UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
(RULE 13D-101)
UNDER THE SECURITIES EXCHANGE ACT OF 1934
TELIGENT, INC.
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(Name of Issuer)
Class A Common Stock,
par value $.01 per share
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(Title of Class of Securities)
87959Y 10 3
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(CUSIP Number)
Myles P. Berkman
Chairman, Chief Executive Officer and President
The Associated Group, Inc.
200 Gateway Towers
Pittsburgh, Pennsylvania 15222
(412) 281-1907
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(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
With a copy to:
Scott G. Bruce, Esq.
General Counsel
The Associated Group, Inc.
Three Bala Plaza East
Suite 502
Bala Cynwyd, Pennsylvania 19004
and to:
Kent A. Coit, Esq.
Skadden, Arps, Slate, Meagher & Flom L.L.P.
One Beacon Street
Boston, Massachusetts 01890
November 26, 1997
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the
following box |_|.
Check the following box if a fee is being paid with this statement |_|.
SCHEDULE 13D
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CUSIP NO. 87959Y 10 3 |
(Class A Common Stock) |
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NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
1 The Associated Group, Inc.
51-0260858
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)|X|
(b)|_|
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
OO (See Item 3)
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e)|_|
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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NUMBER OF SOLE VOTING POWER (See Item 5)
SHARES 7
BENEFICIALLY ---------------------------------------------------------
OWNED BY SHARED VOTING POWER (See Item 5)
EACH 8
REPORTING 21,436,689
PERSON ---------------------------------------------------------
WITH SOLE DISPOSITIVE POWER (See item 5)
9
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SHARED DISPOSITIVE POWER (See Item 5)
10
21,436,689
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AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
(See Item 5)
11 21,436,689
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES*
(See Item 5)|X|
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
72.4%
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14 TYPE OF REPORTING PERSON*
HC
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
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CUSIP NO. 879594 10 3 |
(Class A Common Stock) |
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NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
1 Microwave Services, Inc.
51-0351256
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)|X|
(b)|_|
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
OO (See Item 3)
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e)|_|
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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NUMBER OF SOLE VOTING POWER (See Item 5)
SHARES 7
BENEFICIALLY ---------------------------------------------------------
OWNED BY SHARED VOTING POWER (See Item 5)
EACH 8
REPORTING 21,436,689
PERSON ---------------------------------------------------------
WITH SOLE DISPOSITIVE POWER (See item 5)
9
---------------------------------------------------------
SHARED DISPOSITIVE POWER (See Item 5)
10
21,436,689
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AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
(See Item 5)
11
21,436,689
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES*
(See Item 5)|X|
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
72.4%
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14 TYPE OF REPORTING PERSON*
CO
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
Item 1. Security and Issuer.
The title of the class of equity securities to which this
Statement relates is the Class A Common Stock, par value $.01 per share
(the "Class A Common Stock"), of Teligent, Inc., a Delaware corporation
(the "Company"). Under the Company's Certificate of Incorporation (the
"Certificate of Incorporation"), shares of the Company's Class B Common
Stock, par value $.01 per share (the "Class B Common Stock," and,
together with the Class A Common Stock, the "Common Stock"), including
the Class B Common Stock designated Series 1 (the "Series B-1 Common
Stock") beneficially owned by The Associated Group, Inc. ("Associated")
and its wholly owned subsidiary Microwave Services, Inc. ("MSI" and,
together with Associated, the "Reporting Persons") are convertible at the
option of the holder at any time on a share-for-share basis into Class A
Common Stock and convert automatically upon a transfer to any person
other than a Permitted Transferee (as defined in the Certificate of
Incorporation). The principal executive offices of the Company are
located at 8065 Leesburg Pike, Vienna, Virginia 22182.
Item 2. Identity and Background.
The Reporting Persons. This Statement is being
filed by the Reporting Persons. Each of the Reporting
Persons was incorporated in Delaware. The address of the
principal businesses and offices of each of the Reporting
Persons is 200 Gateway Towers, Pittsburgh, Pennsylvania
15222.
During the last five years, neither of the Reporting Persons
has been convicted in a criminal pro ceeding (excluding traffic
violations or simple misde meanors) or been a party to a civil proceeding
of a judicial or administrative body of competent jurisdiction as a
result of which that Reporting Person was or is sub ject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activi ties subject to, federal or state securities laws or
finding any violation with respect to such laws.
Directors and Executive Officers of the Report ing Persons.
The name, business address, present prin cipal occupation or employment
and citizenship of each director and executive officer of Associated and
MSI are set forth in Schedules I and II hereto, respectively.
To the best knowledge of each Reporting Person, during the
last five years, none of its directors or executive officers has been
convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors) or has been a party to a civil proceeding of a
judicial or administrative body of competent juris diction resulting in
his or her being subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to,
federal or state securities laws or finding any violation with respect to
such laws.
Item 3. Source and Amount of Funds or Other Consideration.
MSI acquired 21,436,689 shares of Series B-1 Common Stock
pursuant to the merger on November 26, 1997 of Teligent, L.L.C., a
Delaware limited liability company and, prior to such merger the owner of
all of the outstanding capital stock of the Company ("Teligent,
L.L.C."), with and into the Company (the "Reorganization Merger"), upon
the terms of the Agreement and Plan of Merger, dated as of October 6,
1997, by and between the Company and Teligent, L.L.C.
As a result of the Reorganization Merger, all of Teligent,
L.L.C.'s member interests were converted into and became shares of Common
Stock of the Company, as follows: (i) the interest of MSI was converted
into 21,436,689 shares of Series B-1 Common Stock; (ii) the interest of
Telcom-DTS Investors, L.L.C. a Delaware limited liability company (the
"Telcom Stockholder"), was converted into 17,206,210 shares of Class B
Common Stock designated Series 2 ("Series B-2 Common Stock"); (iii) the
interest of NTTA&T Investment Inc., a Delaware corporation and an
indirect wholly owned subsidiary of Nippon Telegraph and Telephone
Corporation ("NTTA&T"), was converted into 5,783,400 shares of Class B
Common Stock designated Series 3 ("Series B-3 Common Stock"), including
3,470,040 shares acquired by purchase from the Company immediately after
the Reorganization Merger; and (iv) the interest of Lynn Forester
("Forester") was converted into 1,831,410 shares of Class A Common Stock.
Item 4. Purpose of Transaction.
Reference is made to the discussion in Item 3 hereof, which
is incorporated herein by reference, for a description of the
Reorganization Merger. The Reorgani zation Merger was effected in
connection with and immediately prior to the consummation on November
26, 1997 of the Company's initial public offering of its Class A Common
Stock (the "IPO").
The Reporting Persons have no current plans to dispose of
shares of Common Stock. However, subject to their obligations under the
agreements described under Item 6 below, they may in the future dispose
of shares of Common Stock in the market, in privately negotiated
transactions or otherwise. In addition, while they have no current plans
to do so, the Reporting Persons reserve the right to acquire additional
shares of Common Stock, through market purchases, in privately negotiated
trans actions or otherwise, including pursuant to the exercise of their
rights under the agreements described under Item 6 below.
Under the Certificate of Incorporation, MSI, as the record
holder of all outstanding shares of Series B-1 Common Stock which
constitutes more than 20% of the aggregate number of issued and
outstanding shares of Common Stock, is entitled to elect a majority of
the Company's Board of Directors, which is currently comprised of seven
directors. The Reporting Persons understand that the Company intends to
expand its Board of Directors to the extent necessary under the rules of
the Nasdaq National Market or otherwise to maintain the requisite number
of directors who are not officers of or perform other duties for the
Company (other than serving as such directors). Upon any such expansion,
as contemplated by the Certificate of Incorporation, the Company's Board
of Directors will be further increased and additional individuals
elected as directors by MSI as the holder of Series B-1 Common Stock so
that its designees will continue to constitute a majority of the
Company's Board of Directors. See the discussion under Item 6.
Item 5. Interest in Securities of the Issuer.
(a) As of the close of business on December 8, 1997, by
virtue of their beneficial ownership of 21,436,689 shares of Series B-1
Common Stock, the Report ing Persons beneficially owned 21,436,689 shares
of Class A Common Stock. Based on information set forth in the Company's
Registration Statement on Form S-1 with respect to the IPO which was
declared effective on November 21, 1997 (the "Registration Statement"),
such 21,436,689 shares of Series B-1 Common Stock (assuming the conver
sion of all such 21,436,689 shares of Series B-1 Common Stock into Class
A Common Stock) represented approxi mately 72.4% of the total number of
shares of Class A Common Stock outstanding on November 26, 1997
immediately after consummation of the IPO (plus the 21,436,689 shares of
Class A Common Stock which would be outstanding and beneficially owned by
the Reporting Persons upon such conversion and assuming that no other
shares of Class B Common Stock have been converted to Class A Common
Stock).
As a director and Chairman, President, Chief Executive
Officer and Treasurer of Associated and Chair man, Chief Executive
Officer and Treasurer of MSI, Myles P. Berkman may be deemed to be the
beneficial owner of the shares of Series B-1 Common Stock (and thus of
the shares of Class A Common Stock into which such shares of Series B-1
Common Stock are convertible) beneficially owned by the Reporting
Persons. Neither the filing of this Statement nor any of its contents
shall be deemed to constitute an admission that Myles P. Berkman is, for
purposes of Section 13(d) of the Exchange Act or any other purpose, the
beneficial owner of shares of Class A Common Stock beneficially owned by
the Reporting Persons, and Mr. Berkman expressly disclaims such
beneficial ownership.
David J. Berkman, a director and Executive Vice President of
each of the Reporting Persons and a director of the Company, beneficially
owns 120,968 shares of Class A Common Stock which are subject to options
exercisable within 60 days under the Company's 1997 Stock Incentive Plan
(the "1997 Plan") held by Mr. Berkman as a result of the conversion, in
connection with the Reorganization Merger and the IPO, of Appreciation
Units with respect to Teligent, L.L.C. into stock options (the
"Conversion"). Based on information set forth in the Registration Statement,
such 120,968 shares of Class A Common Stock repre sented approximately 1.5%
of the total number of outstanding shares of Class A Common Stock
outstanding on November 26, 1997 immediately after consummation of the
IPO. As a director and Executive Vice President of each of the Reporting
Persons, David J. Berkman may be deemed to be the beneficial owner of the
shares of Series B-1 Common Stock (and thus of the shares of Class A
Common Stock into which such shares of Series B-1 Common Stock are
convertible) beneficially owned by the Reporting Persons. Neither the
filing of this Statement nor any of its contents shall be deemed to
constitute an admission that David J. Berkman is, for purposes of Section
13(d) of the Exchange Act or any other purpose, the beneficial owner of
shares of Class A Common Stock beneficially owned by the Reporting
Persons, and Mr. Berkman expressly disclaims such beneficial ownership.
William H. Berkman, the President of MSI and a director of
the Company, beneficially owns 120,968 shares of Class A Common Stock
which are subject to options exercisable within 60 days under the 1997
Plan held by Mr. Berkman as a result of the Conversion. Based on
information set forth in the Registration Statement, such 120,968 shares
of Class A Common Stock represented ap proximately 1.5% of the total
number of outstanding shares of Class A Common Stock outstanding on
November 26, 1997 immediately after consummation of the IPO. Neither the
filing of this Statement, nor any of its contents shall be deemed to
constitute an admission that William H. Berkman is, for purposes of
Section 13(d) of the Exchange Act or any other purpose, the beneficial
owner of shares of Class A Common Stock beneficially owned by MSI, and
Mr. Berkman expressly disclaims such beneficial ownership.
Pursuant to Rule 13(d)(5)(b)(1) of the General Rules and
Regulations of the Securities Exchange Act of 1934 (the "Exchange Act"),
the Reporting Persons may, by virtue of certain provisions of certain of
the agreements described under Item 6, be deemed to comprise a "group"
with some or all of the parties to such agreements. Based on information
set forth in the Registration Statement, on November 26, 1997,
immediately after consummation of the IPO, (i) the group which, by
virtue of certain provisions of the Members Agreement (as defined
under Item 6 below), may be deemed to be comprised of the Reporting
Persons, the Telcom Stockholder and certain other parties to the Members
Agreement, is deemed, pursuant to Rule 13(d)(5)(b)(1) under the Exchange
Act, to beneficially own an aggregate of 38,642,899 shares of Class B
Common Stock (and thus of the same number of shares of Class A Common
Stock into which such shares of Class B Common Stock are convertible),
representing approximately 82.6% of the total number of shares of Class A
Common Stock outstanding as of such time (plus the 38,642,899 shares of
Class A Common Stock which would be outstanding and deemed to be
beneficially owned by such group upon such conversion and assuming that
no other shares of Class B Common Stock have been converted into Class A
Common Stock) and (ii) the group which, by virtue of certain provisions
of the Stockholders Agree ment (as defined under Item 6 below), may be
deemed to be comprised of the Reporting Persons, the Telcom Stock holder
and NTTA&T, is deemed, pursuant to Rule 13(d)(5)(b)(1) under the Exchange
Act, to beneficially own an aggregate of 44,426,299 shares of Class B
Common Stock (and thus of the same number of shares of Class A Common
Stock into which such shares of Class B Common Stock are convertible),
representing approximately 84.5% of the total number of shares of Class A
Common Stock outstanding as of such time (plus the 44,426,299 shares of
Class A Common Stock which would be outstanding and deemed to be
beneficially owned by such group upon such conversion). Neither the
filing of this Statement nor any of its contents shall be deemed to
constitute an admission that either of the Reporting Persons is, for
purposes of Section 13(d) of the Exchange Act or any other purpose, the
beneficial owner of shares of Common Stock beneficially owned or deemed
to be beneficially owned by any person or entity who or which may be
deemed to constitute a group with the Reporting Persons or by any such
group, and each of the Reporting Persons expressly disclaims such
beneficial ownership.
(b) The Reporting Persons share the power to vote or direct
the vote and to dispose and direct the disposition of the 21,436,689
shares of Series B-1 Common Stock (and thus of the same number of shares
of Class A Common Stock into which such shares of Series B-1 Common Stock
are convertible) beneficially owned by them. However, by virtue of its
ownership of all of the outstanding capital stock of MSI, Associated has
the power to cause MSI to vote, and to dispose or direct the disposition of,
suchshares of Series B-1 Common Stock (and thus of the shares of Class A
Common Stock into which such shares of Series B-1 Common Stock are
convertible) at the times and in the manner determined by Associated.
Each of David J. Berkman and William H. Berkman have the sole power to
vote and dispose of the 120,968 shares of Class A Common Stock which
would be issuable to each of them upon the exercise by them of options
under the 1997 Plan which are exercisable within 60 days as described
above.
(c) Except as described above under Item 3 and in this Item
5, neither of the Reporting Persons, nor, to the best knowledge of each
Reporting Person, any of its directors or executive officers, has
effected any trans action in shares of Common Stock during the past 60
days.
(d) None.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Rela
tionships With Respect to Securities of the Issuer.
MEMBERS AGREEMENT
In connection with the IPO, the Company, MSI, Associated,
Digital Services Corporation (an original member of Teligent, L.L.C. and
an affiliate of the Telcom Stockholder) ("DSC"), the Telcom Stockholder
and the owners of the Telcom Stockholder entered into an agreement (the
"Members Agreement") whereby the Company granted to DSC certain demand
and "piggyback" registration rights with respect to Common Stock held by
DSC at the time of consummation of the IPO. In addition, in the Members
Agreement, Associated and MSI agreed with DSC that upon a "Change in
Control" (as defined in the Members Agreement) of Associated or MSI, (i)
Associated will immediately convert, and cause its controlled affiliates
to immediately convert, all of the Series B-1 Common Stock owned by them
into Class A Common Stock such that, under the Cer tificate of
Incorporation as then in effect, Associated, alone or together with its
controlled affiliates, will no longer have the right to elect a majority
of the Company's Board of Directors, (ii) MSI will cause its designees on
the Company's Board of Directors to cause the Company's Board of Directors
to convene a meeting of the Company's stockholders and (iii) promptly
after taking the action described in (ii) immediately above, MSI will
cause such number of its designees on the Company's Board of Directors
to resign so that such designees no longer constitute a majority thereof.
Under the Members Agreement, in order for a "Change in Control" of
Associated or MSI to occur, in addition to certain changes in equity
ownership or board composition of Associated or MSI as set forth
in the Members Agreement, the Telcom Stockholder and its affiliates must
own shares of Series B-2 Common Stock represent ing at least 10% of all
then outstanding shares of Common Stock and must continue to be
controlled by Rajendra Singh, Neera Singh, any estates or trusts of which
such persons are executors, trustees or beneficiaries and any entities
controlled by such persons. In the Members Agreement, each of Associated
and MSI also agreed with DSC that it will not transfer control of any
entity which holds Class B Common Stock to any third party (other than an
affiliate of Associated, provided such affiliate agrees to be bound by
the provisions of the Members Agreement applicable to MSI) without the
consent of DSC unless, concurrently with or prior to such transfer,
Associated and MSI take the actions described in clauses (i) through
(iii) above. In addition, in the Members Agreement, MSI and the Telcom
Stockholder have each granted to the other rights of first refusal and
co-sale rights with respect to any sale or transfer by the other (other
than to an affiliate or pursuant to a pledge arrangement, and excluding
any public sale or distribution whether pursuant to a registration
statement, Rule 144 or otherwise) of shares of Common Stock (other than
Common Stock acquired in public market transactions). Pursuant to the
Members Agreement, Associated and the owners of the Telcom Stockholder
have also each granted to the other rights of first re fusal and co-sale
rights, with the same exceptions, with respect to any sale or transfer by
the other of shares of MSI, or member or other equity interests of the
Telcom Stockholder, but only if shares of Common Stock constitute all or
substantially all of the assets of MSI or the Telcom Stockholder,
respectively. The Members Agreement is included as Exhibit 1 to this
Statement, and the foregoing description of the Members Agreement is
qualified in its entirety by reference to such Exhibit, which is hereby
incorporated herein by reference.
STOCKHOLDERS AGREEMENT
Immediately prior to consummation of the IPO, MSI, the Telcom
Stockholder, NTTA&T (collectively, the "Stockholder Parties") and the
Company entered into a Stockholders Agreement (the "Stockholders
Agreement"). Pursuant to the Stockholders Agreement, NTTA&T and the
Telcom Stockholder have certain rights and obligations with respect to
their ownership interest in, and the governance of, the Company,
including, so long as the Telcom Stockholder and NTTA&T, respectively,
have the right to elect a member of the Company's Board, the right of
such respective directors to approve, among other matters, any amendment
to the Certificate of Incorporation which mate rially and adversely
affects the rights of NTTA&T or the Telcom Stockholder, respectively, in
a discriminatory manner vis-a-vis one or more of the other Stockholder
Parties. The Stockholders Agreement also provides that so long as the
Telcom Stockholder and NTTA&T, respectively, have the right to elect a
member of the Company's Board of Directors, the Company will afford to
representatives of the Telcom Stockholder and NTTA&T, respectively,
certain business consultation rights, including with respect to any
action (each a "Consultation Event") which (i) materi ally changes the
fundamental character of the Company's business, (ii) replaces the
Company's Chief Executive Officer or Chief Operating Officer, (iii)
involves the sale or pledge by the Company of a substantial portion of
its assets or any acquisition, divestiture or merger of the Company with
another entity or any joint venture out side the ordinary course of the
Company's business or (iv) involves the issuance by the Company of shares
of Common Stock or preferred stock to any telecommunications car rier.
With respect to any Consultation Event, the Company will be required to
provide reasonable advance notice to NTTA&T and the Telcom Stockholder
and, in the case of the Consultation Event referred to in clause (iv) of
the imme diately preceding sentence, to give due consideration to their
objections. In the Stockholders Agreement each of the parties thereto has
agreed to vote, or act by written consent with respect to, all of their
respective shares of Common Stock in favor of the election of the
Company's Chief Executive Officer as a member of the Company's Board of
Directors.
The Stockholders Agreement also provides, in effect, that
until November 13, 1999, each Stockholder Party will hold at least one-half
of the shares of Common Stock held by such Stockholder Party as of November
26, 1997 (after giving effect to the Reorganization Merger as described under
Item 3 above), except that such require ment will lapse and be without further
effect automatically as to NTTA&T and the Telcom Stockholder, respectively,
if a Consultation Event occurs even though NTTA&T or the Telcom Stockholder,
respectively, has objected thereto. Under the Stockholders Agreement, if
such requirement so lapses with respect to the Telcom Stockholder and, at
the time of such lapsing, MSI is not entitled, pursuant to the Certificate of
Incorporation, to elect a majority of the members of the Company's Board,
then such requirement shall also lapse and be without further effect with
respect to MSI. In addition, in the Stockholders Agreement, MSI and the
Telcom Stockholder have each granted to NTTA&T co-sale rights with
respect to any sale or transfer by either of them (other than to an
affiliate or pursuant to a pledge arrangement, and excluding any public
sale or distribution whether pursuant to a regis tration statement, Rule
144 or otherwise) of shares of Common Stock (other than Common Stock
acquired in public market transactions).
Under the Stockholders Agreement, if the Company is required
by a change in law or other circumstance to reduce the level of foreign
ownership of the Company and the Company is unable to obtain a waiver of
such requirement, the Company will have the right, and will be re
quired, at NTTA&T's election, to refuse to sell stock in the Company to
any Foreign Owner (as defined in the Stock holders Agreement) if such a
transaction would adversely impact NTTA&T's ability to hold its then
existing share ownership in the Company, and, in addition, the Company
will have the right, and will be required, at the election of any
Stockholder Party, to repurchase for cash (to the extent permitted by
applicable Delaware corporation law) shares first from all other Foreign
Owners other than the Stockholder Parties, if applicable, and thereafter
from each of the Stockholder Parties, on a pro rata basis (based on the
percentage of foreign ownership attributable to each Stockholder Party)
at the fair market value thereof based on the Company's then public
trading value.
The Stockholders Agreement is included as Exhibit 2 to this
Statement, and the foregoing description of the Stockholders Agreement is
qualified in its entirety by reference to such Exhibit, which is hereby
incorporated herein by reference.
FIRSTMARK AGREEMENT
Pursuant to a Stock Contribution Agreement dated as of March
10, 1997 (the "FirstMark Agreement") by and between Associated
Communications, L.L.C. (the predecessor to Teligent, L.L.C.), FirstMark
Communications, Inc. ("FirstMark"), Forester, and, for certain limited
purposes MSI and DSC, Forester was granted certain limited "piggy back"
and demand registration rights with respect to the shares of Class A
Common Stock into which Forester's member interest in Teligent L.L.C.
was converted pursuant to the Reorganization Merger ("Forester
Registrable Securities"). In addition, in the FirstMark Agreement,
Forester granted to MSI and DSC a right of first refusal with respect to
any sale or other disposition by her of any eq uity interest in the
Company, other than any sale by her in the public market of Forester
Registrable Securities registered under the Securities Act of 1933, as
amended (the "Securities Act") or pursuant to Rule 144 under the
Securities Act. The FirstMark Agreement is included as Exhibit 3 to this
Statement, and the foregoing description of the FirstMark Agreement is
qualified in its entirety by reference to such Exhibit, which is hereby
incorporated herein by reference.
MANDL EMPLOYMENT AGREEMENT
Under the Company's Employment Agreement with Alex J. Mandl,
the Company's Chairman and Chief Executive Officer, which took effect on
September 1, 1996 (the "Mandl Employment Agreement") and to which MSI and
DSC are parties for certain limited purposes, the Company has granted Mr.
Mandl certain limited "piggyback" and demand registration rights with
respect to the shares of Class A Common Stock which are subject to stock
options under the 1997 Plan as a result of the conversion, in connection
with the Reorganization Merger and the IPO, of the Company Appreciation
Rights ("CARs") with respect to Teligent, L.L.C. granted pursuant to the
Mandl Employment Agreement into stock options. The Mandl Employment
Agreement also provides that if either MSI or DSC sells any of their
respective interests in the Company to a third party, such seller shall
be obligated to require the purchaser of such interest to purchase, and
may require Mr. Mandl to sell to such third party, a proportionate percentage
of the vested equity interest represented by Mr. Mandl's CARs (which have been
converted into stock options as described above) valued as of the date of
such purchase, at the same price paid by the third party for the interest of
such seller. The Mandl Employment Agreement also provides for a right of first
refusal on the part of MSI and DSC with respect to the disposition by Mr.
Mandl of an equity interest in the Company. The Mandl Employment
Agreement is included as Exhibit 4 to this Statement, and the foregoing
descrip tion of the Mandl Employment Agreement is qualified in its
entirety by reference to such Exhibit, which is hereby incorporated
herein by reference.
UNDERWRITER LOCK-UP AGREEMENTS
In connection with the IPO, each of Associated, MSI, Myles P.
Berkman, David J. Berkman, William H. Berkman and Scott G. Bruce,
Secretary of the Company, entered into a lock-up agreement (each a
"Lock-Up Agree ment") with Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith, Incorporated ("Merrill Lynch") and the other underwriters
for the IPO, whereby each agreed not to, without the prior written
consent of Merrill Lynch, directly or indirectly offer, sell, contract to
sell, sell any option or contract to purchase, purchase any option or
contract to sell, grant any option, right or warrant for the sale of, or
otherwise dispose of or transfer any shares of Common Stock or securities
of the Company convertible into or exchangeable or exercisable for
Common Stock, or file any registration statement under the Secu rities
Act of 1933, as amended, with respect to any of the foregoing, before the
expiration of the 180-day period commencing on November 20, 1997, subject
to certain exceptions. The form of Lock-Up Agreement is included as Ex
hibit 5 to this Statement, and the foregoing description of the Lock-Up
Agreement is qualified in its entirety by reference to such Exhibit,
which is hereby incorporated herein by reference.
Except as described in this Statement, neither of the
Reporting Persons nor, to the best knowledge of each Reporting Person,
any of its directors or executive officers has any contracts,
arrangements, understandings or relationships with respect to any
securities of the Company.
Item 7. Material to be Filed as Exhibits.
Exhibit 1: Agreement dated September 29,
1997, among Teligent, L.L.C.,
Digital Services Corporation,
Telcom-DTS Investors, L.L.C.,
Microwave Services, Inc., The
Associated Group, Inc. and certain
other parties
Exhibit 2: Stockholders Agreement dated as
of November 26, 1997 by and among
Teligent, Inc., Microwave Services, Inc.,
Telcom-DTS Investors, L.L.C. and NTTA&T
Investment Inc.
Exhibit 3: Stock Contribution Agreement
dated as of March 10, 1997 among
Associated Communications,
L.L.C., First Mark Communications,
Inc. and Lynn Forester
Exhibit 4: Employment Agreement dated August
19, 1996, between Associated Communications,
L.L.C. and Alex J. Mandl
Exhibit 5: Form of Underwriter Lock-Up
Agreement
Schedule I
DIRECTORS AND EXECUTIVE OFFICERS OF
THE ASSOCIATED GROUP, INC.
The names, business addresses and present principal
occupation or employment of the directors and executive officers of
Associated are set forth below. All of the persons listed below are
citizens of the United States.
DIRECTORS
(INCLUDING EXECUTIVE OFFICERS WHO ARE DIRECTORS)
Present Principal
Name Occupation or Employment
---- ------------------------
David J. Berkman Executive Vice President,
The Associated Group, Inc.
3 Bala Plaza East, Suite 502
Bala Cynwyd, PA 19004
Myles P. Berkman Chairman, President, Chief
Executive Officer and Treasurer,
The Associated Group, Inc.
200 Gateway Towers
Pittsburgh, PA 15222
Donald H. Jones President, DHJ Enterprises,
Inc., a firm engaged in the
development of new business
enterprises and investment
activities
Suite 103
Gateway Towers
Pittsburgh, PA 15222
Joseph A. Katarincic Partner, Katarincic & Salmon,
a law firm
CNG Tower
26th Floor
Pittsburgh, PA 15222
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Present Principal
Name Occupation or Employment
---- ------------------------
Richard I. Goldstein Vice President,
The Associated Group, Inc.
3 Bala Plaza East, Suite 502
Bala Cynwyd, PA 19004
Scott G. Bruce General Counsel and Secretary,
The Associated Group, Inc.
3 Bala Plaza East, Suite 502
Bala Cynwyd, PA 19004
Keith C. Hartman Controller and Assistant
Secretary,
The Associated Group, Inc.
200 Gateway Towers
Pittsburgh, PA 15222
Schedule II
DIRECTORS AND EXECUTIVE OFFICERS OF
MICROWAVE SERVICES, INC.
The names, business addresses and present principal
occupation or employment of the directors and executive officers of MSI
are set forth below. All of the persons listed below are citizens of the
United States.
DIRECTORS
(INCLUDING EXECUTIVE OFFICERS WHO ARE DIRECTORS)
Name and Present Principal
Position with MSI Occupation or Employment
----------------- ------------------------
David J. Berkman Executive Vice President,
Executive Vice President The Associated Group, Inc.
3 Bala Plaza East, Suite 502
Bala Cynwyd, PA 19004
Myles P. Berkman Chairman, Chief Executive
Chairman, Chief Executive Officer and Treasurer,
Officer and Treasurer The Associated Group, Inc.
200 Gateway Towers
Pittsburgh, PA 15222
Donald H. Jones President, DHJ Enterprises,
Director Inc., a firm engaged in the
development of new business
enterprises and investment
activities
Suite 103
Gateway Towers
Pittsburgh, PA 15222
Joseph A. Katarincic Partner, Katarincic & Salmon,
Director a law firm
CNG Tower
26th Floor
Pittsburgh, PA 15222
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Name and Present Principal
Position with MSI Occupation or Employment
----------------- ------------------------
William H. Berkman President, Microwave Services, Inc.
President c/o The Associated Group, Inc.
650 Madison Avenue, 25th Floor
New York, NY 10022
Richard I. Goldstein Vice President,
Vice President The Associated Group, Inc.
3 Bala Plaza East, Suite 502
Bala Cynwyd, PA 19004
Scott G. Bruce General Counsel and Secretary,
General Counsel and The Associated Group, Inc.
Secretary 3 Bala Plaza East, Suite 502
Bala Cynwyd, PA 19004
Keith C. Hartman Controller and Assistant
Controller and Assistant Secretary,
Secretary The Associated Group, Inc.
200 Gateway Towers
Pittsburgh, PA 15222
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is
true, complete and correct.
THE ASSOCIATED GROUP, INC.
By /s/ Myles P. Berkman
Myles P. Berkman
President and Chief
Executive Officer
MICROWAVE SERVICES, INC.
By /s/ Myles P. Berkman
Myles P. Berkman
Chief Executive Officer
DATE: December 8, 1997
EXHIBIT INDEX
Sequentially
Exhibit Description Numbered Page
1 Agreement dated September 29, 1997,
among Teligent, L.L.C., Digital
Services Corporation, Telcom-DTS
Investors, L.L.C., Microwave
Services, Inc., The Associates
Group, Inc. and certain other
parties
2 Stockholders Agreement dated as of
November 26, 1997 by and among
Teligent, Inc., Microwave Services,
Inc., Telcom-DTS Investors, L.L.C.
and NTTA&T Investment Inc.
3 Stock Contribution Agreement dated
as of March 10, 1997 among
Associated Communications, L.L.C.,
First Mark Communications, Inc. and
Lynn Forester
4 Employment Agreement dated August
19, 1996, between Associated Communi
cations, L.L.C. and Alex J. Mandl
5 Form of Underwriter Lock-Up Agreement
EXHIBIT 1
AGREEMENT
AGREEMENT dated as of September 29, 1997, among Teligent, L.L.C.,
a Delaware limited liability company (together with any corporation
resulting from, or which is the successor to Teligent, L.L.C. upon, the
conversion of Teligent, L.L.C. to a corporation, the "Company"), Digital
Services Corporation, a Virginia corporation and a Member of the Company
("DSC"), Telcom-DTS Investors, L.L.C., a Delaware limited liability company
and an Affiliate of DSC ("Telcom"), the members of Telcom, all of whom are
listed on Schedule I hereto (collectively, the "Telcom Members"), Microwave
Services, Inc., a Delaware corporation and a Member of the Company ("MSI"),
and The Associated Group, Inc., a Delaware corporation and the owner of all
of the outstanding capital stock of MSI ("AGI").
The Company has substantially negotiated a Securities Purchase
Agreement to be entered into by the Company, DSC and MSI with Nippon
Telegraph and Telephone Corporation (the "Investor"), providing for the
purchase by the Investor of a Member Interest (the "Securities Purchase
Agreement"), and for the execution and delivery by MSI, DSC and the
Investor at the First Closing under the Securities Purchase Agreement (the
"First Closing") of an Amended and Restated Limited Liability Company
Agreement of the Company (the "Amended LLC Agreement").
In connection with entering into the Securities Purchase Agreement
and the Amended LLC Agreement and the consummation of the transactions
contemplated thereby, the parties desire to provide for certain rights and
obligations of DSC, Telcom, MSI and AGI relating to their ownership
interests in the Company.
In consideration of the foregoing, and the agreements set forth
herein, and for other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Registration Rights. The Company agrees that DSC will have the
registration rights set forth in this Section 1 with respect to equity
interests or securities of the Company held by DSC at the time of
consummation of the Company's initial public offering of equity securities
("Registrable Securities").
(a) "Piggyback" Registration Rights. (i) After the consummation by
the Company of an initial public offering of equity securities (the "IPO"),
if the Company at any time proposes to register under the Securities Act of
1933, as amended (the "Securities Act") (other than a registration on Form
S-4 or S-8 or any successor or similar forms thereto and other than a
registration pursuant to paragraph 1(b) below), whether or not for sale for
its own account (including, without limitation, pursuant to the exercise by
any other person or entity of any registration rights granted by the
Company), on a form and in a manner that would permit registration of
Registrable Securities for sale to the public under the Securities Act, it
will give written notice to DSC of its intention to do so, describing such
securities and specifying the form and manner and the other relevant facts
involved in such proposed registration (including, without limitation, (x)
whether or not such registration will be in connection with an underwritten
offering of equity securities and, if so, the identity of the managing
underwriter and whether such offering will be pursuant to a "best efforts"
or "firm commitment" underwriting and (y) the anticipated price range at
which such equity securities are reasonably expected to be sold to the
public). Upon the written request of DSC delivered to the Company within 15
calendar days after the receipt of any such notice (which request shall
specify the Registrable Securities intended to be disposed of by DSC and
the intended method of disposition thereof), the Company will use
reasonable best efforts to effect the registration under the Securities Act
of the Registrable Securities that the Company has been so requested to
register, subject to the further provisions of this agreement;
(ii) If a registration pursuant to this Section 1 involves
an underwritten offering and the managing underwriter advises the Company
that, in its opinion, the number of Registrable Securities proposed to be
included in such registration should be limited due to market conditions,
then the Company may exclude Registrable Securities requested to be
included pursuant to Section 1(a) pro rata, based on the respective numbers
of Registrable Securities as to which registration has been so requested by
each holder of Registrable Securities.
(iii) In connection with any underwritten offering with
respect to which holders of Registrable Securities shall have requested
registration pursuant to this Section 1, the Company shall have the right
to select the managing underwriter with respect to the offering.
(b) Demand Registration Rights. (i) In addition to the
registration rights afforded by Section 1(a) above, at any time commencing
six months after the closing of the IPO (the "Demand Date"), DSC shall be
entitled to demand in writing that the Company effect a registration under
the Securities Act and under such state securities laws as DSC may
reasonably request (provided that the Company shall not be required to
consent to general service of process in any jurisdiction where it is not
then so subject) in respect of all or part of the Registrable Securities
held by DSC, provided that (A) such demand registration right shall apply
only if the amount of Registrable Securities to be registered (1)
constitutes at least 20% of the amount of Registrable Securities owned by
DSC or (2) has an anticipated aggregate offering price (before
underwriters' fees, commissions and discounts) of at least $20,000,000, (B)
the Company shall not be obligated to use its reasonable best efforts to
cause to become effective a registration statement pursuant to this Section
1(b) until a period shall have elapsed from the effective date of the most
recent previous registration statement under the Securities Act with
respect to a public offering of equity securities of the Company (a "Prior
Public Offering") equal to the greater of (1) 120 days and (2) the shortest
period of any lockup of shareholders of the Company required by the lead
managing underwriter of such Prior Public Offering (the "Holdback Period")
and (C) if, while a registration request is pending pursuant to this
Section 1(b), the Board of Directors of the Company makes a good faith
determination that the filing or effectiveness of a registration statement
would require the public disclosure of material information, the disclosure
of which would adversely affect the Company, the Company shall not be
required to effect a registration pursuant to this Section 1(b) until such
material information is disclosed to the public or ceases to be mate rial;
provided, further, however, that the foregoing delay shall in no event
exceed 120 days. Notwithstanding the foregoing provisions of Section 1(b),
the Company shall not be obligated to effect more than three registrations
pursuant to this Section 1(b)(i).
(ii) At any time after the Demand Date, DSC shall be entitled
to demand in writing that the Company effect a registration under the
Securities Act of all or part of its Registrable Securities on Form S-3 or
any similar short-form ("Short-Form") registration statement ("Short-Form
Registrations"), if available, specifying in the request the number of
Registrable Securities to be registered by DSC and the intended method of
distribution thereof (such notice is hereinafter referred to as an "S-3
Holder Request"); provided, that the Company shall be obligated to effect a
registration of Registrable Securities pursuant to this Section 1(b)(ii)
only if the anticipated aggregated offering price for such Registrable
Securities is in excess of $10,000,000, provided, further, that the Company
shall not be obligated to file and use its reasonable best efforts to cause
to become effective a registration statement pursuant to this Section 1(b)
until a period equal to the Holdback Period shall have elapsed from the
effective date of the Prior Public Offering. The holders of Registrable
Securities will be entitled to request an unlimited number of Short-Form
Registrations. After the Company has become subject to the reporting
requirements of the Securities Exchange Act of 1934, the Company will use
its reasonable best efforts to make Short-Form Registrations on Form S-3
available for the sale of Registrable Securities.
(iii) If, in connection with any underwritten
offering pursuant to this Section 1(b), the managing underwriter thereof advises
the Company in writing that in its opinion the number of securities (including,
for purposes of this Section 1(b), securities of the Company which the Company
has proposed to include in such offering) proposed to be included in such
offering should be limited due to market conditions, the Company will promptly
so advise all holders seeking to participate in such offering, and securities
shall be excluded from such offering in the following order until such
limitation has been met: (A) securities requested to be included in such
offering by holders other than DSC, if any, shall be excluded until all such
other securities shall be so excluded, (B) securities that the Company has
elected to include in such offering, if any, shall be excluded until all such
securities have been excluded, and, (C) thereafter, any Registrable Securities
requested to be included in such offering shall be excluded pro rata, based
on the respective number of Registrable Securities as to which registration
has been so requested by each holder thereof.
(iv) If a requested registration pursuant to this
Section 1(b) involves an underwritten offering, the holders of a majority of
Registrable Securities included in such registration shall have the right,
with the approval of the Company (which approval shall not be unreasonably
withheld), to select the managing underwriter for such offering.
(c) [Intentionally Omitted]
(d) Registration Procedures.
(i) If and whenever the Company is required to use its reasonable
best efforts to effect or cause the registration of any Registrable
Securities under the Securities Act as provided in Section 1(a) or 1(b),
the Company will, as expeditiously as possible:
(A) Prepare and promptly file with the
Securities and Exchange Commission (the "Commission") a registration statement
with respect to such Registrable Securities and use its reasonable best efforts
to cause such registration statement to become and remain effective;
(B) Prepare and file with the Commission
such amendments (including post-effective amendments) and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for a period as may be
requested by holders desiring to register their Registrable Securities for sale
not exceeding 90 days and to comply with the provisions of the Securities Act
with respect to the disposition of all Registrable Securities covered by such
registration statement during such period in accordance with the intended
methods of disposition by the Holder or Holders thereof set forth in such
registration statement.
(C) Furnish to each holder of
Registrable Securities covered by the registration statement and to each
underwriter, if any, of such Registrable Securities, such number of copies of a
prospectus and preliminary prospectus for delivery in conformity with the
requirements of the Securities Act, and such other documents, as such Person
may reasonably request, in order to facilitate the public sale or other
disposition of the Registrable Securities.
(D) Use its reasonable best efforts to
register or qualify such Registrable Securities covered by such registration
Statement under such other securities or blue sky laws of such jurisdictions
as each holder thereof shall reasonably request, and do any and all other acts
and things which may be reasonably necessary or advisable to enable such holder
to consummate the disposi tion of the Registrable Securities owned by such
holder in such jurisdictions, except that the Company shall not for any
such purpose be required (A) to qualify to do business as a foreign
corporation in any jurisdiction where, but for the requirements of this
Section 1(d)(i)(D)), it is not then so qualified, or (B) to subject itself
to taxation in any such jurisdiction, or (C) to take any action which would
subject it to general or unlimited service of process in any such
jurisdiction where it is not then so subject.
(E) Use its reasonable best efforts to
cause such Registrable Securities covered by such registration statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary to enable the holder or holders thereof to consummate the
disposition of such Registrable Securities.
(F) Immediately notify each holder of
Registrable Securities covered by such registration statement, at any time
when a prospectus thereto is required to be delivered under the Securities Act
within the appropriate period mentioned in Section 1(d)(i)(B), if the Company
becomes aware that the prospectus included in such registration statement, as
ten in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances
then existing, and, at the request of any such holder, deliver reasonable
number of copies of an amended or supplemental prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing.
(G) Otherwise use its reasonable best
efforts to comply with all applicable rules and regulations of the Commission
and make generally available to its securityholders, in each case as soon as
practicable, but not later than 45 calendar days after the close of the period
covered thereby (90 calendar days in case the period covered corresponds to a
fiscal year of the Company), an earnings statement of the Company which
will satisfy the provisions of Section 11(a) of the Securities Act.
(H) Use its reasonable best efforts in
connection with the underwriters of list such Registrable Securities on each
securities exchange as they may reasonably designate.
(I) In the event the offering is an
underwritten offering, use its reasonable best efforts to obtain a "cold
comfort" letter from the independent public accountants for the Company in
customary form and covering such matters of the type customarily covered by
such letters.
(J) Execute and deliver all instruments
and documents (including in an underwritten offering an underwriting agreement
in customary form) and taken such other actions and obtain such certificates and
opinions as are customary in an underwritten public offering.
(ii) Each holder of Registrable Securities will, upon receipt of
any notice from the Company of the happening of any event of the kind
described in Section 1(d)(i)(F), forthwith discontinue disposition of the
Registrable Securities pursuant to the registration statement covering such
Registrable Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 1(d)(i)(F).
(iii) If a registration pursuant hereto involves an underwritten
offering, the Company agrees, if so required by the managing underwriter of
such offering, not to effect any public sale or distribution of any of its
equity securities or securities convertible into or exchangeable or
exercisable for any of such equity securities during a period of up to 180
calendar days after the effective date of such registration, except for
securities sold in such underwritten offering or except in connection with
an option plan, purchase plan, savings or similar plan, or an acquisition,
merger or exchange offer.
(iv) If a registration pursuant hereto involves an underwritten
offering, each holder of Registrable Securities, whether or not such
holder's Registrable Securities are included in such registration, will, if
and to the extent request by the managing underwriter in such offering,
enter into an agreement not to effect any public sale or distribution,
including any sale pursuant to Rule 144 under the Securities act (but
excluding those Registrable Securities sold n such offering), of any of the
Company's excluding those Registrable Securities sold in such offering), of
any of the Company's equity securities owned by such holder or securities,
without the consent of such managing underwriter, during a period
commencing on the effective date of such registration and ending a number
of calendar days thereafter not exceeding 180 days as such managing
underwriter shall reasonably determine is required to effect a successful
offering; provided such agreement is substantially identical in form and
substance to other "lock-up" agreements of the Company's other stockholders
who execute such agreements in connection with such offering.
(e) Indemnification.
(i) In the event of any registration of any securities of the
Company under the Securities Act pursuant hereto, the Company will, and it
hereby agreed to, indemnify and hold harmless, to the extent permitted by
law, each holder of any Registrable Securities covered by such registration
statement, its directors and officers or general and limited partners, each
other Person who participates as an underwriter in the offering or sale of
such securities and each other person, if any, who controls such holder or
any such underwriter within the meaning of the Securities Act, as follows:
(A) against any and all loss, liability, claim, damage and expense
whatsoever arising out of or based upon an untrue statement or alleged
untrue statement of a material fact contained in any registration statement
(or any amendment or supplement thereto), including all documents
incorporated therein by reference, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein not misleading, or arising o ut of an untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus or prospectus (or any amendment or supplement
thereto) or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein not misleading;
(B) against any and all loss, liability, claim, damage and expense
whatsoever to the extent of the aggregate amount paid in settlement of any
litigation, or investigation or proceeding by any governmental agency or
body, commenced or threatened, or of any claim whatsoever based upon any
such untrue statement or omission, or any such alleged untrue statement or
omission, if such settlement is effected with the written consent of the
Company; and
(C) against any and all expense reasonably incurred by them in
connection with investigating, preparing or defending against any
litigation, or investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, to the extent that any such expense is not
paid under subparagraph (A) or (B) above;
provided, however, that this indemnity does not apply to any loss,
liability, claim, damage or expense to the extent arising out of an untrue
statement or alleged untrue statement or omission made in reliance upon and
in conformity with written information furnished to the Company by or on
behalf of such holder, underwriter or control person expressly for use in
the preparation of any registration statement (or any amendment or
supplement thereto) and provided, further, that the Company shall not be
liable to any Person who participates as an underwriter in the offering or
sale of Registrable Securities or to any other Person, if any , who
controls such underwriter with the meaning of the Securities or to any
other Person, if any, who controls such underwriter with the meaning of the
Securities Act, in any such case to the extent that such loss, liability,
claim, damage or expense arises out of such Person's failure to send or
give a copy of the final prospectus, as the same may be then supplemented
or amended, to the Person asserting an untrue statement or alleged untrue
statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such Person if such
statement or omission was corrected in the final prospectus.
(ii) The Company may require, as a condition to including any
Registrable Securities in any registration statement filed in accordance
herewith that the Company shall have received an undertaking reasonably
satisfactory to it from the prospective seller of such Registrable
Securities to indemnify and hold harmless (in the same manner and to the
same extent as set forth in Section 1(e)(i) the Company, each director of
the Company, each officer of the Company and each other Person, if any, who
controls the Company within the meaning of the Securities Act with respect
to any statement or alleged statement in or omission or alleged omission
from such registration statement, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement, if such
statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of such holder specifically stating that it is for
use in the preparation of such registration statement, preliminary, final
or summary prospectus or amendment or supplement. Such indemnity shall
remain in full force and effect regardless of any investigation made by or
on behalf of the Company or such director, officer or controlling Person
and shall survive the transfer of such securities by such holder. In that
event, the obligations of the Company and such holders pursuant to this
Section 1(e) are to be several and not joint; provided, however, that with
respect to each claim pursuant to this Section 1(e)(ii), each such holder's
liability under this Section 1(e)(ii) shall be limited to an amount equal
to the net proceeds (after deducting the underwriting discount and
expenses) received by such holder from the sale of such Registrable
Securities by such holder.
(iii) Promptly after receipt by an indemnified party hereunder of
written notice of the commencement of any action or proceeding involving a
claim referred to in this Section 1(e), such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party, give
written notice to such indemnifying party of the commencement of such
action; provided, however, that the failure of any indemnified party to
give notice as provided herein shall not relieve the indemnifying party of
its obligations under this Section 1(e), except to the extent (not
including any such notice of an underwriter) that the indemnifying party is
actually prejudiced by such failure to give notice. In case any such action
is brought against an indemnified party, unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim (in which case the
indemnifying party shall not be liable for the fees and expenses of more
than one firm of counsel for a majority of the sellers of Registrable
Securities or more than one firm of counsel for the underwriters in
connection with any one action or separate but similar or related actions),
the indemnifying party will be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly
notified, to the extent that it may wish with counsel reasonably
satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof. No
indemnified party shall consent to the entry of any judgment or enter into
any settlement of any such action, the defense of which has been assumed by
an indemnifying party and for which an indemnifying party may have
indemnification liability hereunder with the consent of such indemnifying
party.
(iv) The Company and each seller of Registrable Securities shall
provide for the foregoing indemnity (with appropriate modifications) in any
underwriting agreement with respect to any required registration or other
qualification of securities under any federal or state law or regulation of
any governmental authority.
(f) Contribution. In order to provide for just and equitable
contribution in circumstances under which the indemnity contemplated by
Section 1(e) is for any reason not available, the parties required to
indemnify by the terms thereof shall contribute to the aggregate losses,
liabilities, claims, damages and expenses of the nature contemplated by
such indemnity agreement incurred by the Company, any seller of Registrable
Securities and one or more of the underwriters, except to the extent that
contribution is not permitted under Section 11(f) of the Securities Act. In
determining the amounts which the respective parties shall contribute,
there shall be considered the relative benefits received by each party from
the offering of the Registrable Securities (taking into account the portion
of the proceeds of the offering realized by each), the parties relative
knowledge and access to information concerning the matter with respect to
which the claim was asserted, the opportunity to correct and prevent any
statement of omission and any other equitable considerations appropriate
under the circumstances. The Company and each Seller of Registrable
Securities agree with each other that no seller of Registrable Securities
shall be required to contribute any amount in excess of the amount such
seller would have been required to pay to an indemnified party if the
indemnity under Section 1(e)(ii) were available. The Company and each such
seller agree with each other and the underwriters of the Registrable
Securities, if requested by such underwriters, that it would not be
equitable if the amount of such contribution were determined by pro rata or
per capita allocation (even if the underwriters were treated as one entity
for such purpose) or for the underwriters' portion of such contribution to
exceed the percentage that the underwriting discount bears to the initial
public offering price of the Registrable Securities. For purposes of this
Section 1(f), each Person, if any, who controls an underwriter within the
meaning of Section 15 of the Securities Act shall have the same rights to
contribution as such underwriter, and each director and officer of the
Company who signed the registration statement, and each Person, if any, who
controls the Company or a seller of Registrable Securities within the
meaning of Section 15 of the Securities Act shall have the same rights to
contribution as the Company or a seller of Registrable Securities, as the
case may be.
(g) Expenses. The Company shall bear all registration expenses
(exclusive of underwriting fees, discounts and commissions) in connection
with the registrations effected by it pursuant to Section 1(b) and such
registration expenses incurred in connection with up to three fully
completed registrations of Registrable Securities pursuant to Section 1(a).
(h) Transfer of Registration Rights. DSC may assign its rights
under this Section 1 to any person or entity to whom or which DSC sells,
transfers or assigns not less than 20% of the Registrable Securities;
provided that such person or entity agrees in writing with the Company to
be bound by this Agreement to the same extent as DSC was bound at the time
of such sale, transfer or assignment.
(i) Cessation of Registrable Security Status. As to any particular
Registrable Securities, such securities shall cease to be Registrable
Securities when (i) a registration statement with respect to the sale of
such securities shall have become effective under the Securities Act and
such securities shall have been disposed of under such registration
statement, (ii) such securities shall have been transferred pursuant to
Rule 144 under the Securities Act, (iii) such securities shall have been
otherwise transferred or disposed of, and new certificates therefor not
bearing a legend restricting further transfer shall have been delivered by
the Company, and subsequent transfer or disposition of such securities
shall not require their registration or qualification under the Securities
Act or any similar state law then in force, or (iv) such securities shall
have ceased to be outstanding.
2. Change in Control Covenants.
(a) Pre-IPO. MSI covenants and agrees with DSC that if, prior to
an IPO, there is a "Change in Control" of MSI or AGI (as defined below), it
will promptly take all action available to it to cause Section 4.1(c) of
the Amended LLC Agreement to be amended in a manner such that (i) MSI will
no longer have the right and power to elect a majority of the members of
the Board of Directors of the Company and (ii) MSI's voting power as a
Member (as defined in Amended LLC Agreement) will be proportionate to its
Membership Percentage (as defined in the Amended LLC Agreement).
(b) Post-IPO. AGI covenants and agrees with DSC that if, from and
after the consummation of an IPO, there is a Change in Control of AGI or
MSI, AGI will immediately convert, and will cause all of its controlled
Affiliates to convert, all of the Class B Common Stock of the Company
beneficially owned by AGI and such Affiliates into shares of Class A Common
Stock of the Company such that, under the Company's Certificate of
Incorporation as then in effect, AGI, alone or together with its controlled
Affiliates, will no longer have the right to elect a majority of the
Company's Board of Directors.
(c) Shareholder Meeting; Resignations. Promptly upon a Change in
Control of MSI or AGI, MSI agrees with DSC that it will (i) cause the MSI
Directors to cause the Company's Board of Directors to convene a meeting of
Members (in the case of such a Change in Control of MSI or AGI referred to
in Section 2(a)) or of the Company's stockholders (in the case of such a
Change in Control of MSI or AGI, referred to in Section 2(b)) and (ii)
promptly after taking the action required by clause (i) above, cause such
number of the MSI Directors to resign from the Company's Board of Directors
so that the MSI Directors will no longer constitute a majority thereof.
(d) Definition of "Change in Control" of MSI or AGI. For purposes
of this Section 2, a "Change in Control" of MSI or AGI shall occur (i) in
the case of MSI, if (A) any person or entity, or group of affiliated
persons or entities, other than AGI and its controlled Affiliates, (1)
acquires voting securities of MSI representing a majority of the voting
power of all outstanding voting securities of MSI or (2) otherwise
acquires, directly or indirectly, the power to direct the management and
policies of MSI, (B) AGI and its controlled Affiliates shall cease to be,
directly or indirectly, the sole beneficial owners of voting securities
representing at least 50.1% of the voting power of all outstanding voting
securities of MSI and at least 50.1% of the equity ownership in MSI or (C)
individuals who, as of the date hereof, constitute the board of directors
of MSI (the "Incumbent MSI Board") cease for any reason to constitute a
majority of the board of directors of MSI, provided, however, that any
individual becoming a director of MSI after the date hereof whose election,
or nomination for election by MSI's shareholder(s), was approved by a vote
of a majority of the directors of MSI then comprising the Incumbent MSI
Board shall be considered as though such individual were a member of the
Incumbent MSI Board, but excluding for this purpose any such individual
whose initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal of
directors of MSI or other actual or threatened solicitation of proxies or
consents by or on behalf of a person, entity or group other than the board
of directors of MSI, and (ii) in the case of AGI, if (A) any person or
entity, or group of affiliated persons or entities, other than any person
or entity, or group of affiliated persons or entities (including for this
purpose any director of AGI as of the date hereof, their respective spouses
and children, any estates or trusts (and the executors, trustees or legal
representatives thereof) of which such directors, spouses or children are
an executor, trustee or beneficiary and any entities controlled by any of
such persons) (such persons, entity or group being referred to as the
"Current Control Group") who or which, individually or taken together, as
of the date hereof, own or have the right to acquire voting securities of
AGI representing 15% or more of the voting power of all outstanding voting
securities of AGI, (1) acquires voting securities of AGI representing a
majority of the voting power of all outstanding voting securities of AGI or
(2) otherwise acquires, directly or indirectly, the power to direct the
management and policies of AGI; (B) individuals who are either (1) members
of the Current Control Group or (2) persons whose election, or nomination
for election by the stockholders of AGI, was requested, directly or
indirectly, by a member of the Current Control Group and who have a
fiduciary, employment or similar relationship with the Company or a member
of the Current Control Group (the "Incumbent AGI Board"), cease for any
reason (other than death) to constitute at least 50% of the board of
directors of AGI, provided, however, that any individual becoming a
director of AGI after the date hereof whose election, or nomination for
election by AGI's shareholder(s), was approved by a vote of a majority of
the directors of AGI then comprising the Incumbent AGI Board shall be
considered as though such individual were a member of the Incumbent AGI
Board, but excluding, for this purpose, (y) any such individual whose
initial assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors of
AGI or other actual or threatened solicitation of proxies or consents by or
on behalf of a person, entity or group other than the board of directors of
AGI and (z) any such individual nominated for election to the board of
directors of AGI by any stockholder or group of affiliated stockholders of
AGI other than a member or members of the Current Control Group; or (C) the
members of the Current Control Group cease to beneficially hold (and retain
the right to exercise all voting and dispositive rights with respect to)
voting securities of AGI representing at least 10% of the voting power of
all outstanding voting securities of AGI and any other person or entity, or
group of affiliated persons or entities, beneficially owns voting
securities of AGI representing 40% or more of the voting power of all
outstanding voting securities of AGI. Notwithstanding the foregoing, a
Change in Control of MSI or AGI shall not be deemed to have occurred if, at
the time of determination, Telcom and its Affiliates do not have the Telcom
Threshold Membership Percentage. For this purpose, Telcom and its
Affiliates shall be deemed not to have the Telcom Threshold Membership
Percentage if (i) any person or entity, or group of affiliated persons or
entities, other than Rajendra Singh, Neera Singh, any estates or trusts
(and the executors, trustees or legal representatives thereof) of which
such persons are an executor, trustee or beneficiary and any entities
controlled by any of such persons) (such persons, entity or group being
referred to as the "Singh Control Group"), (A) acquires voting securities
(or other interests) of Telcom representing a majority of the voting power
of all outstanding voting securities (or other interests) of Telcom or (B)
otherwise acquires, directly or indirectly, the power to direct the
management and policies of Telcom; (ii) individuals who are either (A)
members of the Singh Control Group or (B) persons whose election, or
nomination for election by the stockholders (or members) of Telcom, was
requested, directly or indirectly, by a member of the Singh Control Group,
and who have a fiduciary, employment or similar relationship with the
Company or a member of the Singh Control Group (the "Incumbent Telcom
Board"), cease for any reason (other than death) to constitute at least 50%
of the board of directors (or other governing body) of Telcom, provided,
however, that any individual becoming a director (or member of the
governing body) of Telcom after the date hereof whose election, or
nomination for election by Telcom's shareholder(s) (or members), was
approved by a vote of a majority of the directors (or persons comprising
the governing body of Telcom) then comprising the Incumbent Telcom Board
shall be considered as though such individual were a member of the
Incumbent Telcom Board, but excluding, for this purpose, (y) any such
individual whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or
removal of directors (or persons comprising the governing body) of Telcom,
or other actual or threatened solicitation of proxies or consents by or on
behalf of a person, entity or group other than the board of directors (or
other governing body) of Telcom and (z) any such individual nominated for
election to the board of directors (or other governing body) of Telcom by
any stockholder (or member) or group of affiliated stockholders (or
members) of Telcom other than a member or members of the Singh Control
Group; or (C) the members of the Singh Control Group cease to beneficially
hold (and retain the right to exercise all voting and dispositive rights
with respect to) voting securities (or other interests of Telcom)
representing at least 10% of the voting power of all outstanding voting
securities (or other interests) of Telcom and any other person or entity,
or group of affiliated persons or entities, beneficially owns voting
securities (or other interests) of Telcom representing 40% or more of the
voting power of all outstanding voting securities (or other interests) of
Telcom.
3. Other Agreements. DSC irrevocably agrees with MSI and AGI that
it will (i) execute and deliver the Securities Purchase Agreement
substantially in the form reviewed by DSC and its counsel through the date
hereof, and will cause Telcom, at the First Closing, to execute and deliver
the Amended LLC Agreement substantially in the form reviewed by DSC and its
counsel through the date hereof, (ii) cause the DSC Director (as defined in
the LLC Agreement) to vote to approve the Securities Purchase Agreement,
the Amended LLC Agreement, the Registration Rights Agreement contemplated
by the Securities Purchase Agreement and the transactions contemplated by
such agreements and (iii) otherwise fully support such transactions and not
take, or cause or allow any of its Affiliates to take, any action
inconsistent with its agreements contained in this Section 3. Each of MSI
and DSC irrevocably agrees with the other that it will not exercise its
rights under Section 5.1(d)(i) of the LLC Agreement with respect to the
$100 million capital contribution to be made by the Investor pursuant to
the Securities Purchase Agreement. Each of AGI and MSI agrees with DSC that
it will not transfer control of any entity which holds a member interest
in, or Class B Common Stock of, the Company to any third party (other than
an Affiliate of AGI, provided such Affiliate agrees to be bound by the
provisions of this Agreement applicable to MSI) without the consent of DSC
unless, concurrently with or prior to such transfer, AGI and MSI take the
steps contemplated by Section 2(a) (in the case of such a transfer prior to
an IPO) or Section 2(b) (in the case of such a transfer concurrently with
or after an IPO).
4. Rights of First Refusal and Co-Sale; Certain Representations.
MSI and Telcom agree with the other that, from and after the consummation
of the IPO, each will have right of refusal and co-sale rights,
respectively, with respect to any sale or transfer by the other or its
Affiliates of Class A Common Stock, Class B Common Stock or other class of
common stock of the Company (collectively, "Common Stock") (and AGI, on the
one hand, and each of the Telcom Members, on the other, agree with each
other that such right of first refusal and co-sale rights shall also apply
to any sale or transfer by them of shares of MSI, or member or other equity
interests of Telcom, respectively, if, at the time of such sale or
transfer, shares of Common Stock constitute all or substantially all of the
assets of MSI or Telcom, respectively), to the same extent and exercisable
in accordance with the same procedures as set forth in Sections 10.3(a) and
10.3(b), respectively, of the Amended LLC Agreement (as if such Sections
were in effect and references in such Sections to an "Interest" being
deemed for this purpose to refer to Common Stock or to shares of MSI, or
member or other equity interests of Telcom, respectively, as contemplated
above). Notwithstanding the foregoing, it is acknowledged and agreed that
(i) pursuant to Section 5.8 of the Amended LLC Agreement, upon the
conversion of Teligent, L.L.C. to a corporation in connection with the IPO
(the "Conversion"), the Company will cease to have any rights pursuant to
such Sections 10.3(a) and 10.3(b) of the LLC Agreement, and (ii) the right
of first refusal and co-sale rights provided for in this Section 4 will in
any event not apply with respect to (A) any sale or transfer of Common
Stock (or of shares of MSI, or member or other equity interests of Telcom,
respectively) which was acquired pursuant to a public market transaction,
(B) any public sale or distribution of Common Stock (or of shares of MSI,
or member or other equity interests of Telcom, respectively), whether
pursuant to a registration statement under the Securities Act, Rule 144
thereunder or otherwise, (C) any sale or transfer of Common Stock (or of
shares of MSI, or member or other equity interests of Telcom, respectively)
to an Affiliate of the selling or transferring party, provided such
Affiliate executes and delivers to the parties hereto an instrument
agreeing to be bound hereby or (D) any pledge of, or grant of a security
interest in, Common Stock (or shares of MSI, or member or other equity
interests of Telcom, respectively), provided such pledge or grant meets the
requirements set forth in Section 10.2(a)(ii), (a)(iii) and (a)(iv) of the
Amended LLC Agreement (as if such Section were still in effect). Associated
hereby represents and warrants to Telcom that, as of the date hereof, it is
the owner of all of the outstanding capital stock of MSI. MSI hereby
represents and warrants to Telcom that, immediately after the Conversion,
MSI will be the sole record and beneficial owner of the shares of Common
Stock into which the member interest in Teligent, L.L.C. currently held by
MSI is converted pursuant to the Conversion. Each of the Telcom Members,
severally and not jointly, hereby represent and warrant to AGI and MSI
that, as of the date hereof, they are the owners of the respective
percentage membership interests in Telcom set forth on Schedule I hereto.
DSC and Telcom hereby represent and warrant to AGI and MSI that,
immediately after the Conversion, Telcom will be the sole record and
beneficial owner of the shares of Common Stock into which the member
interest in Teligent, L.L.C. currently held by DSC is converted pursuant to
the Conversion. Each party hereto represents and warrants to the other
parties that such party has the full legal right, power and authority to
execute, deliver and perform this Agreement, and that this Agreement
constitutes the valid and binding obligation of such party enforceable
against such party in accordance with its terms.
5. Miscellaneous.
(a) Effectiveness. Except for Section 3 hereof and this Section 5,
which shall be effective immediately upon the execution and delivery
hereof, this Agreement shall not be effective, and no party shall have any
rights or obligations hereunder, until the First Closing has occurred,
whereupon this Agreement shall automatically be in full force and effect.
(b) Definitions. Capitalized terms used by not defined herein have
the respective meanings ascribed thereto in the Amended LLC Agreement.
(c) Successors and Assigns. Except as otherwise provided herein,
all of the terms and provisions of this Agreement (to the extent they are
or have become effective pursuant to Section 5(a)) shall be binding upon,
shall inure to the benefit of and shall be enforceable by and against the
respective successors and assigns of the parties hereto, including without
limitation, in the case of DSC, Telcom upon consummation of the transfer
and assignment contemplated by Section 5.9 of the Amended LLC Agreement.
(d) Amendment, Waiver. This Agreement may be amended only by a
written instrument duly executed by the parties hereto. Any failure of any
of the parties to comply with any obligation, covenant, agreement or
condition herein may be waived by the party entitled to the benefits
thereof only by a written instrument signed by the party granting such
waiver, but such waiver or failure to insist upon strict compliance with
such obligation, covenant, agreement or condition shall not operate as a
waiver of, or estoppel with respect to, any subsequent or other failure.
(e) Notices. Any notice, request, claim, demand, docureceipt (or
refusal of receipt) and shall be in writing and delivered personally or
sent by telex or telecopy (with such telex or telecopy confirmed promptly
in writing sent by first class mail), or by reputable overnight courier or
other similar means of communication, as follows:
i) If to the Company, addressed to the
Company at 8065 Leesburg Pike, Vienna, VA 22182, to
the attention of the Company's General Counsel
(Facsimile No. 703-762-5227);
ii) If to MSI or AGI, addressed to it at 3
Bala Plaza East, Suite 300, Bala Cynwyd, PA 19004, to
the attention of AGI's General Counsel;
iii) If to DSC, Telcom or any of the parties
listed on Schedule I hereto, addressed to such party
c/o Telcom Ventures, L.L.C., 211 North Union Street,
Suite 300, Alexandria, VA 22314, to the attention
of President and General Counsel (Facsimile No.
703-706-3801);
or, in each case, to such other address or telex or telecopy
number as such party may designate in writing to the other by
written notice given in the manner specified in this Section
5(e).
(f) Entire Agreement. This Agreement contains the entire agreement
between the parties hereto with respect to the subject matter hereof, and
supersedes all prior oral and written agreements and memoranda and
undertakings between the parties hereto with regard to such subject matter.
(g) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
giving effect to its conflicts of laws principles.
(h) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed and delivered
by the parties as of the day and year first written.
TELIGENT, L.L.C.
By:/s/ Laurence E. Harris
-----------------------------------
Name: Laurence E. Harris
Title: Senior Vice President
MICROWAVE SERVICES, INC.
By:/s/ David J. Berkman
-----------------------------------
Name: David J. Berkman
Title: Executive Vice President
THE ASSOCIATED GROUP, INC.
By:/s/ David J. Berkman
-----------------------------------
Name: David J. Berkman
Title: Executive Vice President
DIGITAL SERVICES CORPORATION
By:/s/ Rajendra Singh
-----------------------------------
Name: Rajendra Singh
Title: President
TELCOM-DTS INVESTORS, L.L.C.
By:/s/ Rajendra Singh
-----------------------------------
Name: Rajendra Singh
Title: President
FOR PURPOSES OF SECTION 4 ONLY:
TELCOM VENTURES, L.L.C.
By: /s/ Rajendra Singh
------------------------------
Name: Rajendra Singh
Title: President
CHERRYWOOD HOLDINGS, INC.
By: /s/ Rajendra Singh
------------------------------
Name: Rajendra Singh
Title: President
TC GROUP, L.L.C.
By: /s/ Mark Ein
------------------------------
Name: Mark Ein
Title: Vice President
BIG BEND INVESTMENTS, L.P.
By: /s/ Morton H. Meyerson
------------------------------
Name: Morton H. Meyerson
Title: General Partner
/s/ Vandana Tandon
- ------------------------------
VANDANA TANDON
SCHEDULE I
Members of Telcom-DTS Investors, L.L.C.
Percentage
Name Interest
- ---- ----------
Telcom Ventures, L.L.C., a Delaware limited liability company 98.01%
Cherrywood Holdings Inc., a Kansas corporation 0.75%
TC Group, L.L.C., a Delaware limited liability company 0.25%
Big Bend Investments, L.P., a Texas limited partnership 0.89%
Vandana Tandon 0.10%
--------------
100.00%
EXHIBIT 2
STOCKHOLDERS' AGREEMENT
STOCKHOLDERS' AGREEMENT, dated as of November 26, 1997 (this
"Agreement"), by and among Teligent, Inc., a Delaware corporation (the
"Company"), Microwave Services, Inc., a Delaware corporation ("MSI"),
Telcom-DTS Investors, L.L.C., a Delaware limited liability company
("Telcom"), and NTTA&T Investment Inc. ("New Member" and, together with
MSI and Telcom, the "Stockholders"), an indirect wholly owned subsidiary
of Nippon Telegraph and Telephone Corporation, a Japanese corporation
("NTT").
WHEREAS, the Stockholders are parties to the Amended and
Restated Limited Liability Company Agreement, dated as of November 13,
1997 (the "LLC Agreement"), of Teligent, L.L.C., a Delaware limited
liability company (the "LLC"), entered into pursuant to the Securities
Purchase Agreement dated as of September 30, 1997 by and among the LLC,
MSI, Digital Services Corporation, a Virginia corporation and an
affiliate of Telcom, and NTT (the "Purchase Agreement");
WHEREAS, upon the terms and subject to the conditions of the
Agreement and Plan of Merger, dated as of October 6, 1997 (the "Merger
Agreement"), by and between the Company and the LLC, immediately prior to
the Company's initial public offering of Class A Common Stock (the "IPO")
the LLC will be merged (the "Merger") with and into the Company;
WHEREAS, the Merger Agreement provides that as a result of
the Merger the Stockholders will receive shares of Common Stock of the
Company, as the entity surviving the Merger; and
WHEREAS, the LLC Agreement contemplates, and the parties
hereto have agreed, that following a Conversion Transaction (as defined
in the LLC Agreement), in connection with an IPO, certain rights,
privileges and obligations set forth in the LLC Agreement with respect to
the ownership and governance of the LLC will, to the extent and upon the
terms and subject to the conditions set forth herein, continue to apply
with respect to the ownership and governance of the Company.
NOW, THEREFORE, in consideration of the premises, and for
other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties to this Agreement covenant and
agree as follows:
Section 1. Effectiveness of Agreement; Defined Terms. This
Agreement shall not become effective unless and until the Merger is
consummated. If the Merger Agreement is terminated in accordance with its
terms, this Agreement shall automatically terminate. Capitalized terms
used but not defined herein shall have the respective meanings assigned
to such terms in the form of Certificate of Incorporation of the Company
attached as Exhibit I to the Merger Agreement, which will be effective
upon the effectiveness of the Merger (the "Certificate of
Incorporation").
Section 2. Information Made Available. The Company
covenants and agrees with each of MSI, Telcom and New Member that, with
respect to MSI, so long as any shares of Class B-Series 1 Common Stock
are outstanding, with respect to Telcom, so long as any shares of Class
B-Series 2 Common Stock are outstanding, and with respect to New Member,
so long as any shares of Class B-Series 3 Common Stock are outstanding,
the Company will use all reasonable efforts to provide regular
information to (and updates thereof), consult with, and obtain the advice
of, representatives of MSI designated by MSI's designees (the "MSI
Directors") to the board of directors of the Company (the "Board of
Directors"), representatives of Telcom designated by Telcom's designee
(the "Telcom Director") to the Board of Directors, and representatives of
New Member designated by New Member's designee (the "New Member
Director") to the Board of Directors, respectively, in connection with
ordinary decisions of the Board of Directors or any committee thereof.
This Section 2 shall terminate as to New Member, and New Member shall
have no further rights under such Section, upon New Member's delivery of,
or failure to deliver, the notice required by Section 15.
Section 3. Consultation. The Company covenants and agrees
with New Member and Telcom that, with respect to New Member, so long as
any shares of Class B-Series 3 Common Stock are outstanding, and with
respect to Telcom, so long as any shares of Class B-Series 2 Common Stock
are outstanding, Consultation (as defined below) with New Member or a
representative (the "New Member Representative") designated from time to
time by New Member for such purpose (who need not be the representative
described in Section 12 hereof), and/or with Telcom or a representative
(the "Telcom Representative") designated from time to time by Telcom for
such purpose (who need not be the representative described in Section 12
hereof), respectively, will be required for any action (each, a
"Consultation Event") which (A) materially changes the fundamental
character of the Company's business; (B) replaces the Company's Chief
Executive Officer or Chief Operating Officer; (C) involves the sale or
pledge by the Company of a substantial portion of its assets or any
acquisition, divestiture or merger of the Company with another entity or
any joint venture outside the ordinary course of the Company's business;
or (D) involves the issuance by the Company of shares of Common Stock or
Preferred Stock to any telecommunications carrier (a "Strategic
Partner"). "Consultation" shall mean and include reasonable advance
notice and advance disclosure of all material facts regarding the
Consultation Event by the Company to the New Member Representative and/or
the Telcom Representative, respectively, and, in the case of the issuance
by the Company of shares of Common Stock or Preferred Stock to a
Strategic Partner, due consideration of any objections of New Member
and/or the Telcom Representative, respectively. New Member and Telcom
shall notify the Company as to who the New Member Representative and the
Telcom Representative, respectively, shall be, and shall provide the
Company with the address, business telephone and facsimile number for
such respective persons. Such persons shall be the New Member
Representative and the Telcom Representative, respectively, until such
time as the Company receives written notice from New Member or Telcom,
respectively, stating the name, address, business telephone and facsimile
number of the new New Member Representative or the new Telcom
Representative, respectively. This Section 3 shall terminate as to New
Member, and New Member shall have no further rights under such Section,
upon New Member's delivery of, or failure to deliver, the notice required
by Section 15.
Section 4. Confidential Treatment of Proprietary
Information. Except as provided in Section 14 hereof, in the event any
Covered Person (as hereinafter defined) (the "Receiving Party") obtains
from any other Covered Person or the Company (the "Disclosing Party")
information relating to the Company in whatever form which is
confidential or proprietary ("Proprietary Information"), the Receiving
Party (i) shall treat all such Proprietary Information as confidential;
(ii) shall use such Proprietary Information only for the purposes
contemplated in this Agreement; (iii) shall protect such Proprietary
Information, whether in storage or in use, with the same degree of care
as the Receiving Party uses to protect its own proprietary information
against public disclosure, but in no case with less than reasonable care;
and (iv) shall not disclose such Proprietary Information to any third
party except to such employees and agents of the Receiving Party who need
to know such Proprietary Information for the purpose of effectuating this
Agreement and who have been informed of the confidential nature of such
Proprietary Information. "Covered Person" shall mean any Stockholder, or
any person (other than the Company) that directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under
common control with, the Company or any Stockholder; any officers,
directors, shareholders, controlling persons, partners, employees,
representatives or agents of any Stockholder or its Affiliates (other
than the Company); any director, officer, employee or agent of the
Company or its Affiliates; or any person who was, at the time of the act
or omission in question, such a person. As used in this Agreement,
"Affiliate" means, with respect to any specified person, a person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the person specified.
Section 5. Exceptions. The provisions of Section 4 of this
Agreement shall not apply to any Proprietary Information which: (i) was
in the public domain on the date hereof or comes into the public domain
other than through the fault or negligence of the Receiving Party; (ii)
was lawfully obtained by the Receiving Party from a third party without
breach of this Agreement and otherwise not in violation of the Disclosing
Party's rights; (iii) was known to the Receiving Party at the time of
disclosure of such Proprietary Information to the Receiving Party by the
Disclosing Party and the Receiving Party was not, at such time, subject
to any confidentiality obligation with respect thereto; (iv) was
independently developed by the Receiving Party without making use of any
Proprietary Information of the Disclosing Party; or (v) is required to be
disclosed pursuant to law.
Section 6. Return of Proprietary Information. Subject to
Section 14(d) of this Agreement, upon the dissolution of the Company, and
in any event upon the Disclosing Party's request at any time, the
Receiving Party shall: (i) return to the Disclosing Party all documents
(including, any copies thereof) embodying the Disclosing Party's
Proprietary Information and (ii) certify in writing to the Disclosing
Party, within ten (10) days following the Disclosing Party's request,
that all such Proprietary Information has been returned.
Section 7. Equitable Remedies. Each Stockholder
acknowledges that the extent of damages in the event of the breach of any
provision of Section 4 or 6 hereof would be difficult or impossible to
ascertain, and that there will be available no adequate remedy at law in
the event of any such breach. Each Stockholder therefore agrees that in
the event it or any Covered Person employed by or affiliated with it
breaches any provision of Section 4 or 6 hereof, the aggrieved party
(including, without limitation, the Company) will be entitled to
injunctive or other equitable relief, in addition to any other relief to
which it may be entitled.
Section 8. CEO as Director. The Stockholders agree to vote,
or act by written consent with respect to, all of their respective shares
of Common Stock in favor of the election of the Chief Executive Officer
of the Company as a member of the Board of Directors.
Section 9. Special Board Votes; Other Board Matters. (a) The
Company and the Stockholders agree that, notwithstanding any provision in
the Company's By-Laws to the contrary, the following actions shall
require the affirmative vote of a majority of the Board of Directors,
which, so long as any shares of Class B-Series 2 Common Stock are issued
and outstanding, shall include the affirmative vote of the Telcom
Director and, so long as any shares of Class B-Series 3 Common Stock are
issued and outstanding, shall include the affirmative vote of the New
Member Director:
(i) any amendment to the Certificate of Incorporation
or By-laws of the Company which materially and adversely affects
the rights of Telcom or New Member in a manner which discriminates
against Telcom or New Member, either individually or with one or
more other Stockholders, vis-a-vis any of the other Stockholders,
provided that the affirmative vote of a majority of the Board of
Directors, including only the Telcom Director (and not the New
Member Director), shall be necessary to approve such an amendment
which so affects Telcom (and not New Member), and the affirmative
vote of a majority of the Board of Directors, including only the
New Member Director (and not the Telcom Director), shall be
necessary to approve such an amendment which so affects New Member
(and not Telcom);
(ii) any transaction between the Company and any
Stockholder or Affiliate thereof involving an amount in excess of
$150,000, except for such transactions contemplated by this
Agreement, the Securities Purchase Agreement between the Company
and Nippon Telegraph and Telephone Corporation dated as of
September 30, 1997 (the "Purchase Agreement") and the Technical
Services Agreement dated as of October 22, 1997 between the Company
and NTT America, Inc.
(iii) the appointment of any independent accountants
or firm of independent accountants, other than a nationally
recognized accounting firm, to serve as the Company's auditors; and
(iv) any action by the Company seeking
protection under any bankruptcy or insolvency law.
(b) So long as, pursuant to the Certificate of
Incorporation, MSI is entitled to elect a majority of the members of the
Board of Directors and to remove or fill vacancies with respect to such
directorships, MSI will use all reasonable efforts to promptly fill any
vacancies in such directorships, however occurring, and to remove and
replace any such director elected by MSI who is or becomes unwilling or
unable to serve as such director.
(c) Without limitation of and subject to Section 4 of
Article III of the Company's By-Laws, the Company covenants and agrees
with New Member to use all reasonable efforts under the circumstances to
provide the New Member Director with at least 72 hours prior notice of
any special meeting of the Board of Directors. If the New Member Director
is temporarily unavailable, New Member may appoint an alternate to act in
his stead, with full powers of substitution.
Section 10. Committees. (a) The Company and the Stockholders
agree that, so long as any shares of Class B-Series 3 Common Stock are
issued and outstanding, (i) the New Member Director and the New Member
Representative shall have visitation rights at meetings of all
significant internal operating committees of the Board of Directors, if
any, and (ii) the New Member Director shall be a member of any technical,
compensation or audit committee, if any, of the Board of Directors or any
other committee designated by the Board of Directors with the power to
negotiate any Consultation Event. In the event no audit committee of the
Board of Directors has been established, the New Member Director shall
have the right to attend, so long as any shares of Class B-Series 3
Common Stock of the Company are issued and outstanding, all meetings
involving the auditor's review of the Company's financial condition and
shall have the right to review and discuss such auditor's reports with
such auditor. The New Member Director and the New Member Representative
shall also, so long as any shares of Class B-Series 3 Common Stock of the
Company are issued and outstanding, have visitation rights with respect
to each committee of the Board of Directors which is established of which
the New Member Director is not a member and shall receive no less than 48
hours prior written notice of each meeting of any such committee. If,
during the course of the meeting of any such committee, the New Member
Director shall determine that the matter being considered should be
considered by the full Board of Directors, such committee shall thereupon
cease its consideration of such matter and such matter shall thereupon be
referred back to the full Board of Directors. This Section 10(a) shall
terminate, and New Member shall have no further rights under such
Section, upon New Member's delivery of, or failure to deliver, the notice
required by Section 15.
(b) The Company and the Stockholders agree that, so long as
any shares of Class B-Series 2 Common Stock are issued and outstanding,
(i) the Telcom Director and the Telcom Representative shall have
visitation rights at meetings of all significant internal operating
committees of the Board of Directors, if any, and (ii) the Telcom
Director shall be a member of any technical, compensation or audit
committee, if any, of the Board of Directors or any other committee
designated by the Board of Directors with the power to negotiate any
Consultation Event. In the event no audit committee of the Board of
Directors has been established, the Telcom Director shall have the right
to attend, so long as any shares of Class B-Series 2 Common Stock of the
Company are issued and outstanding, all meetings involving the auditor's
review of the Company's financial condition and shall have the right to
review and discuss such auditor's reports with such auditor. The Telcom
Director and the Telcom Representative shall also, so long as any shares
of Class B-Series 2 Common Stock of the Company are issued and
outstanding, have visitation rights with respect to each committee of the
Board of Directors which is established of which the Telcom Director is
not a member and shall receive no less than 48 hours prior written notice
of each meeting of any such committee. If, during the course of the
meeting of any such committee, the Telcom Director shall determine that
the matter being considered should be considered by the full Board of
Directors, such committee shall thereupon cease its consideration of such
matter and such matter shall thereupon be referred back to the full Board
of Directors.
Section 11. Annual Business Plans and Budgets. The parties
hereto agree that an annual business plan and budget for the Company
shall be prepared by the officers of the Company and submitted to the
Board of Directors for its approval. Each such annual business plan and
budget shall contain: (i) a comprehensive and detailed budget for the
upcoming year (including, without limitation, projected capital
expenditures and projected income, expense and cash flow levels); (ii)
such other financial, marketing and other plans and projections for the
upcoming year as the Board of Directors shall deem appropriate; and (iii)
such financial, marketing and other plans and projections for the
upcoming five-year period as the Board of Directors shall deem
appropriate. New Member shall have no further rights under this Section
11 upon New Member's delivery of, or failure to deliver, the notice
required by Section 15.
Section 12. New Member and Telcom Consultants. The parties
hereto agree that at any meeting of the Board of Directors at which the
New Member Director and/or the Telcom Director, respectively, is present,
the New Member Director and/or the Telcom Director, respectively, may
each invite a representative designated by New Member (and who is
employed by New Member or an Affiliate of New Member) or Telcom (and who
is employed by Telcom or an Affiliate of Telcom), respectively, to attend
and consult and advise the New Member Director or the Telcom Director,
respectively, on any matter; provided, that such respective
representatives agree with the Company in writing to be bound by Sections
4, 5, 6 and 7 hereof as if such representatives were Covered Persons for
purposes of such Sections.
Section 13. Agreement to Hold. Each Stockholder agrees
that, for the two-year period immediately following the date of the LLC
Agreement, each will continue to hold no less than 50% of its interest in
the Company which it owns immediately following the Merger; provided,
that the foregoing agreement and all other restrictions imposed on the
ability of New Member or Telcom, respectively, to transfer their
respective interests in the Company, except those imposed by law, shall
lapse and be null, void and without further effect, if a Consultation
Event occurs even though New Member or Telcom, respectively, have
objected thereto; and provided, further, that if at the time the
agreement contained in this Section 13 shall have lapsed and become null
and void and without further effect with respect to Telcom pursuant to
the immediately preceding proviso, MSI is not entitled, pursuant to the
Certificate of Incorporation, to elect a majority of the members of the
Board of Directors, then the agreement contained in this Section 13 shall
automatically lapse and become null and void and without further effect
with respect to MSI.
Section 14. New Member Information Right.
(a) Secunded Employees. So long as any shares of Class
B-Series 3 Common Stock of the Company are issued and outstanding, New
Member and its Affiliates shall have the right, at their expense, to
secund to the Company employees of New Member or its Affiliates (not
exceeding a total of five such employees in any three month period) to
observe the Company's operations, including its technical and marketing
activities (such secunded employees being referred to as the "Secunded
Employees"). This Section 14(a) shall automatically terminate and be of
no further force or effect upon New Member's delivery of, or failure to
deliver, the notice required by Section 15.
(b) Status of Secunded Employees; Expenses. The Secunded
Employees shall be and remain employees of New Member (or its Affiliates)
for all purposes, and New Member (or such Affiliates) shall be solely
responsible for, and shall indemnify and hold the Company harmless from
and against any claims for, the payment of any and all salary, bonuses,
living expenses, travel expenses and other compensation, and the
provision of all retirement, health care, insurance and other benefits to
such Secunded Employees. New Member (or its Affiliate) shall be solely
responsible for, and shall indemnify and hold the Company harmless from
and against any claims for, the payment of any taxes or governmental
charges of any kind, including, without limitation, withholding taxes,
payroll taxes or unemployment or worker's compensation insurance, with
respect to any such Secunded Employees. The Secunded Employees shall, at
the Company's expense, be provided, with reasonable office space and
standard office equipment at the Company's facilities to the extent
reasonably necessary for them to carry out their intended purposes as
described in Subsection 14(c) below.
(c) Purpose of Secunded Employees. The Company and New
Member acknowledge that the Secunded Employees will be secunded to the
Company so that they may gain knowledge of the operation of fixed
wireless communications services as conducted by the Company, with a view
to enabling New Member and its Affiliates to provide such services to
their customers outside the United States.
(d) Information Rights. To enable New Member and its
Affiliates to benefit from secunding the Secunded Employees as
contemplated by this Section 14, New Member and its Affiliates shall have
the non-exclusive, perpetual, irrevocable royalty free right and license
to use, solely in the business of New Member and its Affiliates outside
the United States, such product, service, marketing, operational and
technical information of the Company as shall be learned or obtained by
the Secunded Employees; provided that such right and license shall not
include any right or license with respect to any patent (or patent
application), utility model, design patent, copyright, trademark or
tradename (or other similar property rights arising under United States
or other laws) relating to specific inventions, technical devices,
software, publications or other works of the Company; and provided
further that if and to the extent such information constitutes
confidential or proprietary information of the Company, New Member will,
and will cause its Affiliates to, use the same efforts as it uses with
respect to its own confidential or proprietary information to keep such
information of the Company confidential. New Member and its Affiliates
shall not be entitled to sublicense, assign or otherwise transfer to any
third party any of the rights granted, or any of the information relating
to the Company learned or obtained by them, pursuant to this Section 14.
In addition, the grant of rights by the Company pursuant to this Section
15 shall be subject to the Company's need to comply with its other
agreements with third parties in existence on the date hereof relating to
any of the Company information referred to in this Section 14, it being
understood and agreed that the Company will use all reasonable efforts to
afford New Member and its Affiliates the full benefit of the rights
granted pursuant to this Section 14 in a manner consistent with such
other agreements.
Section 15. New Member Notice of Competition. New Member
will provide the Company with at least 90 days prior written notice of
any action which, pursuant to clause (B) of the proviso to Article
FOURTH, Section A(1)(d) of the Certificate of Incorporation, would result
in the automatic conversion of shares of Class B-Series 3 Common Stock
into Class A Common Stock.
Section 16. Foreign Ownership Limitation.
(a) The Company shall have the right to limit New Member's
ownership of the Company to ensure that it does not violate the foreign
ownership limitations imposed by the Communications Act of 1934, as
amended, and by the regulations and decisions of the Federal
Communications Commission (collectively, the "Communications Act").
(b) If at any time after the date hereof the Company is
required by a change in the law or other circumstance to reduce the level
of foreign ownership of the Company, and absent the Company's ability to
obtain a waiver (which the Company will use all reasonable efforts to
obtain), the Company shall have the right, and shall be required (i) at
New Member's election, to refuse to sell equity interests in the Company
or any equity interests in the License Companies (as such term is defined
in the Purchase Agreement) to any Foreign Owner (as defined below) if any
such transaction would, under the Communications Act or other applicable
law, adversely impact New Member's ability to hold its then existing
equity interest in the Company, and (ii) at the election of any
Stockholder, to repurchase such equity interests in the Company, to the
extent necessary to comply with applicable foreign ownership
restrictions, first, from all persons, other than the Stockholders, who
hold Foreign Ownership Interests (as defined below), and thereafter from
each of the Stockholders who hold Foreign Ownership Interests, on a pro
rata basis (based on the percentage of foreign ownership attributable to
each Stockholder), in each case, for an amount in cash (to the extent
permitted by the Delaware corporation law) equal to the "fair market
value" of the equity interests repurchased. If the class of equity
interests to be repurchased (or conversion equivalent) is publicly
traded, "fair market value" shall be the closing price per share or unit
of such equity interest (or conversion equivalent) on the trading day
immediately preceding the date of such repurchase and, if the class of
equity interests to be repurchased (or conversion equivalent) is not
publicly traded, "fair market value" shall be determined by the Board of
Directors. In the event that (i) all or any portion of a Stockholder's
equity interest in the Company is to be repurchased pursuant to this
Section 16, (ii) such class of equity interests (or conversion
equivalent) is not publicly traded and (iii) such Stockholder disputes,
by notice to the Company within forty-five (45) days after receipt of
notice from the Board of Directors of the Board of Director's fair market
value determination (a "Valuation Dispute Notice"), then "fair market
value" shall be determined by two appraisers selected by the Company and
such Stockholder, respectively, within forty-five (45) days after
delivery of the Valuation Dispute Notice. If the appraisers chosen by the
Company and such Stockholder cannot reach an agreement within 30 days of
their appointment, "fair market value" shall be determined by a third
appraiser to be selected by the original appraisers chosen by such
Stockholder and the Company within 10 days thereafter. "Foreign Owner"
shall mean: (a) any person who is a citizen of a country other than the
United States, (b) any corporation or other legal entity organized under
the laws of any government other than the government of the United States
or of any state, territory or possession of the United States, (c) any
government other than the government of the United States or of any
state, territory or possession of the United States, or (d) any
representative of any of the foregoing, or any entity owned, or whose
capital was contributed, in whole or in part, by any of the foregoing;
and "Foreign Ownership Interests" shall mean any equity interests in the
Company or equity interests in the License Companies held by a Foreign
Owner.
Section 17. New Member Co-Sale Rights. MSI and Telcom agree
that New Member will have co-sale rights with respect to any sale or
transfer by MSI or Telcom, respectively, or their respective Affiliates,
to a single buyer or group, of all of the shares of Common Stock held by
MSI or Telcom or such Affiliates, respectively, which co-sale rights
shall be exercisable in accordance with the same procedures as set forth
in Section 10.3(b) of the LLC Agreement (as if such Section were in
effect and references in such Section to an "Interest" being deemed for
this purpose to refer to Common Stock). Notwithstanding the foregoing, it
is acknowledged and agreed that (i) pursuant to Section 5.8 of the LLC
Agreement, upon consummation of the Merger, the Company, New Member and
any person or entity who or which was a member of the LLC but is not a
party hereto will cease to have any rights pursuant to such Sections
10.3(a) and 10.3(b) of the LLC Agreement, except as provided above in
this Section 17 with respect to New Member, and (ii) the co-sale rights
provided for in this Section 17 will in any event not apply with respect
to (A) any sale or transfer of Common Stock which was acquired pursuant
to a public market transaction, (B) any public sale or distribution of
Common Stock, whether pursuant to a registration statement under the
Securities Act, Rule 144 thereunder or otherwise, (C) any sale or
transfer of Common Stock to an Affiliate (as such term is defined in the
LLC Agreement) of the selling or transferring party, provided such
Affiliate executes and delivers to the parties hereto an instrument
agreeing to be bound hereby or (D) any pledge of, or grant of a security
interest in, Common Stock, provided such pledge or grant meets the
requirements set forth in Section 10.2(a)(ii), (a)(iii) and (a)(iv) of
the LLC Agreement (as if such Section were still in effect).
Section 18. Miscellaneous.
(a) This Agreement may be modified or amended at any time
by Stockholders holding shares of Common Stock representing at least
50.01% of the aggregate number of shares of Common Stock held by all
Stockholders; provided, that without the consent of any Stockholder, the
Company may (i) enter into agreements with permitted assignees pursuant
to the terms of this Agreement, providing in substance that such
permitted assignees will be bound by this Agreement and (ii) amend this
Agreement (A) to satisfy any requirements, conditions, guidelines or
opinions contained in any opinion, directive, order, ruling or regulation
of the Securities and Exchange Commission, the Internal Revenue Service
or any other United States federal or state agency, or in any United
States federal or state statute, compliance with which the Board of
Directors deems to be in the best interests of the Company, (B) to change
the name of the Company, and (C) to cure any ambiguity or correct or
supplement any provision of this Agreement that may be incomplete or
inconsistent with any other provision contained herein, so long as any
amendment under this clause (ii) does not adversely affect the investment
in the Company of any Stockholder; provided, further, that,
notwithstanding the foregoing provisions of this Section 18(a), no
amendment of this Agreement shall (y) deprive a Stockholder of any of
such Stockholder's rights hereunder without the prior written consent of
such Stockholder, or (z) change the provisions of this Section 18(a)
without the prior written consent of each Stockholder.
(b) Any party to this Agreement may extend the time for the
performance of any of the obligations or other acts of any other party
hereto, or waive compliance with any of the agreements of any other
party, in each case only to the extent that such obligations, agreements
and conditions are intended for its benefit.
(c) This Agreement contains the parties' entire
understanding and agreement with respect to its subject matter, and any
and all conflicting or inconsistent discussions, agreements, promises,
representations and statements, if any, between the parties or their
representatives that are not incorporated in this Agreement shall be null
and void and are merged into this Agreement.
(d) This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of
which together shall constitute a single agreement.
(e) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without giving effect
to its conflicts of law principles.
(f) The various section headings are inserted for purposes
of reference only and shall not affect the meaning or interpretation of
this Agreement or any provision hereof.
(g) The provisions of this Agreement shall be severable,
and any invalidity, unenforceability or illegality of any provision or
provisions of this Agreement shall not affect any other provision or
provisions of this Agreement, and each term and provision of this
Agreement shall be construed to be valid and enforceable to the full
extent permitted by law.
(h) This Agreement may not be assigned by any party without
the prior written consent of the other parties; provided, that in
connection with any Stockholder's transfer of shares of Class B Common
Stock to a Permitted Transferee of such Stockholder, such Stockholder
shall require such Permitted Transferee to agree in writing to become a
"Stockholder" for purposes of this Agreement and to be bound by the terms
hereof.
(i) This Agreement shall inure to the benefit of, and be
binding upon, the parties to it and their respective successors and
permitted assigns. Nothing contained in this Agreement, express or
implied, is intended to confer upon any person other than the parties to
it and their respective successors and permitted assigns, any rights or
remedies under or by reason of this Agreement.
(j) All notices, requests, demands and other communications
which are required or may be given pursuant to the terms of this
Agreement shall be in writing and shall be deemed given when delivered by
hand, fax (provided, that a confirming copy is sent by a reputable
overnight courier service), or reputable overnight courier service, to
the parties at their respective addresses set forth in Schedule I hereto
or to such other address as any party shall have designated by notice in
writing to the other parties.
(k) The Company, MSI and Telcom covenant and agree with New
Member that any and all disputes hereunder involving any of them and New
Member shall be submitted to the same dispute resolution procedures as
are set forth in Section 7.10 of the Purchase Agreement.
(l) Nothing contained herein shall require any Stockholder
to make any further investment in or otherwise contribute capital to the
Company.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
TELIGENT, INC.
By:/s/ Alex J. Mandl
Name: Alex J. Mandl
Title: Chairman & CEO
MICROWAVE SERVICES, INC.
By:/s/ David J. Berkman
Name: David J. Berkman
Title: Executive Vice President
TELCOM-DTS INVESTORS, L.L.C.
By:/s/ Rajendra Singh
Name: Rajendra Singh
Title: President
NTTA&T INVESTMENT INC.
By:/s/ Keisuke Nakasaki
Name: Keisuke Nakasaki
Title: President
SCHEDULE I
Addresses for Notices
Teligent, Inc.
8065 Leesburg Pike
Vienna, Virginia 22182
Phone: 703-762-5100
Fax: 703-762-5227
Attention: General Counsel
Microwave Services, Inc.
650 Madison Avenue, 25th Floor
New York, New York 10022
Phone: 212-301-2800
Fax: 212-301-2811
Attention: President and General Counsel
Telcom-DTS Investors, L.L.C.
211 N. Union Street
Suite 300
Alexandria, Virginia 22314
Phone: 703-706-3800
Fax: 703-706-3801
Attention: President and General Counsel
NTTA&T Investment Inc.
c/o Nippon Telegraph and Telephone Corporation
Tokyo Opera City Tower
20-2 Nishi-Shinjuku 3-chome
Shinjuku, Tokyo 163-14
JAPAN
Phone: 011-81-3-5353-5111
Fax: 011-81-3-5353-5503
Attention: Mr. Osamue Inoue
and
c/o NTT America, Inc.
101 Park Avenue, 41st Floor
New York, New York 10178
Attention: Mr. Mitsuo Murakami
Fax: 212-661-1078
EXHIBIT 3
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STOCK CONTRIBUTION AGREEMENT
DATED AS OF MARCH 10, 1997
BY AND BETWEEN
ASSOCIATED COMMUNICATIONS, L.L.C.,
FIRSTMARK COMMUNICATIONS, INC.
AND
LYNN FORESTER
- ----------------------------------------------------------------------------
TABLE OF CONTENTS
Page
----
Section 1. Definitional Provisions....................................1
(a) Defined Terms...................................1
(b) Other Definitional Provisions...................6
Section 2. Actions of Associated and Contributor Upon Signing
the Agreement...........................................7
Section 3. Contribution of FirstMark Stock............................7
(a) The Closing.....................................7
(b) Contribution of the Stock.......................8
(c) Consideration...................................8
(d) Conversion of Associated........................9
(e) Trust Channels and Related DEMS Systems.........9
(f) Certain Operating Expenses.....................11
Section 4. Conditions to Consummating the Contribution...............11
Section 5. Termination; Extension Payments...........................12
Section 6. Withdrawal of FirstMark DEMS Applications.................14
(a) Withdrawal.....................................14
(b) Conveyance to Trust............................14
Section 7. Additional Covenants and Agreements of Contributor
and FirstMark...........................................14
(a) Cooperation....................................14
(b) Conduct of Business............................15
(c) Access.........................................15
(d) Capital Stock..................................15
(e) Dividends and Distributions....................15
(f) Debt; Liabilities..............................15
(g) Certain Agreements.............................15
(h) Covenants Regarding DEMS Systems and
FirstMark DEMS Applications..................16
(i) Noncompetition.................................17
(j) Confidentiality................................18
(k) Intercompany Indebtedness......................18
Section 8. Additional Covenants and Agreements of Associated.........18
(a) Cooperation by Associated......................18
(b) Conduct of Business............................18
(c) Books and Records; Personnel...................18
(d) Interim Control of DEMS Systems................19
(e) Opposition to DEMS Licenses....................19
(f) Teledesic Settlement...........................20
(g) Contributor Registration Rights................21
(h) Tag-Along and Drag-Along Rights................22
(i) Right of First Refusal.........................23
(j) Confidentiality................................25
(k) Non-disclosure of Financial Terms..............26
(l) Anti-Dilution Rights...........................26
Section 9. Tax Matters...............................................27
(a) Tax Indemnification by Contributor.............27
(b) Apportionment of Taxes.........................27
(c) Refunds........................................28
(d) Cooperation....................................28
(e) Certain Other Definitions......................28
(f) Certain Taxes..................................28
(g) Tax Treatment of Indemnity Payments............28
(h) Certain Representations........................28
Section 10. Representations and Warranties...........................29
(a) Representations and Warranties of
Contributor and FirstMark....................29
(b) Representations and Warranties of Associated...32
Section 11. Miscellaneous............................................34
(a) Further Assurances.............................34
(b) Binding Effect.................................34
(c) Indemnification; Joint and Several
Liability of FirstMark and Contributor
Prior to Closing.............................34
(d) Survival.......................................35
(e) Entire Agreement...............................35
(f) Costs and Expenses.............................35
(g) Amendment......................................35
(h) Waiver; Cumulative Rights......................35
(i) Notices........................................35
(j) Governing Law..................................37
(k) Counterparts...................................37
(l) Headings.......................................37
Schedule I - DEMS Licenses
Schedule II - FirstMark DEMS Applications
Schedule 7(g) Extraordinary Contracts of FirstMark
Schedule 9(h)(i) Tax Matters
Schedule 10(a)(vi) Regulatory Matters
Schedule 10(a)(vii) Subscription Contracts
Schedule 10(a)(x) Assets and Liabilities of FirstMark
Schedule 10(b)(i) Capitalization of Associated
Exhibit A - Signing Opinion of Lukas McGowan Nace & Gutierrez
Exhibit B - Closing Opinion of Lukas McGowan Nace & Gutierrez
STOCK CONTRIBUTION AGREEMENT
AGREEMENT dated as of March 10, 1997, by and between
ASSOCIATED COMMUNICATIONS, L.L.C., a Delaware limited liability company
(together with its successors, "Associated"), FIRSTMARK COMMUNICATIONS,
INC., a Delaware corporation (together with its successors, "FirstMark"),
and LYNN FORESTER ("Contributor"), and, for purposes of Sections 8(h) and
(i) only, Microwave Services, Inc., a Delaware corporation (together with
its successors, "MSI") and Digital Services Corporation, a Virginia
corporation (together with its successors, "DSC," and, collectively with
MSI, the "Original Shareholders").
WHEREAS, Contributor owns all of the issued and outstanding
capital stock of FirstMark (the "Stock") and all of the issued and
outstanding capital stock of Netwave Inc., a Delaware corporation (together
with its successors, "Netwave"); and
WHEREAS, FirstMark has been granted licenses by the FCC to
provide, and to construct and operate facilities for the provision of,
common carrier digital electronic message services ("DEMS") in the Los
Angeles SMSA and the San Francisco SMSA and has pending before the FCC
applications to provide, and to construct and operate facilities for the
provision of, DEMS in the New York SMSA and the Boston SMSA; and
WHEREAS, Contributor desires to contribute, and Associated
desires to accept the contribution of, the Stock (the "Contribution"), and
Associated desires that Contributor cause, and Contributor has agreed to
cause, FirstMark to withdraw the FirstMark DEMS Applications, all upon the
terms and subject to the conditions set forth herein; and
WHEREAS, in connection with the Contribution, Associated
desires to acquire, and Contributor has agreed to cause Netwave to issue to
Associated, shares of common stock of Netwave, upon the terms and subject
to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the
representations, covenants and agreements contained herein, the parties
hereto agree as follows:
Section 1. Definitional Provisions.
(a) Defined Terms. As used in this Agreement, the following
terms shall have the following meanings:
"Accepting Original Shareholder" shall have the meaning set
forth in Section 8(i) hereof.
"Affiliate" shall mean, as to any Person, any other Person
(i) that is a subsidiary of such Person or (ii) that directly or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, such Person. For the purposes of this definition,
"control" when used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of
the management and policies of such Person, whether through the ownership
of voting securities, by contract or otherwise; the terms "controlling" and
"controlled" shall have meanings correlative to the foregoing.
"Agreement" shall mean this Agreement, as amended, modified,
supplemented or restated from time to time.
"Associated" shall have the meaning set forth in the first
paragraph hereof.
"Books and Records" shall have the meaning set forth in
Section 8(c) hereof.
"Business Day" shall mean each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a day on which banking institutions in New
York, New York are authorized or obligated to close by law or executive
order.
"Change in Control Application" shall mean the application
required under FCC regulations to be filed with the FCC for approval of the
Contribution.
"Closing" shall have the meaning set forth in Section 3(a)
hereof.
"Closing Date" shall have the meaning set forth in Section
3(a) hereof.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Confidential Information" shall have the meaning set forth
in Section 8(j) hereof.
"Contribution" shall have the meaning set forth in the third
"WHEREAS" clause hereof.
"Contributor" shall have the meaning set forth in the first
paragraph hereof.
"Contributor Registrable Securities" shall have the meaning
set forth in Section 8(g) hereof.
"DEMS" shall have the meaning set forth in the second
"WHEREAS" clause hereof.
"DEMS Facilities" shall mean facilities and equipment for the
provision of DEMS in the geographic area or areas covered by any or all of
the DEMS Licenses.
"DEMS Licenses" shall mean the licenses listed on Schedule I
hereto granted by the FCC to FirstMark (and any FCC waivers relating
thereto) any amendments, modifications or renewals thereof, and any other
licenses granted by the FCC to FirstMark after the date hereof (and any FCC
waivers relating thereto) to construct DEMS Facilities or provide DEMS in
any of the geographic areas covered by any of the licenses listed on
Schedule I hereto, or by any amendments, modifications or renewals thereof,
and any licenses, authorizations or approvals granted to FirstMark by any
PUC, together with any amendments, modifications or renewals thereof, with
respect to any DEMS Facilities or DEMS in any of the geographic areas
covered by any of the licenses listed on Schedule I hereto or by any
amendments, modifications or renewals thereof, in each case whether in the
18 GHz frequency band or any other frequency band to which DEMS are
relocated by the FCC. Except as otherwise expressly provided herein, as
used herein "DEMS License" refers to such license with respect to any or
all of the channels covered thereby.
"DEMS Systems" shall mean all assets, property and equipment
comprising or relating to the DEMS Facilities, including without limitation
any DEMS License(s) relating thereto.
"DSC" shall have the meaning set forth in the first paragraph
hereof.
"Equity Interest" shall have the meaning set forth in Section
8(h) hereof.
"Equityholders Agreement" shall mean any shareholder,
operating or similar agreement which establishes certain rights and
obligations of equityholders of Associated. As of the date hereof,
"Equityholders Agreement" means the Limited Liability Company Agreement.
"Extension Payment" shall mean, with respect to each one year
extension of this Agreement as provided in Section 5(b) hereof, an amount
in cash equal to $1,000,000.
"FCC" shall mean the United States Federal Communications
Commission and any successor agency.
"FirstMark" shall have the meaning set forth in the first
paragraph hereof.
"FirstMark DEMS Application License" shall have the meaning
set forth in Section 6(b) hereof.
"FirstMark DEMS Applications" shall mean the applications of
FirstMark pending on the date hereof before the FCC for licenses to
provide, and to construct and operate facilities for the provision of,
DEMS, together with any amendments, modifications or renewals thereof, in
each case whether in the 18 GHz frequency band or any other frequency band
to which DEMS are relocated by the FCC, which applications as currently
pending are listed on Schedule II hereto.
"First Refusal Interest" shall have the meaning set forth in
Section 8(i) hereof.
"First Refusal Notice" shall have the meaning set forth in
Section 8(i) hereof.
"Governmental Authority" shall mean any nation or government,
any state or other political subdivision thereof, and any entity or
official properly exercising executive, legislative, judicial, regulatory
or administrative functions of or pertaining to government.
"Interest" shall have the meaning set forth in the Limited
Liability Company Agreement; provided that, if the Interests in Associated
have been changed into or exchanged for any other equity securities, the
term "Interest" shall refer to the number and class of equity securities
into or for which such Interests have been changed or exchanged.
"IPO" shall have the meaning set forth in Section 8(g)
hereof.
"IRS" shall have the meaning set forth in Section 9(e)
hereof.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including, without limitation, any
conditional sale or other title retention agreement and any capital lease).
"Limited Liability Company Agreement" shall mean the Limited
Liability Company Agreement of the Company dated as of March 5, 1996, as
amended as of August 16, 1996, and as further amended from time to time.
"Mandl " shall mean Alex J. Mandl, currently the Chief
Executive Officer of Associated.
"Mandl Employment Agreement" shall mean the Employment
Agreement dated as of August 19, 1996 between Associated and Mandl, as in
effect on the date hereof.
"Member" shall have the meaning set forth in the Limited
Liability Company Agreement.
"Membership Percentage" shall have the meaning set forth in
the Limited Liability Company Agreement. References in this Agreement to
the Membership Percentage represented by any Interest issued to Contributor
hereunder are to such Membership Percentage calculated as of the date of
this Agreement, after giving effect to the issuance to Contributor of such
Interest and any Interest previously issued to Contributor as if all such
Interests had been issued as of the date of this Agreement (that is, the
Interest receivable by Contributor will be subject to dilution from and
after the date of this Agreement (subject to Section 8(k) hereof), such
that the Interest issued to Contributor at the Closing or upon the release
from the Trust of any Trust Channel or upon the grant by the FCC or the
release from the Trust of any Applicable License may represent a percentage
Interest in Associated when so issued that is less than the Membership
Percentage referred to in Sections 3(c) or 3(e), as applicable).
"MSI" shall have the meaning set forth in the first paragraph
hereof.
"Netwave" shall have the meaning set forth in the first
"WHEREAS" clause hereof.
"Offer" shall have the meaning set forth in Section 8(i)
hereof.
"Offering Price" shall have the meaning set forth in Section
8(i) hereof.
"Operating Expenses" shall have the meaning set forth in
Section 3(f) hereof.
"Original Shareholders" shall have the meaning set forth in
the first paragraph hereof.
"Person" shall mean any individual, corporation, association,
partnership (general or limited), joint venture, trust, joint-stock
company, estate, limited liability company, unincorporated organization or
other legal entity or organization.
"Pre-Closing Tax Period" shall have the meaning set forth in
Section 9(a) hereof.
"Pro Rata Share" shall have the meaning set forth in Section
8(i) hereof.
"PUC" shall mean any state public utility commission of
competent jurisdiction, the approval of which is required to consummate any
DEMS Systems Transfer.
"Related DEMS System" shall have the meaning set forth in
Section 3(e) hereof.
"Representative" shall have the meaning set forth in Section
8(j) hereof.
"Requirement of Law" shall mean, as to any Person, any
statute, law, rule, regulation, ordinance, code, license, permit, order,
judgment, decree or determination of any arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such
Person or any of its properties or to which such Person or any of its
property is subject.
"Requisite Approvals" shall have the meaning set forth in
Section 4(a) hereof.
"Requisite Regulatory Approvals" shall mean decisions of the
FCC and of any applicable PUC approving the Contribution, and any other
consents, approvals or authorizations of any other Governmental Authority
required in connection with the Contribution.
"Return" shall have the meaning set forth in Section 9(e)
hereof.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations thereunder.
"SMSA" shall mean Standard Metropolitan Statistical Area.
"Stock" shall mean all of the issued and outstanding stock of
FirstMark.
"Straddle Period" shall have the meaning set forth in Section
9(b) hereof.
"Tax" shall have the meaning set forth in Section 9(e)
hereof.
"Taxing Authority" shall have the meaning set forth in
Section 9(e) hereof.
"Teledesic" shall mean Teledesic Corp., a Delaware
corporation.
"Teledesic Settlement" shall have the meaning set forth in
Section 8(f) hereof.
"Transfer" shall have the meaning set forth in Section 8(i)
hereof.
"Trust" shall have the meaning set forth in Section 3(e)
hereof.
"Trust Agreement" shall have the meaning set forth in Section
3(e) hereof.
"Trust Channel" shall have the meaning set forth in Section
3(e) hereof.
(b) Other Definitional Provisions.
(i) Any term defined in the singular shall have
a comparable meaning when used in the plural, and vice versa.
(ii) As used herein, the neuter gender shall
also denote the masculine and feminine, and the masculine gender
shall also denote the neuter and feminine, where the context so
permits.
(iii) The words "hereof", "herein" and
"hereunder", and words of a similar import, when used in this
Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. References to Sections
shall refer to Sections of this Agreement, unless otherwise
expressly provided.
Section 2. Actions of Associated and Contributor Upon Signing the Agreement.
(a) As an inducement to Contributor to enter into this
Agreement and in partial consideration for the Contribution, concurrently
with the execution and delivery hereof, Associated is paying or causing to
be paid to Contributor a non-refundable cash payment of $5,570,000, by wire
transfer of immediately available funds to an account previously designated
by Contributor to Associated. Concurrently with and as a condition to such
payment, Contributor is delivering or causing to be delivered to Associated
an opinion of Lukas McGowan Nace & Gutierrez, Chartered, special FCC
counsel to Contributor, in the form of Exhibit A hereto.
(b) As a further inducement to Contributor to enter into this
Agreement and in consideration of the mutual covenants and agreements of
the parties contained herein with respect to the Contribution, as promptly
as practicable after the execution and delivery hereof, pursuant to a
Subscription Agreement in form and substance reasonably satisfactory to
Netwave and Associated, Netwave shall issue to Associated shares of common
stock of Netwave constituting ten percent (10%) of the outstanding shares
of capital stock of Netwave on a fully diluted basis immediately after
giving effect to such issuance, and Associated shall deliver to Netwave
$200,000 by wire transfer of immediately available funds to an account of
Netwave previously designated by Contributor to Associated.
(c) Concurrently with the execution and delivery hereof,
FirstMark is delivering to Associated FirstMark's original technology plan,
marketing study and business plan relating to development of DEMS in the 18
GHz frequency band.
Section 3. Contribution of FirstMark Stock.
(a) The Closing. The closing of the Contribution (the
"Closing") shall occur at the offices of Skadden, Arps, Slate, Meagher &
Flom LLP, 919 Third Avenue, New York, New York, not later than five (5)
Business Days after satisfaction or waiver of the conditions to Closing
specified in Sections 4(a) and (b) hereof, or at such other time and/or
place and/or on such other date as the parties may mutually agree (the
"Closing Date").
(b) Contribution of the Stock.
(i) At the Closing, Contributor shall contribute
to Associated, and Associated shall accept the contribution from
Contributor of, the Stock.
(ii) At the Closing, Contributor shall deliver
to Associated certificates representing the Stock, free and clear
of all Liens, duly endorsed in blank for transfer or accompanied
by duly executed stock powers assigning the Stock in blank.
(c) Consideration. The aggregate consideration for the
Contribution (in addition to the amount previously paid pursuant to Section
2(a) hereof) shall consist of the following:
(i) $4,950,000 payable in cash to Contributor by
wire transfer of immediately available funds to an account
designated by Contributor to Associated not less than two (2)
Business Days prior to the Closing; and
(ii) an Interest of the same class or classes as
that then held by the Original Shareholders which represents a
5.00% Membership Percentage. Commencing as of the Closing,
Contributor shall share in the profits and losses of Associated as
provided in the Limited Liability Company Agreement and a capital
account shall be established for Contributor in an amount equal to
that percentage of the aggregate capital accounts of the Members
equal to Contributor's percentage Interest. The Interest issued to
Contributor shall be evidenced by the Limited Liability Company
Agreement, which Contributor shall sign at the Closing and thereby
become a party to, with Schedule A thereto appropriately amended
to reflect Contributor's admission as a Member and Contributor's
percentage Interest. In the event of any conflict or inconsistency
between the rights and obligations of Contributor under the
Limited Liability Company Agreement and this Agreement, the
provisions of this Agreement shall control. Without limiting the
immediately preceding sentence, Sections 4.1(n), 8.7, 10.3(a) and
10.3(b) (and Section 10.1 to the extent that it relates to the
foregoing subsections of Section 10.3) of the Limited Liability
Company Agreement shall not apply to Contributor. Associated shall
give Contributor written notice of any changes (which notice shall
include the full text of such changes) that are made in the
Limited Liability Company Agreement from time to time, such notice
to be given within fifteen (15) days following any such change;
provided that no amendment or modification to the Limited
Liability Company Agreement shall impose on Contributor any
additional financial obligations, other obligations (except for
immaterial non-financial obligations) or any obligations
inconsistent with the two immediately preceding sentences.
(d) Conversion of Associated. If, prior to the Closing,
Associated shall be reorganized as, or converted or merged into, an entity
taxed as a corporation for federal income tax purposes, then Associated
shall promptly (and in any event not less than ten (10) days prior to the
Closing) notify Contributor thereof. If Associated has been reorganized as,
or converted or merged into, an entity taxed as a corporation for federal
income tax purposes, then at Contributor's sole option, exercisable by
written notice to Associated not less than ten (10) days prior to the
Closing, the Contribution contemplated by this Agreement shall be
restructured as a merger of FirstMark with and into Associated or, at
Associated's option, a wholly owned subsidiary of Associated, pursuant to
which the Stock shall be converted into the right to receive the
consideration contemplated by this Section 3. If Contributor exercises its
option under this paragraph (d), each of Contributor, FirstMark and
Associated shall take all actions necessary to effect the transactions
contemplated by this Agreement as a merger in lieu of the Contribution.
(e) Trust Channels and Related DEMS Systems
(i) If at the Closing control of any DEMS
License or channels covered thereby is not permitted by the FCC to
be transferred as contemplated by this Agreement, the cash
consideration for the Contribution provided for in Section 3(c)
above shall be reduced by $618,750 for each channel control of
which is not permitted to be transferred to Associated and the
Membership Percentage represented by the Interest in Associated to
be issued to Contributor at the Closing shall be reduced by an
amount equal to the product of (a) 0.6250% and (b) the number of
channels control of which is not permitted to be transferred.
(ii) Any channels control of which is not
permitted to be transferred at the Closing (each, a "Trust
Channel" and collectively, the "Trust Channels") and the related
DEMS Systems (each, a "Related DEMS System" and collectively, the
Related DEMS Systems"), shall be conveyed by FirstMark prior to
the Closing to a trust (the "Trust") established by FirstMark
pursuant to a trust agreement (the "Trust Agreement") containing
terms reasonably acceptable to FirstMark, Contributor and
Associated. The operations of the Trust Channels shall be
conducted by the trustee of the Trust in accordance with the
directions of Contributor, and neither Associated nor FirstMark
shall directly or indirectly control, supervise or direct, or
attempt to control, supervise or direct, such operations. After
the Closing, Associated, Contributor and FirstMark shall cooperate
and use their reasonable best efforts, at Associated's expense, to
obtain all Requisite Approvals for the transfer of control of each
Trust Channel, in which event, subject to Section 4(d) hereof,
such Trust Channel and Related DEMS System shall be released from
the Trust to FirstMark. Notwithstanding the foregoing, if less
than all of the channels for which FirstMark holds a DEMS License
are Trust Channels, no portion of the Related DEMS System shall be
conveyed by FirstMark to the Trust, but FirstMark shall enter into
arrangements reasonably acceptable to Contributor and Associated
and consistent with the FCC's rules giving the Trust rights to use
such DEMS System in connection with the operations of the Trust
Channels.
(iii) Concurrently with the release of any Trust
Channel and Related DEMS System (if any) from the Trust to
FirstMark, Associated shall deliver to Contributor the following
consideration:
(A) $618,750 in cash with respect to each Trust
Channel and Related DEMS System (if any) so released,
which amount shall be paid to Contributor by wire
transfer of immediately available funds to an account
designated by Contributor to Associated not less than two
(2) Business Days prior to the release of the applicable
Trust Channel and Related DEMS System (if any) from the
Trust (provided that the aggregate cash consideration to
be paid by Associated pursuant to this Section 3 if
control of all channels for which FirstMark holds a DEMS
License to construct DEMS Facilities or provide DEMS in
the Los Angeles SMSA and San Francisco SMSA is
transferred by Contributor shall not exceed $4,950,000;
and
(B) with respect to each Trust Channel and
Related DEMS System (if any) so released from the Trust
to FirstMark, an Interest in Associated representing a
0.6250% Membership Percentage (provided that the
aggregate Interest in Associated to be issued to
Contributor if control of all channels for which
FirstMark holds a DEMS License to construct DEMS
Facilities or provide DEMS in the Los Angeles SMSA and
San Francisco SMSA is transferred by Contributor shall
not exceed a 5.00 % Membership Percentage).
(f) Certain Operating Expenses. Associated shall reimburse
Contributor in cash at the Closing or, with respect to any DEMS License or
channels covered thereby control of which is not permitted to be
transferred at the Closing, upon transfer of control of such DEMS License
or channels covered thereby, for all expenditures incurred and paid by
FirstMark or Contributor from and after the date six (6) months after the
date hereof required to fund actions deemed by Contributor and/or FirstMark
to be necessary or desirable to be taken in order to fulfill customer
requirements in connection with the regular operation of the DEMS Systems,
including, without limitation, the implementation of marketing,
construction and development plans and legal fees and expenses related
thereto (collectively, the "Operating Expenses"). Reimbursements by
Associated for Operating Expenses under this Section 3(f) shall be made by
wire transfer of immediately available funds to an account previously
designated by Contributor to Associated, against receipt by Associated of
reasonably itemized invoices or other records documenting such Operating
Expenses.
Section 4. Conditions to Consummating the Contribution.
(a) Conditions to Associated's Obligation to Consummate the
Contribution. Associated's obligation to consummate the Contribution is
subject to satisfaction (or, to the extent permissible, waiver by
Associated) of the following conditions:
(i) the representations and warranties of
Contributor and FirstMark contained in this Agreement shall be
true and accurate in all material respects as of the date when
made and (unless made as of a specified date) as of the Closing
Date as if made on and as of such date;
(ii) Contributor and FirstMark shall have
performed in all material respects all of their respective
agreements and covenants contained in this Agreement which are
required to be performed by it on or prior to the Closing Date;
(iii) the parties hereto shall have received all
Requisite Regulatory Approvals, and all other required consents,
approvals or authorizations of any other third party, in
connection with the Contribution (collectively, the "Requisite
Approvals") shall have been obtained and the Requisite Regulatory
Approvals shall not be subject to administrative or judicial
review, reconsideration or appeal; and
(iv) Associated shall have received an opinion
of Lukas McGowan Nace & Gutierrez, Chartered, special FCC counsel
to Contributor, dated the Closing Date, in the form of Exhibit B
hereto.
(b) Conditions to Contributor's Obligation to Consummate the
Contribution. Contributor's obligation to consummate the Contribution is
subject to satisfaction (or, to the extent permissible, waiver) of the
following conditions:
(i) the representations and warranties of
Associated contained in this Agreement shall be true and accurate
in all material respects as of the date when made and (unless made
as of a specified date) as of the Closing Date as if made on and
as of such date;
(ii) Associated shall have performed in all
material respects all of its agreements and covenants contained in
this Agreement which are required to be performed by it on or
prior to the Closing Date; and
(iii) the parties hereto shall have received all
Requisite Approvals.
(c) Certain Regulatory Matters. Notwithstanding the
provisions of paragraphs (a)(iii) and (b)(iii) of this Section 4, if the
Requisite Approvals in connection with the Contribution have been obtained
but contain restrictions the effect of which is to prevent the transfer of
control of a portion of the DEMS Licenses or channels covered thereby, the
parties hereto shall use all commercially reasonable efforts to cause such
restrictions to be removed. If such restrictions have not been removed
within ninety (90) days after the obtaining of the Requisite Approvals, the
conditions set forth in paragraphs (a)(iii) and (b)(iii) of this Section 4
shall be deemed to have been satisfied, and with respect to any DEMS
License or channels covered thereby which cannot be transferred at the
Closing, the provisions of Section 3(e) shall apply.
(d) Conditions to Release of Trust Channels. The conditions
set forth in paragraphs (a) and (b) above shall apply, mutatis mutandis, to
the release of any Trust Channel and the Related DEMS System (if any) to
FirstMark, and the payment of the consideration therefor, as contemplated
by Section 3(e) hereof.
Section 5. Termination; Extension Payments.
(a) If either (i) the Closing has not theretofore occurred or
(ii) the Closing has occurred but in connection therewith one or more Trust
Channels were conveyed to the Trust and all of such Trust Channels have not
been released to FirstMark from the Trust as contemplated by Section
3(e)(ii) hereof, this Agreement and any Trust Agreement shall terminate on
the second anniversary of the date hereof; provided that if the Closing has
not occurred or any Trust Channels have not been released to FirstMark from
the Trust by reason of the breach by Contributor or FirstMark, on the one
hand, or by Associated, on the other hand, of any of its respective
representations and warranties contained in this Agreement, then the date
of termination of this Agreement shall be extended, at the option of the
non-breaching party, for thirty (30) days from the date on which this
Agreement would otherwise have terminated; and provided, further, that if
the Closing has not occurred or any Trust Channels have not been released
to FirstMark from the Trust by reason of the breach by Contributor or
FirstMark, on the one hand, or by Associated, on the other hand, of any of
its respective covenants contained in this Agreement, then the date of
termination of this Agreement shall be extended, at the option of the
non-breaching party, for a period or periods not to exceed in the aggregate
one (1) year from the date on which this Agreement would otherwise have
terminated.
(b) Notwithstanding the preceding paragraph (a), the date of
termination of this Agreement (and any Trust Agreement) may, at the option
of Associated, be extended (collectively but not individually) for two
successive one year periods if, prior to the then scheduled termination
date, Associated shall have paid or caused to be paid to Contributor an
Extension Payment by wire transfer of immediately available funds to an
account previously designated by Contributor to Associated.
(c) If this Agreement terminates prior to the Closing, the
provisions of this Section 5(c), Sections 5(d), 5(e), 7(h)(v), 7(j), 8(f)
(but only in the event that there has been a Teledesic Settlement prior to
such termination and subject to the last sentence of Section 8(f)), 8(j),
8(k), 11(e), 11(f), 11(h), 11(j) and 11(l) hereof shall survive such
termination without limitation as to time, and all other provisions of this
Agreement shall become void and of no further force or effect; provided,
however, that any termination of this Agreement shall not relieve any party
of any damages or other amounts for which it would otherwise be liable by
reason of any breach, prior to such termination, of any of its
representations and warranties or covenants contained in this Agreement;
and provided, further, that no party shall have any liability under this
Agreement for the failure of any representation or warranty of such party
which was true and correct as of the date of this Agreement to continue to
be true and correct after the date of this Agreement, unless the failure of
such representation or warranty to continue to be true and correct results
from the breach by such party of any of its agreements or covenants
contained in this Agreement.
(d) If this Agreement is terminated prior to the Closing by
reason of a breach of this Agreement by Contributor or FirstMark,
Contributor shall be obligated to pay to Associated, promptly (and in any
event within two (2) Business Days) following such termination, the sum of
$600,000 in cash. If this Agreement is terminated without fault of any
party hereto, Contributor shall be obligated to pay to Associated, promptly
(and in any event within two (2) Business Days) following such termination,
the sum of $300,000 in cash.
(e) If this Agreement is terminated prior to the Closing,
each of Associated, Contributor and FirstMark agrees that neither it nor
any of its Affiliates shall, after such termination, oppose, challenge or
in any manner take an adverse position, directly or indirectly, with
respect to any DEMS application of the other party or any of its Affiliates
or the grant to the other party or any of its Affiliates of any DEMS
license, in each case whether in the 18 GHz frequency band or any other
frequency band to which DEMS are relocated by the FCC; provided that,
subject to and without limitation of the obligations of any party under the
other provisions of this Agreement, the provisions of this paragraph (e)
shall not apply to any existing or future DEMS application or DEMS license
of any party to the extent such DEMS application or DEMS license is with
respect to a channel as to which the other party, currently or in the
future, holds a DEMS application or DEMS license.
Section 6. Withdrawal of FirstMark DEMS Applications.
(a) Withdrawal. At such time or times prior to the Closing
and in such manner as Associated may specify, Contributor shall cause
FirstMark promptly to withdraw the FirstMark DEMS Applications (other than
with respect to channel 31 for the New York SMSA) and, upon the request and
at the expense of Associated, Contributor and FirstMark will assist and
cooperate with Associated in seeking to obtain FCC approval of any license
applications filed by MSI or Associated or any of their respective
Affiliates with the FCC to provide DEMS in the New York SMSA or the Boston
SMSA. In consideration of the withdrawal by FirstMark of the foregoing
FirstMark DEMS Applications, upon the FCC's grant of FirstMark's request
for withdrawal of such FirstMark DEMS Applications and for approval of this
Agreement, Associated shall pay to Contributor the sum of $50,000 in
reimbursement of expenses incurred by Contributor and FirstMark in
connection with such FirstMark DEMS Applications.
(b) Conveyance to Trust. If, (i) either (x) prior to the
Closing, FirstMark is granted a DEMS license by the FCC pursuant to the
FirstMark DEMS Application with respect to channel 31 in the New York SMSA
(the "FirstMark DEMS Application License") or (y) the FirstMark DEMS
Application License has not been granted prior to the Closing and the
FirstMark DEMS Application with respect to channel 31 remains outstanding,
and (ii) the transfer of control at the Closing of the FirstMark DEMS
Application License or such FirstMark DEMS Application, as the case may be,
is not permitted under the terms of the Requisite Approvals, the FirstMark
DEMS Application License or such FirstMark DEMS Application, as the case
may be, shall be conveyed by FirstMark prior to the Closing to the Trust.
After the Closing, Associated, Contributor and FirstMark shall cooperate
and use their reasonable best efforts, at Associated's expense, to obtain
all Requisite Approvals for the transfer of control of the FirstMark DEMS
Application License or such FirstMark DEMS Application, as the case may be,
in which event the FirstMark DEMS Application License or such FirstMark
DEMS Application, as the case may be, shall be released from the Trust to
FirstMark, without payment of any additional consideration by Associated.
Section 7. Additional Covenants and Agreements of Contributor and FirstMark.
(a) Cooperation. From and after the date this Agreement,
Contributor and FirstMark shall use their reasonable efforts, and shall
cooperate with Associated, in each case at Associated's expense, to secure
all Requisite Approvals to enable Contributor, FirstMark and Associated to
effect the transactions contemplated by this Agreement, and shall otherwise
use their reasonable efforts, at Associated's expense, to cause the
consummation of such transactions in accordance with the terms and
conditions of this Agreement.
(b) Conduct of Business. Except as may be otherwise
contemplated by this Agreement or the Exhibits or Schedules hereto, or
except as Associated may otherwise consent to in writing, from the date of
this Agreement through the Closing, Contributor and FirstMark shall operate
the business of FirstMark solely in the ordinary course of business; it
being understood that the relocation by FirstMark of radio equipment from
one site to another site in connection with the fulfillment of customer
build-out requirements shall not be prohibited by this paragraph.
(c) Access. From the date of this Agreement and prior to the
Closing, Contributor and FirstMark shall provide Associated with such
information as Associated may from time to time reasonably request with
respect to FirstMark and the transactions contemplated by this Agreement,
and shall provide Associated and its representatives reasonable access
during regular business hours and upon reasonable notice to the properties,
books and records of FirstMark as Associated may from time to time
reasonably request.
(d) Capital Stock. Neither FirstMark nor Contributor shall
issue, sell, transfer, pledge or otherwise encumber any shares of capital
stock of FirstMark, or grant or issue any option, warrant, right or
convertible or exchangeable security exercisable for, convertible into or
exchangeable for shares of capital stock of FirstMark, or make any other
changes in the capital structure of FirstMark, or enter into any contract
with respect to any of the foregoing.
(e) Dividends and Distributions. FirstMark shall not declare,
set aside, pay or make any dividend or other distribution or payment with
respect to shares of its capital stock, and shall not purchase or redeem
any shares of its capital stock.
(f) Debt; Liabilities. FirstMark shall not incur or assume
any indebtedness for borrowed money other than any such indebtedness that
will be paid in full prior to the Closing and shall not make any loans,
advances or capital contributions to, or investments in, any other Person.
From the date of this Agreement through the Closing, FirstMark shall incur
no liabilities other than liabilities arising in the ordinary course of
business of the operations of the DEMS Systems that will not, individually
or in the aggregate, have a material adverse effect on the assets, business
or operations of FirstMark.
(g) Certain Agreements. FirstMark shall not (i) encumber
(unless such encumbrance is removed prior to the Closing without cost or
expense to Associated), sell, lease or otherwise dispose of any assets, or
acquire any assets other than in the ordinary course of business or as
otherwise necessary or desirable to fulfill customer requirements, (ii)
authorize, propose or enter into an agreement in principle or definitive
agreement with respect to any merger, consolidation, other business
combination, liquidation or dissolution pursuant to which FirstMark would
be acquired or would acquire or dispose of (in any such case, by merger,
consolidation, acquisition or disposition of stock or assets, or similar
transaction) assets, (iii) assume, guarantee, endorse (other than checks in
the ordinary course of business) or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any
other Person, (iv) enter into any commitment or transaction outside the
ordinary course of business except as set forth on Schedule 7(g) hereto, or
(v) enter into any contract or commitment to do any of the foregoing.
(h) Covenants Regarding DEMS Systems and FirstMark DEMS
Applications.
(i) Between the date of this Agreement and the
Closing, at Associated's expense, Contributor and FirstMark shall
use all commercially reasonable efforts to maintain in full force
and effect all necessary federal, state and local regulatory
agency authorizations relating to such DEMS System, and shall
operate such DEMS System in accordance with all Requirements of
Law applicable thereto.
(ii) Between the date of this Agreement and the
Closing, neither Contributor nor FirstMark shall sell or otherwise
dispose of, or create Liens or otherwise encumber, any of the DEMS
Systems (including without limitation any of the DEMS Licenses or
DEMS Facilities).
(iii) Upon and as a condition to Associated's
issuance to Contributor of any Interest, Contributor shall execute
and deliver, and thereby become a party to, any Equityholders
Agreement, subject to the last three sentences of Section 3(c) of
this Agreement.
(iv) Except as contemplated by Schedule 7(g),
between the date of this Agreement and the Closing, all customer
subscription contracts with respect to DEMS to be provided through
one or more of the DEMS Systems entered into after the date hereof
shall be entered into by FirstMark only in the ordinary course of
business and shall contain only customary provisions.
(v) Until the Closing, or until such time prior
to the Closing as Associated directs Contributor to cause
FirstMark to withdraw a FirstMark DEMS Application pursuant to
Section 6 hereof, FirstMark shall, and Contributor shall cause
FirstMark to, prosecute such FirstMark DEMS Application, at
Associated's expense, to the extent required by the FCC's rules to
retain FirstMark's eligibility and qualifications for the DEMS
licenses requested by such FirstMark DEMS Application.
(vi) Neither Contributor, FirstMark nor any of
their Affiliates shall (A) oppose, challenge or in any manner take
an adverse position, directly or indirectly, with respect to (i)
any existing or future DEMS applications or licenses of
Associated, DSC or MSI, in each case whether in the 18 GHz
frequency band or any other frequency band to which DEMS are
relocated by the FCC (and FirstMark shall promptly withdraw or
rescind any such previous opposition, challenge or adverse
position); provided that, subject to and without limitation of
Contributor's and FirstMark's obligations under the other
provisions of this Agreement, prior to the Closing the provisions
of this clause (A) shall not apply to any existing or future DEMS
application or DEMS license of Associated to the extent such DEMS
application or DEMS license is with respect to a channel as to
which FirstMark holds a DEMS License, or (ii) any change or
modification to the rules generally applicable to DEMS, DEMS
licenses or DEMS frequencies proposed, ordered or implemented by
the FCC, so long as such change or modification would not
adversely affect FirstMark in a manner different (on a
proportionate and comparable basis) from Associated, MSI, DSC and
their Affiliates, or (B) seek authorizations, directly or
indirectly, with respect to any DEMS channel in the New York SMSA
or the Boston SMSA, in each case whether in the 18 GHz frequency
band or any other frequency band to which DEMS are relocated by
the FCC (except pursuant to a FirstMark DEMS Application).
(i) Noncompetition. Contributor agrees with Associated that,
from and after the date hereof, neither Contributor nor any of its
Affiliates will, alone or as a member, employee or agent of any
partnership, corporation, limited liability company or other business
entity, or as an officer, agent, employee, director, shareholder (except
for passive investments of not more than five percent (5%) of the
outstanding shares of or any other equity interest in any company or entity
listed or traded on a national securities exchange or on an
over-the-counter securities market) of or investor in any partnership,
corporation, limited liability company or other business entity, directly
or indirectly, own, manage, operate, join, control or participate in the
ownership, management, operation or control of, or work for or permit the
use of her or its name by, or be connected in any manner with, any business
(other than Associated) or activity (including without limitation
submitting any application for a license to provide services or construct
or operate equipment or facilities) which engages in or proposes to engage
in the provision in the United States of DEMS in the 18 GHz frequency band
or such other frequency band to which DEMS are relocated by the FCC or the
provision in Canada of fixed wireless voice, video or data transmission
services in any frequency band; provided that the foregoing shall not apply
to the ownership or operation by Contributor of FirstMark and the business
of FirstMark with respect to the DEMS Systems and the FirstMark DEMS
Applications to the extent consistent with the other provisions of this
Agreement. The parties intend that the covenant contained in this Section
7(i) shall be deemed to be a series of separate covenants, one for each
county of each state of the United States and province of Canada. Except
for geographic coverage, each separate covenant shall be deemed identical
in terms to the covenant contained in this paragraph. If, in any judicial
proceeding, a court shall refuse to enforce all of the separate covenants
deemed included in this paragraph, because, taken together, they cover too
extensive a geographic area, the parties intend that those of such
covenants (taken, in the case of the states, territories or counties within
any state in order of the applicable states, territories or counties which
are less populous) which, if eliminated, would permit the remaining
separate covenants to be enforced in such proceedings shall, for the
purpose of such proceedings, be deemed eliminated from the provisions of
this paragraph. The term "county" as used herein shall be deemed to apply
to other similar political subdivisions, such as parishes, in those areas
which have such other political subdivisions.
(j) Confidentiality. If Contributor or FirstMark obtains,
directly or indirectly, information or records, whether prepared by
Associated, its advisors or otherwise, and whether written or oral,
concerning the business of Associated, Contributor and FirstMark shall be
bound by the provisions of Section 8(j) with respect to such information or
records to the same extent that Associated would be bound with respect to
Confidential Information.
(k) Intercompany Indebtedness. Prior to the Closing,
Contributor and FirstMark shall cause all outstanding indebtedness of
FirstMark to Contributor or any of her Affiliates to be cancelled or
discharged without any cost, liability (including, without limitation, any
Tax liability) or expense being incurred by FirstMark.
Section 8. Additional Covenants and Agreements of Associated.
(a) Cooperation by Associated. From and after the date of
this Agreement, Associated will use its reasonable efforts, and will
cooperate with Contributor, in each case at Associated's expense, to secure
all Requisite Approvals to enable Contributor and Associated to effect the
transactions contemplated by this Agreement, and will otherwise use its
reasonable efforts to cause the consummation of such transactions in
accordance with the terms and conditions of this Agreement.
(b) Conduct of Business. From the date of this Agreement
through the Closing, Associated shall not operate its business in any
manner with the intention of diminishing the value of the Interest to be
received by Contributor pursuant to this Agreement.
(c) Books and Records; Personnel. For a period of seven years
from the Closing Date:
(i) Associated shall not, and shall cause
FirstMark not to, dispose of or destroy any of the books and
records of FirstMark in their possession relating to periods prior
to the Closing ("Books and Records") without the prior written
consent of Contributor (which shall be deemed given if Contributor
fails to object in writing to such disposal or destruction with
twenty (20) days of receipt of notice from Associated of its
intention to effect such disposal or destruction).
(ii) Associated shall, and shall cause FirstMark
to, upon at least three (3) days prior written notice from
Contributor, allow Contributor and its agents reasonable access to
all Books and Records during normal working hours at Associated's
principal place of business or at any location where any Books and
Records are stored, and Contributor shall have the right, at its
own expense, to make copies of any Books and Records, in
connection with (x) any pending or threatened litigation in which
Contributor or any of its Affiliates is involved, (y) any
investigation or proceeding of any Governmental Authority in which
Contributor or any of its Affiliates is involved, or (z) the
preparation of any Returns; provided, however, that any such
access or copying shall be had or done in such a manner so as not
to interfere with the normal conduct of Associated's or
FirstMark's businesses, as applicable.
(iii) Contributor shall, and shall cause its
representatives to, keep confidential all Books and Records and
the information contained therein.
(d) Interim Control of DEMS Systems. Without limiting Section
7 hereof, between the date of this Agreement and the Closing, Associated
shall not directly or indirectly control, supervise or direct, or attempt
to control, supervise or direct, the operation of the DEMS Systems of
FirstMark and its Affiliates, and the operations of FirstMark and its
Affiliates shall be the sole responsibility of Contributor and FirstMark
and its Affiliates.
(e) Opposition to DEMS Licenses. Neither Associated nor any
of its Affiliates shall oppose, challenge or in any manner take an adverse
position, directly or indirectly, with respect to any DEMS License (and
Associated or its Affiliates shall promptly withdraw or rescind any such
previous opposition, challenge or adverse position); provided that, subject
to and without limitation of Associated's obligations under the other
provisions of this Agreement, prior to the Closing, the provisions of this
paragraph (e) shall not apply to any channel covered by an existing or
future DEMS License to the extent such DEMS License is with respect to a
channel as to which Associated holds a DEMS license. Notwithstanding any
other provision of this Agreement, if the FCC revokes a DEMS License with
respect to channel 31 in the Los Angeles SMSA or channel 30 in the San
Francisco SMSA and grants, pursuant to a decision that is no longer subject
to administrative or judicial review, reconsideration or appeal, a DEMS
license with respect to such channel, or a channel in substitution for such
channel, to MSI, DSC, Associated or any of their respective Affiliates,
then Contributor shall receive the consideration that she would have
received under Section 3(c) or Section 3(e), at the same time she would
have received such consideration under Section 3(c) or 3(e), if such
channel had been an asset of FirstMark at the Closing and/or had been
released from the Trust, as applicable.
(f) Teledesic Settlement. Associated agrees that (i) any
settlement with Teledesic with respect to DEMS licenses in the 18 GHz
frequency band which involves the relocation of DEMS to a frequency band
other than 18 GHz (a "Teledesic Settlement") will not adversely affect
FirstMark in a manner different (on a proportionate and comparable basis),
after giving effect to clause (ii) below, from Associated, MSI and DSC and
their respective Affiliates and (ii) Associated will reimburse Contributor
for expenditures actually made by FirstMark prior to the date of this
Agreement (and as to which Associated receives reasonable documentary
evidence from FirstMark as to incurrence and amount) in connection with the
DEMS Systems to the same extent (on a proportionate and comparable basis)
and subject to the same conditions and payable to Contributor by wire
transfer of immediately available funds to an account previously designated
by Contributor to Associated at the same time as Associated, MSI or DSC or
their respective Affiliates receive, pursuant to a Teledesic Settlement,
reimbursement for expenditures actually made by them prior to the date of
this Agreement in connection with the DEMS licenses and DEMS systems of
Associated, MSI or DSC or their respective Affiliates; provided that any
such reimbursement of Contributor shall not exceed $600,000 in the
aggregate, and shall be reduced dollar for dollar to the extent that
Contributor or FirstMark receives any amounts from Teledesic pursuant to
any separate agreement, arrangement or understanding with Teledesic (and
FirstMark and Contributor agree promptly to notify Associated of their
receipt of any such payments). Associated agrees that it shall, promptly
following receipt of FCC approval of the Teledesic Settlement which is no
longer subject to administrative or judicial review, reconsideration or
appeal, provide Contributor with a true and correct copy of the
agreement(s) providing for the Teledesic Settlement, subject to execution
of an appropriate confidentiality agreement by Contributor. Without the
prior written consent of Associated, neither Contributor nor FirstMark nor
any of their respective Affiliates shall oppose, challenge, or in any
manner take, directly or indirectly, an adverse position with respect to,
any Teledesic Settlement, or any term thereof, or any plan adopted or order
issued by the FCC to relocate DEMS to a frequency band other than 18 GHz.
If this Agreement is terminated prior to the Closing (x) by reason of a
breach of this Agreement by Contributor or FirstMark, the provisions of
clause (ii) of the first sentence of this paragraph shall be of no further
force or effect, (y) by reason of a breach of this Agreement by Associated,
the provisions of clause (ii) of the first sentence of this paragraph shall
survive termination, or (z) without fault of either party, the provisions
of clause (ii) of the first sentence of this paragraph shall survive
termination, except that the obligation of Associated under such clause
shall be limited to 50% of the expenditures reimbursable under such clause
(ii) and not more than $300,000 in the aggregate.
(g) Contributor Registration Rights.
(i) Contributor "Piggyback". Contributor shall
have the same rights with respect to registration, pursuant to a
registration statement filed by Associated under the Securities
Act, of equity securities of Associated issued to Contributor
pursuant to this Agreement as Mandl has pursuant to clause (A) of
Section 4(d)(I) of the Mandl Employment Agreement. Associated
shall, if requested in writing by Contributor, use all reasonable
efforts to cause to be included in such registration statement up
to an amount of the equity securities of Associated then owned by
Contributor (of the same class as the equity securities of
Associated then owned by or issuable to Mandl) which were issued
to Contributor pursuant to this Agreement ("Contributor
Registrable Securities") proportionate to the amount of equity
securities which are then owned by or issuable to Mandl which are
entitled to be included in such registration statement (based on
the total amount of such equity securities then owned by or
issuable to Mandl and the total amount of Contributor Registrable
Securities then owned by Contributor, respectively). If, in
connection with an underwritten offering registered pursuant to a
registration statement, the managing underwriter imposes a
limitation on the amount of equity securities which may be
included in such registration statement, then Associated shall be
obligated to use all reasonable efforts to include in such
registration statement the Contributor Registrable Securities
validly requested by Contributor in accordance with the terms
hereof to be included in such registration statement (x) only
after the inclusion of all equity securities proposed to be sold
by Associated for its own account and (y) subject to reduction of
the amount of Contributor Registrable Securities and any other
equity securities to be included in such registration statement on
behalf of any Person other than Associated on a pro rata basis in
accordance with the number of Contributor Registrable Securities
and such other equity securities requested to be included in such
registration statement.
(ii) Demand Registration Rights. In addition to
the registration rights afforded by clause (i) of this Section
8(g), at any time after the first anniversary of the closing of
Associated's initial public offering (the "IPO"), Contributor
shall be entitled to one demand registration under the Securities
Act and under such state securities laws as Contributor may
reasonably request (provided that Associated shall not be required
to consent to general service of process in any jurisdiction where
it is not then so subject) in respect of Contributor Registrable
Securities, provided that such demand registration right shall
apply only if the amount of Contributor Registrable Securities to
be registered (x) constitutes at least 50% of the greatest amount
of Contributor Registrable Securities owned by Contributor at any
time and (y) has an anticipated aggregate offering price (before
underwriters' fees, commissions and discounts) of at least
$10,000,000.
(iii) Restrictions. The registration rights of
Contributor provided for in this Section 8(g) shall not be
transferable to any transferee of Contributor Registrable
Securities except (i) during her lifetime by gratuitous transfers
to grantor trusts, charitable remainder trusts or to immediate
family members or trusts for their benefit, provided that any such
transferee agrees in writing to be bound by the provisions of this
Section 8(g) or (ii) upon her death by will or the laws of descent
and distribution. In addition, such registration rights shall be
subject to Contributor entering into underwriting (if applicable),
indemnification, and other customary agreements, including
customary lock-up provisions requested by the managing underwriter
of any offering, and to Associated's right to defer (or require
Contributor to suspend sales pursuant to) any such registration if
(but only for so long as) it determines in good faith that such
registration (or continued sales) would require disclosure which
would be materially adverse to Associated's interests. Associated
shall keep any registration statement filed under clause (ii)
above effective for at least ninety (90) days (increased by the
number of days, if any, that sales under such registration
statement are suspended as provided above). Associated shall bear
all registration expenses (exclusive of underwriting fees,
discounts and commissions) under this Section 8(g) and in such
connection shall provide Contributor with indemnification and
contribution against liabilities under the securities laws in
customary form.
(iv) Contributor agrees to execute a customary
lock-up agreement in connection with the IPO, whether or not
Contributor is a selling stockholder in the IPO.
(h) Tag-Along and Drag-Along Rights. If, prior to the time
that equity securities of Associated (of the same class as the Contributor
Registrable Securities) are publicly traded, the Original Shareholders
shall sell to a third party (other than an Affiliate of such Original
Shareholder) any of their equity interests in Associated at a time when
Contributor holds any equity interest in the Company (an "Equity
Interest"):
(i) The Original Shareholders shall require the
purchaser of their equity interests to purchase, at Contributor's
election, the same percentage of the aggregate Equity Interest
then held by Contributor as the percentage of the aggregate equity
interests of the Original Shareholders which is being purchased;
such purchase from Contributor shall be made on the same terms and
for the same consideration as the purchase from the Original
Shareholders; and
(ii) The Original Shareholders, at their
election, may require the purchaser of their equity interests to
purchase, and Contributor to sell, the same percentage of the
aggregate Equity Interest then held by Contributor as the
percentage of the aggregate equity interests of the Original
Shareholders which is being purchased; any such purchase from
Contributor shall be made on the same terms and for the same
consideration as the purchase from the Original Shareholders.
(i) Right of First Refusal. Upon the terms and subject to the
conditions of this Section 8(i), Contributor grants the Original
Shareholders a right of first refusal with respect to any sale or other
disposition for value by Contributor (a "Transfer") of any Equity Interest.
(i) If Contributor desires to effect a Transfer
of some or all of its Equity Interest pursuant to a bona fide
offer (an "Offer") from any person or entity (an "Offeror"),
Contributor shall give written notice of such Offer (a "First
Refusal Notice") to each of the Original Shareholders. The First
Refusal Notice shall specify the number or amount of securities
comprising the Equity Interest proposed to be transferred pursuant
to such Offer (the "First Refusal Interest"), the price proposed
to be paid by the Offeror (the "Offer Price"), the identity of the
Offeror and the other terms and conditions of such Offer, and
shall be accompanied by a true and correct copy of the Offer. If
any part of the consideration proposed in the Offer consists of
property other than cash, the price proposed to be paid pursuant
to such Offer shall be deemed to include the fair market value of
such non-cash consideration, as determined in good faith by the
board of directors of Associated. If Contributor objects to the
fair market value, as so determined, Contributor may require that
Associated obtain a determination of the fair market value of such
non-cash consideration pursuant to the procedures set forth in
paragraph (v) of this Section 8(i), and such determination shall
be final and binding on all parties.
(ii) Each Original Shareholder shall have the
option to purchase the First Refusal Interest at the Offer Price
and on such other terms as are set forth in the Offer, by giving
notice to Contributor within thirty (30) days of receipt by such
Original Shareholder of the First Refusal Notice (an Original
Shareholder which gives such notice being referred to as an
"Accepting Original Shareholder"), and by purchasing such First
Refusal Interest for the Offer Price in cash, against delivery of
the First Refusal Interest (with appropriate transfer
documentation) free and clear of any Liens within fifteen (15)
days following the expiration of such thirty (30) day period;
provided, however, that if Accepting Original Shareholders elect
in the aggregate to purchase more than 100% of the First Refusal
Interest, then the portion of the First Refusal Interest which may
be purchased by any Accepting Original Shareholder that has
elected to purchase more than such Accepting Original
Shareholder's Pro Rata Share (as defined below) of the First
Refusal Interest shall be reduced (based on each such Accepting
Original Shareholder's Pro Rata Share), but not below such
Accepting Original Shareholder's Pro Rata Share; and provided,
further, that the date for such purchase may be deferred solely to
the extent necessary to obtain any governmental consents or
approvals required to complete such purchase or, if applicable, to
the extent necessary to complete the determination of the fair
market value of any non-cash consideration proposed to be paid by
the Offeror, as provided in paragraph (i) above. For purposes of
this paragraph (ii) of this Section 8(i), an Accepting Original
Shareholder's "Pro Rata Share" shall be the percentage which such
Accepting Original Shareholder's ownership interest in Associated
represents of the ownership interest in Associated of all
Accepting Original Shareholders.
(iii) If the Original Shareholders do not give
timely notice of their election to purchase the entire First
Refusal Interest, or if such notice is timely given but the
Accepting Original Shareholders fail to purchase the entire First
Refusal Interest within the applicable time period specified in
this Section 8(i), then Contributor may, within the 90-day period
immediately following the expiration of the period during which
the Original Shareholders may give notice of such election, or, if
applicable, within the 90-day period immediately following such
failure to purchase the entire First Refusal Interest, transfer
the First Refusal Interest to the Offeror at a price not less than
the Offer Price and on the same terms and subject to the same
conditions as were set forth in the First Refusal Notice. If
Contributor does not complete such Transfer within such 90-day
period, no subsequent Transfer of all or any part of its Equity
Interest may be made without again complying with this Section
8(i), it being understood and agreed that the retention by
Contributor of a security interest in some or part of the First
Refusal Interest which is transferred shall not mean that such
Transfer has not been completed.
(iv) If Contributor fails to comply with this
Section 8(i) with respect to all or any part of its Equity
Interest (including without limitation any beneficial interest
therein), any attempted or purported Transfer thereof shall be
void and of no force or effect.
(v) The fair market value of any non-cash
consideration or property the value of which is to be determined
pursuant to the last sentence of paragraph (i) of this Section
8(i) shall be determined in accordance with the following
procedure: Contributor and Associated shall each select a
nationally recognized appraiser, which shall determine the
valuation or other issue in question. If the higher of the two
original appraisal values is not more than ten percent (10%) above
the lower appraisal value, the value in question shall be the
value agreed upon by the two original appraisers or, in the
absence of such an agreement, the value in question shall be the
average of the two original appraisal values. If the higher of the
two original appraisal values is more than ten percent (10%) above
the lower appraisal value, the two appraisers shall select a third
nationally recognized appraiser who shall determine a value which
shall be at least equal to the lower appraisal value and whose
determination of the value in question shall be final and binding
on all parties. All costs and expenses relating to any appraisal
or review conducted under this paragraph shall be borne by
Associated.
(vi) This Section 8(i) shall not apply to the
sale by Contributor in the public market of Contributor
Registrable Securities registered under the Securities Act or
pursuant to Rule 144 under the Securities Act.
(j) Confidentiality.
(i) Associated shall, and shall cause its
representatives to, keep confidential all information and records,
whether prepared by Contributor, its advisors or otherwise, and
whether written or oral, which were obtained, directly or
indirectly, by Associated or its representatives concerning the
business of FirstMark ("Confidential Information"). Associated
shall, and shall cause its representatives to, use Confidential
Information solely in connection with its analysis and review of
the transactions contemplated by this Agreement or in connection
with operating the business of FirstMark.
(ii) Associated may disclose Confidential
Information to any of its directors, officers, employees, agents
and advisors (each a "Representative" and, collectively, the
"Representatives") who need to know such Confidential Information
for the purpose of assisting Associated in connection with the
transactions contemplated by this Agreement or with operating the
business of FirstMark; provided, however, that prior to making
such disclosure, Associated shall advise each such Representative
of Associated's obligations under this Section 8(j) and Associated
shall be responsible for any breach of this Agreement by any such
Representative. Associated may disclose Confidential Information
if required by legal process or by operation of applicable law;
provided, however, that Associated shall first promptly advise and
consult with Contributor and its counsel concerning the
information Associated proposes to disclose.
(iii) Associated's obligations under clauses (i)
and (ii) of this Section 8(j) do not apply to information which
(x) was known by Associated prior to such disclosure and not
subject to any confidentiality agreement or obligation of secrecy
to Contributor or FirstMark of which Associated is aware or
reasonably should be aware, (y) at the time of disclosure is
generally available to and known by the public or the
telecommunications industry other than as a result of disclosure
in violation of clause (i) or (ii) of this Section 8(j) or (z) was
or becomes available to Associated on a non-confidential basis
from a source other than Contributor or its agents or advisors;
provided, however, that such source is not bound by a
confidentiality agreement or obligation of secrecy to Contributor
in respect thereof of which Associated is aware or reasonably
should be aware.
(iv) In the event that this Agreement is
terminated, all Confidential Information, whether or not then in
Associated's possession, and any copies thereof or notes or
extracts therefrom, shall be returned to Contributor, without
retaining any copies thereof, and Associated shall destroy, as
soon as practicable, all copies of any analyses, studies,
compilations or other documents prepared by Associated or any of
its Representatives to the extent that they contain, reflect or
are generated from any Confidential Information.
(v) Associated acknowledges and agrees that any
breach by it of the provisions of this Section 8(j) will cause
Contributor irreparable injury and damage, for which Contributor
cannot be adequately compensated in damages. Associated,
therefore, expressly agrees that Contributor shall be entitled to
seek injunctive relief and/or other equitable relief to prevent
any breach of the provisions of this Section 8(j), or any part
thereof, and to secure their enforcement.
(vi) The provisions of this Section 8(j) shall
not survive the Closing, except that the provisions of this
Section 8(j) shall survive with respect to any DEMS Licenses and
DEMS Systems unless and until control thereof is transferred to
Associated pursuant to this Agreement.
(k) Non-disclosure of Financial Terms. Associated agrees
that, except as requested by the FCC or required by law or legal process or
in connection with any financing, strategic alliance, acquisition or
disposition transaction, it shall not disclose to any third party, other
than its Affiliates or Representatives, the financial terms of the
transactions contemplated by this Agreement without the prior written
consent of Contributor.
(l) Anti-Dilution Rights. Associated agrees that the
Membership Percentage represented by the Interest to be issued to
Contributor under this Agreement (regardless of when any portion of such
Interest is issued hereunder) shall not be diluted by the first $75 million
of equity investments in Associated by the Original Shareholders and their
Affiliates from the date of this Agreement through August 19, 1997 and
shall be diluted in respect of any other equity investments by the Original
Shareholders or their Affiliates after the date of this Agreement based
upon (A) the amount of such equity investment and (B) the fair market value
of Associated (as determined in good faith by the board of directors of
Associated).
Section 9. Tax Matters.
(a) Tax Indemnification by Contributor.
(i) Contributor shall be liable for, and shall
indemnify Associated and its Affiliates and hold them harmless
from and against, any Taxes of FirstMark for taxable periods
ending on or before the Closing Date ("Pre-Closing Tax Periods")
or portions of taxable periods ending on or before the Closing
Date and any loss, damage, liability or expense, including, but
not limited to, reasonable fees for attorneys and other outside
consultants, incurred in connection with such Taxes.
(ii) Payments required under this Section 9(a)
shall be made within 30 days of Associated furnishing Contributor
with written evidence that Associated has paid such amounts or
such amounts are due and payable to a Taxing Authority.
(b) Apportionment of Taxes. In order to apportion
appropriately any Taxes relating to any taxable period beginning prior to
and ending after the Closing Date ("Straddle Period"), the parties hereto
shall, to the extent permitted under applicable law, elect with the
relevant Tax Authority to treat for all purposes, the Closing Date as the
last day of the taxable year or period of FirstMark, and such period shall
be treated as a short taxable year and a Pre-Closing Tax Period for
purposes of this Section 9. In any case where applicable law does not
permit FirstMark to treat the Closing Date as the last day of the taxable
year or period with respect to Taxes that are payable with respect to a
Straddle Period, the portion of any such Taxes that are allocable to the
portion of the taxable year ending on the Closing Date shall be deemed to
be equal to the amount which would be payable if the taxable year or period
ended on the Closing Date.
(c) Refunds.
(i) Contributor shall be entitled to any refunds
of Taxes attributable to FirstMark (including refunds paid by
means of credit against other or future Tax liabilities) for a
Pre-Closing Tax Period or the portion of a Straddle Period ending
on or before the Closing Date other than refunds arising from a
carryback of a loss or credit from any period other than a
Pre-Closing Tax Period.
(ii) Associated shall forward to Contributor any
refunds to which Contributor is entitled (pursuant to the terms of
this Section 9(c)) within 5 days after receipt thereof. In the
case of a refund received in the form of a credit against other or
future Tax liabilities, reimbursement in respect of such refund
shall be due on the due date for payment of the Taxes against
which such refund has been credited.
(d) Cooperation. After the Closing Date, each of Associated
and Contributor shall make available to the other, as reasonably requested,
and to any Taxing Authority, all information, records and documents
relating to Tax liabilities or potential Tax liabilities relating to
FirstMark and shall preserve all such information, records and documents
until the expiration of any applicable statute of limitations or extension
thereof. Associated shall render such assistance as shall be reasonably
requested by Contributor so as to comply with the responsibilities imposed
on Contributor by Section 9(f).
(e) Certain Other Definitions. For purposes of this Agreement
(i) "IRS" means the Internal Revenue Service; (ii) "Return" means all
returns, reports, declarations, estimates, information returns, statements
and forms of any nature regarding Taxes, including remittance advices,
required to be filed with any Taxing Authority or depository; (iii) "Tax"
means any federal, state, local or foreign tax, including, without
limitation, income (net or gross), gross receipts, franchise, estimated,
alternative minimum, add-on minimum, sales, use, transfer, registration,
value added, excise, natural resources, severance, stamp, occupation,
premium, windfall profit, customs, duties, real property, personal
property, capital stock, social security, unemployment, disability,
payroll, license, employee or other withholding, or other tax, of any kind
whatsoever, and including any interest, penalties or additions to tax
imposed with respect thereto; and (iv) "Taxing Authority" means any
Governmental Authority, domestic or foreign, having jurisdiction over the
assessment, determination, collection, or other imposition of Tax.
(f) Certain Taxes. All transfer, documentary, sales, use,
stamp, registration and other such Taxes and fees (including any penalties
and interest) incurred in connection with this Agreement ("Transfer Taxes")
shall be paid by Contributor when due, and Contributor shall file all
necessary Returns and other documentation with respect to all such Transfer
Taxes, and, if required by applicable law, Associated will, and will cause
FirstMark to, join in the execution of any such Returns and other
documentation. Associated shall reimburse Contributor for one-half of all
Transfer Taxes and one-half of the cost of filing Returns relating to
Transfer Taxes.
(g) Tax Treatment of Indemnity Payments. The Tax treatment of
all indemnity payments made by either party to or for the benefit of the
other party under this Agreement shall be treated by the parties hereto as
an adjustment to the consideration.
(h) Certain Representations. Contributor and FirstMark hereby
jointly and severally represent and warrant to Associated that (i) except
as set forth on Schedule 9(h)(i), FirstMark has filed or has had filed on
its behalf in a timely manner (within any applicable extension periods)
with the appropriate Taxing Authority all income and other materials
Returns with respect to Taxes of FirstMark; (ii) all material Taxes with
respect to FirstMark have been paid in full or have been provided for in
accordance with generally accepted accounting principles on Schedule
10(a)(x); (iii) there are no outstanding agreements or waivers extending
the statutory period of limitations applicable to any federal, state, local
or foreign income or other material Returns required to be filed by or with
respect to FirstMark; (iv) none of the Returns of or with respect to
FirstMark is currently being audited or examined by any Taxing Authority;
and (v) no deficiency for any income or other material Taxes has been
assessed with respect to FirstMark which has not been abated or paid in
full. FirstMark is not, and has not at any time been, a member of a
consolidated group for federal income tax purposes.
Section 10. Representations and Warranties.
(a) Representations and Warranties of Contributor and
FirstMark. Contributor and FirstMark hereby jointly and severally represent
and warrant to Associated as follows:
(i) Capitalization. The authorized capital stock
of FirstMark consists of one thousand (1,000) shares of common
stock, par value $.01 per share, of which one hundred (100) shares
are issued and outstanding and owned of record and beneficially by
Contributor. All of the shares comprising the Stock are validly
issued, fully paid and non-assessable and are held by Contributor
free and clear of all Liens. There are outstanding no securities
convertible into, exchangeable for, or carrying the right to
acquire, equity securities of FirstMark, or subscriptions,
warrants, options, rights or other arrangements or commitments
obligating FirstMark to issue or dispose of any securities or any
ownership interest therein. The Contribution of the Stock to
Associated pursuant to Section 3 hereof will vest in Associated
legal and valid title to the Stock, free and clear of all Liens
(other than Liens created by Associated).
(ii) Litigation. There is no action or
proceeding in any court or before any Governmental Authority
pending or, to Contributor's knowledge, threatened against
Contributor or any of its Affiliates, with respect to which there
is a reasonable likelihood of a determination which would have a
material adverse affect on the ability of Contributor to perform
its obligations under this Agreement or which is otherwise
material to FirstMark. Neither Contributor nor any of its
Affiliates is subject to any outstanding order, ruling, judgment
or decree which would have a material adverse effect on the
ability of Contributor to perform its obligations under this
Agreement or which is otherwise material to FirstMark.
(iii) Corporate Organization. FirstMark is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware.
(iv) Enforceability. This Agreement has been
duly executed and delivered by, and constitutes the valid and
binding obligation of, Contributor and FirstMark, enforceable
against Contributor and FirstMark in accordance with its terms.
(v) No Violation; No Consents or Approvals. The
execution, delivery and performance by Contributor and FirstMark
of this Agreement does not conflict with, result in a breach of or
cause a default under, with or without the giving of notice or the
passage of time, or both, or require any consent or approval of
any party pursuant to, the certificate of incorporation of
FirstMark or any material agreement or instrument to which
Contributor or FirstMark is a party or by which either of them or
any of their respective properties is bound, nor does it conflict
with or violate any Requirement of Law or require any consent or
approval of any Governmental Authority other than the Requisite
Regulatory Approvals.
(vi) DEMS Licenses; FirstMark DEMS Applications.
(A) FirstMark duly and validly holds each of the
DEMS Licenses listed on Schedule I, which are the only licenses
for DEMS granted to FirstMark or any of its Affiliates as of the
date of this Agreement. Each of the DEMS Licenses has been validly
issued, is in full force and effect, has not been suspended,
revoked, canceled, or modified in any adverse way, is not subject
to any conditions or requirements that have not been imposed upon
all such licenses generally, and, except as set forth on Schedule
10(a)(vi) hereto, is not subject to any pending regulatory or
judicial review. To the best knowledge of Contributor and
FirstMark, other than objections by Teledesic, there is not
pending any application, petition, objection, or other pleading
with the FCC or any court of appeals which questions the validity
of or contests any of the DEMS Licenses. To the best knowledge of
Contributor and FirstMark, no pending or threatened action or
matter has occurred that would inhibit or preclude the renewal of
any DEMS License in the ordinary course.
(B) FirstMark has, at all times, operated the
DEMS Systems in material compliance with the Communications Act of
1934, as amended (the "Act"), the rules of the FCC, and the terms
of the DEMS Licenses. No noncompliance with the Act, the rules of
the FCC or the terms of the DEMS Licenses has occurred with
respect to the DEMS Licenses which permits, or after notice or
lapse of time or both would permit, revocation or termination of
any DEMS License or would result in any impairment of the rights
of FirstMark with respect to the DEMS Licenses. All applications
and material reports required by the rules of the FCC have been
timely filed and all representations made in such applications and
reports are truthful and accurate in all material respects.
No radio equipment used in the operation of the DEMS Systems has
been modified from its manufacturers' type-accepted specifications
or causes interference to other FCC-licensed radio station
facilities. All structures that support radio equipment used in
the operation of the DEMS Systems are, and since their
construction have been, reported, registered, marked, lighted,
inspected and maintained in accordance in all material respects
with the rules of the FCC and the standards of the Federal
Aviation Administration.
(C) Schedule I includes a list of all
applications for additions to or modifications of the DEMS Systems
that are pending as of the date of this Agreement before the FCC.
(D) Except as disclosed on Schedule 10(a)(vi)
hereto, FirstMark possesses all authorizations required by any PUC
or other Governmental Authority with jurisdiction over the DEMS
Systems, including, without limitation, certificates of public
convenience and necessity, permits necessary for the use of land
or construction of facilities, and zoning variances (collectively,
the "Local Authorizations"). A list of all Local Authorizations in
effect as of the date of this Agreement is included in Schedule I.
The Local Authorizations are in full force and effect, have not
been suspended, revoked, canceled, or modified in any adverse way,
and are not subject to any conditions or requirements that have
not been imposed upon all wireless communications providers
generally and are not subject to any pending regulatory or
judicial review. To the best knowledge of Contributor and
FirstMark, there is not pending any application, petition,
objection, or other pleading with any state, county, or other
local regulatory agency or court of appeals which questions the
validity of or contests any of the Local Authorizations. FirstMark
has at all times operated the DEMS Systems in material compliance
with all state, county, and other local statutes and ordinances.
All facilities used in the operation of the DEMS Systems are, and
since their construction have been, in material compliance with
all applicable land use and zoning statutes and ordinances.
(E) No communications facility used in
connection with the DEMS Systems has been constructed by FirstMark
under circumstances where such construction may have significantly
affected the environment pursuant to the rules of the FCC, without
the preparation of an environmental assessment and a prior
determination by the FCC that such construction would result in no
significant environmental effect.
(F) The FirstMark DEMS Applications are the only
applications of FirstMark or any of its Affiliates for any DEMS
license.
(vii) Subscription Contracts. Schedule
10(a)(vii) hereto (as supplemented at the Closing by identifying
all additions thereto between the date hereof and such date) sets
forth all subscription contracts for the provision of DEMS entered
into by FirstMark. Accurate and complete copies of all contracts
listed on Schedule 10(a)(vii) have been provided to Associated.
(viii) Tangible Assets. All material tangible
assets comprising a part of the DEMS Systems are in good working
order and condition.
(ix) Intellectual Property. FirstMark has, and
upon consummation of the Contribution will have, all intellectual
property rights associated with the DEMS Systems and such
intellectual property rights do not and will not infringe upon the
intellectual property rights of any Person.
(x) No Undisclosed Assets or Liabilities.
Schedule 10(a)(x) hereto sets forth all assets and liabilities of
FirstMark as of the date of this Agreement. Between the date of
this Agreement and the Closing, except as expressly permitted by
this Agreement, the Schedules and Exhibits hereto, FirstMark will
not incur any liabilities other than liabilities arising in the
ordinary course of business of the operations of the DEMS Systems
that will not, individually or in the aggregate, have a material
adverse effect on the assets, business or operations of FirstMark.
(b) Representations and Warranties of Associated. Associated
hereby represents and warrants to Contributor and FirstMark as follows:
(i) Capitalization. Schedule 10(b)(i) sets forth
the outstanding Membership Percentage and the capital account of
each Member as of the date of this Agreement. As of the date of
this Agreement, except pursuant to the Mandl Employment Agreement
and under Associated's Equity Incentive Plan, there are
outstanding no securities or other instruments convertible into,
exchangeable for, or carrying the right to acquire, any Interest,
or subscriptions, warrants, options, rights or other arrangements
or commitments (other than this Agreement) obligating Associated
to issue any Interest, or any ownership interest therein.
(ii) Corporate Organization. Associated is a
limited liability company duly organized, validly existing and in
good standing under the laws of the State of Delaware.
(iii) Corporate Power and Authority. Associated
has the requisite limited liability company power and authority to
enter into this Agreement, to perform its obligations hereunder
and to consummate the transactions contemplated hereby. The
execution, delivery and performance by Associated of this
Agreement and the consummation by Associated of the transactions
contemplated hereby have been duly authorized by all requisite
limited liability company action on the part of Associated, and no
other limited liability company proceedings on the part of
Associated or its members are necessary to authorize this
Agreement and the transactions contemplated hereby. The Original
Shareholders have irrevocably waived all rights under Section
5.1(d) of the Limited Liability Company Agreement in connection
with the transactions contemplated by this Agreement. This
Agreement has been duly executed and delivered by Associated and
constitutes the valid and binding obligation of Associated,
enforceable against Associated in accordance with its terms.
(iv) No Violation. The execution, delivery and
performance by Associated of this Agreement does not conflict
with, result in a breach of or cause a default under, with or
without the giving of notice or the passage of time, or both, or
require any consent or approval of any party pursuant to, its
operating agreement or any material agreement or instrument to
which it is a party or by which it or any of its property is
bound, nor does it conflict with or violate any Requirement of Law
or require any consent or approval of any Governmental Authority
other than the Requisite Regulatory Approvals.
(v) Litigation. As of the date of this
Agreement, there is no litigation pending or, to Associated's
knowledge, threatened against Associated or any of its Affiliates
with respect to which there is a reasonable likelihood of a
determination which would have a material adverse effect on the
ability of Associated to perform its obligations under this
Agreement. As of the date of this Agreement, neither Associated
nor any of its Affiliated is subject to any outstanding orders,
rulings, judgments or decrees which would have a material adverse
effect on the ability of Associated to perform its obligations
under this Agreement.
(vi) Acquisition of DEMS Licenses. As of the
date of this Agreement, Associated and its Affiliates have no
agreement or understanding with any Person (other than Contributor
or FirstMark) with respect to the direct or indirect purchase or
sale of any DEMS license or any Person which holds any DEMS
license, and as of the date of this Agreement, neither Associated
nor any of its Affiliates is engaged in any discussions or
negotiations relating to any such purchase or sale.
Section 11. Miscellaneous.
(a) Further Assurances. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use all reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to
be done, all things necessary, proper or advisable under any Requirement of
Law to perform its obligations hereunder and to consummate and make
effective the transactions contemplated to be consummated by such party
under this Agreement. Without limitation of the generality of the
foregoing, each party hereto (i) agrees to use all reasonable efforts to
obtain, and to cooperate with the other party in obtaining, as promptly as
practicable as contemplated by this Agreement, any and all Requisite
Approvals, and (ii) agrees that it will not take any action, or enter into
any agreement, which is inconsistent with, or which would impair or
restrict in any manner, its right or ability to promptly perform its
obligations hereunder.
(b) Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the respective successors, heirs, personal
representatives and permitted assigns of the parties hereto, provided that
neither this Agreement nor any rights or obligations hereunder may be
assigned or delegated by Contributor without Associated's prior written
consent. For purposes of this Agreement the term "successor" includes,
without limitation, any Person who or which acquires in a single or series
of related transactions more than 50% of the assets, earnings or voting
stock of a party.
(c) Indemnification; Joint and Several Liability of FirstMark
and Contributor Prior to Closing.
(i) From and after the Closing, Contributor
shall be liable for, and shall indemnify Associated and hold her
harmless from and against, any and all losses, claims, damages or
liabilities incurred by Associated, or to which Associated becomes
subject, to the extent that such losses, claims, damages or
liabilities result from the breach by Contributor or FirstMark of
any of their respective representations and warranties or
covenants contained in this Agreement. In addition, Contributor
shall be liable for, and shall indemnify Associated and its
Affiliates (including FirstMark) and hold them harmless from and
against, any and all losses, claims, damages or liabilities
incurred by Associated or any of its Affiliates, or to which any
of them becomes subject, to the extent that such losses, claims,
damages or liabilities result from FirstMark's former status as an
Affiliate of Contributor. Payments required under this paragraph
shall be made within 30 days of Associated's request therefor.
(ii) From and after the Closing, Associated
shall be liable for, and shall indemnify Contributor and hold her
harmless from and against, any and all losses, claims, damages or
liabilities incurred by Contributor, or to which Contributor
becomes subject, to the extent that such losses, claims, damages
or liabilities result from the breach by Associated of any of its
representations and warranties or covenants contained in this
Agreement. Payments required under this paragraph shall be made
within 30 days of Contributor's request therefor.
(iii) Contributor and FirstMark shall be jointly
and severally liable for any breach by either of them prior to the
Closing of their obligations hereunder; provided that, if the
Closing has occurred, Contributor shall be solely liable for any
such breach.
(d) Survival. The representations and warranties of the
parties contained herein shall survive the Closing of the transactions
contemplated hereby. The covenants and agreements contained herein to be
performed or complied with prior to the Closing (or termination of the
Trust Agreement, if applicable) shall expire at the Closing (or termination
of the Trust Agreement, if applicable). The covenants and agreements
contained herein to be performed or complied with after the Closing shall
survive the Closing in accordance with their terms without limitation as to
time unless otherwise specifically indicated. Nothing in this Section 11(d)
shall limit the rights and remedies of any party for any breach by another
party of any of its representations, warranties, covenants or other
agreements under this Agreement.
(e) Entire Agreement. This Agreement (including the Exhibits
and Schedules hereto) and the other agreements and instruments which may be
entered into in connection herewith constitute the entire agreement of the
parties hereto with respect to the subject matter hereof and thereof and
shall supersede any prior expressions of intent or understanding with
respect to the transactions provided for herein and therein.
(f) Costs and Expenses. Except as otherwise provided in this
Agreement, each party agrees to bear its own expenses, fees and costs
incurred in connection with the transactions contemplated by this
Agreement.
(g) Amendment. Any amendment hereto shall be effective only
if in writing and signed by each of the parties hereto.
(h) Waiver; Cumulative Rights. No provision of this Agreement
shall be deemed to have been waived by any act or knowledge of either party
or of such party's agents, officers or employees, but only by an instrument
in writing signed by such party and delivered to the other party hereto
specifying such waiver. The failure or delay of either party to require
performance by the other party of any provision hereof shall not affect its
right to require performance of such provision unless and until such
performance has been waived in writing. Each and every right hereunder is
cumulative and may be exercised in whole or in part from time to time.
(i) Notices. All notices, demands, requests, certificates or
other communications under this Agreement shall be in writing and shall be
mailed by certified or registered mail (return receipt requested) with
charges prepaid, hand delivered or sent by facsimile transmission or by
commercial courier to the address set forth below for each of the parties
(or at such other address as shall be specified by a party by like notice
to the other party):
(i) if to Associated:
Associated Communications, L.L.C.
11 Canal Center Plaza Suite 300A
Alexandria, VA 22314
Attention: Laurence Harris, Esq.
General Counsel
Facsimile: (703) 299-4585
with copies to:
The Associated Group, Inc.
3 Bala Plaza East
Suite 502
Bala Cynwyd, PA 19004
Attention: Scott G. Bruce, Esq.
Facsimile: (610) 660-4920
and
Skadden, Arps, Slate, Meagher & Flom LLP
One Beacon Street
Boston, MA 02108
Attention: Kent A. Coit, Esq.
Facsimile: (617) 573-4822
(ii) if to Contributor or FirstMark:
Lynn Forester
c/o FirstMark Holdings, Inc.
527 Madison Avenue
New York, New York 10022
and
Lynn Forester
1185 Park Avenue
Apartment 14B
New York, New York 10128
with copies to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attention: Stephen Fraidin, Esq.
Facsimile: (212) 859-4000
and
Starr & Company
350 Park Avenue
New York, New York 10022
Attention: Kenneth Starr
Facsimile: (212) 759-6694
Notices shall be deemed delivered when received; provided that any notice
delivered after business hours or on a Saturday, Sunday or legal holiday at
the place of such delivery shall be deemed for purposes of computing any
time period hereunder to have been delivered on the next business day in
such place of delivery. Nothing in this Section 11(i) shall be deemed to
constitute consent to the manner and address for service of process in
connection with any legal proceeding (including litigation arising out of
or in connection with this Agreement), which service shall be effected as
required by applicable law.
(j) Governing Law. This Agreement shall be governed by and
interpreted in accordance with the internal laws of the State of New York,
without reference to its conflicts of law principles.
(k) Counterparts. This Agreement may be signed in
counterparts, each of which shall be deemed an original but which together
shall constitute one and the same instrument.
(l) Headings. The headings contained in this Agreement are
for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed by the
parties hereof on the date first above written.
ASSOCIATED COMMUNICATIONS, L.L.C.
By: /s/ Alex J. Mandl
-----------------------------------
Name: Alex J. Mandl
Title: Chairman & CEO
FIRSTMARK COMMUNICATIONS, INC.
By: /s/ Lynn Forester
----------------------------------
Name: Lynn Forester
Title:President and Chief Executive Officer
/s/ Lynn Forester
----------------------------------
Lynn Forester
Signed and agreed upon, as to
Sections 8(h) and 8(i) only.
MICROWAVE SERVICES, INC.
By: /s/ William H. Berkman
-------------------------------
Name: William H. Berkman
Title: President
DIGITAL SERVICES CORPORATION
By: /s/ Rajendra Singh
-------------------------------
Name: Rajendra Singh
Title: President
EXHIBIT 4
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 19th day of August 1996, to be effective
September 1, 1996 (the "Effective Date"), between Associated
Communications, L.L.C. (formerly DMT, L.L.C.), a Delaware limited liability
company (the "Company"), and Alex J. Mandl (the "Executive"), and, as to
the last sentence of Section 4(d)(I) and Sections 4(d)(II), 4(d)(III),
4(f), 8(a)(ii), 10(c) and 14 hereof only, Microwave Services, Inc., a
Delaware corporation ("MSI"), and Digital Services Corporation, a Virginia
corporation ("DSC", and collectively with MSI, the "Original
Shareholders").
The Board of Directors of the Company (the "Board") desires to
provide for the employment of the Executive as a member of the Company's
management. The Executive is willing to commit himself to serve the
Company, on the terms and conditions herein provided.
In order to effect the foregoing, the Company and the Executive
wish to enter into an employment agreement on the terms and conditions set
forth below. Accordingly, in consideration of the premises and the
respective covenants and agreements of the parties herein contained, and
intending to be legally bound hereby, the parties hereto agree as follows:
1. Employment. The Company hereby agrees to employ the Executive,
and the Executive hereby agrees to serve the Company, on the terms and
conditions set forth herein.
2. Term. The Company hereby employs the Executive, and the
Executive hereby accepts such employment, for the period commencing on the
Effective Date and ending on the sixth anniversary of the Effective Date,
unless further extended as provided in this Section 2 or sooner terminated
in the event that Executive's employment is terminated pursuant to Section
6 hereof (the "Term of Employment"). On the sixth and each subsequent
anniversary of the Effective Date, the Term of Employment ---- shall
automatically be extended for an additional year unless, not later than 180
days prior to any such anniversary, the Company or the Executive shall have
given notice not to extend the Term of Employment.
3. Position and Duties. Commencing on the Effective Date and
continuing for the remainder of the Term of Employment, the Executive shall
be employed as Chairman of the Board and Chief Executive Officer of the
Company. He shall have such authorities, duties and responsibilities
customarily assigned to a Chairman of the Board and Chief Executive Officer
of an enterprise like the company (including those associated with a public
company if the Company becomes a Public Company, as such term is defined in
Section 4(d)(I) below). The Executive shall be assigned no duties or
responsibilities that are materially inconsistent with, or that materially
impair his ability to discharge, the foregoing duties and responsibilities.
He shall report solely and directly to the Board. Upon any termination of
the Executive's employment with the Company, the Executive shall resign
from the Board. The Executive shall devote substantially all his working
time and efforts to the business and affairs of the Company; provided,
however, that the Executive may also (a) serve on the boards of directors
or trustees of the business enterprises listed on Exhibit A hereof, as well
as any others to which the Board gives its written consent, which shall not
be unreasonably withheld, (b) serve on the boards of directors or trustees
of trade associations and/or charitable organizations or engage in
charitable activities and community affairs, and (c) manage his personal
investments and affairs, provided that such activities do not interfere
with the proper performance of his duties and responsibilities under this
Agreement.
4. Compensation and Related Matters.
(a) Salary. The Company shall pay Executive a base salary ("Base
Salary") during the period of the Executive's employment hereunder, which
shall be at an initial rate of five-hundred-thousand dollars ($500,000) per
annum. The Base Salary may be adjusted from time to time as provided in the
next paragraph and shall be paid in accordance with the Company's standard
payroll procedure.
Prior to the third anniversary of the Effective Date, the Base
Salary shall be reviewed for increase effective on such third anniversary
in the discretion of the Board. Thereafter, the Base Salary shall be
reviewed at least annually for increase in the discretion of the Board. The
Executive's Base Salary may not be decreased at any time during the Term of
Employment.
(b) Annual Bonus. For the Company's fiscal year in which the Term
of Employment begins, the Company shall pay the Executive an amount equal
to the product of five-hundred-thousand dollars ($500,000) multiplied by a
fraction, the numerator of which is the number of calendar days of such
fiscal year during which the Executive is employed hereunder, and the
denominator of which is 366. With respect to each of the first three full
fiscal years of the Company during the period of the Executive's employment
hereunder, the Company shall pay the Executive an annual bonus of
five-hundred-thousand dollars ($500,000). The respective bonus amounts
referred to in the preceding sentences of this on 4(b) shall be paid within
thirty (30) days after the end of the Company's fiscal year in respect of
which such bonus amount is payable. With respect to the fourth and
subsequent full fiscal years of the Company during the period of the
Executive's employment hereunder, the Executive shall be entitled to an
annual bonus in such amount and based upon such criteria as the Board may
determine in its discretion.
(c) Non-Equity-Based Annual Compensation Programs. Beginning on
the third anniversary of the Effective Date, the Executive shall
participate in all annual (but not long-term) executive compensation plans
and programs of the Company which are not equity-based at a level
commensurate with his seniority and position at the Company, provided that
this Section 4(c) shall not duplicate the amount of any benefit provided
pursuant to the last sentence of Section 4(b) hereof.
(d) Company Appreciation Rights.
(I) As of the Effective Date, the Company shall grant the
Executive six separate Company Appreciation Rights ("CARs") which will
expire on the tenth anniversary of the Effective Date and which will vest
on the first through sixth anniversaries of the Effective Date,
respectively, if the Executive shall be employed by the Company on the
respective six anniversaries; provided, however, that, if the Executive's
employment shall be terminated for any reason (other than a termination by
the Company for "Cause," as defined in Section 6(c) hereof), the CAR which
would otherwise have vested on the anniversary of the Effective Date next
following the issuance of a Notice of Termination (as defined in Section
6(e) hereof, except in the case of termination due to death in which event
the date of death shall be deemed to be the issuance of such Notice for
this purpose) in connection with such termination shall vest on the
Executive's Date of Termination (as defined in Section 6(f) hereof). Each
vested CAR will entitle the Executive to receive, as soon as practicable
after its Settlement Date (defined below) in accordance with the terms
hereof, an amount equal to three percent (3%) (subject to adjustment as
described below) of the amount by which the equity value of the Company on
the Settlement Date (calculated based on the Fair Market Value, as defined
below) exceeds the applicable Target Value, as set forth in the table below
(subject to adjustment as described below). If on a Settlement Date the
Company's equity securities which may be paid to the Executive upon
settlement of a CAR are not listed and traded on a national securities
exchange or on the Nasdaq National Market (if such equity securities are so
listed and traded, the Company shall be deemed to be a "Public Company"),
the amount to be paid to the Executive shall be paid as soon as
practicable, and in any event within 120 days, after the Company has
received notice of the final determination of the Company's Fair Market
Value made in accordance with Section 4(d)(VI) hereof. In the discretion of
the Board, the amount to be paid to the Executive may be paid in cash,
equity securities of the Company, or any combination thereof, and/or such
other form of consideration as the Board may determine in good faith;
provided, that, if equity securities of the Company are used and more than
one class of equity securities is outstanding, the Executive shall have the
right to request an appraisal of the fair market value of such equity
securities in accordance with the procedures set forth in Section 4(d)(VI)
hereof for determining the Fair Market Value of the Company; and provided,
further, that a form of consideration other than cash or equity securities
of the Company can be used only with the consent of the Executive, which
shall not be unreasonably withheld. If the Executive gives the Company
notice that he does not consent to payment in such form, the Company shall
pay him promptly in cash and/or equity securities of the Company. If equity
securities of the Company are paid to the Executive, all such securities
shall be of the same type as the securities owned at the time of payment by
the Original Shareholders. If the equity securities of the Company
delivered to the Executive upon the settlement of a CAR are of more than
one class of security, the number of securities of each class so delivered
shall bear the same proportionate relationship as the securities of such
classes then owned by the Original Share holders (including for purposes of
this Section 4(d)(I), their respective successors) bear to each other. If
the Company becomes a Public Company pursuant to an initial public offering
(the "IPO") of equity securities pursuant to a registration statement under
the Securities Act of 1933, as amended (the "Securities Act"), or
otherwise, (A) the Company will, if requested in writing by the Executive,
use its reasonable best efforts to cause to be included in any registration
statement with respect to a public offering (including the IPO) of equity
securities of the class or classes issued to the Executive upon settlement
of a CAR or issued or issuable to the Executive upon exercise of an Option
(as defined in Section 4(d)(V) below) an amount of such equity securities
so issued to and owned by, or so issuable to, the Executive, as of the
Conversion Date (as defined in Section 4(d)(V) below) (the total number of
such equity securities, subject to adjustments for splits, combinations and
the like, being referred to as the "Maximum Amount"), proportionate to the
amount of such equity securities then owned by the Original Shareholders
which are included in such registration statement (based on the total
amount of such equity securities then owned by the Original Shareholders,
and the Maximum Amount, respectively), and (B) in each of the four
successive twelve-month periods, the first of which commences on the
Conversion Date and each of the remaining three of which commences on each
of the three respective subsequent anniversaries thereof, the Company will,
if requested in writing by the Executive (which request with respect to the
first such twelve-month period may not be made prior to six months after
consummation of the IPO), use its reasonable best efforts to promptly cause
to be registered under the Securities Act, and registered or qualified
under such state securities laws as the Executive may reasonably request
(provided that the Company shall not be required to consent to general
service of process in any jurisdiction where it is not then so subject),
for public sale by the Executive an amount of such equity securities
constituting at least 25% of the difference between the Maximum Amount and
the number of such equity securities, if any, sold by the Executive in the
IPO (such difference being referred to as the "Maximum Annual Amount");
provided that in no event will the Executive sell publicly more than the
Maximum Annual Amount in any such twelve-month period. Such registration
rights shall not be transferable to any transferee of such equity
securities (except to transferees referred to in clauses (i) and (ii) of
the last sentence of Section 4(d)(IV) or in the last sentence of Section
4(d)(V)). In addition, such registration rights shall be subject to the
Executive entering into underwriting (if applicable), indemnification, and
other customary agreements, and to the Company's right to defer (or require
the Executive to suspend sales pursuant to) any such registration if (but
only for so long as) it determines in good faith that such registration (or
continued sales) would require disclosure which would be materially adverse
to the Company's interests. The Company shall keep any registration
statement filed under clause (B) above effective for at least 90 days
(increased by the number of days, if any, that sales under any such
registration statement are suspended as provided above). If sold in the
public market, shares registered pursuant to this Section 4(d)(I) shall not
be subject to the first refusal rights set forth below in Section
4(d)(III). The Company shall bear all registration expenses (exclusive of
underwriting discounts and commissions) under this Section 4(d)(I) and
shall provide the Executive with indemnification against liabilities under
the securities laws in customary form.
CAR Vesting Target
Date Value
1 1st Anniversary $200 million
2 2nd Anniversary $250 million
3 3rd Anniversary $325 million
4 4th Anniversary $425 million
5 5th Anniversary $500 million
6 6th Anniversary $2.75 billion
The applicable percentage (initially three percent (3%)) shall be
appropriately adjusted downward by the Board in good faith to reflect
equity investments in the Company (whether such investments are made in
cash or in kind and whether made prior to, on or after the Effective Date);
provided, however, that (i) no such adjustment shall be made in respect of
up to $25 million of equity investments in the Company to the extent such
investments were or are made by the Original Shareholders or their
respective affiliates prior to one year after the Effective Date, (ii) if
equity investments in the Company in excess of $25 million up to a total of
$75 million (i.e., $50 million over and above such $25 million) were or are
made by the Original Shareholders or their respective affiliates prior to
one year after the Effective Date, in lieu of adjusting the applicable
percentage, the applicable Target Value of each CAR shall be adjusted
upward by the amount of such excess equity investments and (iii) if equity
invest ments in the Company not covered by clause (i) or (ii) above were or
are made by the Original Shareholders or their respective affiliates, the
appropriate adjustment in the applicable percentage in respect of such
equity investments shall be based on (A) the amount of such equity
investment, and (B) the Fair Market Value of the Company (determined in
accordance with Section 4(d)(VI)) at the time of such equity investment.
For purposes of this Section 4(d), equity investments made by the Original
Sharehold ers or their respective affiliates shall include (and shall be
deemed made at the time of the payment or advancement of), in addition to
actual capital contributions or investments, amounts paid by the Original
Shareholders or their respective affiliates to the Company in reim
bursement of costs or expenses incurred by or on behalf of the Company and
the amount of the loan advanced by the Original Shareholders to the
Executive pursuant to Section 4(d), provided that if the "DTS Systems
Transfers" are "con summated" (with such quoted terms having the same
meaning as in the Limited Liability Company Agreement, dated as of March 5,
1996 between the Original Shareholders (the "DMT L.L.C. Agreement")), the
contribution to the Company of "DTS Licenses" (with such quoted term having
the same meaning as in the DMT L.L.C. Agreement) pursuant thereto shall not
be considered an investment for purposes of this Section 4(d).
The applicable Target Value of each CAR shall be appropriately adjusted
downward dollar for dollar by the Board in good faith to reflect
distributions from the Company in respect of equity interests in the
Company (whether such distributions are made in cash or in kind); provided,
however, that no adjustment shall be made with respect to distributions for
tax liabilities attributable to such equity interests. For the thirty-day
period immediately following the Company's notice to the Executive that an
additional non-cash equity investment has been made in the Company (other
than a non-cash equity investment pursuant to the DTS Systems Transfers) ,
or that the Company has made a non-cash distribution in respect of equity
interests in the Company (which notice the Company agrees to provide within
fifteen (15) days following any such investment or distribution) the
Executive shall have a right to request an appraisal of the fair market
value of such equity investment or distribution in accordance with the
procedures set forth in Section 4(d)(VI) hereof. In the event the Company
fails to give notice to the Executive as provided in the preceding
sentence, the thirty-day period during which the Executive may request such
appraisal shall commence on the first date, after the end of the fifteen
(15) day notice period for the Company, on which the Executive knows of the
applicable equity investment or distribution. Any appraisal so requested
shall be made only at the first subsequent Settlement Date, unless the
Company, in its discretion, decides to have the appraisal made earlier;
provided, however, that if the aggregate value of all such non-cash equity
investments or distributions, respectively, would reasonably be estimated
to exceed $50 million, the Executive may include in the foregoing request a
request for a current appraisal (including of the dilutive effect of such
investments) in which event an appraisal thereof in accordance with Section
4(d)(VI) shall be made as promptly as reasonably possible. In the case of
an equity investment in cash whereby equity interests in the Company of a
different class from the equity interests held by the Original Shareholders
are issued, the Executive may request an appraisal of the dilutive effect
of such investment on equity interests and the CARs, in which event an
appraisal in accordance with Section 4(d)(VI) shall be made as promptly as
practicable. It shall be a condition to the Executive's receipt of an
Equity Interest (as defined in Section 4(d)(II) below) that, if requested
by the Company, the Executive becomes a party to the DMT L.L.C. Agreement
as then in effect, or any analogous partnership, stockholders or other
governance agreement (with respect to any successor partnership or
corporate entity) to which the Original Shareholders (or their successors)
are parties (such DMT L.L.C. Agreement or analogous agreement being
sometimes referred to as a "Company Governance Agreement"). The Company
shall give the Executive written notice of any changes (which notice shall
include the full text of such changes) which are made in the Company
Governance Agreement from time to time, such notice to be given within
fifteen (15) days following any such change. It is agreed that if the
Executive becomes a party to a Company Governance Agreement, in the event
of any conflict or inconsistency between the respective rights and
obligations of the Executive, the Company and the Original Shareholders
thereunder and under this Agreement, the provisions of this Agreement shall
control.
(II) If the Original Shareholders (including for purposes of this
Section 4(d)(II) and Section 4(d)(III), their respective successors) shall
sell to a third party any of their equity interests in the Company at a
time (whether or not during the Term of Employment) when the Executive
holds vested CARs or owns any equity interest in the Company as a result of
the settlement of any CAR or otherwise (an "Equity Interest"):
(A) The Original Shareholders shall require the purchaser
of their equity interests to purchase, at the Executive's election, the same
percentage of the aggregate of the Executive's vested CARs (treating such
vested CARs as if the date of purchase were a Settlement Date and the
vested CARs had been converted into an Equity Interest as provided in
Section 4(d)(I) above immediately prior to such purchase) and Equity
Interest as the percentage of the aggregate equity interests of the
Original Shareholders which is being purchased; the purchase from the
Executive shall be made on the same terms and for the same consideration as
the purchase from the Original Shareholders; and
(B) The Original Shareholders, at their election, may require the
purchaser of their equity interests to purchase, and the Executive to sell,
the same percentage of the aggregate of the Executive's vested CARs
(treating such vested CARs as if the date of purchase were a Settlement
Date and the vested CARs had been converted into an Equity Interest as
provided in Section 4(d)(I) immediately prior to such purchase) and Equity
Interest as the percentage of the aggregate equity interests of the
Original Shareholders which is being purchased; the Original Shareholders,
in their discretion, may direct the Company to vest part or all of the
Executive's unvested CARs immediately prior to such date of purchase; any
purchase from the Executive shall be made on the same terms and for the
same consideration as the purchase from the Original Shareholders.
(III) Upon the terms and subject to the conditions of this
Section 4(d)(III), the Executive grants the Original Shareholders a right of
first refusal with respect to any sale or other disposition for value by the
Executive (a "Transfer") of any Equity Interest.
(i) If the Executive desires to effect a Transfer of some
or all of his Equity Interest pursuant to a bona fide offer (an "Offer") from
any person or entity (an "Offeror"), the Executive shall give written notice
of such Offer (a "First Refusal Notice") to each of the Original Shareholders.
The First Refusal Notice shall specify the number or amount of securities
comprising the Equity Interest proposed to be transferred pursuant to such
Offer (the "First Refusal Interest"), the price proposed to be paid by the
Offeror (the "Offer Price"), the identity of the Offeror and the other
terms and conditions of such Offer, and shall be accompanied by a true and
correct copy of the Offer. If any part of the consideration proposed in the
Offer consists of other than cash, the price proposed to be paid pursuant
to such Offer shall be deemed to include the fair market value of such
non-cash consideration, as determined in good faith by the Board. If the
Executive objects to the fair market value, as so determined, the Executive
may require that the Company obtain a determination of the fair market
value of such non-cash consideration pursuant to the procedures set forth
in Section 4(d)(VI) hereof for determining the fair market value of the
Company, and such determination shall be final and binding on all parties.
(ii) Each Original Shareholder shall have the option to
purchase the First Refusal Interest at the Offer Price and on such other terms
as are set forth in the Offer, by giving notice to the Executive within thirty
(30) days of receipt by such Original Shareholder of the First Refusal
Notice (an Original Shareholder which gives such notice being referred to
as an "Accepting Original Shareholder"), and by purchasing such First
Refusal Interest for the Offer Price in cash, against delivery of the First
Refusal Interest (with appropriate transfer documentation) free and clear
of any liens or encumbrances within fifteen (15) days following the
expiration of such thirty (30) day period; provided, however, that if
Accepting Original Shareholders elect in the aggregate to purchase more
than 100% of the First Refusal Interest, then the portion of the First
Refusal Interest which may be purchased by any Accepting Original
Shareholder that has elected to purchase more than such Accepting Original
Shareholder's Pro Rata Share (as defined below) of the First Refusal
Interest shall be reduced (based on each such Accepting Original
Shareholder's Pro Rata Share), but not below such Accepting Original
Shareholder's Pro Rata Share; and provided, further, that the date for such
purchase may be deferred solely to the extent necessary to obtain any
governmental consents or approvals required to complete such purchase or,
if applicable, to the extent necessary to complete the determina tion of
the fair market value of any non-cash consideration proposed to be paid by
the Offeror, as provided in subparagraph (i) above. For purposes of this
paragraph (ii) of this Section 4(d)(III), an Accepting Original
Shareholder's "Pro Rata Share" shall be the percentage which such Accepting
Original Shareholder's ownership interest in the Company represents of the
ownership interest in the Company of all Accepting Original Shareholders.
(iii) If the Original Shareholders do not give timely notice
of their election to purchase the entire First Refusal Interest, or if such
notice is timely given but the Accepting Original Shareholders fail to
purchase the entire First Refusal Interest within the applicable time
period specified in this Section 4(d)(III), then the Executive may, within
the 90-day period immediately following the expiration of the period during
which the Original Shareholders may give no tice of such election, or, if
applicable, within the 90-day period immediately following such failure to
purchase the entire First Refusal Interest, transfer the First Refusal
Interest to the Offeror at a price not less than the Offer Price and on the
same terms and subject to the same conditions as were set forth in the
First Refusal Notice. If the Executive does not complete such Transfer
within such 90-day period, no subsequent Transfer of all or any part of his
Equity Interest may be made without again complying with this Section
4(d)(III), it being understood and agreed that the retention by the
Executive of a security interest in some or part of the First Refusal
Interest which is transferred shall not mean that such Transfer has not
been completed.
(iv) If the Executive fails to comply with this Section
4(d)(III) with respect to all or any part of his Equity Interest (including
without limitation any beneficial interest therein), any attempted or
purported Transfer thereof shall be void and of no force or effect.
(IV) Upon any termination of Executive's employment, the
Executive's CARs which have not vested on or before the Date of Termination
shall be forfeited. No Settlement Date shall occur with respect to
forfeited CARs. Except to the extent provided in Section 4(d)(II) hereof,
CARs held by the Executive (whether vested or not) can be transferred (i)
during his lifetime only by gratuitous transfers to immediate family
members or to trusts for their benefit, and (ii) upon his death by his will
or the laws of descent and distribution.
(V) Except to the extent previously settled pursuant to Section
4(d)(II) hereof, the Settlement Date of each vested CAR shall occur, at the
Executive's election, at any time after its vesting and before the tenth
anniversary of the Effective Date, even if the Term of Employment shall
have already ended. Notwithstanding the foregoing, if any vested CAR shall
still be outstanding on the tenth anniversary of the Effective Date, such
anniversary shall be its Settlement Date (and it shall automatically be
settled and thereby expire). If the Company becomes a Public Company, the
Board shall effect as promptly as practicable the conversion (the
"Conversion") of each outstanding CAR (whether or not vested) into a stock
option ("Option"), effective as of the date the Company becomes a Public
Company (such date being referred to as the "Conversion Date"), having the
same vesting schedule, vesting rights (including upon termination of
employment) and term as the CAR being converted, commencing with the
Effective Date. In converting the CARs into Options, the Board shall
proceed in good faith and on an equitable basis so as to preserve the value
and economic opportunities previously represented by the CARs. If on the
Conversion Date there are outstanding equity interests of the Company of a
different class than the shares of common stock for which, as a result of
the Conversion, the Options will be exercisable, the terms of the
Conversion as determined by the Board shall be subject to review, at the
Executive's request, in accordance with the procedures described in Section
4(d)(VI), including, without limitation, determination of the exercise
price and the number of shares subject to the Options. Each Option shall be
exercisable for shares of a class of common stock of the Company that is
listed on a national securities exchange or on the Nasdaq National Market.
Pursuant to the Conversion, each CAR shall become an Option to acquire
shares having an aggregate value (val ued at the average closing price of a
share over the first twenty (20) days of public trading of such class of
shares commencing on the Conversion Date or, if, in accordance with Section
4(d)(I), the Executive is selling shares in the IPO whereby the Company
becomes a Public Company, valued at the price per share to the public of
such shares in the IPO (the "Share Value")) equal to the product of
multiplying (1) the equity value of the Company on the Conversion Date,
which, unless on the Conversion Date there are outstanding equity interests
of the Company of a different class than the shares of common stock for
which, as a result of the Conversion, the Options will be exercisable,
shall be the Share Value times the number of outstanding shares of common
stock of the Company as of the Conversion Date (and in any event the
determination of such equity value shall take the Share Value into account)
by (2) the applicable percentage for the CAR as set forth in Section
4(d)(I), as adjusted in accordance with that Section (the "CAR
Percentage"). Such Option shall have an aggregate exercise price equal to
the product of multiplying (1) the Target Value of the CAR, as adjusted if
applicable, on the Conversion Date by (2) the CAR Percentage. Such Option
shall provide that in the event that any dividend or other distribution
(whether in the form of cash, stock, or other property), recapitalization,
forward or reverse split, reorganization, merger, consolidation, spin-off,
combination, repurchase, share exchange, liquidation, dissolution, or other
similar corporate transaction or event occurs that affects the stock
subject to the Option so that an adjustment is appropriate in order to
prevent dilution or enlargement of the rights of the Option holder, then
the Option shall, in such manner as is equitable, be adjusted as to any or
all of (i) the number and kind of shares of stock which may thereafter be
issued in connection with the Option and (ii) the exercise price of the
Option. Any dispute arising under the prior sentence shall be resolved in
accordance with the procedures described in Section 15. Each Option (when
otherwise exercisable) may be exercised in full, or in part, at the
Executive's election. Any part of the exercise price of any Option may, at
the Executive's election, be paid through the withholding of shares subject
to the Option with a value equal to the portion of the exercise price to be
paid in shares. In addition, any part of the exercise price of any Option
and any related tax withholding amount may, at the Executive's election, be
paid through a cashless exercise procedure that affords the Executive the
opportunity to sell immediately some or all of the shares underlying the
exercised portion of the Option in order to generate sufficient cash to pay
the Option exercise price and/or to satisfy tax withholding obligations
relating to the Option (and if such tax withholding obligations are not
satisfied through such cash, the Executive shall, as a condition of such
exercise, pay to the Company, or make arrangements satisfactory to the
Company for the payment of, the full amount of such tax withholding
obligations), provided that such cashless exercise procedure shall be
available only if at the time of such exercise the shares subject to the
Option being exercised are freely transferable without restriction under
the Securities Act, state securities or "blue sky" laws or otherwise. Any
Option held by the Executive (whether vested or not) may be transferred (1)
during his lifetime only by gratuitous transfers to immediate family
members or to trusts for their benefit, and (2) upon his death by his will
or the laws of descent and distribution.
(VI) For purposes of this Agreement, except as otherwise expressly
provided in this Agreement, (A) the "Fair Market Value" of the Company on
any Settlement Date on which the Company is not a Public Company (or on any
other date for which a valuation of the Company is required by this
Agreement), (B) the fair market value of any non-cash consideration or
property the value of which is to be determined under this Section 4(d)
(including, if required by Section 4(d)(V), the terms of the Conversion)
and (C) if required by Section 4(d)(V), the dilutive effect of any equity
investments or distributions on equity, shall be determined in accordance
with the following procedure: The Executive and the Company shall each
select a nationally recognized appraiser, which shall determine the
valuation or other issue in question. If, in the case of a valuation issue,
the higher of the two original appraisal values is not more than ten
percent (10%) above the lower appraisal value, the value in question shall
be the value agreed upon by the two original appraisers or, in the absence
of such an agreement, the value in question shall be the average of the two
original appraisal values. If, in the case of a valuation issue, the higher
of the two original appraisal values is more than ten percent (10%) above
the lower appraisal value, the two appraisers shall select a third
nationally recognized appraiser who shall determine a value which shall be
at least equal to the lower appraisal value and whose determination of the
value in question shall be final and binding on all parties. In the case of
any other issue, if either appraiser concludes that the two appraisers are
not in substantial agreement, the two appraisers shall select a third
nationally recognized appraiser who shall resolve the remaining differences
and whose determination shall be final and binding on all parties. All
costs and expenses relating to any appraisal or review conducted under this
Section 4(d)(VI) shall be borne by the Company.
(VII) For purposes of this Section 4(d), equity securities of the
Company which are identical except for voting rights shall not be deemed to
be equity securities of different classes.
(e) Special Payment. During the Term of Employment, the Company
shall make no distributions to its members (other than for tax liabilities
attributable to their interests in the Company) until the fifth anniversary
of the Effective Date unless the Company first makes a payment to the
Executive in the amount of five million dollars ($5,000,000). Promptly upon
the fifth anniversary of the Effective Date, if the Executive has not
previously received a payment of five million dollars ($5,000,000) pursuant
to either the immediately preceding sentence or clause (iii) of Section
8(a) hereof, the Company shall pay the Executive the following amount, and
the Executive shall have no further rights under this Section 4(e):
(i) If the Executive is employed hereunder on such fifth
anniversary of the Effective Date, the amount of five million dollars
($5,000,000);
(ii) If the Executive's employment has been terminated by the
Company for Cause prior to such fifth anniversary, an amount equal to one
million dollars ($1,000,000) for each completed year of employment
hereunder;
(iii) If the Executive's employment has been terminated by the
Executive without Good Reason prior to such fifth anniversary, an amount
equal to eighty-three thousand three hundred and thirty-three dollars
($83,333) for each completed month of employment hereunder; and
(iv) If the Executive's employment has been terminated for any
other reason prior to such fifth anniversary, the amount of five million
dollars ($5,000,000).
Any payment made pursuant to this Section 4(e) shall not be offset by any
payment received, or to be received, by the Executive pursuant to any other
provision of this Agreement.
(f) Recourse Loan. As of the Effective Date, the Original
Shareholders shall loan the Executive (in proportion to their respective
equity interests in the Company) the aggregate amount of fifteen million
dollars ($15,000,000). The Executive shall be personally liable, subject to
the terms of this Agreement, for the repayment of such loans, which shall
become due and payable in full on the fifth anniversary of the Effective
Date. Interest shall accrue on such loans at the "Applicable Federal Rate",
determined in accordance with section 1274(d) of the Internal Revenue Code
of 1986, as amended from time to time (the "Code"). On each of the first
two anniversaries of the Effective Date, if, and only if, the Executive
shall be employed by the Company on such anniversary date, all interest
then accrued on such loans and one-fifth (1/5) of the principal amount of
such loans shall automatically be forgiven. Upon any termination of the
Executive's employment for Cause prior to the fifth anniversary of the
Effective Date, the entire outstanding principal balance of such loans and
all accrued interest thereon shall become due and payable immediately. Upon
the earlier to occur of the fifth anniversary of the Effective Date (if,
and only if the Executive shall be employed by the Company on such date) or
any termination of the Executive's employment prior to the fifth
anniversary of the Effective Date by the Company (other than for Cause), by
the Executive for Good Reason (as defined in Section 6(d)(i) hereof), or by
reason of the Executive's death or Disability, the entire outstanding
principal balance of such loans and the accrued interest thereon shall
automatically be forgiven. If the Executive's employment is terminated by
the Executive prior to the fifth anniversary of the Effective Date (other
than for Good Reason or by reason of his death or Disability), forgiveness
of outstanding principal and accrued interest of such loans (beyond amounts
required to be forgiven pursuant to the fourth sentence of this Section
4(f)) shall not occur, and the remaining principal and accrued interest of
such loans shall immediately become due and payable. On September 3, 1996,
the Executive shall execute promissory notes evidencing such loans
substantially in the forms attached hereto as Exhibits B-1 and B-2,
respectively. The parties acknowledge that such promissory notes may be
assigned by the Original Shareholders to the Company, in which case the
rights and obligations under such notes shall inure to the benefit of and
be binding upon, and shall be enforceable by, the Company; provided that no
such assignment shall occur prior to the earlier of (i) the second
anniversary of the Effective Date and (ii) the Company having raised an
aggregate of $150 million of equity or debt financing.
(g) Non-Equity-Based Benefit Plans. The Executive shall be
entitled to participate in or receive benefits under any "employee benefit
plan" (as currently defined in section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) or employee benefit
arrangement which is not equity-based and is made available by the Company
from time to time during the period of the Executive's employment hereunder
to its executives and key management employees, on terms and conditions
commensurate with his position at the Company, subject to and on a basis
consistent with the terms, conditions and overall administration of such
plans and arrangements; provided, however, that there shall be no
duplication of the benefits or compensation elements created by this
Agreement; and provided, specifically, without limitation, that there shall
be no duplication of amounts paid in respect of the annual bonuses and
annual bonus opportunities provided by Sections 4(b) and 4(c) hereof.
(h) Expenses. The Executive shall be entitled to receive prompt
reimbursement for all reasonable and customary expenses incurred by the
Executive in performing services hereunder during the Term of Employment,
including all expenses of travel and living expenses while away from home
on business or at the request of and in the service of the Company,
provided that such expenses are incurred and accounted for in accordance
with the policies and procedures established by the Company. The Executive
shall be entitled to receive prompt reimbursement for his reasonable legal
and public relations expenses incurred in connection with the execution of
this Agreement.
(i) Place of Employment; Services Furnished. The Executive shall
be based in the Company's principal executive offices, currently located in
the Washington, D.C. area, except for reasonable required travel on Company
business. The Company shall furnish the Executive with appropriate office
space and such other facilities and services as shall be suitable to the
Executive's position and adequate for the performance of his duties as set
forth in Section 3 hereof. If the Company's principal executive offices
shall be moved out of the Washington, D.C. area, the Company shall promptly
reimburse the Executive for the reasonable costs of relocating his family,
and principal residence, to the new location of such offices.
5. Offices. At the reasonable request of the Company, the
Executive agrees to serve without additional compensation as a director of
any of the Company's subsidiaries and in one or more executive offices of
any of the Company's subsidiaries or affiliates.
6. Termination.
(a) Death. The Executive's employment hereunder shall terminate
upon his death.
(b) Disability. If, as a result of the Executive's incapacity due
to physical or mental illness (as determined by a medical doctor chosen by
the Company and reasonably satisfactory to the Executive or his legal
representative), the Executive shall have been absent from his duties
hereunder on a full-time basis for the entire period of one-hundred-eighty
(180) consecutive days, the Executive's employment hereunder shall be
terminated for Disability.
(c) Cause. The Company may terminate the Executive's employment
hereunder for "Cause". For purposes of this Agreement, the Company shall
have "Cause" to terminate the Executive's employment hereunder if (i) the
Executive is convicted of a felony; or (ii) the Executive engages in
conduct that constitutes willful gross neglect or willful gross misconduct
in carrying out his duties under this Agreement, resulting, in either case,
in material harm to the Company, monetarily or otherwise, unless the
Executive reasonably believed in good faith that such act or non-act was in
(or not opposed to) the best interests of the Company). Unless the
Executive has been convicted of a felony, no termination for Cause shall
take effect unless the following provisions of this paragraph shall have
been complied with. The Board shall give the Executive written notice of
its intention to terminate him for Cause, such notice (i) to state in
detail the particular circumstances that constitute the grounds on which
the proposed termination for Cause is based and (ii) to be given within
four (4) months of the Board learning of such circumstances. The Executive
shall have ten (10) days, after receiving such special notice, to cure such
grounds, to the extent such cure is possible. If he fails to cure such
grounds to the Board's satisfaction, the Executive shall then be entitled
to a hearing by the Board, during which he may, at his election, be
represented by counsel. Such hearing shall be held within thirty (30) days
of his receiving such special notice, provided he requests a hearing within
fifteen (15) days of receiving the notice. If the Board gives written
notice to the Executive within five (5) days following such hearing
confirming that, in the good faith judgment of a majority of the Board,
Cause for terminating him on the basis set forth in the original notice
exists, he shall thereupon be terminated for Cause.
(d) Termination by the Executive.
(i) The Executive may terminate his employment hereunder for
"Good Reason", which, for purposes of this Agreement, shall mean any failure
by the Company or the Original Shareholders to comply with any material
provision of this Agreement required by the terms hereof to be complied
with by such entity (including, without limitation, any breach of any of
the Company's obligations under Sections 3, 4(a), 4(b), 4(c), 4(d), 4(e),
4(f), 8(a), 9 or 15) that has not been cured within twenty (20) days after
written notice of such noncompliance (specifying in reasonable detail the
particulars of such noncompliance) has been given by the Executive to the
Company.
(ii) The Executive may terminate his employment hereunder without
Good Reason, upon giving four months notice to the Company (which notice
period shall end earlier if the Company's designated successor to the
Executive commences employment with the Company before the end of such
period).
(e) Notice of Termination. Any termination of the Executive's
employment by the Company or by the Executive (other than termination
pursuant to Section 6(a) hereof) shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 17 hereof.
For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated, except that in the
case of a termination by the Company without Cause, or a termination by the
Executive without Good Reason, the Notice may merely state that Cause/Good
Reason for termination is not claimed.
(f) Date of Termination. "Date of Termination" shall mean the
following: (i) if the Executive's employment is terminated by his death,
the date of his death; (ii) if the Executive's employment is terminated
pursuant to Section 6(b) hereof, thirty (30) days after the Notice of
Termination is given; (iii) if the Executive's employment is terminated
pursuant to Section 6(c) hereof, the date specified in the Notice of
Termination; (iv) if the Executive's employment is terminated pursuant to
Section 6(d)(i) hereof, thirty (30) days after the Notice of Termination is
given; (v) if the Executive's employment is terminated pursuant to Section
6(d)(ii) hereof, the date determined in accordance with said Section; and
(vi) if the Executive's employment is terminated by the Company without
Cause, thirty (30) days after the Notice of Termination is given.
Notwithstanding the immediately preceding sentence, if within thirty (30)
days after any Notice of Termination is given the party re ceiving such
Notice of Termination notifies the other party in good faith that a dispute
exists concerning the termination, the Date of Termination shall be the
date on which the dispute is finally determined, either by mutual written
agreement of the parties or by a binding and final arbitration award.
Anything herein to the contrary notwithstanding, if the Executive gives
Notice of Termination on the basis of Good Reason, his absence from
employment after the 30th day following such notice shall not constitute a
basis for termination for Cause.
7. Compensation Upon Termination or During Disability.
(a) During any period that the Executive fails to perform his
duties hereunder as a result of incapacity due to physical or mental
illness ("Disability Period"), the Executive shall continue to receive his
Base Salary at the rate and frequency then in effect for such period and
all other compensation and benefits provided herein until his employment is
terminated pursuant to Section 6(b) hereof, provided that payments so made
to the Executive shall be reduced by the sum of the amounts, if any,
payable to the Executive at or prior to the time of any such payment under
disability benefit plans of the Company or under the Social Security
disability insurance program, and which amounts were not previously applied
to reduce any such payment.
(b) If the Executive's employment is terminated (i) by his death,
(ii) for Disability under Section 6(b) hereof, (iii) by the Company for
Cause under Section 6(c) hereof, or (iv) by the Executive without Good
Reason, the Company shall promptly pay the Executive (or the Executive's
legal representative in accordance with Section 15(b) hereof) his (A) Base
Salary through the Date of Termination at the rate in effect on the Date of
Termination (plus, in the case of termination due to death, Base Salary at
that rate through the ninetieth (90th) day after the date of death); (B)
any amounts due the Executive through the Date of Termination pursuant to
Section 4 hereof, provided that the Company's post-termination obligations
with respect to CARs shall be as provided pursuant to Section 4(d) hereof;
and (C) any other or additional benefits to be provided in accordance with
pertinent plans, programs, or obligations of the Company.
(c) If (A) the Company shall terminate the Executive's employment
(other than for Cause), (B) the Executive shall terminate his employment
for Good Reason or (C) the Executive's employment shall be terminated for
Disability, then, subject to the Executive's continuing compliance with
Section 12 hereof (provided that the Company's post-termination obligations
with respect to CARs, which are provided for in Section 4(d) hereof, shall
not be subject to such compliance),
(i) the Company shall promptly pay the Executive his Base Salary
through the Date of Termination at the rate in effect at the time Notice of
Termination is given, any previously awarded but unpaid bonus for any
fiscal year completed prior to the Date of Termination, all other unpaid
amounts, if any, to which the Executive is entitled as of the Date of
Termination under this Agreement or any compensation plan or program of the
Company, at the time such payments are due, and a pro-rata bonus for the
year of termination based on his prior year's bonus award (or, if the Date
of Termination shall occur prior to the end of the first full fiscal year
of the Company during the Term of Employment, based on an annual bonus of
five-hundred thousand dollars ($500,000));
(ii) in lieu of any further salary or bonus payments to the
Executive for periods subsequent to the Date of Termination, the Company
shall pay as severance to the Executive an amount (the "Severance Amount")
equal to two (2) times the sum of (A) the Executive's annual Base Salary
rate in effect as of the Date of Termination (or, if the termination is for
Good Reason based on a reduction in Base Salary, then the rate shall be the
rate in effect immediately prior to such reduction), plus (B) if the Date
of Termination occurs on or before December 31, 1999, a deemed annual bonus
of five-hundred-thousand dollars ($500,000); the Severance Amount shall be
paid in substantially equal installments and in the same manner and over
the same period of time as the Executive's salary payments would have been
made, except that if the Date of Termination occurs within the two-year
period immediately following a "Change in Control" (as defined in Section 8
hereof) the Severance Amount shall be paid in a single lump sum payment
within the ten-day period immediately following such Date of Termination;
(iii) the Company shall maintain in full force and effect, for the
continued benefit of the Executive for two years, each "employee welfare
benefit plan" (as defined in section 3(1) of ERISA) in which the Executive
was entitled to participate immediately prior to the Date of Termination
(with no reduction in benefits), provided that the Executive's continued
participation is possible under the general terms and provisions of such
plans. In the event that the Executive's participation in any such plan is
barred, the Company shall arrange to provide the Executive with benefits
substantially similar to those which the Executive would otherwise have
been entitled to receive under the plan from which his continued
participation is barred (with no reduction in benefits); and
(iv) the Company shall promptly pay to the Executive (A) any
other amounts due and owing to the Executive under Section 4 of this Agreement
and (B) any other or additional benefits to be provided in accordance with
pertinent plans, programs and obligations of the Company.
(d) After completing the payments and providing the benefits
required by this Section 7 and Section 4 hereof, the Company shall have no
further obligations to the Executive under this Agreement except as
expressly set forth in Sections 9, 10, 14 and 15 hereof. Any amounts due
under this Section 7 and Section 4 hereof are in the nature of compensation
or severance payments considered to be reasonable by the Company and are
not in the nature of a penalty.
8. Change in Control of the Company.
(a) Notwithstanding any other provision of this Agreement, if a
"Change in Control" (as defined in Section 8(b) hereof) shall occur while
the Executive is employed by the Company hereunder, (i) all of the
Executive's outstanding CARs shall immediately vest, (ii) the principal
balance remaining of the loans to the Executive pursuant to Section 4(f)
hereof (and all accrued interest thereon) shall automatically be forgiven,
and (iii) if the Company has not previously made a payment in full to the
Executive pursuant to Section 4(e) hereof, the Company shall immediately
pay the Executive the sum of five million dollars ($5,000,000) less any
amounts previously paid the Executive pursuant to Section 4(e), in complete
settlement of the Executive's rights pursuant to such Section 4(e).
(b) For purposes of this Agreement, a Change in Control shall
occur if (i) any person or entity, or group of affiliated persons or
entities, other than the Original Shareholders and/or their respective
affiliates (for this purpose, the Executive shall be deemed to be an
affiliate of the Original Shareholders), acquires membership interests,
stock or other equity interests of the Company representing more than 50%
of the voting power of all such outstanding membership interests, stock or
other equity interests, (ii) the majority of the Board (or comparable
governing group) consists of persons who are designees of any person or
entity or group of affiliated persons or entities which hold membership
interests, stock or other equity interests in the Company, other than the
Original Shareholders and/or their respective affiliates (for this purpose
the Executive shall be deemed a designee of the Original Shareholders),
(iii) the Company adopts a plan of liquidation providing for the
distribution of all or substantially all of its assets, or (iv) all or
substantially all of the business enterprise of the Company is disposed of
pursuant to a sale of assets transaction or a merger, consolidation or
similar transaction in which the Company is not the surviving entity
(unless (A) no person or entity, or group of affiliated persons or
entities, other than the Original Shareholders and/or their respective
affiliates (for this purpose, the Executive shall be deemed to be an
affiliate of the Original Shareholders) owns immediately after such
transaction membership interests, stock or other equity interests of the
entity which succeeds to the business of the Company as a result of such
transaction representing more than 50% of the voting power of all such
outstanding membership interests, stock or other equity interests, (B) a
majority of the board of directors (or comparable governing body) of the
entity which succeeds to the business of the Company as a result of such
transaction consists of persons (or persons designated by such persons) who
constituted a majority of the Board of the Company immediately prior to
such transaction, and (C) such successor entity assumes in writing the
Company's obligations hereunder and, with respect to the CARs, agrees in
writing to substitute for the CARs on an equitable basis equity-based
awards having the same vesting schedule as the CARs, the same period of
time during which the Executive can exercise a right equivalent to the
settlement right associated with the CARs and otherwise providing
substantially equivalent economic opportunity to that afforded by the CARs
determined, if the Executive requests, as provided in Section 4(d)(VI) (it
being understood and agreed that if the common stock of such successor
entity is listed and traded on a national securities exchange or the Nasdaq
National Market, such substitution will be effected through the conversion
of the CARs into stock options for the purchase of such common stock, or
other equity based awards of such entity having the same economic value, in
the manner described in Section 4(d)(V)). For purposes of this Agreement,
"affiliate" (or derivations thereof, i.e., "affiliated") of any person or
entity means any other person or entity directly or indirectly controlling
or controlled by or under direct or indirect common control with such
person or entity; and for purposes of such definition, "control" when used
with respect to any person or entity means the power to direct the
management and policies of such person or entity, directly or indirectly,
whether through the ownership of voting securities or other equity
interests, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
9. Gross-Up Payment. In the event that the aggregate of any
payments or benefits made or provided to the Executive under this Agreement
(other than any payment pursuant to this Section 9) and under any other
plans, programs or arrangements of the Company (the "Aggregate Payment") is
determined to constitute a Parachute Payment, as such term is defined in
Section 280G(b)(2) of the Code, or any successor provision, then, subject
to the last sentence of this Section 9, the Company shall pay to the
Executive, prior to the time any excise tax imposed by Section 4999 of the
Code, or any successor provision ("Excise Tax"), is payable with respect to
such Aggregate Payment, an additional amount which, after the imposition of
all income and excise taxes thereon, is equal to the Excise Tax on the
Aggregate Payment. The determination of whether an Aggregate Payment
constitutes a Parachute Payment and, if so, the amount to be paid to the
Executive and the time of payment shall be made by an independent Tax
Auditor (the "Tax Auditor") jointly selected by the Company and the
Executive and paid by the Company. The Tax Auditor shall be a nationally
recognized United States public accounting firm that has not, during the
two years preceding the date of its selection, acted in any way on behalf
of the Company or any affiliate thereof. If the Executive and the Company
cannot agree on a firm to serve as the Tax Auditor, then the Executive and
the Company shall each select one nationally recognized United States
accounting firm and those two firms shall jointly select the accounting
firm to serve as the Tax Auditor. Notwithstanding the foregoing (but
subject to the last sentence of this Section 9), in the event that the
amount of the Executive's Excise Tax liability is subsequently determined
to be greater than the Excise Tax liability with respect to which an
initial payment to the Executive under this Section 9 has been made, the
Company shall pay to the Executive an additional amount with respect to
such additional Excise Tax (and any interest and penalties thereon) at the
time that the amount of the actual Excise Tax liability is finally
determined, such additional amount to be calculated in the same manner as
such initial payment. The Executive and the Company shall cooperate with
each other in connection with any proceeding or claim relating to the
existence or amount of liability for Excise Tax, and all expenses relating
to any such proceeding or claim (including all reasonable attorney's fees
and other expenses incurred by the Executive in connection therewith) shall
be paid by the Company promptly upon written demand by the Executive.
Notwithstanding any of the foregoing provisions of this Section 9, the
aggregate amounts payable to the Executive pursuant to this Section 9 with
respect to the Excise Tax liability (exclusive of the aforesaid expenses
incurred by the Executive in connection therewith) shall not exceed one
million dollars ($1,000,000).
10. Indemnification.
(a) The Company agrees that (i) if the Executive is made a party,
or is threatened to be made a party, to any proceeding, by reason of the
fact that he is or was a director, officer, employee or agent of the
Company or is or was serving at the request of the Company as a director,
officer, member, employee or agent of another corporation, partnership,
joint venture, trust, person or other entity, including service with
respect to employee benefit plans, whether or not the basis of such
proceeding is the Executive's alleged action in an official capacity while
serving as a director, officer, member, employee or agent, or (ii) if any
claim, demand, request, threat, or request for information, documents or
testimony (collectively, "Claim") is made, or is threatened to be made,
that arises out of or relates to the Executive's service in any of the
foregoing capacities, then the Executive shall promptly be indemnified and
held harmless by the Company to the fullest extent permitted or authorized
by the Company's limited liability company agreement, certificate of
incorporation, bylaws, or other corporate governance documents or, if
greater, by the laws of the State of Delaware, against any and all costs,
expenses, liabilities and losses (including, without limitation, reasonable
attorney's fees, judgments, fines, ERISA excise taxes or penalties and
amounts paid or to be paid in settlement) incurred or suffered by the
Executive in connection therewith, and such indemnification shall continue
as to the Executive even if he has ceased to be a director, member,
employee or agent of the Company or other person or entity, and shall inure
to the benefit of the Executive's heirs, beneficiaries, executors,
administrators and other representatives and successors. The Company shall
pay all reasonable out-of-pocket costs and expenses incurred by the
Executive in connection with any such proceeding or Claim within fifteen
(15) days of receiving written notice requesting such payment and provid
ing evidence reasonably satisfactory to the Company of the Executive's
incurrence of such costs and expenses. Such notice shall include an
undertaking by the Executive to repay the amount of such payment if he is
ultimately determined not to be entitled to indemnification against such
costs or expenses. Notwithstanding the foregoing provisions of this Section
10(a), the Company shall not indemnify and hold harmless the Executive, and
shall not pay any costs or expenses incurred by the Executive, in
connection with any action, suit or proceeding by the Executive against the
Company or any of its directors, officers, subsidiaries or affiliates;
provided that this sentence shall not affect the Executive's right to
indemnification and payment of costs and expenses if the Company is made a
party to a third party action, suit or proceeding against the Executive,
but no such right to indemnification or payment shall apply with respect to
any claim (other than a claim for indemnification under this Section 10(a)
to which the Executive is otherwise entitled), counterclaim or cross-claim
by the Executive against the Company or any of its directors, officers,
subsidiaries or affiliates.
(b) Neither (i) the failure of the Company (including its Board,
independent legal counsel or stockholders) to have made a determination, in
connection with any request for payment or reimbursement under Section
10(a), that the Executive has satisfied any applicable standard of conduct,
nor (ii) a determination by the Company (including its Board, independent
legal counsel or stockholders) that the Executive has not satisfied any
applicable standard of conduct, shall create a presumption that the
Executive has not met an applicable standard of conduct.
(c) Until such time as the Company shall obtain officers' and
directors' liability insurance coverage providing protections to the
Executive (as part of a policy covering officers and directors of the
Company, generally) as comprehensive as possible (taking into account
scope, exclusions, deductibles, maximum liability and other factors) for an
annual premium not exceeding $100,000, the guarantee provided in Section 14
hereof shall remain in full force and effect with respect to Section 10(a)
hereof (whether or not it has terminated for all other purposes); it being
understood and agreed that from and after the time such guarantee is no
longer in effect with respect to Section 10(a) hereof until the termination
of the Executive's employment with the Company, the Company will continue
to maintain the aforesaid officers' and directors' liability insurance to
the extent available at an annual premium not exceeding $100,000.
11. No Offset; No Mitigation. If the Executive's employment is
terminated for any reason during the Term of Employment, the Executive
shall not be required to mitigate damages by seeking other employment, and
there shall be no offset against amounts due the Executive under this
Agreement on account of (i) any remuneration or benefits attributable to
any subsequent employment that the Executive may obtain or (ii) any claims
the Company or any of its affiliates may have against the Executive.
12. Confidentiality, Noncompetition and Nonsolicitation.
(a) The Executive will not, during or after the Term of
Employment, disclose to any entity or person any information (including,
but not limited to, information about customers or about the design,
manufacture or marketing of products or services) (i) which is not
generally known to the public (other than through the Executive's own
breach of this Agreement); (ii) which relates to the business of the
Company or any of its subsidiaries; (iii) which is treated as confidential
by the Company; and (iv) to which the Executive gains access by reason of
his position as an employee or director of the Company, except as such
disclosure (i) is required or appropriate in connection with his work as an
employee of the Company, or (ii) is required by a court of law, by any
governmental agency having supervisory authority over the business of the
Company, or by any other person or body with apparent jurisdiction to order
him to disclose such information.
(b) While the Executive continues to be an employee of the Company
and for the two-year period immediately following his Date of Termination
(or if the Executive's employment is terminated by the Company without
Cause or by the Executive with Good Reason, for the one-year period
immediately following his Date of Termination), the Executive shall not,
except as permitted by the Company upon its prior written consent, (i)
enter, directly or indirectly, into the employ of or render or engage in,
directly or indirectly, any services to any person, firm, corporation or
other entity that is in competition (or is actively planning to engage in
competition) with the Company with respect to (x) any local loop business
(if the Company is engaged in such business on the Date of Termination),
(y) any business actively conducted by the Company on the Date of
Termination or (z) any business which, on the Date of Termination, the
Company plans to enter pursuant to a business strategy in the development
of which the Executive actively participated and which was adopted by the
Board before the Executive's termination of employment (any of the
foregoing being referred to herein as a "Competitive Business"), or (ii)
become interested, directly or indirectly, in any such person, firm,
corporation or other entity as an individual, partner, member, shareholder,
creditor, director, officer, principal, agent, employee, trustee,
consultant, advisor or in any other relationship or capacity. The ownership
of three percent (3%) of any class of the outstanding securities of any
corporation, even though such corporation may conduct (or be planning to
conduct) a Competitive Business, shall not be deemed as constituting an
interest which violates clause (ii) of the immediately preceding sentence.
Further, the Executive shall not be deemed to have violated the first
sentence of this Section 12(b) solely by reason of the fact that the
Executive is employed by, or rendering services to, a person, firm,
corporation or other entity which conducts or provides services to (or may
be planning to conduct or provide services to) a Competitive Business, so
long as the Executive's employment is, or his services rendered are, solely
in connection with businesses of such person, firm, corporation or other
entity which are not Competitive Businesses and which do not involve the
provision of services to any Competitive Business, and the Executive has no
direct or indirect authority or involvement in connection with any
Competitive Business conducted (or planned to be conducted), or any
services provided (or planned to be provided) to any Competitive Business,
by such person, firm, corporation or other entity.
(c) While the Executive continues to be an employee of the Company
and for the two-year period immediately following his Date of Termination,
the Executive shall not, except as permitted by the Company upon its prior
written consent, attempt, directly or indirectly, to induce any employee
employed by or performing services for the Company, or any subsidiary or
affiliate of the Company ("Another Employee"), to be employed or perform
services elsewhere; provided, however, the Executive shall not be deemed to
have induced Another Employee to be employed or perform services elsewhere
solely as a result of any actions properly taken in the performance of his
duties hereunder. If the Executive engages in discussions with an entity
other than the Company, its subsidiaries or affiliates about his own
subsequent employment or performance of services for such entity or makes
plans to establish an entity by which he will be employed or for which he
will perform services (in either case, the "Subsequent Employer"), the
Executive shall not discuss with Another Employee (or communicate to
Another Employee in any manner) the possibility of the employment of
Another Employee, or the engagement of Another Employee to perform
services, by the Subsequent Employer.
(d) Any violation by the Executive of Section 12 hereof, occurring
after the Date of Termination, shall entitle the Company to cease making
any payments and providing any welfare benefits otherwise required under
Section 7(c) hereof (provided that the Company's post-termination
obligations with respect to CARs which are provided for in Section 4(d)
hereof shall not be subject to this provision). Additionally, the Company
shall have the right and remedy to have the provisions of this Section 12
specifically enforced, including by temporary and/or permanent injunction,
it being acknowledged and agreed that any such violation may cause
irreparable injury to the Company and that money damages will not provide
an adequate remedy to the Company. The Company shall in any event have the
right to seek damages for any breach of this Section 12.
13. Independence and Severability of Section 12 Provisions. Each
of the rights and remedies enumerated in Section 12 shall be independent of
the others and shall be severally enforceable and all of such rights and
remedies shall be in addition to, and not in lieu of, any other rights and
remedies available to the Company under law or in equity. If any of the
covenants contained in Section 12 or if any of the rights or remedies
enumerated in Section 12, or any part of any of them, is hereafter
construed to be invalid or unenforceable, the same shall not affect the
remainder of the covenant or covenants or rights or remedies which shall be
given full effect without regard to the invalid portions. If any of the
covenants contained in Section 12 is held to be unenforceable because of
the duration of such provision or the area covered thereby, the parties
agree that the court or arbitrator making such determination shall have the
authority to reduce the duration and/or area of such provi sion, and in its
reduced form said provision shall then be enforceable.
14. Guarantee. The Original Shareholders, in proportion to their
respective ownership interests (as such interests may vary from time to
time) in the Company, severally and unconditionally guarantee prompt
payment of all amounts that become due and owing to the Executive from the
Company under this Agreement; provided that at such time, if any, as the
"DTS Systems Transfers" are fully "consummated" (with the quoted terms
having the same meaning as in the DMT, L.L.C. Agreement), such guarantee
shall automatically terminate and be of no further force or effect, except
with respect to the guarantee of the Company's obligations under Section
10(a) hereof, which guarantee shall be governed by the provisions of
Section 10(c) hereof. Each of the Original Shareholders hereby represents
and warrants, as to itself, that it is fully authorized and empowered to
enter into this Agreement to the extent provided in the first paragraph
hereof and that the performance of its obligations under this Agreement
does not violate any law, regulation or order, or any agreement between it
and any other person or entity.
15. Arbitration. Any controversy or claim arising out of or
relating to this Agreement, any amendment of this Agreement, or any breach
of any of the foregoing, shall, at the election of the Company or the
Executive, be settled by confidential arbitration, to be held in Washington
D.C., in accordance with the Commercial Arbitration Rules of the American
Arbitration Association. The arbitrator(s) shall apply the provisions of
this Agreement strictly as written (unless doing so violates the clear
intent of this Agreement), and shall explain the reasons and basis of his
(their) award in detail and in writing. Judgment upon the award rendered by
the arbitrator(s) may be entered in any court having jurisdiction thereof.
All costs and expenses relating to any controversy or claim that is
arbitrable under this Section (including reasonable attorney's fees of the
Executive) shall be paid by the Company promptly on written demand, except
that the arbitrator(s) are authorized to require reim bursement of the
Company for moneys paid by it pursuant to this sentence if the
arbitrator(s) determine that the substantive positions of the Executive in
the arbitration were entirely without merit. Pending final resolution of
any arbitration or court proceeding, the Company shall continue prompt
payment of all amounts due the Executive under this Agreement or any
amendment thereof and prompt provision of all benefits to which the
Executive or his beneficiaries are entitled. Notwithstanding the foregoing,
nothing contained in this Section 15 shall limit a party's right to seek
equitable relief in any court of competent jurisdiction.
16. Successors; Binding Agreement.
(a) No rights or obligations of the Company under this Agreement
may be assigned or transferred by the Company except that such rights or
obligations may be assigned or transferred pursuant to a merger or
consolidation in which the Company is not the continuing entity, or in
connection with the sale or liquidation of all or substantially all of the
assets of the Company, or in connection with the disposition of the
business of the Company substantially as an entirety, provided that the
assignee or transferee is the successor to all or substantially all of the
assets of the Company and such assignee or transferee assumes the
liabilities, obligations and duties of the Company under this Agreement,
either contractually or as a matter of law.
(b) This Agreement and all rights of the Executive hereunder shall
inure to the benefit of and be enforceable by the Executive's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive should die while any
amounts would still be payable to him hereunder if he had continued to
live, all such amounts unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the Executive's devisee,
legatee, or other designee or, if there be no such designee, to the
Executive's estate.
17. Notice.
(a) For the purposes of this Agreement, notices, demands and all
other communications provided for in this Agreement shall be in writing and
shall be addressed as follows:
If to the Executive:
Mr. Alex J. Mandl
If to the Company:
Associated Communications, L.L.C.
c/o The Associated Group, Inc.
680 Fifth Avenue
11th Floor
New York, NY 10019
Attention: William H. Berkman
Facsimile No.: 212-265-6443,
with copies to:
The Associated Group, Inc.
Three Bala Plaza East
Suite 502
Bala Cynwyd, PA 19004
Attention: David J. Berkman
Scott G. Bruce, Esq.
Facsimile No.: 610-660-4920;
Skadden, Arps, Slate, Meagher & Flom
One Beacon Street
Boston, MA 02108
Attention: Kent A. Coit
Facsimile No.: 617-573-4822;
and
Digital Services Corporation
2300 Clarendon Boulevard
Suite 800
Arlington, Virginia 22201
Attention: President
Attention: General Counsel
Facsimile No.: 703-234-4960
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
(b) Notices and communications given in accordance with the
foregoing shall conclusively be deemed to have been received and to be
effective on the day on which delivered to the designated recipient, or, if
sent by United States certified or registered mail, postage prepaid, on the
fifth business day after the day on which mailed, provided that a telecopy
or cable of identical content has been sent to the relevant address
specified above within two days after the posting date of such mail.
"Business day" shall mean any day not a Saturday, Sunday or a legal holiday
for non-government employees in the District of Columbia.
18. Miscellaneous. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing signed by the Executive and such officer
of the Company as may be duly authorized by the Board. No waiver by either
party hereto at any time of any prospective or past breach of any condition
or provision of this Agreement by the other party hereto shall be deemed a
waiver of similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time (unless otherwise specified in the waiver). No
agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which
are not set forth expressly in this Agreement. The validity,
interpretation, construction and, performance and enforcement of this
Agreement shall be governed by the laws of the State of Delaware without
regard to its conflicts of law principles. To the extent that the rights
and obligations under this Agreement of the parties hereto and their
successors, as such rights and obligations are described herein, may
require performance after the termination or expiration of this Agreement,
such rights and obligations shall survive the Term of this Agreement and
shall be fully enforceable thereafter. In the event that any portion or
aspect of any provision of this Agreement shall be deemed to be invalid or
unenforceable for any reason, in whole or in part, the remainder of this
Agreement shall remain in full force and effect to the fullest extent
permitted by law so as to achieve the purposes of this Agreement. The
Executive shall be entitled, to the fullest extent permitted by law, to
select and change a beneficiary or beneficiaries to receive any
compensation or benefit hereunder following the Executive's death. In the
event of the Executive's death or a judicial determination of his
incompetence, references in this Agreement to the Executive shall be
deemed, where appropriate, to refer to his beneficiary, estate or other
legal representative. The Executive agrees that he will cooperate with any
application by the Company to obtain insurance to assist in funding its
obligations to him under this Agreement. The Company represents and
warrants that it is fully authorized and empowered to enter into this
Agreement and that the performance of its obligations under this Agreement
does not violate any law, regulation or order, or any agreement between it
and any other person or entity. The Executive represents that there are no
restrictions or limitations of any kind imposed by his current employer
which would affect his ability to execute this Agreement and perform his
obligations hereunder and further represents that such execution and
performance will not create any liabilities to his current employer or
breach the terms of any agreement to which the Executive is a party (except
to the extent of triggering loss of various rights, options, and other
benefits from the Executive's current employer), including without
limitation, any agreement to keep in confidence the confidential or
proprietary information of his current (or any prior) employer. The
Executive shall not, during his employment with the Company or thereafter,
disclose to the Company or otherwise use in an unauthorized manner any
confidential or proprietary information of any third party, including his
current (or any prior) employer. All payments and benefits provided to
Executive hereunder shall be subject to applicable withholding taxes, and
no such payments or benefits shall be made without adequate arrangement,
reasonably acceptable to the Company, for the satisfaction of such
withholding taxes. Notwithstanding any other provision of this Agreement,
wherever this Agreement provides for an action to be taken, or a decision
to be made, by the Company, the action or decision shall be taken or made
by the Company's Board, or by such individual (including, without
limitation, the Executive) or a group of individuals as shall have been
duly authorized by the Company's Board.
19. Validity. The invalidity or unenforceability of any provision
or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain
in full force and effect.
20. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
21. Entire Agreement. This Agreement sets forth the entire
agreement of the parties hereto in respect of the subject matter contained
herein and supersedes all prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether oral
or written, by any officer, employee or representative of any party hereto;
and any prior agreement of the parties hereto in respect of the subject
matter contained herein is hereby terminated and cancelled.
IN WITNESS WHEREOF, the parties have executed this Agreement on
the date and year first above written.
ASSOCIATED COMMUNICATIONS, L.L.C.
By: /s/David J. Berkman
--------------------------
Name: David J. Berkman
Title:
EXECUTIVE
/s/ Alex J. Mandl
------------------------------
Alex J. Mandl
Signed and agreed upon, as to the last
sentence of Section 4(d)(I) and
Sections 4(d)(II), 4(d)(III), 4(f), (8)(a)(ii),
10(c) and 14 hereof only.
MICROWAVE SERVICES, INC.
By: /s/ David J. Berkman
-----------------------
Name: David J. Berkman
Title: Executive Vice President
DIGITAL SERVICES CORPORATION
By: /s/ Rajendra Singh
------------------------
Name: Rajendra Singh
Title: President
EXHIBIT 5
November 12, 1997
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
SALOMON BROTHERS INC
BEAR, STEARNS & CO. INC.
GOLDMAN, SACHS & CO.
MERRILL LYNCH INTERNATIONAL
SALOMON BROTHERS INTERNATIONAL LIMITED
BEAR, STEARNS INTERNATIONAL LIMITED
GOLDMAN SACHS INTERNATIONAL
as Representatives of the several
Underwriters to be named in the
within-mentioned Purchase Agreements
North Tower
World Financial Center
New York, New York 10281
Re: Proposed Public Offering by Teligent, Inc.
Dear Sirs:
The undersigned, understands that Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"),
Salomon Brothers Inc, Bear, Stearns & Co., Inc. and Goldman, Sachs & Co.
propose to enter into a U.S. Purchase Agreement and Merrill Lynch
International, Salomon Brothers International Limited, Bear, Stearns
International Limited and Goldman Sachs International propose to enter
into an International Purchase Agreement (together, the "Purchase
Agreements") with Teligent, Inc., a Delaware corporation (the "Company")
providing for the public offering of shares (the "Securities") of the
Company's Class A Common Stock, par value $.01 per share.
In recognition of the benefit that such an offering will
confer upon the undersigned and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the undersigned agrees with each underwriter to be named in
the Purchase Agreements that, during a period of 180 days from the date
of the Purchase Agreements, the undersigned will not, without the prior
written consent of Merrill Lynch, directly or indirectly, (i) offer,
sell, contract to sell, sell any option or contract to purchase, purchase
any option or contract to sell, grant any option, right or warrant for
the sale of, or otherwise dispose of or transfer any shares of common
stock of the Company or any securities convertible into or exchangeable
or exercisable for common stock of the Company, whether now owned or
hereafter acquired by the undersigned or with respect to which the
undersigned has or hereafter acquires the power of disposition, or file
any registration statement under the Securities Act of 1933, as amended,
with respect to any of the foregoing or (ii) enter into any swap or any
other agreement or any transaction that transfers, in whole or in part,
directly or indirectly, the economic consequence of ownership of any
common stock of the Company, whether any such swap or transaction is to
be settled by delivery of common stock of the Company or other
securities, in cash or otherwise; provided, however, that the undersigned
may without such consent (i) exercise any outstanding stock options
granted pursuant to employment agreements or employee benefit plans of
the Company referred to in the Prospectuses (as defined in the Purchase
Agreements) so long as the undersigned agrees to be bound by this
Agreement with respect to shares of common stock issued upon such
exercise, (ii) make bona fide gifts of shares of common stock of the
Company so long as the transferee agrees to be bound by this Agreement
with respect to such shares and (iii) make a bona fide pledge or pledges
of shares of common stock of the Company, provided the pledgee agrees in
writing to be bound by this Agreement upon becoming entitled to obtain
ownership of such shares pursuant to any seizure or foreclosure with
respect to such pledged shares.
Very truly yours,
Signature: ____________________
Print Name: ____________________
