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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: DECEMBER 14, 1998
DATE OF EARLIEST EVENT REPORTED: NOVEMBER 30, 1998
LODGENET ENTERTAINMENT CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 0-22334 46-0371161
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
3900 WEST INNOVATION STREET, SIOUX FALLS, SOUTH DAKOTA 57107
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (605) 988-1000
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Item 2. ACQUISITION OR DISPOSITION OF ASSETS.
On November 30, 1998 (the "Closing Date"), ResNet Communications, Inc.
("ResNet Inc."), a wholly-owned subsidiary of LodgeNet Entertainment Corporation
("LodgeNet"), through its majority-owned subsidiary, ResNet Communications, LLC
("ResNet LLC"), transferred to Global Interactive Technologies Corporation, a
Delaware corporation ("Global"), substantially all of the assets and liabilities
of ResNet LLC and its wholly-owned subsidiary, which operated LodgeNet's
business in the multi-family dwelling unit market (the "ResNet Assets"). The
ResNet Assets were transferred by the contribution by ResNet LLC of all of the
capital stock of the subsidiary owning the ResNet Assets to Global in exchange
for 1,750 shares of common stock, par value $0.01 per share, of Global ("Global
Common Stock"), representing a 30% common equity ownership interest in Global
and the assumption by Global of certain liabilities, including approximately
$5.8 million of indebtedness to ResNet Inc. Such exchange was made pursuant to
the terms of the Exchange Agreement (the "Exchange Agreement") entered into as
of November 30, 1998 by and among Shared Technologies Communications
Corporation, a Delaware corporation ("STC"), Interactive Cable Systems, Inc., a
California corporation ("ICS"), ResNet LLC, and ResNet Inc. In addition to its
ownership interests in the ResNet Assets, pursuant to the Exchange Agreement,
Global will hold certain cable television and telephone system assets
contributed by STC and ICS.
On the Closing Date, ResNet LLC, STC and ICS entered into a Stockholders
Agreement providing, among other things, for: (i) limitations on each investor's
ability to transfer the shares of Global Common Stock; (ii) approval rights
among the investors regarding sales of Global as a whole or significant assets
of Global; (iii) certain tag-along rights of each investor; (iv) preemptive
rights for each investor; (v) each investor's right to designate one director
for so long as certain ownership of Global Common Stock is maintained by such
investor; and (vi) certain registration rights for the investors. Scott
Petersen, President and Chief Executive Officer of LodgeNet, has been designated
as the ResNet LLC director of Global. The amount of the consideration payable
in the above-described transaction was based on arm's-length negotiations
between the parties.
The foregoing descriptions of the Exchange Agreement and Stockholders
Agreement are qualified in their entirety to the full text of such agreements,
copies of which are attached hereto as exhibits and which are incorporated
herein by reference.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired.
N/A
(b) Pro Forma Financial Information.
N/A
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(c) Exhibits
2.1 Exchange Agreement, dated as of November 30, 1998 among Shared
Technologies Communications Corporation, Interactive Cable Systems,
Inc., ResNet Communications, LLC, ResNet Communications, Inc. and
Global Interactive Technologies Corporation.
99.1 Stockholders Agreement dated as of November 30, 1998, by and among
Global Interactive Technologies Corporation, Shared Technologies
Communications Corporation, Interactive Cable Systems, Inc. and ResNet
Communications, LLC.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: December 14, 1998.
LODGENET ENTERTAINMENT CORPORATION
By
Name Scott C. Petersen
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Title President and CEO
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EXHIBIT 2.1
EXCHANGE AGREEMENT
AMONG
SHARED TECHNOLOGIES COMMUNICATIONS CORPORATION
INTERACTIVE CABLE SYSTEMS, INC.
RESNET COMMUNICATIONS, LLC
RESNET COMMUNICATIONS, INC.
AND
GLOBAL INTERACTIVE TECHNOLOGIES CORPORATION
DATED AS OF NOVEMBER 30, 1998
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TABLE OF CONTENTS
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1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
2. CREATION OF HOLDING COMPANY. . . . . . . . . . . . . . . . . . . . . .1
2.1 Formation of Delaware Corporation. . . . . . . . . . . . . . . . .1
2.2 Acquisition of STC Business. . . . . . . . . . . . . . . . . . . .2
2.3 Acquisition of ICS Business. . . . . . . . . . . . . . . . . . . .2
2.4 Acquisition of ResNet Business . . . . . . . . . . . . . . . . . .3
2.5 Merger of Contributed Subs into Newco Sub. . . . . . . . . . . . .3
2.6 Post-Closing Adjustment. . . . . . . . . . . . . . . . . . . . . .3
2.7 Financing Matters. . . . . . . . . . . . . . . . . . . . . . . . .5
3. ADDITIONAL UNDERTAKINGS AND COVENANTS. . . . . . . . . . . . . . . . .5
3.1 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . .6
3.2 News Releases. . . . . . . . . . . . . . . . . . . . . . . . . . .6
3.3 Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . .6
4. REPRESENTATION AND WARRANTIES OF NEWCO . . . . . . . . . . . . . . . .7
4.1 Organization and Standing. . . . . . . . . . . . . . . . . . . . .7
4.2 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . .7
4.3 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . .8
4.4 Binding Obligation . . . . . . . . . . . . . . . . . . . . . . . .8
4.5 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . .8
4.6 Status of Shares . . . . . . . . . . . . . . . . . . . . . . . . .9
4.7 Offering of Shares . . . . . . . . . . . . . . . . . . . . . . . .9
5. REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTING COMPANIES . . . . .9
5.1 Organization and Standing. . . . . . . . . . . . . . . . . . . . .10
5.2 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . .10
5.3 Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
5.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . . .10
5.5 No Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .11
5.6 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . .11
5.7 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . .11
5.8 Conduct of Contributed Businesses; Absence of Material
Adverse Change. . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.9 Title to Property and Assets. . . . . . . . . . . . . . . . . .. .14
5.10 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . .14
5.11 Intellectual Property . . . . . . . . . . . . . . . . . . . . . .14
5.12 Material Agreements . . . . . . . . . . . . . . . . . . . . . . .14
5.13 Books and Records . . . . . . . . . . . . . . . . . . . . . . . .15
5.14 Litigation; Disputes. . . . . . . . . . . . . . . . . . . . . . .16
5.15 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . .16
5.16 Pension and Benefit Plans . . . . . . . . . . . . . . . . . . . .17
5.16.1 Disclosure Schedule . . . . . . . . . . . . . . . . . . .17
5.16.2 Copies of Documents . . . . . . . . . . . . . . . . . . .17
5.16.3 Multiemployer Plans . . . . . . . . . . . . . . . . . . .17
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5.16.4 ESOPs . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.16.5 Funding . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.16.6 Contributions and Other Obligations . . . . . . . . . . .18
5.16.7 Qualified Plans . . . . . . . . . . . . . . . . . . . . .18
5.16.8 Compliance with Law . . . . . . . . . . . . . . . . . . .18
5.16.9 ERISA; Prohibited Transactions. . . . . . . . . . . . . .19
5.16.10 Non-deductible Payments. . . . . . . . . . . . . . . . .19
5.16.11 Reportable Events. . . . . . . . . . . . . . . . . . . .19
5.16.12 Foreign Plan . . . . . . . . . . . . . . . . . . . . . .19
5.16.13 Tax Form 5330. . . . . . . . . . . . . . . . . . . . . .19
5.16.14 Welfare Plans. . . . . . . . . . . . . . . . . . . . . .19
5.16.15 Post-Retirement Plans. . . . . . . . . . . . . . . . . .19
5.16.16 Health Care Continuation Coverage Requirements . . . . .20
5.16.17 Filed Returns and Reports. . . . . . . . . . . . . . . .20
5.17 Environmental . . . . . . . . . . . . . . . . . . . . . . . . . .20
5.18 Transactions with Related Parties . . . . . . . . . . . . . . . .20
5.19 Restrictions and Consents . . . . . . . . . . . . . . . . . . . .21
5.20 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . .21
5.21 Absence of Violation. . . . . . . . . . . . . . . . . . . . . . .22
5.22 Compliance with Law; Approvals. . . . . . . . . . . . . . . . . .22
5.23 Subscribers; Rights of Entry. . . . . . . . . . . . . . . . . . .23
5.24 Cable Systems . . . . . . . . . . . . . . . . . . . . . . . . . .24
5.25 FCC Licenses. . . . . . . . . . . . . . . . . . . . . . . . . . .24
5.26 FCC Applications. . . . . . . . . . . . . . . . . . . . . . . . .25
5.27 FCC Compliance. . . . . . . . . . . . . . . . . . . . . . . . . .25
5.28 Zoning, Aviation, etc. Compliance . . . . . . . . . . . . . . . .25
5.29 Compliance with the Copyright Act . . . . . . . . . . . . . . . .25
5.30 Must-Carry and Retransmission Consent . . . . . . . . . . . . . .26
5.31 Petitions for Special Relief. . . . . . . . . . . . . . . . . . .26
5.32 Rate Regulation and Effective Competition . . . . . . . . . . . .26
5.33 Hard Wire Public Right-of-Way Crossings . . . . . . . . . . . . .27
5.34 Security Services . . . . . . . . . . . . . . . . . . . . . . . .27
5.35 Copies of Documents . . . . . . . . . . . . . . . . . . . . . . .27
5.36 Binding Obligation. . . . . . . . . . . . . . . . . . . . . . . .27
5.37 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . .27
6. RESTRICTED SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . .28
6.1 No Registration Under the Securities Act . . . . . . . . . . . . .28
6.2 Acquisition for Investment . . . . . . . . . . . . . . . . . . . .28
6.3 Evaluation of Merits and Risks of Investment . . . . . . . . . . .28
6.4 Additional Information . . . . . . . . . . . . . . . . . . . . . .28
7. CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
7.1 Deliveries by Each Contributing Company. . . . . . . . . . . . . .29
7.2 Deliveries by Newco. . . . . . . . . . . . . . . . . . . . . . . .30
8. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION; REMEDIES . . . . . . . .31
8.1 Survival of Representations. . . . . . . . . . . . . . . . . . . .31
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8.2 Agreement of the Contributing Companies to Indemnify . . . . . . .31
8.3 Conditions of Indemnification. . . . . . . . . . . . . . . . . . .32
8.4 Specific Performance . . . . . . . . . . . . . . . . . . . . . . .33
8.5 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . .33
9. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
9.1 Additional Actions and Documents . . . . . . . . . . . . . . . . .33
9.2 No Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
9.3 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
9.4 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
9.5 Entire Agreement; Amendment. . . . . . . . . . . . . . . . . . . .34
9.6 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
9.7 Consent to Jurisdiction. . . . . . . . . . . . . . . . . . . . . .35
9.8 Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . .35
9.9 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . .35
9.10 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . .36
9.11 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
9.12 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
9.13 Execution in Counterparts . . . . . . . . . . . . . . . . . . . .38
9.14 Limitation on Benefits. . . . . . . . . . . . . . . . . . . . . .38
9.15 Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . . .38
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EXHIBIT A DEFINITIONS
EXHIBIT B NEWCO CERTIFICATE OF INCORPORATION
EXHIBIT C NEWCO BYLAWS
EXHIBIT D STOCKHOLDERS AGREEMENT
EXHIBIT E NEWCO SUB CERTIFICATE OF INCORPORATION
EXHIBIT F NEWCO SUB BYLAWS
EXHIBIT G-1 CONTRIBUTING COMPANY OPINION OF COUNSEL
EXHIBIT G-2 CONTRIBUTING COMPANY OPINION OF COUNSEL
EXHIBIT H NEWCO OPINION OF COUNSEL
EXHIBIT I DELOITTE & TOUCHE TAX OPINION
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EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (this "Exchange Agreement") is entered into as
of November 30, 1998 by and among Shared Technologies Communications
Corporation, a Delaware corporation ("STC"), Interactive Cable Systems, Inc., a
California corporation ("ICS"), ResNet Communications, LLC, a Delaware limited
liability company ("ResNet," and together with STC and ICS, the "Contributing
Companies"), ResNet Communications, Inc., a Delaware corporation ("ResNet,
Inc.") and Global Interactive Technologies Corporation, a Delaware corporation
("Newco").
WHEREAS, each of the Contributing Companies has previously executed a
Letter of Intent, dated August 18, 1998, relating to a proposed business
combination of the businesses of the Contributing Companies in a newly-formed
entity; and
WHEREAS, the parties hereto are entering into this Exchange Agreement
to provide for such business combination and to establish various rights and
obligations in connection therewith.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
1. DEFINITIONS
For all purposes of this Exchange Agreement, certain capitalized terms specified
in EXHIBIT A and used in this Exchange Agreement shall have the meanings set
forth in that EXHIBIT A, except as otherwise expressly provided.
2. CREATION OF HOLDING COMPANY
2.1 FORMATION OF DELAWARE CORPORATION
(a) Prior to the date hereof, the parties hereto have caused Newco
to be formed, and caused to be filed with the Secretary of State of the State
of Delaware a certificate of incorporation in the form attached as EXHIBIT B
(the "Certificate of Incorporation"). The initial directors of Newco as set
forth in the Certificate of Incorporation have caused Newco to adopt bylaws
in the form attached as EXHIBIT C and to undertake certain other
organizational actions. The initial directors of Newco have not caused Newco
to take any other action, except as set forth herein or otherwise with the
consent of the Contributing Companies.
(b) Newco shall have no other issued and outstanding capital stock
(or rights, options or warrants therefor) at the Closing except as expressly
contemplated by this SECTION 2. At the Closing, Newco and each Contributing
Company will execute and deliver the Stockholders Agreement in the form
attached as EXHIBIT D.
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(c) Prior to the date hereof, the parties hereto have caused Newco
to form a new Delaware corporation as Newco's wholly-owned subsidiary with
the name Global Interactive Communications Corporation ("Newco Sub") to hold
the businesses of the Contributing Companies as described in more detail in
this SECTION 2, and caused to be filed with the Secretary of State of the
State of Delaware a certificate of incorporation in the form attached as
EXHIBIT E (the "Sub Certificate of Incorporation"). The initial directors of
Newco Sub as set forth in the Sub Certificate of Incorporation have caused
Newco Sub to adopt bylaws in the form attached as EXHIBIT F and to undertake
certain other organizational actions. The initial directors of Newco Sub
have not caused Newco Sub to take any other action, except as set forth
herein or otherwise with the consent of the Contributing Companies.
(d) Each of the Contributing Companies hereby represents and
warrants to each other Contributing Company that with respect to any federal
tax returns, it will report the transfer of all of the equity interests of
its Contributed Sub (as hereinafter defined) to Newco in exchange for, in the
aggregate, all of the outstanding Newco Common Stock as a tax-free exchange
pursuant to Section 351 of the Code.
2.2 ACQUISITION OF STC BUSINESS
Immediately prior to the consummation of the transactions
contemplated hereunder, STC shall transfer or contribute to a newly created
wholly-owned limited liability company (the "STC Sub") substantially all of
the assets of STC except the corporate books and records of STC, and the STC
Sub shall assume such STC current liabilities in an amount not to exceed the
STC Sub's current assets, and may assume up to $4,911,516 in operating or
capital lease obligations, the remaining term of which may not exceed six
years and one month from the date hereof (such assets and liabilities so
transferred or contributed, the "STC Business"). Immediately thereafter, STC
shall contribute all of the issued and outstanding membership interests of
the STC Sub to Newco in exchange for 1,250 shares of common stock, par value
$.01 per share, of Newco (the "Newco Common Stock").
2.3 ACQUISITION OF ICS BUSINESS
(a) Immediately prior to the consummation of the transactions
contemplated hereunder, ICS shall transfer or contribute to a newly created
wholly-owned subsidiary of ICS (the "ICS Sub") all of the assets of ICS and
its existing Subsidiaries (which assets shall include all of the issued and
outstanding capital stock of ActiveTel L.D., Inc. ("ActiveTel") except (i)
the shares of preferred and common stock of Optel, Inc. ("Optel") owned by
ICS and all right, title and interest of ICS and its subsidiaries in and to
the Optel Purchase Agreement, dated as of April 9, 1998 among Optel, ICS and
ICS Licenses, Inc., and any other agreements and instruments executed in
connection therewith, (ii) any and all assets subject to or released from
escrow agreements to which ICS and Optel are parties, and (iii) the corporate
books and records of ICS and its subsidiaries (other than the ICS Sub and
ActiveTel), and the ICS Sub shall assume such ICS current liabilities in an
amount not to exceed the ICS Sub's current assets, and may assume up to
$4,911,516 in operating or capital lease obligations, the remaining term of
which may not exceed five years from the date hereof (such assets and
liabilities so transferred or
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contributed, the "ICS Business"). Immediately
thereafter, ICS shall contribute all of the issued and outstanding shares of
capital stock of the ICS Sub to Newco in exchange for 2,000 shares of Newco
Common Stock.
2.4 ACQUISITION OF RESNET BUSINESS
(a) Immediately prior to the consummation of the transactions
contemplated hereunder, ResNet shall transfer or contribute to a newly
created wholly-owned subsidiary of ResNet (the "ResNet Sub," and together
with the STC Sub and the ICS Sub, the "Contributed Subs") all of the assets
of ResNet except the corporate books and records of ResNet, and the ResNet
Sub shall assume such ResNet current liabilities in an amount not to exceed
the ResNet Sub's current assets, and may assume up to $4,911,516 in operating
or capital lease obligations, the remaining term of which may not exceed five
years from the date hereof (such assets and liabilities so transferred or
contributed, the "ResNet Business;" each of the STC Business, the ICS
Business and the ResNet Business, a "Contributed Business" and collectively,
the "Contributed Businesses"). Immediately thereafter, ResNet shall
contribute all of the issued and outstanding shares of capital stock of the
ResNet Sub to Newco in exchange for 1,750 shares of Newco Common Stock.
2.5 MERGER OF CONTRIBUTED SUBS INTO NEWCO SUB
(a) Upon the terms and subject to the conditions set forth in this
Exchange Agreement, following Newco's acquisition of all of the issued and
outstanding capital stock in all of the Contributed Subs in accordance with
the terms of this SECTION 2, all Contributed Subs shall be concurrently
merged with and into Newco Sub (the "Merger") and the separate corporate
existence of each Contributed Sub shall thereupon cease. Newco Sub shall be
the surviving corporation in the Merger, and the separate corporate existence
of Newco Sub with all its rights, privileges, immunities, powers and
franchises shall continue unaffected by the Merger except as otherwise
provided herein. The Merger shall have the effects specified in the Delaware
General Corporation Law, as amended (the "DGCL").
(b) Immediately following the Closing, Newco Sub and each
Contributed Sub shall execute and deliver an Agreement and Plan of Merger,
and Newco and Newco Sub will cause a Certificate of Merger (the "Certificate
of Merger") to be executed, acknowledged and filed with and accepted for
record by the Delaware Secretary of State (the "Secretary") as provided in
Section 264 of the DGCL. The Merger shall become effective at the time the
Certificate of Merger is filed with the Secretary.
2.6 POST-CLOSING ADJUSTMENT
(a) Following the end of the sixth complete month after the
Closing, Newco shall cause Newco Sub to prepare and deliver to the
Contributing Companies a statement of assets and liabilities of each
Contributed Sub, setting forth the categories of assets and liabilities of
each Contributed Sub as of the date hereof (such date referred to herein as
the "Adjustment
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Date," such statements referred to herein as the "Adjustment Date
Statements") consistent with the projected pro forma balance sheets Furnished
to the Contributing Companies pursuant to SECTION 5.4(b) and attached as part
of the Disclosure Schedule (the "Pro Forma Statements"). The Adjustment Date
Statements shall be prepared using the same accounting principles,
methodologies and assumptions used in connection with the preparation of the
Pro Forma Statements.
(b) Except as provided in paragraph (c) below, within 30 days
following delivery of the Adjustment Date Statements to the Contributing
Companies, in the event that any Contributed Sub's Total Net Worth (as
hereinafter defined) as set forth on its Adjustment Date Statement varies
from its Total Net Worth as set forth on such Contributed Sub's Pro Forma
Statement by an amount greater than $100,000, an adjustment shall be made as
follows:
(i) if such Contributed Sub's Total Net Worth as set forth on
its Adjustment Date Statement exceeds its Total Net Worth as set forth on
its Pro Forma Statement, Newco shall issue an unsecured note payable to the
Contributing Company that transferred such Contributed Sub to Newco in form
and substance identical to the Capital Advance Notes (as defined in SECTION
2.7(b) hereof) in an aggregate principal amount equal to the difference, in
each case subordinate to the prior repayment in full of all amounts owing
under the Bridge Loans (as set forth on Schedule 2.7(a) hereof).
(ii) if such Contributed Sub's Total Net Worth as set
forth on its Adjustment Date Statement is less than its Total Net
Worth as set forth on its Pro Forma Statement, the Contributing
Company that transferred such Contributed Sub to Newco shall pay to
Newco an amount in cash representing the full amount of the
difference; provided, however, that at the election of any affected
Contributing Company, payment of such difference may be offset against
the first amounts owing to the Contributing Company (or its current or
former equity holders) under any indebtedness issued by Newco.
For purposes of this SECTION 2.6, "Total Net Worth" shall mean
stockholder's equity determined in accordance with generally accepted
accounting principles applied in a consistent manner as was applied to
determine stockholder's equity in the Pro Forma Statements.
(c) In the event that any Contributing Company shall dispute any
Adjustment Date Statement and such dispute is not resolved to the mutual
satisfaction of all of the Contributing Companies within sixty days after
delivery of the Adjustment Date Statements, such Contributing Company (the
"Contesting Party") shall have the right to require that such disputed
determinations be submitted to a major accounting firm mutually acceptable to
Newco and the Contesting Party for computation or verification in accordance
with the provisions of this Exchange Agreement. Newco and the Contesting
Party shall direct the accounting firm to use its best efforts to render its
determination in forty-five days. The foregoing provisions for certified
public accounting firm review shall be specifically enforceable by the
parties; the decision of such accounting firm shall be final and binding upon
Newco and such Contesting Party; there shall be no right of appeal from such
decision; and such accounting firm's fees and expenses for
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each such disputed determination shall be borne by Newco, unless such
disputed determination is found to be within ten percent (10%) of such
accounting firm's determination, in which case the Contesting Party shall
bear such fees and expenses.
2.7 FINANCING MATTERS
(a) Simultaneously herewith, Newco and Newco Sub will enter in the
Bridge Loan documents set forth on Schedule 2.7(a).
(b) To the extent that any current or former equity holder, or the
parent of such equity holder, in ICS or STC shall have advanced to ICS or
STC, as the case may be, funds to acquire operating assets properly
capitalized under generally accepted accounting principles applied in a
consistent manner between June 1, 1998 and the date hereof, the assets
purchased with such funds shall be contributed to that Contributing Company's
Contributed Sub, which shall assume the related obligation to repay such
advanced funds, and Newco shall cause Newco Sub to assume a note payable to
such Contributing Company (a "Capital Advance Note") in the full amount
thereof, provided that the amount of any such note issued to ICS or STC
pursuant to the terms hereof shall not exceed $1.5 million, in each case
subject to resolution of any disputed amount pursuant to SECTION 2.6.
Contemporaneously herewith, Newco shall cause Newco Sub to issue a
replacement Capital Advance Note to each of ICS and STC, as the case may be,
upon cancellation of each note so transferred and assumed.
(c) In the case of ResNet, ResNet, Inc. has advanced to ResNet,
through (i) an intercompany note payable to ResNet, Inc. (the "ResNet Capital
Advance Note") and (ii) an intercompany credit agreement and term note
payable to ResNet, Inc. (the "ResNet Intercompany Credit Agreement, and
together with the ResNet Capital Advance Note, the "ResNet Loans"), funds to
acquire operating assets properly capitalized under generally accepted
accounting principles applied in a consistent manner between June 1, 1998 and
the date hereof. At the Closing, ResNet Sub shall assume the ResNet loans
from ResNet. Thereafter, Newco shall cause Newco Sub to assume the ResNet
Loans from ResNet Sub and to issue to ResNet, Inc. (i) an replacement Capital
Advance Note in the amount of $3.0 million and (ii) a Junior Bridge Loan (as
described on Schedule 2.7(a)) in the amount of $2,853,120.00 (in each case
subject to resolution of any disputed amount pursuant to SECTION 2.6), at
which time the ResNet Loans shall be deemed repaid and shall be terminated.
3. ADDITIONAL UNDERTAKINGS AND COVENANTS
Each Contributing Company severally as to itself but not jointly
hereby covenants and agrees as follows (but only with respect to that
particular Contributing Company, its Contributed Business and its Contributed
Sub):
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3.1 CONFIDENTIALITY
Each party hereto hereby acknowledges that it has obtained and may
continue to obtain knowledge of and access to confidential and valuable
business information relating to the Contributing Companies or their
Affiliates not generally known by or available to the general public. Each
party hereto agrees at all times from and after the date hereof to use
reasonable efforts, consistent with those employed by it with respect to its
own confidential information, (i) to keep confidential all such information
that is identified as being of a confidential nature, (ii) not to use such
confidential information on its own behalf, except in connection with the
transactions contemplated hereby, or on behalf of any other person, firm or
entity, and (iii) not to disclose such confidential information to any third
party (other than to its counsel, accountants and other consultants in
connection with the transactions contemplated hereby) without the relevant
Contributing Company's or Affiliate's advance written authorization;
PROVIDED, HOWEVER, that the parties hereto shall have no such obligations
with respect to confidential information that (A) was lawfully obtained by it
not subject to restrictions of confidentiality; (B) is a matter of public
knowledge; (C) has been or is hereafter publicly disclosed other than by or
through such party, or (D) is requested by any Governmental Agency reviewing
the transactions contemplated hereby or is required, on the advice of such
party's counsel, pursuant to any legal requirement or in furtherance of the
transactions contemplated hereby, including to obtain necessary regulatory
approvals. In the event this Exchange Agreement is terminated, each party
hereto will return to the relevant Contributing Company or destroy, at such
Person's option, all documents, workpapers and other materials Furnished to
such party relating to the transactions contemplated hereunder, whether
obtained before or after the execution of this Exchange Agreement. In the
event of a breach or threatened breach by any party hereto of the provisions
of this Section, the relevant Contributing Company shall be entitled to an
injunction restraining that Person from disclosing, in whole or in part, such
information.
3.2 NEWS RELEASES
None of Newco nor any of the Contributing Companies shall issue or
approve any news release or other public announcement concerning the
transactions contemplated by this Exchange Agreement without the prior
approval of all other parties hereto (which approval shall not be
unreasonably withheld or delayed), except that any of the Contributing
Companies may make such disclosure as may be required by applicable law.
3.3 EMPLOYEE MATTERS
(a) A description of the employee benefits to be provided by Newco
and Newco Sub to their respective employees as of the date hereof is set
forth in the Disclosure Schedule. From and after the date hereof and subject
to applicable law, Newco shall provide, and shall cause Newco Sub to provide,
employees of the Contributing Companies who are offered employment with Newco
or Newco Sub, and who accept such employment ("Continuing Employees"),
benefits comparable to those set forth in the Disclosure Schedule as
reasonably determined by Newco and Newco Sub.
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(b) Continuing Employees shall receive credit for service with a
Contributing Company (including any Affiliate or predecessor thereof) for
purposes of determining eligibility to participate and vesting in all Pension
and Welfare Plans maintained by Newco or Newco Sub. No prior existing
condition limitation shall be imposed with respect to any medical coverage
plan as a result of the consummation of the transactions contemplated by this
Exchange Agreement.
(c) Continuing Employees shall be entitled initially to the amount
of vacation time per year to which they were previously entitled under the
applicable vacation policy of a Contributing Company or, if greater, the
amount of vacation time per year to which they would be entitled under the
applicable Newco or Newco Sub vacation plan or policy. Thereafter, increases
in the amount of vacation time per year shall be based solely on the
applicable Newco or Newco Sub vacation policy. Continuing Employees will
carry over current accrued vacation and no more than five (5) days (40 hours)
of sick day credit.
4. REPRESENTATION AND WARRANTIES OF NEWCO
Except as specifically set forth in the Newco Disclosure Schedule
(with a disclosure with respect to a Section of this Exchange Agreement to
require a specific reference in the Newco Disclosure Schedule to the Section
of this Exchange Agreement to which each such disclosure applies, and no
disclosure to be deemed to apply with respect to any Section to which it does
not expressly apply), Newco represents and warrants (which representations
and warranties shall be deemed to include the disclosure with respect thereto
so specified in the Newco Disclosure Schedule) to the Contributing Companies
as follows:
4.1 ORGANIZATION AND STANDING
Each of Newco and Newco Sub is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and has
the full and unrestricted corporate power and authority to own, operate and
lease its Assets, to carry on its business as proposed to be conducted, to
execute and deliver this Exchange Agreement and to carry out the transactions
contemplated hereby. Newco Sub is duly qualified to conduct business as a
foreign corporation and is in good standing in the states, countries and
territories listed on the Newco Disclosure Schedule. Neither Newco nor Newco
Sub is qualified to conduct business in any other jurisdiction, and neither the
nature of the business conducted by such entity nor the character of the Assets
owned, leased or otherwise held by it makes any such qualification necessary.
There is no state, country or territory wherein the absence of licensing or
qualification as a foreign corporation would have a Material Adverse Effect upon
the business of Newco and Newco Sub as proposed to be conducted.
4.2 SUBSIDIARIES
Except for Newco Sub, neither Newco nor Newco Sub has any
Subsidiaries or equity investment or other interest in, nor has Newco or
Newco Sub made advances or loans to,
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any corporation, association, partnership, joint venture or other entity,
except as set forth in the Newco Disclosure Schedule. The Newco Disclosure
Schedule sets forth (a) the authorized capital stock of each direct and
indirect Subsidiary of Newco and Newco Sub and the percentage of the
outstanding capital stock of each Subsidiary directly or indirectly owned by
Newco or Newco Sub, and (b) the nature and amount of any such equity
investment, other interest or advance.
4.3 AUTHORIZATION
The execution, delivery and performance by Newco and Newco Sub, as
the case may be, of this Exchange Agreement and all other Documents
contemplated hereby in accordance with their terms, the fulfillment of and
compliance with the respective terms and provisions hereof and thereof, and
the consummation by Newco and Newco Sub, as the case may be, of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of
Newco or Newco Sub are necessary to authorize this Exchange Agreement and all
Documents contemplated hereby or to consummate the transactions contemplated
hereby, and such actions do not and will not: (a) conflict with, or violate
any provision of, any Law having applicability to Newco or Newco Sub or any
of their respective Assets, or any provision of the certificate of
incorporation or bylaws of Newco or Newco Sub; (b) conflict with, or result
in any breach of, or constitute a default under any material Agreement to
which Newco or Newco Sub is a party or by which it or any of its Assets may
be bound; or (c) result in or require the creation or imposition of or result
in the acceleration of any indebtedness, or of any Encumbrance of any nature
upon, or with respect to, the Assets of Newco or Newco Sub, except as
specifically contemplated under the Bridge Loan documents.
4.4 BINDING OBLIGATION
This Exchange Agreement constitutes a valid and binding obligation
of Newco, and assuming the due authorization, execution and delivery by each
other party hereto, enforceable in accordance with its terms; and each
Document to be executed by Newco or Newco Sub, as the case may be, pursuant
hereto, when executed and delivered in accordance with the provisions hereof,
and assuming the due authorization, execution and delivery by each other
party thereto, shall be a valid and binding obligation of Newco or Newco Sub,
as the case may be, enforceable in accordance with its terms.
4.5 CAPITALIZATION
The authorized capital stock of Newco consists of 10,000 shares of
Newco Common Stock, none of which are issued and outstanding. The authorized
capital stock of Newco Sub consists of 100 shares of common stock, $.01 par
value per share, of which 100 shares are duly authorized, issued and
outstanding, fully paid and nonassessable and issued to Newco. No shares of
capital stock of Newco or Newco Sub have been reserved for any purpose.
There are no outstanding securities convertible into or exchangeable for
Newco Common Stock
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or for the capital stock of Newco Sub and no outstanding options, rights
(preemptive or otherwise), or warrants to purchase or to subscribe for any
shares of such stock or other securities of Newco or Newco Sub. There are no
outstanding Agreements affecting or relating to the voting, issuance,
purchase, redemption, repurchase or transfer of Newco Common Stock, any other
securities of Newco, or any securities of Newco Sub, except as contemplated
hereunder. Upon the consummation of the transactions contemplated by this
Exchange Agreement, the authorized capital stock of Newco will consist of
10,000 shares of Newco Common Stock, 5,000 of which will be duly authorized,
issued and outstanding, fully paid and nonassessable.
4.6 STATUS OF SHARES
The shares of Newco Common Stock (the "Shares") being issued to the
Contributing Companies on the date hereof have been duly authorized by all
necessary corporate action on the part of Newco, and when issued in accordance
with this Exchange Agreement, will be validly issued, fully paid and
nonassessable with no personal liability attaching to the ownership thereof and
will be free and clear of all Encumbrances.
4.7 OFFERING OF SHARES
Neither Newco nor any Person acting on its behalf has offered the
Shares or any similar securities of Newco for sale to, solicited any offers
to buy the Shares or any similar securities of Newco from or otherwise
approached or negotiated with respect to Newco with any Person other than the
Contributing Companies. Neither Newco nor any other Person acting on its
behalf has taken or will take any action (including, without limitation, any
offering of any securities of Newco under circumstances which would require
or result in the integration of such offering with the offering of the Shares
under the Securities Act and the rules and regulations of the Commission
thereunder) which might subject the offering, issuance and sale of the Shares
to the registration requirements of Section 5 of the Securities Act or any
applicable state securities laws.
5. REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTING COMPANIES
Except as specifically set forth in the Disclosure Schedule (with a
disclosure with respect to a Section of this Exchange Agreement to require a
specific reference in the Disclosure Schedule to the Section of this Exchange
Agreement to which each such disclosure applies, and no disclosure to be
deemed to apply with respect to any Section to which it does not expressly
apply), each Contributing Company severally represents and warrants (which
representation and warranty shall be deemed to include the disclosure with
respect thereto so specified in the Disclosure Schedule) to the other
Contributing Companies as follows (but only with respect to that particular
Contributing Company, its Contributed Business and its Contributed Sub):
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5.1 ORGANIZATION AND STANDING
Each Contributed Sub (and, with respect to ICS, ActiveTel) is a
corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization and has the full and unrestricted
corporate power and corporate authority to own, operate and lease its Assets,
to carry on its business as contemplated hereunder in a manner consistent
with its Contributed Business and to carry out the transactions contemplated
hereby to which it is or will be a party.
5.2 SUBSIDIARIES
All of the shares of capital stock of each Contributed Sub (and,
with respect to ICS, ActiveTel) have been duly authorized and validly issued
and are outstanding, fully paid and nonassessable. The Contributing
Companies directly, or indirectly through wholly owned Subsidiaries, own all
such shares of capital stock of the Contributed Subs free and clear of all
Encumbrances, with full right and lawful authority to sell and transfer the
shares to Newco pursuant to this Exchange Agreement. ICS Sub owns all shares
of capital stock of ActiveTel free and clear of all Encumbrances.
ActiveTel is qualified to conduct business and is in good standing in the
states, countries and territories listed in the Disclosure Schedule.
ActiveTel is not qualified to conduct business in any other jurisdictions,
and neither the nature of its business nor the character of the Assets owned,
leased or otherwise held by it makes any such qualification necessary. There
is no state, country or territory wherein the absence of licensing or
qualification as a foreign corporation would have a Material Adverse Effect
upon the business of ActiveTel as currently conducted.
5.3 EMPLOYEES
As to each Contributing Company, the Disclosure Schedule lists all
managers, employees and consultants of the Contributing Company expected to
serve in any such capacities in Newco or Newco Sub, showing each such
person's name, positions, and annual remuneration, bonuses and fringe
benefits for the current fiscal year and the most recently completed fiscal
year. Except as set forth on the Disclosure Schedule, no person has been
promised or offered employment by or on behalf of Newco or Newco Sub.
5.4 FINANCIAL STATEMENTS
(a) All of the historical financial statements, consisting of
audited financial statements for the three most recent years (to the extent
existing) and unaudited statements through July 31, 1998 and including,
without limitation, the notes thereto, of such Contributing Company included
as Exhibits and are part of the Disclosure Schedule (the "Financial
Statements"): (i) conform to the books and records of the entities to which
they pertain, (ii) present fairly the consolidated financial position of the
entities to which they pertain as of the respective dates and the results of
operations, retained earnings and cash flows for the respective periods
indicated, and (iii) have been prepared in accordance with generally accepted
accounting
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principles applied on a basis consistent with prior accounting periods,
except as described in the Disclosure Schedule . The Disclosure Schedule
sets forth all changes in accounting methods (for financial accounting
purposes) at any time made, agreed to, requested or required with respect to
any of the Contributing Companies.
(b) The projected pro forma balance sheet dated as of November 30,
1998 of each Contributed Sub Furnished to the Contributing Companies and
included as part of the Disclosure Schedule (i) are in accordance with the
books and records of the entities to which they pertain, (ii) present fairly
the information shown therein, (iii) have been properly compiled on the pro
forma bases described therein and (iv) in the opinion of such Contributing
Company, the assumptions used in the preparation thereof are reasonable and
the adjustments used therein are appropriate to give effect to the
transactions or circumstances referred to therein.
5.5 NO LIABILITIES
Except as reflected in the Pro Forma Statements Furnished to the
Contributing Companies pursuant to SECTION 5.4(b) hereof or as described on
the Disclosure Schedule, as of the date hereof, there exist no liabilities
(whether contingent or absolute, matured or unmatured, known or unknown)
included in any Contributed Business other than (a) those liabilities
incurred in the Ordinary Course of Business and in amounts that are not
material to that Contributed Business, and (b) for taxes, assessments and
other governmental charges, if such taxes, assessments and other governmental
charges (i) are not yet due and payable, or (ii) are due and payable but can
be paid hereafter without penalty or interest and for which a proper accrual
relating thereto is reflected in the financial statements or the Disclosure
Schedule and which will be paid before penalty or interest begins to accrue
thereon.
5.6 ACCOUNTS RECEIVABLE
The accounts receivable of any Contributed Sub shown on the Pro
Forma Statements Furnished to the other Contributing Companies pursuant to
SECTION 5.4(b) hereof, or thereafter acquired by any of them, have been
collected or, to the knowledge of such Contributing Company, are collectible
in amounts not less than the amounts thereof carried on the books of such
Contributed Sub, except to the extent of the allowance for doubtful accounts
shown on such balance sheets.
5.7 TAXES
(a) The Contributing Company has duly filed all Tax Returns required
to be filed by such Contributing Company on or before the date hereof with
respect to all applicable Taxes. Each "affiliated group," within the meaning of
Section 1504(a) of the Code, with respect to which the Contributing Company has
been a member ("Group"), has duly filed all Tax Returns required to be filed by
such Group on or before the date hereof with respect to all applicable federal
income, withholding and excise Taxes. No penalties or other charges are or will
become due with respect to any of the Tax Returns as the result of the late
filing thereof. All
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of the Tax Returns are true and complete in all material respects. The
Contributing Company: (i) has paid all material Taxes due or claimed to be
due by any taxing authority in connection with any of the Tax Returns
(without regard to whether or not such Taxes are shown as due on such Tax
Returns); or (ii) has established in financial statements provided to the
other Contributing Companies adequate reserves (in conformity with generally
accepted accounting principles consistently applied) for the payment of such
Taxes. Each Group: (i) has paid all federal income, withholding and excise
Taxes due or claimed to be due by any taxing authority in connection with any
of the Tax Returns (without regard to whether or not such Taxes are shown as
due on such Tax Returns or (ii) has established adequate reserves (in
conformity with generally accepted accounting principles consistently
applied) for the payment of such Taxes.
(b) The Contributed Sub has no actual or potential liability with
respect to any period prior to the date hereof for any Taxes of any person or
entity other than the Contributed Sub.
(c) All examinations or audits of the Tax Returns which have been
completed prior to the date hereof have resulted in no adjustments or other
changes or, if any such examination or audit has resulted in a proposed
deficiency, such deficiency has been paid or otherwise settled. Except as
set forth on the Disclosure Schedule, there is no action, suit, proceeding,
audit, investigation or claim pending or, to the knowledge of each
Contributing Company, threatened in respect of any Taxes for which such
Contributing Company is or may become liable, nor has any deficiency or claim
for any such Taxes been proposed, asserted or, to the knowledge of each
Contributing Company, threatened. No Contributing Company or Group has
consented to any waivers or extensions of any statute of limitations with
respect to any taxable year of such Contributing Company. There is no
Agreement, waiver or consent providing for an extension of time with respect
to the assessment or collection of any Taxes against any Contributing
Company, and no power of attorney granted by any Contributing Company with
respect to any tax matters is currently in force. Except as set forth in the
Disclosure Schedule, no Contributing Company is a party to any tax sharing,
tax indemnity or other similar agreement. All Taxes that the Contributing
Company is or was required by law to withhold or collect have been duly
withheld or collected and, to the extent required, have been timely paid to
the proper governmental authority.
(d) Each Contributing Company has Furnished or otherwise made
available to the other Contributing Companies true and complete copies of all
Tax Returns and all written communications relating to any such Tax Returns
or to any deficiency or claim proposed and/or asserted, irrespective of the
outcome of such matter, but only to the extent such items relate to tax years
(i) which are subject to an audit, investigation, examination or other
proceeding, or (ii) with respect to which the statute of limitations has not
expired.
5.8 CONDUCT OF CONTRIBUTED BUSINESSES; ABSENCE OF MATERIAL ADVERSE CHANGE
Other than as set forth in the Disclosure Schedule, since July 31,
1998 there has been no material adverse change, and no change except in the
Ordinary Course of Business, in the business, operations, prospects,
condition (financial or otherwise), Assets or liabilities of the
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Contributed Businesses. Except as set forth in the Disclosure Schedule or as
contemplated hereunder, since July 31, 1998, each Contributing Company has
conducted its Contributed Business diligently and substantially in the manner
heretofore conducted and only in the Ordinary Course of Business and, with
respect to its Contributed Business, the Contributing Company has not (a)
incurred loss of, or significant injury to, any of its Assets as the result
of any fire, explosion, flood, windstorm, earthquake, labor trouble, riot,
accident, act of God or public enemy or armed forces, or other casualty; (b)
borrowed any funds (other than borrowings in the Ordinary Course of Business
in amounts, individually or in the aggregate, that do not exceed $25,000);
(c) incurred, or become subject to, any obligation or liability (absolute or
contingent, matured or unmatured, known or unknown), except liabilities
incurred in the Ordinary Course of Business; (d) discharged or satisfied any
Encumbrance or paid any obligation or liability (absolute or contingent,
matured or unmatured, known or unknown) other than current liabilities shown
in the Financial Statements Furnished to the other Contributing Companies,
and current liabilities incurred since July 31, 1998 in the Ordinary Course
of Business; (e) declared or made payment of, or set aside for payment, any
dividends or distributions of any Assets, or purchased, redeemed or otherwise
acquired any of its capital stock, any securities convertible into capital
stock, or any other securities; (f) mortgaged, pledged or subjected to any
Encumbrance any of its Assets, except for (i) liens reflected in the
financial statements of the Contributing Companies Furnished to the other
Contributing Companies pursuant to SECTION 5.4(a) hereof or on the Disclosure
Schedule, (ii) liens consisting of zoning or planning restrictions,
easements, permits and other restrictions or limitations on the use of real
property or irregularities in title thereto which do not materially detract
from the value of, or impair the use of, such property by the applicable
Contributing Company in the operation of its business, and (iii) liens for
current taxes, assessments or governmental charges or levies on property not
yet due and delinquent; (g) sold, exchanged, transferred or otherwise
disposed of any of its Assets, or canceled any debts or claims, except in
each case in the Ordinary Course of Business; (h) written down the value of
any Assets or written off as uncollectible any notes or accounts receivable,
except write-downs and write-offs in the Ordinary Course of Business, none of
which, individually or in the aggregate, are material; (i) entered into any
transactions other than in the Ordinary Course of Business; (j) increased the
rate of compensation payable, or to become payable, by it to any of its
officers, employees, agents or independent contractors over the rate being
paid to them on July 31, 1998 (other than in the Ordinary Course of Business
in amounts, individually or in the aggregate, that do not exceed 5% of
amounts previously payable to such officers, employees, agents or independent
contractors); (k) made or permitted any amendment or termination of any
material Agreement to which it is a party or which it owns; (l) through
negotiation or otherwise made any commitment or incurred any liability to any
labor organization; (m) made any accrual or arrangement for or payment of
bonuses or special compensation of any kind to any director, officer or
employee (other than in the Ordinary Course of Business in amounts,
individually or in the aggregate, that do not exceed 5% of amounts previously
payable to such directors, officers or employees); (n) directly or indirectly
paid any severance or termination pay to any officer or employee in excess of
three months' salary; (o) made capital expenditures, or entered into
commitments therefor, aggregating more than $50,000; (p) made any change in
any method of accounting or accounting practice; (q) entered into any
transaction of the type described in SECTION 5.18; or (r) made an Agreement
to do any of the foregoing.
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5.9 TITLE TO PROPERTY AND ASSETS
Each Contributed Sub has good, valid and marketable title to all
Assets owned by it, free and clear of all Encumbrances, other than those
identified in the Disclosure Schedule or the balance sheets Furnished to the
other Contributing Companies (or the notes thereto). The Contributing
Company and its Contributed Sub do not own any Real Property. All personal
property of each Contributed Sub is in good operating condition and repair
and is suitable and adequate for the uses for which it is intended or is
being used.
5.10 INSURANCE
The Disclosure Schedule lists all policies of title, Asset, fire,
hazard, casualty, liability, life, worker's compensation and other forms of
insurance of any kind maintained by or with respect to the Contributing
Company. All such policies: (a) are with insurance companies reasonably
believed by the Contributing Company to be financially sound and reputable;
(b) are in full force and effect; (c) are sufficient for compliance by the
Contributing Company with all requirements of Law and of all Agreements to
which the Contributing Company is a party or to which its respective
properties are subject; (d) are valid and outstanding policies enforceable
against the insurer; and (e) insure against risks of the kind customarily
insured against and in amounts customarily carried by companies similarly
situated and by companies engaged in similar businesses and owning similar
properties, and to the best knowledge of the Contributing Company, provide
adequate insurance coverage for the Contributing Company.
5.11 INTELLECTUAL PROPERTY
The Disclosure Schedule lists all trademarks, service marks, trade
names, copyrights, patents and applications therefor owned or licensed by or
registered in the name of any Contributing Company included in the
Contributed Businesses. The Contributed Subs own or have valid license
rights to all of the Intellectual Property listed in the Disclosure Schedule
purported to be owned by or licensed to each of them, pay no royalty to
anyone with respect to any Intellectual Property and have the right to bring
action for the infringement of such Intellectual Property. The Contributed
Subs own or possess adequate rights to use all Intellectual Property
necessary to the conduct of the present business of the Contributed
Businesses. The Contributing Company does not have any knowledge, and has
not received any notice to the effect, that any product such Contributing
Company manufactures or sells or that any service such Contributing Company
renders, or that the marketing or use by such Contributing Company or another
of any such product or service, may or is claimed to infringe any
Intellectual Property or legally protectable right of another.
5.12 MATERIAL AGREEMENTS
(a) The Disclosure Schedule lists all material Agreements which are
to be assigned to the Contributed Subs by the Contributing Companies prior to
Closing or which are otherwise legally binding upon the Contributed Subs.
Each such Agreement is in full force and
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effect and constitutes a legal, valid and binding obligation of, and is
legally enforceable against, the Contributing Company a party thereto and, to
such Contributing Company's knowledge, the other parties thereto. All
necessary governmental approvals with respect thereto have been obtained and
all necessary filings or registrations therefor have been made, in each case
to the extent that a Contributing Company is responsible therefor, and there
have been no threatened cancellations thereof and are no outstanding disputes
thereunder. The Contributing Companies have in all material respects
performed all the obligations thereunder required to be performed by any of
them to date. No Contributing Company, or to the knowledge of the
Contributing Companies, any other party is in material default in any respect
under any of the Agreements described in the Disclosure Schedule, and there
has not occurred any event which (whether with or without notice, lapse of
time or the happening or occurrence of any other event) would constitute such
a default.
(b) Except as specified in the Disclosure Schedule (and without
limiting the foregoing), no Contributed Sub will be a party to, or will be
otherwise legally bound by, any oral or written (i) Agreement for the
employment of any officer, employee, consultant or independent contractor;
(ii) license Agreement or distributor, dealer, manufacturer's representative,
sales agency, advertising, property management or brokerage agreement
involving payments of more than $100,000 over its remaining term (including,
without limitation, periods covered by any option to renew by either party);
(iii) Agreement with any labor organization or other collective bargaining
unit; (iv) Agreement for the future purchase of materials, supplies,
services, merchandise or equipment involving payments of more than $100,000
over its remaining term (including, without limitation, periods covered by
any option to renew by either party); (v) Agreement for the purchase, sale or
lease of any real estate or other Assets involving payments of more than
$25,000 over its remaining term (including, without limitation, periods
covered by any option to renew by either party); (vi) profit-sharing, bonus,
incentive compensation, deferred compensation, stock option, severance pay,
stock purchase, employee benefit, insurance, hospitalization, pension,
retirement or other similar plan or Agreement; (vii) Agreement for the sale
of any of its Assets or the grant of any preferential rights to purchase any
of its Assets or rights, other than in the Ordinary Course of Business;
(viii) Agreement which contains any provisions requiring any Contributed Sub
to indemnify any other party thereto, other than in the Ordinary Course of
Business; (ix) joint venture agreement or other Agreement involving the
sharing of profits; (x) outstanding loan to any person or entity or
receivable due from any stockholder of a Contributing Company or persons or
entities controlling, controlled by or under common control with a
Contributing Company; (xi) any Agreement (including, without limitation,
Agreements not to compete and exclusivity Agreements) that reasonably could
be interpreted to impose any restriction on any business operations of any
Contributed Sub; or (xii) other Agreement which by its terms does not
terminate or is not terminable by a Contributed Sub within 30 days or upon 30
days' (or less) notice.
5.13 BOOKS AND RECORDS
The books of account, stock records, minute books and other records
of the Contributing Company are true and accurate in all material respects
and have been maintained in
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accordance with good business practices, and the matters contained therein
are appropriately and accurately reflected in the financial statements
Furnished to the Contributing Companies.
5.14 LITIGATION; DISPUTES
(a) There are no actions, suits, complaints, claims, arbitrations,
proceedings or known investigations pending or, to the knowledge of the
Contributing Companies, threatened or reasonably anticipated against or
adversely affecting the Contributing Company or its business, Assets or
Approvals, or the transactions contemplated by this Exchange Agreement, at law
or in equity or admiralty, or before or by any court, arbitrator or Governmental
Agency, domestic or foreign. The Contributing Company is not operating under,
subject to or in default with respect to any order, award, writ, injunction,
decree or judgment of any court, arbitrator or governmental authority.
(b) The Disclosure Schedule sets forth each action, suit, complaint,
arbitration, proceeding and investigation to which the Contributing Company is a
party or is otherwise affected and which is included in its Contributed
Business, the rights and responsibilities of which will be assumed by Newco or
Newco Sub following the consummation of the transactions contemplated hereby.
(c) The Contributing Company is not currently involved in any dispute
with any of its current or former employees, agents, brokers, distributors,
vendors, customers, business consultants, franchisees, franchisors,
representatives or independent contractors (or any current or former employees
of any of the foregoing persons or entities), or any property owners with whom
the Contributed Company has contracted to provide services to a particular
property affecting or reasonably likely to affect the business or Assets of its
Contributed Business, other than disputes in the Ordinary Course of Business and
not material in amount.
5.15 LABOR RELATIONS
There are no strikes, work stoppages, grievance proceedings, union
organization efforts or other controversies pending or, to the knowledge of the
Contributing Company, threatened or reasonably anticipated between the
Contributing Company and (i) any current or former employees of the Contributing
Company or (ii) any union or other collective bargaining unit representing such
employees. The Contributing Company has complied and is in compliance with all
Laws relating to employment or the workplace, including, without limitation,
provisions relating to wages, hours, collective bargaining, safety and health,
work authorization, equal employment opportunity, immigration, withholding,
unemployment compensation, worker's compensation, employee privacy and right to
know except when a failure to comply, singly or in the aggregate, would not have
a material adverse effect on such Contributing Company. There are no collective
bargaining agreements, employment agreements between the Contributing Company
and any of its employees, or professional service agreements not terminable at
will relating to the business and Assets of its Contributed Business. The
consummation of the transactions contemplated hereby will not cause Newco, Newco
Sub, any
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Contributed Sub or any stockholder of Newco to incur or suffer any
liability relating to, or obligation to pay, severance, termination or other
payments to any person or entity.
5.16 PENSION AND BENEFIT PLANS
5.16.1 DISCLOSURE SCHEDULE
Except as set forth in the Disclosure Schedule, no Contributing
Company (i) maintains any Plan or Other Arrangement, (ii) is a party to any
Plan or Other Arrangement or (iii) has obligations under any Plan or Other
Arrangement.
5.16.2 COPIES OF DOCUMENTS
The Contributing Company has Furnished or otherwise made available
to the other Contributing Companies true and complete copies of each of the
following Documents: (i) the Documents setting forth the terms of each Plan;
(ii) all related trust agreements or annuity agreements (and any other
funding Document) for each Plan; (iii) for the three most recent plan years,
all annual reports (Form 5500 series) on each Plan that have been filed with
any governmental agency; (iv) the current summary plan description and
subsequent summaries of material modifications for each Title I Plan; (v) all
DOL opinions on any Plan and all correspondence relating to the request for
and receipt of each opinion; (vi) all correspondence with the PBGC on any
Plan; (vii) all IRS rulings, opinions or technical advice relating to any
Plan and all correspondence relating to the request for and receipt of each
ruling, opinion or technical advice; and (viii) all Agreements with service
providers or fiduciaries for providing services on behalf of any Plan. For
each Other Arrangement, the Contributing Company has Furnished to the other
Contributing Companies true and complete copies of each policy, Agreement or
other Document setting forth or explaining the terms of the Other
Arrangement, all related trust agreements or other funding Documents
(including, without limitation, insurance contracts, certificates of deposit,
money market accounts, etc.), all material employee communications, all
material correspondence or other submissions with any governmental agency,
and all Agreements with service providers or fiduciaries for providing
services on behalf of any Other Arrangement.
5.16.3 MULTIEMPLOYER PLANS
No Plan is a Multiemployer Plan.
5.16.4 ESOPS
No Plan is an ESOP.
5.16.5 FUNDING
No Plan is a Defined Benefit Plan.
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5.16.6 CONTRIBUTIONS AND OTHER OBLIGATIONS
The Contributing Company has made all contributions and other
payments required by and due under the terms of each Plan and Other
Arrangement and have taken no action (including, without limitation, actions
required by Law) relating to any Plan or Other Arrangement that will
materially increase any Contributed Sub's, Newco's or Newco Sub's obligation
under any Plan or Other Arrangement.
5.16.7 QUALIFIED PLANS
The Disclosure Schedule sets forth a list of all Qualified Plans.
All Qualified Plans and any related trust agreements or annuity agreements
(or any other funding Document) comply and have complied, in all material
respects, with ERISA, the Code (including, without limitation, the
requirements for Tax qualification described in Section 401 thereof), and all
other Laws. The trusts established under such Plans are exempt from federal
income taxes under Section 501(a) of the Code. The Contributing Company has
received determination letters issued by the IRS with respect to each
Qualified Plan, and the Contributing Company has Furnished to the other
Contributing Companies true and complete copies of all such determination
letters and all correspondence relating to the applications therefor. To the
best knowledge of the Contributing Company, all statements made by or on
behalf of such Contributing Company to the IRS in connection with
applications for determinations with respect to each Qualified Plan were true
and complete when made and continue to be true and complete. To the best
knowledge of the Contributing Company, nothing has occurred since the date of
the most recent applicable determination letter that could reasonably be
expected to adversely affect the tax-qualified status of any Qualified Plan.
5.16.8 COMPLIANCE WITH LAW
The Contributing Company has complied in all material respects with
all applicable provisions of the Code, ERISA, the National Labor Relations
Act, Title VII of the Civil Rights Act of 1964, the Age Discrimination in
Employment Act, the Fair Labor Standards Act, and all other Laws pertaining
to the Plans, Other Arrangements and other employee or employment related
benefits, and all premiums and assessments relating to all Plans or Other
Arrangements. The Contributing Company has no liability for any delinquent
contributions within the meaning of Section 515 of ERISA (including, without
limitation, related attorneys' fees, costs, liquidated damages and interest)
or for any arrearages of wages. The Contributing Company has no pending
unfair labor practice charges, contract grievances under any collective
bargaining agreement, other administrative charges, claims, grievances or
lawsuits before any court, governmental agency, regulatory body, or arbiter
arising under any Law governing any Plan, and to the knowledge of the
Contributing Company there exist no facts that could give rise to such a
claim.
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5.16.9 ERISA; PROHIBITED TRANSACTIONS
To the best knowledge of the Contributing Company, the Disclosure
Schedule describes all transactions in which such Contributing Company or any
of the Plans has engaged in violation of Section 406(a) or 406(b) of ERISA
for which no exemption exists under Section 408 of ERISA and all "prohibited
transactions" (as such term is defined in Section 4975(c)(1) of the Code),
for which no exemption exists under Section 4975(c)(2) or 4975(d) of the
Code. The Contributing Company has Furnished to the other Contributing
Companies true and complete copies of each request for a prohibited
transaction exemption and each exemption obtained in response to such
request. All such requests were true and complete when made and continue to
be true and complete.
5.16.10 NON-DEDUCTIBLE PAYMENTS
No Plan or Other Arrangement, individually or collectively,
provides for any payment by the Contributing Company to any employee or
independent contractor that is not deductible under Section 162(a)(1) or 404
of the Code or that is an "excess parachute payment" pursuant to Section 280G
of the Code.
5.16.11 REPORTABLE EVENTS
No Plan has experienced a "reportable event" (as such term is
defined in Section 4043(b) of ERISA) that is not subject to an administrative
or statutory waiver from the reporting requirement.
5.16.12 FOREIGN PLAN
No Plan is a "qualified foreign plan" (as such term is defined in
Section 404A(e) of the Code), and no Plan is subject to the Laws of any
jurisdiction other than the United States of America or one of its political
subdivisions.
5.16.13 TAX FORM 5330
The Contributing Company has timely filed and has Furnished to the
other Contributing Companies true and complete copies of each Form 5330 (Return
of Excise Taxes Related to Employee Benefit Plans) that such Contributing
Company filed on any Plan. The Contributing Company has no liability for Taxes
required to be reported on Form 5330.
5.16.14 WELFARE PLANS
No Plan is a funded Welfare Plan.
5.16.15 POST-RETIREMENT PLANS
No Plan promises or provides post-retirement medical or life insurance
coverage now or in the future to current, former or retired employees of the
Contributing Company.
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5.16.16 HEALTH CARE CONTINUATION COVERAGE REQUIREMENTS
To the best knowledge of the Contributing Company, all Welfare
Plans and the related trusts that are subject to Section 4980B(f) of the Code
and Sections 601 through 607 of ERISA comply with and have been administered
in compliance with the health care continuation-coverage requirements of
Section 4980B(f) of the Code, Sections 601 through 607 of ERISA, and all
proposed or final Treasury regulations under Section 162 of the Code
explaining those requirements.
5.16.17 FILED RETURNS AND REPORTS
The Contributing Company has (i) filed or caused to be filed all
returns and reports on the Plans that they are required to file and (ii) paid
or made adequate provision for all material fees, interest, penalties,
assessments or deficiencies that have become due pursuant to those returns or
reports or pursuant to any assessment or adjustment that has been made
relating to those returns or reports. To the best knowledge of the
Contributing Company, all other fees, interest, penalties and assessments
that are payable by or for the Contributing Company have been timely
reported, fully paid and discharged. To the best knowledge of the
Contributing Company, there are no unpaid fees, penalties, interest or
assessments due from the Contributing Company or from any other person that
are or could become a lien on any Asset of its Contributed Sub or Newco Sub
or could otherwise adversely affect the businesses or Assets of its
Contributed Sub or Newco Sub. The Contributing Company has collected or
withheld all amounts that are required to be collected or withheld by them to
discharge their obligations, and all of those amounts have been paid to the
appropriate governmental agencies or set aside in appropriate accounts for
future payment when due.
5.17 ENVIRONMENTAL
The Contributing Company has complied and is in compliance with all
Environmental Laws relating to or affecting the Contributed Businesses.
5.18 TRANSACTIONS WITH RELATED PARTIES
Except as set forth on the Disclosure Schedule, neither any present
or former officer, director, stockholder or member of the Contributing
Company, nor any Affiliate of such officer, director, stockholder or member,
is currently a party to any transaction with such Contributing Company, the
rights and obligations of which are included in its Contributed Business,
including, without limitation, any Agreement providing for the employment of,
Furnishing of Services by, rental of Assets from or to, or otherwise
requiring payments to, any such officer, director, stockholder or Affiliate.
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5.19 RESTRICTIONS AND CONSENTS
(a) There are no material Agreements, Laws, Approvals or other
restrictions of any kind to which the Contributing Company or its
stockholders are party (or any Asset thereof is subject) that would prevent
or restrict the execution, delivery or performance of this Exchange Agreement
in accordance with its terms or Newco's or Newco Sub's continued operation of
the Contributed Businesses after the date hereof on substantially the same
basis as heretofore operated. The Disclosure Schedule lists all such
material Agreements and Laws that reasonably could be interpreted or expected
to require the consent or acquiescence of any person or entity not party to
this Exchange Agreement with respect to any aspect of the execution, delivery
or performance of this Exchange Agreement by the Contributing Companies.
(b) Neither the nature of the Contributed Businesses or any of the
businesses, assets, Approvals or properties used in the Contributed
Businesses, nor any relationship between a Contributing Company and any other
Person, nor any circumstance in connection with the transactions contemplated
by this Exchange Agreement is such as to require on behalf of a Contributing
Company any consent, approval or other action by or any notice to or filing
with any court or administrative body or Governmental Agency in connection
with the execution, delivery and performance of this Exchange Agreement,
except for filings under Hart-Scott-Rodino and consents, approvals and other
actions, notices and filings which are described in the Disclosure Schedule
and which, except as specified in the Disclosure Schedule, have been
obtained, taken and completed, as applicable, including, but not limited to,
all required prior consents, approvals, filings or notifications to or from
the FCC and any other Governmental Agency.
5.20 AUTHORIZATION
The execution, delivery and performance by the Contributing Company
of this Exchange Agreement and all other Documents contemplated hereby in
accordance with their respective terms, the fulfillment of and compliance
with the respective terms and provisions hereof and thereof, and the
consummation by the Contributing Company of the transactions contemplated
hereby and thereby, have been duly and validly authorized by all necessary
corporate or other action, no other corporate or other proceedings on the
part of the Contributing Company are necessary to authorize this Exchange
Agreement and all Documents contemplated hereby or to consummate the
transactions contemplated hereby, and such actions do not and will not: (a)
conflict with, or violate any provision of, any Law or any Approval having
applicability to the Contributing Company or any of its Assets, or any
provision of the certificate or articles of incorporation or bylaws or
operating agreement or certificate of formation of the Contributing Company;
(b) conflict with, or result in any breach of, or constitute a default under
any material Agreement to which the Contributing Company is a party or by
which it or any of its Assets may be bound; or (c) result in or require the
creation or imposition, or result in the acceleration, of any indebtedness,
or of any Encumbrance of any nature upon, or with respect to, the Assets of
the Contributing Company.
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5.21 ABSENCE OF VIOLATION
The Contributing Company is not in violation of or default under,
nor has it breached, any term or provision of its certificate or articles of
incorporation or formation or bylaws or operating agreement or any material
Agreement or restriction to which it is a party or by which the Contributing
Company or any Asset thereof is bound or affected. The Contributing Company
and its officers, directors, employees or agents (or stockholders, members,
distributors, representatives or other persons acting on the express, implied
or apparent authority of such entity) have not paid, given or received or
have offered or promised to pay, give or receive, any bribe or other
unlawful, questionable or unusual payment of money or other thing of value,
any extraordinary discount, or any other unlawful or unusual inducement, to
or from any person, business association or governmental official or entity
in the United States or elsewhere in connection with or in furtherance of the
business of the Contributing Company (including, without limitation, any
offer, payment or promise to pay money or other thing of value (i) to any
foreign official or political party (or official thereof) for the purposes of
influencing any act, decision or omission in order to assist the Contributing
Company in obtaining business for or with, or directing business to, any
person, or (ii) to any person, while knowing that all or a portion of such
money or other thing of value will be offered, given or promised to any such
official or party for such purposes). The business of the Contributing
Company is not in any manner dependent upon the making or receipt of such
payments, discounts or other inducements.
5.22 COMPLIANCE WITH LAW; APPROVALS
Except as set forth in the Disclosure Schedule and to the extent
not addressed by other representations contained in this Exchange Agreement:
(a) The operations of the Contributed Business has been conducted
in accordance with all applicable Laws and other requirements of all courts
and other Governmental Agencies having jurisdiction over the Contributing
Company and its Assets, Approvals, properties and operations, except for
violations that individually or in the aggregate would not and, insofar as
may reasonably be foreseen, in the future will not, have a Material Adverse
Effect;
(b) The Contributing Company has not received notice of any
violation of any such Law or other legal requirement, and is not in material
default with respect to any order, writ, judgment, award, injunction or
decree of any federal, state or local court or Governmental Agency or
arbitrator, domestic or foreign, applicable to the Contributing Company or
any of its Assets, Approvals, properties or operations;
(c) The Contributing Company has no knowledge of any proposed
change in any such Laws that would materially adversely affect the
transactions contemplated by this Exchange Agreement or all or any material
part of the Assets or the business of any of the Contributed Business;
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(d) Each of the Contributed Subs has, and all professional
employees or agents of each of the Contributed Businesses have, been granted
and presently hold, all licenses, franchises, permits, registrations,
certificates, authorizations or approvals from all governmental or regulatory
authorities, including the FCC, state governmental agencies having
jurisdiction over intrastate communications and local authorities
("Approvals"), required or necessary for the conduct of the Contributed
Business, except where the failure to have such Approvals would not,
individually or in the aggregate, have a Material Adverse Effect on any of
the Contributed Businesses. The Disclosure Schedule truly and completely
lists all such Approvals. All of such Approvals are in full force and
effect, are not subject to any conditions outside of the ordinary course, and
none of the Contributed Subs or the professional employees or agents of any
of the Contributed Businesses lack any such Approval or are in violation of
any terms or conditions thereof, except for such violations as would not,
individually or in the aggregate, have a Material Adverse Effect on any of
the Contributed Businesses;
(e) No Contributing Company has received any notice or
correspondence from any Governmental Agency (or from any third party or other
Person requesting such action) revoking, canceling, rescinding, modifying or
refusing to renew, or threatening to take any action with respect to, any
such Approval; and
(f) Except as set forth on the Disclosure Schedule, all such
Approvals are freely transferable to Newco Sub subject to prior Governmental
Agency approvals (including approvals of the FCC, state governmental agencies
having jurisdiction over intrastate communications and local authorities),
where applicable, and upon the consummation of the transactions contemplated
hereunder and receipt of any Government Agency and FCC approvals, Newco Sub
will receive the benefits (without any diminution) of all such Approvals.
5.23 SUBSCRIBERS; RIGHTS OF ENTRY
The Disclosure Schedule sets forth a complete and correct list as
of September 30, 1998, of all Rights of Entry possessed by the Contributing
Businesses transferred to the Contributed Subs prior to Closing and the
number of Cable Subscribers and Billable Phone Subscribers served pursuant to
each such Right of Entry. True, accurate and complete copies of all Rights
of Entry listed in the Disclosure Schedule have been furnished by the
Contributing Company to the other Contributing Companies. Except as set
forth in the Disclosure Schedule, all Rights of Entry, including all
amendments thereto, (a) are in writing and are legal, valid, binding and
enforceable in accordance with their terms, and (b) the validity and
enforceability of the same will not be adversely affected by the consummation
of any of the transactions contemplated by this Exchange Agreement. Except
as set forth on the Disclosure Schedule, no material default of any Person
exists under any of the Rights of Entry, and to the best knowledge of the
Contributing Company, the parties thereto other than the Contributing Company
have no offsets or defenses to the enforcement thereof. Additionally, the
Disclosure Schedule accurately sets forth the properties to which each
Contributed Business provides service (the "Relevant Properties"), the
locations of such properties, the number of units to such services at each of
such locations, the number of Cable Subscribers and Billable Phone
Subscribers to such services at each of such locations, the date of the
Rights of Entry relating to each property and the
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expiration of such Right of Entry. Additionally, the Disclosure Schedule sets
forth a complete and correct list, for each Relevant Property, of the source
of signal feed used, specifying whether such feed is SMATV on premises, 18ghz
or another type of feed (and a description thereof).
5.24 CABLE SYSTEMS
The Disclosure Schedule lists all "cable systems," as defined by
the Communications Act and FCC Rules, operated by the Contributed Businesses
transferred to the Contributed Subs prior to Closing (collectively, "Cable
Systems"), the name of the franchise authority ("Franchisor"), if any, the
date on which the franchise was awarded and the date on which the franchise
is scheduled to expire (if not renewed). Except as set forth on the
Disclosure Schedule with respect to each such Cable System, each Contributing
Company (a) has timely filed all required registration statements with the
FCC pursuant to FCC Rule 76.12, (b) has timely filed all required equal
employment opportunity reports with the FCC pursuant to FCC Rule 76.77, such
reports are true and accurate, and the FCC has certified compliance in
response to each such report, (c) is in compliance with all FCC programming
requirements, including the children's programming provisions of FCC Rule
76.225, (d) has timely filed all reports, including those required by FCC
Rule 76.403, and is in material compliance with the record-keeping and
inspection requirements of FCC Rules 76.307 and 76.601, (e) has not received
any notice of non-compliance from any franchisor pursuant to Rule 76.309 and
meets or exceeds the customer service provisions set forth in that rule, (f)
materially complies with the requirements of FCC Rule 76.601 and is in
material compliance with the applicable technical standards of FCC Rule
76.605, (g) is in material compliance with the aeronautical interference
provisions of FCC Rules 76.610-76.615 and (h) has timely paid all appropriate
Federal regulatory fees.
5.25 FCC LICENSES
The Disclosure Schedule correctly sets forth all of the FCC
licenses, permits, approvals and authorizations (collectively, the "FCC
Licenses") used or planned to be used by the Contributed Businesses in
connection with their business and correctly sets forth the entity holding
such FCC License, the call sign or file number and expiration date of each
such FCC License. All of the FCC Licenses have been transferred to the
Contributed Subs prior to Closing. No Contributed Business is required to
hold any other FCC License to conduct its business. Each such FCC License
has been duly and validly issued or assigned to the applicable Contributing
Company, and will be duly and validly assigned to the applicable Contributed
Sub prior to Closing, by or with the consent of the FCC pursuant to
procedures which comply with all requirements of applicable law, is in full
force and effect, and is unimpaired, and Contributed Sub at Closing will have
the right to use all of its FCC Licenses in the ordinary course of business
for the operation of its business. The Contributing Company is in compliance
in all material respects with the FCC Licenses, all provisions of the
Communications Act of 1934, as amended (the "Communications Act") and the
rules and regulations promulgated and policies adopted under the
Communications Act (collectively, the "FCC Rules"), and there is no known
conflict with the valid rights of others which could adversely affect the FCC
Licenses or the business of any Contributed Business. There is no complaint
or proceeding pending before the
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FCC, or to the best knowledge of the Contributing Company threatened, or
other event that has occurred, which could reasonably be expected to result
in the forfeiture, revocation, impairment, non-renewal or adverse
modification, of any such FCC License, or the imposition of a financial or
other penalty upon such Contributing Company. All facilities authorized
pursuant to the FCC Licenses were timely constructed in accordance with such
FCC License, the Communications Act and FCC Rules and are operating in
compliance therewith.
5.26 FCC APPLICATIONS
The Disclosure Schedule sets forth all applications (collectively,
the "FCC Applications") that are pending before the FCC with respect to each
Contributed Business, the file number of each such application and the date
on which it was accepted for filing by the FCC. Each of the FCC Applications
complies in all material respects with the Communications Act and the FCC
Rules. There are no petitions, protests, oppositions, objections, or other
proceedings, formal or informal, pending or threatened, before the FCC
requesting dismissal, denial, reconsideration or reinstatement which, if
granted, could result in the denial, dismissal, return, or non-grant of any
FCC Application, the issuance of a cease and desist order, or the imposition
of any administrative or judicial sanction.
5.27 FCC COMPLIANCE
Except as set forth in the Disclosure Schedule, the Contributing
Company has timely filed with the FCC all reports and filings (collectively,
the "Reports") which are required to be filed by it under the Communications
Act and FCC Rules, including, without limitation, FCC Rules relating to equal
employment opportunity.
5.28 ZONING, AVIATION, ETC. COMPLIANCE
Except as set forth in the Disclosure Schedule, none of the
facilities used in the business of any Contributed Business violates the
provisions of any applicable federal, state, or local aviation regulation
(including FCC and Federal Aviation Administration tower markings and
lighting requirements), building restriction, zoning ordinance or regulation,
and each such facility is zoned, if required, so as to permit the commercial
uses intended by the owner or occupier thereof, and there are no outstanding
variances or special use permits affecting any of such facilities or the uses
thereof.
5.29 COMPLIANCE WITH THE COPYRIGHT ACT
Except as set forth in the Disclosure Schedule, the Contributing
Company has (i) (a) duly filed in a timely manner all registration
statements, statements of account and other filings which are required to be
filed under the Copyright Act, 17 U.S.C. Section 111, et seq., and under any
local laws and rules, (b) conducted its business in compliance with the
Copyright Act and the rules and regulations of the Copyright Office, and (c)
timely submitted any and all notices, statements of account, or other
instruments required under the Copyright Act and the
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Rules and Regulations of the Copyright Office for a license to carry all
broadcast stations previously or currently carried on such Contributing
Company's systems; and (ii) timely remitted all required payments and royalty
fees for the carriage of such stations. The Contributing Company is not
aware of any pending inquiry from the Copyright Office or any other party
regarding the filing of the above-referenced statement of accounts. The
Contributing Company is not liable to any Person for copyright infringement
under the Copyright Act or trademark infringement under the applicable
federal and state statutes and regulations as a result of its business
operations, its conduct of its business or otherwise.
5.30 MUST-CARRY AND RETRANSMISSION CONSENT
The Disclosure Schedule lists each Broadcast Station (as defined
below) which is carried on each Cable System pursuant to the must-carry
provisions of the Communications Act and FCC Rules 76.51-76.62, and the
channel on which it is carried. The Disclosure Schedule also separately
lists each Broadcast Station carried pursuant to a retransmission consent
agreement, and the channel on which it is carried. Except as set forth on
the Disclosure Schedule, there is no dispute pending or threatened with
respect to the carriage of any Broadcast Station. Each Contributing Company,
as applicable, has complied with all Broadcast Station notification
provisions of FCC Rule 76.58 and the must-carry record-keeping provisions of
FCC Rule 76.302 with respect to each Cable System, and with all other FCC
Rules regarding must-carry and retransmission consent. Each Broadcast
Station signal carried by the Cable Systems is carried either pursuant to the
must-carry obligations of the Cable Systems or pursuant to a valid and
binding agreement between a Contributing Company and the Broadcast Station
(or License Company and the Broadcast Station) authorizing the retransmission
of the Broadcast Station signal. For purposes of this section, the term
"Broadcast Station" means, in connection with signals retransmitted, a local
commercial television station, as defined in FCC Rule 76.55(c), a qualified
low power station, as defined in FCC Rule 76.55(d), a qualified noncommercial
educational television broadcasting station as defined in FCC Rule 76.55(a)
or a qualified local noncommercial educational television station as defined
in FCC Rule 76.55(b), but does not include a "superstation" as defined by FCC
Rule 76.64(c)(2).
5.31 PETITIONS FOR SPECIAL RELIEF
The Contributing Company has not received and does not have knowledge
of any petition for special relief or documents so styled filed against or with
respect to such Contributing Company concerning any matters which under FCC
Rules can be raised in a petition for special relief.
5.32 RATE REGULATION AND EFFECTIVE COMPETITION
The Cable Systems are either exempt from rate regulation or are
subject to "effective competition" as defined in FCC Rule 76.905(b). No
Franchisor has certified to the FCC as a pre-condition to rate regulation and
there are no subscriber or franchising authority complaints against the cable
product service tier on the Cable Systems.
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5.33 HARD WIRE PUBLIC RIGHT-OF-WAY CROSSINGS
The Disclosure Schedule sets forth a complete and correct list of
all hard wire public right-of-way crossings relating to the business of the
Contributed Businesses. Except as set forth on the Disclosure Schedule, at
Closing each Contributed Sub will have valid, binding and enforceable rights
and franchises to maintain such crossings. The Disclosure Schedule also
indicates which hard wire public rights-of-way crossings may be required to
have, but do not have, franchises.
5.34 SECURITY SERVICES
The Disclosure Schedule is a true, complete and correct list of all
Relevant Properties for which each Contributing Company has agreements to be
transferred to the Contributed Subs prior to Closing with respect to the
provision of security services, specifying the corresponding Right of Entry,
whether such security service is performed at such Contributing Company's
option or is required by the Right of Entry and all subcontract arrangements
to provide the security services. The Contributing Company has provided the
other Contributing Companies with copies of all contracts and subcontracts
relating to such security services.
5.35 COPIES OF DOCUMENTS
True and complete copies of all Documents listed in the Disclosure
Schedule have been Furnished or otherwise made available to the Contributing
Companies.
5.36 BINDING OBLIGATION
This Exchange Agreement constitutes a valid and binding obligation
of each Contributing Company, and assuming the due authorization, execution
and delivery by each other party hereto, enforceable in accordance with its
terms; and each Document to be executed by any Contributing Company pursuant
hereto, when executed and delivered in accordance with the provisions hereof
and assuming the due authorization, execution and delivery by each other
party thereto, shall be a valid and binding obligation of such Contributing
Company, enforceable in accordance with its terms.
5.37 DISCLOSURE
No representation or warranty by the Contributing Companies in this
Exchange Agreement, and no Document Furnished or to be Furnished pursuant to
this Exchange Agreement, or in connection herewith or with the transactions
contemplated hereby, contains or will contain any untrue statement of a
material fact or omits or will omit any material fact necessary to make the
statements contained herein or therein, in light of the circumstances under
which made, not misleading.
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6. RESTRICTED SECURITIES
Each Contributing Company represents, warrants and covenants to
each other Contributing Company and to Newco as follows:
6.1 NO REGISTRATION UNDER THE SECURITIES ACT
Such Contributing Company understands that the Shares to be
acquired by it at the Closing pursuant to the terms of this Exchange
Agreement will not be registered under the Securities Act, in reliance upon
exemptions contained in the Securities Act or interpretations thereof, and
cannot be offered for sale, sold or otherwise transferred unless such shares
being acquired hereunder subsequently are so registered or qualify for
exemption from registration under the Securities Act.
6.2 ACQUISITION FOR INVESTMENT
The Shares are being acquired under this Exchange Agreement by such
Contributing Company in good faith solely for its own account, for investment
and not with a view toward distribution within the meaning of the Securities
Act. The Shares will not be offered for sale, sold or otherwise transferred
by such Contributing Company without either registration or exemption from
registration under the Securities Act except to permitted transferees as
listed on Schedule 6.2 hereto.
6.3 EVALUATION OF MERITS AND RISKS OF INVESTMENT
Such Contributing Company has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits
and risks of its investment in the Shares being acquired hereunder. Such
Contributing Company is an "accredited investor" within the meaning of one or
more of paragraphs (1), (2), (3) or (8) of Rule 501(a) under the Securities
Act. Such Contributing Company understands and is able to bear any economic
risks associated with such investment (including, without limitation, the
necessity of holding the Shares for an indefinite period of time, inasmuch as
the Shares have not been registered under the Securities Act).
6.4 ADDITIONAL INFORMATION
Such Contributing Company acknowledges that it has been afforded
the opportunity to ask questions and receive answers to its satisfaction
concerning all of the Contributing Businesses and to obtain any additional
information that is necessary to verify the accuracy of the information
contained herein.
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7. CLOSING
Subject to the terms and conditions of this Exchange Agreement, the
Closing shall take place at the offices of Paul Hastings Janofsky & Walker
LLP, 399 Park Avenue, New York, New York on the date hereof or at such other
time, place and date as is mutually agreed to by the parties hereto.
7.1 DELIVERIES BY EACH CONTRIBUTING COMPANY
Contemporaneously with the execution of this Exchange Agreement, each
Contributing Company shall deliver to Newco or each other Contributing Company,
as the case may be, the following:
(a) to Newco, stock certificates representing all of the issued and
outstanding shares of capital stock of its Contributed Sub, duly endorsed in
blank for transfer, or, in the case of STC, evidence satisfactory to Newco of
the transfer of all ownership interests in STC Sub to Newco;
(b) to Newco and each other Contributing Company, a certified copy of
the resolutions adopted by its Board of Directors or other governing body and,
if applicable, stockholders or members, of the Contributing Company authorizing
the transactions contemplated by this Exchange Agreement;
(c) to Newco and each other Contributing Company, opinions of the
Contributing Company's counsel, dated as of the date hereof, to the effect and
substantially in the form of EXHIBITS G-1 and G-2;
(d) [intentionally omitted];
(e) to Newco and each other Contributing Company, certificates of
incumbency and specimen signatures of the signatory officers of such
Contributing Company;
(f) to Newco and each other Contributing Company, good standing
certificates as of a recent date issued by the Secretary of State of the State
of Delaware as to its Contributed Sub;
(g) to Newco, the certificate of incorporation, bylaws, minute books
and stock books of its Contributed Sub (and, with respect to ICS, ActiveTel, and
with respect to STC Sub, its certificate of formation and operating agreement)
and all other books and records of the Contributed Sub (and ActiveTel)
reasonably requested by Newco;
(h) to Newco and each other Contributing Company, an executed copy of
the Stockholders Agreement;
(i) to Newco and each other Contributing Company, true and complete
copies of all consents, notices or approvals (including any required under
SECTION 5.22(f)) necessary to
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be obtained or made by such Contributing Company in connection with the
transactions contemplated by this Agreement, other than those set forth on
Schedule 7.1(i) and those which would otherwise be required under SECTION
5.23.
(j) with respect to STC only, to Newco, an executed copy of its
Secondment Agreement with Newco Sub;
(k) to Newco, an executed copy of its Agreement Regarding Key
Management with Newco Sub;
(l) to Newco and the lenders under the Bridge Loans, documentation
evidencing the release of any and all liens on the Assets being delivered by
such Contributing Company; and
(m) such other documents as Newco or any other Contributing Company
may reasonably request.
7.2 DELIVERIES BY NEWCO
Contemporaneously with the execution of this Agreement, Newco shall
deliver or shall cause Newco Sub to deliver, as appropriate, to each
Contributing Company the following:
(a) stock certificates issued in the name of such Contributing
Company for the Shares acquired by such Contributing Company pursuant to SECTION
2 hereof;
(b) a certified copy of the resolutions adopted by the Board of
Directors of Newco authorizing the transactions contemplated by this Exchange
Agreement;
(c) an opinion of Hogan & Hartson L.L.P., counsel to Newco, dated as
of the date hereof, in substantially the form attached hereto as EXHIBIT H;
(d) an opinion from Deloitte & Touche L.L.P., Newco's independent
certified public accountants, addressed to Newco and each Contributing Company
and dated as of the date hereof, to the effect and in substantially the form
attached hereto as EXHIBIT I;
(e) certificates of incumbency and specimen signatures of the
signatory officers of Newco;
(f) executed copies of the Bridge Loan documents, as set forth on
Schedule 2.7(a) hereto and evidence of the funding of all amounts thereunder;
(g) an executed copy of the Stockholders Agreement;
(h) a good standing certificate and copy of the charter, certified by
the Secretary of State of the State of Delaware for ActiveTel;
(i) an executed copy of the Secondment Agreement with STC;
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(j) an executed copy of the Agreement Regarding Key Management with
each respective Contributing Company; and
(k) such other Documents any Contributing Company may reasonably
request.
8. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION; REMEDIES
8.1 SURVIVAL OF REPRESENTATIONS
All representations and warranties in this Exchange Agreement shall
survive for a period of eighteen (18) months after the date hereof.
Notwithstanding anything herein to the contrary, any representation or warranty
which is the subject of a claim that is asserted in writing prior to the
expiration of the 18-month period set forth above shall survive with respect to
such claim or dispute until the final resolution thereof.
8.2 AGREEMENT OF THE CONTRIBUTING COMPANIES TO INDEMNIFY
(a) Subject to the conditions and provisions of this SECTION 8,
each Contributing Company hereby agrees to indemnify, defend and hold
harmless Newco, Newco Sub and their respective officers, directors,
employees, agents and representatives (collectively, the "Newco Indemnified
Persons") from and against and in respect of all Claims asserted against,
resulting to, imposed upon or incurred by the Newco Indemnified Persons
(whether such Claims are by, against or relate to Newco, Newco Sub, a
Contributing Company or any other party, including, without limitation, a
Governmental Agency), directly or indirectly, arising out of, by reason of or
resulting from (i) any misrepresentation or breach of any representation or
warranty, or noncompliance with any conditions or other Agreements, given or
made by such Contributing Company in this Exchange Agreement or in any
Document, certificate or Agreement Furnished by or on behalf of any such
party pursuant to this Exchange Agreement or (ii) the Assets or the business
and operations of such Contributing Company during the period prior to the
date hereof (to the extent not reflected or reserved against in such
Contributing Company's Pro Forma Statement). It shall be a condition to the
right of any Newco Indemnified Person to indemnification pursuant to this
Section that such Newco Indemnified Person shall assert a claim for such
indemnification within the 18-month period set forth in SECTION 8.1 hereof.
Notwithstanding the foregoing, no Contributing Company shall have any
indemnification obligation or liability under this SECTION 8 for or in
respect of any breach or asserted breach of any representation or warranty
set forth in SECTION 5.4(b), SECTION 5.5 or SECTION 5.6 (without limiting,
however, any indemnification obligation or liability under any other Section
arising out of the same facts).
(b) A Contributing Company will have no liability for
indemnification under this SECTION 8.2 until the total of all damages
incurred by the Newco Indemnified Persons resulting from such Contributing
Company's actions or inactions exceeds $100,000.
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(c) In the event that ResNet shall be liquidated prior to the
expiration of the 18-month period set forth in SECTION 8.1 above and the
shares of Newco Common Stock shall be distributed to its members, ResNet,
Inc. hereby agrees to assume any and all obligations of ResNet under this
SECTION 8.
(d) Except with respect to Claims based upon fraud by any such
Contributing Company, the maximum aggregate amount of indemnification which
the Newco Indemnified Persons shall be entitled to from any Contributing
Company under this SECTION 8.2 shall be an amount equal to the aggregate
value on the date hereof of the Shares being issued to such indemnifying
party hereunder, at an assumed price per share of $16,800.
8.3 CONDITIONS OF INDEMNIFICATION
The obligations and liabilities of each Contributing Company
hereunder with respect to their respective indemnities pursuant to this
SECTION 8, resulting from any Claim shall be subject to the following terms
and conditions:
(a) The indemnified party shall give prompt written notice to the
indemnifying party of any Claim which is asserted against, resulting to,
imposed upon or incurred by such indemnified party and which may give rise to
liability of the indemnifying party pursuant to this SECTION 8, stating (to
the extent known or reasonably anticipated) the nature and basis of such
Claim and the amount thereof.
(b) The indemnifying party shall promptly and timely engage counsel
for representation with respect to any such Claim, such representation
(including the compromise or settlement of any Claim) to be undertaken on
behalf of the indemnified party, and the indemnified party shall have the
right to approve such counsel (such approval not to be unreasonably
withheld). In the event the indemnifying party elects not to undertake the
defense of such Claim by its own counsel, the indemnifying party shall give
prompt written notice of such election to the indemnified party, and the
indemnified party will undertake the defense thereof by counsel or other
representatives designated by it, at the cost and expense of the indemnifying
party (such costs and expenses of such defense to be advanced by the
indemnifying party as incurred by the indemnified party).
(c) In the event that with respect to any Claim Newco and Newco
Sub, on the one hand, and the Contributing Companies, on the other hand, are
liable or reasonably likely to be held liable for part of the liability or
obligation arising therefrom, then the parties shall, each choosing its or
his own counsel and bearing its or his own expense, defend such Claim, and no
settlement or compromise of such Claim may be made without the joint consent
or approval of all parties (which consents shall not be unreasonably
withheld).
(d) The amount which any indemnifying party is or may be required
to pay any indemnified party pursuant to this SECTION 8 shall be measured
taking into account (i) any income tax savings (and income tax cost
attributable to the indemnity payment) actually realized (or occurred) that
affect the overall economic impact of the losses to the indemnified party,
and
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(ii) any insurance proceeds actually realized and adverse insurance
consequences incurred (such as premium adjustments and other detriments) that
affect the overall economic impact of the Claims to the indemnified party.
8.4 SPECIFIC PERFORMANCE
In addition to any other remedies which the Contributing Companies
may have at law or in equity, the Contributing Companies hereby acknowledge
that the Contributing Businesses are unique, and that the harm to each of the
Contributing Companies resulting from breaches by the other parties hereto of
their respective obligations cannot be adequately compensated by damages.
Accordingly, the parties hereto agree that the Contributing Companies shall
have the right to have all obligations, undertakings, Agreements, covenants
and other provisions of this Exchange Agreement specifically performed by the
other parties hereto, as the case may be, and that any such party shall have
the right to obtain an order or decree of such specific performance in any of
the courts of the United States of America or of any state or other political
subdivision thereof.
8.5 REMEDIES CUMULATIVE
The remedies provided herein shall be cumulative and shall not
preclude the assertion by Newco or any Contributing Company of any other
rights or the seeking of any other remedies against the other, or their
respective successors or assigns.
9. MISCELLANEOUS
9.1 ADDITIONAL ACTIONS AND DOCUMENTS
Each of the parties hereto hereby agrees to take or cause to be
taken such further actions, to execute, deliver and file or cause to be
executed, delivered and filed such further Documents, and will obtain such
consents, as may be necessary or as may be reasonably requested in order to
fully effectuate the purposes, terms and conditions of this Exchange
Agreement, including, but not limited to those consents set forth on Schedule
7.1(i). ICS further agrees to cause its subsidiary, ICS Licenses, Inc. to
take all necessary action to transfer its FCC Microwave License (Call Sign
WNTU955) to Newco within 45 days of the Closing Date.
9.2 NO BROKERS
Each of the parties hereto represents and warrants to the other
parties (and to each of them) that such party has not engaged any broker,
finder or agent in connection with the transactions contemplated by this
Exchange Agreement and has not incurred (and will not incur) any unpaid
liability to any broker, finder or agent for any brokerage fees, finders'
fees or commissions, with respect to the transactions contemplated by this
Exchange Agreement. Each party agrees to indemnify, defend and hold harmless
each of the other parties from and against
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any and all claims asserted against such parties for any such fees or
commissions by any persons purporting to act or to have acted for or on
behalf of the indemnifying party.
9.3 EXPENSES
Newco and each Contributing Company shall be represented by its own
independent counsel and will be responsible for its respective legal and
consulting expenses, except that the Contributing Companies shall bear
equally the expenses incurred by Newco, including the fees and expenses of
Hogan & Hartson L.L.P., counsel to Newco, which fees and expenses shall not
exceed $300,000 without the consent of the Contributing Companies.
9.4 ASSIGNMENT
Each Contributing Company shall have the right to assign its rights
and obligations under this Exchange Agreement, in whole or in part, to an
Affiliate or to designate any of its Affiliates (to the extent permitted by Law)
to receive directly the Shares to be acquired hereunder or to exercise any of
the rights of such Contributing Company, or to perform any of its obligations
and shall be permitted to pledge all or any portion of such Shares to any lender
thereof as collateral to secure indebtedness owed by such party. Except as
provided in the foregoing sentence, no Contributing Company shall assign its
rights and obligations under this Exchange Agreement, in whole or in part,
whether by operation of law or otherwise, and any such assignment contrary to
the terms hereof shall be null and void and of no force and effect. In no event
shall the assignment by a Contributing Company of its respective rights or
obligations under this Exchange Agreement, whether before or after the Closing,
release such Contributing Company from its respective liabilities and
obligations hereunder.
9.5 ENTIRE AGREEMENT; AMENDMENT
This Exchange Agreement, including the Disclosure Schedule, the
Exhibits and other Documents referred to herein or Furnished pursuant hereto,
constitutes the entire Agreement among the parties hereto with respect to the
transactions contemplated herein, and it supersedes all prior oral or written
Agreements, commitments or understandings with respect to the matters provided
for herein. No amendment, modification or discharge of this Exchange Agreement
shall be valid or binding unless set forth in writing and duly executed and
delivered by the party against whom enforcement of the amendment, modification,
or discharge is sought.
9.6 WAIVER
No delay or failure on the part of any party hereto in exercising any
right, power or privilege under this Exchange Agreement or under any other
Documents Furnished in connection with or pursuant to this Exchange Agreement
shall impair any such right, power or privilege or be construed as a waiver of
any default or any acquiescence therein. No single or partial exercise of any
such right, power or privilege shall preclude the further exercise of such
right, power or privilege, or the exercise of any other right, power or
privilege. No waiver shall
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be valid against any party hereto unless made in
writing and signed by the party against whom enforcement of such waiver is
sought and then only to the extent expressly specified therein.
9.7 CONSENT TO JURISDICTION
(a) This Exchange Agreement and the duties and obligations of the
Contributing Companies hereunder and under each of the Documents referred to
herein shall be enforceable against each and all of the Contributing Companies
in the courts of the United States of America and of the State of New York. For
such purpose, each of the Contributing Companies hereby irrevocably submits to
the non-exclusive jurisdiction of such courts, and agrees that all claims in
respect of this Exchange Agreement and such other Documents may be heard and
determined in any of such courts.
(b) Each of the Contributing Companies hereby irrevocably agrees that
a final judgment of any of the courts specified above in any action or
proceeding relating to this Exchange Agreement or to any of the other Documents
referred to herein or therein shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
9.8 ARBITRATION
The parties to this Exchange Agreement agree that the exclusive remedy
for resolution of any and all disputes arising out of or related to this
Agreement, including any request for injunctive relief, shall be resolved by
confidential binding arbitration in accordance with the J.A.M.S./ENDISPUTE
Arbitration Rules and Procedures then in force, except as may be expressly
modified by this Exchange Agreement. Such arbitration shall be conducted in New
York, New York unless otherwise mutually agreed upon in writing by the parties.
The costs of arbitration, including fees and expenses of the arbitrator, shall
be shared equally by the parties unless the arbitration award provides
otherwise. Each party shall bear its own fees and costs for the preparation and
presentation of its case. The parties agree that this provision and the
Arbitrator's authority to grant relief shall be subject to the United States
Arbitration Act, 9 U.S.C. Sections 1-16 et seq. ("USAA"), the provisions of this
Exchange Agreement, and the ABA-AAA Code of Ethics for Arbitrators in Commercial
Disputes. The parties agree that in no event shall the arbitrator have the
authority to make any award that provides for punitive or exemplary damages.
The arbitrator's decision shall be final and binding. The parties hereby agree
to subject themselves to the jurisdiction of any court in the State of New York
for (i) confirmation and enforcement of any decision of the arbitrator pursuant
to this SECTION 9.8 and (ii) injunctive relief solely to compel arbitration in
accordance with this SECTION 9.8. All post-award proceedings shall be governed
by the USAA and relevant laws of the State of New York.
9.9 SEVERABILITY
If any part of any provision of this Exchange Agreement or any other
Agreement or document given pursuant to or in connection with this Exchange
Agreement shall be invalid or
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unenforceable in any respect, such part shall be ineffective to the extent of
such invalidity or unenforceability only, without in any way affecting the
remaining parts of such provision or the remaining provisions of this
Exchange Agreement.
9.10 GOVERNING LAW
This Exchange Agreement, the rights and obligations of the parties
hereto, and any claims or disputes relating thereto, shall be governed by and
construed in accordance with the laws of the State of New York (excluding the
conflicts of law rules thereof).
9.11 NOTICES
All notices, demands, requests, or other communications which may be
or are required to be given, served, or sent by any party to any other party
pursuant to this Exchange Agreement shall be in writing and shall be hand
delivered, sent by overnight courier or mailed by first-class, registered or
certified mail, return receipt requested, postage prepaid, or transmitted by
telegram, telecopy or telex, addressed as follows:
(a) If to STC:
Shared Technologies Communications Corporation
100 Constitution Plaza, Suite 1200
Hartford, Connecticut 06103
Attention: Anthony D. Autorino
with a copy (which shall not constitute notice) to:
Day, Berry & Howard LLP
CityPlace I
Hartford, Connecticut 06103
Attention: Paul F. McAlenney
(b) If to ICS:
Interactive Cable Systems, Inc.
1901 North Glenville Road, Suite 800
Richardson, Texas 75801
Attention: Kevin Schottlaender
with a copy (which shall not constitute notice) to:
Fulbright & Jaworski L.L.P.
865 South Figueroa Street, 29th Floor
Los Angeles, California 90017
Attention: Tim C. Bruinsma
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(c) If to ResNet or ResNet, Inc.:
ResNet Communications, LLC
3900 West Innovation Street
Sioux Falls, South Dakota 57107
Attention: Scott C. Petersen
with a copy (which shall not constitute notice) to:
Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, California 94120
Attention: Gregg Vignos
(d) If to Newco:
Global Interactive Technologies Corporation
1901 North Glenville Road, Suite 800
Richardson, Texas 75801
Attention: Kevin Schottlaender
with a copy (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
111 South Calvert Street, Suite 1600
Baltimore, Maryland 21202
Attention: Michael D. Colglazier
Each party may designate by notice in writing a new address to which any notice,
demand, request or communication may thereafter be so given, served or sent.
Each notice, demand, request, or communication which shall be hand delivered,
sent, mailed, telecopied or telexed in the manner described above, or which
shall be delivered to a telegraph company, shall be deemed sufficiently given,
served, sent, received or delivered for all purposes at such time as it is
delivered to the addressee (with the return receipt, the delivery receipt, or
(with respect to a telecopy or telex) the answerback being deemed conclusive,
but not exclusive, evidence of such delivery) or at such time as delivery is
refused by the addressee upon presentation.
9.12 HEADINGS
Section headings contained in this Exchange Agreement are inserted for
convenience of reference only, shall not be deemed to be a part of this Exchange
Agreement for any purpose, and shall not in any way define or affect the
meaning, construction or scope of any of the provisions hereof.
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9.13 EXECUTION IN COUNTERPARTS
To facilitate execution, this Exchange Agreement may be executed in as
many counterparts as may be required to obtain signatures from all parties. It
shall not be necessary that the signatures of, or on behalf of, each party, or
that the signatures of all persons required to bind any party, appear on each
counterpart; but it shall be sufficient that the signature of, or on behalf of,
each party, or that the signatures of the persons required to bind any party,
appear on one or more of the counterparts. All counterparts shall collectively
constitute a single Agreement. It shall not be necessary in making proof of
this Exchange Agreement to produce or account for more than a number of
counterparts containing the respective signatures of, or on behalf of, all of
the parties hereto.
9.14 LIMITATION ON BENEFITS
The covenants, undertakings and agreements set forth in this Exchange
Agreement shall be solely for the benefit of, and shall be enforceable only by,
the parties hereto and their respective successors, heirs, executors,
administrators, legal representatives and permitted assigns.
9.15 BINDING EFFECT
Subject to any provisions hereof restricting assignment, this Exchange
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors, heirs, executors, administrators, legal
representatives and assigns.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Exchange Agreement, or have caused this Exchange Agreement to be duly executed
on their behalf, as of the day and year first above written.
SHARED TECHNOLOGIES
COMMUNICATIONS CORPORATION
By: /s/ Paul C. Barry
---------------------------------------
Paul C. Barry, President
INTERACTIVE CABLE
SYSTEMS, INC.
By: /s/ Kevin Schottlaender
---------------------------------------
Kevin Schottlaender, President
RESNET COMMUNICATIONS, LLC
By: ResNet Communications, Inc.
As Managing Member
By: /s/ Scott C. Petersen
---------------------------------------
Scott C. Petersen, President
GLOBAL INTERACTIVE TECHNOLOGIES
CORPORATION
By: /s/ Kevin Schottlaender
---------------------------------------
Kevin Schottlaender, President
RESNET COMMUNICATIONS, INC.
For purposes of Sections 2.7 and 8 only:
By: /s/ Scott C. Petersen
---------------------------------------
Scott C. Petersen, President
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EXHIBIT A
TO EXCHANGE AGREEMENT
DATED AS OF NOVEMBER 30, 1998
DEFINITIONS
"ACTIVETEL" means ActiveTel L.D., Inc., a Delaware corporation.
"ADJUSTMENT DATE" has the meaning set forth in SECTION 2.6(a) hereof.
"ADJUSTMENT DATE STATEMENT" has the meaning set forth in SECTION
2.6(a) hereof.
"AFFILIATE" means: (a) with respect to a person, any member of such
person's family; (b) with respect to an entity, any officer, director,
stockholder, partner or investor of or in such entity or of or in any Affiliate
of such entity; and (c) with respect to a person or entity, any person or entity
which directly or indirectly, through one or more intermediaries, Controls, is
Controlled by, or is under common Control with such person or entity.
"AGREEMENT" means any concurrence of understanding and intention
between two or more persons (or entities) with respect to their relative rights
and/or obligations or with respect to a thing done or to be done (whether or not
conditional, executory, express, implied, in writing or meeting the requirements
of contract), including, without limitation, contracts, leases, promissory
notes, covenants, easements, rights of way, covenants, commitments, arrangements
and understandings.
"AGREEMENT REGARDING KEY MANAGEMENT" means the Agreements Regarding
Key Management by and between Newco Sub and each Contributing Company,
separately, and dated the date hereof, whereby Newco Sub agrees to permit
certain of its Key Employees (as defined therein) to provide certain services to
a Contributing Company.
"APPROVALS" has the meaning set forth in SECTION 5.22 hereof.
"ASSETS" means assets of every kind and everything that is or may be
available for the payment of liabilities (whether inchoate, tangible or
intangible), including, without limitation, real and personal property.
"BILLABLE PHONE SUBSCRIBER" means residential subscribers receiving
service on a for-charge basis at a Contributing Company's undiscounted rates
in a Relevant Property, whose account is not more than 90 days past due for a
retail contract and excluding those properties for which (a) there is no PBX
or service is not being offered or (b) there is either no contract or a
month-to-month contract where a Contributing Company has received notice that
its service to such properties is or will be terminated or such Contributing
Company has knowledge that another operator has been granted the right to
service such properties.
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<PAGE>
"BRIDGE LOANS" means the senior and junior bridge loans being obtained
by Newco and Newco Sub on the date hereof as set forth on SCHEDULE 2.7(a).
"BROADCAST STATION" has the meaning set forth in SECTION 5.30 hereof.
"CABLE SUBSCRIBERS" means individual residential subscribers to the
basic cable service tier in retail properties and fully activated units in bulk
contract properties, which comprise the Relevant Properties, and which, as of
the Closing, are active subscribers to the cable services offered by the
applicable Contributing Company, whose account is not more that 90 days past due
for a retail contract and 60 days past due for a bulk contract and excluding
those properties for which there is no contract or a month-to-month contract
where a Contributing Company has received notice that its service to such
properties is or will be terminated or such Contributing Company has knowledge
that another operator has been granted the right to service such properties.
"CABLE SYSTEMS" has the meaning set forth in SECTION 5.24 hereof.
"CAPITAL ADVANCE NOTE" has the meaning set forth in SECTION 3.2
hereof.
"CERTIFICATE OF MERGER" has the meaning set forth in SECTION 2.5
hereof.
"CLAIMS" means all demands, claims, actions or causes of action,
assessments, losses, damages (including, without limitation, diminution in
value), liabilities, costs and expenses, including, without limitation,
interest, penalties and reasonable attorneys' fees and disbursements.
"CLOSING" means the closing of the sale and purchase of the equity
interests in Newco pursuant to this Exchange Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended, and all
Laws promulgated pursuant thereto or in connection therewith.
"COMMUNICATIONS ACT" means the Communications Act of 1934, as amended,
47 U.S.C. Section 151, et seq.
"CONTINUING EMPLOYEES" has the meaning set forth in SECTION 3.3
hereof.
"CONTRIBUTED BUSINESSES" means the ICS Business, the STC Business and
the ResNet Business.
"CONTRIBUTED SUBS" means the ICS Sub, the STC Sub and the ResNet Sub.
"CONTRIBUTING COMPANIES" means STC, ICS and ResNet.
"CONTROL" means possession, directly or indirectly, of power to direct
or cause the direction of management or policies (whether through ownership of
voting securities, by Agreement or otherwise).
A-2
<PAGE>
"DEFINED BENEFIT PLAN" means a Plan that is or was a "defined benefit
plan" as such term is defined in Section 3(35) of ERISA.
"DGCL" means the Delaware General Corporation Law, as amended.
"DISCLOSURE SCHEDULE" means the disclosure schedule identified as the
Disclosure Schedule to the Exchange Agreement, which is hereby incorporated by
reference.
"DOCUMENTS" means any paper or other material (including, without
limitation, computer storage media) on which is recorded (by letters, numbers or
other marks) information that may be evidentially used, including, without
limitation, legal opinions, mortgages, indentures, notes, instruments, leases,
Agreements, insurance policies, reports, studies, financial statements
(including, without limitation, the notes thereto), other written financial
information, schedules, certificates, charts, maps, plans, photographs, letters,
memoranda and all similar materials.
"DOL" means the Department of Labor or its successors.
"ENCUMBRANCE" means any mortgage, lien, pledge, encumbrance, security
interest, deed of trust, option, encroachment, reservation, order, decree,
judgment, condition, restriction, charge, Agreement, claim or equity of any
kind.
"ENVIRONMENTAL LAWS" means any Laws (including, without limitation,
the Comprehensive Environmental Response, Compensation, and Liability Act),
including any plans, other criteria, or guidelines promulgated pursuant to such
Laws, now or hereafter in effect relating to the generation, production,
installation, use, storage, treatment, transportation, release, threatened
release, or disposal of Hazardous Materials, noise control, or the protection of
human health, safety, natural resources, animal health or welfare, or the
environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and all Laws promulgated pursuant thereto or in connection therewith.
"ESOP" means an "EMPLOYEE STOCK OWNERSHIP PLAN" as such term is
defined in Section 407(d)(6) of ERISA or Section 4975(e)(7) of the Code.
"EXHIBIT" means an exhibit attached to the Exchange Agreement.
"FCC" means the Federal Communications Commission or any successor
thereto.
"FCC APPLICATIONS" has the meaning set forth in SECTION 5.26 hereof.
"FCC LICENSES" has the meaning set forth in SECTION 5.25 hereof.
"FCC RULES" has the meaning set forth in SECTION 5.25 hereof.
"FRANCHISOR" has the meaning set forth in SECTION 5.24 hereof.
A-3
<PAGE>
"FURNISHED" means supplied, delivered or provided in any way.
"GOVERNMENTAL AGENCY" means (a) any international, foreign,
federal, state, county, local or municipal government or administrative
agency or political subdivision thereof, (b) any governmental agency,
authority, board, bureau, commission, department or instrumentality, (c) any
court or administrative tribunal, (d) any non-governmental agency, tribunal
or entity that is vested by a governmental agency with applicable
jurisdiction, or (e) any arbitration tribunal or other non-governmental
authority with applicable jurisdiction.
"HART-SCOTT-RODINO" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and all Laws promulgated pursuant thereto or in
connection therewith.
"HAZARDOUS MATERIALS" means any wastes, substances, radiation, or
materials (whether solids, liquids or gases) (i) which are hazardous, toxic,
infectious, explosive, radioactive, carcinogenic, or mutagenic; (ii) which are
or become defined as a "pollutants" "contaminants", "hazardous materials,"
"HAZARDOUS WASTES," "HAZARDOUS SUBSTANCES," "TOXIC SUBSTANCES," "RADIOACTIVE
MATERIALS," "solid wastes," or other similar designations in, or otherwise
subject to regulation under, any Environmental Laws; (iii) the presence of which
on the Real Property cause or threaten to cause a nuisance pursuant to
applicable statutory or common law upon the Real Property or to adjacent
properties; (iv) without limitation, which contain polychlorinated biphenyls
(PCBs), asbestos, lead-based paints, urea-formaldehyde foam insulation, and
petroleum or petroleum products (including, without limitation, crude oil or
any fraction thereof) or (iv) which pose a hazard to human health, safety,
natural resources, industrial hygiene, or the environment, or an impediment to
working conditions.
"ICS" means Interactive Cable Systems, Inc., a California corporation.
"ICS BUSINESS" has the meaning set forth in SECTION 2.3(a) hereof.
"ICS SUB" has the meaning set forth in SECTION 2.3(a) hereof.
"INTELLECTUAL PROPERTY" means all franchises, patents, patent
qualifications, trademarks, service marks, trade names, trade styles, brands,
private labels, copyrights, know-how, computer software, industrial designs and
drawings and general intangibles of a like nature, trade secrets, licenses, and
rights and filings with respect to the foregoing, and all reissues, extensions
and renewals thereof.
"LAWS" means all foreign, federal, state and local statutes, laws,
ordinances, regulations, rules, resolutions, orders, determinations, writs,
injunctions, awards (including, without limitation, awards of any arbitrator),
judgments and decrees applicable to the specified persons or entities and to the
businesses and Assets thereof (including, without limitation, Laws relating to
securities registration and regulation; the sale, leasing, ownership or
management of real property; employment practices, terms and conditions, and
wages and hours; building standards, land use and zoning; safety, health and
fire prevention; environmental protection, including Environmental Laws; and
Laws relating to communications and cable television regulation, including the
Communications Act).
A-4
<PAGE>
"MATERIAL ADVERSE EFFECT" means any material adverse effect on the
assets, properties, business, operations, prospects, condition (financial or
otherwise) or liabilities of any of the Contributing Companies or their
Affiliates, if any, taken as a whole.
"MERGER" has the meaning set forth in SECTION 2.5 hereof.
"MULTIEMPLOYER PLAN" means a "MULTIEMPLOYER PLAN" as such term is
defined in Section 3(37) of ERISA.
"NEWCO" means Global Interactive Technologies Corporation, a Delaware
corporation.
"NEWCO COMMON STOCK" means the common stock, par value $.01 per share,
of Newco.
"NEWCO DISCLOSURE SCHEDULE" means the disclosure schedule identified
as the Newco Disclosure Schedule to the Exchange Agreement, which is hereby
incorporated by reference.
"NEWCO SUB" means Global Interactive Communications Corporation, a
Delaware corporation.
"ORDINARY COURSE OF BUSINESS" means ordinary course of business
consistent with past practices and prudent business operations.
"OTHER ARRANGEMENT" means a benefit program or practice providing for
bonuses, incentive compensation, vacation pay, severance pay, insurance,
restricted stock, stock options, employee discounts, company cars, tuition
reimbursement or any other perquisite or benefit (including, without limitation,
any fringe benefit under Section 132 of the Code) to employees, officers or
independent contractors that is not a Plan.
"PBGC" means the Pension Benefit Guaranty Corporation or its
successor.
"PENSION PLAN" means an "EMPLOYEE PENSION BENEFIT PLAN" as such term
is defined in Section 3(2) of ERISA.
"PERSON" means any individual, partnership, joint venture,
corporation, trust, unincorporated organization, government or department or
agency of a government.
"PLAN" means any plan, program or arrangement, whether or not written,
that is or was an "EMPLOYEE BENEFIT PLAN" as such term is defined in Section
3(3) of ERISA and (a) which was or is established or maintained by a
Contributing Company; (b) to which a Contributing Company contributed or was
obligated to contribute or to fund or provide benefits; or (c) which provides or
promises benefits to any person who performs or who has performed services for a
Contributing Company and because of those services is or has been (i) a
participant therein or (ii) entitled to benefits thereunder.
A-5
<PAGE>
"PRO FORMA STATEMENT" has the meaning set forth in SECTION 2.6(a)
hereof.
"QUALIFIED PLAN" means a Pension Plan that satisfies, or is intended
by Company to satisfy, the requirements for tax qualification described in
Section 401 of the Code.
"REAL PROPERTY" means the real property owned, operated, or used by
the Contributing Companies in the Contributed Businesses as of July 31, 1998,
any additional real property owned, operated, or used since that date, and, for
purposes of SECTION 5.17, any real property formerly owned or operated.
"RELEVANT PROPERTIES" has the meaning set forth in SECTION 5.23
hereof.
"REPORTS" has the meaning set forth in SECTION 5.27 hereof.
"RESNET" means ResNet Communications, LLC, a Delaware limited
liability company.
"RESNET BUSINESS" has the meaning set forth in SECTION 2.4(a) hereof.
"RESNET SUB" has the meaning set forth in SECTION 2.4(a) hereof.
"RIGHTS OF ENTRY" means valid, lawful, binding and enforceable written
agreements in favor of a Contributing Company to provide exclusive video
programming delivery service, telephone service and/or telecommunications
service to Cable Subscribers and/or Billable Phone Subscribers.
"SECTION" means a Section (or a subsection) of this Exchange
Agreement.
"SECONDMENT AGREEMENT" means the Secondment Agreement by and between
Newco Sub and STC, dated the date hereof, regarding STC seconding certain of its
employees to Newco Sub.
SECURITIES ACT" means the Securities Act of 1933, as amended, and all
laws promulgated pursuant thereto or in connection therewith.
"SHARES" has the meaning set forth in SECTION 4.6 hereof.
"STC" means Shared Technologies Communications Corporation, a Delaware
corporation.
"STC BUSINESS" has the meaning set forth in SECTION 2.2(a) hereof.
"STC SUB" has the meaning set forth in SECTION 2.2(a) hereof.
"STOCKHOLDERS AGREEMENT" means the Stockholders Agreement in the form
attached hereto as EXHIBIT D.
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<PAGE>
"SUBSIDIARY" means a corporation or other entity of which at least 80%
of the outstanding securities or other interests having rights to vote or
otherwise exercise control are held, directly or indirectly, by a Contributing
Company.
"TAXES" means all federal, state, local and foreign taxes (including,
without limitation, income, profit, franchise, sales, use, real property,
personal property, ad valorem, excise, employment, social security and wage
withholding taxes) and installments of estimated taxes, assessments,
deficiencies, levies, imports, duties, license fees, registration fees,
withholdings, or other similar charges of every kind, character or description
imposed by any governmental or quasi-governmental authorities, and any interest,
penalties or additions to tax imposed thereon or in connection therewith.
"TAX RETURNS" means all federal, state, local, foreign and other
applicable tax returns, declarations of estimated tax reports required to be
filed by any Contributing Company or "affiliated group" within the meaning of
Section 1504(a) of the Code (without regard to extensions of time permitted by
law or otherwise).
"TITLE I PLAN" means a Plan that is subject to Title I of ERISA.
"WELFARE PLAN" means an "EMPLOYEE WELFARE BENEFIT PLAN" as such term
is defined in Section 3(1) of ERISA.
A-7
<PAGE>
EXHIBIT 99.1
STOCKHOLDERS AGREEMENT
AMONG
GLOBAL INTERACTIVE TECHNOLOGIES
CORPORATION
AND
THE STOCKHOLDERS IDENTIFIED ON
APPENDIX 1
NOVEMBER 30, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
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1. DIRECTORS AND OFFICERS OF THE COMPANY . . . . . . . . . . . . . . . . . . 1
1.1. Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. TRANSFER OF EQUITY SECURITIES . . . . . . . . . . . . . . . . . . . . . . 3
2.1. Transfers Prohibited . . . . . . . . . . . . . . . . . . . . . . . 3
2.2. Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3. Rights of First Offer. . . . . . . . . . . . . . . . . . . . . . . 3
2.3.1. Transfer Subject to Rights of Stockholders. . . . . . . . . 3
2.3.2. Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.3.3. Acceptance. . . . . . . . . . . . . . . . . . . . . . . . . 4
2.3.4. Release of Transferor from Restrictions . . . . . . . . . . 5
2.4. Tag-Along Rights . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.5. Preemptive Rights. . . . . . . . . . . . . . . . . . . . . . . . . 6
3. COVENANTS OF THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . 7
3.1. Corporate Existence. . . . . . . . . . . . . . . . . . . . . . . . 6
3.2. Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . 7
3.3. Access and Examination Rights. . . . . . . . . . . . . . . . . . . 7
3.4. Statements, Notices, and Reports . . . . . . . . . . . . . . . . . 7
3.5. Fundamental Changes. . . . . . . . . . . . . . . . . . . . . . . . 9
3.6. Transfer of Assets . . . . . . . . . . . . . . . . . . . . . . . . 9
3.7. Capitalization; Dividends. . . . . . . . . . . . . . . . . . . . . 9
3.8. Amendment of Certificate of Incorporation and Bylaws . . . . . . . 9
3.9. FCC Ownership Restrictions . . . . . . . . . . . . . . . . . . . . 10
4. REGISTRATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.1. Demand Registration Rights . . . . . . . . . . . . . . . . . . . . 10
4.1.1. Request . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.1.2. Delay by Company. . . . . . . . . . . . . . . . . . . . . . 10
4.1.3. Pro Rata Reduction. . . . . . . . . . . . . . . . . . . . . 11
4.1.4. Withdrawal. . . . . . . . . . . . . . . . . . . . . . . . . 11
4.2. Piggyback Registration Rights. . . . . . . . . . . . . . . . . . . 12
4.2.1. Request . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.2.2. Pro Rata Reduction. . . . . . . . . . . . . . . . . . . . . 12
4.3. Registration Procedures. . . . . . . . . . . . . . . . . . . . . . 12
4.4. Holdback Agreement . . . . . . . . . . . . . . . . . . . . . . . . 14
4.5. Registration Expenses. . . . . . . . . . . . . . . . . . . . . . . 14
4.5.1. Stockholder Expenses. . . . . . . . . . . . . . . . . . . . 14
4.5.2. Company Expenses. . . . . . . . . . . . . . . . . . . . . . 15
4.5.3. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.6. Subsequent Registration Statements . . . . . . . . . . . . . . . . 17
5. COVENANTS OF STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . 17
5.1. Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
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<TABLE>
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5.2. Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . 17
6. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 17
6.1. Representations and Warranties of Non-Individual Stockholders. . . 17
6.1.1. Organization and Standing . . . . . . . . . . . . . . . . . 18
6.1.2. Authorization . . . . . . . . . . . . . . . . . . . . . . . 18
6.1.3. Absence of Violation. . . . . . . . . . . . . . . . . . . . 18
6.1.4. Binding Obligation. . . . . . . . . . . . . . . . . . . . . 18
6.2. Representations and Warranties of Individual Stockholders. . . . . 18
6.2.1. Power and Authority . . . . . . . . . . . . . . . . . . . . 18
6.2.2. Absence of Violation. . . . . . . . . . . . . . . . . . . . 19
6.2.3. Binding Obligation. . . . . . . . . . . . . . . . . . . . . 19
6.3. Representations and Warranties of the Company. . . . . . . . . . . 19
6.3.1. Organization and Standing . . . . . . . . . . . . . . . . . 19
6.3.2. Authorization . . . . . . . . . . . . . . . . . . . . . . . 19
6.3.3. Absence of Violation. . . . . . . . . . . . . . . . . . . . 19
6.3.4. Binding Obligation. . . . . . . . . . . . . . . . . . . . . 20
7. EFFECTIVENESS OF AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . 20
8. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.1. Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.2. Additional Actions and Documents . . . . . . . . . . . . . . . . . 22
9.3. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.4. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.5. Entire Agreement; Amendment. . . . . . . . . . . . . . . . . . . . 23
9.6. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.7. Limitation on Benefit. . . . . . . . . . . . . . . . . . . . . . . 23
9.8. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.9. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.10. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.11. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.12. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
Appendix 1--Stockholders
Appendix 2--Initial Officers
Exhibit A--Certificate of Incorporation
Exhibit B--Bylaws
- ii -
<PAGE>
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (this "Agreement") is entered into as of
November 30, 1998 by and among Global Interactive Technologies Corporation, a
Delaware corporation (the "Company"), Shared Technologies Communications
Corporation, a Delaware corporation ("STC"), Interactive Cable Systems, Inc., a
California corporation ("ICS"), and ResNet Communications, LLC, a Delaware
limited liability company ("ResNet," and together with ICS and STC and any other
stockholders of the Company who may become parties hereto as contemplated
hereby, the "Stockholders").
WHEREAS, each of the Stockholders holds the Equity Securities (as
defined in ARTICLE 8) in the Company set forth opposite such Stockholder's name
on APPENDIX 1 hereto;
WHEREAS, the Company and the Stockholders desire to enter into this
Agreement in order to provide, among other things, for certain mutual
restrictions relating to the transfer of such Equity Securities (as hereinafter
defined) and other rights and responsibilities as set forth herein; and
WHEREAS, capitalized terms used in this Agreement shall have the
meaning ascribed to them in ARTICLE 8 hereof;
NOW, THEREFORE, for and in consideration of the foregoing and of the
mutual covenants and agreements hereinafter set forth, the parties hereto agree
as follows:
1. DIRECTORS AND OFFICERS OF THE COMPANY
1.1. BOARD OF DIRECTORS
The Company and each Stockholder (for so long as such Stockholder
owns any Equity Securities) shall take or cause to be taken all such action
within their respective power and authority (including without limitation the
voting of shares of Equity Securities held by such Stockholder or the taking of
action by consent with respect to such shares) as may be required:
1.1.1. to establish and maintain the authorized size of the
Board of Directors of the Company at seven (7) directors; to maintain the quorum
requirements for actions of the Board of Directors at four (4) directors; and to
maintain the voting requirements for actions of the Board of Directors at a
majority of directors present at a meeting at which there is a quorum, except in
respect of such matters as this Agreement, the Certificate of Incorporation, a
copy of which is attached hereto as EXHIBIT A or the Bylaws of the Company, a
copy of which are attached hereto as EXHIBIT B may impose a greater voting
requirement, and except where actions may be taken by the Board of Directors by
written consent of all directors;
1.1.2. to cause to be elected to the Board of Directors of
the Company (A) one (1) director designated by STC reasonably satisfactory to
the other Stockholders holding a
<PAGE>
majority of the Equity Securities then held by all of such Stockholders so
long as STC owns Equity Securities with a combined voting power of not less
than 10% of the aggregate voting power of all outstanding Equity Securities,
who shall initially be Tom Decker, (B) one (1) director designated by ICS
reasonably satisfactory to the other Stockholders holding a majority of the
Equity Securities then held by all of such Stockholders so long as ICS owns
Equity Securities with a combined voting power of not less than 10% of the
aggregate voting power of all outstanding Equity Securities, who shall
initially be Dennis Dolan, (C) one (1) director designated by ResNet
reasonably satisfactory to the other Stockholders holding a majority of the
Equity Securities then held by all of such Stockholders so long as ResNet
owns Equity Securities with a combined voting power of not less than 10% of
the aggregate voting power of all outstanding Equity Securities, who shall
initially be Scott Petersen, (D) the Chief Executive Officer of the Company,
who shall initially be Kevin Schottlaender, (E) the Chief Operating Officer
of the Company, who shall initially be Doug Truckenmiller, (F) the Chairman
of the Board of Directors, who shall initially be Anthony D. Autorino, and
(G) one (1) independent director reasonably satisfactory to the Stockholders
holding a majority of the Equity Securities then held by all of the
Stockholders;
1.1.3. to remove forthwith from the Board of Directors any
director when removal is requested for any reason by the Stockholder group
designating the election of such director pursuant to Section 1.1.2 above (each
a "Designating Group"), with or without cause;
1.1.4. in the case of death, resignation or other removal as
herein provided of such director, to elect another person designated by the
respective Designating Group to fill the vacancy created thereby;
1.1.5. to use its best efforts to prevent any action from
being taken by the Board of Directors of the Company during the pendency of any
vacancy due to death, resignation or removal of a director, unless the
Designating Group shall have failed for a period of five (5) days after written
notice of such vacancy to designate a replacement; and
1.1.6. The provisions of this SECTION 1.1 shall terminate
automatically and shall be of no further force and effect at such time as (i)
the Stockholders collectively own Equity Securities with a combined voting power
equal to less than 30% of the aggregate voting power of all outstanding Equity
Securities, or (ii) there are more than 500 holders of record of any class of
Equity Securities, or (iii) the Company consummates an Initial Public Offering.
1.2. OFFICERS
The persons named on APPENDIX 2 attached hereto have been elected
initially to the offices of the Company set forth opposite their names by the
Board of Directors of the Company. Additional and successor officers shall be
elected in the manner and upon the terms and conditions set forth in the Bylaws
of the Company.
- 2 -
<PAGE>
2. TRANSFER OF EQUITY SECURITIES
2.1. TRANSFERS PROHIBITED
Until the first anniversary of the date hereof, no Stockholder
shall (during his lifetime, in the case of an individual) make any transfer (as
defined in SECTION 2.2 hereof) of any Equity Securities now or hereafter held or
acquired by such Stockholder to any individual or entity without first obtaining
the prior written consent of the Stockholders holding at least 85% of the Equity
Securities then held by all Stockholders. Thereafter, any transfer of Equity
Securities by a Stockholder shall be subject to the provisions of SECTIONS 2.3
and 2.4 hereof, except as contemplated by the proviso to the first sentence of
SECTION 2.2 below. Any purported transfer contrary to the terms of this
SECTION 2.1 shall be null and void and of no force and effect.
2.2. TRANSFER
The term "transfer" as used in this ARTICLE 2 shall include a sale,
gift, mortgage, pledge, exchange, assignment or other disposition, or any
agreement to consummate any of the foregoing (whether with or without
consideration and whether voluntary or involuntary or by operation of law),
including a disposition under judicial order, legal process, execution,
attachment or enforcement of an encumbrance, but shall not include the following
(the "Permitted Transfers"): (i)(A) a pledge, grant of security interest or
other encumbrance effected in a bona fide transaction with a primary lender of a
Stockholder or (B) any exercise by such a lender of its rights thereunder,
including without limitation a foreclosure on any Equity Securities subject to
such pledge or security interest; (ii) any transfer by ICS to Nomura Holding
America Inc. or any Affiliate thereof in partial or full satisfaction of ICS'
indebtedness obligations to Nomura Holding America Inc.; (iii) any transfer by
ResNet to PRIMESTAR, Inc. ("PRIMESTAR") or LodgeNet Entertainment Corporation,
or any Affiliate of the foregoing, in consideration of PRIMESTAR's partial or
complete release, repurchase, exchange and/or satisfaction of its interest in
ResNet; or (iv) a transfer by a Stockholder of Equity Securities to one or more
of its Affiliates. In the case of any Permitted Transfers described in clauses
(i)(B), (ii), (iii) or (iv) of this SECTION 2.2, the transferees of such Equity
Securities and any subsequent transferees of such Equity Securities shall hold
the Equity Securities subject to the terms of this Agreement and, as a condition
precedent to such transfers, shall be required to execute and deliver this
Agreement; PROVIDED, HOWEVER, in the case of Permitted Transfers described in
clauses (i)(B) and (ii) of this SECTION 2.2, Equity Securities in the hands of
the transferees shall be not be subject to the provisions of SECTIONS 2.3 and
2.4 of this Agreement. Thereafter, the transferees of such Equity Securities
and any subsequent transferees of such Equity Securities shall be deemed to be
Stockholders for purposes of this Agreement to the extent the provisions hereof
are binding upon such transferees.
2.3. RIGHTS OF FIRST OFFER
2.3.1. TRANSFER SUBJECT TO RIGHTS OF STOCKHOLDERS
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In the event that a Stockholder (the "Transferor") at any time
after the first anniversary of the date hereof desires to transfer for value (a
"Sale of Shares") all or any Shares now or hereafter held or acquired by such
Transferor, before the Transferor may effect a Sale of Shares, the Transferor
first must make the offer(s) required by this SECTION 2.3 and such offer(s) must
not have been accepted as provided in this SECTION 2.3. Notwithstanding the
foregoing, the provisions of this SECTION 2.3 shall not apply to (i) a sale by a
Stockholder in one or a series of transactions of less than 5%, in the
aggregate, of the Equity Securities of the Company, (ii) a sale of all or
substantially all of the Equity Securities of the Company, or (iii) a Sale of
Shares by a Stockholder in a public offering of the Company's Equity Securities.
2.3.2. OFFER
Prior to effecting a Sale of Shares, the Transferor shall make to
the other Stockholders who then hold Equity Securities (the "Offerees") an offer
in writing to sell the Equity Securities proposed to be transferred by the
Offeror (the "Offer") setting forth the terms and conditions on which the
Transferor desires to effect the Sale of Shares.
2.3.3. ACCEPTANCE
Within thirty (30) days after the receipt of the Offer (the "Offer
Period"), each Offeree shall notify the Transferor whether or not it desires to
purchase any or all of the Equity Securities offered and how many of the Equity
Securities it desires to purchase (an "Offer Response"). In the event that the
aggregate number of Equity Securities that the Offerees who elected to make
purchases (the "Purchasing Offerees") desire to purchase is greater than the
total number of Equity Securities offered to them, such Equity Securities shall
be allocated among the Purchasing Offerees in proportion to their holdings, or
in such other proportions as they may agree; PROVIDED, HOWEVER, that any
Purchasing Offeree who elected in such Offeree's Offer Response to purchase less
than such Offeree's proportionate number of Equity Securities so determined
shall be allocated only the number of Equity Securities specified in such Offer
Response, and the balance of such Equity Securities shall be allocated among the
remaining Purchasing Offerees in proportion to their holdings (up to the number
of shares specified in each Purchasing Offeree's Offer Response), or in such
other proportions as they may agree, and this procedure shall be repeated until
all the Equity Securities offered to the Offerees have been allocated to a
Purchasing Offeree. The phrase "in proportion to their holdings" as used in
this SECTION 2.3.3 shall mean in the proportion which the number of Equity
Securities held by each Purchasing Offeree bears to the aggregate number of
Equity Securities held by all Purchasing Offerees among whom Equity Securities
are being allocated, determined as of the last day of the Offer Period. The
Transferor shall then fix a closing date for the sale of the Equity Securities
so subscribed to the Purchasing Offerees, which date shall be not less than
fifteen (15) nor more than thirty (30) days after expiration of the Offer
Period, unless any longer period is necessary to comply with any law, rule,
regulation or statute of any governmental entity, in which case the Transferor
shall use its best efforts to obtain such consents as soon as practicable,
provided that in no event shall the time period to receive such consents exceed
ninety (90) days without the consent of the non-transferring Stockholders.
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2.3.4. RELEASE OF TRANSFEROR FROM RESTRICTIONS
If the other Offerees shall fail to purchase all of the Equity
Securities offered by the Transferor pursuant to the terms of this SECTION 2.3,
the Transferor shall be free for a period of sixty (60) days to sell the offered
but unsold Equity Securities to any individual or entity, for the price and on
terms no more favorable to such transferee(s) than were available to the other
Offerees under the Offer. If the offered but unsold Equity Securities are not
so sold by the Transferor within such sixty (60)-day period, the Transferor
shall have no right to transfer of the Equity Securities without again complying
with the restrictions contained in this SECTION 2.3.
2.4. TAG-ALONG RIGHTS
In the event any Stockholder or Stockholders (the "Offeree
Stockholder(s)") receive a bona fide offer or related series of offers from any
person (the "Third Party Offeror") to purchase from the Offeree Stockholder(s)
not less than ten percent (10)%, by voting power, of the then outstanding
capital stock of the Company (a "Third Party Offer"), the Offeree Stockholder(s)
shall promptly forward a copy of such Third Party Offer to the Company and the
other Stockholders. The other Stockholders may elect to participate in the sale
to the Third Party Offeror at the same price per share and on the same terms by
delivering written notice to the Offeree Stockholder(s) within thirty (30) days
after delivery to all other Stockholders of such copy of the Third Party Offer.
If any other Stockholders elect to participate in the sale to the Third Party
Offeror, the Offeree Stockholder(s) and such other Stockholders shall each be
entitled to sell to the Third Party Offeror the number of shares of stock as to
which the Third Party Offer relates equal to the product of (i) the number of
shares of stock to which such Third Party Offer relates times (ii) the ratio of
the number of shares of stock owned by such Stockholder over the number of
shares of stock owned by all Stockholders electing to sell to the Third Party
Offeror. The Offeree Stockholder(s) shall not sell any such stock to the Third
Party Offeror unless the Third Party Offeror agrees to extend the Third Party
Offer to the other Stockholders in accordance with the foregoing and to purchase
from the Offeree Stockholder(s) and such other Stockholders their respective
proportionate shares as described above of the aggregate number of shares of
stock as to which the Third Party Offer relates. Each Stockholder participating
in the sale to the Third Party Offeror shall pay its pro rata share (based on
the number of shares to be sold) of the expenses incurred by the Offeree
Stockholder(s) in connection with such transfer and shall be obligated to join
on a pro rata basis (based on the number of shares to be sold) in any
indemnification or other obligations that the Offeree Stockholder(s) agree to
provide in connection with such transfer (other than any such obligations that
relate specifically to a particular Offeree Stockholder such as indemnification
with respect to representations and warranties given by a Stockholder regarding
such Stockholder's title to and ownership of the shares to be sold; PROVIDED
that no participating Stockholder shall be obligated in connection with the sale
to the Third Party Offeror to agree to indemnify or hold harmless the Third
Party Offeror with respect to an amount in excess of the net cash proceeds paid
to such Stockholder in connection with such sale).
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Equity Securities transferred pursuant to SECTIONS 2.3 AND 2.4
shall remain subject to the provisions of SECTIONS 1.1 and 9.1 of this
Agreement, and, prior to consummating any such transfer, the Transferor shall
require the purchaser to acknowledge in writing the purchaser's agreement to be
bound by such restrictions.
2.5. PREEMPTIVE RIGHTS
The Company hereby grants each Stockholder the right, without any
obligation, to purchase its pro rata share of all (or any part) of New
Securities (as hereinafter defined) that the Company may, from time to time,
propose to sell and issue on the same terms and conditions as each other
investor acquiring New Securities in such sale or issuance. A pro rata share,
for purposes of this preemptive right, is the portion of the New Securities
obtained by multiplying the total New Securities by a fraction, the numerator of
which is the number of shares of Common Stock then held by such Stockholder and
the number of shares of Common Stock into which any other Equity Securities then
held by such Stockholder may then be converted ("Conversion Shares"), and the
denominator of which is the total number of shares of Common Stock and
Conversion Shares held by all Stockholders. For purposes of this SECTION 2.5,
"New Securities" shall mean any common stock or preferred stock of the Company,
but shall not include securities issued: (i) in consideration of services
performed or to be performed for the Company; (ii) in consideration of the
transfer of property to the Company; (iii) as dividends on any Equity Securities
of the Company; (iv) upon the exercise of any option held by an officer,
director or employee of the Company; or (v) in connection with the merger or
consolidation of the Company.
3. COVENANTS OF THE COMPANY
The Company hereby covenants as set forth in this ARTICLE 3 with
each Stockholder, so long as such Stockholder owns Equity Securities with a
combined voting power equal to at least five percent (5%) of the aggregate
voting power of Equity Securities held by all Stockholders. The covenants set
forth in this ARTICLE 3 shall terminate at such time as (i) the Stockholders
collectively own Equity Securities with a combined voting power equal to less
than 30% of the aggregate voting power of all outstanding Equity Securities, or
(ii) there are more than 500 holders of record of any class of Equity
Securities, or (iii) the Company consummates an Initial Public Offering. Each
Stockholder (for so long as such Stockholder owns any capital stock of the
Company) shall take or cause to be taken all such action within such
Stockholder's power and authority (including without limitation the voting of
shares of Equity Securities held by such Stockholder or the taking of action by
consent with respect to such shares) as may be required to cause the Company to
comply with the covenants and agreements of the Company set forth in this
ARTICLE 3.
3.1. CORPORATE EXISTENCE
The Company shall preserve, maintain, and keep in full force and
effect the Company's corporate existence; shall preserve, maintain, and keep in
full force sand effect all
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rights, franchises, and privileges necessary or desirable in the normal
conduct of the Company's business; and shall qualify and remain qualified as
a foreign corporation in each jurisdiction in which such qualification is
necessary in view of the Company's business and operations and the ownership
of its properties.
3.2. BOOKS AND RECORDS
The Company shall keep and maintain adequate and proper books and
records of account, in which complete entries are made in accordance with
generally accepted accounting principles consistently applied and in accordance
with all applicable laws, rules, and regulations, reflecting all financial and
other transactions of the Company normally or customarily included in books and
records of account of companies engaged in the same or similar businesses and
activities as the Company. All financial statements that the Company shall
prepare and deliver pursuant to this Agreement (i) shall be true, correct, and
complete in all material respects, (ii) shall be in accordance with the books
and records of the Company in all material respects, (iii) subject, in the case
of quarterly financial statements, to year-end adjustments, which shall not, in
the aggregate, be material, shall present fairly the financial position of the
Company as of the respective dates and the results of operations and changes in
financial positions of the Company for the respective periods indicated, and
(iv) shall have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis.
3.3. ACCESS AND EXAMINATION RIGHTS
The Company shall permit each Stockholder and any agents or
representatives thereof to visit and inspect the properties of the Company, to
examine and make abstracts from any of the Company's books and records
(including agreements, licenses, and similar documents) at any reasonable time
and as often as such Stockholder or such agents or representatives may
reasonably request, and to discuss the business, operations, prospects, assets,
properties, and condition (financial or otherwise) of the Company with any of
the officers, directors, employees, agents, or representatives of the Company;
PROVIDED, HOWEVER, that such rights of access and examination shall be subject
to such security or safety rules and regulations as the Company may have in
effect from time to time that are applicable to all visitors to its facilities
and to applicable laws and regulations, including those applying to classified
material and facilities.
3.4. STATEMENTS, NOTICES, AND REPORTS
The Company shall furnish to each Stockholder:
3.4.1. as soon as available and in any event within
seventy-five (75) days after the end of each fiscal year of the Company,
a copy of the audited balance sheet of the Company as of the end of such
fiscal year and the related audited statements of income, stockholders'
equity, and changes in financial condition for such fiscal year, all prepared
in reasonable detail and in accordance with the requirements of SECTION 3.2
hereof, and certified by independent
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certified public accountants of recognized national standing as presenting
fairly the financial position of the Company and approved by the Board of
Directors of the Company; and as soon as available and in any event within
thirty (30) days after the end of each fiscal quarter of the Company (other
than the last quarter of each fiscal year), a copy of the unaudited balance
sheet of the Company as of the end of such quarter and the related unaudited
statements of income, stockholders' equity, and changes in financial
condition of the Company for the periods commencing at the end of the
previous quarter and ending at the end of such quarter and commencing at the
beginning of the fiscal year and ending at the end of such quarter, in each
case including footnotes and setting forth in comparative form the
corresponding figures for the corresponding period of the preceding fiscal
year and the figures for such period set forth in the operating plan and
budget delivered by the Company pursuant to SECTION 3.4.5 hereof, all
prepared in reasonable detail and duly certified by the chief financial
officer of the Company as having been prepared in accordance with the
requirements of SECTION 3.2 hereof;
3.4.2. promptly after the commencement thereof, notice of all
actions, suits, and proceedings before or by any court, other governmental
authority, or arbitrator affecting the Company;
3.4.3. promptly upon the occurrence of a material adverse
change in the business, operations, prospects, assets, properties, or condition
(financial or otherwise) of the Company, a statement of the chief financial
officer of the Company setting forth the details thereof and the action that the
Company proposes to take with respect thereto;
3.4.4. promptly after the sending or filing thereof, copies
of all financial statements and reports that the Company sends to its
stockholders and copies of all regular, periodic, and special reports which the
Company files with any governmental authority;
3.4.5. as soon as available and in any event no later than
thirty (30) days after the Effective Date and forty-five (45) days prior to the
first day of each fiscal year of the Company beginning after the Effective Date,
an annual operating plan and budget (including cash flow data) for the Company
for such fiscal year, each prepared in reasonable detail, as each such operating
plan and budget has been approved by the Board of Directors of the Company;
3.4.6. as soon as available and in any event no later than
ninety (90) days after the Effective Date and no later than the sixtieth day of
each fiscal year beginning after the Effective Date, an updated five-year
business plan for the Company, each prepared in reasonable detail, as each such
updated business plan has been approved by the Board of Directors of the
Company; and
3.4.7. promptly upon receipt of a reasonable good faith
request from any Stockholder therefor, such other information respecting the
business, operations, prospects, assets, properties or condition (financial or
otherwise) of the Company as such Stockholder from time to time reasonably may
request.
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3.5. FUNDAMENTAL CHANGES
Except upon the affirmative vote of Stockholders holding Equity
Securities with a combined voting power equal to at least 85% of the aggregate
voting power of Equity Securities held by all Stockholders, the Company shall
not consolidate or merge with or into any other corporation or other legal
entity, voluntarily dissolve, liquidate or wind-up its affairs, or enter into
any business substantially different from the business currently engaged in by
the Company.
3.6. TRANSFER OF ASSETS
Except upon the affirmative vote of Stockholders holding Equity
Securities with a combined voting power equal to at least 85% of the aggregate
voting power of Equity Securities held by all Stockholders, the Company shall
not sell, lease, license, assign, pledge, transfer, or otherwise dispose of any
material part of its properties or assets (including license agreements, whether
as licensor or licensee), whether now owned or hereafter acquired, except for
such disposals as are made in the ordinary course of business and for the fair
market value of the asset so disposed.
3.7. CAPITALIZATION; DIVIDENDS
Except upon the affirmative vote of Stockholders holding Equity
Securities with a combined voting power equal to at least 85% of the aggregate
voting power of Equity Securities held by all Stockholders, the Company shall
not issue any additional capital stock or any rights, options or warrants to
purchase or subscribe for such stock, or any securities convertible into such
stock, adopt any employee stock option, stock purchase, stock bonus, or similar
benefit plan, declare or pay any dividend or distribution upon any class of its
capital stock, or purchase, redeem or otherwise acquire any of its own capital
stock or indebtedness.
3.8. AMENDMENT OF CERTIFICATE OF INCORPORATION AND BYLAWS
Except upon the affirmative vote of Stockholders holding Equity
Securities with a combined voting power equal to at least 85% of the aggregate
voting power of Equity Securities held by all Stockholders, the Company shall
not amend the Certificate of Incorporation of the Company, or the Bylaws of the
Company as set forth, respectively, in EXHIBITS A and B attached hereto.
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3.9. FCC OWNERSHIP RESTRICTIONS
The Company shall not enter into any agreement or obligation of any
kind to acquire or purchase all or substantially all of the assets of any other
entity, including shares of stock or other evidences of beneficial ownership of
other entities, if the director designated by the ICS, STC or ResNet
Stockholders, as the case may be, objects to such acquisition on the basis that
its consummation could violate the "cross-ownership" rules of the FCC with
respect to any member of such director's Designating Group.
4. REGISTRATION RIGHTS
4.1. DEMAND REGISTRATION RIGHTS
4.1.1. REQUEST
Subject to the provisions of this SECTION 4.1, at any time after
the first anniversary of the Effective Time, one or more Stockholders may
request registration for sale under the Act of all or part of the Common
Stock then held by them; PROVIDED, HOWEVER, that such Stockholders must
request registration for sale of a number of shares which represents at least
twenty-five percent (25%) of the total number of shares of Common Stock held
by all Stockholders on the date of such request. (As used in SECTIONS 4.1
through 4.6 of this Agreement, the Common Stock held by a Stockholder shall
be deemed to include Conversion Shares). Within fifteen (15) days after
receipt by the Company of such request (which request shall specify the
number of shares proposed to be registered and sold), the Company shall
promptly give written notice to all other Stockholders of the proposed demand
registration, and such other Stockholders shall have the right to join in
such proposed registration and sale, upon written request to the Company
(which request shall specify the number of shares proposed to be registered
and sold) within fifteen (15) days after receipt of such notice from the
Company. The Company shall thereafter, as expeditiously as practicable, use
its best efforts (i) to file with the SEC under the Act a registration
statement on the appropriate form concerning all Common Stock specified in
the demand request and all shares with respect to which the Company has
received such written request from the other Stockholders and (ii) to cause
such registration statement to be declared effective. The Company shall use
its best efforts to cause each offering pursuant to this SECTION 4.1 to be
managed, on a firm commitment basis, by a recognized regional or national
underwriter. The Company shall not be required to comply with more than two
(2) requests by the Stockholders, collectively, for demand registrations
pursuant to this SECTION 4.1 unless pursuant to the provisions of SECTION
4.1.3 hereof a number of shares in excess of one-third of the Common Stock
requested to be included in a registration are not included, in which event
the Company shall be obligated to comply with an additional request for a
demand registration (but in no event shall the Company be obligated to comply
with more than a total of three (3) requests for a demand registration).
4.1.2. DELAY BY COMPANY
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The Company shall not be required to effect a demand registration
under the Act pursuant to SECTION 4.1.1 above if (i) the Company receives such
request for registration within one hundred twenty (120) days preceding the
anticipated effective date of a proposed underwritten public offering of
securities of the Company approved by the Company's Board of Directors prior to
the Company's receipt of such request; (ii) within twelve (12) months prior to
any such request for registration, a registration of securities of the Company
has been effected in which the Stockholders had the right to participate
pursuant to this SECTION 4.1 or SECTION 4.2 hereof; or (iii) the Board of
Directors of the Company reasonably determines in good faith that effecting such
a demand registration at such time would have a material adverse effect upon a
proposed sale of all (or substantially all) the assets of the Company, or a
merger, reorganization, recapitalization, or similar transaction materially
affecting the capital structure or equity ownership of the Company; provided,
however, that the Company may only delay a demand registration pursuant to this
SECTION 4.1.2(iii) for a period not exceeding one hundred twenty (120) days (or
until such earlier time as such transaction is consummated or no longer
proposed); and provided further, that the Company may exercise its right to
delay a demand registration only once in any twelve-month period. The Company
shall promptly notify in writing the Stockholders requesting registration of any
decision not to effect any such request for registration pursuant to this
SECTION 4.1.2, which notice shall set forth in reasonable detail the reason for
such decision and shall include an undertaking by the Company to promptly notify
such Stockholders as soon as a demand registration may be effected.
4.1.3. PRO RATA REDUCTION
If a demand registration is an underwritten registration and the
managing underwriters advise the Company and the Stockholders participating in
the demand registration in writing that in their opinion the number of shares of
Common Stock requested to be included in such registration exceeds the number
which can be sold in such offering, then the amount of such shares that may be
included in such registration shall be allocated pro rata among all of such
participating Stockholders in proportion to the number of shares of Common Stock
such Stockholders have requested to include in the demand registration.
4.1.4. WITHDRAWAL
Stockholders participating in any demand registration pursuant to
this SECTION 4.1 may withdraw at any time before a registration statement is
declared effective, in which event the Company shall withdraw such registration
statement (and the Stockholders shall not be deemed to have requested a demand
registration for purposes of SECTION 4.1.1 hereof) unless at least 100,000
shares of Common Stock of the Company owned by the Stockholders remain covered
by such registration statement. If the Company withdraws a registration
statement under this SECTION 4.1.4 in respect of a registration for which the
Company would otherwise be required to pay expenses under SECTION 4.1.2 hereof,
the Stockholders that shall have withdrawn shall be liable to the Company for
all expenses of such registration specified in SECTION 4.1.2 hereof in
proportion to the number of shares each such withdrawing Stockholder shall have
requested to be registered.
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4.2. PIGGYBACK REGISTRATION RIGHTS
4.2.1. REQUEST
If at any time or times after the Effective Time the Company
proposes to make a registered public offering (subject to SECTION 3.7 hereof)
of any of its securities under the Act (whether to be sold by it or by one or
more third parties), other than an offering pursuant to a demand registration
under SECTION 4.1.1 hereof or an offering registered on Form S-8, Form S-4,
or successor or similar forms, the Company shall, not less than forty-five
(45) days prior to the proposed filing date of the registration form, give
written notice of the proposed registration to each Stockholder, and at the
written request of a Stockholder delivered to the Company within fifteen (15)
days after the receipt of such notice, shall include in such registration and
offering, and in any underwriting of such offering, all shares of Common
Stock as may have been designated in such Stockholder's request.
Notwithstanding the foregoing, the Company shall not be required to include
in the Initial Public Offering (as defined in ARTICLE 8 hereof) more than ten
percent (10%) of the aggregate number of shares of Common Stock held by all
Stockholders. In the event that Stockholders shall have requested the
inclusion of more than ten percent (10%) of the Common Stock in the Initial
Public Offering, the Company shall include the Common Stock of the
Stockholders making such requests in proportion to the number of shares of
Common Stock so requested by each of them to be included in the proposed
registration.
4.2.2. PRO RATA REDUCTION
If a registration in which any Stockholder has the right to
participate pursuant to this SECTION 4.2 is an underwritten primary
registration on behalf of the Company, and the managing underwriters advise
the Company in writing that in their opinion the number of securities
requested to be included in such registration exceeds the number which can be
sold in such offering, the Company shall include in such registration (i)
first, the securities of the Company proposed to be sold by the Company, and
(ii) second, the Common Stock proposed to be sold by such Stockholder and by
any other Stockholders proposing to sell shares of Common Stock pursuant to
such registration, in proportion to the number of shares of Common Stock so
requested by each of them to be included. If a registration in which such
Stockholder has the right to participate pursuant to this SECTION 4.2 is an
underwritten secondary registration and the managing underwriters advise the
Company in writing that in their opinion the number of securities requested
to be included in such registration exceeds the number which can be sold in
such offering, then the Company shall include in such offering the number of
shares of Common Stock owned and proposed to be sold by such Stockholder and
by any other participants (including other Stockholders) proposing (and
entitled) to sell shares pursuant to such registration, in proportion to the
number of shares of Common Stock so requested by each of them to be included.
4.3. REGISTRATION PROCEDURES
The Company shall have no obligation to file a registration
statement pursuant to SECTION 4.1 hereof, or to include shares of Common
Stock owned by any Stockholder in a
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registration statement pursuant to SECTION 4.2 hereof, unless and until such
Stockholder shall have furnished the Company with all information and
statements about or pertaining to such Stockholder in such reasonable detail
and on such timely basis as is reasonably deemed by the Company to be
necessary or appropriate with respect to the preparation of the registration
statement. Whenever any Stockholder has requested that any shares of Common
Stock be registered pursuant to SECTIONS 4.1 or 4.2 hereof, the Company
shall, as expeditiously as reasonably possible:
4.3.1 prepare and file with the SEC a registration
statement with respect to such shares and use its best efforts to cause such
registration statement to become effective as soon as reasonably practicable
thereafter (provided that before filing a registration statement or
prospectus or any amendments or supplements thereto, the Company shall
furnish counsel for such Stockholder with copies of all such documents
proposed to be filed);
4.3.2 prepare and file with the SEC such amendments and supplements
to such registration statement and prospectus used in connection therewith as
may be necessary to keep such registration statement effective for a period of
not less than nine months or until such Stockholder has completed the
distribution described in such registration statement, whichever occurs first;
4.3.3 furnish to such Stockholder such number of copies of such
registration statement, each amendment and supplement thereto, the prospectus
included in such registration statement (including each preliminary prospectus),
and such other documents as such Stockholder may reasonably request;
4.3.4 use its best efforts to register or qualify such shares under
such other securities or blue sky laws of such jurisdictions as such Stockholder
reasonably requests (and to maintain such registrations and qualifications
effective for a period of nine months or until such Stockholder has completed
the distribution of such shares, whichever occurs first), and to do any and all
other acts and things which may be reasonably necessary or advisable to enable
such Stockholder to consummate the disposition of such shares in such
jurisdictions (provided that the Company will not be required to (i) qualify
generally to do business in any jurisdiction where it would not be required but
for this SECTION 4.3.4, (ii) subject itself to taxation in any such
jurisdiction, or (iii) file any general consent to service of process in any
such jurisdiction); PROVIDED, that notwithstanding anything to the contrary in
this Agreement with respect to the bearing of expenses, if any such jurisdiction
shall require that expenses incurred in connection with the qualification of
such shares in that jurisdiction be borne in part or full by such Stockholder,
then such Stockholder shall pay such expenses to the extent required by such
jurisdiction;
4.3.5 notify such Stockholder, at any time when a prospectus
relating to such shares of Common Stock is required to be delivered under the
Act within the period that the Company is required to keep the registration
statement effective, of the happening of any event as a result of which the
prospectus included in any such registration statement contains an untrue
statement of a material fact or omits any fact necessary to make the
statements therein not
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misleading, and prepare a supplement or amendment to such prospectus so that,
as thereafter delivered to the purchasers of such shares, such prospectus
will not contain an untrue statement of a material fact or omit to state any
fact necessary to make the statements therein not misleading; provided, that
prior to the filing of the supplement or amendment, the Company will furnish
copies of the supplement or amendment to the Stockholders, any underwriters
and such Stockholder's counsel and will not file the supplement or amendment
without the prior consent of such Stockholder's counsel, which consent shall
not be unreasonably withheld;
4.3.6 cause all such shares to be listed on securities exchanges,
if any, on which similar securities issued by the Company are then listed;
4.3.7 provide a transfer agent and registrar for all such shares
(if the Company does not already have such an agent) not later than the
effective date of such registration statement;
4.3.8 enter into and perform such customary agreements (including
an underwriting agreement in customary form if the offering is proposed to be
an underwritten offering) and take all such other actions as such Stockholder
reasonably requests (and subject to the Company's reasonable approval) in
order to expedite or facilitate the disposition of such shares; and
4.3.9 make available for inspection by such Stockholder, by any
underwriter participating in any distribution pursuant to such registration
statement, and by any attorney, accountant or other agent retained by such
Stockholder or by any such underwriter, all financial and other records,
pertinent corporate documents, and properties (other than confidential
intellectual property) of the Company and any of its subsidiaries.
4.4. HOLDBACK AGREEMENT
In the event that the Company effects an underwritten public
offering of any Equity Security, each Stockholder agrees, if requested by the
managing underwriters, not to effect any public sale or distribution,
including any sale pursuant to Rule 144 under the Act, of any Equity
Securities (except as part of such underwritten offering) during the 180-day
period commencing with the effective date of the registration statement for
the Company's Initial Public Offering and the 90-day period commencing with
the effective date of the registration statement for any subsequent public
offering, provided that all officers, directors and holders of more than 5%
or more of the Company's outstanding voting securities enter into agreements
providing for similar restrictions on sales.
4.5. REGISTRATION EXPENSES
4.5.1. STOCKHOLDER EXPENSES
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If, pursuant to SECTION 4.1 or 4.2 hereof, shares of Common Stock
owned by any Stockholder are included in a registration statement, then such
Stockholder shall pay all transfer taxes, if any, relating to the sale of its
shares, the fees and expenses of its own counsel, and its pro rata portion of
any underwriting discounts or commissions or the equivalent thereof.
4.5.2. COMPANY EXPENSES
Except for the fees and expenses specified in SECTION 4.5.1 hereof
and except as provided below in this SECTION 4.5.2, the Company shall pay all
expenses incident to the registration and to the Company's performance of or
compliance with this Agreement, including, without limitation, all registration
and filing fees, fees and expenses of compliance with securities or blue sky
laws, underwriting discounts, fees and expenses (other than such Stockholder's
pro rata portion of any underwriting discounts or commissions or the equivalent
thereof), printing expenses, messenger and delivery expenses, and fees and
expenses of counsel for the Company and all independent certified public
accountants and other persons retained by the Company. If the Company shall
previously have paid, pursuant to this SECTION 4.5.2, the expenses of a demand
registration, the Stockholders requesting registration of shares of Common Stock
in any subsequent demand registration shall pay all expenses described in this
SECTION 4.5.2 (but not the internal expenses described in the following
sentence) in proportion to the number of shares each such Stockholder requests
to be included in such registration; provided, however, that if the Company
shall previously have paid the expenses of a demand registration and pursuant to
SECTION 4.1.3 hereof, more than one-third of the shares of the Common Stock
requested to be included were not included in such registration, the Company
shall pay the expenses of any subsequent demand registration in accordance with
this SECTION 4.5.2. With respect to any registration pursuant to SECTION 4.1 or
4.2 hereof, the Company shall pay its internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties) and the expenses and fees for listing the securities
to be registered on exchanges on which similar securities issued by the Company
are then listed.
4.5.3. INDEMNITY
In the event that any shares of Common Stock owned by a Stockholder
are sold by means of a registration statement pursuant to SECTION 4.1 or 4.2
hereof, the Company agrees, to the fullest extent permitted by law, to indemnify
and hold harmless such Stockholder, each of its officers and directors, and each
person, if any, who controls or may control such Stockholder within the meaning
of the Act, from and against all demands, claims, actions or causes of action,
assessments, losses, damages, liabilities, costs, and expenses (including,
without limitation, interest, penalties, and reasonable attorneys' fees and
disbursements) (hereinafter referred to in this SECTION 4.5.3 in the singular as
a "claim" and in the plural as "claims") asserted against, resulting to, imposed
upon or incurred by such indemnified person, directly or indirectly, based upon,
arising out of or resulting from any untrue statement of a material fact
contained in the registration statement or any omission to state therein a
material fact necessary to make the statements made therein, in the light of the
circumstances under which they were made, not misleading, except insofar as such
claim is based upon, arises out of or results from information
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<PAGE>
furnished to the Company in writing by such Stockholder expressly for use in
connection with the registration statement. Such Stockholder agrees to
indemnify and hold harmless the Company, its officers and directors, and each
person, if any, who controls or may control the Company within the meaning of
the Act, from and against all claims asserted against, resulting to, imposed
upon or incurred by such indemnified person, directly or indirectly, based
upon, arising out of or resulting from any untrue statement of a material
fact contained in the registration statement or any omission to state therein
a material fact necessary in order to make the statements made therein, in
the light of the circumstances under which they were made, not misleading, to
the extent that such claim is based upon, arises out of or results from
information furnished to the Company in writing by such Stockholder expressly
for use in connection with the registration statement. The indemnifications
set forth herein shall be in addition to any liability the Company or such
Stockholder may otherwise have to the indemnified persons. Promptly after
actually receiving definitive notice of any claim in respect of which an
indemnified person may seek indemnification under this SECTION 4.5.3, such
indemnified person shall submit written notice thereof to the indemnifying
person under this SECTION 4.5.3. The failure of such indemnified person so
to notify such indemnifying person of any such claim shall not relieve the
indemnifying person from any liability it may have hereunder except to the
extent that (a) such liability was caused or increased by such failure, or
(b) the ability of the indemnifying person to reduce such liability was
materially adversely affected by such failure. In addition, the failure of
the indemnified person so to notify the indemnifying person of any such claim
shall not relieve the indemnifying person from any liability it may have
otherwise than hereunder. The indemnifying person shall have the right to
undertake, by counsel or representatives of its own choosing, the defense,
compromise or settlement (without admitting liability of the indemnified
person) of any such claim asserted, such defense, compromise or settlement to
be undertaken at the expense and risk of the indemnifying person, and the
indemnified person shall have the right to engage separate counsel, at its
own expense, whom counsel for the indemnifying person shall keep informed and
consult with in a reasonably satisfactory manner. In the event the
indemnifying person shall elect not to undertake such defense by its own
representatives, the indemnifying person shall give prompt written notice of
such election to the indemnified person, and the indemnified person shall
undertake the defense, compromise or settlement (without admitting liability
of the indemnified person) thereof on behalf of and for the account and risk
of the indemnifying person by counsel or other representatives designated by
the indemnified person and the indemnifying party shall bear the reasonable
fees, costs and expenses of such separate counsel or representatives. In the
event that any claim shall arise out of a transaction or cover any period or
periods wherein the Company and such Stockholder shall each be liable
hereunder for part of the liability or obligation arising therefrom, then the
parties shall, each choosing its own counsel and bearing its own expenses,
defend such claim, and no settlement or compromise of such claim may be made
without the joint consent or approval of the Company and such Stockholder.
Notwithstanding the foregoing, (i) no indemnifying person shall be obligated
hereunder with resect to amounts paid in settlement of any claim if such
settlement is effected without the consent of such indemnifying person (which
consent shall not be unreasonably withheld); (ii) no Stockholder shall be
liable for indemnification in an amount in excess of the net proceeds
received by such Stockholder in connection with the sale of shares hereunder,
and (iii) no Stockholder shall be liable to the Company, any underwriter, or
any officer, director, employee or controlling person of the
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<PAGE>
Company or such underwriter, with respect to any claim that would have been
remedied by delivery of a corrected prospectus that was available, but which
the Company and/or such underwriter failed to deliver prior to written
confirmation of such sale.
4.6. SUBSEQUENT REGISTRATION STATEMENTS
The Company shall not cause any new registration statements (except
registration statements on Forms S-8, S-4, or comparable forms) to become
effective during the one hundred eighty (180) days after the effective date of a
registration statement covering shares of Common Stock owned by any Stockholder.
5. COVENANTS OF STOCKHOLDERS
5.1. PUBLICITY
Each Stockholder hereby covenants and agrees that such
Stockholder shall not, directly or indirectly, make any press release or
public notice, announcement, or filing available to the public concerning the
Company, its Stockholders, or the Company's business without prior notice to
and reasonable consultation with the Company and the other Stockholders,
unless such notice and consultation is impracticable under applicable laws or
governmental regulations. It is specifically recognized that Stockholders
that are subject to the disclosure requirements of the Securities Exchange
Act of 1934 or that are making offerings or distributions subject to the
Securities Act of 1933 or other applicable securities laws governing
disclosure may, from time to time, be required to make such releases,
notices, announcements, or filings without the opportunity for prior notice
to or reasonable consultation with the Company and the other Stockholders.
5.2. CONFIDENTIALITY
Each Stockholder covenants and agrees that, unless the Company and
each other Stockholder otherwise consent in advance in writing, and except as
otherwise required by any applicable law or governmental regulation, such
Stockholder shall not, directly or indirectly, disclose to anyone other than its
counsel, accountants and other consultants, the other Stockholders or the
employees or directors of the Company any non-public information regarding this
Agreement or any of the Exhibits or Appendices hereto or the transactions
contemplated hereby or thereby or the Stockholders or business of the Company.
6. REPRESENTATIONS AND WARRANTIES
6.1. REPRESENTATIONS AND WARRANTIES OF NON-INDIVIDUAL STOCKHOLDERS
Each Stockholder that is a corporation, partnership, or limited
liability company hereby represents and warrants to the Company and to each
other Stockholder as follows:
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<PAGE>
6.1.1. ORGANIZATION AND STANDING
Such Stockholder is duly organized, validly existing, and in good
standing under the laws of the jurisdiction in which it is organized. Such
Stockholder has the corporate, partnership, or limited liability company power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby.
6.1.2. AUTHORIZATION
Such Stockholder has taken all corporate, partnership, or limited
liability company action necessary for it to enter into this Agreement and to
consummate the transactions contemplated hereby.
6.1.3. ABSENCE OF VIOLATION
Neither the execution and delivery of this Agreement, or of any
document or instrument to be executed and delivered by such Stockholder pursuant
hereto, nor the consummation of the transactions contemplated hereby and thereby
will constitute a violation of, or default under, or conflict with, or require
any consent under (other than a violation or default that has been waived or a
consent that has been obtained), any term or provision of the certificate or
articles of incorporation or bylaws, partnership agreement, or certificate or
articles of formation or limited liability company agreement of such Stockholder
or any contract, commitment, indenture, lease, or other agreement to which such
Stockholder is a party or by which such Stockholder or any of its assets is
bound.
6.1.4. BINDING OBLIGATION
This Agreement constitutes a valid and binding obligation of such
Stockholder, enforceable in accordance with its terms, except to the extent that
such enforceability may be limited by bankruptcy, insolvency, and similar laws
affecting the rights and remedies of creditors generally, and by general
principles of equity and public policy; and each document and instrument to be
executed by such Stockholder pursuant hereto, when executed and delivered in
accordance with the provisions hereof, shall be a valid and binding obligation
of such Stockholder, enforceable in accordance with its terms (with the
aforesaid exceptions).
6.2. REPRESENTATIONS AND WARRANTIES OF INDIVIDUAL STOCKHOLDERS
Each Stockholder who is an individual hereby represents and
warrants to the Company and each other Stockholder as follows:
6.2.1. POWER AND AUTHORITY
Such Stockholder has the legal capacity and all other necessary
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby.
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<PAGE>
6.2.2. ABSENCE OF VIOLATION
Neither the execution and delivery of this Agreement, or of any
document or instrument to be executed and delivered by such Stockholder
pursuant hereto, nor the consummation of the transactions contemplated hereby
and thereby will constitute a violation of, or default under, or conflict
with, or require any consent under (other than a violation or default that
has been waived or a consent that has been obtained), any term or provision
of any contract, commitment, indenture, lease, or other agreement to which
such Stockholder is a party or by which such Stockholder or any of his assets
is bound.
6.2.3. BINDING OBLIGATION
This Agreement constitutes a valid and binding obligation of such
Stockholder, enforceable in accordance with its terms, except to the extent
that such enforceability may be limited by bankruptcy, insolvency, and
similar laws affecting the rights and remedies of creditors generally, and by
general principles of equity and public policy; and each document and
instrument to be executed by such Stockholder pursuant hereto, when executed
and delivered in accordance with the provisions hereof, shall be a valid and
binding obligation of such Stockholder, enforceable in accordance with its
terms (with the aforesaid exceptions).
6.3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each Stockholder as
follows:
6.3.1. ORGANIZATION AND STANDING
The Company is a corporation duly organized, validly existing, and
in good standing under the laws of Delaware. The Company has the corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby.
6.3.2. AUTHORIZATION
The Company has taken all corporate action necessary for it to
enter into this Agreement and to consummate the transactions contemplated
hereby.
6.3.3. ABSENCE OF VIOLATION
Neither the execution and delivery of this Agreement, or of any
document or instrument to be executed and delivered by the Company pursuant
hereto, nor the consummation of the transactions contemplated hereby and thereby
will constitute a violation of, or default under, or conflict with, or require
any consent under (other than a violation or default that has been waived or a
consent that has been obtained), any term or provision of the Certificate of
Incorporation or Bylaws of the Company or any of its subsidiaries or any
contract, commitment,
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<PAGE>
indenture, lease, or other agreement to which the Company or any of its
subsidiaries is a party or by which the Company, its subsidiaries or any of
their respective assets is bound.
6.3.4. BINDING OBLIGATION
This Agreement constitutes a valid and binding obligation of the
Company, enforceable in accordance with its terms, except to the extent that
such enforceability may be limited by bankruptcy, insolvency, and similar laws
affecting the rights and remedies of creditors generally, and by general
principles of equity and public policy; and each document and instrument to be
executed by the Company pursuant hereto, when executed and delivered in
accordance with the provisions hereof, shall be a valid and binding obligation
of the Company, enforceable in accordance with its terms (with the aforesaid
exceptions).
7. EFFECTIVENESS OF AGREEMENT
This Agreement is effective for all purposes at such time as each
Stockholder and the Company shall have executed and delivered this Agreement.
8. DEFINITIONS
Capitalized terms used in this Agreement shall have the meaning
ascribed to them as follows:
"Act" shall mean the Securities Act of 1933, as amended.
"Affiliate" shall mean: (a) with respect to a natural person, any
member of such person's immediate family; (b) with respect to an entity, any
officer, director, stockholder, partner or investor of or in such entity or of
or in any Affiliate of such entity; and (c) with respect to a legal entity, any
natural person or entity which directly or indirectly, through one or more
intermediaries, Controls, is Controlled by, or is under common Control with such
person or entity.
"Agreement" shall mean this Stockholders Agreement.
"Company" shall mean Global Interactive Technologies Corporation, a
Delaware corporation.
"Common Stock" shall mean the common stock of the Company, par
value $.01 per share.
"Control" means possession, directly or indirectly, of power to
direct or cause the direction of management or policies (whether through
ownership of voting securities, by agreement, by law or otherwise).
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<PAGE>
"Conversion Shares" shall have the meaning ascribed to that term
in SECTION 2.5.
"Designating Group" shall have the meaning ascribed to that term in
SECTION 1.1.3.
"Effective Date" shall mean the date on which the Effective Time
shall occur.
"Effective Time" shall mean the time at which this Agreement shall
become effective in accordance with the provisions of ARTICLE 7.
"Equity Securities" shall mean any share of any class or series of
capital stock of the Company or any right or option to acquire any share of
capital stock of the Company and shall include the Common Stock.
"ICS" shall mean Interactive Cable Systems, Inc., a California
corporation.
"Initial Public Offering" shall mean the first public sale of any
securities of the Company pursuant to the registration provisions of ARTICLE 4
of, or the provisions of Regulation A under, the Act, with an aggregate public
offering price of at least $40,000,000.
"New Securities" shall have the meaning ascribed to that term in
SECTION 2.5.
"Offer" shall have the meaning ascribed to that term in
SECTION 2.3.2.
"Offer Period" shall have the meaning ascribed to that term in
SECTION 2.3.3.
"Offer Response" shall have the meaning ascribed to that term in
SECTION 2.3.3.
"Offeree" shall have the meaning ascribed to that term in
SECTION 2.3.2.
"Offeree Stockholder" shall have the meaning ascribed to that term
in SECTION 2.4.
"Purchasing Offeree" shall have the meaning ascribed to that term
in SECTION 2.3.3.
"ResNet" shall mean ResNet Communications, LLC, a Delaware limited
liability company.
"Sale of Shares" shall have the meaning ascribed to that term in
SECTION 2.3.1.
"STC" shall mean Shared Technologies Communications Corporation, a
Delaware corporation.
"Stockholder" shall have the meaning ascribed to that term in the
preamble hereof.
"Third Party Offer" shall have the meaning ascribed to that term in
SECTION 2.4.
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<PAGE>
"Third Party Offeror" shall have the meaning ascribed to that term
in SECTION 2.4.
"Transferor" shall have the meaning ascribed to that term in
SECTION 2.3.1.
9. MISCELLANEOUS
9.1. LEGEND
The certificates or other evidence representing the Equity Securities shall
bear a legend in substantially the following form:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933 (the "Act") or
state securities laws and cannot be offered, sold or
otherwise transferred in the absence of registration or the
availability of an exemption from registration under the Act
and regulations promulgated thereunder and applicable state
securities laws. The voting rights with respect to, and
transfer, sale or other disposition of the securities
represented by this certificate are restricted by and subject
to the provisions of a Stockholders' Agreement dated as of
November __, 1998 among the Company and certain of the
Company's Stockholders. A copy of such Stockholders'
Agreement is available for inspection at the offices of the
Company."
9.2. ADDITIONAL ACTIONS AND DOCUMENTS
Each of the parties hereto hereby agrees to take or cause to be
taken such further actions, to execute, deliver and file or cause to be
executed, delivered and filed such further documents and instruments, and to
obtain such consents, as may be necessary or as may be reasonably requested in
order to fully effectuate the purposes, terms and conditions of this Agreement.
9.3. EXPENSES
Each party shall pay his or its own expenses incident to the
preparation and negotiation of this Agreement and the transactions contemplated
hereunder, including all legal and accounting fees and disbursements, except as
expressly set forth in SECTION 4.5 hereof or in any other provision of this
Agreement.
9.4. ASSIGNMENT
Neither the Company nor any Stockholder shall assign this
Agreement, in whole or in part, whether by operation of law or otherwise,
(a) unless such person shall have obtained the
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<PAGE>
prior written consent of all the other parties, or (b) unless and to the
extent that such assignment is in accordance with the transfer provisions set
forth in SECTION 2.2 of this Agreement. Any purported assignment of this
Agreement contrary to the terms hereof shall be null and void and of no force
and effect.
9.5. ENTIRE AGREEMENT; AMENDMENT
This Agreement, including the Appendices and Exhibits hereto and
other writings referred to herein or delivered pursuant hereto, constitutes the
entire agreement among the parties hereto with respect to the transactions
contemplated herein, and it supersedes all prior oral or written agreements,
commitments or understandings with respect to the matters provided for herein.
No amendment, modification or discharge of this Agreement shall be valid or
binding unless set forth in writing and duly executed by the all of the
Stockholders.
9.6. WAIVER
No delay or failure on the part of any party hereto in exercising
any right, power or privilege under this Agreement or under any other
instruments given in connection with or pursuant to this Agreement shall impair
any such right, power or privilege or be construed as a waiver of any default or
any acquiescence therein. No single or partial exercise of any such right,
power or privilege shall preclude the further exercise of such right, power or
privilege, or the exercise of any other right, power or privilege. No waiver
shall be valid against any party hereto unless made in writing and signed by the
party against whom enforcement of such waiver is sought and then only to the
extent expressly specified therein.
9.7. LIMITATION ON BENEFIT
It is the explicit intention of the parties hereto that no person
or entity other than the parties hereto is or shall be entitled to bring any
action to enforce any provision of this Agreement against any of the parties
hereto, and the covenants, undertakings and agreements set forth in this
Agreement shall be solely for the benefit of, and shall be enforceable only by,
the parties hereto or their respective successors, heirs, executors,
administrators, legal representatives and permitted assigns.
9.8. BINDING EFFECT
This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors, heirs, executors,
administrators, legal representatives and permitted assigns.
9.9. GOVERNING LAW
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<PAGE>
This Agreement, the rights and obligations of the parties hereto,
and any claims or disputes relating thereto, shall be governed by and construed
in accordance with the laws of New York (excluding the conflicts of law rules
thereof).
9.10. NOTICES
All notices, demands, requests, or other communications which may
be or are required to be given, served, or sent by any party to any other party
pursuant to this Agreement shall be in writing and shall be hand-delivered or
mailed by first-class, registered or certified mail, return receipt requested,
postage prepaid, or transmitted by telegram, telecopy, facsimile transmission or
telex, addressed as follows:
(i) If to the Company:
Global Interactive Technologies Corporation
1901 North Glenville Road, Suite 800
Dallas, Texas 75801
Attention: Kevin Schottlaender
with a copy (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
111 South Calvert Street
Baltimore, MD 21202
Attention: Michael D. Colglazier
(ii) If to a Stockholder:
To such Stockholder's address on APPENDIX 1 hereto.
Each party may designate by notice in writing a new address to which any
notice, demand, request or communication may thereafter be so given, served
or sent. Each notice, demand, request, or communication which shall be
hand-delivered, mailed transmitted, telecopied or telexed in the manner
described above, or which shall be delivered to a telegraph company, shall be
deemed sufficiently given, served, sent, received or delivered for all
purposes at such time as it is delivered to the addressee (with the return
receipt, the delivery receipt, or the answerback being deemed conclusive, but
not exclusive, evidence of such delivery) or at such time as delivery is
refused by the addressee upon presentation.
9.11. HEADINGS
Article and Section headings contained in this Agreement are
inserted for convenience of reference only, shall not be deemed to be a part of
this Agreement for any
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<PAGE>
purpose, and shall not in any way define or affect the meaning, construction
or scope of any of the provisions hereof.
9.12. EXECUTION IN COUNTERPARTS
To facilitate execution, this Agreement may be executed in as many
counterparts as may be required; and it shall not be necessary that the
signatures of, or on behalf of, each party, or that the signatures of all
persons required to bind any party, appear on each counterpart; but it shall be
sufficient that the signature of, or on behalf of, each party appear on one or
more of the counterparts. All counterparts shall collectively constitute a
single agreement. It shall not be necessary in making proof of this Agreement
to produce or account for more than a number of counterparts containing the
respective signatures of, or on behalf of, all of the parties hereto.
IN WITNESS WHEREOF, the undersigned have duly executed this
Agreement, or have caused this Agreement to be duly executed on their behalf, as
of the day and year first hereinabove set forth.
GLOBAL INTERACTIVE TECHNOLOGIES CORPORATION
By: /s/ Kevin Schottlaender
--------------------------------------
Kevin Schottlaender
President and Chief Executive Officer
SHARED TECHNOLOGIES
COMMUNICATIONS CORPORATION
By: /s/ Paul C. Barry
--------------------------------------
Paul C. Barry, President
INTERACTIVE CABLE SYSTEMS, INC.
By: /s/ Kevin Schottlaender
--------------------------------------
Kevin Schottlaender, President
RESNET COMMUNICATIONS, LLC
By: /s/ Scott C. Petersen
--------------------------------------
Scott C. Petersen, President
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<PAGE>
APPENDIX 1
GLOBAL INTERACTIVE TECHNOLOGIES CORPORATION
LIST OF STOCKHOLDERS PARTY TO
STOCKHOLDERS AGREEMENT
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF COMMON
STOCKHOLDER STOCK OWNED
- ----------- ----------------
<S> <C>
Shared Technologies Communications Corporation 1,250
100 Constitution Plaza, Suite 1200
Hartford, Connecticut 06103
Attention: Anthony D. Autorino
Interactive Cable Systems, Inc. 2,000
1901 North Glenville Road, Suite 800
Richardson, Texas 75801
Attention: Kevin Schottlaender
ResNet Communications, LLC 1,750
3900 West Innovation Street
Sioux Falls, South Dakota 57107
Attention: Scott C. Petersen
</TABLE>
<PAGE>
APPENDIX 2
GLOBAL INTERACTIVE TECHNOLOGIES CORPORATION
LIST OF INITIAL OFFICERS
Kevin Schottlaender President and Chief Executive Officer
Douglas Truckenmiller Executive Vice President and Chief Operating
Officer
Tom Dupont Senior Vice President and Treasurer
Carl Koenig Senior Vice President and Secretary
GLOBAL INTERACTIVE COMMUNICATIONS CORPORATION
LIST OF INITIAL OFFICERS
Kevin Schottlaender President and Chief Executive Officer
Douglas Truckenmiller Executive Vice President and
Chief Operating Officer
Tom Dupont Senior Vice President and Treasurer
Carl Koenig Senior Vice President and Secretary
Tony Quattrochi Senior Vice President, Sales and Marketing
Mike Whitson Vice President, Production Operations
Dave Carlson Vice President, Engineering
Ken Kemper Vice President, Field Operations
