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Exhibit 10.1
INTERMEDIA COMMUNICATIONS INC.
200,000 Shares of
7% Series G Junior Convertible Participating Preferred Stock
and
Warrants to Purchase 2,000,000 Shares of
Common Stock
PURCHASE AGREEMENT
JANUARY 11, 2000
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INTERMEDIA COMMUNICATIONS INC.
PURCHASE AGREEMENT
January 11, 2000
ICI Ventures LLC
x/x Xxxxxxxx Xxxxxx Xxxxxxx & Co. L.P.
0 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Intermedia Communications Inc., a corporation organized and existing
under the laws of Delaware (the "Company"), proposes, subject to the terms and
conditions stated herein, to issue and sell to ICI Ventures LLC ("you" or the
"Purchaser"), or to issue to one of its subsidiaries (the "Selling Subsidiary")
and to cause the Selling Subsidiary to sell to you, an aggregate of 200,000
shares of its 7% Series G Junior Convertible Participating Preferred Stock, par
value $1.00 per share, liquidation preference $1,000 per share (the "Series G
Preferred Stock") and warrants (the "Warrants") to purchase initially up to
2,000,000 shares of its common stock, par value $0.01 per share (the "Common
Stock").
The Series G Preferred Stock is to be authorized and issued pursuant to
the provisions of a Certificate of Designation of Voting Power, Designation
Preferences and Relative, Participating, Optional or Other Special Rights and
Qualifications, Limitations and Restrictions (the "Certificate of Designation")
in the form attached hereto as Exhibit D to be filed with the Secretary of State
of the State of Delaware. Continental Stock Transfer & Trust Company will be
transfer agent and registrar for the Series G Preferred Stock. The Warrants will
be issued pursuant to two separate warrant agreements, one reflecting Warrants
to purchase 1,000,000 shares of Common Stock at $40 per share and one reflecting
Warrants to purchase 1,000,000 shares of Common Stock at $45 per share, in each
case, subject to adjustment as provided in such warrant agreements
(collectively, the "Warrant Agreement") in the forms attached hereto as Exhibits
B-1 and B-2, each to be dated the Closing Date, between you and the Company. The
Series G Preferred Stock, the Warrants, the shares of Common Stock issuable upon
conversion, as dividends or distributions on, or as a change
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of control payment of the Series G Preferred Stock (the "Conversion Shares") and
the shares of Common Stock issuable upon exercise of the Warrants (the "Warrant
Shares") are collectively referred to herein as the "Securities". References
herein to Series G Preferred Stock shall be deemed to be references to any
shares of any new series of preferred stock issued in connection with any
recapitalization contemplated by Section 4(I)(m) hereof, and references to the
Warrants and Warrant Shares shall include any warrants (and the shares of Common
Stock receivable upon exercise of such warrants) received in such
recapitalization.
Upon original issuance thereof, and until such time as the same is no
longer required under the applicable requirements of the Securities Act of 1933,
as amended (the "Securities Act"), the Securities (and all securities issued in
exchange therefor or in substitution thereof) shall bear the following legend:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER XXXXXXX 0 XX XXX
XXXXXX XXXXXX SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM."
Holders (including subsequent transferees) of the Securities will have
the registration rights set forth in the registration rights agreement (the
"Registration Rights Agreement") in the form attached hereto as Exhibit C, to be
dated the Closing Date for so long as such Securities constitute "Registrable
Securities" (as defined in such agreement). This Agreement, the Securities, the
Certificate of Designation, the Warrant Agreement, and the Registration Rights
Agreement are hereinafter sometimes referred to collectively as the "Operative
Documents."
1. Representations and Warranties of the Company and the
Purchaser.
I. The Company represents and warrants to, and agrees with, you
that:
(a) Each of the Company and the subsidiaries listed on Annex I
(the "Subsidiaries") (i) has been duly organized and is validly existing as a
corporation in good standing under the laws of its respective jurisdiction of
incorporation, (ii) has all requisite corporate power and authority to carry on
its business as it is currently being conducted and to own, lease and operate
its properties, and (iii) is duly qualified and in good standing as a foreign
corporation authorized to do business in each jurisdiction in which the nature
of its business or its ownership or leasing of property requires such
qualification except, with respect to clauses (i) (as it relates to good
standing, other than good standing of the Company in the State of Delaware) and
(iii), where the failure to be so qualified or in good standing does not and
could not reasonably be expected to (x) individually
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or in the aggregate, result in a material adverse effect on the properties,
business, results of operations, condition (financial or otherwise), affairs or
prospects of the Company and the Subsidiaries, taken as a whole, (y) interfere
with or adversely affect the issuance or marketability of the Securities
pursuant hereto or (z) in any manner draw into question the validity of this
Agreement (any of the events set forth in clauses (x), (y) or (z), a "Material
Adverse Effect").
(b)(i) As of November 30, 1999, the capitalization of the
Company consisted of the following:
(1) 150,000,000 shares of Common Stock, (A) 51,823,129 shares
of which were issued and outstanding, (B) 10,096,491 shares of which
were reserved for future issuance to employees pursuant to outstanding
stock options under the Stock Option Plans (as defined below), (C)
17,617,317 shares of which were reserved for future issuance upon the
conversion or exercise of securities convertible into or exercisable
for shares of Common Stock and (D) 4,645,823 shares of which were
reserved for future issuance for the payment of dividends on the
Existing Preferred Stock (as defined below); and
(2) 2,000,000 shares of Preferred Stock, par value $1.00 per
share (the "Preferred Stock"), (A) 600,000 of which were designated
Series B Redeemable Exchangeable Preferred Stock (the "Series B
Preferred Stock"), 421,890 of which were issued and outstanding, (B)
40,000 of which were designated Series C Preferred Stock, none of which
were issued and outstanding, (C) 69,000 of which were designated Series
D Junior Convertible Preferred Stock, 53,729 of which were issued and
outstanding, (D) 87,500 of which were designated Series E Junior
Convertible Preferred Stock, 64,892 of which were issued and
outstanding, and (E) 92,000 of which were designated Series F Junior
Convertible Preferred Stock, 79,600 of which were issued and
outstanding (collectively, the "Existing Preferred Stock").
Except upon the exercise of options described in clause (i)(B), upon
conversion of the Existing Preferred Stock or the Existing Warrants (as defined
below) or as dividends on the Existing Preferred Stock, since November 30, 1999,
no shares of Common Stock or Preferred Stock have been issued. The rights,
preferences, privileges and restrictions of the Existing Preferred Stock are as
stated in the charter of the Company and such other certificates of designation
as have been delivered to Purchaser on or prior to the date hereof. The terms of
the Existing Warrants are as stated in the forms of warrants and/or warrant
agreements as have been delivered to Purchaser on or prior to the date hereof.
The Company has delivered to Purchaser true and correct copies of its charter
and by-laws as amended to the date hereof.
All of the outstanding shares of capital stock of the Company have been
duly authorized, validly issued, and are fully paid and non-assessable and were
not issued in violation of any preemptive or similar rights. The Series G
Preferred Stock and Warrants, when issued, delivered
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and sold in accordance with this Agreement, the Conversion Shares when issued
and delivered in accordance with the terms of the Certificate of Designation and
the Warrant Shares when issued and sold in accordance with the terms of the
Warrant Agreement, will be duly authorized and validly issued, fully paid and
non-assessable, and will not have been issued in violation of or subject to any
preemptive or similar rights.
(ii) The Company has delivered to Purchaser copies of the 1992
Stock Option Plan, the Long-Term Incentive Plan, the 1997 Stock Option Plan for
the Benefit of Employees of Digex, Incorporated and the 1997 Equity
Participation Plan for the Benefit of Employees of Digex, Incorporated
(collectively referred to as the "Stock Option Plans"). Except as set forth in
Schedule 1.I(c), other than (w) the 10,096,491 shares reserved for issuance upon
the exercise of options outstanding under the Stock Option Plans, (x) the stock
options issued pursuant to the Stock Option Plans, (y) outstanding shares of
Existing Preferred Stock convertible into 17,001,314 shares of Common Stock and
(z) outstanding warrants to purchase 616,003 shares of Common Stock (the
"Existing Warrants"), there are no outstanding subscriptions, options, calls,
warrants, rights (including conversion or preemptive rights and rights of first
refusal), proxy or stockholder agreements, or agreements of any kind for the
purchase or acquisition from the Company or any Subsidiary of any of their
securities, nor has the Company taken or agreed to take any action to issue or
grant the same. Except as described in this Agreement or set forth on Schedule
1.I(c), (x) there are no outstanding obligations of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any securities of the
Company or any voting or equity securities or interests of any Subsidiary, (y)
there is no voting trust, proxy, stockholder or other agreements or
understandings to which the Company or any of its Subsidiaries or, to the
knowledge of the Company, any of its stockholders is a party or is bound with
respect to the voting or transfer of the capital stock or other voting
securities of the Company or any of its Subsidiaries and (z) there are no other
subscriptions, options, calls, warrants or other rights (including registration
rights, whether demand or piggyback registration rights), agreements,
arrangements or commitments of any character relating to the issued or unissued
capital stock of the Company or any of its Subsidiaries to which the Company or
any of its Subsidiaries is a party. Except as set forth on Schedule 1.I(c), the
consummation of the transactions contemplated by this Agreement and the other
Operative Documents will not trigger the anti-dilution provisions or other price
adjustment mechanisms of any outstanding subscriptions, options, calls,
warrants, commitments, contracts, preemptive rights, rights of first refusal,
demands, conversion rights or other agreements or arrangements of any character
or nature whatsoever under which the Company is or may be obligated to issue or
acquire shares of any of its capital stock.
(c) Except as disclosed on Schedule 1.I(c), all of the
outstanding capital stock of, or other ownership interests in, the Subsidiaries
are owned by the Company free and clear of any security interest, claim, lien,
limitation on voting rights or encumbrance; and all such securities have been
duly authorized, validly issued and are fully paid and non-assessable and were
not issued in violation of any preemptive or similar rights. Except as disclosed
on Schedule 1.I(c), there are not, and will not be as a result of the
transactions contemplated hereby, any outstanding subscriptions,
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rights, warrants, calls, commitments of sale or options to acquire or
instruments convertible into or exchangeable for, any capital stock or other
equity interest of the Company or any Subsidiary (other than the Securities).
(d) The Common Stock is registered pursuant to Section 12(g)
of the Securities Exchange Act of 1934 (the "Exchange Act") and is listed for
quotation on the Nasdaq National Market System ("Nasdaq"), and the Company has
taken no action designed to, or likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act or delisting the Common
Stock from Nasdaq, nor has the Company received any notification that the
Commission or Nasdaq is contemplating terminating such registration or listing.
(e) The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under the Operative
Documents and to consummate the transactions contemplated hereby and thereby,
including, without limitation, the corporate power and authority to issue, sell
and deliver the Securities as provided herein and in the other Operative
Documents.
(f) This Agreement has been duly and validly authorized,
executed and delivered by the Company and is the legal, valid and binding
agreement of the Company, enforceable against the Company in accordance with its
terms subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization or similar laws affecting the rights of creditors generally and
subject to general principles of equity.
(g) The shares of Series G Preferred Stock have been duly and
validly authorized for issuance and sale by the Company pursuant to this
Agreement and, when issued, delivered and paid for in accordance with the terms
of this Agreement, will be validly issued, fully paid and non-assessable and
entitled to the rights, privileges and preferences set forth in the Certificate
of Designation, and the issuance of such shares of Series G Preferred Stock will
not be subject to any preemptive or similar rights.
(h) The Certificate of Designation has been duly authorized by
all necessary corporate and any necessary stockholder action and, on the Closing
Date, will have been duly executed by the Company and filed with the Secretary
of State of the State of Delaware.
(i) Each of the Registration Rights Agreement and each Warrant
Agreement has been duly and validly authorized by the Company and, when duly
executed and delivered by the Company, will be the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization or similar laws affecting the rights of creditors generally and
subject to general principles of equity and limitations on the validity or
enforceability of provisions relating to rights of indemnity and contribution
set forth therein.
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(j) The Warrants have been duly and validly authorized for
issuance and sale by the Company pursuant to this Agreement and, when issued,
delivered and paid for in accordance with this Agreement, will be the legal,
valid and binding obligation of the Company, enforceable against the Company in
accordance with their terms and entitled to the benefits of the Warrant
Agreement, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization or similar laws affecting the rights of creditors generally and
subject to general principles of equity.
(k) The Warrants are exercisable for Warrant Shares in
accordance with the terms of the Warrant Agreement and the Series G Preferred
Stock is convertible into Conversion Shares in accordance with the terms of the
Certificate of Designation. The Warrant Shares and Conversion Shares have been
duly authorized for issuance by the Company and, when issued upon exercise of
the Warrants in accordance with the terms thereof or upon conversion of, as
dividends or distributions on, or as a change of control payment with respect to
the Series G Preferred Stock in accordance with the terms thereof, will be
validly issued, fully paid and non-assessable, free of any preemptive or similar
rights. The Company has reserved sufficient shares of Common Stock for issuance
upon the exercise of the Warrants and the conversion of the Series G Preferred
Stock
(l) Neither the Company nor any Subsidiary is, nor after
giving effect to the consummation of the transactions contemplated hereby or by
the other Operative Documents will be, (i) in violation of its charter or
bylaws, (ii) in default in the performance of any bond, debenture, note,
indenture, mortgage, deed of trust or other agreement or instrument to which it
is a party or by which it is bound or to which any of its properties is subject,
or (iii) in violation of any local, state or federal law, statute, ordinance,
rule, regulation, requirement, judgment or court decree applicable to the
Company or any Subsidiary or any of their assets or properties (whether owned or
leased) other than, in the case of clauses (ii) and (iii), any default or
violation that (A) would not reasonably be expected to have a Material Adverse
Effect or (B) which is disclosed in the registration statements or reports filed
since January 1, 1999 and prior to the date hereof by the Company and the
Subsidiaries with the Securities and Exchange Commission (the "Commission")
pursuant to the rules promulgated by the Commission under the Securities Act or
the Exchange Act (collectively, "SEC Filings") or on Schedule 1.I(l). There
exists no condition that, with notice, the passage of time or otherwise, would
constitute a default under any such document or instrument, except as would not
reasonably be expected to have a Material Adverse Effect or as disclosed or on
Schedule 1.I(l).
(m) None of (i) the execution, delivery or performance by the
Company of this Agreement or the other Operative Documents, (ii) the issuance
and sale of the Series G Preferred Stock and Warrants and (iii) the consummation
by the Company of the transactions contemplated hereby or by the other Operative
Documents violate, conflict with or constitute a breach of any of the terms or
provisions of, or a default under (or an event that with notice or the lapse of
time, or both, would constitute a default), or require consent under, or result
in the imposition of a lien on any properties of the Company or any Subsidiary,
or an acceleration of any indebtedness of the Company or any Subsidiary pursuant
to, (A) the charter or bylaws of the Company or any
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Subsidiary, (B) any bond, debenture, note, indenture, mortgage, deed of trust,
contract or other agreement or instrument to which the Company or any Subsidiary
is a party or by which any of them or their properties is or may be bound, (C)
any statute, rule or regulation applicable to the Company or any Subsidiary or
any of their assets or properties or (D) any judgment, order or decree of any
court or governmental agency or authority having jurisdiction over the Company
or any Subsidiary or any of their assets or properties, except in the case of
clauses (B), (C) and (D) for such violations, conflicts, breaches, defaults,
consents, impositions of liens or accelerations that (x) would not singly, or in
the aggregate, have a Material Adverse Effect or (y) which are disclosed on
Schedule 1.I(m). Other than as described on Schedule 1.I(m), no consent,
approval, authorization or order of, or filing, registration, qualification,
license or permit of or with, (i) any court or governmental agency, body or
administrative agency or (ii) any other person is required for (A) the
execution, delivery and performance by the Company of this Agreement or the
other Operative Documents, (B) the issuance and sale of the Series G Preferred
Stock and Warrants (or the issuance of the Conversion Shares or the Warrant
Shares) and (C) the consummation by the Company of the transactions contemplated
hereby or by the other Operative Documents, except (x) the filing of a
Notification and Report Form by the Company under the Xxxx-Xxxxx Xxxxxx
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (y) such as may
be required under the Securities Act and state securities or Blue Sky laws and
regulations in connection with compliance by the Company with its obligations
under the Registration Rights Agreement or (z) where the failure to obtain any
such consent, approval, authorization or order of, or filing, registration,
qualification, license or permit would not reasonably be expected to result in a
Material Adverse Effect.
(n) Except as set forth on Schedule 1.I(n), there is (i) no
action, suit or proceeding before or by any court, arbitrator or governmental
agency or official, domestic or foreign, pending or, to the best knowledge of
the Company or any Subsidiary, threatened or contemplated to which the Company
or any Subsidiary is a party or to which the business or property of the Company
or any Subsidiary is subject, (ii) no statute, rule, regulation or order that
has been enacted, adopted or issued by any governmental agency or that has been
proposed by any governmental body or (iii) no injunction, restraining order or
order of any nature by a federal or state court or foreign court of competent
jurisdiction to which the Company or any Subsidiary is or may be subject or to
which the business, assets, or property of the Company or any Subsidiary are or
may be subject, that, in the case of clauses (i), (ii) and (iii) above, (w) is
required to be disclosed in the SEC Filings and that is not so disclosed, or (x)
could reasonably be expected to, individually or in the aggregate, result in a
Material Adverse Effect.
(o) No action has been taken and no statute, rule, regulation
or order has been enacted, adopted or issued by any governmental agency that
prevents the issuance of the Series G Preferred Stock or Warrants or the
Conversion Shares or Warrant Shares; no injunction, restraining order or order
of any kind by a federal or state court of competent jurisdiction has been
issued that prevents the issuance of the Series G Preferred Stock or Warrants,
or that could reasonably be
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expected to adversely affect the consummation of the transactions contemplated
by this Agreement or the other Operative Documents.
(p) Except as set forth in the SEC Filings or on Schedule
1.I(p), there is (i) no unfair labor practice complaint pending against the
Company or any Subsidiary nor, to the best knowledge of the Company, threatened
against any of them, before the National Labor Relations Board, any state or
local labor relations board or any foreign labor relations board, and no
grievance or significant arbitration proceeding arising out of or under any
collective bargaining agreement is so pending against the Company or any
Subsidiary nor, to the best knowledge of the Company, threatened against any of
them, (ii) no strike, labor dispute, slowdown or stoppage pending against the
Company or any Subsidiary nor, to the best knowledge of the Company, threatened
against the Company or any Subsidiary and (iii) to the best knowledge of the
Company, no union representation question existing with respect to the employees
of the Company or any Subsidiary that, in the case of clauses (i), (ii) or (iii)
above, individually or in the aggregate, could reasonably be expected to result
in a Material Adverse Effect. To the best knowledge of the Company, no
collective bargaining organizing activities are taking place with respect to the
Company or any Subsidiary. Except as set forth on Schedule 1.I(p), neither the
Company nor any Subsidiary has violated (A) any federal, state or local law or
foreign law relating to discrimination in hiring, promotion or pay of employees,
(B) any applicable wage or hour laws or (C) any provision of the Employee
Retirement Income Security Act of 1974, as amended, and the regulations and
published interpretations thereunder (collectively, "ERISA"), which in the case
of clause (A), (B) or (C) above, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect. Except as set
forth on Schedule 1.I(p), with respect to any employee benefit plan, policy,
program or arrangement sponsored or maintained by the Company or any subsidiary
for the benefit of any of its current or former employees or directors, (x) no
event has occurred and no condition exists that would subject the Company or any
Subsidiary, either directly or by reason of its affiliation with any member of
its controlled group of organizations (within the meaning of sections 414(b),
(c), (m) or (o) of the Internal Revenue Code of 1986, as amended (the "Code"))
to any tax, fine, lien, penalty or other liability imposed by applicable laws,
rules and regulations and (y) no payment of money or other property, or
acceleration or provision of any rights or benefits, will be due to any such
current or former employee or director as a result of the transaction
contemplated by this Agreement, whether or not such payment, acceleration or
provision would constitute a parachute payment within the meaning of Section
280G of the Code, which in the case of clause (x) could reasonably be expected
to result in a Material Adverse Effect.
(q) Neither the Company nor any Subsidiary has (i) violated
any environmental, safety or similar law or regulation applicable to it or its
business or property relating to the protection of human health and safety, the
environment or Hazardous Substances or wastes, pollutants or contaminants
("Environmental Laws"), (ii) lacks any permit, license or other approval
required of it under applicable Environmental Laws, (iii) has released,
generated or disposed of any pollutant, contaminant, toxic substance, hazardous
waste, hazardous material, or hazardous substance, or any
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oil, petroleum or petroleum product, each as defined or listed in, or classified
pursuant to, any Environmental Laws ("Hazardous Substance") in a manner which
could reasonably be expected to give rise to a liability under or relating to
any Environmental Laws or (iv) is violating any term or condition of such
permit, license or approval, which in the case of clause (i), (ii), (iii) or
(iv) could reasonably be expected to, either individually or in the aggregate,
have a Material Adverse Effect.
(r) Each of the Company and the Subsidiaries has (i) good and
marketable title to all of the properties and assets owned by it, free and clear
of all liens, charges, encumbrances and restrictions, except such as are
described in the SEC Filings or on Schedule 1.I(r) or as would not have a
Material Adverse Effect, (ii) peaceful and undisturbed possession of its
properties under all material leases to which it is a party as lessee, (iii) all
licenses, certificates, permits, authorizations, approvals, franchises and other
rights from, and has made all declarations and filings with, all federal, state
and local authorities, all self-regulatory authorities and all courts and other
tribunals (each an "Authorization") necessary to engage in the business
conducted by it in the manner currently conducted, except as described in the
SEC Filings or on Schedule 1.I(r) or where failure to hold such Authorizations
would not, individually or in the aggregate, have a Material Adverse Effect and
(iv) no reason to believe that any governmental body or agency is considering
limiting, suspending or revoking any such Authorization. Except where the
failure to be in full force and effect would not, individually or in the
aggregate, have a Material Adverse Effect, all such Authorizations are valid and
in full force and effect, and each of the Company and the Subsidiaries is in
compliance in all material respects with the terms and conditions of all such
Authorizations and with the rules and regulations of the regulatory authorities
having jurisdiction with respect thereto. All material leases to which the
Company or any Subsidiary is a party are valid and binding, and no default by
the Company or any Subsidiary has occurred and is continuing thereunder and, to
the best knowledge of the Company and the Subsidiaries, no defaults by the
landlord are existing under any such lease except for any of the foregoing that
could not, individually or in the aggregate, reasonably be expected to result in
a Material Adverse Effect.
(s) Except as described in the SEC Filings or as set forth on
Schedule 1.I(r), each of the Company and the Subsidiaries owns, possesses or has
the right to employ all patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, software, systems or
procedures), trademarks, service marks and trade names, inventions, computer
programs, technical data and information (collectively, the "Intellectual
Property") necessary for the operation of the Company as now operated by it or
as proposed to be operated by it free and clear of and without violating any
right, claimed right, charge, encumbrance, pledge, security interest,
restriction or lien of any kind of any other person and neither the Company nor
any Subsidiary has received any notice of infringement of or conflict with
asserted rights of others with respect to any of the foregoing, except as could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The use of the Intellectual Property in connection with the
business and operations of the
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Company and the Subsidiaries does not infringe on the rights of any person,
except as could not reasonably be expected to have a Material Adverse Effect.
(t) Neither the Company nor any Subsidiary nor, to the best
knowledge of the Company, any of their respective officers, directors, partners,
employees, agents or affiliates or any other person acting on behalf of the
Company or any Subsidiary has, directly or indirectly, given or agreed to give
any money, gift or similar benefit (other than legal price concessions to
customers in the ordinary course of business) to any customer, supplier,
employee or agent of a customer or supplier, official or employee of any
governmental agency (domestic or foreign), instrumentality of any government
(domestic or foreign) or any political party or candidate for office (domestic
or foreign) or other person who was, is or may be in a position to help or
hinder the business of the Company or any Subsidiary (or assist the Company or
any Subsidiary in connection with any actual or proposed transaction), which (i)
could reasonably be expected to subject the Company or any Subsidiary, or any
other individual or entity, to any damage or penalty in any civil, criminal or
governmental litigation or proceeding (domestic or foreign), (ii) if not given
in the past, could reasonably have been expected to have a Material Adverse
Effect or (iii) if not continued in the future, could reasonably be expected to
have a Material Adverse Effect.
(u) All material tax returns required to be filed by or with
respect to the Company and the Subsidiaries in all jurisdictions have been so
filed. All material taxes, including withholding taxes, penalties and interest,
assessments, fees and other charges due or claimed to be due from such entities
or that are due and payable have been paid (whether or not shown on any tax
returns), other than those being contested in good faith and for which adequate
reserves have been provided or those currently payable without penalty or
interest. There are no material proposed additional tax assessments against the
Company or the assets or property of the Company or any Subsidiary. There are no
liens for taxes on any assets of the Company or any Subsidiary other than for
current taxes not yet due and payable. The Company has made adequate (in
accordance with generally accepted accounting principles) charges, accruals and
reserves in the applicable financial statements included in the SEC Filings in
respect of all federal, state, local and foreign income and franchise taxes for
all periods presented therein as to which the tax liability of the Company or
any of its consolidated Subsidiaries has not been finally determined.
(v) Neither the Company nor any Subsidiary is (i) an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended (the "Investment
Company Act"), or (ii) a "holding company" or a "subsidiary company" or an
"affiliate" of a holding company within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
(w) Except as disclosed in the SEC Filings or on Schedule
1.I(w), there are no holders of securities of the Company or any Subsidiary who,
by reason of the execution by the Company of this Agreement or the consummation
by the Company of the transactions contemplated
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hereby, including the filing of any registration statement which the Company may
be required to file pursuant to the terms of the Registration Rights Agreement,
have the right to request or demand that the Company or any Subsidiary register
under the Securities Act or analogous foreign laws and regulations securities
held by them, other than such that have been duly waived.
(x) Each of the Company and the Subsidiaries maintains a
system of internal accounting controls sufficient to provide reasonable
assurance that: (i) transactions are executed in accordance with management's
general or specific authorizations; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences therein.
(y) Each of the Company and the Subsidiaries maintains
insurance covering its properties, operations, personnel and businesses. Such
insurance insures against such losses and risks as are adequate in accordance
with customary industry practice to protect the Company and the Subsidiaries and
their respective businesses. Neither the Company nor any Subsidiary has received
notice from any insurer or agent of such insurer that substantial capital
improvements or other expenditures will have to be made in order to continue
such insurance. All such insurance is outstanding and duly in force on the date
hereof, subject only to changes made in the ordinary course of business,
consistent with past practice, which do not, singly or in the aggregate,
materially alter the coverage thereunder or the risks covered thereby.
(z) No registration under the Securities Act of the Series G
Preferred Stock or Warrants is required for the sale of the Series G Preferred
Stock and Warrants as contemplated hereby or the issuance of the Conversion
Shares and the Warrant Shares, as the case may be, upon conversion or exercise
thereof by the Purchaser, assuming the accuracy of the representations contained
in Section 1.II herein.
(aa) Except for liabilities included or reserved for on the
audited consolidated balance sheet of the Company included in its Annual Report
on Form 10-K for the year ended December 31, 1998 (the "1998 10-K") and the
unaudited consolidated balance sheet of the Company included in its Quarterly
Report on Form 10-Q for the quarter ended September 30, 1999 (the "September
10-Q") and except as set forth in the SEC Filings or on Schedule 1.I(aa),
neither the Company nor any Subsidiary had, and since such date none of them has
incurred any liabilities or obligations, direct or contingent, that were, are or
will be material, in the aggregate, to the Company and the Subsidiaries taken as
a whole. Since December 31, 1998, except for liabilities specifically described
in the SEC Filings or as set forth on Schedule 1.I(aa), (i) there has not been,
singly or in the aggregate, any Material Adverse Effect or any change or
development that could reasonably be expected to result in a Material Adverse
Effect; (ii) the Company and its Subsidiaries have carried
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on their respective businesses only in the ordinary and usual course consistent
with their past practices and (iii) there has been no dividend or distribution
of any kind declared, paid or made by the Company or any Subsidiary on any class
of its capital stock.
(bb) The Company has filed with the Commission all forms,
reports, schedules, proxy statements (collectively, and in each case including
all exhibits and schedules thereto and documents incorporated by reference
therein, the "Company SEC Reports") required to be filed by the Company with the
Commission since January 1, 1997. As of its date of filing, each Company SEC
Report complied in all material respects with the requirements of the Exchange
Act or the Securities Act and the rules and regulations promulgated thereunder
and none of such Company SEC Reports (including any and all financial statements
included therein) contained when filed or (except to the extent revised or
superceded by a subsequent filing with the SEC prior to the date hereof)
contains any untrue statement of a material fact or omitted or omits to state a
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they were made, not
misleading. Except as set forth on Schedule 1.I(bb), each of the financial
statements, together with the related notes, included in the Company SEC Reports
complied as to form in all material respects, as of its date of filing with the
Commission with all applicable accounting requirements and the published rules
and regulations of the Commission with respect thereto and present fairly in all
material respects the consolidated financial position of the Company and the
Subsidiaries as of and at the dates indicated and the results of their
operations and cash flows for the periods specified. Except as set forth on
Schedule 1.I(bb), such financial statements have been prepared in conformity
with generally accepted accounting principles applied on a consistent basis
throughout the periods involved, except as may be expressly stated in the
related notes thereto.
(cc) There are no contracts, agreements or understandings
between the Company and any other person that would give rise to a valid claim
against you or the Company for a brokerage commission, finder's fee or like
payment in connection with the issuance, purchase and sale of the Securities,
other than with Bear, Xxxxxxx & Co. Inc., whose fees shall be paid by the
Company.
(dd) Each of the Company and the Subsidiaries has implemented
Year 2000 compliance programs designed to ensure that its computer systems and
applications, databases, automated systems, and other computer and
telecommunications equipment owned or leased by the Company or its Subsidiaries
and all products and services distributed or sold thereby (collectively, the
"Systems") will function properly as to the processing, calculating, comparing,
sequencing or the use of date related data beyond 1999. Adequate resources have
been allocated for this purpose and the Company's and the Subsidiaries' Year
2000 date conversion programs have been completed on a timely basis, except as
would not have a Material Adverse Effect. No fact has come to the Company's
attention that causes the Company to believe that there has been or will be any
such malfunction in the Systems that could reasonably expected to have a
Material Adverse Effect.
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(ee) The Company does not have, and as of the Closing Date
will not have, any direct or indirect subsidiaries other than those listed on
Annex I and other than those which are not material. No subsidiary of the
Company not listed on Annex I is (x) material to the business and operations of
the Company or (y) a "significant subsidiary" as defined in Article I, Rule 1-02
of Regulation S-X promulgated pursuant to the Securities Act, as such regulation
is in effect on the date hereof.
The Company acknowledges that for purposes of the opinions to be
delivered pursuant to Section 4 hereof, counsel to the Company will rely upon
the accuracy and truth of the foregoing representations and hereby consents to
such reliance.
II. The Purchaser represents and warrants to, and agrees with, the
Company that:
(a) The Purchaser has all requisite power and authority to
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby.
(b) This Agreement has been duly and validly authorized,
executed and delivered by the Purchaser and is the legal, valid and binding
agreement of the Purchaser, enforceable against the Purchaser in accordance with
its terms subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization or similar laws affecting the rights of creditors generally and
subject to general principles of equity.
(c) No consent, approval, authorization or order of, or
filing, registration, qualification, license or permit of or with, (i) any court
or governmental agency, body or administrative agency or (ii) any other person
is required for (A) the execution, delivery and performance by the Purchaser of
this Agreement or any other Operative Document and (B) the consummation by the
Purchaser of the transactions contemplated hereby except for the filing of a
Notification and Report Form by the Purchaser under the HSR Act.
(d) The Purchaser (i) understands that the Series G Preferred
Stock and Warrants to be issued pursuant to this Agreement, the Conversion
Shares which may be issued upon conversion of the Series G Preferred Stock and
the Warrant Shares which may be issued upon exercise of the Warrants have not
been registered for sale under any federal or state securities laws and that
such Securities are being offered and sold to the Purchaser pursuant to an
exemption from registration provided under Section 4(2) of the Securities Act,
(ii) agrees that the Purchaser is acquiring such Securities for its own account
for investment purposes and without a view to any distribution thereof, (iii) is
an "accredited investor" as defined in Regulation D under the Securities Act,
(iv) acknowledges that the representations and warranties set forth in this
Section 1.II are given with the intention that the Company rely on them for
purposes of claiming such exemption, and
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(v) understands that it must bear the economic risk of the investment in such
Securities for an indefinite period of time as such Securities cannot be sold
unless subsequently registered under such laws or unless an exemption from
registration is available.
(e) The Purchaser agrees that the Securities issued pursuant
to this Agreement will not be sold or otherwise transferred for value unless (i)
a registration statement with respect thereto has become effective under the
Securities Act, (ii) the sale or transfer is pursuant to Rule 144 under the
Securities Act or any similar provision or (iii) the sale or transfer is
pursuant to another exemption from registration and, in the case of clause
(iii), there is presented to the Company an opinion, reasonably satisfactory to
the Company, of counsel reasonably satisfactory to the Company (and the Company
hereby acknowledges and agrees that Xxxxxxx Xxxxxxx & Xxxxxxxx is reasonably
satisfactory to the Company) that such registration is not required, and the
Purchaser consents that any transfer agent of the Company may be instructed not
to transfer any such Securities unless it receives satisfactory evidence of
compliance with the foregoing provisions.
(f) The Purchaser (i) is aware of the Company's business and
affairs and financial condition and has acquired sufficient information about
the Company and the Subsidiaries to reach an informed and knowledgeable decision
to acquire the Securities issued pursuant to this Agreement, (ii) has reviewed
the recent SEC Filings, (iii) has discussed the Company and its plans,
operations and financial condition with the Company's officers, (iv) has
received such information as it has deemed necessary and appropriate to enable
it to evaluate the financial risk inherent in making an investment in the
Securities, (v) has received satisfactory information concerning the business
and financial condition of the Company and the Subsidiaries in response to
inquiries in respect thereof, (vi) has sufficient knowledge and experience in
financial and business matters and the Internet, technology and
telecommunications businesses so as to be capable of evaluating the merits and
risks of its investment in the Securities, the exercise of the Warrants or the
conversion of the Series G Preferred Stock, and (vii) is capable of bearing the
economic risks of such investment, including a complete loss of its investment
in the Securities. Notwithstanding the foregoing, all representations and
warranties made by the Company in this Agreement will be deemed to have been
relied upon by the Purchaser.
The Purchaser acknowledges that, for purposes of the opinions to be
delivered pursuant to Section 4 hereof, counsel to the Company will rely upon
the accuracy and truth of the foregoing representations and hereby consents to
such reliance.
2. Purchase, Sale and Delivery of the Series G Preferred Stock and
Warrants.
(a) On the basis of the representations, warranties, covenants
and agreements herein contained, but subject to the terms and conditions herein
set forth, the Company agrees to sell to you, or to cause the Selling Subsidiary
to sell to you, and you agree to purchase from the
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Company or the Selling Subsidiary, as the case may be, for an aggregate purchase
price of $200,000,000 (the "Purchase Price"), 200,000 shares of Series G
Preferred Stock and the Warrants to purchase initially 2,000,000 shares of
Common Stock (each as more fully described in the second paragraph of this
Agreement).
(b) Payment of the purchase price for, and delivery of
certificates for, the Series G Preferred Stock and Warrants (the "Closing")
shall be made at the offices of Kronish Xxxx Xxxxxx & Xxxxxxx LLP, 0000 Xxxxxx
xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other place as shall be
agreed upon by you and the Company, at 10:00 A.M. on the fifth business day
following the satisfaction or waiver of the conditions set forth in Section 4
hereof or such other time not later than fifteen business days after such date
as shall be agreed upon by you and the Company (such time and date of payment
and delivery being herein called the "Closing Date"). Payment of the Purchase
Price (subject to Section 8) shall be made to the Company or the Selling
Subsidiary, as the case may be, by wire transfer in same day funds, against
delivery to you of certificates for the Series G Preferred Stock and Warrants to
be purchased.
(c) If during the period from the date of this Agreement to
the Closing Date (the "Pre-Closing Period") the Company shall take any action
which would have resulted in an adjustment pursuant to the provisions in Section
3 of the Certificate of Designation and Section 6 of the Warrant Agreement had
the Series G Preferred Stock and Warrants been issued on the date hereof, the
Company and the Purchaser shall negotiate in good faith to agree on an
appropriate adjustment to the terms of this Agreement or the terms of the
Certificate of Designation and the Warrant Agreement, as the case may be, so
that the conversion price of the Series G Preferred Stock and the exercise price
and/or the number of shares for which the Warrants are then exercisable will be
adjusted to provide the Purchaser with such terms that Purchaser would have
received if such event had occurred after the Closing.
3. Covenants of the Company and the Purchaser.
I. The Company covenants and agrees:
(a) To do and perform all things required to be done and
performed under this Agreement by it prior to or after the Closing Date and to
use its best efforts to satisfy all conditions precedent on its part to the
delivery of the Series G Preferred Stock and the Warrants.
(b) To comply with the agreements in the Certificate of
Designation, the Warrant, the Registration Rights Agreement and any other
Operative Documents.
(c) Except as otherwise contemplated by the terms of this
Agreement and except for changes resulting from the conduct of the business of
the Company and the Subsidiaries in the
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ordinary course, during the Pre-Closing Period, the Company shall use
commercially reasonable efforts to preserve intact its and its Subsidiaries'
current business organizations, keep available the services of their current
officers and employees and preserve their relationships with customers,
suppliers, licensors, licensees, advertisers, distributors and others having
business dealings with them to the end that their goodwill and ongoing
businesses shall be unimpaired. Without limiting the generality of the
foregoing, during the Pre-Closing Period, each of the Company and its
Subsidiaries shall not, without the prior written consent of Purchaser, take any
of the actions specified under Section 7 of the Certificate of Designation which
would require the consent of the holders of the Series G Preferred Stock if such
action were taken immediately following the Closing Date.
(d) During the Pre-Closing Period, the Company shall, and
shall cause its Subsidiaries, officers, directors, employees, auditors and other
agents to, (a) afford the officers, employees, auditors and other agents of
Purchaser, during normal business hours reasonable access at all reasonable
times to its officers, employees, auditors, legal counsel, properties, offices,
plants and other facilities and to all books and records, (b) furnish Purchaser
with all financial, operating and other data and information as Purchaser,
through its officers, employees or agents, may from time to time reasonably
request and (c) afford Purchaser the opportunity to discuss the Company's
affairs, finances and accounts with the Company's officers on a regular basis.
Any information obtained by the Purchaser and its representatives pursuant to
this provision shall be "Evaluation Material" (as defined in the Confidentiality
Agreement, dated September 13, 1999, between the Company and Kohlberg Kravis
Xxxxxxx & Co. L.P. (the "Confidentiality Agreement").
(e) During the period that Purchaser has designees on the
Board of Directors of the Company (the "Board"), the Company agrees to maintain
Directors and Officers Insurance in the amount of at least $50 million.
(f) From and after the Closing, the Company shall at all times
reserve and keep available for issuance (a) such reasonable number of authorized
shares (until such shares are actually issued as dividends) of Common Stock
sufficient for payment of the dividends on the Series G Preferred Stock for a
period of five years, (b) a number of shares of Common Stock sufficient for the
issuance of the Warrant Shares and (c) such number of its authorized but
unissued shares of Common Stock as shall be sufficient to permit the issuance of
all of the Conversion Shares.
(g) The Company shall promptly make any and all filings which
it is required to make under the HSR Act, for the sale of the Series G Preferred
Stock, the Warrants, the Conversion Shares and the Warrant Shares and the
Company agrees to furnish Purchaser with such necessary information and
reasonable assistance as Purchaser may reasonably request in connection with its
preparation of any necessary filings or submissions to the Federal Trade
Commission ("FTC") or the Antitrust Division of the U.S. Department of Justice
(the "Antitrust Division"), including, without limitation, any filings or
notices necessary under the HSR Act. Any such actions, if necessary, with
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respect to the conversion of the Conversion Shares and the exercise of the
Warrant Shares shall be taken by the Company at such times as Purchaser
reasonably shall request. The Company shall, at its own expense, use all
reasonable efforts to respond to any request for additional information, or
other formal or informal request for information, witnesses or documents which
may be made by any governmental authority pertaining to the Company with respect
to the sale of the Series G Preferred Stock, the Warrants, the Conversion Shares
and the Warrant Shares and shall keep Purchaser fully apprised of its actions
with respect thereto.
(h) Prior to the Closing, the Company shall take all action
necessary to increase the size of the Board by two (2) members (but to no more
than ten (10) members) and to elect two (2) designees of the Purchaser (as the
holder of the Series G Preferred Stock) to the Board.
(i) On or prior to the Closing Date, the Board will adopt a
resolution providing that the Purchaser's beneficial ownership of the Series G
Preferred Stock, the Warrants, the Conversion Shares and the Warrant Shares
shall not result in Purchaser becoming an "Acquiring Person" pursuant to the
terms of the Rights Agreement dated as of March 7, 1996, between the Company and
Continental Stock Transfer and Trust Company, as amended by Amendment No. 1
dated as of February 20, 1997, and as further amended by Amendment No. 2 dated
as of January 27, 1998.
(j) Prior to the Closing, the Purchaser shall provide the
Company with a proposed reasonable allocation of the Purchase Price between the
Series G Preferred Stock and the Warrants and the Company shall agree to such
allocation.
(k) At any time or from time to time after the date hereof,
the parties agree to cooperate with each other, and at the request of any other
party, to execute and deliver any further instruments or documents and to take
all such further action as the other party may reasonably request in order to
evidence or effectuate the consummation of the transactions contemplated hereby
and to otherwise carry out the intent of the parties hereunder.
(l) The Company shall make all necessary applications with all
applicable state regulatory authorities within 20 days of the date of this
Agreement but in any event prior to the Closing and shall use its best efforts
to obtain any necessary approvals of the issuance of the Series G Preferred
Stock, the Warrants, the Conversion Shares and the Warrant Shares from all
applicable state regulatory authorities.
(m) At any time after the Closing, at Purchaser's request, the
Company and the Purchaser shall use their best efforts to (a) negotiate in good
faith and agree to terms of a new series of preferred stock of the Company and
warrants (which terms, in the aggregate, shall be no less favorable to the
Company than the terms of the Series G Preferred Stock) and (b) cause a
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recapitalization to be consummated pursuant to which all outstanding shares of
Series G Preferred Stock would be exchanged for such new securities.
II. The Purchaser covenants and agrees:
(a) To do and perform all things required to be done and
performed under this Agreement by it prior to the Closing Date and to use its
best efforts to satisfy all conditions precedent on its part to the purchase of
the Series G Preferred Stock and the Warrants.
(b) Purchaser shall promptly make any and all filings which it
is required to make under the HSR Act with respect to the purchase of the Series
G Preferred Stock, the Warrants, the Conversion Shares and the Warrant Shares
and Purchaser agrees to furnish the Company with such necessary information and
reasonable assistance as it may request in connection with its preparation of
any necessary filings or submissions to the FTC or the Antitrust Division,
including, without limitation, any filings or notices necessary under the HSR
Act. Purchaser shall, at its own expense, use all reasonable efforts to response
promptly to any request for additional information, or other formal or informal
request for information, witnesses or documents which may be made by any
governmental authority pertaining to Purchaser with respect to the purchase of
the Series G Preferred Stock, the Warrants, the Conversion Shares and the
Warrant Shares and shall keep the Company fully apprised of its actions with
respect thereto.
4. Conditions of the Company's and the Purchaser's Obligations.
I. The obligations of the Purchaser to purchase and pay for the Series
G Preferred Stock and Warrants, as provided herein, shall be subject to the
following conditions:
(a) All of the representations and warranties of the Company
contained in this Agreement shall be true and correct on the date hereof and on
the Closing Date with the same force and effect as if made on and as of the date
hereof and the Closing Date, respectively. The Company shall have performed or
complied with all of the agreements herein contained and required to be
performed or complied with by it at or prior to the Closing Date.
(b) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency which would, as of the Closing Date, prevent the issuance of
the Securities or which has the effect of rendering it unlawful to consummate
the transactions contemplated hereby and by the other Operative Documents; no
action, suit or proceeding shall have been commenced and be pending against the
Company or any of its subsidiaries before any court or arbitrator or any
governmental body, agency or official which seeks
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to prevent the issuance of the Securities, provided that this condition shall
not apply if Purchaser or any of its affiliates shall have directly encouraged
such action, suit or proceeding.
(c) The Purchaser shall have received a certificate, dated the
Closing Date, signed on behalf of the Company by each of the Company's Chief
Executive Officer and Chief Financial Officer in form and substance reasonably
satisfactory to the Purchaser, confirming, as of the Closing Date, the matters
set forth in paragraph (a) of this Section 4.I.
(d) The Purchaser shall have received on the Closing Date an
opinion, dated the Closing Date, in form and substance satisfactory to the
Purchaser and counsel to the Purchaser, of Kronish Xxxx Xxxxxx & Xxxxxxx LLP,
counsel for the Company, to the effect set forth in Exhibit A.1 hereto.
(e) The Purchaser shall have received on the Closing Date an
opinion, dated the Closing Date, in form and substance satisfactory to the
Purchaser and counsel to the Purchaser, of Xxxxxx Xxxx & Xxxxxx LLP, special
telecommunications counsel for the Company, to the effect set forth in Exhibit
A.2 hereto.
(f) All notifications required pursuant to the HSR Act, to
carry out the transactions contemplated by this Agreement shall have been made,
and the applicable waiting period and any extensions thereof shall have expired
or been terminated.
(g) The Company shall have delivered to the Purchaser an
executed counterpart of each Warrant Agreement, substantially in the forms of
Exhibits B-1 and B-2, executed warrant certificates in the forms attached to the
Warrant Agreement, evidencing the Warrants, and an executed counterpart of the
Registration Rights Agreement, substantially in the form of Exhibit C.
(h) The Company shall have authorized, executed and filed the
Certificate of Designation, substantially in the form of Exhibit D, in
accordance with Delaware law and the Purchaser shall have received an original,
duly executed copy thereof.
(i) The Company shall have taken all actions required by
Sections 3.I(h), (i) and (l).
(j) The Company shall have paid to Purchaser, or an affiliate
of Purchaser designated by Purchaser, the amount provided for in Section 8
hereof.
(k) The Alliance Agreement between Microsoft Corporation and
Digex, Incorporated shall have been executed and the Purchase Agreement between
Microsoft Corporation and Digex, Incorporated pursuant to which Microsoft shall
purchase preferred stock and warrants
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to purchase common stock of Digex, Incorporated shall have been executed and the
transactions contemplated by such Purchase Agreement shall have been
consummated.
II. The obligations of the Company to deliver the Series G Preferred
Stock and the Warrants as provided herein shall be subject to the following
conditions:
(a) All the representations and warranties of the Purchaser
contained in this Agreement shall be true and correct on the date hereof and on
the Closing Date with the same force and effect as if made on and as of the date
hereof and Closing Date, respectively. The Purchaser shall have performed or
complied with all of the agreements contained herein and required to be
performed or complied with by it at or prior to the Closing Date.
(b) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency which would, as of the Closing Date, prevent the issuance of
the Securities or which has the effect of rendering it unlawful to consummate
the transactions contemplated hereby and by the other Operative Documents; no
action, suit or proceeding shall have been commenced and be pending against the
Company or any of its subsidiaries before any court or arbitrator or any
governmental body, agency or official which seeks to prevent the issuance of the
Securities, provided that this condition shall not apply if the Company or any
of its affiliates shall have directly encouraged such action, suit or
proceeding.
(c) The Company shall have received a certificate, dated as of
the Closing Date, signed on behalf of the Purchaser by an authorized officer of
the Purchaser, in form and substance reasonably satisfactory to the Company,
confirming as of the Closing Date the matters set forth in paragraph (a) of this
Section 4.II.
(d) All notifications required pursuant to the HSR Act, to
carry out the transactions contemplated by this Agreement shall have been made,
and the applicable waiting period and any extensions thereof shall have expired
or been terminated.
5. Survival of Representations and Warranties; Indemnities.
I. (a) The representations and warranties contained in
Sections 1.I(b), (g), (h), (j) and (k) of this Agreement shall survive
indefinitely.
(b) All other representations and warranties contained in
Section 1.I of this Agreement shall survive until the later of (x) the first
anniversary of the Closing Date and (y) 30
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days after the filing by the Company of its Annual Report of Form 10-K for the
year ended December 31, 2000.
(c) The representations and warranties contained in Section
1.II(d) and (f) of this Agreement shall survive until the expiration of the
applicable statute of limitations with respect to the subject matter of each
such representation or warranty. The remaining representations and warranties
contained in Section 1.II of this Agreement shall survive until the later of (x)
the first anniversary of the Closing Date, and (y) 30 days after the filing by
the Company of its Annual Report of Form 10-K for the year ended December 31,
2000.
(d) The representations and warranties contained in Section 1
of this Agreement, and the rights and remedies that may be exercised by any
person seeking indemnification hereunder, shall not be limited or otherwise
affected by or as a result of any information furnished to, or any investigation
made by, any such person or its representatives.
(e) For purposes of this Agreement, each statement or other
item of information set forth by the Company on any Schedule hereto shall be
deemed to be a representation and warranty made by the Company in this
Agreement.
(f) From and after the Closing Date and subject to Sections
5.I(a), (b), (d), (h) and (j), the Company (the "Purchaser Indemnitor") shall
defend, indemnify and hold harmless Purchaser and its Affiliates and each
director, officer, member, partner, employee and agent of such Persons (the
"Purchaser Indemnitees") against any loss, damage, claim, liability, judgment or
settlement of any nature or kind, including all costs and expenses relating
thereto, including without limitation, interest, penalties and reasonable
attorneys' fees (collectively, "Damages"), arising out of, resulting from or
relating to:
(x) the breach of any representation or warranty contained in
Section 1.I, or any certificate delivered by the Company pursuant
hereto; and
(y) the breach by the Company of any covenant or agreement
(whether to be performed prior to or after the Closing) contained in
this Agreement, or any certificate delivered by the Company pursuant
hereto.
(g) From and after the Closing Date and subject to Sections
5.I(a), (c), (d), (h) and (j), Purchaser (the "Company Indemnitor" and
collectively with the Purchaser Indemnitor, the "Indemnitors") shall defend,
indemnify and hold harmless the Company and its affiliates and each director,
officer, member, partner, employee and agent of such persons (the "Company
Indemnitees" and collectively with the Purchaser Indemnitees, the "Indemnitees")
against any Damages arising out of, resulting from or relating to:
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(x) the breach of any representation or warranty contained in
Section 1.II; and
(y) the breach by Purchaser of any covenant or agreement
(whether to be performed prior to or after the Closing) contained in
this Agreement.
(h) An Indemnitor shall not have liability under Section
5.I(f) or 5.I(g) until the aggregate amount of Damages theretofore incurred by
the Purchaser Indemnitees or the Company Indemnitees, as applicable, exceeds an
amount equal to $6.0 million (the "Deductible"), in which case the Purchaser
Indemnitees or the Company Indemnitees, as applicable, shall be entitled to
Damages only in the amount by which all Damages exceed the Deductible. The
limitations on the indemnification obligations set forth in this clause (h)
shall not apply to any covenants or agreements of the parties of this Agreement.
In addition, notwithstanding the provisions of the first sentence of this clause
(h) above, the limitations on the indemnification obligations of the parties set
forth therein shall not apply to breaches of the representations and warranties
referred to in Section 5.I(a).
(i) The indemnification remedies provided in this Section 5.I
shall be exclusive; provided, that nothing herein shall relieve any party from
liability in the case of fraud.
(j) The indemnification obligations of the parties hereto for
any breach of a representation and warranty described in Section 1 of this
Agreement shall survive for only the period applicable to such representations
and warranties as set forth in Section 5.I(a) of this Agreement, and thereafter
all such representations and warranties of the applicable Indemnitor under this
Agreement shall be extinguished; provided, however, that such indemnification
obligation shall not be extinguished in the event of Damages incurred as a
result of an Action that was instituted or begun prior to the expiration of the
survival period set forth in Section 5.I(a), (b) or (c) if noticed in writing to
the applicable Indemnitor by the applicable Indemnitee within 30 days of such
Indemnitee receiving notice thereof. Subject to the proviso at the end of the
immediately preceding sentence, no claim for the recovery of such Damages may be
asserted by an Indemnitee after such period.
II. The Company agrees to indemnify and hold harmless Purchaser, its
respective directors and officers and its affiliates (and the directors,
officers, partners, affiliates and controlling persons thereof, each, an
"Indemnified Party") from and against any and all liability, including, without
limitation, all losses, liabilities, damages, deficiencies, obligations, costs,
fines and assessments, penalties, claims, actions, injuries, demands, suits,
judgments, proceedings, investigations, arbitrations (including stockholder
claims, actions, injuries, demands, suits, judgments, proceedings,
investigations or arbitrations) and reasonable expenses, including, without
limitation, reasonable accountant's and reasonable attorney's fees and expenses
not subject to the provisions of Section 5.I above (together the "Losses"),
incurred by the Purchaser or an Indemnified Party before or after the date of
this Agreement and arising out of or directly resulting from, (i) the operations
of the Company, (ii) the Purchaser's purchase and/or any Indemnified Party's
ownership
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of the Securities or any shares of Common Stock or other securities of the
Company issued with respect thereto, (iii) the transactions contemplated by this
Agreement, the Registration Rights Agreement, the Certificate of Designation and
the Warrant Agreement, or (iv) any litigation to which the Purchaser or an
Indemnified Party is made a party in its capacity as a stockholder or owner of
securities (or as partner, director, officer, affiliate or controlling person of
the Purchaser) of the Company; provided, that (w) the foregoing indemnification
rights in this Section 5.II shall not be available to the extent that any such
Losses are incurred as a result of the Indemnified Party's willful misconduct or
gross negligence, (x) the indemnification rights set forth in clause (i) of this
Section 5.II shall not be available to the extent that any such Losses are
incurred as a result of non-compliance by Purchaser and its representatives on
the Board with all laws and regulations applicable to them, (y) the
indemnification rights set forth in clause (ii) of this Section 5.II shall not
be available to the extent that any such Losses are incurred as a result of
non-compliance by Purchaser with all laws and regulations applicable to it and
(z) the indemnification rights set forth in clause (iii) of this Section 5.II
shall not be available to the extent any such Losses are incurred as a result of
non-compliance by Purchaser with its obligations under the Operative Documents.
For purposes of this Section 5.II, Purchaser and its representatives shall be
deemed to have complied with all laws and regulations applicable to them and
their obligations under the Operative Documents and each Indemnified Party shall
be deemed not to have engaged in willful misconduct or gross negligence absent a
final non-appealable judgment of a court of competent jurisdiction to the
contrary.
6. Governance Provisions.
(a) If at any time there are no longer more than 100,000
shares of Series G Preferred Stock outstanding and (i) at such time, Purchaser
and its affiliates hold in the aggregate at least 3,780,000 shares of Common
Stock (assuming the conversion of all shares of Series G Preferred Stock held by
Purchaser and its affiliates and the exercise of all Warrants held by Purchaser
and such affiliates), Purchaser shall have the right to appoint two members of
the Board as more fully described in paragraph 7(ii) of the Certificate of
Designation, or (ii) at such time, Purchaser and its affiliates hold in the
aggregate at least 1,890,000 shares of Common Stock (assuming the conversion of
all shares of Series G Preferred Stock held by Purchaser and such affiliates and
the exercise of all Warrants held by Purchaser and such affiliates), Purchaser
shall have the right to appoint one member of the Board as more fully described
in paragraph 7(ii) of the Certificate of Designation. From such time and for so
long as Purchaser or any transferee of Purchaser who has received an assignment
of rights pursuant to paragraph (c) below shall be entitled to any such rights,
the Company shall take such action as may be required under applicable law to
cause the Board to consist of not more than ten directors (12 directors if
directors have been elected to the Board pursuant to paragraph 7(vi) of the
Certificate of Designation), to include in the slate of nominees recommended by
the Board the designees of Purchaser and to use its best efforts to cause the
election of each such nominee of Purchaser to the Board. In the event that
Purchaser has the
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right to elect two nominees to the Board, the Company shall also take such
action as may be required under applicable law to cause the Purchaser's nominees
to be divided as equally as practicable among each class of directors. In the
event that a vacancy is created at any time by the death, disability,
retirement, resignation or removal (with or without cause) of any designee of
Purchaser, the remaining directors and the Company shall cause the vacancy
created thereby to be filled by a new designee of Purchaser as soon as possible,
who is designated in the manner specified in this clause (a), and the Company
hereby agrees to take, at any time and from time to time, all actions necessary
to accomplish the same. For purposes of any measurement of Purchaser's and its
affiliates' ownership of Common Stock pursuant to this clause (a), any shares of
Series G Preferred Stock, Common Stock or Warrants held by a transferee to whom
rights were transferred under clause (c) below shall be included in any such
measurement so long as such transferee or subsequent transferee is entitled to
retain such right pursuant to clause (c). If at any time Purchaser and its
affiliates cease to own at least 3,780,000 shares of Common Stock, upon receipt
of written notice from the Chairman of the Board, the term of one of Purchaser's
designees on the Board pursuant to this Section 6(a) shall thereupon terminate
and such director shall be deemed to have resigned. If at any time Purchaser and
its affiliates cease to own at least 1,890,000 shares of Common Stock, upon
receipt of written notice from the Chairman of the Board, the term of
Purchaser's remaining designee on the Board pursuant to this Section 6(a) shall
thereupon terminate and such director shall be deemed to have resigned. The
numbers of shares contained in this Section 6(a) shall be adjusted as
appropriate to reflect any adjustments pursuant to Section 3 of the Certificate
of Designation and Section 6 of the Warrant Agreement.
(b) For so long as Purchaser and its affiliates hold in the
aggregate at least 1,323,000 shares of Common Stock (assuming conversion of all
shares of Series G Preferred Stock held by Purchaser and such affiliates and the
exercise of all Warrants held by Purchaser and such affiliates), Purchaser shall
also have the rights of the holders of the Series G Preferred Stock described in
the last two paragraphs of paragraph 7(ii) and in paragraph 8 of the Certificate
of Designation and the Company shall provide such information and access to the
Purchaser. All such information provided to Purchaser and its representatives
shall be "Evaluation Material" as such term is defined in the Confidentiality
Agreement, and notwithstanding any term or other expiration of the obligations
contained in the Confidentiality Agreement, shall be subject to Purchaser's
obligations of confidentiality set forth in the Confidentiality Agreement for
two years following the receipt of such information by Purchaser and its
representatives. The numbers of shares contained in this Section 6(b) shall be
adjusted as appropriate to reflect any adjustments pursuant to Section 3 of the
Certificate of Designation and Section 6 of the Warrant Agreement.
(c) No transferee of Purchaser or of any such transferee shall
have any rights or obligations under this Section 6, except that if a transferee
of Purchaser together with its affiliates acquires from Purchaser and its
affiliates Series G Preferred Stock, Common Stock or Warrants representing at
least 50% of the shares of Common Stock acquired at the Closing by Purchaser
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(assuming the conversion of the Series G Preferred Stock and the exercise of the
Warrants) then, in the sole discretion of Purchaser, Purchaser may assign to
such transferee all or a portion of the rights and obligations of Purchaser
under Section 6(a) and 6(b) (and such rights shall be further transferable to
any further transferee subject to this Section 6(c)). Any such transferee or
subsequent transferee shall cease to have the right to elect more than one Board
member pursuant to this clause (c) at such time as such transferee or subsequent
transferee shall own, together with its affiliates, less than 50% of the shares
acquired at the Closing by Purchaser (assuming the conversion of the Series G
Preferred Stock and the exercise of the Warrants). Any such transferee or
subsequent transferee shall cease to have the rights to elect any Board members
pursuant to this clause (c) and the rights described in clause (b) at such time
as such transferee or subsequent transferee shall own, together with its
affiliates, less than 25% of the shares acquired at the Closing by Purchaser
(assuming the conversion of the Series G Preferred Stock and the exercise of the
Warrants). At any such time as a transferee's rights to elect members of the
Board expires pursuant to this paragraph (c), the term of such transferee's
designees on the Board pursuant to this paragraph (c) shall thereupon terminate
and such director or directors, as the case may be, shall be deemed to have
resigned. The numbers of shares contained in this Section 6(c) shall be adjusted
as appropriate to reflect any adjustments pursuant to Section 3 of the
Certificate of Designation and Section 6 of the Warrant Agreement.
(d) The Company acknowledges that Purchaser may transfer
shares of Series G Preferred Stock and retain the right to designate one or two
members of the Board under the terms of the Certificate of Designation by
agreement with such transferee.
(e) The Company shall reimburse each director appointed
pursuant to Section 7 of the Certificate of Designation or this Section 6 for
his reasonable out-of-pocket expenses incurred by him for the purpose of
attending meetings of the Board or any committee of the Board.
7. Effective Date of Agreement; Termination.
(a) This Agreement shall become effective upon the execution
and delivery of a counterpart hereof by each of the parties hereto.
(b) This Agreement may be terminated at any time prior to the
Closing:
(i) by the mutual written consent of the parties
hereto; or
(ii) by Purchaser or the Company in the event that
prior to the Closing any governmental or regulatory
authority shall have issued an order, decree or
ruling or taken any other action which has the effect
of restraining, enjoining or otherwise prohibiting
the transactions contemplated by this
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Agreement and such order, decree, ruling or other
action shall have become final and non-appealable; or
(iii) by Purchaser or the Company in the event that
the Closing has not occurred prior to the earlier of
(1) the fifteenth business day following the
satisfaction or waiver of all of the conditions to
the obligations of the parties set forth in Section 4
or (2) March 31, 2000; provided, however, that the
right to terminate this Agreement under this Section
5(b)(iii) shall not be available to any party whose
failure to fulfill its obligation to consummate the
transactions contemplated hereby upon satisfaction or
waiver of all of the conditions to the obligations of
the parties set forth in Section 4 or whose
non-performance shall have been the cause of, or
shall have resulted in, the failure of the Closing to
occur on or prior to such date.
(c) Any notice of termination pursuant to this Section 5 shall
be by telephone, telecopy, telex or telegraph, confirmed in writing by letter.
(d) In the event of termination of this Agreement as provided
in this Section 5, this Agreement shall forthwith become void and there shall be
no liability on the part of any party hereto, provided, however, that nothing
herein shall limit the right of any party hereto to seek damages for breach of
this Agreement.
8. Expenses. The Company shall bear its own expenses with respect to
the transactions contemplated by this Agreement. On the Closing Date, the
Company shall pay to the Purchaser or its designees $6 million, reflecting, as
Purchaser shall determine in its sole discretion, a transaction fee and expenses
payable to consultants, investment bankers, accountants and counsel incurred for
the benefit of the Company in connection with the issuance of the Securities. In
no event shall any fees be payable pursuant to this Section 8 in the event the
Closing does not occur. Purchaser may, at its option, net any such amounts
payable to it or its designees under this Section 8 against amounts payable to
the Company at the Closing in respect of the Purchase Price.
9. Notices. All communications hereunder, except as may be otherwise
specifically provided herein, shall be in writing and shall be deemed
effectively given: (a) upon personal delivery to the party to be notified; (b)
when sent by confirmed telex or facsimile if sent during normal business hours
of the recipient, if not, then on the next business day; (c) five (5) days after
having been sent by registered or certified mail, return receipt requested,
postage prepaid; or (d) one (1) business day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written
verification of receipt. All communications shall be sent to the addresses set
forth below:
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(x) if sent to the Purchaser, x/x Xxxxxxxx Xxxxxx Xxxxxxx & Co. L.P., 0
Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxxxxx Xxxxx, Xx.,
telecopy number: (000) 000-0000, with a copy to Xxxxxxx Xxxxxxx & Xxxxxxxx, 000
Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxx X. Xxxxxx, telecopy
number: (000) 000-0000; and
(y) if sent to the Company, to Intermedia Communications Inc., 0000
Xxxxx Xxxx Xxxxx, Xxxxx, Xxxxxxx 00000, Attention: Chief Financial Officer,
telecopy number: (000) 000-0000, with a copy to Kronish Xxxx Xxxxxx & Xxxxxxx
LLP, 1114 Avenue of the Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attention: Xxxxx X. Xxxxxxxxx, telecopy number: (000) 000-0000.
10. Parties. This Agreement shall inure solely to the benefit of, and
shall be binding upon, the Purchasers, the Company and their respective
successors and assigns, and no other person shall have or be construed to have
any legal or equitable right, remedy or claim under or in respect of or by
virtue of this Agreement or any provision herein contained. The term "successors
and assigns" shall not include a purchaser except as expressly contemplated
herein, in its capacity as such, of Securities from the Purchaser. This
Agreement may not be assigned without the prior written consent of the other
party, except that Purchaser may assign its rights and obligations hereunder to
any affiliate or affiliates or to any transferee of Purchaser or any subsequent
transferee pursuant to Section 6(c).
11. Construction. This Agreement shall be construed in accordance with
the internal laws of the State of New York applicable to agreements made and to
be performed within New York, without giving any effect to any provisions
thereof relating to conflicts of law. TIME IS OF THE ESSENCE IN THIS AGREEMENT.
12. Captions. The captions included in this Agreement are included
solely for convenience of reference and are not to be considered a part of this
Agreement.
13. Counterparts. This Agreement may be executed in various
counterparts which together shall constitute one and the same instrument.
14. Entire Agreement. This Agreement and the Exhibits hereto, the other
Operative Documents and the other documents delivered pursuant hereto constitute
the full and entire understanding and agreement between the parties with regard
to the subjects hereof and no party shall be liable or bound to any other in any
manner by any representations, warranties, covenants and agreements except as
specifically set forth herein and therein.
15. Severability. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
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16. Amendment and Waiver. This Agreement may be amended or modified,
and the rights of the Company or Purchaser hereunder may only be waived, upon
the written consent of the Company and Purchaser.
17. No Recourse. Notwithstanding anything that may be expressed or
implied in this Agreement, the Company and Purchaser covenant, agree and
acknowledge that no recourse under this Agreement or any of the other Operative
Documents or any documents or instruments delivered in connection with this
Agreement or any of the other Operative Documents shall be had against any
current or future director, officer, employee, general or limited partner,
member, affiliate or assignee of Purchaser or of any of the foregoing, whether
by the enforcement of any assessment or by any legal or equitable proceeding, or
by virtue of any statute, regulation or other applicable law, it being expressly
agreed and acknowledged that no personal liability whatsoever shall attach to,
be imposed on or otherwise incurred by any current or future officer, agent or
employee of Purchaser or any current or future member of Purchaser or any
current or future director, officer, employee, partner, member, affiliate or
assignee of any of the foregoing, as such for any obligation of Purchaser under
this Agreement, any other Operative Document or any documents or instruments
delivered in connection with this Agreement or any other Operative Document for
any claim based on, in respect of or by reason of such obligations or their
creation.
[SIGNATURE PAGE FOLLOWS]
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If the foregoing correctly sets forth the understanding between you and
the Company, please so indicate in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement among us.
Very truly yours,
INTERMEDIA COMMUNICATIONS INC.
By: /s/ XXXXX X. XXXXXX
Name: Xxxxx X. Xxxxxx
Title: President and Chief Executive
Officer
Accepted as of the date first above written:
ICI VENTURES LLC
By: /s/ XXXX XXXXX
__________________________
Name: Xxxx Xxxxx
Title: President
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