
(iii) Within five Business Days following the selection of the second
arbitrator, the two arbitrators shall select a third arbitrator. In the
event they fail to do so within that time period, either party may apply to
the New York Court for appointment of a third arbitrator. The application
shall provide no less than five days' notice to the other party before
presentation to the New York Court. The third arbitrator must be an
attorney reasonably experienced in commercial affairs who is a member of
the New York Bar, must be impartial and must otherwise satisfy the
requirements of CPLR 7506(a) and 9 U.S.C. sec. 10. The method of selection
of arbitrators, or the arbitrators as selected, may be changed at any time
only upon written agreement of the parties.
(iv) In the selection of the party-appointed arbitrators under clauses
(i) and (ii) above, a party may select any person, including a person with
"partiality" under the meaning of CPLR 7511 or "evident partiality" under
the meaning of 9 U.S.C. sec. 10, but no party may select an arbitrator who
is or ever has been an officer, director or employee of such party or of
any Affiliate of such party; the "partiality" or "evident partiality" of an
arbitrator selected in compliance with this clause (iv) shall not be a
basis for vacating the award.
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(v) If any arbitrator fails or is otherwise unable to act, a successor
arbitrator shall be selected in the same manner as the arbitrator who fails
or is otherwise unable to act was selected, except that no more than five
days shall be allowed to select a successor arbitrator under this
provision.
(vi) The Arbitration hearing shall be conducted in New York or such
other place as the arbitrators shall decide. The hearing shall commence
within a period agreed to by the parties in writing or, in the absence of
such agreement, within ten days after the selection of the third
arbitrator, within a period determined by a majority of the arbitrators and
of which the parties are notified at least ten days prior to the first date
of hearing. Written interrogatories shall not be permitted. Depositions
shall be permitted by majority decision of the arbitration panel upon a
showing that the deposition may be helpful to the conduct of the
Arbitration. The parties may request that documents be produced, but the
only documents which must be produced are those which a majority of the
arbitration panel determines may be helpful to the conduct of the
Arbitration. The parties shall, seven days before the commencement of the
Arbitration hearing, exchange all exhibits they intend to use in the
Arbitration and notify the other party of the identity of all witnesses
whose testimony is to be presented at the arbitration. Testimony at the
hearing may be presented by telephone or affidavit, as well as by personal
appearance. The Arbitration proceeding shall be private, and all parties
and their representatives and all arbitrators shall maintain the
confidentiality of the claims, counterclaims, testimony, evidence and all
other aspects of the proceeding, except insofar as such disclosure is
required by law. The arbitrators may only resolve the question submitted to
Arbitration and shall include as part of their consideration a full review
of this Agreement and any related agreement. The decision of the majority
of the arbitrators shall be the decision of the panel. Although the
Arbitration shall not be under the auspices of the American Arbitration
Association, the Arbitration shall be conducted in accordance with the
January 1, 1991 Commercial Arbitration Rules of the American Arbitration
Association (the "Arbitration Rules"), except the procedures, requirements
and restrictions set out in this Section 9.12(g) shall govern over the
Arbitration Rules; otherwise applicable provisions of the Arbitration Rules
calling for notification by or to the American Arbitration Association
shall be satisfied by notification by or to the panel, as the case may be.
(vii) In any Arbitration pursuant to this Section 9.12(g) each party
shall pay the fees and costs of the arbitrator whom he selected. The
arbitration panel may award to the more prevailing party its other fees,
costs and expenses of the Arbitration, including reasonable attorney fees.
During the pendency of the arbitration, the fees of the third arbitrator
shall be split equally by the parties. At the conclusion of the
Arbitration, any party may apply to the New York Court for an order
confirming the Arbitration panel's decision.
(viii) Any proceeding in a court of law in connection with this
Section 9.12(g) (other than to compel Arbitration, to select an arbitrator
under clauses (ii) and (iii) above, to stay litigation pending Arbitration,
to confirm an arbitration award or to enforce an arbitration judgment)
shall be immediately stayed upon receipt of a notice or demand for
Arbitration. In any action or proceeding to compel Arbitration, to stay
litigation or confirm an arbitration award, the more prevailing party shall
be entitled to recover its fees, costs and expenses incurred therein,
including reasonable attorney fees, and including the fees, costs and
expenses, including reasonable attorney fees, incurred in any appellate
proceeding.
(h) Prior to any sale of a Subsidiary, business or assets (the "Sale
Assets") by either BT or the Company pursuant to Section 9.12(b)(iv) or
9.12(b)(v) or Section 9.12(d)(iv) or 9.12(d)(v), respectively, or by either BT
or the Company pursuant to Section 9.12(e), the party proposing to divest itself
of the Sale Assets shall provide the other party with the opportunity to acquire
the Sale Assets pursuant to a notice in writing (the "Opportunity Notice")
setting forth such terms and conditions upon which the divesting party in good
faith proposes to sell or cause the sale of the Sale Assets to the other party.
If within 90 days of receipt of the Opportunity Notice the party that is offered
the Sale Assets elects not to acquire the Sale Assets or if the parties cannot
reach agreement with respect to the terms and conditions of such offered sale,
then the divesting party shall be free to sell or cause the sale of the Sale
Assets in its discretion, provided that any subsequent sale of the Sale Assets
to a third party shall not be upon terms and conditions that are in the
aggregate less favorable to the divesting party than the terms and conditions
upon which the Sale Assets were
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offered to the other party to this Agreement and the purchase price paid by a
third party shall in no event be less than the purchase price offered to the
other party to this Agreement.
(i) Subsequent to the Closing Date, in the event of a Newco Triggering
Event or if the Class A Common Stock is otherwise no longer outstanding (and BT
does not retain any rights under Section 9.7) or if the Company has been subject
to a Loss of Rights pursuant to Arbitration, then BT may undertake the
activities specified in Section 9.12(a) without suffering any Loss of BT Rights.
(j) Subsequent to the Closing Date, in the event of a Newco Triggering
Event or if the Class A Common Stock is otherwise no longer outstanding (and BT
does not retain any rights under Section 9.7) or BT has been subject to Loss of
Rights pursuant to Arbitration, then the Company may undertake the activities
specified in Section 9.12(c) without suffering any Loss of Company Rights.
9.13. FCC Licenses. The Company shall not directly acquire any license
from the FCC that is subject to the provisions of Section 310(b) of the
Communications Act, and shall hold or otherwise control such licenses only
through one or more of its Subsidiaries.
9.14. Notice of Breach. The Company shall provide BT with ten days' prior
written notice of any alleged breach by BT or any of its Affiliates of its
obligations under Sections 5.1, 5.3, 7.1, 7.2, 7.3, 7.4, 10.2 or 10.3,
specifying in reasonable detail the nature of the Company's objections, and
provide BT an opportunity to cure such objections within such ten-day period
prior to seeking a judicial determination (other than in an ex parte proceeding)
that BT or any of its Affiliates has materially breached its obligations under
the aforesaid Sections (other than BT's failure to have given timely any
required notice thereunder unless the Company has been materially adversely
affected by such failure), provided that such breach is reasonably capable of
being cured. If, after having followed such procedures, the Company has applied
for such a judicial determination, BT shall reasonably cooperate with the
Company in seeking an expedited judicial resolution of the question of whether
BT has committed a breach described in the preceding sentence. The Company shall
make no public announcement that would cause the outstanding shares of Class A
Common Stock to convert automatically into shares of Common Stock pursuant to
section 4(b)(9)(ii) of the Certificate of Incorporation (as amended by the
Certificate of Amendment) by reason of the occurrence of an event described in
section 4(b)(11)(vi)(E)(i) of the Certificate of Incorporation (as amended by
the Certificate of Amendment) unless the Company has complied with the foregoing
procedures.
SECTION 10. COVENANTS OF BT
10.1. Pre-Closing Covenants.
(a) No Shopping; Other Acquisitions. From the date of this Agreement
until the Closing, BT agrees that (i) neither BT nor any of its Subsidiaries nor
any of the respective officers and directors of BT or any of its Subsidiaries
shall, and BT shall direct and use its best efforts to cause its employees,
agents and representatives (including, without limitation, any investment
banker, attorney or accountant retained by BT or any of its Subsidiaries) not
to, initiate, solicit or encourage, directly or indirectly, any inquiries or the
making of any proposal or offer (including, without limitation, any proposal or
offer to stockholders) or to engage in any discussions or negotiations with any
third party relating to an Acquisition Proposal or a tender offer or exchange
offer with respect to the Company, or otherwise facilitate any effort or attempt
to make or implement an Acquisition Proposal or a tender offer or exchange offer
with respect to the Company and (ii) BT will not enter into any transaction or
arrangement that, directly or indirectly, would after the Closing Date
reasonably be expected to result in a Loss of BT Rights under Section 9.12(a).
BT will immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to clause (i) of the preceding sentence. BT will notify the Company immediately
if any inquiries or proposals are received by, any information is requested
from, or any negotiations or discussions are sought to be initiated or continued
with, BT or any of its Affiliates regarding any Acquisition Proposals or any
tender offer or exchange offer with respect to the Company.
(b) Proxy Information. BT represents, warrants, covenants and agrees that
(i) it will provide to the Company for inclusion in the Proxy Statement all
information concerning BT and its Affiliates requested by the Company and
necessary for the preparation of such Proxy Statement and (ii) such information
will not
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contain any material misstatement of fact or omit to state any material fact
necessary to make the statements, in light of the circumstances under which they
are made, not misleading.
10.2. Notice of Acquisition Proposals. So long as the restrictions on the
acquisition by BT and its Affiliates of additional shares of capital stock set
forth in Section 7.1 have not been terminated, BT agrees that it will notify the
Company immediately if any inquiries or proposals are received by, any
information is requested from, or any negotiations or discussions are sought to
be initiated or continued with, BT or any of its Affiliates regarding any
Acquisition Proposals, any tender offer or exchange offer with respect to the
Company or any purchase of any of the shares of capital stock of the Company
beneficially owned by BT and its Affiliates (whether by way of a tender offer or
exchange offer or otherwise).
10.3. Voting of Shares. From the Closing Date and thereafter so long as
(i) the Outstanding Interest is at least 10% and (ii) no event has occurred that
has caused (x) the restrictions on the acquisition by BT and its Affiliates of
additional Voting Securities set forth in Section 7.1 to be terminated earlier
than the tenth anniversary of the Closing Date (without such restrictions having
been reinstated) or (y) the obligations of BT set forth in clauses (i) and (ii)
of Section 7.4(a) to be terminated (without such obligations having been
reinstated):
(a) If no shares of Class A Common Stock are outstanding and BT is
entitled to designate nominees for director pursuant to Section 9.7(c) or
9.11(a), as long as there has not been a judicial determination (other than
in an ex parte proceeding) that the Company has materially breached its
obligations under Section 9.7(c) or 9.11(a), if any, BT and its Affiliates
shall cast all of the votes they are entitled to cast in such election
(whether at an annual or special meeting of stockholders or by written
consent in lieu of a meeting or otherwise and whether they are so entitled
to cast such votes as a result of ownership or other control of capital
stock or by proxy or otherwise) for the election of the BT Nominees to the
Board of Directors of the Company, provided that if cumulative voting has
been eliminated, BT and its Affiliates shall cast all of the votes they are
entitled to cast in any such election for the election of the nominees to
the Board of Directors nominated by the Board of Directors of the Company.
BT shall provide the Company with ten days' prior written notice of any
alleged violation by the Company of its obligations under Section 9.7(c) or
Section 9.11(a), specifying in reasonable detail the nature of BT's
objections, and provide the Company an opportunity to cure such objections
within such ten-day period prior to seeking the judicial determination
described in the preceding sentence, provided that such violation is
reasonably capable of being cured. If, after having followed such
procedures, BT has applied for such a judicial determination, the Company
shall reasonably cooperate with BT in seeking an expedited judicial
resolution of the question of whether the Company has committed a violation
described in the first sentence of this Section 10.3(a).
(b) BT and its Affiliates shall vote their Voting Securities (other
than in connection with (i) the election of directors, (ii) any proposal to
redeem the Rights prior to the earlier of the fourth anniversary of the
Closing Date or the date that shares of the Class A Common Stock are no
longer outstanding, which proposal is submitted to the stockholders
pursuant to section 4(d)(7) of the Certificate of Incorporation (as amended
by the Certificate of Amendment), (iii) with respect only to the shares of
Class A Common Stock held by BT and its Affiliates, any matter in
connection with which the holders of shares of Class A Common Stock are
entitled to vote separately as a class under section 4(b)(7) or 4(b)(8) of
the Certificate of Incorporation (as amended by the Certificate of
Amendment) or under the DGCL) or (iv) as provided in Section 10.3(f)) at
the option of the Company either (A) in the same proportion as the Voting
Securities owned by other stockholders are voted with respect to any matter
other than a proposed Business Combination proposed by BT or (B) in BT's
discretion. Subject to the preceding sentence, if no instructions are
provided by the Company with respect to any matter upon which stockholders
are voting, BT and its Affiliates shall vote their Voting Securities in the
same proportion as the Voting Securities owned by other stockholders are
voted.
(c) Notwithstanding anything to the contrary contained in Section
10.3(b), if there is a judicial determination (other than in an ex parte
proceeding) that BT or any of its Affiliates has materially breached the
provisions of Sections 7.1 through 7.3, then BT and its Affiliates shall
vote their Voting Securities in the same proportion as the Voting
Securities owned by other stockholders are voted in
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connection with the consideration by the stockholders of any redemption of
the Rights pursuant to section 4(d)(7) of the Certificate of Incorporation
(as amended by the Certificate of Amendment) or the approval of any
Business Combination proposed by BT.
(d) Neither BT nor any of its Affiliates shall solicit any proxies or
consents in connection with any matter to be voted upon, or sought to be
voted upon, by the stockholders of the Company, become a participant, or
encourage any Person to become a participant, in any such solicitation or
publicly take a position with respect to any issue that is the subject of
such solicitation, seek to advise or influence any Person with respect to
the voting of any shares, become part of a voting group or deposit shares
in a voting trust.
(e) If cumulative voting for the election of directors of the Company
has not been eliminated from the Certificate of Incorporation and BT is not
entitled to designate a nominee for director pursuant to Section 9.7(c) or
9.11(a), then BT and its Affiliates shall cast all of the votes they are
entitled to cast in any election of directors (other than with respect to
shares of Class A Common Stock), whether at an annual or special meeting of
stockholders or by written consent in lieu of a meeting or otherwise and
whether they are entitled to cast such votes as a result of ownership or
other control of capital stock or by proxy or otherwise, equally among the
nominees proposed by the Board of Directors of the Company, provided that
if cumulative voting has been eliminated from the Certificate of
Incorporation, BT and its Affiliates shall cast all of the votes they are
entitled to cast in any such election for the election of the nominees
nominated by the Board of Directors of the Company to the Board of
Directors.
(f) BT and its Affiliates, in furtherance of the obligations of the
parties herein, shall vote their Voting Securities in connection with any
proposal to amend the Certificate of Incorporation to eliminate cumulative
voting for the election of directors of the Company in favor of such
proposal, provided that a majority of the outstanding Voting Securities
entitled to a vote thereon held by Stockholders other than BT and its
Affiliates are voted in favor of such proposal.
During the period that the provisions of this Section 10.3 are in effect,
BT covenants and agrees that it will (i) cause all Voting Securities
beneficially owned by BT or its Affiliates to be present, in person or
represented by proxy, at all stockholder meetings of the Company so that all
such Voting Securities may be counted for determining the presence of a quorum
at such meetings and (ii) except in connection with any matter as to which,
under the DGCL or the Certificate of Incorporation, the holders of Class A
Common Stock are entitled to vote separately as a class (except as provided in
clause (c) above), cause such Voting Securities to be voted in accordance with
this Section 10.3 with respect to any matter upon which stockholders are voting
at such meetings.
10.4. Notice of Changes to Outstanding Interest. BT agrees that it will
notify the Company immediately if BT or any of its Affiliates takes any action
that causes or will cause the Outstanding Interest or Outstanding Voting
Interest to be, or otherwise has actual knowledge that the Outstanding Interest
or Outstanding Voting Interest is, less than the percentage specified in any
provision of the Certificate of Incorporation, the by-laws of the Company or
this Agreement as a condition to the applicability of any rights, obligations,
covenants or agreements contained therein or herein, provided that BT shall have
no liability under this Section 10.4 to the extent that such failure to notify
the Company as provided herein is inadvertent.
SECTION 11. CONDITIONS TO BT'S OBLIGATIONS
BT's obligation to purchase and pay for the Shares is subject to the
satisfaction, on or before the Closing Date, of each of the following
conditions:
11.1. Representations and Warranties. The representations and warranties
of the Company set forth in Section 3 hereof shall be true and correct in all
material respects when made and shall be true and correct in all material
respects at and as of the Closing Date, as if made on and as of such date,
taking into account any date specified therein.
11.2. Agreements and Conditions. The Company shall have performed and
complied in all material respects with all agreements, covenants and conditions
contained herein that are required to be performed or complied with by it on or
before the Closing Date.
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11.3. Governmental Approvals. An FCC Order shall have been obtained,
which has not been revoked or stayed as of the Closing Date, the waiting period
under the HSR Act shall have expired or been terminated and review and
investigation under Exon-Florio shall have been terminated and the President
shall have taken no action authorized under Exon-Florio, provided that such
governmental approvals shall not be deemed to have been obtained for purposes
hereof if such governmental approvals contain a condition or restriction that,
in the reasonable opinion of BT, would materially diminish, taken as a whole,
BT's rights or protections with respect to its investment in the Company under
this Agreement, the Certificate of Amendment or the By-Law Amendments.
11.4. Purchase of Shares Not Enjoined. The purchase of the Shares by BT
shall not have been enjoined (temporarily or permanently) as of the Closing
Date.
11.5. Stockholder Approval. The stockholders of the Company shall have
approved the Proposals at the Stockholders' Meeting by the affirmative vote of a
majority of the votes entitled to be cast by the holders of all outstanding
shares of Common Stock.
11.6. Other Agreements. Each of the Newco Agreement, the BT North America
Agreement and the Registration Rights Agreement shall have been executed by the
Company and delivered to BT, all actions required to have been taken thereunder
on or prior to the Closing hereunder shall have been accomplished and all other
conditions thereto (other than the Closing under this Agreement) shall have been
satisfied or waived.
11.7. Non-U.S. Ownership Certificate. The Company shall have delivered to
BT a certificate, signed by a duly authorized officer, calculating the
percentage of the Company's outstanding capital stock that is Owned of Record or
Voted by Non-U.S. Persons or Entities in a manner that the Company reasonably
believes, upon the advice of counsel, is appropriate for determining compliance
with Section 310(b)(4) of the Communications Act (the "Non-U.S. Ownership
Certificate").
11.8. Rights Plan. The Rights Plan shall have been adopted by the
Company, its effectiveness contingent upon the closing of the Transactions.
11.9. Section 203. The Board of Directors of the Company shall have taken
appropriate action so that, if the Closing occurs, the provisions of Section 203
of the DGCL restricting "business combinations" with "interested stockholders"
(each as defined in such Section 203) will not apply to BT or any Person who as
of August 4, 1993, was an Affiliate of BT.
11.10. NASDAQ Notification. The Company shall have provided notification
of the proposed issuance of the Shares to the NASDAQ pursuant to Schedule D to
the By-Laws of the NASD.
11.11. Number of Shares to be Delivered. (a) The total number of Fixed
Shares, and Optional Shares and Conversion Shares (whether or not BT elects to
purchase the Optional Shares), after giving effect to any reduction pursuant to
Section 2.1(b) or 2.1(c), shall represent at least 19% of the total number of
outstanding Common Shares (excluding Section 9.2 Shares), calculated as of the
seventh Business Day prior to the Closing and after giving effect to the
purchase of the Shares by BT at the Closing and the exchange of shares pursuant
to Section 2.3.
(b) The aggregate percentage of the outstanding capital stock of the
Company represented by all shares of such capital stock to be Owned of Record or
Voted by BT and its Affiliates immediately following the Closing, together with
all other capital stock Owned of Record or Voted by Non-U.S. Persons or Entities
as set forth in the survey conducted in connection with the Non-U.S. Ownership
Certificate (or as otherwise known to BT), after giving effect to the purchase
of the Shares by BT at the Closing, shall not exceed the Closing Foreign
Ownership Limitation.
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SECTION 12. CONDITIONS TO THE COMPANY'S OBLIGATIONS
The Company's obligation to sell the Shares to BT is subject to the
satisfaction, on or before the Closing Date, of each of the following
conditions:
12.1. Representations and Warranties. The representations and warranties
of BT contained in Section 4 hereof shall be true and correct in all material
respects when made and shall be true and correct in all material respects at and
as of the Closing Date, as if made on and as of such date.
12.2. Agreements and Conditions. BT shall have performed and complied in
all material respects with all agreements, covenants and conditions contained
herein that are required to be performed or complied with by it on or before the
Closing Date.
12.3. Governmental Approvals. An FCC Order shall have been obtained,
which has not been revoked or stayed as of the Closing Date, the waiting period
under the HSR Act shall have expired or been terminated and review and
investigation under Exon-Florio shall have been terminated and the President
shall have taken no action authorized under Exon-Florio, provided that such
governmental approvals shall not be deemed to have been obtained for purposes
hereof if such governmental approvals contain a condition or restriction that
would materially and adversely affect the business of the Company and its
Subsidiaries, taken as a whole, or, in the reasonable opinion of the Company,
would materially diminish, taken as a whole, the Company's rights or protections
under this Agreement, provided that the provisions of Section 9.12(a) shall be
deemed material to the Company for purposes hereof and Section 8.2.
12.4. Sale of Shares Not Enjoined. The sale of the Shares by the Company
shall not have been enjoined (temporarily or permanently) as of the Closing
Date.
12.5. Stockholder Approval. The stockholders of the Company shall have
approved the Proposals at the Stockholders' Meeting by the affirmative vote of a
majority of the votes entitled to be cast by the holders of all outstanding
shares Common Stock.
12.6. Other Agreements. Each of the Newco Agreement, the BT North America
Agreement and the Registration Rights Agreement shall have been executed by BT
and delivered to the Company, all actions required to have been taken thereunder
on or prior to the Closing hereunder shall have been accomplished and all other
conditions thereto (other than the Closing under this Agreement) shall have been
satisfied or waived.
12.7. NASD Approval. The Company shall have been advised by the NASD that
the Common Stock will continue to be designated as a "NASDAQ National Market
System security" (as defined for purposes of Schedule D to the By-Laws of the
NASD) after the issuance and sale of the Shares and the Conversion Shares and
the effectiveness of the provisions of this Agreement relating to BT and the
Company.
12.8. Foreign Ownership Limitation. The aggregate percentage of the
outstanding capital stock of the Company represented by all shares of such
capital stock to be Owned of Record or Voted by BT and its Affiliates
immediately following the Closing, together with all other capital stock Owned
of Record or Voted by Non-U.S. Persons or Entities as set forth in the survey
conducted in connection with the Non-U.S. Ownership Certificate (or as otherwise
known to the Company), after giving effect to the purchase of the Shares by BT
at the Closing, shall not exceed the Closing Foreign Ownership Limitation,
provided that the total number of Fixed Shares, Optional Shares and Conversion
Shares (subject to purchase at the option of BT), after giving effect to any
reduction pursuant to Section 2.1(b) or 2.1(c), shall represent at least 19% of
the outstanding Common Shares (excluding Section 9.2 Shares), calculated as of
the seventh Business Day prior to the Closing and after giving effect to the
purchase of the Shares by BT at the Closing and the exchange of shares pursuant
to Section 2.3.
SECTION 13. TERMINATION
13.1. Termination. This Agreement and the transactions contemplated
hereby may be terminated at any time prior to the Closing Date:
(a) Mutual Consent. By mutual consent of the Company and BT;
(b) Expiration Date. By the Company or BT by written notice to the
other party at any time after the first anniversary of the date of this
Agreement if any condition is not waived or satisfied within such
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<PAGE> 54
one year period until such time as all conditions are waived or satisfied;
provided, however, that if any condition shall not have been waived or
satisfied within such one year period due to the willful act or omission of
one of the parties, that party may not terminate this Agreement;
(c) Permanent Injunction. By the Company or BT if consummation of the
Transactions shall violate any final non-appealable order, decree or
judgment of any court or governmental body having competent jurisdiction;
(d) Lack of FCC Approval. By the Company or BT if an FCC Order shall
be permanently and unconditionally denied;
(e) Failure to Honor Agreements. By the Company or BT if the other
party shall have failed to perform or comply in any material respect with
any agreement or covenant contained herein that is required to be performed
or complied with by it on or before the Closing Date after having been
provided by the other party written notice of, and a reasonable opportunity
to cure, such failure;
(f) Other Offer. By BT if (i) the Board of Directors of the Company
recommends the acceptance of a tender offer or exchange offer by a third
party for outstanding shares of the Common Stock, (ii) prior to the
Stockholders' Meeting the Board of Directors of the Company fails to
recommend or withdraws its recommendation to the stockholders of the
Proposals, or (iii) the Company enters into an agreement in principle or a
definitive agreement with a Person other than BT with respect to an
Acquisition Proposal; or
(g) Lack of Stockholder Approval. By the Company or BT if the
stockholders of the Company shall have failed to approve the Proposals at
the Stockholders' Meeting.
13.2. Effect of Termination. If this Agreement is terminated pursuant to
this Section 13, this Agreement shall forthwith become wholly void and of no
further force and effect and all further obligations of the Company and BT or
their respective officers or directors with respect to any obligation under this
Agreement shall terminate without further liability except (i) for the
provisions set forth in Section 5 other than in Section 5.1(b) (except that the
date "June 2, 1995" shall be substituted for the words "the fourth anniversary
of the Closing Date" in the first sentence of Section 5.1 and, if the
Registration Rights Agreement shall not yet have been entered into, the first
two sentences of Section 5.5 shall be terminated), (ii) for the provisions of
Sections 7.1, 7.2, 7.3 and 10.2, which shall terminate on the later of the first
anniversary of the date of such termination (the "Termination Date") or December
31, 1994 (except that the Termination Date shall be deemed substituted in place
of the term "Closing Date" wherever the same appears in such provisions of
Section 7), (iii) for the obligations of the Company and BT under Section 14.2
and (iv) that such termination shall not constitute a waiver or bar by any party
of any rights or remedies at law or in equity it may have by reason of a breach
of this Agreement by the other party.
SECTION 14. MISCELLANEOUS
14.1. Notices. All notices, demands, requests, certificates or other
communications under this Agreement shall be in writing and shall be
telegraphed, mailed by certified or registered mail with charges prepaid,
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hand delivered or sent by facsimile transmission, by tested or otherwise
authenticated telex or cable or by commercial courier guaranteeing next Business
Day delivery:
(i) if to the Company:
MCI Communications Corporation
1801 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Attention: Mr. John Whiteside
Senior Vice President
with a copy to:
MCI Communications Corporation
1801 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Attention: John R. Worthington, Esq.
Senior Vice President and General Counsel
and a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Richard I. Beattie, Esq.
(ii) if to BT:
British Telecommunications plc
BT Centre
81 Newgate Street
London EC1A 7AJ
England
Attention: Mr. Colin R. Green
Solicitor and Chief Legal Adviser
with a copy to:
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
Attention: Albert F. Lilley, Esq.
Any notice delivered after business hours or on a Saturday, Sunday or legal
holiday at the place designated in such delivery shall be deemed for purposes of
computing any time period hereunder to have been delivered on the next Business
Day.
14.2. Expenses. Each party shall bear its own expenses, including the
fees and expenses of any attorneys, accountants, investment bankers, brokers,
finders or other intermediaries or other Persons engaged by it, incurred in
connection with this Agreement or the other agreements contemplated hereby and
the Transactions.
14.3. Restrictive Trade Practices Act. No provision of this Agreement or
any other agreements or documents relating to the Transactions, which is subject
to registration under the RTPA shall come into effect until the day following
the date that particulars of this Agreement (and such other agreement or
document) have been furnished to the Director General of Fair Trading pursuant
to Section 24 of the RTPA (or such date following such furnishing of particulars
as may be provided for such in relation to any such restriction).
14.4. Amendment and Restatement; Effectiveness of Representations,
Warranties and Agreements. (a) This Agreement amends certain provisions of the
Original Investment Agreement and restates the terms of the Original Investment
Agreement in their entirety so as to reflect and give effect to such amendments;
except as provided in Section 14.4(b), all amendments to the Original Investment
Agreement effected by this
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Agreement, and all other covenants, agreements, terms and provisions of this
Agreement, shall have effect from the date of the Original Investment Agreement.
(b) Each of the representations and warranties made in Sections 3 and 4
shall be deemed (i) to be made on the date of the Original Investment Agreement
(other than the representations and warranties in respect of this Agreement that
are contained in Sections 3.2 and 4.2, which are made as of the date hereof) and
as of the Closing Date and (ii) not made on the date hereof (except as set forth
in the parenthetical in clause (i) above).
(c) All representations and warranties made by the Company or BT herein or
in any certificate or other instrument delivered by it or on its behalf under
this Agreement shall not survive the Closing.
14.5. Benefits; Assignment. The provisions of this Agreement shall be
binding upon, and inure to the benefit of, the parties and their respective
successors and permitted assigns; however, except as expressly provided in this
Agreement, neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned (i) by the Company under any
circumstances (other than as provided in Section 5) or (ii) by BT, except (1) to
a wholly owned direct or indirect subsidiary of BT, provided that BT (A) shall
remain liable for the performance by any such subsidiary of its obligations
under this Agreement, (B) shall act as agent for any and all such subsidiaries
in connection with the receipt or giving of any and all notices under this
Agreement and (C) shall not cause or permit any such subsidiary to be other than
a wholly owned direct or indirect subsidiary of BT and (2) BT may assign its
rights under the Registration Rights Agreement as permitted in clause (v) of the
first sentence of Section 5.1(b). Nothing in this Agreement, express or implied,
is intended to confer upon any Person other than the parties hereto and their
respective successors and permitted assigns any rights, remedies or obligations
under or by reason of this Agreement.
14.6. Entire Agreement; Amendment and Waiver. (a) This Agreement (which
includes the Schedules and Exhibits hereto), the Newco Agreement and the
"Related Agreements" (as defined in the Newco Agreement) constitute the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersede all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof except for those
written agreements or understandings executed in writing by a duly authorized
officer of each party subsequent to August 4, 1993.
(b) This Agreement may not be amended, changed, supplemented, waived or
otherwise modified except by an instrument in writing signed by the party
against which enforcement is sought. Any waiver by any party hereto of a breach
of this Agreement shall not operate or be construed as a waiver of any
subsequent breach.
14.7. Headings. The headings in this Agreement are for convenience only
and shall not affect the construction hereof.
14.8. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.
14.9. Remedies. (a) Each of the Company and BT acknowledges that the
other party would not have an adequate remedy at law for money damages in the
event that any of the covenants or agreements of the other party in this
Agreement were not performed in accordance with its terms, and it is therefore
agreed that each of BT and the Company, in addition to and without limiting any
other remedy or right it may have, will have the right to an injunction or other
equitable relief in any court of competent jurisdiction, subject to Section
14.10, enjoining any such breach and enforcing specifically the terms and
provisions hereof, and each of BT and the Company hereby waive any and all
defenses they may have on the ground of lack of jurisdiction or competence of
the court to grant such an injunction or other equitable relief. Notwithstanding
anything to the contrary contained herein, any action that the Company or the
Board of Directors of the Company is required to take or is prohibited from
taking pursuant to an order of a court shall not give rise to a breach of this
Agreement, provided that (i) the Company is not prior to such order in breach of
this Agreement with respect to such action and (ii) the Company has used
reasonable efforts in good faith (including, without limitation, the taking of
any appropriate appeals) to resist the imposition of such order.
(b) All rights, powers and remedies provided under this Agreement or
otherwise available in respect hereof at law or in equity shall be cumulative
and not alternative, and the exercise or beginning of the exercise
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of any thereof by any party shall not preclude the simultaneous or later
exercise of any other such right, power or remedy by such party.
14.10. SUBMISSION TO JURISDICTION; WAIVERS. EACH OF BT AND THE COMPANY
IRREVOCABLY AGREES THAT ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF
BROUGHT BY THE OTHER PARTY HERETO OR ITS SUCCESSORS OR ASSIGNS, MAY BE BROUGHT
AND DETERMINED IN THE SUPREME COURT OF THE STATE OF NEW YORK IN NEW YORK COUNTY
OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK,
AND EACH OF BT AND THE COMPANY HEREBY IRREVOCABLY SUBMITS WITH REGARD TO ANY
SUCH ACTION OR PROCEEDING FOR ITSELF AND IN RESPECT TO ITS PROPERTY, GENERALLY
AND UNCONDITIONALLY, TO THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS.
EACH OF BT AND THE COMPANY HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT,
BY WAY OF MOTION, AS A DEFENSE, COUNTERCLAIM OR OTHERWISE, IN ANY ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT, THE DEFENSE OF SOVEREIGN IMMUNITY,
ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF THE
ABOVE-NAMED COURTS FOR ANY REASON OTHER THAN THE FAILURE TO SERVE PROCESS IN
ACCORDANCE WITH THIS SECTION 14.10, THAT IT OR ITS PROPERTY IS EXEMPT OR IMMUNE
FROM JURISDICTION OF ANY SUCH COURT OR FROM ANY LEGAL PROCESS COMMENCED IN SUCH
COURTS (WHETHER THROUGH SERVICE OF NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID OF EXECUTION OF JUDGMENT, EXECUTION OF JUDGMENT OR OTHERWISE),
AND TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THAT THE SUIT, ACTION OR
PROCEEDING IN ANY SUCH COURT IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE
OF SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER, OR THAT THIS AGREEMENT, OR THE
SUBJECT MATTER HEREOF, MAY NOT BE ENFORCED IN OR BY SUCH COURTS AND FURTHER
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE
BENEFIT OF ANY DEFENSE THAT WOULD HINDER, FETTER OR DELAY THE LEVY, EXECUTION OR
COLLECTION OF ANY AMOUNT TO WHICH THE PARTY IS ENTITLED PURSUANT TO THE FINAL
JUDGMENT OF ANY COURT HAVING JURISDICTION. BT HEREBY IRREVOCABLY DESIGNATES CT
CORPORATION SYSTEM (IN SUCH CAPACITY, THE "PROCESS AGENT"), WITH AN OFFICE ON
AUGUST 4, 1993, AT 1633 BROADWAY, NEW YORK, NEW YORK 10019, AS THE DESIGNEE,
APPOINTEE AND AGENT OF BT TO RECEIVE, FOR AND ON BEHALF OF BT SERVICE OF PROCESS
IN SUCH JURISDICTION IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT AND SUCH SERVICE SHALL BE DEEMED COMPLETE UPON DELIVERY THEREOF TO THE
PROCESS AGENT, PROVIDED THAT IN THE CASE OF ANY SUCH SERVICE UPON THE PROCESS
AGENT, THE PARTY EFFECTING SUCH SERVICE SHALL ALSO DELIVER A COPY THEREOF TO BT
IN THE MANNER PROVIDED IN SECTION 14.1. BT SHALL TAKE ALL SUCH ACTION AS MAY BE
NECESSARY TO CONTINUE SAID APPOINTMENT IN FULL FORCE AND EFFECT OR TO APPOINT
ANOTHER AGENT SO THAT BT WILL AT ALL TIMES HAVE AN AGENT FOR SERVICE OF PROCESS
FOR THE ABOVE PURPOSES IN NEW YORK, NEW YORK. EACH OF BT AND THE COMPANY FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED AIRMAIL, POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS SET FORTH IN
THIS AGREEMENT, SUCH SERVICE OF PROCESS TO BE EFFECTIVE UPON ACKNOWLEDGEMENT OF
RECEIPT OF SUCH REGISTERED MAIL. NOTHING HEREIN SHALL AFFECT THE RIGHT OF EITHER
PARTY TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE OTHER PARTY IN ANY OTHER
JURISDICTION IN WHICH THE OTHER PARTY MAY BE SUBJECT TO SUIT. BT EXPRESSLY
ACKNOWLEDGES THAT THE FOREGOING WAIVER IS INTENDED TO BE IRREVOCABLE UNDER THE
LAWS OF THE STATE OF NEW YORK AND OF THE UNITED STATES OF AMERICA, PROVIDED THAT
BT'S CONSENT TO JURISDICTION AND SERVICE CONTAINED IN THIS SECTION 14.10 IS
SOLELY FOR THE PURPOSE REFERRED TO IN THIS SECTION 14.10 AND SHALL NOT BE DEEMED
TO BE A GENERAL SUBMISSION TO SAID COURTS OR IN THE STATE OF NEW YORK OTHER THAN
FOR SUCH PURPOSE.
IN THE EVENT OF THE TRANSFER OF ALL OR SUBSTANTIALLY ALL OF THE ASSETS AND
BUSINESS OF THE PROCESS AGENT TO ANY OTHER CORPORATION BY CONSOLIDATION, MERGER,
SALE OF ASSETS OR OTHERWISE, SUCH OTHER CORPORATION SHALL BE SUBSTITUTED
HEREUNDER FOR THE PROCESS AGENT WITH THE SAME EFFECT AS IF NAMED HEREIN IN PLACE
OF CT CORPORATION SYSTEM.
14.11. Severability. In the event that any provision of this Agreement
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
14.12. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
MCI COMMUNICATIONS CORPORATION
By: /s/ BERT C. ROBERTS, JR.
Name: Bert C. Roberts, Jr.
Title: Chairman of the Board of
Directors
and Chief Executive Officer
BRITISH TELECOMMUNICATIONS plc
By: /s/ COLIN R. GREEN
Name: Colin R. Green
Title: Solicitor and Chief Legal
Adviser
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Exhibit A
[to Amended and Restated
Investment Agreement]
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
MCI COMMUNICATIONS CORPORATION
PURSUANT TO SECTION 242 OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE
------------------------------------
MCI Communications Corporation, a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware
(hereinafter, the "Corporation"), DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of the Corporation held
on , 1994 resolutions were duly adopted setting forth proposed
amendments to the Restated Certificate of Incorporation of the Corporation,
declaring said amendments to be advisable, and directing that said amendments be
considered at a special meeting of the stockholders of the Corporation. The
resolution setting forth the proposed amendments is as follows:
"RESOLVED, that the board of directors hereby declares it advisable
that the Restated Certificate of Incorporation of this corporation be
amended as follows:
(i) That section 4 of the Restated Certificate of Incorporation be
amended by deleting the introductory paragraph of section 4 in its entirety
and substituting in lieu thereof the following:
'Authorized Capital Stock. The total number of shares of stock that this
corporation shall have authority to issue is Two Billion Five Hundred
Fifty Million (2,550,000,000) shares of par value of ten cents ($.10)
each, divided into three classes: Fifty Million (50,000,000) shares
designated as Preferred Stock (hereinafter, the "Preferred Stock"); Five
Hundred Million (500,000,000) shares designated as Class A Common Stock
(hereinafter, the "Class A Common Stock"); and Two Billion
(2,000,000,000) shares designated as Common Stock (hereinafter, the
"Common Stock").'
(ii) That section 4 of the Restated Certificate of Incorporation be
further amended by relettering paragraph (b) and paragraph (c),
respectively, of section 4 to become paragraph (c) and paragraph (d) of
section 4, respectively; and any and all references throughout the Restated
Certificate of Incorporation to the paragraphs of section 4 formerly
lettered as paragraphs (b) and (c) shall be amended accordingly to refer to
paragraphs (c) and (d), respectively.
(iii) That section 4 of the Restated Certificate of Incorporation be
further amended by adding the following as a new paragraph (b) of section
4:
'(b) The Class A Common Stock.
(1) After the requirements with respect to preferential dividends
on the Preferred Stock (fixed in accordance with the provisions of
paragraph (a) of this section 4) shall have been met and after this
corporation shall have complied with all the requirements, if any, with
respect to the setting aside of sums as sinking funds or redemption or
purchase accounts in respect of the Preferred Stock (fixed in accordance
with the provisions of paragraph (a) of this section 4), and subject
further to any other conditions that may be fixed in accordance with the
provisions of paragraph (a) of this section 4, including, without
limitation, the right of any of the holders of any series of Preferred
Stock to participate therein, the holders of shares of Class A Common
Stock shall be entitled to receive, when, as and if declared by the
board of directors out of funds legally available for the
A-1
<PAGE> 60
purpose, dividends, payable on the same date fixed for the payment of
the corresponding dividend on the Common Stock (other than a dividend
payable in shares of Common Stock), in an amount per share (rounded to
the nearest cent if payable in cash) equal to the aggregate per share
amount of any cash dividend and the aggregate per share amount (payable
in kind) of any non-cash dividend (other than a dividend payable in
shares of Common Stock) paid on the Common Stock.
(2) In the event this corporation shall at any time declare and pay
any dividend on the Common Stock payable in shares of Common Stock or
effect a subdivision or combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by payment
of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case this corporation
shall, as the case may be, declare and pay an equivalent dividend per
share on the Class A Common Stock payable in shares of Class A Common
Stock or effect an equivalent subdivision or combination or
consolidation of the outstanding shares of Class A Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of
Class A Common Stock) into a greater or lesser number of shares of Class
A Common Stock.
(3) This corporation shall declare a dividend on the Class A Common
Stock as provided in subparagraph (1) and subparagraph (2) of this
paragraph (b) at the same time that it declares any dividend on the
Common Stock and shall effect a subdivision or combination or
consolidation of the outstanding shares of Class A Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of
Class A Common Stock) into a greater or lesser number of shares of Class
A Common Stock as provided in subparagraph (2) of this paragraph (b) at
the same time that it effects any subdivision or combination or
consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of
Common Stock) into a greater or lesser number of shares of Common Stock.
(4) Except as set forth in subparagraphs (1) through (3) of this
paragraph (b), holders of shares of the Class A Common Stock shall not
be entitled to receive, and this corporation shall not declare or pay,
any dividend or distribution (whether in cash, property or securities)
on the Class A Common Stock.
(5) After distribution in full of the preferential amount, if any,
to be distributed to the holders of the Preferred Stock (fixed in
accordance with the provisions of paragraph (a) of this section 4) in
the event of any voluntary or involuntary liquidation, dissolution or
winding-up of this corporation, the holders of the Class A Common Stock
shall, subject to the right, if any, of the holders of any series of
Preferred Stock to participate therein (fixed in accordance with the
provisions of paragraph (a) of this section 4), be entitled together
with the holders of the Common Stock to receive all the remaining assets
of this corporation, tangible and intangible, of whatever kind available
for distribution to stockholders, ratably in proportion to the number of
shares held by each such holder.
(6) Except as may otherwise be required by law, this Certificate of
Incorporation or the provisions of the resolutions adopted by the board
of directors pursuant to paragraph (a) of this section 4, each holder of
the Class A Common Stock shall have one vote in respect of each share of
the Class A Common Stock held by such holder on each matter in respect
of which the holders of the Common Stock are entitled to vote, and the
holders of the Class A Common Stock shall vote together with the holders
of the Common Stock as a single class; provided, however, that the
holders of the Class A Common Stock shall not be entitled to vote in the
election of directors except as provided in subparagraph (7) of this
paragraph (b).
(7) (i) The holders of the Class A Common Stock shall have the
right, voting separately as a class together with the holders of any
series of Preferred Stock that is accorded the right (fixed in
accordance with the provisions of paragraph (a) of this section 4) to
vote for the election of Class A Directors (as defined below) together
with the holders of the Class A Common Stock as a single class
(hereinafter, the Class A Preferred Stock") to elect that number of
directors of this corporation (hereinafter, the "Class A Directors")
equal to the product (rounded to the nearest whole number if such
product is not a whole number) of (x) the Outstanding Voting Interest
(as
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hereinafter defined in subdivision (xv) of subparagraph (11) of this
paragraph (b)) times (y) the total number of directors constituting the
whole board of directors, at each meeting of the stockholders held for
the purpose of electing directors; provided that, at any time that the
Outstanding Voting Interest is from and including 15% to and including
20%, then in calculating such number of directors the multiplier set
forth in the preceding clause (x) shall be deemed to be 20% in lieu of
the then Outstanding Voting Interest; and provided further that while
Section 310(b) of the Communications Act of 1934, as amended (or any
successor provision of law), remains in effect, under no circumstances
shall the holders of Class A Common Stock (either alone or together with
holders of any Class A Preferred Stock) have the right to elect
directors such that the number of Class A Directors would constitute
more than the maximum percentage of the total directors of this
corporation permitted under such Section 310(b) and under no
circumstances shall the number of Class A Directors serving on the board
of directors be more than the maximum percentage permitted under such
Section 310(b). The directors of this corporation other than the Class A
Directors shall be elected by the holders of the class or classes or
series of stock entitled to vote therefor, but excluding the Class A
Common Stock.
(ii) At any meeting held for the purpose of electing directors, the
presence in person or by proxy of the holders of at least a majority in
voting power then outstanding shares of Class A Common Stock and any
Class A Preferred Stock shall be required and be sufficient to
constitute a quorum of such class for the election of Class A Directors
by such class. At any such meeting or adjournment thereof (x) the
absence of a quorum of the holders of Class A Common Stock and any Class
A Preferred Stock shall not prevent the election of directors other than
the Class A Directors and the absence of a quorum or quorums of the
holders of capital stock entitled to elect such other directors shall
not prevent the election of the Class A Directors and (y) in the absence
of a quorum of the holders of shares of Class A Common Stock and any
Class A Preferred Stock, a majority of such holders present in person or
by proxy shall have the power to adjourn the meeting for the election of
Class A Directors, from time to time, without notice (except as required
by law) other than an announcement at the meeting, until a quorum shall
be present.
(iii) Except as provided in this subdivision (iii), each Class A
Director shall serve until the next annual meeting of the stockholders
and until such director's successor has been elected and qualified,
subject to such director's earlier death, resignation, removal or
retirement. Upon the conversion of all outstanding shares of Class A
Common Stock pursuant to subdivision (ii) of subparagraph (9) of this
paragraph (b), the term of office of all Class A Directors then in
office shall thereupon terminate, the vacancy or vacancies resulting
from such termination shall be filled by the remaining directors then in
office, (other than any directors elected by the holders of one or more
series of Preferred Stock voting separately as a class or series (as may
be fixed in accordance with paragraph (a) of section 4 of this
Certificate of Incorporation)) acting by majority vote of such remaining
directors, and the director or directors so elected to fill such vacancy
or vacancies shall not be treated hereunder or under the by-laws of this
corporation as Class A Directors. If at any time the number of directors
that the holders of the Class A Common Stock and any Class A Preferred
Stock have the right to elect pursuant to subdivision (i) of this
subparagraph (7) shall decrease other than as set forth in the preceding
sentence (whether upon the conversion of shares of Class A Common Stock
pursuant to subdivision (i) of subparagraph (9) of this paragraph (b),
upon the decrease in the number of directors constituting the whole
board of directors or otherwise), then the term of office of a number of
Class A Directors then in office equal to such decrease shall terminate
effective at the close of business on the fifteenth day following the
event that resulted in such decrease (the "Termination Date"); provided,
however, that if, prior to the Termination Date, the holders of the
Class A Common Stock and any Class A Preferred Stock shall not have
removed or caused to resign, in either case effective as of the
Termination Date, a number of Class A Directors equal to such decrease,
then the terms of office of all Class A Directors then in office shall
terminate on the Termination Date. The vacancy or vacancies resulting
from the termination provided for in the preceding sentence shall be
filled as follows: (A) the vacancy or vacancies equal to the number of
directors that the holders of the Class A Common Stock and any Class A
Preferred Stock then have
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the right to elect pursuant to subdivision (i) of this subparagraph (7)
(after giving effect to the decrease referred to in the preceding
sentence) shall be filled as provided in subdivision (iv) of this
subparagraph (7), and the director or directors so elected to fill such
vacancy or vacancies shall be treated hereunder and under the by-laws of
this corporation as Class A Directors; and (B) the remaining vacancy or
vacancies shall be filled by the remaining directors then in office
(other than any directors elected by the holders of one or more series
of Preferred Stock voting separately as a class or series (as may be
fixed in accordance with paragraph (a) of section 4 of this Certificate
of Incorporation)), acting by majority vote of such remaining directors,
and the director or directors so elected to fill such vacancy or
vacancies shall not be treated hereunder or under the by-laws as Class A
Directors.
(iv) Subject to subdivision (iii) of this subparagraph (7), in case
of any vacancy occurring among the Class A Directors, the remaining
Class A Director or Directors may appoint a successor to hold office for
the unexpired term of the Class A Director whose place shall be vacant.
If at any time the offices of all Class A Directors shall be vacant,
then, subject to subdivision (iii) of this subparagraph (7), the holders
of Class A Common Stock then outstanding, voting separately as a class
together with the holders of any Class A Preferred Stock, may, either by
written consent or at a special meeting of such holders called in
accordance with the by-laws of this corporation, elect successors to
hold office for the unexpired terms of the directors whose places shall
be vacant.
(8) So long as any shares of Class A Common Stock are outstanding,
this corporation shall not, without the written consent or affirmative
vote of the holders of a majority of the shares of Class A Common Stock
at the time outstanding, voting separately as a class, either in writing
or by resolution adopted at an annual or special meeting called for the
purpose, take, and this corporation shall not directly or indirectly
engage in, any of the following actions (other than actions involving
transactions solely between or among this corporation and one or more
wholly owned Subsidiaries (as hereinafter defined in subdivision (xix)
of subparagraph (11) of this paragraph (b)) of this corporation):
(i) The amendment of this Certificate of Incorporation so as to
affect adversely the rights of holders of shares of Class A Common
Stock;
(ii) Any Business Combination (as hereinafter defined in
subdivision (iv) of subparagraph (11) of this paragraph (b)) to be
effected prior to the fourth anniversary of the Closing Date (as
hereinafter defined in subdivision (v) of subparagraph (11) of this
paragraph (b));
(iii) The issuance of any series or class of capital stock
having either (A) more than one vote per share (other than pursuant
to the Rights Plan (as hereinafter defined in subdivision (xviii) of
subparagraph (11) of this paragraph (b))) or (B) a class vote on any
matter, except to the extent such class vote is required by Delaware
corporate law or to the extent that the holders of any series of
preferred stock may have the right, voting separately as a class, to
elect a number of directors of this corporation upon the occurrence
of a default in payment of dividends or redemption price;
(iv) (A) The adoption of any stockholder rights plan, or any
other plan or arrangement that could reasonably be expected to
disadvantage any stockholder on the basis of the size of its
shareholding, such that any holder of Class A Common Stock or any of
its Affiliates (as hereinafter defined in subdivision (i) of
subparagraph (11) of this paragraph (b)) would be adversely affected
in relation to their position under the Rights Plan as in effect on
the Closing Date; provided that the adoption of a stockholder rights
plan that is substantially similar to the Rights Plan as in effect on
the Closing Date (without regard to the provisions of this
Certificate of Incorporation or the Investment Agreement (as
hereinafter defined in subdivision (x) of subparagraph (11) of this
paragraph (b)) relating thereto) shall be deemed not to affect such
holders and their Affiliates adversely in relation to their position
under the Rights Plan as in effect on the Closing Date;
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(B) The amendment, modification or termination of the Rights
Plan (but excluding any redemption or exchange of the Rights (as
hereinafter defined in subdivision (xvii) of subparagraph (11) of
this paragraph (b)) effected in accordance with the terms of the
Rights Plan and, to the extent applicable thereto, this Certificate
of Incorporation and the Investment Agreement and excluding any
amendment of the Rights Plan made in order that the execution of a
definitive agreement providing for a Business Combination or the
consummation of the transactions contemplated thereby would not
result in the Rights thereby becoming exercisable, if at the time of
such amendment this corporation would otherwise be entitled to redeem
the Rights in accordance with the terms of this Certificate of
Incorporation and the Investment Agreement) if such action would
adversely affect the rights of holders of shares of Class A Common
Stock and their Affiliates in relation to their position under the
Rights Plan as in effect on the Closing Date (without regard to the
provisions of this Certificate of Incorporation or the Investment
Agreement) provided that the amendment of the Rights Plan to extend
the expiration date or amend the exercise price thereof shall be
deemed not to affect such holders and their Affiliates adversely in
relation to their position under the Rights Plan as in effect on the
Closing Date;
(v) The issuance of Voting Securities (as hereinafter defined in
subdivision (xxiii) of subparagraph (11) of this paragraph (b))
(excluding the issuance of Voting Securities pursuant to or upon (v)
the terms of the Series D Convertible Preferred Stock or the Class A
Common Stock, (w) the exercise or exchange of the Rights, (x) grants
or issuances of capital stock or any options or any other rights to
acquire shares of capital stock pursuant to Employee Stock Plans (as
hereinafter defined in subdivision (viii) of subparagraph (11) of
this paragraph (b)) and any Voting Securities issuable upon the
exercise or exchange of any such options or other rights, (y) the
exercise of any option or options to purchase Voting Securities
granted in connection with the execution of a definitive agreement
providing for any Business Combination or (z) the reissuance of
Voting Securities purchased by this corporation subsequent to August
4, 1993) representing voting power in excess of (A) 10% of the
aggregate voting power of the outstanding Voting Securities as of the
date of such issuance in any single or related series of transactions
or (B) 15% of the aggregate voting power of the average number of
Voting Securities outstanding over a rolling three-year period;
provided that, for purposes of this subdivision (v), (i) the issuance
of options, warrants or other securities exercisable for or
convertible into shares of capital stock shall be deemed to be the
issuance of the shares of capital stock for or into which such
securities are exercisable or convertible and capital stock shall be
deemed to be issued on the date that this corporation executes an
agreement to issue such capital stock unless, at the time of such
execution, this corporation shall have elected to consider such
capital stock to be issued on a subsequent date and (ii) such
percentages shall be calculated after giving effect to the issuance
or issuances in question;
(vi) The issuance of Voting Securities (other than issuances (A)
applicable on a pro rata basis to all holders of a class or series of
capital stock generally, (B) upon the exercise of the Rights or (C)
upon the exercise of any option or options to purchase Voting
Securities granted in connection with the execution of a definitive
agreement providing for any Business Combination) to any person
(other than a holder of Class A Common Stock or any of its
Affiliates) that beneficially owns, or as a result thereof would
beneficially own, more than 5% of the outstanding Voting Securities,
and transactions (other than transactions (x) applicable on an equal
basis to all holders of a class or series of capital stock generally,
(y) in accordance with the Rights Plan or (z) any Business
Combination effected subsequent to the fourth anniversary of the
Closing Date) with any person that beneficially owns more than 5% of
the outstanding shares of capital stock of this corporation;
(vii) Any single or related series of acquisitions of businesses
or assets or investments therein (including, without limitation, the
formation of a joint venture with persons other than holders of Class
A Common Stock or any of their Affiliates), other than money market
types of
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investments and trade receivables, pursuant to which the Fair Market
Value (as hereinafter defined in subdivision (ix) of subparagraph
(11) of this paragraph (b)) of the aggregate purchase price paid by
this corporation will exceed 20% of the Market Capitalization (as
hereinafter defined in subdivision (xii) of subparagraph (11) of this
paragraph (b)) of this corporation at the time that this corporation
executes a definitive agreement to effect such acquisition or
investment;
(viii) Any single or related series of acquisitions of
businesses or assets or investments (including, without limitation,
the formation of a joint venture with persons other than holders of
Class A Common Stock or any of their Affiliates) in a Non-Core
Business (as hereinafter defined in subdivision (xiii) of
subparagraph (11) of this paragraph (b)) pursuant to which the Fair
Market Value of the aggregate purchase price paid by this corporation
will exceed 5% of the Market Capitalization of this corporation at
the time that this corporation executes a definitive agreement to
effect such acquisition or investment, except to the extent that any
such Non-Core Business is obtained in the course of a bona fide
transaction the principal purpose of which is the acquisition of a
Core Business (as hereinafter defined in subdivision (vii) of
subparagraph (11) of this paragraph (b));
(ix) Any single or related series of sales, transfers or other
dispositions or encumbrances of assets having a Fair Market Value in
excess of 15% of the aggregate Fair Market Value of the total assets
of this corporation and its Subsidiaries taken as a whole at the time
that this corporation executes a definitive agreement to effect such
disposition or encumbrance; provided that a sale of all or
substantially all of the assets of this corporation shall not be
deemed a sale, transfer or other disposition or encumbrance for
purposes of this subdivision (ix);
(x) The incurrence of indebtedness for money borrowed,
including, without limitation, financing whether or not required to
be presented on the consolidated balance sheet of this corporation
and its Subsidiaries in accordance with generally accepted accounting
principles, that would cause this corporation's ratio of consolidated
debt-to-total capitalization to exceed 65%; for purposes of this
subdivision (x), "total capitalization" means the sum of consolidated
stockholders' equity and consolidated long-term indebtedness
(including, without limitation, financing that is not required to be
presented on such consolidated balance sheet); and
(xi) The declaration of any extraordinary cash dividends or
other distribution to holders of any class or classes, and/or any
series thereof, of capital stock in excess of 5% of the Market
Capitalization of this corporation at the time of such dividend or
other distribution;
provided, however, that nothing in the foregoing shall require any
consent or affirmative vote of the holders of the Class A Common Stock
pursuant to this subparagraph (8) in order for this corporation to
satisfy its obligations or exercise its rights under the Investment
Agreement, the Joint Venture Agreement (as hereinafter defined in
subdivision (xi) of subparagraph (11) of this paragraph (b)) or any
"Related Agreement" (as defined in the Joint Venture Agreement), for any
transaction pursuant to the terms of the Series D Preferred Stock or the
Class A Common Stock, for any other transaction between or in respect of
this corporation or any of its Affiliates, on the one hand, and any
holder of Series D Preferred Stock or the Class A Common Stock or any of
their Affiliates, on the other hand, or in connection with any action
pursuant to a Requirement of Law (as hereinafter defined in subdivision
(xvi) of subparagraph (11) of this paragraph (b)).
(9) (i) If any issued and outstanding share of Class A Common Stock
is Transferred (as hereinafter defined in subdivision (xx) of
subparagraph (11) of this paragraph (b)) to any person other than a
wholly owned direct or indirect subsidiary of the transferring holder or
the corporate parent or ultimate corporate parent of the transferring
holder (provided that such transferring holder is a wholly owned direct
or indirect subsidiary of such corporate parent or ultimate corporate
parent), each share of Class A Common Stock so Transferred shall be
automatically converted, without any action on the part of this
corporation or any action on the part of the transferring holder, into
one fully paid and nonassessable share of the Common Stock.
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(ii) Upon the occurrence of a Conversion Event (as hereinafter
defined in subdivision (vi) of subparagraph (11) of this paragraph (b)),
without any action on the part of this corporation or the holders of
shares of Class A Common Stock, each share of Class A Common Stock
issued and outstanding immediately prior to the Conversion Event shall
automatically be converted into one fully paid and nonassessable share
of the Common Stock. Upon the occurrence of a Conversion Event, prompt
written notice thereof and of the resulting conversion of the Class A
Common Stock shall be given by first class mail, postage prepaid, to
each person who immediately prior to the Conversion Event was a holder
of record of shares of Class A Common Stock at such person's address as
the same appears on the stock register of this corporation; provided,
however, that no failure to give such notice nor any defect therein
shall affect the effectiveness of the conversion of any shares of Class
A Common Stock. Each such notice shall include a statement setting forth
the place or places where certificates formerly representing shares of
Class A Common Stock are to be surrendered in accordance with
subparagraph (iv) of this subparagraph (9).
(iii) Conversion pursuant to this subparagraph (9) shall be deemed
to have been effected at the time of the Transfer or the Conversion
Event, as the case may be, that resulted in such conversion
(hereinafter, the "Conversion Time"). Immediately upon such conversion,
the rights of the holders of shares of Class A Common Stock so converted
as such shall cease and such holders shall be treated for all purposes
as having become the record owners of the shares of Common Stock
issuable upon such conversion; provided, however, that such persons
shall be entitled to receive when paid any dividends declared on the
Class A Common Stock as of a record date preceding the Conversion Time
and unpaid as of the Conversion Time. In the event the stock transfer
books of this corporation shall be closed at the Conversion Time, such
person or persons shall be deemed to have become such holder or holders
of record of the Common Stock at the opening of business on the next
succeeding day on which such stock transfer books are open.
(iv) As promptly as practicable after the Conversion Time, upon the
delivery to this corporation of the certificates formerly representing
shares of Class A Common Stock, this corporation shall deliver or cause
to be delivered, to or upon the written order of the record holder of
the surrendered certificates formerly representing shares of Class A
Common Stock, a certificate or certificates representing the number of
fully paid and nonassessable shares of Common Stock into which the
shares of Class A Common Stock formerly represented by such certificates
have been converted in accordance with the provisions of this
subparagraph (9).
(v) This corporation will pay any and all documentary, stamp or
similar issue or transfer taxes payable in respect of the issue or
delivery of shares of Common Stock on the conversion of shares of Class
A Common Stock pursuant to this subparagraph (9); provided, however,
that this corporation shall not be required to pay any tax which may be
payable in respect of any registration of transfer involved in the issue
or delivery of shares of Common Stock in a name other than that of the
registered holder of Class A Common Stock converted or to be converted,
and no such issue or delivery shall be made unless and until the person
requesting such issue has paid to this corporation the amount of any
such tax or has established, to the satisfaction of this corporation,
that such tax has been paid.
(vi) This corporation shall at all times reserve and keep
available, out of the aggregate of its authorized but unissued Common
Stock and its issued Common Stock held in its treasury, for the purpose
of effecting the conversion of the Class A Common Stock, the full number
of shares of Common Stock then deliverable upon the conversion of all
outstanding shares of the Class A Common Stock.
(10) Subject to the provisions of the Investment Agreement, holders
of Class A Common Stock shall be entitled to such Voting Equity purchase
rights as may be accorded to such holders pursuant to Section 6.1 of the
Investment Agreement, so long as such agreement remains in effect.
(11) For purposes of this paragraph (b) (and, with respect to
subdivision (v), subdivision (xvii) and subdivision (xxiii) of this
subparagraph (11), for purposes of paragraph (d) of this
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section 4, and, with respect to subdivision (ix), subdivision (x) and
subdivision (xix) of this subparagraph (11), for purposes of section 9
of this Certificate of Incorporation):
(i) "Affiliate" shall mean, as applied to a specified person,
any other person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common
control with, such specified person.
(ii) "Americas" shall have the meaning set forth in the
Investment Agreement.
(iii) "BT" shall mean British Telecommunications plc, a public
limited company incorporated under the laws of England and Wales, or
its successor.
(iv) "Business Combination" shall mean a merger or consolidation
in which this corporation is a constituent corporation and pursuant
to which the Common Stock is exchanged for cash, securities or other
property or a sale of all or substantially all of the assets of this
corporation and its Subsidiaries taken as a whole; provided that
neither (A) a merger or consolidation in which the beneficial
ownership of the capital stock of this corporation or of the sole
surviving corporation of the transaction (or of the ultimate parent
of this corporation or of such sole surviving corporation)
immediately after the consummation of such transaction is
substantially the same as the beneficial ownership of the capital
stock of this corporation immediately prior to the consummation
thereof nor (B) a merger in which this corporation is the surviving
corporation, in which all shares of the Common Stock outstanding
immediately prior to the consummation of such merger remain
outstanding immediately after the consummation thereof and the only
change in the capital stock of the Company resulting from such merger
is the issuance of shares of capital stock pursuant thereto, and in
connection with which no consent or affirmative vote of the holders
of the Class A Common Stock would otherwise be required under
subparagraph (8) of this paragraph (b), shall be deemed a Business
Combination.
(v) "Closing Date" shall mean the first date that shares of
Class A Common Stock are issued and sold under the Investment
Agreement.
(vi) "Conversion Event" shall mean any of the following
occurrences:
(A) The Outstanding Interest (as hereinafter defined in
subdivision (xiv) of this subparagraph (11)) becomes less than
10%, unless the Outstanding Interest becomes less than 10% solely
as a result of an acquisition of Voting Securities beneficially
owned by any holder of shares of Class A Common Stock or any of
its Affiliates by this corporation pursuant to section 9 of this
Certificate of Incorporation; provided, however, that a
"Conversion Event" shall be deemed to occur if, subsequent to the
aforesaid acquisition of Voting Securities by this corporation
pursuant to said section 9, the Outstanding Interest is reduced
as a result of any other action or transaction unless upon the
consummation of such action or transaction the Outstanding
Interest is not less than 10%.
(B) The holders of shares of Class A Common Stock have
Transferred (other than to wholly owned direct or indirect
subsidiaries of such holders) in the aggregate Voting Securities
representing more than 25% of the largest amount in voting power
of Voting Securities at any time beneficially owned by such
holders and any of their Affiliates (adjusted for stock splits,
stock dividends and other combinations or reclassifications of
the capital stock of this corporation) and the Outstanding
Interest is less than 15%, unless the holders of Class A Common
Stock have so Transferred more than, or the Outstanding Interest
has become less than, the applicable percentages as aforesaid
solely as a result of an acquisition of Voting Securities
beneficially owned by any holder of shares of Class A Common
Stock or any of its Affiliates by this corporation pursuant to
section 9 of this Certificate of Incorporation; provided,
however, that a "Conversion Event" shall be deemed to occur if,
subsequent to the aforesaid acquisition of Voting Securities by
this corporation pursuant to said section 9, either (i) any
holder of shares of Class A Common
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Stock Transfers (other than to a wholly owned direct or indirect
subsidiary of such holder and other than to this corporation
pursuant to section 9 of this Certificate of Incorporation) any
additional shares of capital stock of this corporation or (ii)
the Outstanding Interest is reduced as a result of any other
action or transaction, unless upon the consummation of such
action or transaction the Outstanding Interest is not less than
15%.
(C) There shall have been a public announcement by this
corporation that (i) this corporation or any of its Affiliates
has exercised its right to require BT or any of its Affiliates to
purchase this corporation's direct or indirect interest in the
Joint Venture (as hereafter defined in subdivision (xi) of this
subparagraph (11)) pursuant to the terms of the Joint Venture
Agreement, (ii) this corporation or any of its Affiliates has
transferred this corporation's direct or indirect interest in the
Joint Venture to a third party in accordance with the terms of
the Joint Venture Agreement or BT or any of its Affiliates has
acquired this corporation's direct or indirect interest in the
Joint Venture pursuant to the terms of the Joint Venture
Agreement in connection with the proposed transfer of this
corporation's direct or indirect interest in the Joint Venture,
(iii) BT or any of its Affiliates has transferred BT's direct or
indirect interest in the Joint Venture to a third party or this
corporation or any of its Affiliates has acquired BT's direct or
indirect interest in the Joint Venture pursuant to the terms of
the Joint Venture Agreement in connection with a proposed
transfer of BT's direct or indirect interest in the Joint Venture
or (iv) BT or any of its Affiliates has exercised its right to
require this corporation or any of its Affiliates to sell to BT
this corporation's direct or indirect interest in the Joint
Venture pursuant to the terms of the Joint Venture Agreement
(other than as a result of the event described in clause (i) of
subpart (D) of this subdivision (vi)).
(D) There shall have been a public announcement by this
corporation that (i) BT or any of its Affiliates has exercised
its right to require this corporation or any of its Affiliates to
sell to BT or any of its Affiliates this corporation's direct or
indirect interest in the Joint Venture as a result of a material
breach by this corporation pursuant to Section 29.1(a) of the
Joint Venture Agreement and (ii) this corporation has delivered a
notice to BT in which this corporation set forth its consent to
the conversion of shares of the Class A Common Stock.
(E) There shall have been a public announcement by this
corporation that either (i) there has been any judicial
determination (other than in an ex parte proceeding), following
the notice and other procedures set forth in Section 9.14 of the
Investment Agreement, that BT or any of its Affiliates has
breached Section 5.1, 5.3, 7.1, 7.2, 7.3, 7.4, 10.2 or 10.3 of
the Investment Agreement (other than BT's or such Affiliate's
failure to have given timely any required notice thereunder,
unless this corporation has been materially adversely affected by
such failure) and, if such judicial determination has not set
forth whether such breach was material with respect to the
Investment Agreement, that such breach has been determined to be
material with respect to such agreement by the Independent
Directors in accordance with the procedures for a determination
by the Independent Directors set forth in the Investment
Agreement or (ii) there has been a "Loss of BT Rights" (as
defined in Section 9.12(a) of the Investment Agreement) following
an arbitration pursuant to Section 9.12(e) or 9.12(f) of the
Investment Agreement.
(F) There shall have been a public announcement by this
corporation that (i) this corporation or any of its Affiliates
has exercised its right to require BT or any of its Affiliates to
sell to this corporation or any of its Affiliates BT's direct or
indirect interest in the Joint Venture pursuant to the terms of
the Joint Venture Agreement and (ii) this corporation has
delivered a notice to BT in which this corporation set forth its
consent to the conversion of shares of the Class A Common Stock.
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For purposes of this subdivision (vi), the issuance by this
corporation of a press release in this corporation's customary manner
shall be deemed to be 'public announcement by this corporation.'
(vii) "Core Business" shall mean the "Core Business" (as defined
in the Investment Agreement) of the Company in the Americas.
(viii) "Employee Stock Plans" shall have the meaning set forth
in the Investment Agreement.
(ix) "Fair Market Value" shall mean, as to any shares or other
property, the cash price at which a willing seller would sell and a
willing buyer would buy such shares or property in an arms'-length
negotiated transaction without time constraints, as determined by the
Independent Directors in accordance with the procedures for a
determination by the Independent Directors set forth in the
Investment Agreement. Notwithstanding the foregoing, as to any shares
of stock of this corporation issued to effect an acquisition or
investment, "Fair Market Value" shall mean the Current Market Value
of such shares.
(x) "Investment Agreement" shall mean the Amended and Restated
Investment Agreement dated as of January 31, 1994 between BT and this
corporation, as such agreement may be amended, changed, supplemented
or otherwise modified.
(xi) "Joint Venture Agreement" shall mean the Joint Venture
Agreement dated August 4, 1993 among BT, Moorgate (Twelve) Limited, a
company incorporated under the laws of England and Wales, this
corporation, MCI Ventures Corporation, a Delaware corporation, and BT
Forty-Eight Company, an unlimited company incorporated under the laws
of England and Wales (the "Joint Venture"), as such agreement may be
amended, changed, supplemented or otherwise modified.
(xii) "Market Capitalization" shall have the meaning set forth
in the Investment Agreement.
(xiii) "Non-Core Business" shall have the meaning set forth in
the Investment Agreement.
(xiv) "Outstanding Interest" shall mean the percentage of the
aggregate voting power of the outstanding Voting Securities (other
than voting power with respect to the election of directors or a
class vote on specified matters) represented by the Voting Securities
beneficially owned by any holder of shares of Class A Common Stock or
any of its Affiliates; provided that, for purposes of calculating
such percentage, Uncounted Shares (as hereinafter defined in
subdivision (xxi) of this subparagraph (11)) shall be deemed not to
be outstanding Voting Securities; provided, however, that the
foregoing proviso shall not apply to the extent that, without the
benefit of such proviso, the Outstanding Interest would be less than
7 1/2%.
(xv) "Outstanding Voting Interest" shall mean the percentage of
the aggregate voting power of the outstanding Voting Securities
(other than voting power with respect to the election of directors or
a class vote on specified matters) represented by the number of
outstanding shares of Class A Common Stock and Class A Preferred
Stock.
(xvi) "Requirement of Law" shall have the meaning set forth in
the Investment Agreement.
(xvii) "Rights" shall mean the rights issued pursuant to the
Rights Plan.
(xviii) "Rights Plan" shall mean the Rights Agreement dated
, 1994 between this corporation and
, as the same may be amended from time to
time, or any successor plan thereto, as the same may be amended from
time to time. For purposes of this subdivision (xviii), any rights
plan adopted by this
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<PAGE> 69
corporation subsequent to the termination of such Rights Agreement or
the expiration, redemption or exchange of the Rights shall be deemed
a "successor plan thereto".
(xix) "Subsidiary" shall mean any corporation or other entity of
which at least a majority of the voting power of the voting equity
securities or equity interest is owned, directly or indirectly, by
this corporation.
(xx) "Transferred" shall mean the occurrence of any act pursuant
to which, directly or indirectly, including by operation of law, the
beneficial ownership of shares of Class A Common Stock shall have
been offered, sold, transferred, assigned, pledged, hypothecated or
otherwise disposed.
(xxi) "Uncounted Shares" shall have the meaning set forth in the
Investment Agreement.
(xxii) "Voting Equity" shall mean any and all Voting Securities,
securities of this corporation convertible into Voting Securities,
and options, warrants or other rights to acquire Voting Securities.
(xxiii) "Voting Securities" shall mean the Common Stock, the
Class A Common Stock, any Class A Preferred Stock and any other
securities of this corporation having voting power under ordinary
circumstances with respect to the election of directors of this
corporation.
For purposes of this subparagraph (11), a person shall be deemed to
"beneficially own" any securities in accordance with the provisions of
Rule 13d-3 under the Securities Exchange Act of 1934, as amended, as in
effect on August 4, 1993; provided that capital stock of this
corporation underlying any options, warrants, rights or other securities
convertible into or exercisable for such capital stock shall not be
deemed to be beneficially owned by any person if the applicable
conversion price or exercise price, as the case may be, of such option,
warrant, right or other security is more than the Current Market Value
(as hereinafter defined in subdivision (i) of paragraph (b) of section 9
of this Certificate of Incorporation) of the underlying capital stock.
(12) Shares of the Class A Common Stock may not be issued by this
corporation other than pursuant to, or in accordance with, the terms
hereof and of the Investment Agreement.'
(iv) That section 4 of the Restated Certificate of Incorporation be
further amended by deleting paragraph (c) (as relettered pursuant to clause
(ii) of this resolution) of section 4 in its entirety and substituting in
lieu thereof the following:
'(c) Common Stock.
(1) After the requirements with respect to preferential dividends
on the Preferred Stock (fixed in accordance with the provisions of
paragraph (a) of this section 4) shall have been met and after this
corporation shall have complied with all the requirements, if any, with
respect to the setting aside of sums as sinking funds or redemption or
purchase accounts in respect of the Preferred Stock (fixed in accordance
with the provisions of paragraph (a) of this section 4), and subject to
any other conditions that may be fixed in accordance with the provisions
of paragraph (a) of this section 4, including, without limitation, the
right of any of the holders of any series of Preferred Stock to
participate therein, and subject further to the right of the holders of
Class A Common Stock to participate therein to the extent provided in
subparagraphs (1) and (3) of paragraph (b) of this section 4, then, but
not otherwise, the holders of shares of Common Stock shall be entitled
to receive such dividends, if any, as may be declared from time to time
by the board of directors.
(2) In the event this corporation shall at any time effect a
subdivision or combination or consolidation of the outstanding shares of
Class A Common Stock into a greater or lesser number of shares of Class
A Common Stock (other than pursuant to subparagraph (2) of paragraph (b)
of this section 4), then in each such case this corporation shall effect
an equivalent subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or
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<PAGE> 70
otherwise than by payment of a dividend in shares of Common Stock) into
a greater or lesser number of shares of Common Stock.
(3) After distribution in full of the preferential amount, if any,
to be distributed to the holders of the Preferred Stock (fixed in
accordance with the provisions of paragraph (a) of this section 4) in
the event of any voluntary or involuntary liquidation, dissolution or
winding-up of this corporation, the holders of the Common Stock shall,
subject to the right, if any, of the holders of any series of Preferred
Stock to participate therein (fixed in accordance with the provisions of
paragraph (a) of this section 4), be entitled together with the holders
of the Class A Common Stock to receive all the remaining assets of this
corporation, tangible and intangible, of whatever kind available for
distribution to stockholders, ratably in proportion to the number of
shares held by each such holder.
(4) Except as may otherwise be required by law, this Certificate of
Incorporation or the provisions of the resolutions adopted by the board
of directors pursuant to paragraph (a) of this section 4, each holder of
the Common Stock shall have one vote in respect of each share of the
Common Stock held by such holder on each matter voted upon by the
stockholders. Holders of the Common Stock may not take any action that
is required or permitted to be taken by them at an annual or special
meeting of such stockholders without a meeting, without prior notice or
without a vote, and the right of the holders of the Common Stock to act
by written consent in lieu of a meeting is expressly denied.'
(v) That section 4 of the Restated Certificate of Incorporation be
further amended by deleting subparagraph (4) of paragraph (d) (as
relettered pursuant to clause (ii) of this resolution) of section 4 in its
entirety and substituting in lieu thereof the following:
'(4) The authorized amount of shares of the Common Stock, of the
Class A Common Stock and of the Preferred Stock may, without a class or
series vote, be increased or decreased from time to time by the
affirmative vote of a majority of the votes entitled to be cast
thereon.'
(vi) That section 4 of the Restated Certificate of Incorporation be
further amended by deleting subparagraph (6) of paragraph (d) (as
relettered pursuant to clause (ii) of this resolution) of section 4 in its
entirety and substituting in lieu thereof the following:
'(6) Notwithstanding any other provision of this Certificate of
Incorporation, until the fourth anniversary of the Closing Date (as
defined in subdivision (v) of subparagraph (11) of paragraph (b) of this
section 4), so long as any shares of Class A Common Stock remain
outstanding, this corporation shall not, without the affirmative vote of
the holders of at least 75% in voting power of the Voting Securities (as
defined in subdivision (xxiii) of subparagraph (11) of paragraph (b) of
this section 4) at the time outstanding, given in person or by proxy, at
an annual or special meeting called for the purpose, at which the
holders of the Voting Securities shall vote together as a single class,
redeem the Rights (as defined in subdivision (xvii) of subparagraph (11)
of paragraph (b) of section 4 of this Certificate of Incorporation).'
(vii) That section 6 of the Restated Certificate of Incorporation be
amended by adding the following as a new paragraph (c) immediately
following paragraph (b) of section 6:
'(c)(i) Any director of this corporation elected to a class of the
board of directors pursuant to paragraph (b) of Section 1 of Article III
of the by-laws of this corporation (as such provision hereafter may be
amended or relettered or renumbered) may be removed from office, but
only for cause and only by the affirmative vote of the holders of not
less than four-fifths of the votes entitled to be cast by the holders of
all outstanding shares (considered as one class for purposes of this
paragraph (c)) entitled to vote thereon. The stockholders entitled to
vote for the election of such removed director's successor may, at the
meeting at which such removal was effectuated, elect a successor to any
director so removed, which successor shall hold office until the next
election of the class of directors of which the director so removed was
a member. The remaining directors (other than the Class A Directors and
any other directors elected by the holders of one or more series of
Preferred Stock voting separately as a class or series (as may be fixed
in accordance with the
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<PAGE> 71
provisions of paragraph (a) of section 4 of this Certificate of
Incorporation)) may, to the extent that the vacancy is not filled by
election by the stockholders, fill such vacancy for such term.
(ii) Any Class A Director (as defined in subdivision (i) of
subparagraph (7) of paragraph (b) of section 4 of this Certificate of
Incorporation) may be removed from office (A) for cause by the
affirmative vote of the holders of not less than four-fifths of the
votes entitled to be cast by the holders of all outstanding shares
(considered as one class for purposes of this paragraph (c)) entitled to
vote thereon, and (B) without cause only by the affirmative vote of the
holders of not less than a majority of the voting power represented by
the outstanding Class A Common Stock and any Class A Preferred Stock,
voting separately as a class, provided that, if less than all the Class
A Directors are to be removed, no Class A Director may be removed
without cause if the votes cast against such director's removal would be
sufficient to elect such director if then cumulatively voted at an
election of all Class A Directors. Any vacancy resulting from any such
removal of a Class A Director shall be filled as provided in subdivision
(iv) of subparagraph (7) of paragraph (b) of section 4 of this
Certificate of Incorporation.
(iii) Any other director of this corporation may be removed from
office, with or without cause, and the vacancy resulting therefrom may
be filled, in accordance with applicable law and any other provision of
this Certificate of Incorporation (including any resolution of the board
of directors adopted in accordance with the provisions of paragraph (a)
of section 4 of this Certificate of Incorporation) or of the by-laws of
this corporation applicable thereto.
(viii) That the Restated Certificate of Incorporation be amended by
deleting therefrom section 9 in its entirety and adding the following as a
new section 9:
'9. Redemption of Stock.
(a) Notwithstanding any other provision of this Certificate of
Incorporation to the contrary (but subject to the terms of any series of
Preferred Stock fixed in accordance with the provisions of paragraph (a) of
section 4 of this Certificate of Incorporation), outstanding shares of
stock of this corporation held by Disqualified Holders (as hereinafter
defined in subdivision (ii) of paragraph (b) of this section 9) shall
always be subject to redemption by this corporation to the extent
necessary, in the judgment of the board of directors, to prevent the loss
or secure the renewal or reinstatement of any license or franchise from any
governmental agency held by this corporation or any of its Subsidiaries (as
defined in subdivision (xix) of subparagraph (11) of paragraph (b) of
section 4 of this Certificate of Incorporation) to conduct any portion of
the business of this corporation or any of its Subsidiaries, which license
or franchise is conditioned upon some or all of the holders of the stock of
this corporation possessing prescribed qualifications. The terms and
conditions of such redemption shall be as follows, subject in any case to
any additional or different rights of a particular Disqualified Holder or
of this corporation pursuant to any contract or agreement between such
Disqualified Holder and this corporation:
(i) the redemption price of the shares to be redeemed pursuant to
this section shall be equal to the Current Market Value (as hereinafter
defined in subdivision (i) of paragraph (b) of this section 9) of such
shares; provided that such redemption price as to any Disqualified
Holder who purchased such shares after February 4, 1994 and within one
year of the Redemption Date (as hereinafter defined in subdivision (iv)
of paragraph (b) of this section 9) shall not (unless otherwise
determined by the board of directors) exceed the purchase price paid by
such Disqualified Holder for such shares;
(ii) the redemption price of such shares may be paid in cash,
Redemption Securities (as hereinafter defined in subdivision (v) of
paragraph (b) of this section 9) or any combination thereof;
(iii) if less than all of the shares held by Disqualified Holders
are to be redeemed, the shares to be redeemed shall be selected in such
manner as shall be determined by the board of directors, which may
include selection first of the most recently purchased shares thereof,
selection by lot or selection in any other manner determined by the
board of directors to be equitable; provided that this
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<PAGE> 72
corporation shall be entitled to redeem shares of Common Stock held by
Disqualified Holders prior to redeeming shares of Class A Common Stock
held by Disqualified Holders;
(iv) at least ten days' written notice of the Redemption Date shall
be given to the record holders of the shares selected to be redeemed
(unless waived in writing by any such holder), provided that the
Redemption Date may be the date on which written notice shall be given
to record holders if the cash or Redemption Securities necessary to
effect the redemption shall have been deposited in trust for the benefit
of such record holders and subject to immediate withdrawal by them upon
surrender of the stock certificates for their shares to be redeemed;
(v) on the Redemption Date, unless this corporation shall have
defaulted in paying or setting aside for payment the cash or Redemption
Securities payable upon such redemption, any and all rights of
Disqualified Holders in respect of shares so redeemed (including without
limitation any rights to vote or participate in dividends), shall cease
and terminate, and from and after such Redemption Date such Disqualified
Holders shall be entitled only to receive the cash or Redemption
Securities payable upon redemption of the shares so redeemed; and
(vi) such other terms and conditions as the board of directors
shall determine;
provided, however, that in the event that any shares of Class A Common
Stock are redeemed pursuant to this section 9, the redemption price and
the other terms and conditions of such redemption shall be as set forth
in the Investment Agreement (as defined in subdivision (x) of
subparagraph (11) of paragraph (b) of section 4 of this Certificate of
Incorporation), so long as such agreement remains in effect.
(b) For purposes of this section 9 (and, with respect to subdivision
(i) and subdivision (iii) of this paragraph (b), for purposes of paragraph
(b) of section 4 of this Certificate of Incorporation):
(i) "Current Market Value" of a share of the stock of this
corporation of any class or series shall mean the average of the daily
closing prices on the NASDAQ National Market System (or such principal
exchange on which such class or series of stock may be listed) for such
a share for the 20 consecutive trading days commencing on the 22nd
trading day prior to the date on which notice of redemption shall be
given pursuant to subdivision (iv) of paragraph (a) of this section 9
(or, if such notice shall have been waived, the date that is ten days
prior to the Redemption Date). The closing price for each day shall be
the closing price, if reported, or, if the closing price is not
reported, the average of the closing bid and asked prices as reported by
the electronic inter-dealer quotation system operated by NASDAQ, Inc. or
a similar source selected from time to time by this corporation for the
purpose. In the event such closing prices are unavailable, the Current
Market Value shall be the Fair Market Value (as defined in subdivision
(ix) of subparagraph (11) of paragraph (b) of section 4 of this
Certificate of Incorporation) of such a share as determined by the
Independent Directors (as hereinafter defined in subdivision (iii) of
this paragraph (b)) in accordance with the procedures for a
determination by the Independent Directors set forth in the Investment
Agreement. Notwithstanding anything to the contrary contained herein,
the Independent Directors shall establish the Current Market Value of
the Class A Common Stock to be equal to the Current Market Value of the
Common Stock and shall establish the Current Market Value of any
options, warrants, rights or other securities convertible into or
exercisable for Class A Common Stock to be equal to the Current Market
Value of options, warrants, rights or other securities convertible into
or exercisable for Common Stock upon the same terms and otherwise
containing the same terms as such options, warrants, rights or other
securities convertible into or exercisable for Class A Common Stock.
(ii) "Disqualified Holder" shall mean any holder of shares of any
class or series of stock of this corporation whose continued holding of
such stock, either individually or taken together with the holding of
shares of stock of this corporation by any other holder or holders of
shares of stock of this corporation, may result, in the judgment of the
board of directors, in the loss of, or the failure to secure the renewal
or reinstatement of, any license or franchise from any governmental
agency held
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<PAGE> 73
by this corporation or any of its Subsidiaries to conduct any portion of
the business of this corporation or any of its Subsidiaries.
(iii) "Independent Directors" shall have the meaning set forth in
the Investment Agreement.
(iv) "Redemption Date" shall mean the date fixed by the board of
directors for the redemption of any shares of stock of this corporation
pursuant to this section 9.
(v) "Redemption Securities" shall mean any debt or equity
securities of this corporation, any of its Subsidiaries or any other
corporation, or any combination thereof, having such terms and
conditions as shall be approved by the board of directors and which,
together with any cash to be paid as part of the redemption price, in
the opinion of any nationally recognized investment banking firm
selected by the board of directors (which may be a firm which provides
other investment banking, brokerage or other services to this
corporation), has a value, at the time notice of redemption is given
pursuant to subdivision (iv) of paragraph (a) of this section 9 (or, if
such notice shall have been waived, the date that is ten days prior to
the Redemption Date), at least equal to the price required to be paid
pursuant to subdivision (i) of paragraph (a) of this section 9
(assuming, in the case of Redemption Securities to be publicly traded,
such Redemption Securities were fully distributed and subject only to
normal trading activity).'
(ix) That the Restated Certificate of Incorporation be amended by
deleting therefrom section 10 in its entirety.
(x) That section 11 of the Restated Certificate of Incorporation be
amended by renumbering section 11 to become section 10, and any and all
references throughout the Restated Certificate of Incorporation to former
section 11 shall be amended accordingly to refer to section 10."
SECOND: That thereafter, pursuant to resolution of the board of directors
of the corporation, a meeting of the stockholders of the corporation was duly
called and held, upon notice in accordance with Section 222 of the General
Corporation Law of the State of Delaware, at which meeting the necessary number
of shares as required by statute and the Restated Certificate of Incorporation
were voted in favor of the amendments.
THIRD: That said amendments were duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, the corporation has caused its corporate seal to be
affixed and this Certificate to be signed by its and attested to by
its this day of , 1994.
MCI COMMUNICATIONS CORPORATION
By:
--------------------------------------
Name:
Title:
[Corporate Seal]
Attest:
- --------------------------------------
Name:
Title:
A-15
<PAGE> 74
Exhibit B
[to Amended and Restated
Investment Agreement]
PROPOSED AMENDMENTS TO
BY-LAWS OF
MCI COMMUNICATIONS CORPORATION
"RESOLVED, that the board of directors hereby deems it advisable that the
by-laws of this corporation be amended as follows:
(i) That Article II of the by-laws be amended by adding the following
to the end of Section 5 of Article II:
'Subject to the Certificate of Incorporation, special meetings of the
holders of any one or more classes, and/or one or more series thereof,
of capital stock of the corporation entitled to vote separately as a
class or classes with respect to any matter as required by law or as
provided by the Certificate of Incorporation shall be held at such place
within or without the State of Delaware as shall be determined by the
person or persons calling the meeting and as shall be designated in the
notice of the meeting. Subject to the Certificate of Incorporation,
special meetings of such holders may be called by a majority of the
directors elected by such class or classes, and/or series thereof, of
capital stock, a majority of the whole board of directors or by the
Chairman and shall be called by the Chairman, the President or the
Secretary at the request in writing of holders owning at least two-
thirds of the issued and outstanding shares of such class or classes,
and/or series thereof, of the capital stock of the corporation.'
(ii) That Article II of the by-laws be amended by deleting the first
sentence of Section 6 of Article II and substituting in lieu thereof the
following:
'Unless otherwise provided by law, the Certificate of Incorporation or
these by-laws, not less than ten nor more than sixty days before any
stockholders meeting, the Chairman, the President, the Secretary or an
Assistant Secretary shall give each stockholder entitled to vote at the
meeting written notice of the place, date and hour of the meeting and,
in the case of a special meeting, the purpose or purposes for which the
meeting is called.'
(iii) That Article III of the by-laws be amended by deleting the
second sentence of paragraph (a) of Section 1 of Article III and
substituting in lieu thereof the following:
'The number of directors of the corporation (exclusive of directors to
be elected by the holders of one or more classes, and/or one or more
series thereof, of capital stock (other than the Class A Common Stock)
of the corporation entitled to vote separately for directors as a class
or classes), including the directors to be elected by the holders of the
Class A Common Stock of the corporation (sometimes hereafter in these
by-laws, the "Class A Directors"), shall be not less than three nor more
than sixteen.'
(iv) That Article III of the by-laws be further amended by deleting
the first sentence of paragraph (b) of Section 1 of Article III and
substituting in lieu thereof the following:
'The board of directors (excluding the Class A Directors) shall be
divided into three classes, each class to be as nearly equal in number
to the other classes as the then total number of directors constituting
the whole board (excluding the Class A Directors) permits, with the term
of office of one class expiring each year.'
(v) That Article III of the by-laws be further amended by deleting
paragraph (d) of Section 1 of Article III in its entirety and substituting
in lieu thereof the following:
'(d) Subject to the Certificate of Incorporation, no decrease in
the number of directors constituting the whole board shall shorten the
term of any incumbent director.'
B-1
<PAGE> 75
(vi) That Article III of the by-laws be further amended by deleting
the words "Section 10 of this Article III" as such words appear in each of
paragraph (a) and paragraph (b) of Section 4 of Article III and
substituting in lieu thereof the words "the Certificate of Incorporation".
(vii) That Article III of the by-laws be further amended by deleting
the third sentence of Section 5 of Article III and substituting in lieu
thereof the following:
'Special meetings may be held at any time upon the call of the Chairman
or at least two directors, by oral, telephonic, telegraphic or facsimile
notice duly given or sent at least one hour, or by written notice sent
by express mail at least one day, before the meeting to each director;
provided that all such notices to directors located outside the United
States shall be given or sent orally or by telephone, telegraph or
facsimile transmission.'
(viii) That Article III of the by-laws be further amended by deleting
the first three sentences of Section 8 of Article III and substituting in
lieu thereof the following:
'The board of directors may, from among its own members, in its
discretion and by the affirmative vote of a majority of the whole board,
designate one or more committees, each of such committees to consist of
one or more members. The committees designated by the board shall have
such powers and authority as shall be specified in the resolution or
resolutions whereby such committees are designated.'
(ix) That Article III of the by-laws be further amended by deleting
the fifth sentence of Section 8 of Article III and substituting in lieu
thereof the following:
'No committee shall have the power or authority of the board of
directors in reference to amending the Certificate of Incorporation
(except that a committee may, to the extent authorized in the resolution
or resolutions providing for the issuance of shares of stock adopted by
the board pursuant to paragraph (a) of section 4 of the Certificate of
Incorporation, fix the designations and any of the preferences or rights
of such shares relating to dividends, redemption, dissolution, any
distribution of assets of the corporation or the conversion into, or the
exchange of such shares for, shares of any other class or classes or any
series of the same or any other class or classes of stock of the
corporation or fix the number of shares of any series of stock or
authorize the increase or decrease of the shares of any series),
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of
the corporation's property and assets, recommending to the stockholders
a dissolution of the corporation or a revocation of a dissolution, or
amending these by-laws; and, unless the resolution of the board of
directors expressly so provides, no committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock or
to adopt a certificate of ownership and merger.'
(x) That Article III of the by-laws be further amended by deleting
Section 10 of Article III in its entirety.
(xi) That Article III of the by-laws be further amended by renumbering
Section 11 and Section 12, respectively, of Article III to become Section
10 and Section 11 of Article III, respectively, and any and all references
throughout the bylaws to the sections of Article III formerly numbered as
Section 11 and Section 12 shall be amended to refer to Section 10 and
Section 11, respectively.
(xii) That the by-laws be amended by adding the following new Article
X to the end thereof:
ARTICLE X
INDEMNIFICATION
Section 1. Indemnification. To the fullest extent permitted by the
General Corporation Law of the State of Delaware, the corporation shall
indemnify any current or former director, officer, employee or agent of the
corporation against all expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with any threatened, pending or
B-2
<PAGE> 76
completed action, suit or proceeding, or any inquiry or investigation, brought
by or in the right of the corporation or otherwise, to which such person was or
is a party or threatened to be made a party by reason of his current or former
position with the corporation or by reason of the fact that such person is or
was serving, at the request of the corporation, as a director, officer, partner,
trustee, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise.
Section 2. Advancement of Expenses. Expenses (including attorneys' fees)
incurred by a current or former director or officer of the corporation in
defending any threatened or pending action, suit or proceeding shall be paid by
the corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall be ultimately determined that such
person is not entitled to be indemnified by the corporation under the
Certificate of Incorporation, these by-laws, the General Corporation Law of the
State of Delaware or otherwise. Such expenses (including attorneys' fees)
incurred by other current or former employees or agents of the corporation may
be so paid upon such terms and conditions, if any, as the board of directors
deems appropriate'."
B-3
<PAGE> 77
EXHIBIT C
[To Amended and Restated Investment Agreement]
[FORM OF RIGHTS AGREEMENT]
MCI COMMUNICATIONS CORPORATION
AND
,
AS RIGHTS AGENT
RIGHTS AGREEMENT
DATED AS OF , 1994
<PAGE> 78
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C> <C>
Section 1. Certain Definitions....................................................... C- 1
Section 2. Appointment of Rights Agent............................................... C- 3
Section 3. Issue of Right Certificates............................................... C- 3
Section 4. Form of Right Certificates................................................ C- 5
Section 5. Countersignature and Registration......................................... C- 5
Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen Right Certificates................... C- 5
Section 7. Exercise of Rights, Purchase Price; Expiration Date of Rights............. C- 6
Section 8. Cancellation and Destruction of Right Certificates........................ C- 7
Section 9. Availability of Preferred Shares.......................................... C- 7
Section 10. Preferred Shares Record Date.............................................. C- 8
Section 11. Adjustment of Purchase Price, Number of Shares or Number of Rights........ C- 8
Section 12. Certificate of Adjusted Purchase Price or Number of Shares................ C- 13
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earnings Power..... C- 14
Section 14. Fractional Rights and Fractional Shares................................... C- 16
Section 15. Rights of Action.......................................................... C- 17
Section 16. Agreement of Right Holders................................................ C- 17
Section 17. Right Certificate Holder Not Deemed a Stockholder......................... C- 17
Section 18. Concerning the Rights Agent............................................... C- 17
Section 19. Merger or Consolidation or Change of Name of Rights Agent................. C- 18
Section 20. Duties of Rights Agent.................................................... C- 18
Section 21. Change of Rights Agent.................................................... C- 20
Section 22. Issuance of New Right Certificates........................................ C- 20
Section 23. Redemption................................................................ C- 20
Section 24. Exchange.................................................................. C- 21
Section 25. Notice of Certain Events.................................................. C- 22
Section 26. Notices................................................................... C- 22
Section 27. Supplements and Amendments................................................ C- 22
Section 28. Successors................................................................ C- 23
Section 29. Benefits of this Agreement................................................ C- 23
Section 30. Severability.............................................................. C- 23
Section 31. Governing Law............................................................. C- 23
Section 32. Counterparts.............................................................. C- 23
Section 33. Descriptive Headings...................................................... C- 23
</TABLE>
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RIGHTS AGREEMENT
Agreement, dated as of , 1994, between MCI Communications
Corporation, a Delaware corporation (the "Company"), and , a [national
banking association] (the "Rights Agent").
The Board of Directors of the Company has authorized and declared a
dividend of one preferred share purchase right (a "Right") for each Common Share
(as hereinafter defined) of the Company outstanding as of the close of business
(as defined below) on , 1994 (the "Record Date"), each Right
representing the right to purchase one one-hundredth (subject to adjustment) of
a Preferred Share (as hereinafter defined), upon the terms and subject to the
conditions herein set forth, and has further authorized and directed the
issuance of one Right (subject to adjustment as provided herein) with respect to
each Common Share that shall become outstanding between the Record Date and the
earliest of the Distribution Date, the Redemption Date and the Final Expiration
Date (as such terms are hereinafter defined); provided, however, that Rights may
be issued with respect to Common Shares that shall become outstanding after the
Distribution Date and prior to the Redemption Date and the Final Expiration Date
in accordance with Section 22.
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meaning indicated:
(a) "Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which, shall be the Beneficial Owner (as such
term is hereinafter defined) of 10% or more of the Common Shares then
outstanding, but shall not include an Exempt Person (as such term is
hereinafter defined); provided, however, that if the Board of Directors of
the Company determines in good faith that a Person who would otherwise be
an "Acquiring Person," has become such inadvertently, and such Person
divests himself or itself as promptly as practicable of beneficial
ownership of a sufficient number of Common Shares so that such Person would
no longer be an Acquiring Person, then such Person shall not be deemed to
be or have become an "Acquiring Person" for any purposes of this Agreement.
Notwithstanding the foregoing: (i) BT shall not be deemed an Acquiring
Person unless it becomes the Beneficial Owner of more than 20.1% of the
Common Shares then outstanding, (ii) no Person (including BT) shall become
an "Acquiring Person" as the result of an acquisition of Common Shares by
the Company which, by reducing the number of shares outstanding, increases
the proportionate number of shares beneficially owned by such Person to 10%
or more (more than 20.1% in the case of BT) of the Common Shares then
outstanding, provided, however, that if a Person shall become the
Beneficial Owner of 10% or more of the Common Shares then outstanding (more
than 20.1% in the case of BT) by reason of such share acquisitions by the
Company and thereafter become the Beneficial Owner of any additional Common
Shares, then such Person shall be deemed to be an "Acquiring Person" unless
upon the consummation of the acquisition of such additional Common Shares
such Person does not own 10% or more (20.1% or more in the case of BT) of
the Common Shares then outstanding and (iii) BT shall not become an
"Acquiring Person" because it becomes the Beneficial Owner of any Common
Shares as a result of the acquisition of Common Shares from the Company
pursuant to Section 2 of the Investment Agreement or upon the exercise of
its equity purchase rights set forth in Section 6 of the Investment
Agreement or upon the issuance of Common Shares upon conversion or exercise
of securities issued pursuant to such equity purchase rights, provided,
however, that if BT shall become the Beneficial Owner of more than 20.1% of
the Common Shares by reason of such acquisition of such Common Shares from
the Company or the exercise of such equity purchase rights and shall
thereafter become the Beneficial Owner of any additional Common Shares,
then BT shall be deemed to be an "Acquiring Person" unless upon
consummation of the acquisition of such additional Common Shares BT does
not own more than 20.1% of the Common Shares then outstanding. The phrase
"then outstanding", when used with reference to a Person's Beneficial
Ownership of securities of the Company, shall mean the number of such
securities then issued and outstanding together with the number of such
securities not then actually issued and outstanding which such Person would
be deemed to own beneficially hereunder.
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(b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
as in effect on the date of this Agreement; provided that, when used to
indicate a relationship with BT, "Associate" shall mean a corporation or
organization of which BT is, directly or indirectly, the beneficial owner
of 20% or more of any class of voting securities, provided, however, that,
with respect to a corporation or organization that would otherwise be an
Associate of BT as of the date hereof, such percentage shall be 23% or more
and such percentage shall be applied with reference to all outstanding
voting securities, provided further that the applicable percentage shall be
10% or more and such percentage shall be applied with reference to any
class of voting securities if such corporation or organization holds Voting
Securities (as defined in the Investment Agreement) in order to circumvent
the purposes of this Agreement.
(c) A Person shall be deemed the "Beneficial Owner" of, shall be
deemed to have "Beneficial Ownership" of and shall be deemed to
"beneficially own" any securities:
(i) which such Person or any of such Person's Affiliates or
Associates is deemed to beneficially own, directly or indirectly within
the meaning of Rule 13d-3 of the General Rules and Regulations under the
Exchange Act as in effect on the date of this Rights Agreement;
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is
exercisable immediately or only after the passage of time) pursuant to
any agreement, arrangement or understanding (other than customary
agreements with and between underwriters and selling group members with
respect to a bona fide public offering of securities), or upon the
exercise of conversion rights, exchange rights, rights, warrants or
options, or otherwise; provided, however, that a Person shall not be
deemed the Beneficial Owner of, or to beneficially own, (x) securities
tendered pursuant to a tender or exchange offer made by or on behalf of
such Person or any of such Person's Affiliates or Associates until such
tendered securities are accepted for purchase, (y) securities which such
Person has a right to acquire on the exercise of Rights at any time
prior to the time a Person becomes an Acquiring Person or (z) securities
issuable upon exercise of Rights from and after the time a Person
becomes an Acquiring Person if such Rights were acquired by such Person
or any of such Person's Affiliates or Associates prior to the
Distribution Date or pursuant to Section 3(a) or Section 22 hereof
("original Rights") or pursuant to Section 11(i) or Section 11(n) with
respect to an adjustment to original Rights; or (B) the right to vote
pursuant to any agreement, arrangement or understanding; provided,
however, that a Person shall not be deemed the Beneficial Owner of, or
to beneficially own, any security by reason of such agreement,
arrangement or understanding if the agreement, arrangement or
understanding to vote such security (1) arises solely from a revocable
proxy or consent given to such Person in response to a public proxy or
consent solicitation made pursuant to, and in accordance with, the
applicable rules and regulations promulgated under the Exchange Act and
(2) is not also then reportable on Schedule 13D under the Exchange Act
(or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by any
other Person with which such Person or any of such Person's Affiliates
or Associates has any agreement, arrangement or understanding (other
than customary agreements with and between underwriters and selling
group members with respect to a bona fide public offering of securities)
for the purpose of acquiring, holding, voting (except to the extent
contemplated by the proviso to Section 1(c)(ii)(B)) or disposing of any
securities of the Company.
(d) "BT" shall mean British Telecommunications plc, a public limited
company organized and existing under the laws of England and Wales, and its
wholly-owned subsidiaries.
(e) "Business Day" shall mean any day other than a Saturday, a Sunday,
or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
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(f) "close of business" on any given date shall mean 5:00 P.M., New
York City time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 P.M., New York City time, on the next
succeeding Business Day.
(g) "Common Shares" when used with reference to the Company shall mean
shares of Common Stock and shares of the Class A Common Stock, presently
par value $.10 per share, of the Company. "Common Shares" when used with
reference to any Person other than the Company shall mean the capital stock
(or, in the case of an unincorporated entity, the equivalent equity
interest) with the greatest voting power of such other Person or, if such
other Person is a subsidiary of another Person, the Person or Persons which
ultimately control such first-mentioned Person.
(h) "Common Stock" shall mean the common stock, presently par value
$.10 per share, of the Company.
(i) "Distribution Date" shall have the meaning set forth in Section 3
hereof.
(j) "Exempt Person" shall mean the Company, any Subsidiary (as such
term is hereinafter defined) of the Company, any employee benefit plan of
the Company or of any Subsidiary of the Company, or any entity or trustee
holding Common Shares for or pursuant to the terms of any such plan or for
the purpose of funding any such plan or funding other employee benefits for
employees of the Company or of any Subsidiary of the Company.
(k) "Final Expiration Date" shall have the meaning set forth in
Section 7 hereof.
(l) "Investment Agreement" shall mean the Amended and Restated
Investment Agreement, dated as of January 31, 1994, between BT and the
Company, as the same may be amended, supplemented or otherwise modified
from time to time.
(m) "NASDAQ Stock Market" shall mean stock market operated by National
Association of Securities Dealers, Inc.
(n) "Person" shall mean any individual, firm, corporation or other
entity, and shall include any successor (by merger or otherwise) of such
entity.
(o) "Preferred Shares" shall mean shares of Series E Junior
Participating Preferred Stock, par value $.10 per share, of the Company
having the rights and preferences set forth in the Form of Certificate of
Designations attached to this Agreement as Exhibit A.
(p) "Redemption Date" shall have the meaning set forth in Section 7
hereof.
(q) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(r) "Shares Acquisition Date" shall mean the first date of public
announcement by the Company or an Acquiring Person that an Acquiring Person
has become such or such earlier date as a majority of the Board of
Directors shall become aware of the existence of an Acquiring Person.
(s) "Subsidiary" of any Person shall mean any corporation or other
entity of which securities or other ownership interests having ordinary
voting power sufficient to elect a majority of the board of directors or
other persons performing similar functions are beneficially owned, directly
or indirectly, by such Person, and any corporation or other entity that is
otherwise controlled by such Person.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall prior to the Distribution Date also
be the holders of the Common Shares) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment. The Company may
from time to time appoint such co-Rights Agents as it may deem necessary or
desirable.
Section 3. Issue of Right Certificates. (a) Until the earlier of (i) the
tenth day after the Shares Acquisition Date or (ii) the tenth business day (or
such later date as may be determined by action of the Board of Directors prior
to such time as any Person becomes an Acquiring Person) after the date of the
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commencement by any Person (other than an Exempt Person) of, or of the first
public announcement of the intention of such Person (other than an Exempt
Person) to commence, a tender or exchange offer the consummation of which would
result in any Person becoming the Beneficial Owner of Common Shares aggregating
10% or more (more than 20.1% if such Person is BT) of the Common Shares then
outstanding (including any such date which is after the date of this Agreement
and prior to the issuance of the Rights; the earlier of such dates being herein
referred to as the "Distribution Date"), (x) the Rights will be evidenced
(subject to the provisions of Section 3(b) hereof) by the certificates for
Common Shares registered in the names of the holders thereof and not by separate
Right Certificates, and (y) the Rights will be transferable only in connection
with the transfer of Common Shares. As soon as practicable after the
Distribution Date, the Company will prepare and execute, the Rights Agent will
countersign, and the Company will send or cause to be sent (and the Rights Agent
will, if requested, send) by first-class, insured, postage-prepaid mail, to each
record holder of Common Shares as of the close of business on the Distribution
Date (other than any Acquiring Person or any Associate or Affiliate of an
Acquiring Person), at the address of such holder shown on the records of the
Company, a Right Certificate, in substantially the form of Exhibit B hereto (a
"Right Certificate"), evidencing one Right (subject to adjustment as provided
herein) for each Common Share so held. As of the Distribution Date, the Rights
will be evidenced solely by such Right Certificates.
(b) On the Record Date, or as soon as practicable thereafter, the Company
will send a copy of a Summary of Rights to Purchase Preferred Shares, in
substantially the form of Exhibit C hereto (the "Summary of Rights"), by
first-class, postage-prepaid mail, to each record holder of Common Shares as of
the close of business on the Record Date (other than any Acquiring Person or any
Associate or Affiliate of any Acquiring Person), at the address of such holder
shown on the records of the Company. With respect to certificates for Common
Shares outstanding as of the Record Date, until the Distribution Date, the
Rights will be evidenced by such certificates registered in the names of the
holders thereof together with the Summary of Rights. Until the Distribution Date
(or the earlier of the Redemption Date or the Final Expiration Date), the
surrender for transfer of any certificate for Common Shares outstanding on the
Record Date, with or without a copy of the Summary of Rights, shall also
constitute the transfer of the Rights associated with the Common Shares
represented thereby.
(c) Certificates issued for Common Shares (including, without limitation,
upon transfer of outstanding Common Shares, disposition of Common Shares out of
treasury stock or issuance or reissuance of Common Shares out of authorized but
unissued shares) after the Record Date but prior to the earliest of the
Distribution Date, the Redemption Date or the Final Expiration Date shall have
impressed on, printed on, written on or otherwise affixed to them the following
legend:
This certificate also evidences and entitles the holder
hereof to certain rights as set forth in a Rights
Agreement between MCI Communications Corporation and
, dated as of , 1994 (the "Rights
Agreement") as the same may be amended from time to time,
the terms of which are hereby incorporated herein by
reference and a copy of which is on file at the principal
executive offices of MCI Communications Corporation. Under
certain circumstances, as set forth in the Rights
Agreement, such Rights will be evidenced by separate
certificates and will no longer be evidenced by this
certificate. MCI Communications Corporation will mail to
the holder of this certificate a copy of the Rights
Agreement without charge after receipt of a written
request therefor. Under certain circumstances, as set
forth in the Rights Agreement, Rights owned by or
transferred to any Person who becomes an Acquiring Person
(as defined in the Rights Agreement) and certain
transferees thereof will become null and void and will no
longer be transferable.
With respect to such certificates containing the foregoing legend, until the
Distribution Date, the Rights associated with the Common Shares represented by
such certificates shall be evidenced by such certificates alone, and the
surrender for transfer of any such certificate, except as otherwise provided
herein, shall also constitute the transfer of the Rights associated with the
Common Shares represented thereby. In the event that the Company purchases or
otherwise acquires any Common Shares after the Record Date but prior to the
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Distribution Date, any Rights associated with such Common Shares shall be deemed
cancelled and retired so that the Company shall not be entitled to exercise any
Rights associated with the Common Shares which are no longer outstanding.
Notwithstanding this paragraph (c), the omission of a legend shall not
affect the enforceability of any part of this Rights Agreement or the rights of
any holder of the Rights.
Section 4. Form of Right Certificates. The Right Certificates (and the
forms of election to purchase Preferred Shares and of assignment to be printed
on the reverse thereof) shall be substantially in the form set forth in Exhibit
B hereto and may have such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any applicable law or with any rule or
regulation made pursuant thereto or with any rule or regulation of the NASDAQ
Stock Market or of any stock exchange on which the Rights may from time to time
be listed, or to conform to usage. Subject to the provisions of Sections 11 and
22 hereof, the Right Certificates shall entitle the holders thereof to purchase
such number of one one-hundredths of a Preferred Share as shall be set forth
therein at the price per one one-hundredth of a Preferred Share set forth
therein (the "Purchase Price"), but the number of such one onehundredths of a
Preferred Share and the Purchase Price shall be subject to adjustment as
provided herein.
Section 5. Countersignature and Registration. (a) The Right Certificates
shall be executed on behalf of the Company by the Chairman of the Board of
Directors, the President, any of the Vice Presidents, the Treasurer or the
Controller of the Company, either manually or by facsimile signature, shall have
affixed thereto the Company's seal or a facsimile thereof, and shall be attested
by the Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature. The Right Certificates shall be manually countersigned by
the Rights Agent and shall not be valid for any purpose unless countersigned. In
case any officer of the Company who shall have signed any of the Right
Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as though
the Person who signed such Right Certificates had not ceased to be such officer
of the Company; and any Right Certificate may be signed on behalf of the Company
by any Person who, at the actual date of the execution of such Right
Certificate, shall be a proper officer of the Company to sign such Right
Certificate, although at the date of the execution of this Rights Agreement any
such Person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or cause to
be kept, at an office or agency designated for such purpose, books for
registration and transfer of the Right Certificates issued hereunder. Such books
shall show the names and addresses of the respective holders of the Right
Certificates, the number of Rights evidenced on its face by each of the Right
Certificates and the date of each of the Right Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. (a)
Subject to the provisions of Sections 11(a)(ii) and 14 hereof, at any time after
the close of business on the Distribution Date, and at or prior to the close of
business on the earlier of the Redemption Date or the Final Expiration Date, any
Right Certificate or Right Certificates (other than Right Certificates
representing Rights that have become void pursuant to Section 11(a)(ii) hereof
or that have been exchanged pursuant to Section 24 hereof) may be transferred,
split up, combined or exchanged for another Right Certificate or Right
Certificates, entitling the registered holder to purchase a like number of one
one-hundredths of a Preferred Share as the Right Certificate or Right
Certificates surrendered then entitled such holder to purchase. Any registered
holder desiring to transfer, split up, combine or exchange any Right Certificate
or Right Certificates shall make such request in writing delivered to the Rights
Agent, and shall surrender the Right Certificate or Right Certificates to be
transferred, split up, combined or exchanged at the office or agency of the
Rights Agent designated for such purpose. Thereupon the Rights Agent shall
countersign and deliver to the Person entitled thereto a Right Certificate or
Right Certificates, as the case may be, as so requested. The Company may require
payment of a sum sufficient to cover any tax or governmental
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charge that may be imposed in connection with any transfer, split up,
combination or exchange of Right Certificates.
(b) Subject to the provisions of Section 11(a)(ii) hereof, upon receipt by
the Company and the Rights Agent of evidence reasonably satisfactory to them of
the loss, theft, destruction or mutilation of a Right Certificate, and, in case
of loss, theft or destruction, of indemnity or security reasonably satisfactory
to them, and, at the Company's request, reimbursement to the Company and the
Rights Agent of all reasonable expenses incidental thereto, and upon surrender
to the Rights Agent and cancellation of the Right Certificate if mutilated, the
Company will make and deliver a new Right Certificate of like tenor to the
Rights Agent for delivery to the registered holder in lieu of the Right
Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights, Purchase Price; Expiration Date of
Rights. (a) Except as otherwise provided herein, the Rights shall become
exercisable on the Distribution Date, and thereafter the registered holder of
any Right Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein) in whole or in part, upon surrender of the Right
Certificate, with the form of election to purchase on the reverse side thereof
duly executed, to the Rights Agent at the office or agency of the Rights Agent
designated for such purpose, together with payment of the Purchase Price for
each one one-hundredth of a Preferred Share as to which the Rights are
exercised, at any time which is both after the Distribution Date and prior to
the earliest of (i) the close of business on , 2004 (the "Final
Expiration Date"), (ii) the time at which the Rights are redeemed as provided in
Section 23 hereof (the "Redemption Date") or (iii) the time at which such Rights
are exchanged as provided in Section 24 hereof.
(b) The Purchase Price shall be initially $[ ] for each one
one-hundredth of a Preferred Share purchasable upon the exercise of a Right. The
Purchase Price and the number of one one-hundredths of a Preferred Share or
other securities or property to be acquired upon exercise of a Right shall be
subject to adjustment from time to time as provided in Sections 11 and 13 hereof
and shall be payable in lawful money of the United States of America in
accordance with paragraph (c) of this Section 7.
(c) Except as otherwise provided herein, upon receipt of a Right
Certificate representing exercisable Rights, with the form of election to
purchase duly executed, accompanied by payment of the aggregate Purchase Price
for the Preferred Shares to be purchased and an amount equal to any applicable
transfer tax required to be paid by the holder of such Right Certificate in
accordance with Section 9 hereof, in cash or by certified check, cashier's check
or money order payable to the order of the Company, the Rights Agent shall
thereupon promptly (i) (A) requisition from any transfer agent of the Preferred
Shares certificates for the number of Preferred Shares to be purchased and the
Company hereby irrevocably authorizes its transfer agent to comply with all such
requests, or (B) requisition from the depositary agent depositary receipts
representing interests in such number of one one-hundredths of a Preferred Share
as are to be purchased (in which case certificates for the Preferred Shares
represented by such receipts shall be deposited by the transfer agent with the
depositary agent) and the Company hereby directs the depositary agent to comply
with such request, (ii) when appropriate, requisition from the Company the
amount of cash to be paid in lieu of issuance of fractional shares in accordance
with Section 14 hereof, (iii) promptly after receipt of such certificates or
depositary receipts, cause the same to be delivered to or upon the order of the
registered holder of such Right Certificate, registered in such name or names as
may be designated by such holder and (iv) when appropriate, after receipt,
promptly deliver such cash to or upon the order of the registered holder of such
Right Certificate.
(d) Except as otherwise provided herein, in case the registered holder of
any Right Certificate shall exercise less than all the Rights evidenced thereby,
a new Right Certificate evidencing Rights equivalent to the Rights remaining
unexercised shall be issued by the Rights Agent to the registered holder of such
Right Certificate or to his duly authorized assigns, subject to the provisions
of Section 14 hereof.
(e) Notwithstanding anything in this Rights Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall have
(i) completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise and (ii) provided such additional evidence of the identity of the
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Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Right Certificates. All Right
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Rights Agreement. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall deliver
all cancelled Right Certificates to the Company, or shall, at the written
request of the Company, destroy such cancelled Right Certificates, and in such
case shall deliver a certificate of destruction thereof to the Company.
Section 9. Availability of Preferred Shares. (a) The Company covenants
and agrees that it will cause to be reserved and kept available out of its
authorized and unissued Preferred Shares or any Preferred Shares held in its
treasury, the number of Preferred Shares that will be sufficient to permit the
exercise in full of all outstanding Rights.
(b) So long as the Preferred Shares (and, following the time that a Person
becomes an Acquiring Person, shares of Common Stock and other securities)
issuable upon the exercise of Rights may be listed or admitted to trading on the
NASDAQ Stock Market or listed on any national securities exchange, the Company
shall use its best efforts to cause, from and after such time as the Rights
become exercisable, all shares reserved for such issuance to be listed or
admitted to trading on the NASDAQ Stock Market or listed on such exchange upon
official notice of issuance upon such exercise.
(c) From and after such time as the Rights become exercisable, the Company
shall use its best efforts to, if then necessary to permit the issuance of
Preferred Shares (and following the time that a Person first becomes an
Acquiring Person, shares of Common Stock and other securities) upon the exercise
of Rights, register and qualify such Preferred Shares (and following the time
that a Person first becomes an Acquiring Person, shares of Common Stock and
other securities) under the Securities Act and any applicable state securities
or "Blue Sky" laws (to the extent exemptions therefrom are not available), cause
such registration statement and qualifications to become effective as soon as
possible after such filing and keep such registration and qualifications
effective until the earlier of the date as of which the Rights are no longer
exercisable for such securities and the Final Expiration Date. The Company may
temporarily suspend, for a period of time not to exceed 90 days, the
exercisability of the Rights in order to prepare and file a registration
statement under the Securities Act and permit it to become effective. Upon any
such suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect.
Notwithstanding any provision of this Agreement to the contrary, the Rights
shall not be exercisable in any jurisdiction unless the requisite qualification
in such jurisdiction shall have been obtained and until a registration statement
under the Securities Act (if required) shall have been declared effective.
(d) The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all Preferred Shares (and, following the time
that a Person becomes an Acquiring Person, shares of Common Stock and other
securities) delivered upon exercise of Rights shall, at the time of delivery of
the certificates therefor (subject to payment of the Purchase Price), be duly
and validly authorized and issued and fully paid and nonassessable shares.
(e) The Company further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of the Right Certificates or of
any Preferred Shares (or shares of Common Stock or other securities) upon the
exercise of Rights. The Company shall not, however, be required to pay any
transfer tax which may be payable in respect of any transfer or delivery of
Right Certificates to a Person other than, or the issuance or delivery of
certificates or depositary receipts for the Preferred Shares in a name other
than that of, the registered holder of the Right Certificate evidencing Rights
surrendered for exercise or to issue or deliver any certificates or depositary
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receipts for Preferred Shares upon the exercise of any Rights until any such tax
shall have been paid (any such tax being payable by that holder of such Right
Certificate at the time of surrender) or until it has been established to the
Company's reasonable satisfaction that no such tax is due.
Section 10. Preferred Shares Record Date. Each Person in whose name any
certificate for Preferred Shares is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of the Preferred
Shares represented thereby on, and such certificate shall be dated, the date
upon which the Right Certificate evidencing such Rights was duly surrendered and
payment of the Purchase Price (and any applicable transfer taxes) was made;
provided, however, that if the date of such surrender and payment is a date upon
which the Preferred Shares transfer books of the Company are closed, such Person
shall be deemed to have become the record holder of such shares on, and such
certificate shall be dated, the next succeeding Business Day on which the
Preferred Shares transfer books of the Company are open. Prior to the exercise
of the Rights evidenced thereby, the holder of a Right Certificate shall not be
entitled to any rights of a holder of Preferred Shares for which the Rights
shall be exercisable, including, without limitation, the right to vote, to
receive dividends or other distributions or to exercise any preemptive rights,
and shall not be entitled to receive any notice of any proceedings of the
Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number of Shares or Number of
Rights. The Purchase Price, the number of Preferred Shares or other securities
or property purchasable upon exercise of each Right and the number of Rights
outstanding are subject to adjustment from time to time as provided in this
Section 11.
(a) (i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Preferred Shares payable in
Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C)
combine the outstanding Preferred Shares into a smaller number of Preferred
Shares or (D) issue any shares of its capital stock in a reclassification
of the Preferred Shares (including any such reclassification in connection
with a consolidation or merger in which the Company is the continuing or
surviving corporation), except as otherwise provided in this Section 11(a),
the Purchase Price in effect at the time of the record date for such
dividend or of the effective date of such subdivision, combination or
reclassification, and the number and kind of shares of capital stock
issuable on such date, shall be proportionately adjusted so that the holder
of any Right exercised after such time shall be entitled to receive the
aggregate number and kind of shares of capital stock which, if such Right
had been exercised immediately prior to such date and at a time when the
Preferred Shares transfer books of the Company were open, the holder would
have owned upon such exercise and been entitled to receive by virtue of
such dividend, subdivision, combination or reclassification; provided,
however, that in no event shall the consideration to be paid upon the
exercise of one Right be less than the aggregate par value of the shares of
capital stock of the Company issuable upon exercise of one Right.
(ii) Subject to Section 24 of this Agreement and except as otherwise
provided in this Section 11(a)(ii), in the event any Person becomes an
Acquiring Person, each holder of a Right, shall thereafter have the right
to receive, upon exercise thereof at a price equal to the then current
Purchase Price multiplied by the number of one one-hundredths of a
Preferred Share for which a Right is then exercisable, in accordance with
the terms of this Agreement and in lieu of Preferred Shares, such number of
shares of Common Stock (or at the option of the Company, such number of one
one-hundredths of Preferred Shares) as shall equal the result obtained by
(x) multiplying the then current Purchase Price by the number of one
one-hundredths of a Preferred Share for which a Right is then exercisable
and dividing that product by (y) 50% of the then current per share market
price of the Company's Common Stock (determined pursuant to Section 11(d)
hereof) on the date of the occurrence of such event. Notwithstanding
anything in this Rights Agreement to the contrary, however, from and after
the time (the "invalidation time") when any Person first becomes an
Acquiring Person, any Rights that are beneficially owned by (x) any
Acquiring Person (or any Affiliate or Associate of any Acquiring Person),
(y) a transferee of any Acquiring Person (or any such Affiliate or
Associate) who becomes a transferee after the invalidation time or (z) a
transferee of any Acquiring Person (or any such Affiliate or Associate) who
became a transferee prior to or concurrently with the invalidation time
pursuant to either (I) a transfer from the Acquiring Person to holders of
its equity securities or to any Person with whom it
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has any continuing agreement, arrangement or understanding regarding the
transferred Rights or (II) a transfer which the Board of Directors has
determined is part of a plan, arrangement or understanding which has the
purpose or effect of avoiding the provisions of this paragraph, and
subsequent transferees of such Persons, shall be void without any further
action and any holder of such Rights shall thereafter have no rights
whatsoever with respect to such Rights under any provision of this Rights
Agreement. The Company shall use all reasonable efforts to ensure that the
provisions of this Section 11(a)(ii) are complied with, but shall have no
liability to any holder of Right Certificates or other Person as a result
of its failure to make any determinations with respect to an Acquiring
Person or its Affiliates, Associates or transferees hereunder. From and
after the invalidation time, no Right Certificate shall be issued pursuant
to Section 3 or Section 6 hereof that represents Rights that are or have
become void pursuant to the provisions of this paragraph, and any Right
Certificate delivered to the Rights Agent that represents Rights that are
or have become void pursuant to the provisions of this paragraph shall be
cancelled. From and after the occurrence of an event specified in Section
13(a) hereof, any Rights that theretofore have not been exercised pursuant
to this Section 11(a)(ii) shall thereafter be exercisable only in
accordance with Section 13 and not pursuant to this Section 11(a)(ii).
(iii) The Company may at its option substitute for a share of Common
Stock issuable upon the exercise of Rights in accordance with the foregoing
subparagraph (ii) such number or fractions of Preferred Shares having an
aggregate current market value equal to the current per share market price
of a share of Common Stock. In the event that there shall not be sufficient
shares of Common Stock issued but not outstanding or authorized but
unissued to permit the exercise in full of the Rights in accordance with
the foregoing subparagraph (ii), the Board of Directors shall, to the
extent permitted by applicable law and any material agreements then in
effect to which the Company is a party (A) determine the excess of (1) the
value of the shares of Common Stock issuable upon the exercise of a Right
in accordance with the foregoing subparagraph (ii) (the "Current Value")
over (2) the then current Purchase Price multiplied by the number of one
one-hundredths of Preferred Shares for which a Right was exercisable
immediately prior to the time that the Acquiring Person became such (such
excess, the "Spread"), and (B) with respect to each Right (other than
Rights which have become void pursuant to Section 11(a)(ii)), make adequate
provision to substitute for the shares of Common Stock issuable in
accordance with subparagraph (ii) upon exercise of the Right and payment of
the applicable Purchase Price, (1) cash, (2) a reduction in the Purchase
Price, (3) Preferred Shares or other equity securities of the Company
(including, without limitation, shares or fractions of shares of preferred
stock which, by virtue of having dividend, voting and liquidation rights
substantially comparable to those of the shares of Common Stock, are deemed
in good faith by the Board of Directors to have substantially the same
value as the shares of Common Stock (such Preferred Shares and shares or
fractions of shares of preferred stock are hereinafter referred to as
"Common Share equivalents"), (4) debt securities of the Company, (5) other
assets, or (6) any combination of the foregoing, having a value which, when
added to the value of the shares of Common Stock actually issued upon
exercise of such Right, shall have an aggregate value equal to the Current
Value (less the amount of any reduction in the Purchase Price), where such
aggregate value has been determined by the Board of Directors upon the
advice of a nationally recognized investment banking firm selected in good
faith by the Board of Directors; provided, however, if the Company shall
not make adequate provision to deliver value pursuant to clause (B) above
within thirty (30) days following the date that the Acquiring Person became
such (the "Section 11(a)(ii) Trigger Date"), then the Company shall be
obligated to deliver, to the extent permitted by applicable law and any
material agreements then in effect to which the Company is a party, upon
the surrender for exercise of a Right and without requiring payment of the
Purchase Price, shares of Common Stock (to the extent available), and then,
if necessary, such number or fractions of Preferred Shares (to the extent
available) and then, if necessary, cash, which shares and/or cash have an
aggregate value equal to the Spread. If, upon the date any Person becomes
an Acquiring Person, the Board of Directors shall determine in good faith
that it is likely that sufficient additional shares of Common Stock could
be authorized for issuance upon exercise in full of the Rights, then, if
the Board of Directors so elects, the thirty (30) day period set forth
above may be extended to the extent necessary, but not more than ninety
(90) days after the Section 11(a)(ii) Trigger Date, in order that the
Company may seek stockholder approval for the
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authorization of such additional shares (such thirty (30) day period, as it
may be extended, is herein called the "Substitution Period"). To the extent
that the Company determines that some action need be taken pursuant to the
second and/or third sentence of this Section 11(a)(iii), the Company (x)
shall provide, subject to Section 11(a)(ii) hereof and the last sentence of
this Section 11(a)(iii) hereof, that such action shall apply uniformly to
all outstanding Rights and (y) may suspend the exercisability of the Rights
until the expiration of the Substitution Period in order to seek any
authorization of additional shares and/or to decide the appropriate form of
distribution to be made pursuant to such second sentence and to determine
the value thereof. In the event of any such suspension, the Company shall
issue a public announcement stating that the exercisability of the Rights
has been temporarily suspended, as well as a public announcement at such
time as the suspension is no longer in effect. For purposes of this Section
11(a)(iii), the value of the shares of Common Stock shall be the current
per share market price (as determined pursuant to Section 11(d)(i)) on the
Section 11(a)(ii) Trigger Date and the per share or fractional value of any
"Common Share equivalent" shall be deemed to equal the current per share
market price of the Common Shares. The Board of Directors of the Company
may, but shall not be required to, establish procedures to allocate the
right to receive shares of Common Stock upon the exercise of the Rights
among holders of Rights pursuant to this Section 11(a)(iii).
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Shares entitling
them (for a period expiring within 45 calendar days after such record date)
to subscribe for or purchase Preferred Shares (or shares having the same
rights, privileges and preferences as the Preferred Shares ("equivalent
preferred shares")) or securities convertible into Preferred Shares or
equivalent preferred shares at a price per Preferred Share or equivalent
preferred share (or having a conversion price per share, if a security
convertible into Preferred Shares or equivalent preferred shares) less than
the then current per share market price of the Preferred Shares (determined
pursuant to Section 11(d) hereof) on such record date, the Purchase Price
to be in effect after such record date shall be determined by multiplying
the Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the number of Preferred Shares
and equivalent preferred shares outstanding on such record date plus the
number of Preferred Shares and equivalent preferred shares which the
aggregate offering price of the total number of Preferred Shares and/or
equivalent preferred shares so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would
purchase at such current market price, and the denominator of which shall
be the number of Preferred Shares and equivalent preferred shares
outstanding on such record date plus the number of additional Preferred
Shares and/or equivalent preferred shares to be offered for subscription or
purchase (or into which the convertible securities so to be offered are
initially convertible); provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable
upon exercise of one Right. In case such subscription price may be paid in
a consideration part or all of which shall be in a form other than cash,
the value of such consideration shall be as determined in good faith by the
Board of Directors of the Company, whose determination shall be described
in a statement filed with the Rights Agent. Preferred Shares and equivalent
preferred shares owned by or held for the account of the Company shall not
be deemed outstanding for the purpose of any such computation. Such
adjustment shall be made successively whenever such a record date is fixed;
and in the event that such rights, options or warrants are not so issued,
the Purchase Price shall be adjusted to be the Purchase Price which would
then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of the Preferred Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of
indebtedness or assets (other than a regular quarterly cash dividend or a
dividend payable in Preferred Shares) or subscription rights or warrants
(excluding those referred to in Section 11(b) hereof), the Purchase Price
to be in effect after such record date shall be determined by multiplying
the Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the then current per share market
price of the Preferred Shares (determined pursuant to Section 11(d) hereof)
on such record date, less the fair market value (as determined in good
faith by the Board of Directors of the Company whose
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determination shall be described in a statement filed with the Rights
Agent) of the portion of the assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to one
Preferred Share, and the denominator of which shall be such current per
share market price (determined pursuant to Section 11(d) hereof) of a
Preferred Share; provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company to be
issued upon exercise of one Right. Such adjustments shall be made
successively whenever such a record date is fixed; and in the event that
such distribution is not so made, the Purchase Price shall again be
adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed.
(d) (i) Except as otherwise provided herein, for the purpose of any
computation hereunder, the "current per share market price" of any security
(a "Security" for the purpose of this Section 11(d)(i)) on any date shall
be deemed to be the average of the daily closing prices per share of such
Security for the 30 consecutive Trading Days (as such term is hereinafter
defined) immediately prior to such date; provided, however, that in the
event that the current per share market price of the Security is determined
during a period following the announcement by the issuer of such Security
of (A) a dividend or distribution on such Security payable in shares of
such Security or securities convertible into such shares, or (B) any
subdivision, combination or reclassification of such Security, and prior to
the expiration of 30 Trading Days after the ex-dividend date for such
dividend or distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such case, the current
per share market price shall be appropriately adjusted to reflect the
current market price per share equivalent of such Security. The closing
price for each day shall be the last sale price, regular way, or, in case
no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported by the principal
consolidated transaction reporting system with respect to securities listed
or admitted to trading on the NASDAQ Stock Market or, if the Security is
not listed or admitted to trading on the NASDAQ Stock Market, as reported
in the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which
the Security is listed or admitted to trading or, if the Security is not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. Automated Quotations System
("NASDAQ") or such other system then in use, or, if on any such date the
Security is not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a
market in the Security selected by the Board of Directors of the Company.
The term "Trading Day" shall mean a day on which the principal national
securities exchange on which the Security is listed or admitted to trading
is open for the transaction of business or, if the Security is not listed
or admitted to trading on any national securities exchange, a Business Day.
(ii) For the purpose of any computation hereunder, if the Preferred
Shares are publicly traded, the "current per share market price" of the
Preferred Shares shall be determined in accordance with the method set
forth in Section 11(d)(i). If the Preferred Shares are not publicly traded
but the Common Stock is publicly traded, the "current per share market
price" of the Preferred Shares shall be conclusively deemed to be the
current per share market price of the shares of Common Stock as determined
pursuant to Section 11(d)(i) multiplied by one hundred (appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof). If neither the Common Stock nor the
Preferred Shares are publicly traded, "current per share market price"
shall mean the fair value per share as determined in good faith by the
Board of Directors of the Company, whose determination shall be described
in a statement filed with the Rights Agent.
(e) No adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in the
Purchase Price; provided, however, that any adjustments which by reason of
this Section 11(e) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under
this Section 11 shall be made to the nearest cent or to the nearest one
ten-thousandth of a Preferred Share or share of Common Stock or other share
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or security as the case may be. Notwithstanding the first sentence of this
Section 11(e), any adjustment required by this Section 11 shall be made no
later than the earlier of (i) three years from the date of the transaction
which requires such adjustment or (ii) the date of the expiration of the
right to exercise any Rights.
(f) If as a result of an adjustment made pursuant to Section 11(a)
hereof, the holder of any Right thereafter exercised shall become entitled
to receive any shares of capital stock of the Company other than Preferred
Shares, thereafter the number of such other shares so receivable upon
exercise of any Right shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions
with respect to the Preferred Shares contained in Sections 11(a)(i), 11(b),
11(c) and 11(i), and the provisions of Sections 7, 9, 10 and 13 with
respect to the Preferred Shares shall apply on like terms to any such other
shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-hundredths
of a Preferred Share purchasable from time to time hereunder upon exercise
of the Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided
in Section 11(i), upon each adjustment of the Purchase Price as a result of
the calculations made in Sections 11(b) and (c), each Right outstanding
immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number
of one one-hundredths of a Preferred Share (calculated to the nearest one
ten-thousandth of a Preferred Share) obtained by (i) multiplying (x) the
number of one one-hundredths of a share covered by a Right immediately
prior to such adjustment by (y) the Purchase Price in effect immediately
prior to such adjustment of the Purchase Price and (ii) dividing the
product so obtained by the Purchase Price in effect immediately after such
adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of one one-hundredths of a Preferred Share
purchasable upon the exercise of a Right. Each of the Rights outstanding
after such adjustment of the number of Rights shall be exercisable for the
number of one one-hundredths of a Preferred Share for which a Right was
exercisable immediately prior to such adjustment. Each Right held of record
prior to such adjustment of the number of Rights shall become that number
of Rights (calculated to the nearest one ten-thousandth) obtained by
dividing the Purchase Price in effect immediately prior to adjustment of
the Purchase Price by the Purchase Price in effect immediately after
adjustment of the Purchase Price. The Company shall make a public
announcement of its election to adjust the number of Rights, indicating the
record date for the adjustment, and, if known at the time, the amount of
the adjustment to be made. This record date may be the date on which the
Purchase Price is adjusted or any day thereafter, but, if the Right
Certificates have been issued, shall be at least 10 days later than the
date of the public announcement. If Right Certificates have been issued,
upon each adjustment of the number of Rights pursuant to this Section
11(i), the Company may, as promptly as practicable, cause to be distributed
to holders of record of Right Certificates on such record date Right
Certificates evidencing, subject to Section 14 hereof, the additional
Rights to which such holders shall be entitled as a result of such
adjustment, or, at the option of the Company, shall cause to be distributed
to such holders of record in substitution and replacement for the Right
Certificates held by such holders prior to the date of adjustment, and upon
surrender thereof, if required by the Company, new Right Certificates
evidencing all the Rights to which such holders shall be entitled after
such adjustment. Right Certificates so to be distributed shall be issued,
executed and countersigned in the manner provided for herein and shall be
registered in the names of the holders of record of Right Certificates on
the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
the number of one one-hundredths of a Preferred Share issuable upon the
exercise of the Rights, the Right Certificates
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theretofore and thereafter issued may continue to express the Purchase
Price and the number of one one-hundredths of a Preferred Share which were
expressed in the initial Right Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then par value, if any, of the Preferred
Shares or other shares of capital stock issuable upon exercise of the
Rights, the Company shall take any corporate action which may, in the
opinion of its counsel, be necessary in order that the Company may validly
and legally issue fully paid and nonassessable Preferred Shares or other
such shares at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for
a specified event, the Company may elect to defer until the occurrence of
such event the issuing to the holder of any Right exercised after such
record date of the Preferred Shares and other capital stock or securities
of the Company, if any, issuable upon such exercise over and above the
Preferred Shares and other capital stock or securities of the Company, if
any, issuable upon such exercise on the basis of the Purchase Price in
effect prior to such adjustment; provided, however, that the Company shall
deliver to such holder a due bill or other appropriate instrument
evidencing such holder's right to receive such additional shares upon the
occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and
to the extent that it in its sole discretion shall determine to be
advisable in order that any consolidation or subdivision of the Preferred
Shares, issuance wholly for cash of any Preferred Shares at less than the
current market price, issuance wholly for cash of Preferred Shares or
securities which by their terms are convertible into or exchangeable for
Preferred Shares, dividends on Preferred Shares payable in Preferred Shares
or issuance of rights, options or warrants referred to hereinabove in
Section 11(b), hereafter made by the Company to holders of its Preferred
Shares shall not be taxable to such stockholders.
(n) Anything in this Rights Agreement to the contrary notwithstanding,
in the event that at any time after the date of this Agreement and prior to
the Distribution Date, the Company shall (i) declare or pay any dividend on
the Common Shares payable in Common Shares or (ii) effect a subdivision,
combination or consolidation of the Common Shares (by reclassification or
otherwise than by payment of dividends in Common Shares) into a greater or
lesser number of Common Shares, then in any such case, the number of Rights
associated with each Common Share then outstanding, or issued or delivered
thereafter shall be proportionately adjusted so that the number of Rights
thereafter associated with each Common Share following any such event shall
equal the result obtained by multiplying the number of Rights associated
with each Common Share immediately prior to such event by a fraction the
numerator of which shall be the total number of Common Shares outstanding
immediately prior to the occurrence of the event and the denominator of
which shall be the total number of Common Shares outstanding immediately
following the occurrence of such event.
(o) The Company agrees that, after the earlier of the Distribution
Date or the Shares Acquisition Date, it will not, except as permitted by
Sections 23, 24 or 27 hereof, take (or permit any Subsidiary to take) any
action if at the time such action is taken it is reasonably foreseeable
that such action will diminish substantially or eliminate the benefits
intended to be afforded by the Rights.
Section 12. Certificate of Adjusted Purchase Price or Number of
Shares. Whenever an adjustment is made as provided in Section 11 or 13 hereof,
the Company shall promptly (a) prepare a certificate setting forth such
adjustment, and a brief statement of the facts accounting for such adjustment,
(b) file with the Rights Agent and with each transfer agent for the Common
Shares or the Preferred Shares a copy of such certificate and (c) mail a brief
summary thereof to each holder of a Right Certificate in accordance with Section
25 hereof. The Rights Agent shall be fully protected in relying on any such
certificate and on any adjustment therein contained and shall not be deemed to
have knowledge of any such adjustment unless and until it shall have received
such certificate.
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Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earnings Power. (a) In the event, directly or indirectly, at any time after any
Person has become an Acquiring Person, (i) the Company shall merge with and into
any other Person, (ii) any Person shall consolidate with the Company, or any
Person shall merge with and into the Company and the Company shall be the
continuing or surviving corporation of such merger and, in connection with such
merger, all or part of the Common Shares shall be changed into or exchanged for
stock or other securities of any other Person (or of the Company) or cash or any
other property, or (iii) the Company shall sell or otherwise transfer (or one or
more of its Subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets or earning power aggregating 50% or more of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person (other than the Company or one or more of its wholly-owned
Subsidiaries), then upon the first occurrence of such event, proper provision
shall be made so that: (A) each holder of record of a Right (other than Rights
which have become void pursuant to Section 11(a)(ii)) shall thereafter have the
right to receive, upon the exercise thereof at a price equal to the then current
Purchase Price multiplied by the number of one one-hundredths of a Preferred
Share for which a Right was exercisable immediately prior to the time that any
Person first became an Acquiring Person (as subsequently adjusted thereafter
pursuant to Sections 11(a)(i), 11(b), 11(c) and 11(i)), in accordance with the
terms of this Agreement and in lieu of Preferred Shares, such number of validly
issued, fully paid and non-assessable and freely tradeable Common Shares of the
Principal Party (as defined herein) not subject to any liens, encumbrances,
rights of first refusal or other adverse claims, as shall be equal to the result
obtained by (1) multiplying the then current Purchase Price by the number of one
one-hundredths of a Preferred Share for which a Right was exercisable
immediately prior to the time that any Person first became an Acquiring Person
(as subsequently adjusted thereafter pursuant to Sections 11(a)(i), 11(b), 11(c)
and 11(i)) and (2) dividing that product by 50% of the then current per share
market price of the Common Shares of such Principal Party (determined pursuant
to Section 11(d)(i) hereof) on the date of consummation of such consolidation,
merger, sale or transfer; provided that the Purchase Price and the number of
Common Shares of such Principal Party issuable upon exercise of each Right shall
be further adjusted as provided in Section 11(f) of this Rights Agreement to
reflect any events occurring in respect of such Principal Party after the date
of the such consolidation, merger, sale or transfer; (B) such Principal Party
shall thereafter be liable for, and shall assume, by virtue of such
consolidation, merger, sale or transfer, all the obligations and duties of the
Company pursuant to this Rights Agreement; (C) the term "Company" shall
thereafter be deemed to refer to such Principal Party; and (D) such issuer shall
take such steps (including, but not limited to, the reservation of a sufficient
number of its shares of Common Stock in accordance with Section 9 hereof) in
connection with such consummation of any such transaction as may be necessary to
assure that the provisions hereof shall thereafter be applicable, as nearly as
reasonably may be, in relation to the shares of Common Stock thereafter
deliverable upon the exercise of the Rights; provided that, upon the subsequent
occurrence of any consolidation, merger, sale or transfer of assets or other
extraordinary transaction in respect of such Principal Party, each holder of a
Right shall thereupon be entitled to receive, upon exercise of a Right and
payment of the Purchase Price as provided in this Section 13(a), such cash,
shares, rights, warrants and other property which such holder would have been
entitled to receive had such holder, at the time of such transaction, owned the
Common Shares of the Principal Party purchasable upon the exercise of a Right
pursuant to this Section 13(a), and such Principal Party shall take such steps
(including, but not limited to, reservation of shares of stock) as may be
necessary to permit the subsequent exercise of the Rights in accordance with the
terms hereof for such cash, shares, rights, warrants and other property.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in (i) or (ii) of the
first sentence of Section 13(a) hereof: (A) the Person that is the issuer
of the securities into which Common Shares are converted in such merger or
consolidation, or, if there is more than one such issuer, the issuer the
Common Shares of which has the greatest aggregate market value of shares
outstanding or (B) if no securities are so issued, (x) the Person that is
the other party to the merger, if such Person survives said merger, or, if
there is more than one such Person, the Person the Common Shares of which
has the greatest aggregate market value of shares outstanding or (y) if the
Person that is the other party to the merger does not survive the
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merger, the Person that does survive the merger (including the Company if
it survives) or (z) the Person resulting from the consolidation; and
(ii) in the case of any transaction described in (iii) of the first
sentence in Section 13(a) hereof, the Person that is the party receiving
the greatest portion of the assets or earning power transferred pursuant to
such transaction or transactions, or, if each Person that is a party to
such transaction or transactions receives the same portion of the assets or
earning power so transferred or if the Person receiving the greatest
portion of the assets or earning power cannot be determined, whichever of
such Persons as is the issuer of Common Shares having the greatest
aggregate market value of shares outstanding;
provided, however, that in any such case described in the foregoing clause
(b)(i) or (b)(ii), (1) if the Common Shares of such Person are not at such time
or have not been continuously over the preceding 12-month period registered
under Section 12 of the Exchange Act, and if such Person is a direct or indirect
Subsidiary of another Person the Common Shares of which are and have been so
registered, the term "Principal Party" shall refer to such other Person, or (2)
if such Person is a Subsidiary, directly or indirectly, of more than one Person,
the Common Shares of all of which are and have been so registered, the term
"Principal Party" shall refer to whichever of such Persons is the issuer of the
Common Shares having the greatest aggregate market value of shares outstanding,
or (3) if such Person is owned, directly or indirectly, by a joint venture
formed by two or more Persons that are not owned, directly or indirectly, by the
same Person, the rules set forth in clauses (1) and (2) above shall apply to
each of the owners having an interest in the venture as if the Person owned by
the joint venture was a Subsidiary of both or all of such joint venturers, and
the Principal Party in each such case shall bear the obligations set forth in
this Section 13 in the same ratio as its interest in such Person bears to the
total of such interests.
(c) The Company shall not consummate any consolidation, merger, sale or
transfer referred to in Section 13(a) hereof unless prior thereto the Company
and the Principal Party involved therein shall have executed and delivered to
the Rights Agent an agreement confirming that the requirements of Sections 13(a)
and (b) hereof shall promptly be performed in accordance with their terms and
that such consolidation, merger, sale or transfer of assets shall not result in
a default by the Principal Party under this Rights Agreement as the same shall
have been assumed by the Principal Party pursuant to Sections 13(a) and (b)
hereof and providing that, as soon as practicable after executing such agreement
pursuant to this Section 13, the Principal Party will:
(i) prepare and file a registration statement under the Securities
Act, if necessary, with respect to the Rights and the securities
purchasable upon exercise of the Rights on an appropriate form, use its
best efforts to cause such registration statement to become effective as
soon as practicable after such filing and use its best efforts to cause
such registration statement to remain effective (with a prospectus at all
times meeting the requirements of the Securities Act) until the Expiration
Date, and similarly comply with applicable state securities laws;
(ii) use its best efforts, if the Common Shares of the Principal Party
shall be listed or admitted to trading on the NASDAQ Stock Market or on a
national securities exchange, to list or admit to trading (or continue the
listing of) the Rights and the securities purchasable upon exercise of the
Rights on NASDAQ Stock Market or such securities exchange and, if the
Common Shares of the Principal Party shall not be listed or admitted to
trading on NASDAQ Stock Market or a national securities exchange, to cause
the Rights and the securities purchasable upon exercise of the Rights to be
reported by such other system then in use;
(iii) deliver to holders of the Rights historical financial statements
for the Principal Party which comply in all respects with the requirements
for registration on Form 10 (or any successor form) under the Exchange Act;
and
(iv) obtain waivers of any rights of first refusal or preemptive
rights in respect of the Common Shares of the Principal Party subject to
purchase upon exercise of outstanding Rights.
(d) Furthermore, in case the Principal Party which is to be a party to a
transaction referred to in this Section 13 has provision in any of its
authorized securities or in its certificate of incorporation or by-laws or
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other instrument governing its corporate affairs, which provision would have the
effect of (i) causing such Principal Party to issue (other than to holders of
Rights pursuant to this Section 13), in connection with, or as a consequence of,
the consummation of a transaction referred to in this Section 13, Common Shares
of such Principal Party at less than the then current market price per share
(determined pursuant to Section 11(d) hereof) or securities exercisable for, or
convertible into, Common Shares of such Principal Party at less than such then
current market price, or (ii) providing for any special payment, tax or similar
provisions in connection with the issuance of the Common Shares of such
Principal Party pursuant to the provisions of Section 13, then, in such event,
the Company hereby agrees with each holder of Rights that it shall not
consummate any such transaction unless prior thereto the Company and such
Principal Party shall have executed and delivered to the Rights Agent a
supplemental agreement providing that the provision in question of such
Principal Party shall have been cancelled, waived or amended, or that the
authorized securities shall be redeemed, so that the applicable provision will
have no effect in connection with, or as a consequence of, the consummation of
the proposed transaction.
(e) The Company covenants and agrees that it shall not, at any time after a
Person first becomes an Acquiring Person, enter into any transaction of the type
contemplated by (i)-(iii) of Section 13(a) hereof if (x) at the time of or
immediately after such consolidation, merger, sale, transfer or other
transaction there are any rights, warrants or other instruments or securities
outstanding or agreements in effect which would substantially diminish or
otherwise eliminate the benefits intended to be afforded by the Rights, (y)
prior to, simultaneously with or immediately after such consolidation, merger,
sale, transfer of other transaction, the stockholders of the Person who
constitutes, or would constitute, the "Principal Party" for purposes of Section
13(a) hereof shall have received a distribution of Rights previously owned by
such Person or any of its Affiliates or Associates or (z) the form or nature of
organization of the Principal Party would preclude or limit the exercisability
of the Rights.
Section 14. Fractional Rights and Fractional Shares. (a) The Company
shall not be required to issue fractions of Rights or to distribute Right
Certificates which evidence fractional Rights. In lieu of such fractional
Rights, there shall be paid to the registered holders of the Right Certificates
with regard to which such fractional Rights would otherwise be issuable, an
amount in cash equal to the same fraction of the current market value of a whole
Right. For the purposes of this Section 14(a), the current market value of a
whole Right shall be the closing price of the Rights for the Trading Day
immediately prior to the date on which such fractional Rights would have been
otherwise issuable. The closing price for any day shall be the last sale price,
regular way, or, in case no such sale takes place on such day, the average of
the closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the NASDAQ Stock Market or, if the Rights are
not listed or admitted to trading on the NASDAQ Stock Market, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Rights are
listed or admitted to trading or, if the Rights are not listed or admitted to
trading on any national securities exchange, the last quoted price or, if not so
quoted, the average of the high bid and low asked prices in the over-the-counter
market, as reported by NASDAQ or such other system then in use or, if on any
such date the Rights are not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker making
a market in the Rights selected by the Board of Directors of the Company. If on
any such date no such market maker is making a market in the Rights, the fair
value of the Rights on such date as determined in good faith by the Board of
Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of Preferred
Shares (other than fractions which are integral multiples of one one-hundredth
of a Preferred Share) upon exercise of the Rights or to distribute certificates
which evidence fractional Preferred Shares (other than fractions which are
integral multiples of one one-hundredth of a Preferred Share). Interests in
fractions of Preferred Shares in integral multiples of one one-hundredth of a
Preferred Share may, at the election of the Company, be evidenced by depositary
receipts, pursuant to an appropriate agreement between the Company and a
depositary selected by it; provided, that such agreement shall provide that the
holders of such depositary receipts shall have all the rights, privileges and
preferences to which they are entitled as beneficial owners of the Preferred
Shares
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represented by such depositary receipts. In lieu of fractional Preferred Shares
that are not integral multiples of one one-hundredth of a Preferred Share, the
Company shall pay to the registered holders of Right Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one Preferred Share. For the purposes of
this Section 14(b), the current market value of a Preferred Share shall be the
closing price of a Preferred Share (as determined pursuant to Section 11(d)(i)
hereof) for the Trading Day immediately prior to the date of such exercise.
(c)The holder of a Right by the acceptance of the Right expressly waives
his right to receive any fractional Rights or any fractional shares upon
exercise of a Right (except as provided above).
Section 15. Rights of Action. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Right Certificate (or, prior to
the Distribution Date, of the Common Shares), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Shares), on his own behalf and for his own
benefit, may enforce, and may institute and maintain any suit, action or
proceeding against the Company to enforce, or otherwise act in respect of, his
right to exercise the Rights evidenced by such Right Certificate in the manner
provided in such Right Certificate and in this Agreement. Without limiting the
foregoing or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and will be entitled to specific performance of
the obligations under, and injunctive relief against actual or threatened
violations of, the obligations of any Person subject to this Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered
at the office or agency of the Rights Agent designated for such purpose,
duly endorsed or accompanied by a proper instrument of transfer; and
(c) the Company and the Rights Agent may deem and treat the Person in
whose name the Right Certificate (or, prior to the Distribution Date, the
associated Common Shares certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations
of ownership or writing on the Right Certificates or the associated Common
Shares certificate made by anyone other than the Company or the Rights
Agent) for all purposes whatsoever, and neither the Company nor the Rights
Agent shall be affected by any notice to the contrary.
Section 17. Right Certificate Holder Not Deemed a Stockholder. No holder,
as such, of any Right Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of the Preferred Shares or any other
securities of the Company which may at any time be issuable on the exercise of
the Rights represented thereby, nor shall anything contained herein or in any
Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in this Agreement), or to receive dividends or
subscription rights, or otherwise, until the Rights evidenced by such Right
Certificate shall have been exercised in accordance with the provisions hereof.
Section 18. Concerning the Rights Agent. (a) The Company agrees to pay to
the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the administration
and execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability or expense,
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incurred without negligence, bad faith or willful misconduct on the part of the
Rights Agent, for anything done or omitted by the Rights Agent in connection
with the acceptance and administration of this Agreement, including the costs
and expenses of defending against any claim of liability arising therefrom,
directly or indirectly.
(b) The Rights Agent shall be protected and shall incur no liability for,
or in respect of any action taken, suffered or omitted by it in connection with,
its administration of this Agreement in reliance upon any Right Certificate or
certificate for the Preferred Shares or Common Shares or for other securities of
the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
Person or Persons, or otherwise upon the advice of counsel as set forth in
Section 20 hereof.
Section 19. Merger or Consolidation or Change of Name of Rights
Agent. (a) Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
stock transfer or corporate trust powers of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties hereto; provided, that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent shall succeed to the
agency created by this Agreement, any of the Right Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Right
Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor Rights
Agent or in the name of the successor Rights Agent; and in all such cases such
Right Certificates shall have the full force provided in the Right Certificates
and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed and
at such time any of the Right Certificates shall have been countersigned but not
delivered the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and in case at that time any of
the Right Certificates shall not have been countersigned, the Rights Agent may
countersign such Right certificates either in its prior name or in its changed
name and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Right Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
be proved or established by the Company prior to taking or suffering any
action hereunder, such fact or matter (unless other evidence in respect
thereof be herein specifically prescribed) may be deemed to be conclusively
proved and established by a certificate signed by any one of the Chairman
of the Board of Directors, the President, any Vice President, the
Treasurer, the Controller or the Secretary of the Company and delivered to
the Rights Agent; and such certificate shall be full authorization to the
Rights Agent for any action taken or suffered in good faith by it under the
provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company and any
other Person only for its own negligence, bad faith or wilful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the
Right Certificates (except its countersignature thereof) or be
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required to verify the same, but all such statements and recitals are and
shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Right Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Right
Certificate; nor shall it be responsible for any change in the
exercisability of the Rights (including the Rights becoming void pursuant
to Section 11(a)(ii) hereof) or any adjustment in the terms of the Rights
(including the manner, method or amount thereof) provided for in Sections
3, 11, 13, 23 and 24, or the ascertaining of the existence of facts that
would require any such change or adjustment (except with respect to the
exercise of Rights evidenced by Right Certificates after receipt of a
certificate furnished pursuant to Section 12, describing such change or
adjustment); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any
Preferred Shares to be issued pursuant to this Agreement or any Right
Certificate or as to whether any Preferred Shares will, when issued, be
validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably
be required by the Rights Agent for the carrying out or performing by the
Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from
any person reasonably believed by the Rights Agent to be one of the
Chairman of the Board of Directors, the President, any Vice President, the
Secretary, the Controller or the Treasurer of the Company, and to apply to
such officers for advice or instructions in connection with its duties, and
it shall not be liable for any action taken or suffered by it in good faith
in accordance with instructions of any such officer or for any delay in
acting while waiting for those instructions. Any application by the Rights
Agent for written instructions from the Company may, at the option of the
Rights Agent, set forth in writing any action proposed to be taken or
omitted by the Rights Agent under this Rights Agreement and the date on
and/or after which such action shall be taken or such omission shall be
effective. The Rights Agent shall not be liable for any action taken by, or
omission of, the Rights Agent in accordance with a proposal included in any
such application on or after the date specified in such application (which
date shall not be less than five Business Days after the date any officer
of the Company actually receives such application, unless any such officer
shall have consented in writing to an earlier date) unless, prior to taking
any such action (or the effective date in the case of an omission), the
Rights Agent shall have received written instructions in response to such
application specifying the action to be taken or omitted.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or
lend money to the Company or otherwise act as fully and freely as though it
were not Rights Agent under this Agreement. Nothing herein shall preclude
the Rights Agent from acting in any other capacity for the Company or for
any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or
by or through its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of
any such attorneys or agents or for any loss to the Company resulting from
any such act, default, neglect or misconduct, provided reasonable care was
exercised in the selection and continued employment thereof.
(j) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate contained in the
form of assignment or the form of election to purchase set forth on the
reverse thereof, as the case may be, has not been completed to certify the
holder is not an Acquiring
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Person (or an Affiliate or Associate thereof), a Rights Agent shall not
take any further action with respect to such requested exercise of transfer
without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer agent
of the Common Shares or Preferred Shares by registered or certified mail, and to
the holders of the Right Certificates by first-class mail. The Company may
remove the Rights Agent or any successor Rights Agent upon 30 days' notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to each transfer agent of the Common Shares or Preferred Shares by
registered or certified mail, and to the holders of the Right Certificates by
first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Rights Agent. If the Company shall fail to make such appointment within a
period of 30 days after giving notice of such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Right Certificate (who shall,
with such notice, submit his Right Certificate for inspection by the Company),
then the registered holder of any Right Certificate may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent. Any successor
Rights Agent, whether appointed by the Company or by such a court, shall be a
corporation organized and doing business under the laws of the United States or
the [State of New York] (or of any other state of the United States so long as
such corporation is authorized to do business as a banking institution in the
State of New York), in good standing, having an office in the State of New York,
which is authorized under such laws to exercise corporate trust or stock
transfer powers and is subject to supervision or examination by federal or state
authority and which has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $50 million. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of any such appointment the
Company shall file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Common Shares or Preferred Shares, and mail a
notice thereof in writing to the registered holders of the Right Certificates.
Failure to give any notice provided for in this Section 21, however, or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent, as
the case may be.
Section 22. Issuance of New Right Certificates. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Right Certificates evidencing Rights in such forms
as may be approved by its Board of Directors to reflect any adjustment or change
in the Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the Right Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of Common Shares following the Distribution Date and
prior to the earlier of the Redemption Date and the Expiration Date, the Company
may with respect to Common Shares so issued or sold pursuant to (i) the exercise
of stock options, (ii) under any employee plan or arrangement, (iii) upon the
exercise, conversion or exchange of securities notes or debentures issued by the
Company or (iv) a contractual obligation of the Company, in each case existing
prior to the Distribution Date, issue Rights Certificates representing the
appropriate number of Rights in connection with such issuance or sale.
Section 23. Redemption. (a) The Board of Directors of the Company may, at
any time prior to such time as any Person first becomes an Acquiring Person,
redeem all but not less than all the then outstanding Rights at a redemption
price of $.01 per Right, appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date hereof (the
redemption price being hereinafter referred to as the "Redemption Price"). The
redemption of the Rights may be made effective at such time, on such basis and
with such conditions as the Board of Directors in its sole discretion may
establish.
(b) Immediately upon the action of the Board of Directors ordering the
redemption of the Rights pursuant to paragraph (a) of this Section 23 (or at
such later time as the Board of Directors may establish for
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the effectiveness of such redemption), and without any further action and
without any notice, the right to exercise the Rights will terminate and the only
right thereafter of the holders of Rights shall be to receive the Redemption
Price. The Company shall promptly give public notice of any such redemption;
provided, however, that the failure to give, or any defect in, any such notice
shall not affect the validity of such redemption. Within 10 days after such
action of the Board of Directors ordering the redemption of the Rights, the
Company shall mail a notice of redemption to all the holders of the then
outstanding Rights at their last addresses as they appear upon the registry
books of the Rights Agent or, prior to the Distribution Date, on the registry
books of the transfer agent for the Common Shares. Any notice which is mailed in
the manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of redemption shall state the method by
which the payment of the Redemption Price will be made.
Section 24. Exchange. (a) The Board of Directors of the Company may, at
its option, at any time after any Person first becomes an Acquiring Person,
exchange all or part of the then outstanding and exercisable Rights (which shall
not include Rights that have become void pursuant to the provisions of Section
11(a)(ii) hereof) for shares of Common Stock at an exchange ratio of one share
of Common Stock per Right, (such exchange ratio being hereinafter referred to as
the "Exchange Ratio"). Notwithstanding the foregoing, the Board of Directors
shall not be empowered to effect such exchange at any time after any Person
(other than an Exempt Person), together with all Affiliates and Associates of
such Person, becomes the Beneficial Owner of Common Shares aggregating 50% or
more of the Common Shares then outstanding.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the exchange of any Rights pursuant to paragraph (a) of this Section 24
and without any further action and without any notice, the right to exercise
such Rights shall terminate and the only right thereafter of a holder of such
Rights shall be to receive that number of shares of Common Stock equal to the
number of such Rights held by such holder multiplied by the Exchange Ratio. The
Company shall promptly give public notice of any such exchange; provided,
however, that the failure to give, or any defect in, such notice shall not
affect the validity of such exchange. The Company shall promptly mail a notice
of any such exchange to all of the holders of the Rights so exchanged at their
last addresses as they appear upon the registry books of the Rights Agent. Any
notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of exchange will
state the method by which the exchange of the shares of Common Stock for Rights
will be effected and, in the event of any partial exchange, the number of Rights
which will be exchanged. Any partial exchange shall be effected pro rata based
on the number of Rights (other than Rights which have become void pursuant to
the provisions of Section 11(a)(ii) hereof) held by each holder of Rights.
(c) In the event that there shall not be sufficient shares of Common Stock
issued but not outstanding or authorized but unissued to permit any exchange of
Rights as contemplated in accordance with this Section 24, the Company may, in
its discretion, take such action as may be necessary to authorize additional
shares of Common Stock for issuance upon exchange of the Rights. In the event
that the Company shall determine not to take such action or shall, after good
faith effort, be unable to take such action as may be necessary to authorize
such additional shares of Common Stock, the Company shall substitute, to the
extent of such insufficiency, for each share of Common Stock that would
otherwise be issuable upon exchange of a Right, a number of Preferred Shares or
fractions thereof (or equivalent preferred shares as such term is defined in
Section 11(b)), having an aggregate value equal to the current per share market
price of one share of Common Stock (determined pursuant to Section 11(d) hereof)
as of the date of issuance of such Preferred Shares or fractions thereof (or
equivalent preferred shares).
(d) The Company shall not, in connection with any exchange pursuant to this
Section 24, be required to issue fractions of shares of Common Stock or to
distribute certificates which evidence fractional shares of Common Stock. In
lieu of such fractional shares of Common Stock, the Company shall pay to the
registered holders of the Right Certificates with regard to which such
fractional shares of Common Stock would otherwise be issuable an amount in cash
equal to the same fraction of the current market value of a whole share of
Common Stock. For the purposes of this paragraph (d), the current market value
of a whole share of Common Stock shall be the closing price of a share of Common
Stock (as determined pursuant to the second
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sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to
the date of exchange pursuant to this Section 24.
Section 25. Notice of Certain Events. (a) In case the Company shall at
any time after the earlier of the Distribution Date or the Shares Acquisition
Date propose (i) to pay any dividend payable in stock of any class to the
holders of its Preferred Shares or to make any other distribution to the holder
of its Preferred Shares (other than a regular quarterly cash dividend), (ii) to
offer to the holders of its Preferred Shares rights or warrants to subscribe for
or to purchase any additional Preferred Shares or shares of stock of any class
or any other securities, rights or options, (iii) to effect any reclassification
of its Preferred Shares (other than a reclassification involving only the
subdivision of outstanding Preferred Shares), (iv) to effect the liquidation,
dissolution or winding up of the Company, or (v) to declare or pay any dividend
on the Common Shares payable in Common Shares or to effect a subdivision,
combination or consolidation of the Common Shares (by reclassification or
otherwise than by payment of dividends in Common Shares), then, in each such
case, the Company shall give to each holder of a Right Certificate, in
accordance with Section 26 hereof, a notice of such proposed action, which shall
specify the record date for the purposes of such stock dividend, or distribution
of rights or warrants, or the date on which such liquidation, dissolution or
winding up is to take place and the date of participation therein by the holders
of the Common Shares and/or Preferred Shares, if any such date is to be fixed,
and such notice shall be so given in the case of any action covered by clause
(i) or (ii) above at least 10 days prior to the record date for determining
holders of the Preferred Shares for purposes of such action, and in the case of
any such other action, at least 10 days prior to the date of the taking of such
proposed action or the date of participation therein by the holders of the
Common Shares and/or Preferred Shares, whichever shall be the earlier.
(b) In case any event described in Section 11(a)(ii) or Section 13 shall
occur then the Company shall as soon as practicable thereafter give to each
holder of a Right Certificate (or if occurring prior to the Distribution Date,
the holders of Common Shares) in accordance with Section 26 hereof, a notice of
the occurrence of such event, which notice shall describe such event and the
consequences of such event to holders of Rights under Section 11(a)(ii) and
Section 13 hereof.
Section 26. Notices. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Right Certificate
to or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
MCI Communications Corporation
1801 Pennsylvania Avenue, N.W.
Washington D.C. 20006
Attention: Secretary
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
[ ]
[ ]
[ ]
Attention: [ ]
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 27. Supplements and Amendments. Except as provided in the
penultimate sentence of this Section 27, for so long as the Rights are then
redeemable, the Company may in its sole and absolute discretion, and the Rights
Agent shall if the Company so directs, supplement or amend any provision of this
C- 22
<PAGE> 101
Rights Agreement in any respect without the approval of any holders of the
Rights. At any time when the Rights are no longer redeemable, except as provided
in the penultimate sentence of this Section 27, the Company may, and the Rights
Agent shall, if the Company so directs, supplement or amend this Rights
Agreement without the approval of any holders of Rights Certificates in order to
(i) cure any ambiguity, (ii) correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions herein,
(iii) shorten or lengthen any time period hereunder, or (iv) change or
supplement the provisions hereunder in any manner which the Company may deem
necessary or desirable; provided that no such supplement or amendment shall
adversely affect the interests of the holders of Rights as such (other than an
Acquiring Person or an Affiliate or Associate of an Acquiring Person), and no
such amendment may cause the rights again to become redeemable or cause the
Agreement again to become amendable other than in accordance with this sentence.
Notwithstanding anything contained in this Rights Agreement to the contrary, no
supplement or amendment shall be made which changes the Redemption Price. Upon
the delivery of a certificate from an appropriate officer of the Company which
states that the proposed supplement or amendment is in compliance with the terms
of this Section 27, the Rights Agent shall execute such supplement or amendment.
Section 28. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any Person other than the Company, the Rights Agent and
the registered holders of the Right Certificates (and, prior to the Distribution
Date, the Common Shares) any legal or equitable right, remedy or claim under
this Agreement; but this Agreement shall be for the sole and exclusive benefit
of the Company, the Rights Agent and the registered holders of the Right
Certificates (and, prior to the Distribution Date, the Common Shares).
Section 30. Severability. If any term, provision, covenant or restriction
of this Agreement or applicable to this Agreement is held by a court of
competent jurisdiction or other authority to be invalid, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
Section 31. Governing Law. This Agreement and each Right Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Delaware and for all purposes shall be governed by and construed in
accordance with the laws of such State applicable to contracts to be made and
performed entirely within such State.
Section 32. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
Section 33. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
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<PAGE> 102
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the day and year first above written.
<TABLE>
<S> <C>
Attest: MCI COMMUNICATIONS CORPORATION
By By
Name: Name:
Title: Title:
[ ]
Attest:
By By
Name: Name:
Title: Title:
</TABLE>
C- 24
<PAGE> 103
Exhibit A
[to Form of Rights
Agreement]
FORM
OF
CERTIFICATE OF DESIGNATIONS
OF
SERIES E JUNIOR PARTICIPATING PREFERRED STOCK
OF
MCI COMMUNICATIONS CORPORATION
(PURSUANT TO SECTION 151 OF THE
DELAWARE GENERAL CORPORATION LAW)
------------------------------------
MCI Communications Corporation, a corporation organized and existing under
the General Corporation Law of the State of Delaware (hereinafter called the
"Company"), hereby certifies that the following resolution was adopted by the
Board of Directors of the Company as required by Section 151 of the General
Corporation Law at a meeting duly called and held on , 1994:
RESOLVED, that pursuant to the authority granted to and vested in the Board
of Directors of the Company (hereinafter called the "Board of Directors" or the
"Board") in accordance with the provisions of the Restated Certificate of
Incorporation, as amended to date (hereinafter called the "Certificate of
Incorporation"), the Board of Directors hereby creates a series of Preferred
Stock, par value $.10 per share (the "Preferred Stock"), of the Company and
hereby states the designation and number of shares, and fixes the relative
rights, preferences, and limitations thereof as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series E Junior Participating Preferred Stock" (the "Series E
Preferred Stock") and the number of shares constituting the Series E Preferred
Stock shall be . Such number of shares may be increased or decreased
by resolution of the Board of Directors; provided, that no decrease shall reduce
the number of shares of Series E Preferred Stock to a number less than the
number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the Company convertible
into Series E Preferred Stock.
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares of any series of
preferred stock of the Company (the "Preferred Stock") (or any similar stock)
ranking prior and superior to the Series E Preferred Stock with respect to
dividends, the holders of shares of Series E Preferred Stock, in preference to
the holders of Common Stock, par value $.10 per share of the Company (the
"Common Stock"), of Class A Common Stock, par value $.10 per share of the
Company ("Class A Common Stock") and of any other stock of the Company ranking
junior to the Series E Preferred Stock, shall be entitled to receive, when, as
and if declared by the Board of Directors out of funds legally available for the
purpose, [semi-annual] dividends payable in cash on the first day of [
and ] in each year (each such date being referred to herein as a
"Dividend Payment Date"), commencing on the first Dividend Payment Date after
the first issuance of a share or fraction of a share of Series E Preferred
Stock, in an amount per share (rounded to the nearest cent) equal to the greater
of (a) $[1] or (b) subject to the provision for adjustment hereinafter set
forth, 100 times the aggregate per share amount of all cash dividends, and 100
times the aggregate per share amount (payable in kind) of all non-cash dividends
or other distributions other than a dividend payable in shares of Common Stock,
declared on the Common Stock since the immediately preceding Dividend Payment
Date or, with respect to the first Dividend Payment Date, since the first
issuance of any share or fraction of a share of
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<PAGE> 104
Series E Preferred Stock. In the event the Company shall at any time declare or
pay any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the outstanding shares
of Common Stock (by reclassification or otherwise than by payment of a dividend
in shares of Common Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the amount to which holders of shares of Series E
Preferred Stock were entitled immediately prior to such event under clause (b)
of the preceding sentence shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
(B) The Company shall declare a dividend or distribution on the Series E
Preferred Stock as provided in paragraph (A) of this Section immediately after
it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided that, in the event no
dividend or distribution shall have been declared on the Common Stock during the
period between any Dividend Payment Date and the next subsequent Dividend
Payment Date, a dividend of $[1] per share on the Series E Preferred Stock shall
nevertheless be payable on such subsequent Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding shares
of Series E Preferred Stock from the Dividend Payment Date next preceding the
date of issue of such shares, unless the date of issue of such shares is prior
to the record date for the first Dividend Payment Date, in which case dividends
on such shares shall begin to accrue from the date of issue of such shares, or
unless the date of issue is a Dividend Payment Date or is a date after the
record date for the determination of holders of shares of Series E Preferred
Stock entitled to receive a quarterly dividend and before such Dividend Payment
Date, in either of which events such dividends shall begin to accrue and be
cumulative from such Dividend Payment Date. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the shares of Series E Preferred Stock in
an amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series E Preferred
Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be not more than 60 days prior to the date
fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series E Preferred
Stock shall have the following voting rights;
(A) Subject to the provision for adjustment hereinafter set forth and
except as otherwise provided in the Certificate of Incorporation or
required by law, each share of Series E Preferred Stock shall entitle the
holder thereof to 100 votes on all matters upon which the holders of the
Company are entitled to vote. In the event the Company shall at any time
declare or pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than
by payment of a dividend in shares of Common Stock) into a greater or
lesser number of shares of Common Stock, then in each such case the number
of votes per share to which holders of shares of Series E Preferred Stock
were entitled immediately prior to such event shall be adjusted by
multiplying such number by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) Except as otherwise provided herein, in the Certificate of
Incorporation or in any other Certificate of Designations creating a series
of Preferred Stock or any similar stock, and except as otherwise required
by law, the holders of shares of Series E Preferred Stock and the holders
of shares of Common Stock and any other capital stock of the Company having
general voting rights shall vote together as one class on all matters
submitted to a vote of stockholders of the Company.
(C) Except as set forth herein, or as otherwise provided by law,
holders of Series E Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled
to vote with holders of Common Stock as set forth herein) for taking any
corporate action.
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<PAGE> 105
Section 4. Certain Restrictions.
(A) Whenever [semi-annual] dividends or other dividends or distributions
payable on the Series E Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series E Preferred Stock outstanding shall have
been paid in full, the Company shall not:
(i) declare or pay dividends, or make any other distributions, on any
shares of stock ranking junior (as to dividends) to the Series E Preferred
Stock;
(ii) declare or pay dividends, or make any other distributions, on any
shares of stock ranking on a parity (as to dividends) with the Series E
Preferred Stock, except dividends paid ratably on the Series E Preferred
Stock and all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the holders of all such
shares are then entitled;
(iii) except as and to the extent permitted under Section 9 of the
Certificate of Incorporation, redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series E Preferred
Stock, provided that the Company may at any time redeem, purchase or
otherwise acquire shares of any such junior stock in exchange for shares of
any stock of the Company ranking junior (as to dividends and upon
dissolution, liquidation or winding up) to the Series E Preferred Stock;
(iv) except as and to the extent permitted under Section 9 of the
Certificate of Incorporation, redeem or purchase or otherwise acquire for
consideration any shares of Series E Preferred Stock, or any shares of
stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series E Preferred Stock, except in
accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such shares upon
such terms as the Board of Directors, after consideration of the respective
annual dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will result in
fair and equitable treatment among the respective series or classes.
(B) The Company shall not permit any subsidiary of the Company to purchase
or otherwise acquire for consideration any shares of stock of the Company unless
the Company could, under paragraph (A) of this Section 4, purchase or otherwise
acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series E Preferred Stock
purchased or otherwise acquired by the Company in any manner whatsoever shall be
retired and cancelled promptly after the acquisition thereof.
Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Company, no distribution shall be made (A) to
the holders of the Common Stock, of the Class A Common Stock or of shares of any
other stock of the Company ranking junior upon liquidation, dissolution or
winding up to the Series E Preferred Stock unless, prior thereto, the holders of
shares of Series E Preferred Stock shall have received $[100] per share, plus an
amount equal to accrued and unpaid dividends and distributions thereon, whether
or not declared, to the date of such payment, provided that the holders of
shares of Series E Preferred Stock shall be entitled to receive an aggregate
amount per share, subject to the provision for adjustment hereinafter set forth,
equal to 100 times the aggregate amount to be distributed per share to holders
of shares of Common Stock, or (B) to the holders of shares of stock ranking on a
parity upon liquidation, dissolution or winding up with the Series E Preferred
Stock, except distributions made ratably on the Series E Preferred Stock and all
such parity stock in proportion to the total amounts to which the holders of all
such shares are entitled upon such liquidation, dissolution or winding up. In
the event the Company shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the aggregate amount to which holders of shares of Series E Preferred
Stock were entitled immediately prior to such event under the proviso in clause
(A) of the preceding sentence shall be adjusted by multiplying such amount by a
fraction the
A-3
<PAGE> 106
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Company shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series E Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Company shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series E Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series E Preferred Stock shall
not be redeemable from any holder, except as, and to the extent permitted under
Section 9 of the Certificate of Incorporation.
Section 9. Rank. The Series E Preferred Stock shall rank, with respect to
the payment of dividends and the distribution of assets upon liquidation,
dissolution or winding up of the Company, junior to all series of any other
class of Preferred Stock and senior to the Common Stock and the Class A Common
Stock.
Section 10. Amendment. If any proposed amendment to the Certificate of
Incorporation (including this Certificate of Designations) would alter, change
or repeal any of the preferences, powers or special rights given to the Series E
Preferred Stock so as to affect the Series E Preferred Stock adversely, then the
holders of the Series E Preferred Stock shall be entitled to vote separately as
a class upon such amendment, and the affirmative vote of two-thirds of the
outstanding shares of the Series E Preferred Stock, voting separately as a
class, shall be necessary for the adoption thereof, in addition to such other
vote as may be required by the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf
of the Company by its Chairman of the Board of Directors and attested by its
Secretary this th day of , 1993.
------------------------------------
Chairman of the Board of Directors
Attest:
- ------------------------------------
Secretary
A-4
<PAGE> 107
Exhibit B
[to Form of Rights
Agreement]
FORM OF RIGHT CERTIFICATE
Certificate No. R -- Rights
NOT EXERCISABLE AFTER , 2004 OR EARLIER IF
REDEMPTION OR EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO
REDEMPTION AT $.01 PER RIGHT AND TO EXCHANGE ON THE TERMS
SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT,
RIGHTS OWNED BY OR TRANSFERRED TO ANY PERSON WHO BECOMES
AN ACQUIRING PERSON (AS DEFINED IN THE RIGHTS AGREEMENT)
AND CERTAIN TRANSFEREES THEREOF WILL BECOME NULL AND VOID
AND WILL NO LONGER BE TRANSFERABLE.
RIGHT CERTIFICATE
MCI COMMUNICATION CORPORATION
This certifies that or registered assigns, is the registered
owner of the number of Rights set forth above, each of which entitles the owner
thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of , 1994 (the "Rights Agreement"), between MCI
Communications Corporation, a Delaware corporation (the "Company"), and
(the "Rights Agent"), to purchase from the Company at any time after
the Distribution Date (as such term is defined in the Rights Agreement) and
prior to 5:00 P.M., New York City time, on , 2004 at the office or
agency of the Rights Agent designated for such purpose, or of its successor as
Rights Agent, one one-hundredth of a fully paid non-assessable share of Series E
Junior Participating Preferred Stock, par value $.10 per share (the "Preferred
Shares"), of the Company, at a purchase price of $ per one
one-hundredth of a Preferred Share (the "Purchase Price"), upon presentation and
surrender of this Right Certificate with the Form of Election to Purchase duly
executed. The number of Rights evidenced by this Rights Certificate (and the
number of one one-hundredths of a Preferred Share which may be purchased upon
exercise hereof) set forth above, and the Purchase Price set forth above, are
the number and Purchase Price as of , 1994, based on the Preferred
Shares as constituted at such date. As provided in the Rights Agreement, the
Purchase Price, the number of one one-hundredths of a Preferred Share which may
be purchased upon the exercise of the Rights and the number of Rights evidenced
by this Right Certificate are subject to modification and adjustment upon the
happening of certain events.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, as the same may be amended from time to
time, which terms, provisions and conditions are hereby incorporated herein by
reference and made a part hereof and to which Rights Agreement reference is
hereby made for a full description of the rights, limitations of rights,
obligations, duties and immunities hereunder of the Rights Agent, the Company
and the holders of the Right Certificates. Copies of the Rights Agreement are on
file at the principal executive offices of the Company and the above-mentioned
office or agency of the Rights Agent. The Company will mail to the holder of
this Right Certificate a copy of the Rights Agreement without charge after
receipt of a written request therefor.
This Right Certificate, with or without other Right Certificates, upon
surrender at the office or agency of the Rights Agent designated for such
purpose, may be exchanged for another Right Certificate or Right Certificates of
like tenor and date evidencing Rights entitling the holder to purchase a like
aggregate number of Preferred Shares as the Rights evidenced by the Right
Certificate or Right Certificates surrendered shall have entitled such holder to
purchase. If this Right Certificate shall be exercised in part, the holder shall
be entitled to receive upon surrender hereof another Right Certificate or Right
Certificates for the number of whole Rights not exercised.
B-1
<PAGE> 108
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate (i) may be redeemed by the Company at a redemption price of
$.01 per Right or (ii) may be exchanged in whole or in part for Preferred Shares
or shares of the Company's Common Stock, par value $.10 per share.
No fractional Preferred Shares will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-hundredth of a Preferred Share, which may, at the election
of the Company, be evidenced by depositary receipts), but in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.
No holder of this Right Certificate, as such, shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of the Preferred
Shares or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement) or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Right
certificate shall have been exercised as provided in the Rights Agreement. This
Right Certificate shall not be valid or obligatory for any purpose until it
shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal. Dated as of .
<TABLE>
<S> <C>
ATTEST: MCI COMMUNICATIONS CORPORATION
By By
Countersigned:
,
as Rights Agent
By
Authorized Signature
</TABLE>
B-2
<PAGE> 109
FORM OF REVERSE SIDE OF RIGHT CERTIFICATE
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate)
FOR VALUE RECEIVED hereby sells, assigns and
transfer unto
(Please print name and address of transferee)
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint
Attorney, to transfer the within Right Certificate on the books of the
within-named Company, with full power of substitution.
Dated:
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
- --------------------------------------------------------------------------------
(To be completed)
The undersigned hereby certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by, and were not acquired by the
undersigned from, an Acquiring Person or an Affiliate or Associate thereof (as
defined in the Rights Agreement).
Signature
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
Rights represented by the Rights Certificate)
To MCI COMMUNICATIONS CORPORATION:
This undersigned hereby irrevocably elects to exercise
Rights represented by this Right Certificate to
purchase the Preferred Shares issuable upon the exercise of such Rights and
requests that certificates for such Preferred Shares be issued in the name of:
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
B-3
<PAGE> 110
FORM OF REVERSE SIDE OF RIGHT CERTIFICATE -- continued
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivery to:
Please insert social security
or other identifying number
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
Dated:
Signature
(Signature must conform to holder specified on Right Certificate)
Signature Guaranteed:
Signature must be guaranteed by a member of firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
- --------------------------------------------------------------------------------
(To be completed)
The undersigned certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by, and were not acquired by the
undersigned from, an Acquiring Person or an Affiliate or Associate thereof (as
defined in the Rights Agreement)
Signature
- --------------------------------------------------------------------------------
NOTICE
The signature in the Form of Assignment or Form of Election to Purchase, as
the case may be, must conform to the name as written upon the face of this Right
Certificate in every particular, without alteration or enlargement or any change
whatsoever.
In the event the certification set forth above in the Form of Assignment or
the Form of Election to Purchase, as the case may be, is not completed, the
Company and the Rights Agent will deem the beneficial owner of the Rights
evidenced by this Right Certificate to be an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Rights Agreement) and such Assignment or
Election to Purchase will not be honored.
B-4
<PAGE> 111
Exhibit C
[to Form of Rights
Agreement]
UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS
AGREEMENT, RIGHTS OWNED BY OR TRANSFERRED TO ANY PERSON
WHO BECOMES AN ACQUIRING PERSON (AS DEFINED IN THE RIGHTS
AGREEMENT) AND CERTAIN TRANSFEREES THEREOF WILL BECOME
NULL AND VOID AND WILL NO LONGER BE TRANSFERABLE.
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
On , 1994, the Board of Directors of MCI Communications
Corporation (the "Company") declared a dividend of one preferred share purchase
right (a "Right") for each outstanding share of common stock, par value $.10 per
share and Class A common stock, par value $.10, of the Company (the "Common
Shares"). The dividend is payable on , 1994 (the "Record Date") to the
stockholders of record on that date. Each Right entitles the registered holder
to purchase from the Company one one-hundredth of a share of Series E Junior
Participating Preferred Stock, par value $.10 per share (the "Preferred Shares")
of the Company at a price of $ per one one-hundredth of a Preferred Share
(the "Purchase Price"), subject to adjustment. The description and terms of the
Rights are set forth in a Rights Agreement dated as of , 1994 (the
"Rights Agreement") between the Company and , as Rights Agent (the
"Rights Agent").
Until the earlier to occur of (i) 10 days following a public announcement
that a person or group of affiliated or associated persons (an "Acquiring
Person") have acquired beneficial ownership of 10% or more of the outstanding
Common Shares (more than 20.1% of the outstanding Common Shares in the case of
share acquisitions by British Telecommunications plc ("BT")) or (ii) 10 business
days (or such later date as may be determined by action of the Board of
Directors prior to such time as any person or group of affiliated persons
becomes an Acquiring Person) following the commencement of, or announcement of
an intention to make, a tender offer or exchange offer the consummation of which
would result in the beneficial ownership by a person or group of 10% or more of
the outstanding Common Shares (more than 20.1% of the outstanding Common Shares
in the case of a tender offer or exchange offer commenced or announced by BT)
(the earlier of such dates being called the "Distribution Date"), the Rights
will be evidenced, with respect to any of the Common Share certificates
outstanding as of the Record Date, by such Common Share certificate together
with a copy of this Summary of Rights.
The Rights Agreement provides that, until the Distribution Date (or earlier
redemption or expiration of the Rights), the Rights will be transferred with and
only with the Common Shares. Until the Distribution Date (or earlier redemption
or expiration of the Rights), new Common Share certificates issued after the
Record Date upon transfer or new issuances of Common Shares will contain a
notation incorporating the Rights Agreement by reference. Until the Distribution
Date (or earlier redemption or expiration of the Rights), the surrender for
transfer of any certificates for Common Shares outstanding as of the Record
Date, even without such notation or a copy of this Summary of Rights, will also
constitute the transfer of the Rights associated with the Common Shares
represented by such certificate. As soon as practicable following the
Distribution Date, separate certificates evidencing the Rights ("Right
Certificates") will be mailed to holders of record of the Common Shares as of
the close of business on the Distribution Date and such separate Right
Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The Rights will
expire on , 2004 (the "Final Expiration Date"), unless the Final
Expiration Date is extended or unless the Rights are earlier redeemed or
exchanged by the Company, in each case as described below.
The Purchase Price payable, and the number of Preferred Shares or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of
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a stock dividend on, or a subdivision, combination or reclassification of, the
Preferred Shares, (ii) upon the grant to holders of the Preferred Shares of
certain rights or warrants to subscribe for or purchase Preferred Shares at a
price, or securities convertible into Preferred Shares with a conversion price,
less than the then-current market price of the Preferred Shares or (iii) upon
the distribution to holders of the Preferred Shares of evidences of indebtedness
or assets (excluding regular periodic cash dividends paid out of earnings or
retained earnings or dividends payable in Preferred Shares) or of subscription
rights or warrants (other than those referred to above).
The number of outstanding Rights are also subject to adjustment in the
event of a stock split of the Common Shares or a stock dividend on the Common
Shares payable in Common Shares or subdivisions, consolidations or combinations
of the Common Shares occurring, in any such case, prior to the Distribution
Date.
Preferred Shares purchasable upon exercise of the Rights will not be
redeemable, except as otherwise provided under Section 9 of the Certificate of
Incorporation. Each Preferred Share will be entitled to a minimum preferential
quarterly dividend payment of $[1] per share but will be entitled to an
aggregate dividend of 100 times the dividend declared per Common Share. In the
event of liquidation, the holders of the Preferred Shares will be entitled to a
minimum preferential liquidation payment of $[100] per share but will be
entitled to an aggregate payment of 100 times the payment made per Common Share.
Each Preferred Share will have 100 votes, voting together with the Common
Shares. Finally, in the event of any merger, consolidation or other transaction
in which Common Shares are exchanged, each Preferred Share will be entitled to
receive 100 times the amount received per Common Share. These rights are
protected by customary antidilution provisions.
Because of the nature of the Preferred Shares' dividend, liquidation and
voting rights, the value of the one one-hundredth interest in a Preferred Share
purchasable upon exercise of each Right should approximate the value of one
Common Share.
In the event that any person or group of affiliated or associated persons
becomes an Acquiring Person, proper provision shall be made so that each holder
of a Right, other than Rights beneficially owned by the Acquiring Person (which
will thereafter be void), will thereafter have the right to receive upon
exercise of the Right at the then current exercise price of the Right, that
number of Common Shares having a market value of two times the exercise price of
the Right.
In the event that, after a person or group has become an Acquiring Person,
the Company is acquired in a merger or other business combination transaction or
50% or more of its consolidated assets or earning power are sold, proper
provision will be made so that each holder of a Right (other than Rights
beneficially owned by an Acquiring Person which will have become void) will
thereafter have the right to receive, upon the exercise thereof of the Right at
the then current exercise price of the Right, that number of shares of common
stock of the person with whom the Company has engaged in the foregoing
transaction which number of shares at the time of such transaction will have a
market value of two times the exercise price of the Right.
At any time after any person or group becomes an Acquiring Person and prior
to the acquisition by such person or group of 50% or more of the outstanding
Common Shares, the Board of Directors of the Company may exchange the Rights
(other than Rights owned by such person or group which will have become void),
in whole or in part, at an exchange ratio of one Common Share, or one
one-hundredth of a Preferred Share (or of a share of a class or series of the
Company's preferred stock having equivalent rights, preferences and privileges),
per Right (subject to adjustment).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional Preferred Shares will be issued (other than
fractions which are integral multiples of one one-hundredth of a Preferred
Share, which may, at the election of the Company, be evidenced by depositary
receipts) and in lieu thereof, an adjustment in cash will be made based on the
market price of the Preferred Shares on the last trading day prior to the date
of exercise.
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At any time prior to the time an Acquiring Person becomes such, the Board
of Directors of the Company may redeem the Rights in whole, but not in part, at
a price of $.01 per Right (the "Redemption Price"). The redemption of the Rights
may be made effective at such time, on such basis and with such conditions as
the Board of Directors in its sole discretion may establish. Immediately upon
any redemption of the Rights, the right to exercise the Rights will terminate
and the only right of the holders of Rights will be to receive the Redemption
Price.
For so long as Rights are then redeemable, the Company may, except with
respect to the redemption price, amend the Rights in any manner. After the
Rights are no longer redeemable the Company may amend the Rights in any manner
that does not adversely affect the interests of holders of the Rights.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-K dated
, 1994. A copy of the Rights Agreement is available free of charge
from the Company. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
as the same may be amended from time to time, which is hereby incorporated
herein by reference.
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[Exhibit D to Amended and Restated Investment Agreement -
See Exhibit 2 to this Schedule 13D]
<PAGE> 1
Exhibit 2
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT dated as of September 30, 1994 between
BRITISH TELECOMMUNICATIONS plc, a public limited company incorporated under the
laws of England and Wales ("BT"), and MCI COMMUNICATIONS CORPORATION, a Delaware
corporation (the "Company").
WHEREAS, pursuant to the terms of an Amended and Restated Investment
Agreement dated as of January 31, 1994 (the "Investment Agreement"), the Company
has determined to issue and sell and BT has determined to purchase shares of the
Company's capital stock on the terms and conditions set forth in the Investment
Agreement; and
WHEREAS, it is a condition to the obligations of each of BT and the Company
to consummate the transactions contemplated by the Investment Agreement that
this Registration Rights Agreement be executed and delivered by the Company and
BT.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the parties hereto agree as follows:
1. Definitions. As used in this Agreement, the following terms shall have
the following meanings:
"Class A Common Stock" shall mean the Class A Common Stock, par value
$.10 per share, of the Company.
"Common Stock" shall mean the Common Stock, par value $.10 per share,
of the Company.
"Determination of the Independent Directors" shall have the meaning
assigned in the Investment Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of
the SEC thereunder, all as the same shall be in effect from time to time,
and a reference to a particular section thereof shall be deemed to include
a reference to the comparable section, if any, of any such similar federal
statute.
"Holder" shall mean BT or its permitted assignee under Section 7(c)
hereof.
"Investment Agreement" shall mean the Amended and Restated Investment
Agreement dated as of January 31, 1994 between BT and the Company, as such
agreement may be amended, changed, supplemented or otherwise modified.
"Person" shall mean any individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint
venture, nation or government, state or other political subdivision thereof
(or other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government) or other entity of
whatever nature.
"Registrable Securities" shall mean the Common Stock issued or
issuable upon the conversion of the Class A Common Stock or any other
Common Stock issued pursuant to the Investment Agreement or otherwise
acquired by the Holder at such time that either (x) shares of the Class A
Common Stock remain outstanding or (y) BT is entitled to designate a
nominee for director pursuant to Section 9.7(c) or 9.11 of the Investment
Agreement, or issuable upon exercise or conversion of any options, warrants
or other securities acquired pursuant to the Investment Agreement and
Common Stock which may be issued or distributed in respect thereof by way
of stock dividend or stock split or other distribution, recapitalization or
reclassification. As to any particular Registrable Securities, once issued
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 in accordance with such registration statement, (ii)
they shall have been distributed to the public pursuant to Rule 144 (or any
successor provision) under the Securities Act, (iii) they shall have been
otherwise transferred (except transfers pursuant to clause (i) of the first
sentence of Section 5.1(a) or clause (iv) of the first sentence of Section
5.1(b) of the Investment Agreement), new certificates for them not bearing
a legend restricting further transfer shall have been delivered by the
Company and
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<PAGE> 2
subsequent disposition of them shall not require registration or
qualification of them under the Securities Act or any state securities or
blue sky law then in force, or (iv) they shall have ceased to be
outstanding.
"Registration Expenses" shall mean any and all expenses incident to
performance of or compliance with this Agreement, including, without
limitation, (i) all SEC and stock exchange or National Association of
Securities Dealers, Inc. registration and filing fees, (ii) all fees and
expenses of complying with securities or blue sky laws (including fees and
disbursements of counsel for the underwriters in connection with blue sky
qualifications of the Registrable Securities), (iii) all printing,
messenger and delivery expenses, (iv) all fees and expenses incurred in
connection with the listing of the Registrable Securities on the NASDAQ
National Market System or on any securities exchange pursuant to clause
(viii) of Section 4, (v) the fees and disbursements of counsel for the
Company and of its independent public accountants, including the expenses
of any special audits and/or "cold comfort" letters required by or incident
to such performance and compliance and the reasonable fees of any special
experts retained in connection with the requested registration, but
excluding the expenses of counsel to the Holder or (vi) any fees and
disbursements of underwriters customarily paid by the issuers or sellers of
securities, including liability insurance if the Company so desires or if
the underwriters so require, and the reasonable fees and expenses of any
special experts retained in connection with the requested registration, but
excluding underwriting discounts and commissions and transfer taxes, if
any.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the SEC
thereunder, all as the same shall be in effect from time to time, and a
reference to a particular section thereof shall be deemed to include a
reference to the comparable section, if any, of any such similar federal
statute.
"SEC" shall mean the Securities and Exchange Commission or its
successor.
2. Incidental Registrations.
(a) Right to Include Registrable Securities. If the Company at any time
after the date hereof proposes to register its Common Stock under the Securities
Act (other than a registration on Form S-4 or S-8, or any successor or other
forms promulgated for similar purposes), whether or not for sale for its own
account, in a manner which would permit registration of Registrable Securities
for sale to the public under the Securities Act, it will, at each such time,
give prompt written notice to the Holder of its intention to do so and of the
Holder's rights under this Section 2. Upon the written request of the Holder
made within 15 days after the receipt of any such notice (which request shall
specify the Registrable Securities intended to be disposed of by such Holder),
the Company will use its best efforts to effect the registration under the
Securities Act of all Registrable Securities which the Company has been so
requested to register by the Holder, to the extent required to permit the
disposition of the Registrable Securities so to be registered; provided, that
(i) if, at any time after giving written notice of its intention to register any
securities and prior to the effective date of the registration statement filed
in connection with such registration, the Company shall determine for any reason
not to proceed with the proposed registration of the securities to be sold by
it, the Company may, at its election, give written notice of such determination
to the Holder and, thereupon, shall be relieved of its obligation to register
any Registrable Securities in connection with such registration (but not from
its obligation to pay the Registration Expenses in connection therewith), and
(ii) if such registration involves an underwritten offering, the Holder
requesting to be included in the Company's registration must sell its
Registrable Securities to the underwriters selected by the Company on the same
terms and conditions as apply to the Company or other selling holders, with such
differences, including any with respect to indemnification and liability
insurance, as may be customary or appropriate for such underwriters in combined
primary and secondary offerings. If a registration requested pursuant to this
Section 2(a) involves an underwritten public offering, the Holder requesting to
be included in such registration may elect, in writing prior to the effective
date of the registration statement filed in connection with such registration,
not to register such securities in connection with such registration.
(b) Expenses. The Company will pay all Registration Expenses in connection
with each registration of Registrable Securities requested pursuant to this
Section 2.
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<PAGE> 3
(c) Priority in Incidental Registrations. If a registration pursuant to
this Section 2 involves an underwritten offering and the managing underwriter
advises the Company in writing that, in its opinion, the number of securities
requested to be included in such registration exceeds the number which can be
sold in such offering, so as to be likely to have an adverse effect on such
offering as contemplated by the Company (including the price at which the
Company or other holders of Securities propose to sell such securities), then
the Company will include in such registration (i) first, 100% of the securities
the Company or such other holders propose to sell and (ii) second, the number of
Registrable Securities requested to be included in such registration by the
Holder which, in the opinion of such managing underwriter, can be sold without
having the adverse effect referred to above, in preference to the inclusion in
such registration of securities subject to all rights to registration to which
other holders (other than any holder or holders on whose behalf such
registration may have been proposed) may be entitled in connection with such
offering.
3. Registration on Request.
(a) Request by the Holder. Upon the written request of the Holder
requesting that the Company effect the registration under the Securities Act of
all or part of such Holder's Registrable Securities (constituting in the
aggregate at least 20,000,000 shares (such number of shares to be adjusted to
reflect any stock split, stock dividend, or other combination or
reclassification of the Company's capital stock after the date hereof) or such
lesser number of Registrable Securities as the managing underwriter of the
offering may determine is the maximum number of shares that may be offered
without adversely affecting the trading market of the Common Stock) and
specifying the intended method of disposition thereof, and thereupon will, as
expeditiously as possible, use its best efforts to effect the registration under
the Securities Act of the Registrable Securities which the Company has been so
requested to register by the Holder, provided that the Company shall be
obligated to register such Registrable Securities pursuant to this Section 3(a)
on only three occasions and each demand registration shall be separated by at
least 18 months and provided that the Company (i) shall not be obligated to
cause any special audit to be undertaken in connection with any such
registration, (ii) shall be entitled to postpone for a reasonable period of
time, but not in excess of 60 days, the filing of any registration statement
otherwise required to be prepared pursuant to this Section 3 if the Company is,
at such time, conducting or about to conduct an underwritten public offering of
equity securities (or securities convertible into equity securities) and is
advised in writing by its managing underwriter that such offering would in its
opinion be adversely affected by the registration so requested and (iii) shall
be entitled to postpone such requested registration for up to 90 days if there
is a Determination of the Independent Directors, in view of the advisability of
deferring public disclosure of material corporate developments or other
information, that such registration and the disclosure required to be made
pursuant thereto would not be in the best interests of the Company at such time,
provided, however, that the Company may not postpone any requested registrations
for more than a total of 90 days in any nine-month period.
(b) Registration Statement Form. If any registration requested pursuant to
this Section 3 which is proposed by the Company to be effected by the filing of
a registration statement on Form S-3 (or any successor or similar short-form
registration statement) shall be in connection with an underwritten public
offering, and if the managing underwriter shall advise the Company in writing
that, in its opinion, the use of another form of registration statement is of
material importance to the success of such proposed offering, then such
registration shall be effected on such other form.
(c) Expenses. The Company will pay all Registration Expenses in connection
with the three demand registrations of Registrable Securities pursuant to this
Section 3.
(d) Effective Registration Statement. A registration requested pursuant to
this Section 3 will not be deemed to have been effected unless it has become
effective, provided that, if within 180 days after it has become effective the
offering of Registrable Securities pursuant to such registration is interfered
with by any stop order, injunction or other order or requirement of the SEC or
other governmental agency or court, such registration will be deemed not to have
been effected.
(e) Selection of Underwriters. If a requested registration pursuant to
this Section 3 involves an underwritten offering, the Company shall have the
right to select in good faith the investment banker or
3
<PAGE> 4
bankers and managers to administer the offering, provided, however, that such
investment banker or bankers and managers shall be reasonably satisfactory to
the Holder.
(f) Priority in Requested Registrations. If a requested registration
pursuant to this Section 3 involves an underwritten offering and the managing
underwriter advises the Company in writing that, in its opinion, the number of
securities requested to be included in such registration (including securities
of the Company which are not Registrable Securities) exceeds the number which
can be sold in such offering, the Company will include in such registration only
the Registrable Securities requested to be included in such registration. In the
event that the number of Registrable Securities requested to be included in such
registration is less than the number which, in the opinion of the managing
underwriter, can be sold, the Company may include in such registration the
securities that the Company or other holders of securities propose to sell up to
the number of securities that, in the opinion of the managing underwriter, can
be sold and would not be likely to have an adverse effect on the offering of the
Registrable Securities.
(g) Additional Rights. If the Company at any time grants to any other
holders of Common Stock any rights to request the Company to effect the
registration under the Securities Act of any such shares of Common Stock on
terms more favorable to such holders than the terms set forth in this Section 3,
the terms of this Section 3 shall be deemed amended or supplemented to the
extent necessary to provide the Holder such more favorable rights and benefits.
4. Registration Procedures. If and whenever the Company is required to use
its best efforts to effect or cause the registration of any Registrable
Securities under the Securities Act as provided in this Agreement, the Company
will, as expeditiously as possible:
(i) prepare and, in any event within 60 days after the later of (x)
the date of the Holder's request for registration or (y) the end of the
period within which a request for registration may be given to the Company,
file with the SEC a registration statement with respect to such Registrable
Securities and use its best efforts to cause such registration statement to
become effective, provided, however, that the Company may discontinue any
registration of its securities which is being effected pursuant to Section
2 at any time prior to the effective date of the registration statement
relating thereto;
(ii) prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective for a
period not in excess of 120 days and to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by
such registration statement during such period in accordance with the
intended methods of disposition by the seller thereof set forth in such
registration statement, provided, that before filing a registration
statement or prospectus relating to the sale of Registrable Securities, or
any amendments or supplements thereto, the Company will furnish to counsel
to the Holder, copies of all documents proposed to be filed, which
documents will be subject to the review of such counsel, and the Company
will give reasonable consideration in good faith to any comments of such
counsel;
(iii) furnish to the seller of Registrable Securities such number of
copies of such registration statement and of each amendment and supplement
thereto (in each case including all exhibits), such number of copies of the
prospectus included in such registration statement (including each
preliminary prospectus and summary prospectus), in conformity with the
requirements of the Securities Act, and such other documents as such seller
may reasonably request in order to facilitate the disposition of the
Registrable Securities by such seller but only while the Company shall be
required under the provisions hereof to cause the registration statement to
remain current;
(iv) use its best efforts to register or qualify such Registrable
Securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as the seller shall
reasonably request, and do any and all other acts and things which may be
reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by
such seller, except that the Company shall not for any such purpose be
required to qualify generally to do business as a foreign corporation in
any jurisdiction where, but for the requirements of this clause (iv),
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<PAGE> 5
it would not be obligated to be so qualified, to subject itself to taxation
in any such jurisdiction, or to consent to general service of process in
any such jurisdiction;
(v) use its best efforts to cause such Registrable Securities covered
by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable
the seller to consummate the disposition of such Registrable Securities;
(vi) notify promptly the seller of any such Registrable Securities
covered by such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act
within the appropriate period mentioned in clause (ii) of this Section 4,
of the Company's becoming aware that the prospectus included in such
registration statement, as then in effect, includes an untrue statement of
a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing, and at the request of any such
seller, prepare and furnish to such seller a reasonable number of copies of
an amended or supplemental prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances
then existing;
(vii) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC, and make available to its security
holders, as soon as reasonably practicable (but not more than eighteen
months) after the effective date of the registration statement, an earnings
statement which shall satisfy the provisions of Section 11(a) of the
Securities Act and the rules and regulations promulgated thereunder;
(viii) use its best efforts to list or admit for trading such
Registrable Securities on the National Association of Securities Dealers,
Inc. National Market System ("NASDAQ NMS") or any securities exchange on
which the Common Stock is then listed, if such Registrable Securities are
not already so listed and if such listing is then permitted under the rules
of the NASDAQ NMS or such exchange, and to provide a transfer agent and
registrar for such Registrable Securities covered by such registration
statement not later than the effective date of such registration statement;
(ix) enter into an underwriting agreement with a managing underwriter
or underwriters selected by the Company containing representations,
warranties, indemnities and agreements then customarily included by an
issuer in underwriting agreements with respect to secondary distributions;
provided, however, that such underwriter or underwriters shall agree to use
their best efforts to ensure that the offering results in a distribution of
the Registrable Securities sold in accordance with the terms of the
Investment Agreement;
(x) obtain a "cold comfort" letter or letters from the Company's
independent public accountants in customary form and covering matters of
the type customarily covered by "cold comfort" letters as the seller of
such Registrable Securities shall reasonably request (provided that
Registrable Securities constitute at least 25% of the securities covered by
such registration statement, unless such a "cold comfort" letter or letters
are provided to the Company or other selling holders in connection with
such registration);
(xi) make available for inspection by the seller of such Registrable
Securities covered by such registration statement, by any underwriter
participating in any disposition to be effected pursuant to such
registration statement and by any attorney, accountant or other agent
retained by any such seller or any such underwriter, all pertinent
financial and other records, pertinent corporate documents and properties
of the Company, and cause all of the Company's officers, directors and
employees to supply all information reasonably requested by any such
seller, underwriter, attorney, accountant or agent in connection with such
registration statement; and
(xii) obtain for delivery to the underwriter or agent an opinion or
opinions from counsel for the Company in customary form and in form and
scope reasonably satisfactory to such underwriter or agent and their
counsel.
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<PAGE> 6
The Company may require the seller of Registrable Securities as to which
any registration is being effected to furnish the Company with such information
regarding such seller and pertinent to the disclosure requirements relating to
the registration and the distribution of such securities as the Company may from
time to time reasonably request in writing.
The Holder agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in clause (vi) of this Section 4,
such Holder will forthwith discontinue disposition of Registrable Securities
pursuant to the registration statement covering such Registrable Securities
until such Holder's receipt of the copies of the supplemented or amended
prospectus contemplated by clause (vi) of this Section 4, and, if so directed by
the Company, the Holder will deliver to the Company (at the Company's expense)
all copies, other than permanent file copies then in such Holder's possession,
of the prospectus covering such Registrable Securities current at the time of
receipt of such notice. In the event the Company shall give any such notice, the
period mentioned in clause (ii) of this Section 4 shall be extended by the
number of days during the period from and including the date of the giving of
such notice pursuant to clause (vi) of this Section 4 and including the date
when each seller of Registrable Securities covered by such registration
statement shall have received the copies of the supplemented or amended
prospectus contemplated by clause (vi) of this Section 4.
5. Indemnification and Contribution.
(a) Indemnification by the Company. In the event of any registration of
any securities of the Company under the Securities Act pursuant to Section 2 or
3, the Company will, and it hereby does, indemnify and hold harmless, to the
extent permitted by law, the seller of any Registrable Securities covered by
such registration statement, each affiliate of such seller and their respective
directors and officers or general and limited partners (and the directors,
officers, affiliates and controlling Persons thereof), each other Person who
participates as an underwriter in the offering or sale of such securities and
each other Person, if any, who controls such seller or any such underwriter
within the meaning of the Securities Act (collectively, with any Person
entitled to indemnification pursuant to Section 5(b), the "Indemnified
Parties"), against any and all losses, claims, damages or liabilities, joint or
several, and expenses to which such seller, any such director or officer or
general or limited partner or affiliate or any such underwriter or controlling
Person may become subject under the Securities Act, common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof, whether or not such Indemnified Party is a party
thereto) arise out of or are based upon (a) any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered under the Securities Act, any
preliminary, final or summary prospectus contained therein, or any amendment or
supplement thereto, or (b) any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing, and the
Company will reimburse such Indemnified Party for any legal or any other
expenses reasonably incurred by it in connection with investigating or defending
any such loss, claim, liability, action or proceeding, provided that the Company
shall not be liable to any Indemnified Party in any such case to the extent that
any such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement or amendment or supplement thereto or in any such
preliminary, final or summary prospectus in reliance upon and in conformity with
written information furnished to the Company through an instrument duly executed
by such seller specifically stating that it is for use in the preparation
thereof, and provided further that the Company will not be liable to any Person
who participates as an underwriter in the offering or sale of Registrable
Securities or any other Person, if any, who controls such underwriter within the
meaning of the Securities Act, under the indemnity agreement in this Section
5(a) with respect to any preliminary prospectus or the final prospectus or the
final prospectus as amended or supplemented, as the case may be, to the extent
that any such loss, claim, damage or liability of such underwriter or
controlling Person results from the fact that such underwriter sold Registrable
Securities to a person to whom there was not sent or given, at or prior to the
written confirmation of such sale, a copy of the final prospectus (including any
documents incorporated by reference therein) or of the final prospectus as then
amended or supplemented (including any documents incorporated by reference
therein), whichever is most recent, if the Company has previously furnished
copies thereof to such underwriter. Such indemnity shall
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<PAGE> 7
remain in full force and effect regardless of any investigation made by or on
behalf of such seller or any Indemnified Party and shall survive the transfer of
such securities by such seller.
(b) Indemnification by the Seller. The Company may require, as a condition
to including any Registrable Securities in any registration statement filed in
accordance with Section 4 herein, that the Company shall have received an
undertaking reasonably satisfactory to it from the prospective seller of such
Registrable Securities or any underwriter to indemnify and hold harmless (in the
same manner and to the same extent as set forth in subdivision (a) of this
Section 5) the Company and all other prospective sellers with respect to any
statement or alleged statement in or omission or alleged omission from such
registration statement, any preliminary, final or summary prospectus contained
therein, or any amendment or supplement, if such statement or alleged statement
or omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company through an instrument duly executed
by such seller or underwriter specifically stating that it is for use in the
preparation of such registration statement, preliminary, final or summary
prospectus or amendment or supplement, or a document incorporated by reference
into any of the foregoing. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Company or any of
the prospective sellers, or any of their respective affiliates, directors,
officers or controlling Persons and shall survive the transfer of such
securities by such seller.
(c) Notices of Claims, Etc. Promptly after receipt by an Indemnified Party
hereunder of written notice of the commencement of any action or proceeding with
respect to which a claim for indemnification may be made pursuant to this
Section 5, such Indemnified Party will, if a claim in respect thereof is to be
made against an indemnifying party, give written notice to the latter of the
commencement of such action, provided that the failure of the Indemnified Party
to give notice as provided herein shall not relieve the indemnifying party of
its obligations under the preceding subdivisions of this Section 5, except to
the extent that the indemnifying party is materially prejudiced by such failure
to give notice. In case any such action is brought against an Indemnified Party,
the indemnifying party will be entitled to participate in and to assume control
of the defense of such action, including any settlement thereof, provided that
the indemnifying party will not agree to any settlement without the prior
consent of the Indemnified Party (which consent shall not be unreasonably
withheld) unless such settlement requires no more than a monetary payment for
which the indemnifying party agrees to indemnify the Indemnified Party and
includes a full, unconditional and complete release of the Indemnified Person,
provided, however, that the Indemnified Party shall be entitled to take control
of the defense of any claim as to which, in the reasonable judgment of the
Indemnifying Party's counsel, representation of both the indemnifying party and
the Indemnified Party would be inappropriate under the applicable standards of
professional conduct due to actual or potential differing interests between
them. After notice has been provided by the indemnifying party to such
Indemnified Party of its election to assume the defense of any claim pursuant to
this Section 5(c), the indemnifying party will not be liable to such Indemnified
Party for any legal or other expenses subsequently incurred by the latter in
connection with the defense of such claim. In the event that the indemnifying
party does not assume the defense of a claim pursuant to this Section 5(c), the
indemnified party will have the right to defend such claim by all appropriate
proceedings, and will have control of such defense and proceedings, provided
that no Indemnified Party shall agree to any settlement without the prior
consent of the indemnifying party (which consent shall not be unreasonably
withheld) unless the Indemnified Party irrevocably waives their right to
indemnity under this Agreement with respect to such settlement. Each Indemnified
Party shall, and shall cause their legal counsel to, provide reasonable
cooperation to the indemnifying party and its legal counsel in connection with
its assuming the defense of any claim, including the furnishing of the
indemnifying party with all papers served in such proceeding. In the event that
an indemnifying party assumes the defense of an action under this Section 5(c),
then such indemnifying party shall, subject to the provisions of this Section 5,
indemnify and hold harmless the Indemnified Party from any and all losses,
claims, damages or liabilities by reason of such settlement or judgment.
(d) Other Indemnification. Indemnification similar to that specified in
the preceding subdivisions of this Section 5 (with appropriate modifications)
shall be given by the Company and each seller of Registrable
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<PAGE> 8
Securities with respect to any required registration or other qualification of
securities under any federal or state law or regulation or governmental
authority other than the Securities Act.
(e) Contribution. If the indemnity provided for in the foregoing
paragraphs of this Section 5 is unavailable or insufficient for any reason to
hold harmless an Indemnified Party in respect of any losses, claims, damages or
liabilities referred to therein, then the indemnifying party, in lieu of
indemnifying such Indemnified Party, agrees to contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages or
liabilities in such proportion as is appropriate to reflect (i) the relative
benefits received by the indemnifying party on the one hand and the Indemnified
Party on the other hand from the sale of securities under such registration
statement, (ii) the relative fault of the indemnifying party on the one hand and
the Indemnified Party on the other hand in connection with the statements,
actions or omissions which resulted in such losses, claims, damages or
liabilities and (iii) any other relevant equitable considerations. The relative
fault of the indemnifying party on the one hand and of the Indemnified Party on
the other hand (i) in the case of an untrue or alleged untrue statement of a
material fact or an omission or alleged omission to state a material fact, shall
be determined by reference to, among other things, whether such statement or
omission relates to information supplied by the indemnifying party or by the
Indemnified Party respectively and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission and (ii) in the case of any other action or omission, shall be
determined by reference to, among other things, whether such action or omission
was taken or omitted to be taken by the indemnifying party or the Indemnified
Party respectively and the parties' relative intent, knowledge, access to
information and opportunity to prevent such action or omission. The parties
agree that it would not be just and equitable if contribution pursuant to this
Section 5(e) were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in the immediately preceding sentences. The amount paid or payable by the
Indemnified Party as a result of the losses, claims, damages or liabilities
referred to in such sentences 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, preparing to defend or
defending any such action or claim.
(f) Non-Exclusivity. The obligations of the parties under this Section 5
shall be in addition to any liability which any party may otherwise have to any
other party.
6. Rule 144. For so long as the Company continues to be subject to the
requirements of Section 12 of the Exchange Act, the Company covenants that it
will file the reports required to be filed by it under the Securities Act and
the Exchange Act and the rules and regulations adopted by the SEC thereunder
(or, if the Company is not required to file such reports, it will, upon the
request of the Holder, make publicly available such information), and it will
take such further action as the Holder may reasonably request, all to the extent
required from time to time to enable the Holder to sell shares of Registrable
Securities without registration under the Securities Act within the limitation
of the exemptions provided by (i) Rule 144 under the Securities Act, as such
Rule may be amended from time to time, or (ii) any similar rule or regulation
hereafter adopted by the SEC. Upon the request of the Holder, the Company will
deliver to the Holder a written statement as to whether it has complied with
such requirements. Notwithstanding anything contained in this Section 6, the
Company may deregister under Section 12 of the Exchange Act if it then is
permitted to do so pursuant to the Exchange Act and the rules and regulations
thereunder.
7. Miscellaneous.
(a) Holdback Agreement. If any registration (whether or not Registrable
Securities are included therein) shall be in connection with an underwritten
public offering, the Holder agrees not to effect any public sale or
distribution, including any sale pursuant to Rule 144 under the Securities Act,
of any equity securities of the Company, or of any security convertible into or
exchangeable or exercisable for any equity security of the Company (in each
case, other than as part of such underwritten public offering), within 7 days
before or 180 days (or such lesser period as the managing underwriter may
permit) after the effective date of such registration, and the Company hereby
also so agrees and agrees to use reasonable efforts to cause each other holder
of any equity security, or of any security convertible into or exchangeable or
exercisable for any equity
8
<PAGE> 9
security, of the Company purchased from the Company (at any time other than in a
public offering) to so agree.
(b) Amendments and Waivers. This Agreement may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the Holder. The
Holders of any Registrable Securities at the time or thereafter outstanding
shall be bound by any consent authorized by this Section 7(b), whether or not
such Registrable Securities shall have been marked to indicate such consent.
(c) Successors, Assigns and Transferees. This Agreement shall be binding
upon, and inure to the benefit of, the parties hereto and their respective
successors and permitted assigns, provided, however, that neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned (i)
by the Company under any circumstances or (ii) by BT, except (1) to a wholly
owned direct or indirect subsidiary of BT, provided that BT (A) shall remain
liable for the performance by any such subsidiary of its obligations under this
Agreement, (B) shall act as agent for any and all such subsidiaries in
connection with the receipt or giving of any and all notices under this
Agreement and (C) shall not cause or permit any such subsidiary to be other than
a wholly owned direct or indirect subsidiary of BT and (2) to a transferee of
the Registrable Securities as permitted in clause (iv) of the first sentence of
Section 5.1(b) of the Investment Agreement.
(d) Notices. All notices and other communications provided for hereunder
shall be in writing and shall be sent by first class mail, telex, telecopier or
hand delivery:
(1) If to the Company, to:
MCI Communications Corporation
1801 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Attention: John Whiteside
Vice President
with a copy to:
MCI Communications Corporation
1801 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Attention: John R. Worthington, Esq.
Senior Vice President and
General Counsel
With a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Richard I. Beattie, Esq.
(2) If to BT:
British Telecommunications plc
BT Centre
81 Newgate Street
London EC1A 7AJ
England
Attention: Mr. Colin R. Green
Solicitor and Chief Legal Adviser
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<PAGE> 10
With a copy to:
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
Attention: Albert F. Lilley, Esq.
(3) if to any other holder of Registrable Securities, to the address
of such other holder as shown in the stock record book of the
Company, or to such other address as any of the above shall have
designated in writing to all of the other above.
Any notice delivered after business hours or on a Saturday, Sunday or legal
holiday at the place designated in such delivery shall be deemed for purposes of
computing any time period hereunder to have been delivered on the next business
day.
(e) Headings. The headings in this Agreement are for convenience only and
shall not affect the construction hereof.
(f) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.
(g) Remedies. (i) Each of the Company and BT acknowledges that the other
party would not have an adequate remedy at law for money damages in the event
that any of the covenants or agreements of the other party in this Agreement
were not performed in accordance with its terms, and it is therefore agreed that
each of BT and the Company, in addition to and without limiting any other remedy
or right it may have, will have the right to an injunction or other equitable
relief in any court of competent jurisdiction, subject to Section 7(h),
enjoining any such breach and enforcing specifically the terms and provisions
hereof, and each of BT and the Company hereby waive any and all defenses they
may have on the ground of lack of jurisdiction or competence of the court to
grant such an injunction or other equitable relief.
(ii) All rights, powers and remedies provided under this Agreement or
otherwise available in respect hereof at law or in equity shall be cumulative
and not alternative, and the exercise or beginning of the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise of
any other such right, power or remedy by such party.
(h) SUBMISSION TO JURISDICTION; WAIVERS. Each of BT and the Company
irrevocably agrees that any legal action or proceeding with respect to this
Agreement or for recognition and enforcement of any judgment in respect thereof
brought by the other party hereto or its successors or assigns, may be brought
and determined in the Supreme Court of the State of New York in New York County
or in the United States District Court for the Southern District of New York,
and each of BT and the Company hereby irrevocably submits with regard to any
such action or proceeding for itself and in respect to its property, generally
and unconditionally, to the nonexclusive jurisdiction of the aforesaid courts.
Each of BT and the Company hereby irrevocably waives, and agrees not to assert,
by way of motion, as a defense, counterclaim or otherwise, in any action or
proceeding with respect to this Agreement, the defense of sovereign immunity,
any claim that it is not personally subject to the jurisdiction of the
above-named courts for any reason other than the failure to serve process in
accordance with this Section 7(h), that it or its property is exempt or immune
from jurisdiction of any such court or from any legal process commenced in such
courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment or otherwise),
and to the fullest extent permitted by applicable law, that the suit, action or
proceeding in any such court is brought in an inconvenient forum, that the venue
of such suit, action or proceeding is improper, or that this Agreement, or the
subject matter hereof or thereof, may not be enforced in or by such courts and
further irrevocably waives, to the fullest extent permitted by applicable law,
the benefit of any defense that would hinder, fetter or delay the levy,
execution or collection of any amount to which the party is entitled pursuant to
the final judgment of any court having jurisdiction. BT hereby irrevocably
designates CT Corporation System (in such capacity, the "Process Agent"), with
an office on the date hereof at 1633 Broadway, New York, New York 10019, as the
designee, appointee and agent of BT to receive, for and on behalf of BT service
of process in such jurisdiction in any legal action or proceeding with respect
to this Agreement and
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<PAGE> 11
such service shall be deemed complete upon delivery thereof to the Process
Agent, provided that in the case of any such service upon the Process Agent, the
party effecting such service shall also deliver a copy thereof to BT in the
manner provided in Section 7(d). BT shall take all such action as may be
necessary to continue said appointment in full force and effect or to appoint
another agent so that BT will at all times have an agent for service of process
for the above purposes in New York, New York. Each of BT and the Company further
irrevocably consents to the service of process out of any of the aforementioned
courts in any such action or proceeding by the mailing of copies thereof by
registered airmail, postage prepaid, to such party at its address set forth in
this Agreement, such service of process to be effective upon acknowledgement of
receipt of such registered mail. Nothing herein shall affect the right of either
party to serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against the other party in any other
jurisdiction in which the other party may be subject to suit. BT expressly
acknowledges that the foregoing waiver is intended to be irrevocable under the
laws of the State of New York and of the United States of America, provided that
BT's consent to jurisdiction and service contained in this Section 7(h) is
solely for the purpose referred to in this Section 7(h) and shall not be deemed
to be a general submission to said Courts or in the State of New York other than
for such purpose.
In the event of the transfer of all or substantially all of the assets and
business of the Process Agent to any other corporation by consolidation, merger,
sale of assets or otherwise, such other corporation shall be substituted
hereunder for the Process Agent with the same effect as if named herein in place
of CT Corporation System.
(i) Severability. In the event that any provision of this Agreement shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
(j) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
MCI COMMUNICATIONS CORPORATION
By: /s/ Bert C. Roberts, Jr.
Name:
Title:
BRITISH TELECOMMUNICATIONS plc
By: /s/ Colin R. Green
Name:
Title:
11
<PAGE> 1
Exhibit 3
FIRST AMENDMENT
FIRST AMENDMENT, dated as of September 29, 1994, to the Amended and
Restated Investment Agreement dated as of January 31, 1994 (as amended,
supplemented and modified through the date hereof, and as the same may be
further amended, supplemented or otherwise modified from time to time, the
"Investment Agreement"; capitalised terms which are used herein and defined in
the Investment Agreement shall have the meanings specified in the Investment
Agreement), between British Telecommunications plc, a public limited company
incorporated under the laws of England and Wales ("BT") and MCI Communications
Corporation, a Delaware corporation (the "Company").
W I T N E S S E T H :
WHEREAS, in connection with the EC Commission's review of the
transactions contemplated by the Investment Agreement and the Newco Agreement,
the EC Commission has requested and, in accordance with Sections 8.1 and 8.2 of
the Investment Agreement, the Company and BT have agreed, that the Investment
Agreement be amended as set forth below;
NOW THEREFORE, in consideration of the foregoing and the mutual
promises contained herein, the parties hereto agree as follows:
SECTION 1. Amendment and Restatement of Section 9.12 of the
Investment Agreement. Section 9.12 of the Investment Agreement is hereby
amended and restated to read in its entirety as set forth on Annex A hereto.
SECTION 2. Representation and Warranty of the Company and BT. Each
of MCI and BT represents and warrants to the other party hereto that this First
Amendment has been duly authorized by all necessary corporate action on the
part of such party and duly executed and delivered by such party and
constitutes a legal, valid and binding agreement of such party, enforceable
against it in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and other similar
laws relating to or affecting creditors generally, by general equity principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) or by an implied covenant of good faith and fair dealing.
SECTION 3. Counterparts. This First Amendment may be executed by
one or more of the parties to this First
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<PAGE> 2
Amendment on any number of separate counterparts and all of said counterparts
taken together shall be deemed to constitute one and the same instrument.
SECTION 4. Limitation of Amendment. Except as expressly provided
herein, the Investment Agreement shall continue to be, and shall remain, in
full force and effect. Except as expressly provided herein, this First
Amendment shall not be deemed to be a waiver of, or consent to, or a
modification or amendment of, any other term or condition of the Investment
Agreement.
SECTION 5. Governing Law. This First Amendment shall be governed
by, and construed in accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
MCI COMMUNICATIONS CORPORATION
By: /s/ Bert C. Roberts, Jr.
-------------------------
Name:
Title:
BRITISH TELECOMMUNICATIONS plc
By: /s/ Colin R. Green
-------------------------
Name:
Title:
2
<PAGE> 3
Annex A
to First Amendment
9.12 RELEASE OF RIGHTS AND OBLIGATIONS. (a) Except as otherwise
provided in Section 9.12(b), subsequent to the Closing, in the event that BT or
any of its Affiliates engages directly or indirectly in the Core Business of
the Company in the Americas or transfers or provides sales and marketing
support, technology or customer traffic in connection with any Person engaged
in the Core Business of the Company in the Americas or holds or acquires an
interest in any Person who is engaged in the Core Business of the Company in
the Americas as a partner, shareholder, principal or in any other capacity of
ownership or control (such activities, whether or not engaged in the Americas,
are collectively referred to as being "Engaged in the Core Business of the
Company"), then, as provided in the Certificate of Incorporation (as amended by
the Certificate of Amendment), any outstanding shares of Class A Common Stock
shall be subject to conversion into shares of Common Stock in accordance with
section 4(b)(9)(ii) of the Certificate of Incorporation (as amended by the
Certificate of Amendment) by reason of the occurrence of an event described in
section 4(b)(11)(vi)(E)(ii) of the Certificate of Incorporation (as amended by
the Certificate of Amendment), Sections 9.3 through 9.7 of this Agreement
(except for the last sentence of Section 9.7(c)) shall become void and of no
further force and effect (such consequences are collectively referred to herein
as the "Loss of BT Rights") and all further obligations of the Company and BT
or any of their respective Affiliates or their respective officers or directors
with respect to any obligation thereunder shall terminate without further
liability, in each case pursuant to a determination in accordance with the
arbitration procedures set forth in Section 9.12(f) or 9.12(g).
(b) Notwithstanding anything contained in Section 9.12(a), BT shall
not be subject to the Loss of BT Rights under Section 9.12(a) from:
(i) acquiring or owning, directly or indirectly, for investment
purposes, securities of any Person not principally Engaged in the Core
Business of the Company (or if such Person is principally Engaged in the
Core Business of the Company, less than 10% of its Core Business revenues
are derived within the Americas) if such Person is a publicly traded
company and BT and its Affiliates own less than 5% of the voting
securities of such Person, provided that such investment does not exceed
0.5% of BT's total consolidated assets;
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(ii) correspondent relationships in the ordinary course of business
and the activities listed on Schedule 9.12;
(iii) any activity undertaken by BT or Affiliates pursuant to
Requirements of Law if the failure to comply with such Requirement of Law
would contravene in any material respect the license granted to BT on 22nd
June 1984 under the Telecommunications Act 1984, as from time to time
amended, or would otherwise have a material adverse effect on the business
or results of operations of BT;
(iv) a transaction whereby, directly or indirectly, control of (by
merger, tender offer or otherwise), or all or substantially all of the
assets of, any Person Engaged in the Core Business of the Company in the
Americas are transferred to BT or any of its Affiliates, provided that (x)
less than 20% of such Person's consolidated revenues are derived from
sales in the Americas contributed by operations within the Core Business
of the Company and (y) BT, at the request of the Company, shall sell or
cause the sale of the subsidiary, division or other entity conducting such
operations in accordance with the procedures (the "First Offer
Procedures") set forth in Section 9.12(i), provided further that such
subsidiary, division or other entity shall not be required to be sold
until such time as it generates annual revenues of $25 million or more per
year;
(v) any inadvertent condition or act (each an "Inadvertent
Condition") that would otherwise result in a Loss of BT Rights, including,
without limitation, any such condition or act that results solely from the
actions of any Person other than BT or its Affiliates or any activity
undertaken without the knowledge of any executive officer of BT, provided
that, if BT shall become aware of such Inadvertent Condition, it shall
promptly give written notice of such Inadvertent Condition to the Company
and BT and the Company shall negotiate in good faith to reach an agreement
in writing with respect to a cure for such Inadvertent Condition, provided
further that, unless otherwise agreed by BT and the Company in such
written agreement, within one year following the delivery of such notice,
BT shall dispose of the securities, assets or business that gave rise to
such Inadvertent Condition, provided that BT, at the request of the
Company, shall sell or cause the sale of such securities, assets or
business in accordance with the First Offer Procedures;
(vi) ownership of Newco and the activities contemplated by the Newco
Agreement and the "Related Agreements" (as defined in the Newco
Agreement); or
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(vii) any activity undertaken with confirmation in writing by the
Company that such activity will not result in a Loss of BT Rights;
(c) Except as otherwise provided in Section 9.12(e), subsequent to
the Closing, in the event that the Company or any of its Affiliates engages
directly or indirectly in the Core Business of BT outside the Americas or
transfers or provides sales and marketing support, technology or customer
traffic in connection with any Person engaged in the Core Business of BT
outside the Americas or holds or acquires an interest in any Person who is
engaged in the Core Business of BT outside the Americas as a partner,
shareholder, principal or in any other capacity of ownership or control (such
activities, whether or not engaged in outside the Americas, are collectively
referred to as being "Engaged in the Core Business of BT"), then Sections 5.1,
5.3, 7.1, 7.2, 7.3, 10.2 and 10.3 of this Agreement shall become void and of no
further force and effect (such consequences are collectively referred to herein
as the "Loss of Company Rights") and all further obligations of the Company and
BT or any of their respective Affiliates or their respective officers or
directors with respect to any obligation thereunder shall terminate without
further liability, provided that any determination as to whether the Company
has undertaken the foregoing activities or the activities described in the next
succeeding sentence shall be determined in accordance with the arbitration
procedures set forth in Section 9.12(f) and 9.12(g). Notwithstanding the
foregoing, the Company shall not be subject to the Loss of Company Rights under
this Section 9.12(c) from being Engaged in the Core Business of BT in any of
the states located in the European Economic Area as it may exist from time to
time (the "EEA") subsequent to the fifth anniversary of the Closing Date;
provided that being Engaged in the Core Business of BT in the EEA subsequent to
the fifth anniversary of the Closing Date (except as otherwise provided in
Section 9.12(e) and subject to the proviso in the next preceding sentence)
shall subject the Company to the Loss of Company Rights if, prior to the fifth
anniversary of the Closing Date, the Company or any of its Affiliates takes, or
causes to be taken, any actions with the purpose of facilitating the Company or
any of its Affiliates being Engaged in the Core Business of BT in the EEA
subsequent to the fifth anniversary of the Closing Date; and provided further
that (except as otherwise provided in Section 9.12(e) and subject to the
proviso in the next preceding sentence) the Company will continue to be subject
to the Loss of Company Rights to the extent that any activity permitted by this
sentence results in or causes the Company or any of its Affiliates to be
Engaged in the Core Business of BT outside (x) the Americas and (y) the EEA.
(d) Except as otherwise provided in Section 9.12(e), subsequent to
the fifth anniversary of the Closing,
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in the event that the Company or any of its Affiliates becomes Engaged in the
Core Business of BT in the EEA, then BT may undertake the activities specified
in Section 9.12(a) without suffering any loss of BT Rights (such consequence is
referred to herein as the "Loss of BT Rights Termination"), provided that any
determination as to whether the Company has undertaken the foregoing activities
shall be determined in accordance with the arbitration procedures set forth in
Section 9.12(f) and 9.12(g).
(e) Notwithstanding anything contained in Section 9.12(c) or
Section 9.12(d), the Company shall not be subject to the Loss of Company Rights
under Section 9.12(c) or the Loss of BT Rights Termination under Section
9.12(d) from the Company or any of its Affiliates:
(i) acquiring or owning, directly or indirectly, for investment
purposes, securities of any Person not principally Engaged in the Core
Business of BT (or if it is principally Engaged in the Core Business of
BT, less than 10% of its Core Business revenues are derived outside the
Americas) if such Person is a publicly traded company and the Company and
its Affiliates own less than 5% of the voting securities of such Person,
provided that such investment does not exceed 0.5% of the Company's total
consolidated assets;
(ii) correspondent relationships in the ordinary course of business
and the activities listed on Schedule 9.12;
(iii) any activity undertaken by the Company or its Affiliates
pursuant to Requirements of Law if the failure to comply with such law
would have a material adverse effect on the business or results of
operations of the Company;
(iv) a transaction whereby, directly or indirectly, control of (by
merger, tender offer or otherwise), or all or substantially all of the
assets of, any Person Engaged in the Core Business of BT outside the
Americas are transferred to the Company or any of its Affiliates, provided
that (x) less than 20% of such Person's consolidated revenues are derived
from sales outside the Americas contributed by operations within the Core
Business of BT and (y) the Company, at the request of BT, shall sell or
cause the sale of the subsidiary, division or other entity conducting such
operations in accordance with the First Offer Procedures set forth in
Section 9.12(j), provided further that such subsidiary, division or other
entity shall not be required to be sold until such time as it generates
annual revenues of $25 million or more per year;
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(v) any Inadvertent Condition that would otherwise result in a Loss
of Company Rights, including, without limitation, any such condition or
act that results solely from the actions of any Person other than the
Company or its Affiliates or any activity undertaken without the knowledge
of any executive officer of the Company, provided that, if the Company
shall become aware of such Inadvertent Condition, it shall promptly give
written notice of such Inadvertent Condition to BT and the Company and BT
shall negotiate in good faith to reach an agreement in writing with
respect to a cure for such Inadvertent Condition, provided further that,
unless otherwise agreed by the Company and BT in such written agreement,
within one year following the delivery of such notice, the Company shall
dispose of the securities, assets or business that gave rise to such
Inadvertent Condition, provided that the Company, at the request of BT,
shall sell or cause the sale of such securities, assets or business in
accordance with the First Offer Procedures;
(vi) ownership of Newco and the activities contemplated by the Newco
Agreement and the "Related Agreements" (as defined in the Newco
Agreement); or
(vii) any activity undertaken with confirmation in writing by BT that
such activity will not result in a Loss of Company Rights.
(f) In the event that either of the parties hereto but which, in the
case of activities described in Section 9.12(d), shall be the Company (the
"Investing Party") is considering any activity that it believes the other party
("Subject Party") may view as resulting in the loss of rights as specified in
Section 9.12(a) or 9.12(c) as may be applicable (the "Loss of Rights") or in
the Loss of BT Rights Termination, then the Investing Party may provide notice
(the "Investing Notice") of such proposed activity to the Subject Party and
seek the Subject Party's consent to engaging in such activity. If following
good faith consultation the Subject Party fails to grant such consent, then the
Investing Party may within 30 days after delivery of the Investing Notice
initiate binding arbitration as to whether such activities would result in the
Loss of Rights or in the Loss of BT Rights Termination as hereinafter provided
pursuant to the arbitration procedures set forth in Section 9.12(h) (the
"Arbitration"). The parties shall seek to conclude the Arbitration as promptly
as practicable but in no event shall the Arbitration be conducted more than 90
days subsequent to the initiation of Arbitration. If the result of the
Arbitration is that the Investing Party would incur a Loss of Rights if it
engaged in the activity being considered (without regard to the last sentence
of Section 9.12(c)), then the Investing Party shall be subject to a Loss of
Rights, without the opportunity for cure, if it then goes
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forward with such activities (without regard to the last sentence of Section
9.12(c)). If the result of the Arbitration is that there would occur a Loss of
BT Rights Termination if the Investing Party engaged in the activity being
considered, then the Loss of BT Rights Termination shall occur, without the
opportunity for cure by the investing party, if it then goes forward with such
activities. Any determination by the Arbitration shall take into account any
proposed divestment by the Investing Party to an unaffiliated third party,
provided that (i) such divestment occurs as promptly as commercially reasonable
(but no more than one year following the activity or investment that would
otherwise lead to a Loss of Rights) and (ii) is conducted in accordance with
the First Offer Procedures.
(g) In the event that either party (but which, in the case of
activities described in Section 9.12(d), shall be BT) (the "Aggrieved Party")
believes that the other party (the "Active Party") has engaged in activities
that would subject such Active Party to a Loss of Rights or would result in the
Loss of BT Rights Termination, then the Aggrieved Party shall notify the Active
Party and the parties shall seek to resolve the matter to their mutual
satisfaction. In the event that BT delivers a notice to the Company in
accordance with the immediately preceding sentence with respect to activities
engaged in by the Company or its Affiliates on or prior to the fifth
anniversary of the Closing Date, the last sentence of Section 9.12(c), insofar
as it permits the Company and its Affiliates to be Engaged in the Core Business
of BT in the EEA subsequent to the fifth anniversary of the Closing Date, shall
not be applicable to the activities that are the subject of such notice. If
the parties cannot resolve the matter within 60 days, then either party can
initiate Arbitration within 60 days thereafter as provided in Section 9.12(h).
The parties shall seek to conclude the Arbitration as promptly as practicable
but in no event shall such Arbitration be conducted more than 90 days
subsequent to the initiation of Arbitration. If the result of the Arbitration
is that (i) the Active Party should be subject to a Loss of Rights (without
regard to the last sentence of Section 9.12(c)) or (ii) there should occur a
Loss of BT Rights Termination, then the Active Party shall be entitled to a one
year cure period (if the arbitrators believe that the activity is capable of
cure) which cure shall be effected by divestment pursuant to the First Offer
Procedures, provided that the Active Party shall not be entitled to a cure
period, or shall be entitled to a reduced cure period, at the discretion of the
arbitrators, if the arbitrators conclude that the Aggrieved Party's business,
results of operations or prospects were materially and adversely affected by
the conduct of the Active Party or that the Active Party engaged in activities
that gave rise to the Arbitration in willful disregard of the consequences.
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(h) Arbitration under Section 9.12(f) or 9.12(g) shall proceed as
herein set forth:
(i) The Investing Party (which, for purposes of this clause (h)
only, will be deemed to also refer to any party that initiates Arbitration
in accordance with clause (g) above) shall give the Subject Party (which,
for purposes of this clause (h) only, will be deemed to also refer to the
party in any Arbitration initiated in accordance with clause (g) above
that did not initiate such Arbitration) a written notice which shall also
contain, in addition to the demand for arbitration, a clear statement of
the issue to be resolved by the Arbitration, the name and address of the
arbitrator selected by the Investing Party and the address to which all
further papers regarding the Arbitration are to be mailed or delivered.
(ii) The Subject Party shall deliver a written response to the
arbitration notice within 30 days following its actual receipt of such
notice. Such response shall contain a clear statement of its position
concerning the issue in dispute, the name and address of the arbitrator
selected by the Subject Party and the address to which all further papers
regarding the Arbitration are to be mailed or delivered. If the Subject
Party fails to designate its arbitrator within the time allowed, the
Investing Party may apply to the United States District Court for the
Southern District of New York (the "New York Court") for designation of
the second arbitrator. The application shall provide no less than five
days' notice to the Subject Party, before presentation to the New York
Court. The Subject Party may appoint the second arbitrator at any time
prior to the day the Court appoints the second arbitrator.
(iii) Within five Business Days following the selection of the second
arbitrator, the two arbitrators shall select a third arbitrator. In the
event they fail to do so within that time period, either party may apply
to the New York Court for appointment of a third arbitrator. The
application shall provide no less than five days' notice to the other
party before presentation to the New York Court. The third arbitrator
must be an attorney reasonably experienced in commercial affairs who is a
member of the New York Bar, must be impartial and must otherwise satisfy
the requirements of CPLR 7506(a) and 9 U.S.C. Section 10. The method of
selection of arbitrators, or the arbitrators as selected, may be changed
at any time only upon written agreement of the parties.
(iv) In the selection of the party-appointed arbitrators under
clauses (i) and (ii) above, a party may select any person, including a
person with
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"partiality" under the meaning of CPLR 7511 or "evident partiality" under
the meaning of 9 U.S.C. Section 10, but no party may select an arbitrator
who is or ever has been an officer, director or employee of such party or
of any Affiliate of such party; the "partiality" or "evident partiality"
of an arbitrator selected in compliance with this clause (iv) shall not be
a basis for vacating the award.
(v) If any arbitrator fails or is otherwise unable to act, a
successor arbitrator shall be selected in the same manner as the
arbitrator who fails or is otherwise unable to act was selected, except
that no more than five days shall be allowed to select a successor
arbitrator under this provision.
(vi) The Arbitration hearing shall be conducted in New York or such
other place as the arbitrators shall decide. The hearing shall commence
within a period agreed to by the parties in writing or, in the absence of
such agreement, within ten days after the selection of the third
arbitrator, within a period determined by a majority of the arbitrators
and of which the parties are notified at least ten days prior to the first
date of hearing. Written interrogatories shall not be permitted.
Depositions shall be permitted by majority decision of the arbitration
panel upon a showing that the deposition may be helpful to the conduct of
the Arbitration. The parties may request that documents be produced, but
the only documents which must be produced are those which a majority of
the arbitration panel determines may be helpful to the conduct of the
Arbitration. The parties shall, seven days before the commencement of the
Arbitration hearing, exchange all exhibits they intend to use in the
Arbitration and notify the other party of the identity of all witnesses
whose testimony is to be presented at the arbitration. Testimony at the
hearing may be presented by telephone or affidavit, as well as by personal
appearance. The Arbitration proceeding shall be private, and all parties
and their representatives and all arbitrators shall maintain the
confidentiality of the claims, counterclaims, testimony, evidence and all
other aspects of the proceeding, except insofar as such disclosure is
required by law. The arbitrators may only resolve the question submitted
to Arbitration and shall include as part of their consideration a full
review of this Agreement and any related agreement. The decision of the
majority of the arbitrators shall be the decision of the panel. Although
the Arbitration shall not be under the auspices of the American
Arbitration Association, the Arbitration shall be conducted in accordance
with the January 1, 1991 Commercial Arbitration Rules of the American
Arbitration Association (the "Arbitration Rules"), except the procedures,
requirements and
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restrictions set out in this Section 9.12(h) shall govern over the
Arbitration Rules; otherwise applicable provisions of the Arbitration
Rules calling for notification by or to the American Arbitration
Association shall be satisfied by notification by or to the panel, as the
case may be.
(vii) In any Arbitration pursuant to this Section 9.12(h) each party
shall pay the fees and costs of the arbitrator whom he selected. The
arbitration panel may award to the more prevailing party its other fees,
costs and expenses of the Arbitration, including reasonable attorney fees.
During the pendency of the arbitration, the fees of the third arbitrator
shall be split equally by the parties. At the conclusion of the
Arbitration, any party may apply to the New York Court for an order
confirming the Arbitration panel's decision.
(viii) Any proceeding in a court of law in connection with this
Section 9.12(h) (other than to compel Arbitration, to select an arbitrator
under clauses (ii) and (iii) above, to stay litigation pending
Arbitration, to confirm an arbitration award or to enforce an arbitration
judgment) shall be immediately stayed upon receipt of a notice or demand
for Arbitration. In any action or proceeding to compel Arbitration, to
stay litigation or confirm an arbitration award, the more prevailing party
shall be entitled to recover its fees, costs and expenses incurred
therein, including reasonable attorney fees, and including the fees, costs
and expenses, including reasonable attorney fees, incurred in any
appellate proceeding.
(i) Prior to any sale of a Subsidiary, business or assets (the "Sale
Assets") by either BT or the Company pursuant to Section 9.12(b)(iv) or
9.12(b)(v) or Section 9.12(e)(iv) or 9.12(e)(v), respectively, or by either BT
or the Company pursuant to Section 9.12(f), the party proposing to divest
itself of the Sale Assets shall provide the other party with the opportunity to
acquire the Sale Assets pursuant to a notice in writing (the "Opportunity
Notice") setting forth such terms and conditions upon which the divesting party
in good faith proposes to sell or cause the sale of the Sale Assets to the
other party. If within 90 days of receipt of the Opportunity Notice the party
that is offered the Sale Assets elects not to acquire the Sale Assets or if the
parties cannot reach agreement with respect to the terms and conditions of such
offered sale, then the divesting party shall be free to sell or cause the sale
of the Sale Assets in its discretion, provided that any subsequent sale of the
Sale Assets to a third party shall not be upon terms and conditions that are in
the aggregate less favorable to the divesting party than the terms and
conditions upon which the Sale Assets were offered to the other party to this
Agreement and the purchase price paid by a third party shall
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in no event be less than the purchase price offered to the other party to this
Agreement.
(j) Subsequent to the Closing Date, in the event of a Newco
Triggering Event or if the Class A Common Stock is otherwise no longer
outstanding (and BT does not retain any rights under Section 9.7) or if the
Company has been subject to a Loss of Rights pursuant to Arbitration, then BT
may undertake the activities specified in Section 9.12(a) without suffering any
Loss of BT Rights.
(k) Subsequent to the Closing Date, in the event of a Newco
Triggering Event or if the Class A Common Stock is otherwise no longer
outstanding (and BT does not retain any rights under Section 9.7) or BT has
been subject to Loss of Rights pursuant to Arbitration, then the Company may
undertake the activities specified in Section 9.12(c) without suffering any
Loss of Company Rights.
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