EXECUTION VERSION
(CONFORMED COPY)
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INVESTMENT AGREEMENT
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Between
NTL INCORPORATED
and
FRANCE TELECOM, S.A.
Dated July 26, 1999
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TABLE OF CONTENTS
Section Page
ARTICLE I
DEFINITIONS
1.01. Certain Defined Terms...................................................2
1.02. Other Definitions......................................................10
ARTICLE II
SALE AND PURCHASE
2.01. Sale of the New Securities.............................................12
2.02. Purchase Price.........................................................12
2.03. Closing................................................................12
2.04. Closing Deliveries by the Company......................................13
2.05. Closing Deliveries by the Purchaser....................................14
2.06. Acceleration of Closing................................................14
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.01. Organization, Authority and Qualification of the Company and the
Significant Subsidiaries; Significant Subsidiaries............................15
3.02. Capital Stock of the Company; Ownership of the New Securities..........16
3.03. No Conflict............................................................17
3.04. Governmental Consents and Approvals....................................17
3.05. SEC Filings; Financial Statements......................................17
3.06. No Undisclosed Liabilities.............................................19
3.07. Absence of Certain Changes or Events...................................19
3.08. Litigation.............................................................21
3.09. Compliance with Laws...................................................22
3.10. Environmental Matters..................................................22
3.11. Material Contracts.....................................................23
3.12. Intellectual Property; Company Systems.................................23
3.13. Year 2000 Compliance...................................................24
3.14. Title to Properties; Absence of Encumbrances...........................24
3.15. Employee Benefit Matters; Labor Matters................................25
3.16. Insurance..............................................................27
3.17. Brokers................................................................27
3.18. Taxes..................................................................28
Section Page
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
4.01. Organization and Authority of the Purchaser............................28
4.02. No Conflict............................................................29
4.03. Governmental Consents and Approvals....................................29
4.04. Investment Purpose.....................................................29
4.05. Status of New Securities; Limitations on Transfer and
Other Restrictions.....................................................29
4.06. Fees and Expenses......................................................30
ARTICLE V
ADDITIONAL AGREEMENTS
5.01. Conduct of Business by the Company Pending the Closing.................30
5.02. Access to Information; Confidentiality.................................31
5.03. Public Announcements...................................................32
5.04. Company's Action.......................................................33
5.05. Tax Matters............................................................34
5.06. No Solicitation of Transactions........................................35
5.07. Use of Proceeds........................................................35
5.08. Certain Costs and Expenses.............................................35
5.09. Standstill; Restrictions on Transfer...................................35
5.10. Right to Purchase Equity Securities....................................37
5.11. Level of Ownership at the Time of Delivery.............................38
5.12. Corporate Governance; Issuance of Senior Preferred Stock;
Strategic Transactions.................................................38
5.13. Other Registration Rights..............................................41
5.14. Takeover Statutes......................................................41
5.15. Securities.............................................................41
5.16. Further Action; Consents; Filings......................................41
5.17. Strategic Committee....................................................42
5.18. Employment by the Company of the Purchaser's Employees.................42
5.19. Transaction Agreement..................................................42
5.20. CWC....................................................................42
ARTICLE VI
CONDITIONS
6.01. Conditions to Purchaser's Obligations..................................42
6.02. Provision of Certificate Relating to Satisfaction or Waiver of
Conditions.............................................................45
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ARTICLE VII
INDEMNIFICATION
7.01. Survival of Representations and Warranties.............................45
7.02. Indemnification........................................................45
7.03. Limits on Indemnification..............................................47
7.04. Indemnification for ConsumerCo's Liabilities...........................47
ARTICLE VIII
TERMINATION
8.01. Termination............................................................48
8.02. Effect of Termination..................................................49
ARTICLE IX
GENERAL PROVISIONS
9.01. Waiver.................................................................49
9.02. Expenses...............................................................50
9.03. Notices................................................................50
9.04. Headings...............................................................51
9.05. Severability...........................................................51
9.06. Entire Agreement.......................................................51
9.07. Assignment.............................................................51
9.08. Holding Company........................................................52
9.09. No Third Party Beneficiaries...........................................52
9.10. Amendment..............................................................52
9.11. Governing Law..........................................................52
9.12. Counterparts...........................................................52
9.13. Specific Performance...................................................53
9.14. Terms Generally........................................................53
9.15. References to the Company..............................................53
ATTACHMENTS AND EXHIBITS
Attachment I Certificate of Designation of 5% Cumulative Participating
Convertible Preferred Stock, Series B
Exhibit A Pro Forma Capitalization
Exhibit B Principal Terms of the Registration Rights Agreement
Exhibit C Form of Legal Opinion of Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇
LLP
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DISCLOSURE SCHEDULE
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INVESTMENT AGREEMENT, dated July 26, 1999, between NTL INCORPORATED, a
Delaware corporation (the "Company") and FRANCE TELECOM, S.A., a company
organized under the laws of France (the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Company is a party to the Transaction Agreement, dated the
date hereof, among the Company, ▇▇▇▇ Atlantic Corporation, Cable & Wireless plc
("C&W") and Cable & Wireless Communications plc ("CWC") (the "Transaction
Agreement") providing, among other things, for a series of transactions which
will result in the Company acquiring 100% of the capital stock of ConsumerCo (as
defined in the Transaction Agreement) (the "Strategic Acquisition");
WHEREAS, for purposes of raising a portion of the financing (the
"Funds") for the Strategic Acquisition, including refinancing of any assumed
indebtedness, the Company wishes to issue and sell to the Purchaser certain
equity securities of the Company;
WHEREAS, for purposes of raising the initial portion of the Funds, the
Company and the Purchaser entered into the Purchase Agreement, dated July 15,
1999 (the "Purchase Agreement"), pursuant to which the Company agreed to issue
and sell to the Purchaser and the Purchaser agreed to purchase from the Company,
subject to the terms and conditions contained in the Purchase Agreement, the
Securities (as defined in the Purchase Agreement);
WHEREAS, for purposes of providing for availability of the remainder of
the Funds at the time the Strategic Acquisition is consummated, the Company
wishes to issue and sell to the Purchaser, and the Purchaser wishes to purchase
from the Company, subject to the terms and conditions contained herein, an
aggregate of 27,027,027 shares (the "Common Shares") of the Company's common
stock, par value $0.01 per share (the "Common Stock") and 2,000,000 shares (the
"Preferred Shares") of the Company's 5.0% Cumulative Participating Convertible
Preferred Stock, Series B, having an aggregate stated value of $2,000,000,000
(the "Preferred Stock"), and having the designations, rights and preferences set
forth in the Certificate of Designation (as defined below), upon the terms and
subject to the conditions set forth herein. All shares of Common Stock and
Preferred Stock purchased pursuant to this Agreement are collectively referred
to as the "New Securities"; and
WHEREAS, upon consummation of the Strategic Acquisition, the Company
will continue to pursue a growth strategy as the leading integrated wireline,
Internet and cable operator in the United Kingdom;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereinafter set forth, the Purchaser and the Company
hereby agree as follows:
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ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Action" means any claim, action, suit, arbitration, inquiry,
proceeding or investigation by or before any Governmental Authority.
"Affiliate" means, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person.
"Agreement" or "this Agreement" means this Investment Agreement, dated
July 26, 1999, between the Company and the Purchaser (including the Attachments
and the Exhibits hereto and the Disclosure Schedule) and all amendments hereto
made in accordance with the provisions of Section 9.10.
"Alliance" means any joint venture, co-ownership or co-operation
agreement or similar relationship with any telecommunications operator.
"beneficial owner" (including the terms "beneficially own" or
"beneficial ownership") has the meaning given to such terms in Rule 13d-3 of the
Exchange Act.
"Benefit Plan" means each of the Company's and Significant
Subsidiaries' plan, program, policy, payroll practice, contract, agreement or
other arrangement providing for compensation, retirement benefits, severance,
termination pay, performance awards, stock or stock-related awards, fringe
benefits or other employee benefits of any kind, whether formal or informal,
funded or unfunded, written or oral and whether or not legally binding,
including, without limitation, each "employee benefit plan", within the meaning
of Section 3(3) of ERISA and each "multi-employer plan" within the meaning of
Section 3(37) of 4001(a)(3) of ERISA.
"Board" means the board of directors of the Company.
"Business Combination Statute" means Section 203 of the Delaware
General Corporation Law or any other Law prohibiting, restricting, or imposing
conditions with respect to, business combinations or limiting voting powers or
other rights, or imposing any obligations, on any party to a business
combination.
"Business Day" means any day that is not a Saturday, a Sunday or other
day on which banks are required or authorized by law to be closed in The City of
New York or Paris.
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"By-laws" means the by-laws of the Company as amended as of the date
hereof and as may be amended from time to time, provided that such amendment
does not adversely affect the rights of the Purchaser under this Agreement, the
Purchase Agreement, the Certificate of Designation or the Series A Certificate
of Designation.
"CERCLA" means the U.S. Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended as of the date hereof.
"Certificate of Designation" means the Certificate of Designation of
the Company's 5% Cumulative Participating Convertible Preferred Stock, Series B,
to be filed with the Secretary of State of the State of Delaware, in the form of
Attachment I attached hereto, setting forth the designations, rights and
preferences of the Preferred Stock.
"Certificate of Incorporation" means the restated certificate of
incorporation of the Company, as amended through the date of this Agreement and
as may be amended from time to time, provided that such amendment does not
adversely affect the rights of the Purchaser under this Agreement, the Purchase
Agreement, the Certificate of Designation or the Series A Certificate of
Designation.
"Code" means the Internal Revenue Code of 1986, as amended through the
date of this Agreement.
"Company Subsidiary" or "Company Subsidiaries" means any Subsidiary or
all of the Subsidiaries of the Company, respectively.
"Company Systems" means all computers, hardware, software, systems,
facilities and equipment (including, without limitation, cable, wireline,
wireless, microwave, satellite and any other telecommunications equipment and
facilities, and embedded microcontrollers in noncomputer equipment) owned,
leased or licensed by the Company or any Significant Subsidiary and material to,
or necessary for, the Company or any Significant Subsidiary to carry on its
business as currently conducted or intended to be conducted.
"Completion" has the meaning given to such term in the Transaction
Agreement.
"Completion Date" has the meaning given to such term in the Transaction
Agreement.
"Conflicting Investment" means any investment of funds or assets of the
Company or any Company Subsidiary directly or indirectly in any French Operator
or in any joint venture entity which is partly owned by any French Operator (the
joint venture entity being known as the "Entity"), in connection with operations
in France of such French Operator or Entity other than any purchase (either in a
stock or asset purchase transaction) for cash by the Company and/or any Company
Subsidiary of not less than 51% (based on the fair market value and voting
power) of any company or business from any French Operator or the investment of
funds or assets in any
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Entity in which the Company and/or any Company Subsidiary will, following such
investment, own at least 51% (based on fair market value and voting power) of
such Entity.
"ConsumerCo Companies" means the companies listed in Schedule 5 of the
Transaction Agreement.
"ConsumerCo Material Adverse Effect" means (i) any circumstance,
development, change in, or effect on the ConsumerCo Companies or their
businesses that, individually or in the aggregate with any other circumstances,
developments, changes in, or effects on any one or more of the ConsumerCo
Companies or their businesses is, or is reasonably expected to be, materially
adverse to the business of the ConsumerCo Companies, taken as a whole, or the
financial condition, results of operations, assets or properties of the
ConsumerCo Companies, taken as a whole, and (ii) any material adverse change or
any development involving a prospective material adverse change in or affecting
the general affairs, management, financial positions, shareholders' equity or
results of operations of the ConsumerCo Companies, taken as a whole; provided,
however, that any change or development resulting from: (i) general economic
conditions in the countries in which the ConsumerCo Companies operate; (ii)
changes generally affecting the industry in which the ConsumerCo Companies
operate; or (iii) any change in law and regulations (other than laws and
regulations related to Taxes) applicable to the business of the ConsumerCo
Companies, shall not be deemed a ConsumerCo Material Adverse Effect.
"control" (including the terms "controlled by" and "under common
control with"), with respect to the relationship between or among two or more
Persons, means the possession, directly or indirectly or as trustee or executor,
of the power to direct or cause the direction of the affairs or management of a
Person, whether through the ownership of voting securities, as trustee or
executor, by contract or otherwise, including, without limitation, the
ownership, directly or indirectly, of securities having the power to elect a
majority of the board of directors or similar body governing the affairs of such
Person.
"Conversion Shares" means new shares of Common Stock issued or issuable
upon conversion, redemption of, or as a dividend with respect to, the shares of
Preferred Stock.
"Convertible Debentures" means the 7% Convertible Subordinated Notes
due 2008 of NTL Communications Corp., a Delaware corporation.
"Core Business Assets" means assets that are used in a business that
operates directly or indirectly, or holds a license to operate (i) a cable
system or service, (ii) a fixed-line telephone or telecommunications system or
service or (iii) a broadcasting transmission system or service.
"Diluted Shares" means, as of any applicable time, shares of Common
Stock issued and outstanding as of such time plus shares of Common Stock
issuable upon conversion, redemption, exchange, exercise of, or as a dividend
declared as of the time of measurement with
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respect to, any shares of preferred stock, options, warrants, debentures and
other securities or any subscription rights.
"Director" means a member of the Board.
"Disclosure Schedule" means the Disclosure Schedule delivered in
connection with this Agreement dated as of the date hereof and incorporated
herein by reference.
"Employee Agreement" means each management, employment, severance,
consulting, non-compete, confidentiality, or similar agreement or contract
between the Company or any ERISA Affiliate and any Employee pursuant to which
the Company has or may have any material liability contingent or otherwise.
"Encumbrance" means any security interest, pledge, mortgage, lien
(including, without limitation, environmental and tax liens), charge,
encumbrance, adverse claim, preferential arrangement or restriction of any kind,
including, without limitation, any restriction on the use, voting, transfer,
receipt of income or other exercise of any attributes of ownership, but
excluding Permitted Encumbrances.
"Environmental Law" means any Law and any judicial or administrative
interpretation thereof, including any judicial or administrative order, consent
decree or judgment, relating to pollution or protection of the environment,
health, safety or natural resources, including, without limitation, those
relating to the use, handling, transportation, treatment, storage, disposal,
release or discharge of Hazardous Materials.
"Environmental Permits" means any permit, approval, identification
number, license and other authorization required under any applicable
Environmental Law.
"ERISA" means Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means each business or entity which is or was a
member of a "controlled group of corporations", under "common control" or an
"affiliated service group" with the Company within the meaning of Section
414(b), (c) or (m) of the Code, or required to be aggregated with the Company
under Section 414(o) of the Code or is under "common control" with the Company,
within the meaning of Section 4001(a)(14) of ERISA.
"Exchange Act" means the United States Securities Exchange Act of 1934,
as amended.
"Existing Agreements" means the following registration rights
agreements: the Registration Rights Agreement, dated March 5, 1999, between the
Company and stockholders of Diamond Cable Communications Plc, the Registration
Rights Agreement, dated January 28, 1999, between the Company and Microsoft
Corporation, the Registration Rights Agreement, dated October 29, 1998, between
the Company and Comcast Corporation and Warburg Pincus
6
and the Registration Rights Agreement, dated September 22, 1998, between the
Company and Vision Networks B.V., copies of which have been made available to
the Purchaser.
"French Operator" means any significant provider of telecommunications
services in France (or that provider's Affiliates) or any Person whose primary
line of business in France is to provide telecommunications services (or such
Person's Affiliates) other than the Company or its Affiliates.
"GAAP" means United States generally accepted accounting principles and
practices as in effect from time to time and applied consistently throughout the
periods involved.
"Governmental Authority" means any United States or foreign federal,
state, provincial, local, supranational government, governmental, regulatory or
administrative authority, agency or commission or any court, tribunal, or
judicial or arbitral body.
"Governmental Order" means any order, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any Governmental
Authority.
"Hazardous Materials" means (i) any petroleum, petroleum products,
by-products or breakdown products, radioactive materials, asbestos-containing
materials or polychlorinated biphenyls or (ii) any chemical, material or
substance defined or regulated as toxic or hazardous or as a pollutant or
contaminant or waste under any applicable Environmental Law.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Indebtedness" means (a) indebtedness for borrowed money, (b)
obligations evidenced by bonds, notes, debentures or other similar instruments
or by letters of credit, including purchase money obligations or other
obligations relating to the deferred purchase price of property (other than
trade payables incurred in the ordinary course of business), (c) obligations as
lessee under leases which have been or should have been, in accordance with
GAAP, recorded as capital leases, (d) obligations under direct or indirect
guarantees in respect of Liabilities of others, including indebtedness of others
secured by an Encumbrance on any asset of such Person, whether or not such
indebtedness is assumed by such Person, (e) obligations in respect of
outstanding or unpaid checks or drafts or overdraft obligations and (f) accrued
interest, if any, on and all other amounts owed in respect of any of the
foregoing.
"Indentures" means the indentures of the Company or a Company
Subsidiary listed in Section 1.01 of the Disclosure Schedule.
"knowledge of the Company" means, with respect to any matter in
question, the actual knowledge, after due inquiry, of J. ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇.
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"Law" means any supranational, United States or foreign federal,
national, state, regional or local statute, law, ordinance, regulation, rule,
code, order, other requirement or rule of law.
"Liabilities" means any and all debts, liabilities and obligations,
whether accrued or fixed, absolute or contingent, matured or unmatured or
determined or determinable, including, without limitation, those arising under
any Law, Action or Governmental Order and those arising under any contract,
agreement, arrangement, commitment or undertaking.
"Material Adverse Effect" means (i) any circumstance, development,
change in, or effect on the Company, any Company Subsidiary or their businesses
that, individually or in the aggregate with any other circumstances,
developments, changes in, or effects on, the Company, any Company Subsidiary or
their businesses is, or is reasonably expected to be, materially adverse to the
business of the Company and the Company Subsidiaries, taken as a whole, or the
financial condition, results of operations, assets or properties of the Company
and the Company Subsidiaries, taken as a whole, and (ii) any material adverse
change or any development involving a prospective material adverse change, in or
affecting the general affairs, management, financial position, shareholders'
equity or results of operations of the Company and the Company Subsidiaries,
taken as a whole; provided, however, that any change or development resulting
from (i) the Strategic Acquisition; (ii) general economic conditions in the
countries in which the Company and the Significant Subsidiaries operate; (iii)
changes generally affecting the industry in which the Company and the
Significant Subsidiaries operate; or (iv) any change in laws and regulations
(other than laws and regulations related to Taxes) applicable to the business of
the Company and Significant Subsidiaries, shall not be deemed a Material Adverse
Effect.
"Nasdaq" means the Nasdaq Stock Market, Inc., the electronic securities
market regulated by the National Association of Securities Dealers, Inc.
"Nasdaq National Market" has the meaning set forth in Rule 4200(a)(23)
of the rules of the National Association of Securities Dealers, Inc.
"New Crown Shares" has the meaning given to such term in the
Transaction Agreement.
"Paying Agent" means the bank or the financial institution to be
mutually agreed upon by the Company and the Purchaser to make payments of the
consideration to the holders of the New Crown Shares under the Transaction
Agreement.
"Permitted Encumbrances" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced or is reasonably expected to commence: (a) liens for taxes,
assessments and governmental charges or claims that are not yet delinquent or
that are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted, provided that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been
8
made therefor; (b) Encumbrances imposed by law, such as materialmen's,
mechanics', carriers', workmen's and repairmen's liens and other similar liens
arising in the ordinary course of business; (c) pledges or deposits to secure
obligations under workers' compensation laws or similar legislation or to secure
public or statutory obligations or other obligations of a like nature incurred
in the ordinary course of business; (d) minor survey exceptions, reciprocal
easement agreements and other customary encumbrances on title to real property
that (i) were not incurred in connection with any indebtedness, (ii) do not
render title to the property encumbered thereby unmarketable and (iii) do not,
individually or in the aggregate, materially adversely affect the value or use
of such property for its current and anticipated purposes; (e) Encumbrances
permitted under any of the Indentures; (f) purchase money security interests in
supplier equipment; (g) precautionary liens filed by lessors with respect to
leased equipment; and (h) any single or series of related Encumbrances which are
not in excess of $2,500,000 and do not materially impair the value or use of the
property subject thereto or the operation of the Company's business as currently
conducted.
"Person" shall mean any individual, partnership, association, joint
venture, corporation, business, trust, joint stock company, limited liability
company, any unincorporated organization, any other entity, a "group" of such
persons, as that term is defined in Rule 13d-5(b) under the Exchange Act, or a
government or political subdivision thereof.
"Posting Date" has the meaning given to such term in the Transaction
Agreement.
"Purchaser Directors" means Directors elected by the Purchaser as a
holder of Preferred Stock in accordance with the Certificate of Designation or
otherwise nominated in accordance with this Agreement.
"Purchaser Law and Decrees" means (a) Act No. 83-675 of July 23, 1983
concerning the democratization of the public sector, (b) Act No. 90-568 of July
2, 1990 concerning the organization of the Post Office and Telecommunications
public service as amended by Act No. 96-660 of July 26, 1996 concerning the
national undertaking of France Telecom, S.A. and (c) Decree No. 96-1174 of
December 27, 1996 approving the constitution of France Telecom, S.A., including
miscellaneous provisions concerning the operation of France Telecom, S.A.
"Release" means disposing, discharging, injecting, spilling, leaking,
leaching, dumping, emitting, escaping, emptying, seeping, placing and the like
into or upon any land or water or air or otherwise entering into the
environment.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the United States Securities Act of 1933, as
amended.
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"Senior Preferred Stock" means (i) the Company's 13% Senior Redeemable
Exchangeable Preferred Stock, par value $0.01 per share; and (ii) 5.25%
Convertible Preferred Stock.
"Series A Certificate of Designation" means the Certificate of
Designation for the Series A Preferred Stock to be filed with the Secretary of
State of the State of Delaware in accordance with the Purchase Agreement.
"Series A Preferred Stock" means the 5% Cumulative Participating
Convertible Preferred Stock, Series A of the Company to be issued pursuant to
the Purchase Agreement.
"Significant Subsidiary" shall have the meaning given to such term in
Regulation S- X under the Exchange Act.
"Subsidiaries" of any Person means any corporation, partnership, joint
venture, limited liability company, trust, estate or other Person of which (or
in which), directly or indirectly, more than 50% of (a) the issued and
outstanding capital stock having ordinary voting power to elect a majority of
the board of directors of such corporation (irrespective of whether at the time
capital stock of any other class or classes of such corporation shall or might
have voting power upon the occurrence of any contingency), (b) the interest in
the capital or profits of such partnership, joint venture or limited liability
company or other Person or (c) the beneficial interest in such trust or estate
is at the time owned by such first Person, or by such first Person and one or
more of its other Subsidiaries or by one or more of such Person's other
Subsidiaries.
"Tax" or "Taxes" means any federal, state, county, local, foreign and
other taxes (including, without limitation, income, profits, premium, estimated,
excise, sales, use, occupancy, gross receipts, franchise, ad valorem, severance,
capital levy, production, transfer, withholding, employment, unemployment
compensation, payroll and property taxes, import duties and other governmental
charges and assessments), whether or not measured in whole or in part by net
income, and including deficiencies, interest, additions to tax or interest, and
penalties with respect thereto, whether disputed or not, imposed by any
Governmental Authority or other Tax authority or arising under any Tax law or
agreement, including, without limitation, any joint venture or partnership
agreement.
"Tax Claim" means any claim arising out of or otherwise in respect of
any inaccuracy in or any breach of any representation, warranty, covenant or
agreement of the Company contained in this Agreement relating to Taxes.
"Tax Return" means any return, declaration, report, claim for refund,
form, or information or return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendments thereof.
"U.K. Competition Law" means the Competition Act of 1998 of the United
Kingdom and all competition or antitrust Laws applicable to the business of the
Company or
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Company Subsidiaries, whether of the United Kingdom, European Union or any other
jurisdiction.
"U.K. Takeover Code" means The City Code on Takeovers and Mergers.
"Unconditional Time" means the time when the transactions contemplated
by the Transaction Agreement become unconditional in accordance with the terms
thereof and all conditions of the parties to the Transaction Agreement contained
therein are deemed waived.
"Vendors" means any and all vendors who are unaffiliated with the
Company who supply raw materials, components, spare parts, supplies, goods,
merchandise or services to the Company or any Company Subsidiary.
"Year 2000 Compliant" means that the Company Systems provide
uninterrupted millennium functionality in that (i) the Company Systems will
record, store, process and present calendar dates falling on or after January 1,
2000, in the same manner and with the same functionality and accuracy as the
Company Systems record, store, process and present calendar dates falling on or
before December 31, 1999; (ii) the Company Systems operate accurately in all
material respects, to the extent necessary in connection with the conduct of the
business of the Company as currently conducted, with other software and hardware
that use standard date format (four digits) for representation of the year; and
(iii) the occurrence of the calendar year 2000 will not materially adversely
affect the Company Systems.
SECTION 1.02. Other Definitions. Terms defined in the Transaction
Agreement and not otherwise defined in this Agreement have the meanings given to
them in the Transaction Agreement. The meanings of the following terms can be
found in the Sections of this Agreement indicated below:
Term Section
---- -------
Accelerated Closing..........................2.06
Accelerated Time of Delivery.................2.06
Assignee.....................................5.05(c)
Audited Financial Statements.................3.05(b)
Additional Issuer Information................5.02(b)
Bankruptcy Proceeding........................3.07(b)
Blackout Period..............................5.01(d)
C&W..........................................Recitals
Closing......................................2.03
Common Shares................................Recitals
Common Stock.................................Recitals
Company......................................Preamble
Company Balance Sheet........................3.05(b)
Company Loss.................................7.02(b)
11
Company Permits..............................3.09(b)
Confidentiality Agreement....................5.02(f)
ConsumerCo...................................Recitals
CWC..........................................Recitals
Designated Bank Account......................2.03
Employee.....................................3.15(d)
Equity Securities............................5.10
Exchange Act Reports.........................3.05(a)
Expected Date................................2.03
First Stockholder Meeting....................2.06
Funds........................................Recitals
HoldCo.......................................9.08
Improvements.................................3.14(d)
Indemnified Party............................7.02(c)
Indemnifying Party...........................7.02(c)
Intellectual Property........................3.12(a)
Interim Financial Statements.................3.05(b)
IRS..........................................3.15(b)
Lease........................................3.14(c)
Leased Real Property.........................3.14(a)
Loss.........................................7.02(b)
Market Value.................................5.12(e)
Material Contracts...........................3.11(a)
▇▇▇▇▇▇ ▇▇▇▇▇▇▇...............................3.17
New Securities...............................Recitals
NTL Communications...........................3.05
Owned Real Property..........................3.14(a)
Preferred Shares.............................Recitals
Preferred Stock..............................Recitals
Pro Forma Capitalization Table...............3.02(a)
Pro Forma Financial Statements...............3.05(b)
Pro Forma Rating.............................5.12(f)
Proxy Statement..............................5.04(a)
Purchase Agreement...........................Recitals
Purchase Price...............................2.02
Purchaser....................................Preamble
Purchaser Loss...............................7.02(a)
Qualified Holding Condition..................5.02(d)
Real Property................................3.14(a)
Relevant Time................................6.01
Registration Rights Agreement................4.05
Representatives..............................5.02(a)
Rights Agreement.............................5.04(d)
Salomon Brothers.............................4.06
12
Second Stockholders Meeting..................2.06
Securities...................................Recitals
Securities Act...............................3.05(a)
Strategic Acquisition........................Recitals
Third Party Claims...........................7.02(c)
Third-Party Offer............................5.09(b)
Time of Delivery.............................2.03
Transaction Agreement........................Recitals
ARTICLE II
SALE AND PURCHASE
SECTION 2.01. Sale of the New Securities. Upon the terms and subject to
the conditions set forth in this Agreement, the Company shall duly issue and
sell to the Purchaser, and the Purchaser shall purchase from the Company, the
New Securities.
SECTION 2.02. Purchase Price. The purchase price to be paid by the
Purchaser to the Company for the Common Shares shall be $2,500,000,000 and the
purchase price to be paid by the Purchaser for the Preferred Shares shall be
$2,000,000,000 (the aggregate purchase price payable hereunder for the Common
Shares and the Preferred Shares shall be the "Purchase Price"). The parties will
consult with each other regarding the advisability of providing that the
Purchase Price will be payable in Sterling and the equal sharing of any currency
exchange risk in connection therewith using mutually agreed upon hedging
strategy. The parties will use their reasonable best efforts to reach a
conclusion on the matter by August 15, 1999.
SECTION 2.03. Closing. The New Securities to be purchased by the
Purchaser will be represented by one or more stock certificates evidencing the
Common Shares and one or more certificates evidencing the Preferred Shares. The
Company will deliver the certificates evidencing the Preferred Shares and the
Common Shares to the Purchaser against payment of the Purchase Price as
hereinafter provided. The delivery of and payment for the New Securities
contemplated by this Agreement shall take place at a closing (the "Closing") to
be held at the offices of ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ at 10:00 a.m. (London time)
on the Completion Date.
The time and date upon which the Closing occurs is referred to herein
as the "Time of Delivery". The Company shall notify the Purchaser, at least 10
Business Days prior to the date on which the New Crown Call Option (as defined
in the Transaction Agreement) is expected to be exercised, of (i) the date on
which such option is expected to be exercised (such date or such later date as
the Company may indicate by a written notice to the Purchaser after the initial
notice was given, being the "Expected Date"); and (ii) the bank account
(including the sort code and address) established with the Paying Agent (the
"Designated Bank Account") into which the Purchaser shall transfer the Purchase
Price. The Purchaser shall transfer to the
13
Designated Bank Account the Purchase Price in US Dollars by wire transfer in
immediately available funds on the Business Day immediately preceding the
Expected Date.
The Purchaser shall instruct the Paying Agent to hold the Purchase
Price (and any interest accrued thereon) for the account and for the benefit of
the Purchaser on interest-bearing overnight deposit until the date on which the
New CWC Put Option or the New CWC Call Option is exercised (the "Option Exercise
Date"), at which time the Purchaser shall instruct the Paying Agent to apply
such amount of the Purchase Price as the Company shall specify in writing to the
Paying Agent in satisfaction of the consideration payable at Completion by the
Company to the shareholders in New CWC pursuant to the Transaction Agreement or
the New CWC Tag-Along Rights in respect of their shares in New CWC but
otherwise to continue to hold the Purchase Price for the account and for the
benefit of the Purchaser. If Completion shall not have taken place within three
Business Days after the Option Exercise Date, the Purchaser shall be entitled to
withdraw its instruction to the Paying Agent; provided however, that if
Completion did not occur because of the failure of any Closing Condition, the
Purchaser will upon three Business Days' notice be required to redeposit the
Purchase Price with the Paying Agent for disbursement as provided above.
SECTION 2.04. Closing Deliveries by the Company. At the Closing, the
Company shall deliver or cause to be delivered to the Purchaser:
(a) newly issued certificates for each of the Common Shares and the
Preferred Shares, issued to and registered in the name of the Purchaser and
evidencing the Common Shares and Preferred Shares being purchased hereunder;
(b) a receipt for the Purchase Price;
(c) a true and complete copy, certified by the Secretary or an
Assistant Secretary of the Company, of the resolutions duly and validly
adopted by the Board evidencing (i) its authorization of the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby and the filing of the Certificate of Designation with
the Secretary of State of the State of Delaware and the issuance of the
Securities, (ii) the amendment of the Rights Agreement as required by this
Agreement, and (iii) the amendment of the By-laws as required by this
Agreement;
(d) a legal opinion, addressed to the Purchaser and dated the Time of
Delivery from Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, substantially in the
form of Exhibit C;
(e) a copy of (i) the Certificate of Incorporation, certified by the
Secretary of State of the State of Delaware, as of a date not earlier than
five Business Days prior to the Time of Delivery and accompanied by a
certificate of the Secretary or Assistant Secretary or other authorized
officer of the Company, dated as of the Time of Delivery, stating that no
amendments, other than the filing of the Certificate of Designation, have
been made to
14
such Certificate of Incorporation since such date, and (ii) the By-laws,
certified by the Secretary or Assistant Secretary of the Company;
(f) a good standing certificate for the Company from the Secretary of
State of the State of Delaware dated as of a date not earlier than five
Business Days prior to the Time of Delivery; and
(g) on Completion (or at such later time when the consideration payable
to the holders of the New Crown Shares (or, if earlier, C&W) under the
Transaction Agreement is to be paid), joint instructions to the Receiving
Agent referred to in Section 2.03.
SECTION 2.05. Closing Deliveries by the Purchaser. At the Closing, the
Purchaser shall deliver to the Company the items specified below:
(a) a receipt acknowledging delivery by the Company of the stock
certificates specified in Section 2.04(a); and
(b) on Completion (or at such later time when the consideration payable
to the holders of the New Crown Shares (or, if earlier, C&W) under the
Transaction Agreement is to be paid), joint instructions to the Receiving
Agent referred to in Section 2.03.
SECTION 2.06. Acceleration of Closing. (a) Notwithstanding any other
provision of this Agreement, the Purchaser shall have the right to accelerate
the issuance, sale and purchase of the New Securities by giving written notice
(an "Acceleration Notice") to the Company of its election to exercise such
right.
(b) An Acceleration Notice shall specify the date on which the closing
(the "Accelerated Closing") of the purchase and sale of the New Securities is to
occur (the "Accelerated Time of Delivery"), which date shall be at least five
Business Days after the date of such notice.
(c) At least three Business Days before the Accelerated Time of
Delivery, the Company shall give written notice to the Purchaser of the bank
account (including the sort code and address) into which the Purchaser shall
transfer the Purchase Price at the Accelerated Closing.
(d) The Accelerated Closing shall occur at 10:00 a.m., London time, at
the offices of ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ at the Accelerated Time of Delivery (or
such later time as the parties agree in writing). At the Accelerated Closing,
the Company shall deliver certificates, evidencing the Common Stock and the
Preferred Stock comprising the New Securities, registered in the name of the
Purchaser against payment of the Purchase Price.
15
(e) The Purchaser's obligation to purchase the New Securities at the
Accelerated Time of Delivery shall be subject to the following conditions being
satisfied (or waived by the Purchaser):
(i) the conditions in Sections 6.01(a), (b), (c), (d), (e) and (g)
shall have been satisfied as if the Accelerated Time of Delivery was the
Posting Date; and
(ii) receipt by the Purchaser of the certificates and opinions set
forth in Sections 2.04(c), (d), (e) and (f) as if the references in those
sections to the Time of Delivery were to the Accelerated Time of Delivery.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As an inducement to the Purchaser to enter into this Agreement, the
Company hereby represents and warrants to the Purchaser as follows:
SECTION 3.01. Organization, Authority and Qualification of the Company
and the Significant Subsidiaries; Significant Subsidiaries. (a) The Company and
each Significant Subsidiary is a corporation duly incorporated, validly existing
and in good standing (in jurisdictions recognizing the concept) under the laws
of the jurisdiction of its incorporation, and the Company has all necessary
corporate power and authority to enter into this Agreement, to carry out its
obligations hereunder and to consummate the transactions contemplated hereby.
The Company and each Significant Subsidiary is duly qualified to do business
(and is in good standing in each jurisdiction that recognizes the concept) in
which (x) it owns or leases properties or conducts any business or (y) such
qualification is necessary, except where the failure to be so qualified or in
good standing (with respect to jurisdictions recognizing the concept) in any
such jurisdiction does not or would not subject the Company or the Significant
Subsidiary, as the case may be, to any material liability or disability. The
execution and delivery of this Agreement by the Company, the performance by the
Company of its obligations hereunder and the consummation by the Company of the
transactions contemplated hereby have been duly authorized by all requisite
action on the part of the Company (other than, with respect to the approval of
this Agreement and the transactions contemplated hereby, by the requisite action
of the holders of voting securities of the Company in accordance with Delaware
General Corporation Law and the Certificate of Incorporation and By-laws, which
approval shall be obtained prior to the Posting Date). This Agreement has been
duly executed and delivered by the Company, and (assuming due authorization,
execution and delivery by the Purchaser) this Agreement constitutes a legal,
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except that (A) such enforcement may be subject to
(i) any bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar law now or hereafter in effect relating to
creditors' rights generally, (ii) general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in equity)
16
and (B) rights to indemnification and contribution may be limited by public
policy. Neither the Company nor any Significant Subsidiary is in violation of
any of the provisions of their respective articles of incorporation, by-laws or
equivalent organizational documents in any material respect.
(b) Section 3.01(b) of the Disclosure Schedule sets forth a complete
and accurate list of each Company Subsidiary, together with its jurisdiction of
incorporation or organization. Except as disclosed in Section 3.01(b) of the
Disclosure Schedule, each such Company Subsidiary is directly or indirectly
wholly owned by the Company.
SECTION 3.02. Capital Stock of the Company; Ownership of the New
Securities. (a) As of the date hereof, the authorized capital stock of the
Company consists of (x) 400,000,000 shares of Common Stock, of which (i)
81,470,850 shares are outstanding, (ii) 2,702,703 shares of Common Stock are
reserved for issuance pursuant to the Purchase Agreement and 6,000,000 shares of
Common Stock are reserved as of the date of closing of the Purchase Agreement
for issuance on conversion of the Series A Preferred Stock, (iii) 27,027,027
shares are reserved as the Common Shares for issuance at Closing and 16,000,000
shares are reserved as of the date of Closing for issuance as the Conversion
Shares, (iv) 54,400,000 shares are reserved for issuance pursuant to the
Transaction Agreement, (v) 7,318,768 shares are reserved for issuance upon
conversion of the Senior Preferred Stock, (vi) 9,795,918 shares are reserved for
issuance upon conversion of the Convertible Debentures, and (vii) 21,093,980
shares are reserved for issuance upon the exercise of stock options and warrants
in the amounts and at the exercise prices disclosed in Section 3.02(a)(vii) of
the Disclosure Schedule, except for options to be issued pursuant to the
Transaction Agreement; and (y) 10,000,000 shares of preferred stock, par value
$0.01 per share, of which (i) 750,000 shares will be designated the Series A
Preferred Stock and 2,000,000 will be designated as Preferred Stock and will be
sold to the Purchaser pursuant to this Agreement and (ii) an aggregate of
822,063 shares have been designated as various series or classes of Senior
Preferred Stock, of which an aggregate of 822,063 shares are issued and
outstanding. All of the outstanding shares of the Company's capital stock are
duly and validly issued, fully paid and nonassessable. None of the issued and
outstanding shares of capital stock of the Company was issued in violation of
any preemptive rights. As of the date hereof, except as described above or as
disclosed in Section 3.02(a) of the Disclosure Schedule, there are no options,
warrants, subscriptions, calls, convertible securities or other rights,
agreements, arrangements or commitments relating to the capital stock of the
Company or obligating the Company to issue or sell any shares of capital stock
of, or any other equity interest in, the Company. Except as disclosed in Section
3.02(a) of the Disclosure Schedule, there are no outstanding contractual
obligations of the Company to repurchase, redeem or otherwise acquire any shares
of capital stock of the Company or make any investment (in the form of a loan,
capital contribution or otherwise) in any other Person other than a Company
Subsidiary. The New Securities and the Conversion Shares have been duly and
validly authorized by the Company and, upon consummation of the Closing or the
Accelerated Closing, as the case may be, as contemplated hereby, the New
Securities purchased by the Purchaser will be duly and validly issued, fully
paid and nonassessable, and the issuance of the New Securities is not subject to
preemptive or other similar rights. The Conversion Shares, if and when issued,
17
will be duly and validly issued, fully paid and nonassessable. Exhibit A hereto
contains a true and complete copy of the pro forma capitalization table as of
the date hereof (the "Pro Forma Capitalization Table") of the Company and the
Company Subsidiaries, giving effect to consummation of the transactions
contemplated by the Transaction Agreement, this Agreement and the Purchase
Agreement. The Pro Forma Capitalization Table has been prepared by senior
management of the Company based on the reasonable assumptions and best currently
available information, estimates and judgment of the Company's senior
management.
(b) Except as disclosed in Section 3.02(b) of the Disclosure Schedule,
all of the outstanding shares of capital stock of each Significant Subsidiary
that is a corporation are duly and validly issued, fully paid and nonassessable.
Except for directors' qualifying shares, all of the outstanding shares of
capital stock of, or other ownership interest in, each Significant Subsidiary
are owned, directly or indirectly, by the Company free and clear of any
Encumbrances. No Significant Subsidiary has outstanding options, warrants,
subscriptions, calls, rights, convertible securities or other agreements or
commitments obligating the Significant Subsidiary to issue, transfer or sell any
securities of any Significant Subsidiary.
SECTION 3.03. No Conflict. Assuming the making and obtaining of all
filings, notifications, consents, approvals, authorizations and other actions
referred to in Section 3.04, and except as may arise from facts or circumstances
relating solely to the Purchaser, the execution, delivery and performance of
this Agreement by the Company do not and will not (a) violate, conflict with or
result in the breach of any provision of the articles of incorporation or
by-laws (or similar organizational documents) of the Company or any Significant
Subsidiary, (b) conflict with or violate any Law or Governmental Order
applicable to the Company, any Significant Subsidiary or any of their respective
assets, properties or businesses, except for such conflicts or violations that,
individually or in the aggregate, would not result in a Material Adverse Effect,
or (c) except as disclosed in Section 3.03(c) of the Disclosure Schedule,
conflict with, result in any breach of, constitute a default (or event which
with the giving of notice or lapse of time, or both, would become a default)
under, require any consent under, or give to others any rights of termination,
amendment, acceleration, suspension, revocation or cancellation of, or result in
the creation of any Encumbrance on any of the assets or properties of the
Company or any Significant Subsidiary pursuant to, any note, bond, mortgage or
indenture, contract, agreement, lease, sublease, license, permit, franchise or
other instrument, obligation or arrangement to which the Company or any
Significant Subsidiary is a party or by which any of its assets or properties is
bound or affected, except for such conflicts, breaches or defaults that,
individually or in the aggregate, would not result in a Material Adverse Effect.
SECTION 3.04. Governmental Consents and Approvals. The execution,
delivery and performance of this Agreement, or the consummation of the
transactions contemplated hereby, by the Company do not and will not require any
consent, approval, authorization or other order of, action by, filing with or
notification to any Governmental Authority, except (i) for the applicable
requirements, if any, of the Exchange Act, state securities or "blue sky" laws,
(ii) the notification requirements of the HSR Act, (iii) the listing of the
Common Shares and the Conversion Shares on the Nasdaq National Market, (iv) the
filing of the Certificate of
18
Designation with the Secretary of State of the State of Delaware, and (v) such
actions and measures that are required to satisfy the conditions set forth in
Section 6.01(c).
SECTION 3.05. SEC Filings; Financial Statements. (a) The Annual Report
on Form 10-K of NTL Communications Corp., formerly known as NTL Incorporated or
International CableTel Incorporated ("NTL Communications"), for the fiscal year
ended December 31, 1998 and Quarterly Report on Form 10-Q for the quarter ended
March 31, 1999 have been made available to the Purchaser in connection with the
offering of the New Securities. All documents of NTL Communications filed with
the SEC prior to the formation of the Company and documents of the Company filed
with the SEC pursuant to the Exchange Act are referred to herein as the
"Exchange Act Reports". The Exchange Act Reports, when they were filed with the
SEC, complied in all material respects with the requirements of the Exchange Act
and the applicable rules and regulations of the SEC thereunder. The Exchange Act
Reports did not, as of their respective dates, contain any untrue statement of
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The Company has timely
filed all reports and registration statements and made all filings required to
be made with the SEC under the Exchange Act, the Securities Act, or the
applicable rules and regulations of the SEC thereunder.
(b) The audited consolidated balance sheets of NTL Communications and
its subsidiaries for the fiscal years ended as of December 31, 1996, December
31, 1997, and December 31, 1998, and the related audited consolidated statements
of income, retained earnings, stockholders' equity and cash flow of NTL
Communications and its subsidiaries together with all related notes and
schedules thereto (the "Audited Financial Statements"), the unaudited
consolidated balance sheet of NTL Communications and its subsidiaries as of
March 31, 1999, and the related unaudited consolidated statements of income,
retained earnings, stockholders' equity and cash flow of NTL Communications and
its subsidiaries together with all related notes and schedules thereto (the
"Interim Financial Statements"), all of which Audited Financial Statements and
Interim Financial Statements are contained in the respective Exchange Act
Reports, (i) were prepared in accordance with the books of account and other
financial records of NTL Communications and its subsidiaries, (ii) present
fairly the consolidated financial condition and results of operations of NTL
Communications and its subsidiaries as of the dates thereof or for the periods
covered thereby, (iii) have been prepared in accordance with GAAP applied on a
basis consistent with the past practices of NTL Communications and (iv) in case
of the Interim Financial Statements, include all adjustments (consisting only of
normal recurring accruals) that are necessary for a fair presentation of the
consolidated financial condition and the results of the operations of NTL
Communications as of the dates thereof or for the periods covered thereby. The
balance sheet of NTL Communications contained in its Annual Report on Form 10-K
for the fiscal year ended December 31, 1998 is hereinafter referred to as the
"Company Balance Sheet". The unaudited pro forma condensed consolidated
statement of operations of NTL Communications together with all related notes
and schedules thereto (the "Pro Forma Financial Statements") included in the
Company's and NTL Communications Corp.'s registration statement on Form ▇-▇, ▇-▇
(File No. 333-81397, 81395) present fairly the
19
information shown therein, have been prepared in accordance with the SEC rules,
regulations and guidelines with respect to pro forma financial statements and
have been properly compiled on the basis described therein, and the assumptions
used and adjustments made in the preparation thereof are reasonable, and the
adjustments made in preparation thereof give effect to the transactions and
circumstances referred to therein.
(c) The Company has heretofore furnished to the Purchaser a complete
and correct copy of any material amendment or modification, that has not yet
been filed with the SEC, to agreements, documents or other instruments that
previously had been filed by the Company with the SEC (except as may be required
with respect to the transactions contemplated hereby), pursuant to the
Securities Act or the Exchange Act.
SECTION 3.06. No Undisclosed Liabilities. Except as set forth in
Section 3.06 of the Disclosure Schedule and except as set forth in the financial
statements of the Company included in the Exchange Act Reports filed and
publicly available prior to the date of this Agreement, and except for
liabilities and obligations incurred in the ordinary course of business
(including liabilities and obligations incurred in the ordinary course of
business by businesses or companies acquired by the Company since the date of
the Company Balance Sheet and prior to the date hereof) since the date of the
most recent consolidated balance sheet included in the Exchange Act Reports
filed and publicly available prior to the date of this Agreement, neither the
Company nor any of the Company Subsidiaries has any Liabilities required by GAAP
to be set forth on a consolidated balance sheet of the Company and the Company
Subsidiaries or in the notes thereto; provided, however, that there are no
undisclosed liabilities which are reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on the Company, whether or not
arising in the ordinary course of business since the date of the most recent
consolidated balance sheet included in the Exchange Act Reports filed and
publicly available prior to the date of this Agreement. Section 1.01 of the
Disclosure Schedule contains a true and complete list of all Indentures to which
the Company or any Company Subsidiary is a party and which have not been filed
with any Exchange Act Report or registration statements filed with the SEC under
the Securities Act.
SECTION 3.07. Absence of Certain Changes or Events. (a) Except as
disclosed in Section 3.07 of the Disclosure Schedule, since the date of the
Company Balance Sheet, except as contemplated by this Agreement, the Purchase
Agreement or the Transaction Agreement, or disclosed in any Exchange Act Report
filed after the date of the Company Balance Sheet and prior to the date hereof,
the Company has conducted its business only in the ordinary course and in a
manner consistent with past practices and there has not been any
(i) Material Adverse Effect;
(ii) material change by the Company in its accounting methods,
principles or policies, except as may be required by GAAP;
20
(iii) material change in the capital stock of the Company or any
Company Subsidiary;
(iv) material revaluation by the Company of any asset (including,
without limitation, any writing down of the value of inventory or
writing-off of notes or accounts receivable), other than in the ordinary
course of business consistent with past practices;
(v) declaration, setting aside or payment of any dividend or
distribution in respect of any capital stock of the Company or any optional
redemption, purchase or other acquisition of any of its securities;
(vi) increase in or establishment of any bonus, insurance, severance,
deferred compensation, pension, retirement, profit-sharing, stock option
(including, without limitation, the granting of stock options, stock
appreciation rights, performance awards, or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase in the
compensation payable or to become payable to any executive officers or key
employees of the Company or any Company Subsidiary, except in the ordinary
course of business consistent with past practices;
(vii) amendment of any term of any outstanding security of the Company
or any Company Subsidiary that would materially increase the obligations of
the Company or such Company Subsidiary under such security;
(viii) damage, destruction or other casualty loss with respect to any
asset or property owned, leased or otherwise used by the Company or any
Company Subsidiary, except for such damage, destruction or loss that,
individually or in the aggregate, has not resulted, or would not reasonably
be expected to result, in a Material Adverse Effect;
(ix) incurrence, assumption or guarantee by the Company or any Company
Subsidiary of any Indebtedness other than in the ordinary course of business
and consistent with past practices;
(x) making of any loan, advance or capital contribution to or
investment in any Person by the Company or any Company Subsidiary other than
(A) loans, advances or capital contributions to or investments in any wholly
owned Company Subsidiary, (B) loans or advances to the Company by any
Company Subsidiary or (C) loans or advances to employees of the Company or
any Company Subsidiary made in the ordinary course of business consistent
with past practices;
(xi) (A) transactions, commitments, contracts or agreements entered
into by the Company or any Company Subsidiary relating to any material
disposition of any assets or business or (B) modification, amendment,
assignment, termination or relinquishment by the Company or any Company
Subsidiary of any contract, license or other right that would be reasonably
likely to have a Material Adverse Effect, other than, in either case,
21
transactions, commitments, contracts or agreements in the ordinary course of
business consistent with past practices and those contemplated by this
Agreement;
(xii) amendment, alteration or repeal (by merger, consolidation or
otherwise) of any provision of the Certificate of Incorporation or the
By-laws, that would adversely affect the relative rights, preferences,
qualifications, limitations or restrictions of the Purchaser as the holder
of the Preferred Stock at the Time of Delivery or the rights of the
Purchaser under this Agreement, other than the amendments to the Certificate
of Incorporation by filing of one or more certificates of designation in
connection with the issuance of Senior Preferred Stock as a payment of
dividends to holders thereof in accordance with the terms thereof;
(xiii) creation of any new class of capital stock that would have a
preference with respect to dividends and/or liquidation over or on parity
with the Preferred Stock;
(xiv) reclassification of any of the Company's capital stock into
shares that would have a preference over or on parity with the Preferred
Stock;
(xv) sale of (or an agreement to sell) Core Business Assets of the
Company or the Company Subsidiaries, or any merger, consolidation or
combination of the Company or any Company Subsidiary with another entity;
(xvi) increase in the authorized number of shares of Common Stock or
shares of preferred stock of the Company;
(xvii) increase in the authorized number of shares of or issuance of
any additional Senior Preferred Stock other than the issuance of Senior
Preferred Stock as a dividend to holders thereof in accordance with the
terms thereof;
(xviii) initiation of a voluntary liquidation, dissolution or winding
up of the Company or of any Significant Subsidiary;
(xix) commencement of any tender or exchange offer involving the
Company's equity securities or any security convertible into, exchangeable
for, or otherwise giving the holder thereof the right to obtain, equity
securities of the Company;
(xx) any material acquisitions, other than the Strategic Acquisition,
or an agreement to consummate any material acquisition, other than the
Transaction Agreement; or
(xxi) any material amendments to any Material Contracts.
(b) Neither the Company nor any Company Subsidiary has made a general
assignment for the benefit of creditors, and no proceeding (a "Bankruptcy
Proceeding") has been
22
instituted by or against the Company or any Company Subsidiary seeking to
adjudicate any of them a bankrupt or insolvent, or seeking liquidation, winding
up or reorganization, arrangement, adjustment, protection, relief or composition
of its debts under any Law relating to bankruptcy, insolvency or reorganization.
SECTION 3.08. Litigation. There are no Actions by or against the
Company or any Company Subsidiary or affecting any of the assets of the Company
or any of the Significant Subsidiaries, pending before any Governmental
Authority or, to the knowledge of the Company, threatened or contemplated to be
brought by or before any Governmental Authority which has, has had or is
reasonably expected to have a Material Adverse Effect. None of the Company, the
Company Subsidiaries or any of the assets of the Company or the Company
Subsidiaries is subject to any Governmental Order (or, to the knowledge of the
Company, are there any such Governmental Orders threatened or contemplated to be
imposed by any Governmental Authority) which has, has had or is reasonably
expected to have, individually or in the aggregate, a Material Adverse Effect.
SECTION 3.09. Compliance with Laws. (a) Except as disclosed in Section
3.09(a) of the Disclosure Schedule or as disclosed in any Exchange Act Report,
neither the Company nor any Company Subsidiary is in default or violation of any
Law (including, without limitation, the U.K. Competition Law) or Governmental
Order, except for such defaults or violations that would not, individually or in
the aggregate, have a Material Adverse Effect.
(b) Except as disclosed in Section 3.09(b) of the Disclosure Schedule,
(i) the Company and each Company Subsidiary are in possession of all material
franchises, grants, authorizations, licenses, permits, memoranda of
understanding, agreements, easements, variances, exceptions, consents,
certificates, approvals and orders of or with any Governmental Authority (the
"Company Permits") necessary or required for the Company or any Company
Subsidiary to own, lease and operate its properties or to carry on its business
as it is now being conducted and the Company Permits are in full force and
effect, are not subject to any unusual or onerous conditions and have been
complied with in all material respects, (ii) no suspension or cancellation or
revocation of any of the Company Permits is pending or, to the knowledge of the
Company, threatened nor has any of the Company Permits expired and, with respect
to any such Company Permit which will expire prior to the Time of Delivery, the
Company is not aware of any circumstance which would reasonably be expected to
cause such Company Permit not to be renewed or extended upon expiration, except
as would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect, and (iii) neither the Company nor any Company
Subsidiary is in default under any Company Permit, except as would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
SECTION 3.10. Environmental Matters. Except as disclosed in Section
3.10 of the Disclosure Schedule or as disclosed in any Exchange Act Report and
as would not reasonably be expected to have a Material Adverse Effect:
23
(a) the Company and the Company Subsidiaries (i) are in compliance with
all applicable Environmental Laws, (ii) hold all necessary Environmental
Permits and (iii) are in compliance with their respective Environmental
Permits;
(b) neither the Company nor any Company Subsidiary has received any
written request for information, or been notified in writing that it is a
potentially responsible party, under CERCLA, or any similar Law of any
country, state, province, municipality, locality or any other jurisdiction;
(c) neither the Company nor any Company Subsidiary has entered into or
agreed to any consent decree or order or is subject to any judgment, decree
or judicial order relating to compliance with Environmental Laws,
Environmental Permits or the investigation, sampling, monitoring, treatment,
remediation, removal or cleanup of Hazardous Materials and, to the knowledge
of Company, no investigation, litigation or other proceeding is pending or
threatened with respect thereto, and, to the knowledge of Company, no
condition exists on any property currently or formerly owned or operated by
the Company that is reasonably likely to lead to such investigation,
litigation or proceeding;
(d) none of the real property currently or formerly owned or leased by
the Company or any Company Subsidiary is listed or, to the knowledge of the
Company, proposed for listing on the "National Priorities List" under
CERCLA, as updated through the date of this Agreement, or any similar list
of sites in the United States, United Kingdom or any other jurisdiction
requiring investigation or cleanup; and
(e) the Purchaser has been provided access to all material reports in
the Company's possession or control assessing the environmental condition of
the Company's and the Company Subsidiaries current and former properties.
SECTION 3.11. Material Contracts. (a) Section 3.11(a) of the Disclosure
Schedule sets forth a complete list of all contracts, agreements, licenses,
notes, bonds, mortgages, guarantees, security agreements and commitments,
including all amendments and modifications thereto, to which the Company or any
Company Subsidiary is a party that are material to the Company and the Company
Subsidiaries, taken as a whole, and that have not been filed with any Exchange
Act Report or a registration statement under the Securities Act (together,
"Material Contracts").
(b) Except as disclosed in Section 3.11(b) of the Disclosure Schedule,
each Material Contract: (i) is valid and binding on the Company or the Company
Subsidiary that is a party thereto, as the case may be, and is in full force and
effect and (ii) upon consummation of the transactions contemplated by this
Agreement, except to the extent that any consents disclosed in Section 3.04 of
the Disclosure Schedule are not obtained, shall continue in full force and
effect without penalty or other adverse consequence.
24
(c) Except as disclosed in Section 3.11(c) of the Disclosure Schedule,
(i) neither the Company nor any Company Subsidiary is in material breach of, or
default under, any Material Contract, and (ii) to the knowledge of the Company,
no other party to any Material Contract is in material breach thereof or default
thereunder.
SECTION 3.12. Intellectual Property; Company Systems. (a) Section
3.12(a) of the Disclosure Schedule sets forth a true and complete list
(including, to the extent applicable, registration, application or file numbers)
of each material trademark, trade name, patent, service ▇▇▇▇, brand ▇▇▇▇, brand
name, industrial design, and copyright owned by the Company or the Company
Subsidiaries as well as a true and complete list of all registrations thereof
and pending applications therefor, including any additions thereto or
extensions, continuations, renewals or divisions thereof (setting forth the
registration, issue or serial number and a description of the same)
(collectively, the "Intellectual Property"). All of the Intellectual Property is
owned or used pursuant to a valid license by the Company or the Company
Subsidiaries free and clear of any and all Encumbrances, and the Company or one
of the Company Subsidiaries has good, marketable and exclusive title to or
license for, and the valid right to use all of the Intellectual Property. Except
as disclosed in Section 3.12(a) of the Disclosure Schedule, to the knowledge of
the Company, neither the Company nor any of the Significant Subsidiaries has
received any complaint, assertion, threat or allegation or otherwise has notice
of any claim, lawsuit, demand, proceeding or investigation involving any such
matters or the Intellectual Property or otherwise knows that any of the
Intellectual Property is invalid or conflicts with the rights of any third party
that would individually or in the aggregate, have a Material Adverse Effect.
(b) Each of the Company and each Significant Subsidiary owns or has a
right to use all Intellectual Property used in the operation of its business as
presently conducted.
(c) Except as disclosed in Section 3.12(c) of the Disclosure Schedule,
each of the Company and each Significant Subsidiary owns free and clear of all
Encumbrances or has a valid license to use all Company Systems.
(d) Except as disclosed in Section 3.12(d) of the Disclosure Schedule,
the Company Systems have been maintained in accordance with good business
practice, are in good operating condition and repair and are suitable for the
purposes for which they are used and intended.
SECTION 3.13. Year 2000 Compliance. The Company (i) has undertaken an
assessment of all Company Systems that could be adversely affected by a failure
to be Year 2000 Compliant, (ii) has developed a plan and timeline for rendering
such Company Systems Year 2000 Compliant and (iii) expects to comply with the
plan and timeline for rendering the Company Systems Year 2000 Compliant. The
Company has made available for review to the Purchaser copies of all material
documents related to such assessment and plan implementation efforts and all
plans, time lines and cost estimates for rendering the Company Systems Year 2000
Compliant. All Company Systems presently are Year 2000 Compliant or are expected
to be Year 2000 Compliant.
25
SECTION 3.14. Title to Properties; Absence of Encumbrances. (a) Section
3.14(a) of the Disclosure Schedule lists the real property interests owned by
the Company and the Company Subsidiaries in the United Kingdom (together with
all other material real property interests of the Company and the Company
Subsidiaries in other countries, being "Owned Real Property") and lists all
leases relating to real property in the United Kingdom to which the Company or
any Company Subsidiary is a party as a lessee (together with all other material
leases and licenses relating to real property in other countries to which the
Company or any Company Subsidiaries, being "Leased Real Property," and together
with the Owned Real Property, the "Real Property"). All leases for Leased Real
Property are in full force and effect, are valid and effective in accordance
with their respective terms, and there is not, under any of such leases, any
existing default or event of default (or event which with notice or lapse of
time, or both, would constitute a default) that would reasonably be expected to
have a Material Adverse Effect.
(b) Except as disclosed in Section 3.14(b) of the Disclosure Schedule,
each of the Company and the Company Subsidiaries has good and marketable fee
title to, or, in the case of leased properties and assets, has good and valid
leasehold interests in, all of its tangible properties and assets, real,
personal and mixed, used or held for use in, or which are necessary to conduct,
the respective business of the Company and each Company Subsidiary as currently
conducted, free and clear of any Encumbrances, except where such failure would
not, individually or in the aggregate, have a Material Adverse Effect.
(c) Section 3.14(c) of the Disclosure Schedule sets forth all material
leases, subleases and other agreements (each, a "Lease" and collectively, the
"Leases") granting to any Person or entity other than the Company or any Company
Subsidiary any right to the possession, use, occupancy or enjoyment of the Real
Property or any portion thereof. Each such Lease is valid, binding and in full
force and effect, all rent and other sums and charges payable by the tenant
thereunder are current, no notice of default or termination under any Lease is
outstanding, no termination event or condition or uncured default on the part of
the Company or any Company Subsidiary or, to the knowledge of the Company, the
tenant, exists under any Lease, and no event has occurred and no condition
exists that, with the giving of notice or the lapse of time, or both, would
constitute such a default or termination event or condition, except as would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(d) To the knowledge of the Company, all components of all buildings,
structures, fixtures, facilities and other improvements in, on or within the
Real Property (the "Improvements") are in good operating condition and repair,
subject to continued repair and replacement in accordance with past practice,
except as would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
(e) The Company and each Company Subsidiary has not received notice of
and, to the knowledge of the Company, there is no pending, threatened or
contemplated condemnation proceeding, action or Governmental Order affecting the
Real Property or any part thereof, nor any sale or other disposition of the Real
Property or any part thereof in lieu of
26
condemnation. Since December 31, 1998, no portion of the Real Property has
suffered any material damage by fire, flood or other casualty that has not
heretofore been completely repaired and restored, except as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
SECTION 3.15. Employee Benefit Matters; Labor Matters. (a) Each Benefit
Plan has been operated in material compliance with its terms and the
requirements of all applicable Laws, including, without limitation, ERISA and
the Code. Each of the Company and the Company Subsidiaries has performed all
obligations required to be performed by it under, and is not in any respect in
default under or in violation of, any Benefit Plan, except where such failure to
perform obligations, default or violation would not have a Material Adverse
Effect. No action, claim or proceeding is pending or, to the knowledge of the
Company, threatened with respect to any Benefit Plan (other than claims for
benefits in the ordinary course).
(b) Except as disclosed in Section 3.15(b) of the Disclosure Schedule,
each Benefit Plan that is intended to be qualified under Section 401(a) of the
Code (or a similar provision under the applicable Law in a foreign jurisdiction)
has received a favorable determination letter from the Internal Revenue Service
(the "IRS") or other applicable Governmental Authority and each trust
established in connection with any Benefit Plan which is intended to be exempt
from federal income taxation under Section 501(a) of the Code has received a
determination letter from the IRS, Inland Revenue Service or other applicable
Governmental Authority that it is so exempt and, to the knowledge of the
Company, nothing has occurred since the date of such letter that has or is
reasonably likely to adversely affect such qualification or exemption.
(c) Neither the Company, any Company Subsidiary nor any ERISA Affiliate
has, within the last six years, sponsored or made contributions to or had any
obligations, whether absolute or contingent, direct or indirect, under any
Benefit Plan subject to Title IV of ERISA, and the Company has not incurred, nor
could it reasonably be expected to incur, any Liability under, arising out of or
by operation of Title IV of ERISA, including, without limitation, any Liability
in connection with (i) the termination or reorganization of any employee benefit
plan subject to Title IV of ERISA or (ii) the withdrawal from any (A)
"Multiemployer Plan" (within the meaning of Section 3(37) or 4001(a)(3) of
ERISA) or (B) single employer pension plan (within the meaning of Section
4001(a)(15) of ERISA) for which the Company or any Company Subsidiary could
incur liability under Section 4063 or 4064 of ERISA.
(d) Except as provided in Section 3.15(d) of the Disclosure Schedule,
the execution of, and consummation of the transactions contemplated in, this
Agreement will not (either alone or upon the occurrence of any additional or
subsequent events, other than the Strategic Acquisition) (i) constitute an event
under any Benefit Plan, Employee Agreement, trust or loan that will or may
result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any current, former or retired
employee, officer, consultant, independent contractor, agent or director of the
Company or a Company Subsidiary (an
27
"Employee"); or (ii) result in the triggering or imposition of any restrictions
or limitations on the right of the Company or the Purchaser to amend or
terminate any Benefit Plan. No payment or benefit which will or may be made by
the Company, the Purchaser or any of their respective Affiliates with respect to
any Employee will be characterized as an "excess parachute payment", within the
meaning of Section 280G(b)(1) of the Code.
(e) Except as disclosed in Section 3.15(e) of the Disclosure Schedule,
neither the Company nor any Company Subsidiary has any obligation to provide, or
has any direct or indirect liability, whether contingent or otherwise, with
respect to the post-termination provision of health or death benefits to any
employee or former employee, except as may be required pursuant to Section 4980B
of the Code (or a similar provision under the applicable Law in a foreign
jurisdiction) and the costs of which are fully paid by such former employees.
(f) Except as disclosed in Section 3.15(f) of the Disclosure Schedule,
neither the Company nor any Company Subsidiary is a party to any collective
bargaining or other labor union contract applicable to persons employed by the
Company or any Company Subsidiary and no collective bargaining agreement is
being negotiated by the Company or any Company Subsidiary. Except as disclosed
in Section 3.15(f) of the Disclosure Schedule, to the knowledge of the Company,
there is no labor dispute, strike or work stoppage against the Company or any
Company Subsidiary pending or threatened in writing which may interfere with the
respective business activities of the Company or any Company Subsidiary, except
where such dispute, strike or work stoppage would not result in a Material
Adverse Effect. To the knowledge of the Company, none of the Company, any
Company Subsidiary, or any of their respective representatives or employees has
violated any Law regarding the terms and conditions of employment of employees,
former employees or prospective employees or other labor-related matters or
committed any unfair labor practices in connection with the operation of the
respective businesses of the Company or any Company Subsidiary, and there is no
charge or complaint against the Company or any Company Subsidiary by the United
States National Labor Relations Board or a similar Governmental Authority in a
foreign jurisdiction or any comparable state agency pending or threatened in
writing, except where such unfair labor practice, charge or complaint would not
reasonably be expected to result in a Material Adverse Effect.
SECTION 3.16. Insurance. All material policies or binders of fire,
liability, workmen's compensation, vehicular or life insurance held by the
Company or the Significant Subsidiaries or other types of policies customary for
the industry in which the businesses of the Company and the Significant
Subsidiaries are operated are in full force and effect. Neither the Company nor
any Company Subsidiary is in default with respect to any provision contained in
any such policy or binder and neither has failed to give any notice or present
any claim under such policy or binder in due and timely fashion, except as would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. There are no material outstanding unpaid claims under any such
policy or binder. Neither the Company nor any Significant Subsidiary has
received a notice of cancellation or non-renewal of any such policy or binder.
The Company has not received notice of any inaccuracy in any application for
such policies or binders, any failure to pay premiums when due or any similar
state of facts which
28
might form the basis for termination of any such insurance, except as would not,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.
SECTION 3.17. Brokers. Except for ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. International
Limited ("▇▇▇▇▇▇ ▇▇▇▇▇▇▇"), no broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company. The Company is solely responsible for the fees and
expenses of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇.
SECTION 3.18. Taxes. (a) (i) Except as disclosed in Section 3.18 of the
Disclosure Schedule, the Company and each Company Subsidiary has filed or caused
to be filed, or has properly filed extensions for, all material Tax Returns that
are required to be filed and has paid or caused to be paid all Taxes as shown on
such returns and on all material assessments received by it to the extent that
such Taxes have become due, except any Tax the validity or amount of which is
being contested in good faith by appropriate proceedings and with respect to
which adequate reserves, in accordance with GAAP, have been set aside; (ii) such
Tax Returns are true and correct in all material respects; (iii) the Company has
paid or caused to be paid, or has established reserves in accordance with GAAP
for all material Tax liabilities applicable to the Company for all fiscal years
that have not been examined and reported on by the taxing authorities (or closed
by applicable statutes); and (iv) no additional Tax assessment against the
Company or any Company Subsidiary has been heretofore proposed by any
Governmental Authority or Tax authority for which provision deemed adequate by
the Company in its reasonable judgment has not been made on its balance sheet.
(b) Except as disclosed in Schedule 3.18, with respect to all material
Tax Returns of the Company and the Company Subsidiaries, (i) no audit is in
progress and no extension of time is in force with respect to any date on which
any Tax Return was or is to be filed and no waiver or agreement is in force for
the extension of time for the assessment or payment of any Tax and (ii) there is
no unassessed deficiency proposed or threatened against the Company or any of
the Company Subsidiaries.
(c) The Company knows of no change in the rates or basis of assessment
of any Tax (other than federal income tax) of the Company and the Company
Subsidiaries that would reasonably be expected to result in a Material Adverse
Effect.
(d) The Company is not a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code.
29
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
As an inducement to the Company to enter into this Agreement, the
Purchaser hereby represents and warrants to the Company as follows:
SECTION 4.01. Organization and Authority of the Purchaser. The
Purchaser is a company duly organized, validly existing and in good standing
under the laws of the Republic of France. The Purchaser has all necessary power
and authority to enter into this Agreement, to carry out its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by the Purchaser, the performance by the
Purchaser of its obligations hereunder and the consummation by the Purchaser of
the transactions contemplated hereby have been duly authorized by all requisite
action on the part of the Purchaser. This Agreement has been duly executed and
delivered by the Purchaser, and (assuming due authorization, execution and
delivery by the Company) this Agreement constitutes a legal, valid and binding
obligation of the Purchaser enforceable against the Purchaser in accordance with
its terms.
SECTION 4.02. No Conflict. Assuming the making and obtaining of all
filings, notifications, consents, approvals, authorizations and other actions
referred to in Section 4.03 and except as may result from any facts or
circumstances relating solely to the Company, the execution, delivery and
performance of this Agreement by the Purchaser does not (a) violate, conflict
with or result in the breach of any provision of Purchaser Law and Decrees, (b)
conflict with or violate any Law or Governmental Order applicable to the
Purchaser or (c) conflict with, or result in any breach of, constitute a default
(or event which with the giving of notice or lapse or time, or both, would
become a default) under, require any consent or waiver under, or give to others
any rights of termination, amendment, acceleration, suspension, revocation, or
cancellation of, or result in the creation of any Encumbrance on any of the
assets or properties of the Purchaser pursuant to, any note, bond, mortgage or
indenture, contract, agreement, lease, sublease, license, permit, franchise or
other instrument or arrangement to which the Purchaser is a party or by which
any of such assets or properties are bound or affected, except in the case of
clauses (b) and (c) above, as would not have a material adverse effect on the
Purchaser.
SECTION 4.03. Governmental Consents and Approvals. The execution,
delivery and performance of this Agreement by the Purchaser does not require any
consent, approval, authorization or other order of, action by, filing with, or
notification to, any Governmental Authority, except (i) for the applicable
requirements, if any, of the Exchange Act, (ii) the notification requirements of
the HSR Act and (iii) for such other consents, waivers, approvals,
authorizations, orders, actions, filings or notifications, which if not obtained
or made would not be reasonably likely to affect performance by the Purchaser of
its obligations hereunder or the consummation of the transactions contemplated
hereby.
30
SECTION 4.04. Investment Purpose. The Purchaser is acquiring the New
Securities for its own account solely for the purpose of investment and not with
a view to, or for offer or sale in connection with, any distribution thereof.
SECTION 4.05. Status of New Securities; Limitations on Transfer and
Other Restrictions. The Purchaser hereby acknowledges and agrees with the
Company that the New Securities have not been registered under the Securities
Act and may not be offered or sold except pursuant to registration or to an
exemption from the registration requirements of the Securities Act and that the
certificates evidencing the New Securities will bear a legend to that effect.
The Purchaser further agrees that it has not entered and will not enter into any
contractual arrangement with respect to the distribution or delivery of the New
Securities or the Conversion Shares, other than (i) pursuant to a Registration
Rights Agreement between the parties substantially on the terms set forth in
Exhibit B (the "Registration Rights Agreement"), (ii) pursuant to Rule 144 under
the Securities Act, (iii) pursuant to any transaction that does not require
registration under the Securities Act, (iv) any such arrangements with an
Affiliate of the Purchaser or (v) with the prior written consent of the Company.
SECTION 4.06. Fees and Expenses. Except for Salomon Brothers
International Limited ("Salomon Brothers"), no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Purchaser. The Purchaser is solely
responsible for the fees and expenses of Salomon Brothers.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Conduct of Business by the Company Pending the Closing.
The Company agrees that it shall not, directly or indirectly, between the date
of this Agreement and the Time of Delivery, except as specifically contemplated
by any other provision of this Agreement or the Transaction Agreement, unless
the Purchaser shall otherwise consent in writing:
(a) take any action which would (i) be reasonably likely to result in
the circumstances described in clauses (i) through (xxi) of Section 3.07(a)
having a Material Adverse Effect (except that for purposes of this Section
5.01(a), the circumstances that are qualified by "materiality, "material" or
"Material Adverse Effect", shall be deemed not to be so qualified) or (ii)
materially affect the rights of the Purchaser under the Certificate of
Designation, assuming for purposes of this clause (ii) that the Closing had
occurred, it being understood that the actions permitted by, and in
accordance with, Section 5.01(d) shall not be deemed to materially affect
such rights of the Purchaser;
31
(b) take any action to cause the Company's representations and
warranties set forth in Article III (except those set forth in Section 3.07,
which shall be subject to the provisions of Section 5.01(a) hereof) to be
untrue in any material respect;
(c) agree to take any of the actions described in Sections 5.01(a) and
(b) above; or
(d) from the date hereof and prior to the Time of Delivery (the
"Blackout Period"), issue or sell any equity securities or securities
exercisable or convertible into equity securities of the Company or any
Company Subsidiary, other than (i) issuances of common stock upon the
exercise of stock options or warrants outstanding as of the date hereof,
issuances of stock options pursuant to stock option plans and employee
benefit schemes existing as of the date hereof (as such plans or schemes may
be amended or replaced, provided that such amended or replaced plans and
schemes shall have terms similar to and consistent with the terms of
existing plans and schemes) and issuances of common stock upon exercise of
such stock options; (ii) issuances of equity securities or any securities
convertible into or exchangeable or exercisable for equity securities as
consideration for future acquisitions; provided, however, that, in the event
of any such issuance described in this clause (ii), the Company shall notify
the Purchaser in writing of such issuance and shall offer to the Purchaser
the right to purchase (at the price equal to the value at which such equity
securities shall be included in the consideration paid by the Company in
such acquisition) such number of the equity securities being issued as would
be necessary for the Purchaser to maintain the level of ownership of the
Diluted Shares that the Purchaser shall have immediately prior to
consummation of such acquisition (it being understood that the Purchaser's
preemptive rights under this proviso will be exercised in a manner and based
on a timetable that will not restrict or adversely affect the Company's
ability to issue securities in such acquisition in a flexible and cost
effective manner); (iii) issuances of common stock on conversion of the
convertible notes outstanding as of the date hereof and issuances of common
stock or preferred stock on conversion or redemption or in payment of
dividends on shares of preferred stock outstanding as of the date hereof or
of Series A Preferred Stock or issued as dividends on such preferred stock
subsequent to the date hereof, and (iv) with the consent of the Purchaser,
which consent shall not be unreasonably withheld, issuances of equity
securities as consent payments to holders of debt securities outstanding as
of the date hereof issued under any of the Indentures of the Company or the
Company Subsidiaries; it being understood that notwithstanding anything to
the contrary contained in this Section 5.01(d), during the Blackout Period,
the Company shall have the right to issue up to an aggregate amount of
$400,000,000 of equity securities of the Company with the consent of the
Purchaser, which consent shall not be unreasonably withheld, it being
further understood that the provisions of this Section 5.01(d) shall
supercede the provisions of Section 5(g) of the Purchase Agreement.
SECTION 5.02. Access to Information; Confidentiality. (a) Except as
required pursuant to any confidentiality agreement or similar agreement or
arrangement to which the
32
Company or any Company Subsidiary is a party or pursuant to any applicable Law,
from the date of this Agreement to the Time of Delivery, the Company shall, and
shall cause the Company Subsidiaries to: (i) provide to the Purchaser (and its
officers, directors, employees, accountants, consultants, legal counsel, agents
and other representatives (collectively, "Representatives")) access at
reasonable times upon reasonable prior notice to the officers, employees,
agents, properties, offices and other facilities of the Company and Company
Subsidiaries and to the books and records thereof and (ii) furnish promptly such
information concerning the business, properties, contracts, assets, liabilities,
personnel and other aspects of the Company and the Company Subsidiaries as the
Purchaser or its Representatives may reasonably request.
(b) At any time when the Company is not subject to Section 13 or 15(d)
of the Exchange Act and prior to two years from the Time of Delivery, the
Company shall, for the benefit of the holders from time to time of the New
Securities, furnish at its expense, upon request, to holders of the New
Securities information (the "Additional Issuer Information") satisfying the
requirements of subsection (d)(4)(i) of Rule 144A under the Securities Act.
(c) The Company agrees to make available to the holders of the New
Securities as soon as practicable after the end of each fiscal year, and in any
event within 90 days, an annual report (including a balance sheet and statements
of income, shareholders' equity and cash flows of the Company and the Company
Subsidiaries on a consolidated basis certified by independent public
accountants) and, as soon as practicable after the end of each of the first
three quarters of each fiscal year (beginning with the fiscal quarter ending
after the Time of Delivery), and in any event within 45 days, consolidated
summary financial information of the Company and its subsidiaries for such
quarter in reasonable detail in accordance with past practice.
(d) So long as after the Time of Delivery or the Accelerated Time of
Delivery, as the case may be, the Purchaser or any Affiliate of the Purchaser is
a holder of at least 15% of Diluted Shares (the "Qualified Holding Condition"),
the Company shall make available to the Purchaser copies of all reports or other
communications (financial or other) furnished to shareholders or members of the
Board of Directors of the Company, and to make available to the Purchaser (x) as
soon as they are generally available, copies of any reports and financial
statements furnished to or filed or required to be filed with the SEC or any
securities exchange on which the New Securities or any class of securities of
the Company is listed; and (y) such additional information concerning the
business and financial condition of the Company as the Purchaser may from time
to time reasonably request (such financial statements to be on a consolidated
basis to the extent the accounts of the Company and the Company Subsidiaries are
consolidated in reports furnished to its shareholders generally or to the SEC).
(e) The Company shall provide or cause to be provided to the Purchaser
and its Representatives all relevant information (including, without limitation
any documents or correspondence relating thereto) concerning ConsumerCo, the
Strategic Acquisition, the Transaction Agreement and other transactions
contemplated by the Transaction Agreement available to the Company, and shall,
cause its Representatives to, notify the Purchaser of the status of and new
developments with respect to the Strategic Acquisition and the Transaction
33
Agreement and such transactions, and respond on a timely basis to questions and
inquiries that the Purchaser or its advisors may reasonably have.
(f) The parties shall comply with, and shall cause their respective
Representatives to comply with, all of their obligations under the
confidentiality agreement dated July 1, 1999 (the "Confidentiality Agreement")
between the Company and the Purchaser.
SECTION 5.03. Public Announcements. The initial press release relating
to this Agreement shall be a joint press release the text of which has been
agreed to by the Purchaser and the Company. Thereafter, unless otherwise
required by applicable Law or the requirements of the Nasdaq or any stock
exchange, neither the Purchaser nor the Company shall make, or cause to be made,
any press release or public announcement in respect of this Agreement, the
Transaction Agreement or the transactions contemplated hereby and thereby,
without the prior consent of the other party hereto, and the parties shall
cooperate as to the timing and contents of any such press release or public
announcement.
SECTION 5.04. Company's Action. (a) To the extent required by any
applicable Law or requirements of Nasdaq or any stock exchange, as soon as
practicable after the date hereof, the Company shall prepare and file with the
SEC one or more proxy statements in connection with the transactions
contemplated by this Agreement and the Transaction Agreement (each such proxy
statement, together with any amendments or supplements thereto, in each case in
the form mailed to the Company stockholders, being a "Proxy Statement"). Each
Proxy Statement shall not, at the date such Proxy Statement is first mailed to
the Company's stockholders, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. All documents that the Company will file with
the SEC in connection with the transactions contemplated herein will comply as
to form and substance in all material respects with the applicable requirements
of the Exchange Act and the rules and regulations thereunder. The Company shall
promptly after the date hereof take all action necessary in accordance with the
Delaware General Corporation Law and the Certificate of Incorporation and
By-laws to convene two stockholders meetings, the first of which (the "First
Stockholders Meeting") to vote on the issuance of the New Securities to the
Purchaser at any time at the option of the Purchaser prior to Completion, shall
be held as promptly as practicable after the date hereof, and the second of
which (the "Second Stockholders Meeting") to vote on the transactions
contemplated by the Transaction Agreement shall be held subsequent to the
Posting Date but in no event prior to the last to occur of any of the
shareholders meetings (other than the Company's) required to be held under
Transaction Agreement. The Company shall use its reasonable best efforts to
solicit from stockholders of the Company proxies in favor of the transactions to
be voted on at each of the stockholders meetings. The Company shall use its best
efforts to ensure that the Proxy Statement includes the unconditional
recommendation of the Board in favor of the transactions to be voted on at each
of the stockholders meetings. The Company shall provide to the Purchaser and its
Representatives drafts of any materials to be filed with the SEC or mailed to
the Company's stockholders and, prior to submitting or filing such materials
with the SEC, shall accept reasonable comments from the Purchaser and its
Representatives.
34
(b) The Company shall file the Certificate of Designation with the
Secretary of State of the State of Delaware prior to the Time of Delivery or the
Accelerated Time of Delivery, as the case may be.
(c) As soon as practicable after the Time of Delivery or the
Accelerated Time of Delivery, as the case may be, the Company shall file a
listing application with the Nasdaq National Market with respect to the Common
Shares and the Conversion Shares and shall use its best efforts to have the
Common Shares and the Conversion Shares so listed.
(d) Prior to the Time of Delivery or the Accelerated Time of Delivery
as the case may be, the Company shall amend the Shareholder Rights Agreement,
dated as of October 1, 1993, between the Company and Continental Stock Transfer
& Trust Co., as amended (the "Rights Agreement") to provide that the ownership
by the Purchaser of the New Securities, the Securities, any Conversion Shares
and any other securities purchased by the Purchaser in accordance with this
Agreement and the Purchase Agreement will not result in the Purchaser being
deemed an Acquiring Person (as such term is defined in the Rights Agreement) or
result in the occurrence of a Stock Acquisition Date, Section 11(a)(ii) Event or
Section 13 Event (as such terms are defined in the Rights Agreement), or
otherwise as may be necessary.
(e) The Company shall file together with the Purchaser as soon as
practicable after the date hereof notifications under the HSR Act and to respond
as promptly as practicable to all inquiries or requests received from the United
States Federal Trade Commission or the Antitrust Division of the Department of
Justice for additional information or documentation and to respond as promptly
as practicable to all inquiries and requests received from any State Attorney
General or other governmental authority in connection with antitrust matters.
The Company shall take such action as may be necessary to ensure that any
necessary notifications or filings that are required to satisfy the conditions
set forth in Section 6.01(c) are made and that all inquiries and requests
received from the relevant Governmental Authorities are responded to as promptly
as practicable.
(f) The Company shall not enter into, or otherwise agree to, an
amendment of the Transaction Agreement (except for amendments that are
insignificant, insubstantial or minor or amendments that do not adversely affect
the Purchaser or the value of the Purchaser's investment in the Company or the
Purchaser's rights assuming that the transactions contemplated by this Agreement
have been consummated), without the written consent of the Purchaser, and shall
comply with all of its obligations under the Transaction Agreement, unless
performance of such obligations shall have been waived by the other parties to
the Transaction Agreement.
SECTION 5.05. Tax Matters. (a) Upon request by the Purchaser, the
Company shall cooperate in delivering to the Purchaser or an affiliate thereof
(as applicable) within 30 days after such request a valid statement described in
Treasury Regulation section 1.897-2(g)(1)(ii) and to comply with the notice
requirements in Treasury Regulation section 1.897-2(h).
(b) The Company shall indemnify the Purchaser and each of its
affiliates and hold them harmless against (i) any French Tax imposed thereon
under Art. 209 B of the French
35
Tax Code (or any successor provision) as a result of any activities or
investments of the Company or any of the Company Subsidiaries and (ii) any
liability (including penalties, interest and expenses) arising therefrom. Any
such indemnification shall be made on an after-tax basis and shall be made
within 30 days from the date the Purchaser makes written demand therefor. To the
extent that the Purchaser receives any French Tax benefit in respect of an item
for which it received an indemnity payment under this provision, the Purchaser
shall, to the extent it can do so without jeopardizing its entitlement to such
benefit (including any benefit resulting from a payment by it under this
sentence), pay to the Company an amount equal to the amount of any such Tax
benefit so realized.
(c) If, and to the extent that, the Purchaser transfers or assigns
(including an assignment pursuant to Section 9.07 of this Agreement) its rights
under this Agreement to a person (the "Assignee"), any payment to the Company
with respect to the New Securities purchased by the Assignee shall either be
paid (i) directly by the Assignee, or (ii) by the Purchaser on behalf of the
Assignee and shall be reflected as a capital contribution or as an intercompany
obligation on the books of Purchaser and the Assignee. In addition, the
Purchaser or, where the Purchaser has assigned its rights under this Agreement
pursuant to Section 9.07 of this Agreement, the Assignee shall provide to the
Company on the Completion Date a representation that, as of such date, it has
not entered into any understanding and is under no binding obligation to sell,
exchange or otherwise dispose of any of the New Securities, the Securities or
other shares of capital stock of the Company that it owns and the
representations set forth in Sections 4.04 and 4.05.
SECTION 5.06. No Solicitation of Transactions. (a) The Company shall
not, directly or indirectly, and will instruct the Company Subsidiaries and its
Representatives not to, directly or indirectly, solicit, initiate, facilitate or
encourage (including by means of furnishing nonpublic information) the making of
any proposal or offer that constitutes, or may reasonably be expected to lead
to, any Conflicting Investment; provided, however, that, if the Board shall have
consulted with and obtained the advice of outside counsel in respect of its
fiduciary duties under Delaware Law and such outside counsel believes that such
action is advisable in order for the Board to fulfill its fiduciary duties under
Delaware Law and if a written notice thereof is given (unless such outside
counsel believes that such written notice is not advisable) to the Purchaser,
the Company may take any action to respond to inquiries or enter into or
maintain or continue discussions or negotiate with any Person in furtherance of
such inquiries or to obtain a Conflicting Investment, or agree to or endorse any
Conflicting Investment.
(b) Before entering into any Alliance to provide telecommunications
services in any country in the European Union the Company shall consult with the
Purchaser with a view to mutually cooperating in such venture.
SECTION 5.07. Use of Proceeds. The Company shall use the Purchase Price
solely for the purpose of consummating the Strategic Acquisition, including,
without limitation, refinancing of any assumed indebtedness.
36
SECTION 5.08. Certain Costs and Expenses. The Company covenants and
agrees with the Purchaser that the Company will pay or cause to be paid the
following: (i) the cost of producing and, if required, filing with the SEC of
this Agreement, closing documents (including any compilations thereof) and any
other documents in connection with the purchase, sale and delivery of the New
Securities; (ii) the cost of preparing the stock certificates for the New
Securities, (iii) the cost of filing the Certificate of Designation with the
Secretary of State of the State of Delaware, (iv) the cost of filing listing
applications with respect to the Common Shares and the Conversion Shares, with
the Nasdaq National Market and (v) all other costs and expenses incident to the
performance of its obligations hereunder which are not otherwise specifically
provided for in this Section 5.08.
SECTION 5.09. Standstill; Restrictions on Transfer. (a) The Purchaser
and its successors and permitted assigns shall not without the prior written
consent of the Company or the Board:
(i) acquire, offer to acquire, or agree to acquire, directly or
indirectly, by purchase or otherwise, any voting securities or direct or
indirect rights to acquire any voting securities or any assets of the
Company;
(ii) make, or in any way participate, directly or indirectly, in any
"solicitation" of "proxies" to vote (as such terms are used in the rules
promulgated by the SEC under the Exchange Act); or
(iii) form, join or in any way participate in a "group" as defined in
Section 13(d)(3) of the Exchange Act or act in concert with other
shareholders in connection with the activities described in clauses (i) and
(ii) above.
(b) Notwithstanding anything to the contrary contained herein, none of
the restrictions contained in Section 5.09(a)(i) shall apply under any of the
following circumstances:
(i) if the Purchaser or any of its Affiliates makes an offer to acquire
or purchase 100% of the capital stock of the Company, in a transaction or
series of related transactions involving a contractual sale or other
acquisition of 100% of the capital stock of the Company, provided that such
transaction is definitive or provides for a make-whole premium or similar
significant penalty payable to shareholders of the Company other than the
Purchaser in the event the Purchaser does not complete such a transaction;
or
(ii) if the Company or the Board enters into a definitive agreement
with a third party or accepts, approves or recommends an offer from a third
party to acquire more than 15% of the Diluted Shares (the "Third-Party
Offer"), or amends or waives provisions of the Rights Agreement with respect
thereto or with respect to the Person making such Third Party Offer, in
which case the Company shall give the Purchaser reasonable prior written
notice of any of the above circumstances or events, and the Purchaser shall
have the right to offer to acquire the number of shares of the Common Stock
that is equal to or greater than the number of shares contemplated to be
acquired pursuant to the Third-Party
37
Offer, and the Company shall not amend or waive the Rights Agreement in a
manner that would provide a timing advantage to the Person making the Third
Party Offer.
(c) Without the prior written approval by the Company or the Board, the
Purchaser shall not (or in case of a tender offer, shall use its best efforts
not to) sell the New Securities or the Conversion Shares to any Person that is
not an Affiliate of the Purchaser if as a result of such sale, such person shall
beneficially own 12.5% or more of the Diluted Shares.
(d) The Purchaser shall not sell or transfer (i) any shares of
Preferred Stock to any Person, other than a wholly owned direct or indirect
Subsidiary of the Purchaser based in one of the countries of the European Union
meeting the requirements with respect to credit rating described in Section
5.12(f), provided that such transfer to such Affiliate will not (x) in the
reasonable judgment of the Purchaser, result in an adverse effect on the credit
rating of the Company or NTL Communications, and (y) adversely affect the
Company from a regulatory perspective, and (ii) the Common Shares and any
Conversion Shares for 12 months after the Time of Delivery or the Accelerated
Time of Delivery, with any sale or transfer thereafter to be made in blocks of
not more than five percent of the aggregate Common Shares and Conversion Shares
held by the Purchaser. Notwithstanding the above, the Purchaser shall have the
right to pledge any and all shares of Preferred Stock and Common Stock as
security or collateral pursuant to a bona fide financing transaction.
(e) The Purchaser shall not, without the prior written consent of the
Company, acquire more than 1% of equity interest in any of TeleWest
Communications plc, British Telecommunications plc, Eurobell Holdings Plc, ESAT
Telecom Group Plc, Telecom Eireann plc or Scottish Power Telecommunications Ltd.
In addition, the Purchaser shall not acquire any interest in Energis plc without
offering the Company the right to participate together with the Purchaser in
such acquisition on the same terms and conditions and at the same time as the
Purchaser.
(f) Following the earlier to occur of (i) 30-month anniversary of the
Time of Delivery or the Accelerated Time of Delivery or (ii) June 30, 2002, in
the event that the Board of Directors approves a transaction with a third party
that would result in a change of control, the Purchaser shall tender its shares
in, or vote its shares in favor of, such transaction, unless (after reasonable
prior written notice of such transaction) the Purchaser makes an offer to the
Board that the Board determines (after consultation with its financial and legal
advisors) to be superior to an offer made by such third party.
(g) Restrictive provisions contained in this Section 5.09 shall not
apply to the Purchaser after the earliest to occur of: (i) consummation of a
transaction that would constitute a "change of control" transaction for purposes
of any of the Indentures; (ii) any Person acquiring beneficial ownership of 25%
or more of the Diluted Shares; (iii) majority of Directors on the Board who were
not nominated for election by the existing Directors, being elected to the Board
as a result of a proxy solicitation by a Person other than the Company or the
Purchaser; and (iv) the date of the three-month anniversary of the date on which
the Qualified Holding Condition ceases to be satisfied.
38
(h) Nothing contained in this Agreement shall prohibit the Purchaser
from acquiring (i) at any time prior to the earliest to occur of (A) the
30-month anniversary of the Time of Delivery, or the Accelerated Time of
Delivery, as the case may be, and (B) June 30, 2002, up to 25% of the Diluted
Stock and (ii) at any time after the earliest date specified in clause (i) above
up to 34% of the Diluted Shares.
SECTION 5.10. Right to Purchase Equity Securities. The Company shall
not issue, sell, transfer to any Person or grant to any Person a right to
acquire any shares of capital stock or options, warrants or similar instrument
or any other security convertible or exchangeable for shares of capital stock of
the Company (other than (i) through exercise of any options, warrants,
Convertible Debentures or Senior Preferred Stock or the 9.9% Non-Voting
Mandatorily Redeemable Preferred Stock, Series A and B outstanding on the date
hereof and other than issuance of options to the employees or directors of the
Company and the Company Subsidiaries pursuant to Benefit Plans existing on the
date hereof, as such Benefit Plans may be amended or replaced, provided that
such amended or replaced Benefit Plans shall have terms similar to and
consistent with the terms of existing Benefit Plans, and the exercise of such
options, (ii) as consent payments contemplated by and in accordance with Section
5.01(d)(iv), (iii) as contemplated by the Transaction Agreement, or (iv) as
dividends on or on conversion or in redemption of shares of preferred stock
contemplated by and in accordance with Section 5.01(d)(iii) (the "Equity
Securities")), unless the Purchaser is notified in writing of any such issuance,
sale or transfer and is offered the right to purchase at the sale price and on
the terms of the sale and conditions such quantity of Equity Securities as would
be necessary for the Purchaser to maintain the then current beneficial ownership
level of the Diluted Shares. The Purchaser's preemptive rights pursuant to this
Section 5.10 will be exercised in a manner and based on a timetable that will
not restrict or adversely affect the Company's ability to raise equity capital
in a flexible and cost-effective manner.
SECTION 5.11. Level of Ownership at the Time of Delivery. The Company
agrees that it will not issue, sell or transfer any shares of its capital stock
or any options, warrants, convertible securities, nor shall the Company grant
any subscription rights to acquire any of the above, if as a result thereof, any
Person shall own more than 12.5% of the Diluted Shares at the Time of Delivery.
SECTION 5.12. Corporate Governance; Issuance of Senior Preferred Stock;
Strategic Transactions. (a) So long as the Qualified Holding Condition is
satisfied, the Purchaser or its Affiliate shall have the right in accordance
with the Certificate of Designation and the Series A Certificate of Designation
to elect to the Board of Directors of the Company an aggregate of (i) three
Purchaser Directors (if the Board consists of 12 or fewer Directors) and (ii)
four Purchaser Directors (if the Board consists of 14 Directors or more). The
Company shall use its best efforts to cause the Board to be comprised of no more
than 16 Directors at any time. If the Purchaser and its Affiliates are no longer
the holders of any shares of Preferred Stock or Series A Preferred Stock but the
Qualified Holding Condition is still satisfied, the Purchaser or such Affiliate
of the Purchaser shall have the right to nominate to the Board of Directors of
the Company an aggregate of (i) three Purchaser Directors (if the Board consists
of 12 or fewer Directors) and (ii) four Purchaser Directors (if the Board
consists of 14 Directors or more). The
39
Company shall use best efforts to support election of the Purchaser's (or such
Affiliate's) nominee to the Board of Directors of the Company and shall include
such nominees in the list of Directors proposed by the Board of Directors of the
Company for election by the Company's stockholders. Further, so long as the
Qualified Holding Condition is satisfied, the Company shall use its best efforts
to maintain the total number of Directors at a level which would enable the
holders of the Preferred Stock and the Series A Preferred Stock to elect at
least 10% of the total number of Directors of the Company.
(b) So long as the Qualified Holding Condition is satisfied, the
Company shall use best efforts and shall take such action as may be necessary
(including amending the By-laws) to ensure that (i) at least one of the
Purchaser Directors shall be a member of each committee of the Board (other than
a committee formed to evaluate a transaction between the Company and the
Purchaser); (ii) the Purchaser Directors are elected as members of the boards of
directors of the Company's Subsidiaries, if such boards of directors include
substantially all of the other Directors; and (iii) the Company's By-laws
contain provisions (A) requiring notices to be given to Directors in a
reasonable and customary form and allowing Directors enough time to take any
action that Directors may deem necessary with respect to such notice and (B)
allowing participation of Directors in any meeting of the Board and any
committee thereof by means of telephonic conference.
(c) The Company shall not, without the prior written consent of the
Purchaser (which consent shall be granted or withheld at the sole discretion of
the Purchaser), issue additional shares of any of "Senior Securities" or "Parity
Securities" (each as defined in the Certificate of Designation) or any
additional shares of the Preferred Stock (except pursuant to the terms thereof
as dividends). In the event of refinancing of any of the Senior Preferred Stock,
the maximum value of the new securities issued by the Company in such
refinancing as shall be reflected on the Company's consolidated balance sheet
prepared in accordance with GAAP applied on the basis consistent with the
Company's prior practice, shall not exceed the aggregate value of the Senior
Preferred Stock reflected on the Company's consolidated balance sheet as
contained in the Exchange Act Report that is most recent prior to such
refinancing.
(d) So long as the Qualified Holding Condition is satisfied, the
Company shall not offer, issue, sell or transfer any securities to any Person or
amend or waive the Rights Agreement to permit a transaction with any Person, if
as a result of such offer, issuance, sale or transfer such Person will
beneficially own 15% or more of the Diluted Shares; provided, however, that the
restrictions contained in this Section 5.12(d) shall not apply to a transaction
or series of related transactions involving a contractual sale or other
acquisition of 100% of the capital stock of the Company, provided that such
transaction is definitive or provides for a make-whole premium or similar
significant penalty payable to shareholders of the Company other than the
Purchaser in the event the Purchaser does not complete such a transaction, if
the transactions contemplated by the agreement are approved by the Board and are
either (i) submitted for
40
approval by the holders of Common Stock or (ii) are subject to the tender offer
rules under the Exchange Act. If the Company offers, issues, sells or transfers
any securities to any Person that would result in such Person beneficially
owning less than 15% of the Diluted Shares, the Company shall comply with
provisions contained in Section 5.10 and shall not (i) grant to such Person a
right to elect more than one Director, and (ii) agree to standstill or transfer
restrictions more favorable than the respective provisions contained in this
Agreement and shall not grant any rights that the Purchaser does not have
pursuant to this Agreement.
(e) So long as the Qualified Holding Condition is satisfied:
(i) The Company shall not consummate without the approval of a majority
of holders of the Common Stock or the unanimous approval by the Board or a
committee thereof (if such committee includes a Purchaser Director) any
transaction or a series of transactions involving (x) an acquisition (either
in an asset or stock purchase transaction) of Core Business Assets or (y) a
sale or transfer (either in an asset or stock purchase transaction) (other
than a spin-off of the Company's and the Company Subsidiaries' broadcast
assets and assets located outside of the United Kingdom to the Company's
stockholders) of any of the Company's Core Business Assets, if the fair
market value of the Core Business Assets to be so acquired, sold or
transferred exceeds 10% of the Market Value (as defined below) of the
Company. For purposes of this Section 5.12(e), "Market Value" shall mean (A)
the market value of the Company's outstanding shares of capital stock plus
(B) the market value of any debt securities of the Company for which quotes
are available from brokerage companies of national reputation plus (C) with
respect to shares of preferred stock for which no such quotes are available,
the aggregate amount of liquidation preference thereof and the amount of
accumulated and unpaid dividends with respect thereto plus (D) the principal
amount and the amount of accrued and unpaid interest with respect to any
borrowings of the Company and the Company Subsidiaries. In the case of a
spin-off of the Company's or Company Subsidiaries' broadcast assets, it is
understood that all rights of the Purchaser shall be maintained in the
spun-off entity to the extent set forth in Section 5.10, Section 5.12
(except for Section 5.12(f)) and Section 5.13 of this Agreement. In
addition, in the case of such a spin-off, the Purchaser will be subject to
the restrictions in respect of the spun-off entity contained in Section
5.09(f) (other than that in Section 5.09(f), under which the obligations of
the Purchaser shall commence only on June 1, 2001 and in the case of Section
5.09(h), the restrictions on acquiring shares of the spun-off entity shall
be set at 34% as of June 1, 2001). In the case of a spin-off of other assets
located outside of the United Kingdom, the Purchaser will be entitled to all
rights of the Purchaser in Section 5.10, Section 5.12 and Section 5.13 and
the Purchaser will be subject to all the restrictions contained in Section
5.09, in each case in respect of the spun-off entity. Notwithstanding the
foregoing, none of the above rights or obligations will apply if the Company
shall distribute the non-U.K. assets in a split-off pursuant to which the
Company's shareholders can exchange their Common Stock for the split-off
entities' shares (or a transaction that is agreed by the parties to be
substantially similar in effect).
41
(ii) The Company shall not consummate without the approval of holders
of two-thirds of shares of Common Stock or the unanimous approval by the
Board or a committee thereof (if such committee includes a Purchaser
Director), any transaction or series of transactions in which the Company
would acquire any assets or stock of a business that does not constitute
Core Business Assets and that, individually or in the aggregate during the
24-month period prior thereto, shall have the fair market value equal to 10%
of the Market Value of the Company prior to such acquisition. For purposes
of this Section 5.12(e), a transaction will be considered to be part of the
series of related transactions if it shall have been completed (in which
case the fair market value of the acquired assets shall be determined at the
time of completion) or announced pursuant to a definitive agreement (in
which case the fair market value of the acquired assets shall be determined
at the time of such announcement).
(f) So long as the Qualified Holding Condition is satisfied, the
Company shall not, without the unanimous approval by the Board or a committee
thereof (if such committee includes a Purchaser Director), incur any
Indebtedness (other than any refinancing of any existing Indebtedness that would
not result in a material increase of the principal amount of such existing
Indebtedness) after the Company receives its first credit rating from a rating
agency of national reputation giving effect to the Strategic Acquisition (the
"Pro Forma Rating"), if the Board has reason to believe (after reasonable
inquiry of an internationally recognized rating agency or a major investment
bank having expertise in credit rating advisory work) that the effect of
incurring such Indebtedness would reduce the credit rating of NTL Communications
Corp. below (i) the lower of (x) the equivalent of Standard & Poor's rating of
BB- or (y) the Pro Forma Rating, if such Indebtedness is incurred prior to
January 1, 2001 or (ii) the equivalent of Standard & Poor's rating of BB, if the
Indebtedness is incurred after January 1, 2001.
(g) So long as the Qualified Holding Condition is satisfied, the
Company or any Company Subsidiary shall not (i) consummate any reclassification,
combination, stock dividend or any similar transaction that may adversely affect
the rights of holders of the Preferred Stock; (ii) give effect to an amendment
of the Certificate of Incorporation or By-laws of the Company that may adversely
affect the rights of holders of the Preferred Stock; (iii) make a voluntary
filing of a petition for bankruptcy, insolvency or appointment of a receiver or
a custodian or commence a Bankruptcy Proceeding; (iv) issue any security that
would adversely affect the rights of holders of the Preferred Stock; or (v)
enter into an agreement with respect to a Conflicting Investment.
SECTION 5.13. Other Registration Rights. Except for the Existing
Agreements and "cut-back" provisions in registration rights granted referred to
in the Transaction Agreement, the Company has not granted, and has not agreed to
grant, any demand or incidental registration rights to any Person other than (a)
rights to be granted pursuant to the Registration Rights Agreement, and (b)
rights that will not adversely affect the registration rights to be granted to
the Purchaser in the Registration Rights Agreement.
42
SECTION 5.14. Takeover Statutes. The Board of Directors has taken
appropriate action so that the provisions of the Business Combination Statute
will not, prior to the termination of this Agreement, apply to the Purchaser or
any Person who as of the date hereof is an Affiliate of the Purchaser.
SECTION 5.15. Securities. The Securities to be purchased by the
Purchaser pursuant to the Purchase Agreement shall be subject to the provisions
applicable to the New Securities set forth in Sections 5.09.
SECTION 5.16. Further Action; Consents; Filings. Upon the terms and
subject to the conditions hereof, each of the parties hereto shall use its
reasonable best efforts to (i) take, or cause to be taken, all appropriate
action and do, or cause to be done, all things necessary, proper or advisable
under applicable Law to consummate the transactions contemplated by this
Agreement, (ii) obtain from Governmental Authorities and any third parties, as
may be necessary, any consents, licenses, permits, waivers, approvals,
authorizations, orders or estoppel certificates required to be obtained or made
by the Purchaser or the Company or any of their Subsidiaries in connection with
the authorization, execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby and (iii) make all necessary filings,
and thereafter make any other required submissions, with respect to this
Agreement and the transactions contemplated hereby that are required under any
applicable Law. The parties hereto shall cooperate with each other in connection
with the making of all such filings, including by providing copies of all such
documents to the nonfiling party and its advisors prior to filing and, if
requested, by accepting all reasonable additions, deletions or changes suggested
in connection therewith.
SECTION 5.17. Strategic Committee. The Company and the Purchaser shall
create a joint Strategic Committee for purposes of investigating and
implementing mutually beneficial commercial initiatives and for discussing
strategic initiatives and industry developments. The Strategic Committee shall
have meetings at least three times per year.
SECTION 5.18. Employment by the Company of the Purchaser's Employees.
The parties intend that employees of the Purchaser, selected on merit, will be
employed, from time to time, by the Company on the terms that the parties may
mutually agree.
SECTION 5.19. Transaction Agreement. (a) Nothing in Article III or V of
this Agreement shall prevent the Company from complying with its obligations
under the Transaction Agreement, provided such obligations are performed in
accordance with the terms of the Transaction Agreement, this Agreement and the
Purchase Agreement.
(b) Nothing contained in this agreement shall prevent the Company or
any of the Company Subsidiaries from acquiring from or disposing to TeleWest
Communications Plc shares of capital stock of Cable London PLC in accordance
with the Settlement Agreement, dated August 1998.
43
SECTION 5.20. CWC. The Purchaser covenants to the Company that up to
and including Completion, neither the Purchaser nor any of its Affiliates shall
acquire or sell any securities of Cable & Wireless Communications plc or any
derivatives or other instruments based thereon.
ARTICLE VI
CONDITIONS
SECTION 6.01. Conditions to Purchaser's Obligations. The obligations of
the Purchaser under this Agreement are subject to the following conditions
having been satisfied (or waived by the Purchaser) as at 6:00 p.m. (London time)
on the business day immediately preceding the Posting Date (for the purposes of
this Section 6, the "Relevant Time"):
(a) No Order. No Governmental Authority shall have enacted, threatened,
issued, promulgated, enforced or entered any Governmental Order that is then
in effect, pending or threatened and has, or would have, the effect of
prohibiting consummation of the transactions contemplated by this Agreement;
(b) Antitrust Waiting Periods. Any waiting period (and any extension
thereof) applicable to the consummation of the transactions contemplated by
this Agreement under the HSR Act shall have expired or been terminated; and
(c) U.K. Antitrust and Other Regulatory Requirements. (i) (A) It shall
have been determined that the Secretary of State for Trade and Industry (the
"SOS") has not and will not refer the transactions contemplated by this
Agreement or any matter arising therefrom or related thereto to the United
Kingdom Competition Commission (the "CC"); or (B) if the SOS has indicated
that he intends to refer the transactions contemplated hereby, or any matter
arising therefrom or related thereto, to the CC unless suitable undertakings
are obtained from the Purchaser, such undertakings shall be acceptable to
the Purchaser and given by the Purchaser; or (C) if the SOS has made a
reference to the CC either (a) the CC has concluded that neither the
transactions contemplated hereby nor any matter arising therefrom or related
thereto may be expected to operate against the public interest or (b) the
SOS has allowed the transactions contemplated hereby to proceed on terms
satisfactory to the Purchaser; or (D) the transactions contemplated hereby
shall have been subject to a decision made by the European Commission
pursuant to Article 6 (1) (a) or (b) or Article 8(2) of Council Regulation
(EEC) 4064/89 concerning the control of concentrations between undertakings
(as amended by Council Regulation (EC) No. 1310/97) (the "ECMR") and, if a
request under Article 9(2) of the ECMR has been made by one or more EEA
States, the European Commission either has not acceded to any such request
or, if it has, the competent authority in the EEA State or States concerned
has adopted a decision satisfactory to the Purchaser.
44
(ii) subject to clause (i) above, all other clearances required from
any merger control, competition or antitrust authority, which has
jurisdiction over the transactions contemplated by this Agreement shall have
been obtained;
(iii) subject to clause (i) above, no relevant authority shall have
intervened, or indicated that it is contemplating intervening, in a way that
would or might reasonably be expected to make the transactions contemplated
by this Agreement or their implementation void, unenforceable and/or illegal
or directly or indirectly restrain, restrict, prohibit, delay or otherwise
interfere with the implementation thereof, or impose additional conditions
or obligations with respect thereto, or otherwise challenge or hinder the
transactions or their implementation;
(iv) all requisite notifications shall have been given to the relevant
United Kingdom Governmental Authorities, including, without limitation, the
Secretary of State for Trade and Industry, the Director General of
Telecommunications, the Independent Television Commission and the
Radiocommunications Agency regarding change of shareholding in the Company
as a result of the purchase of the New Securities in accordance with the
terms of any relevant licenses, and no indications shall have been received
from the Secretary of State or any other regulatory body that any such
license has been, will be or is likely to be revoked or materially modified;
and
(v) all other necessary notifications and filings in respect of the
transactions contemplated by this Agreement shall have been made and all
other consents, approvals or other authorizations with respect to such
transactions shall have been obtained whether in the United Kingdom or
elsewhere.
(d) Representations, Warranties and Covenants. The representations and
warranties of the Company contained in this Agreement (except for the
representations and warranties contained in Section 3.07 to the extent
permitted by Section 5.01(a)) shall have been true and correct when made and
true and correct in all material respects as of the Relevant Time, with the
same force and effect as if made as of the Relevant Time, other than such
representations and warranties as are made as of another date, which shall
be true and correct as of such date, if earlier than the Relevant Time
(provided, however, that if any portion of any representation or warranty is
already qualified by materiality, for purposes of determining whether this
Section 6.01(d) has been satisfied with respect to such portion of such
representation or warranty, such portion of such representation or warranty
as so qualified must be true and correct in all respects), and the covenants
and agreements contained in this Agreement to be complied with by the
Company on or before the Relevant Time shall have been complied with in all
material respects, and the Purchaser shall have received a certificate of
the Company to such effect signed by a duly authorized officer thereof;
(e) Transaction Agreement. The Transaction Agreement shall not have
been amended without the prior written consent of the Purchaser (except for
amendments that
45
are insignificant, insubstantial or minor or amendments that do not
adversely affect the Purchaser or the value of the Purchaser's investment in
the Company or the Purchaser's rights, assuming that the transactions
contemplated by this Agreement have been consummated) or terminated, and all
of the obligations of the parties to the Transaction Agreement required to
be performed on or prior to the Posting Date, shall have been performed or,
with respect to the obligations of the Company performance thereof, shall
have been waived by the other parties to the Transaction Agreement;
(f) Pre-conditions Under the Transaction Agreement. The Pre-conditions
(as defined in the Transaction Agreement) to the obligations of the parties
to the Transaction Agreement shall have been satisfied and shall not have
been waived or modified without the prior written consent of the Purchaser;
and
(g) The Stockholders of the Company shall have approved the matters
submitted to them at the First Stockholders Meeting.
SECTION 6.02. Provision of Certificate Relating to Satisfaction or
Waiver of Conditions. At or before 12:01 a.m. (London time) on the Posting Date,
subject to the prior delivery by the Company to the Purchaser of a certificate
signed by a duly authorized officer of the Company to the effect that all
Pre-Conditions set forth in the Transaction Agreement (other than the
Pre-condition relating to the Purchaser's certificate referred to below) have
been satisfied or waived in accordance with this Agreement and assuming that all
conditions set forth in Section 6.01 above have been satisfied (or waived by the
Purchaser), the Purchaser shall deliver to the Company a certificate signed by a
duly authorized officer thereof, dated and effective as of the Relevant Time, to
the effect that all of the conditions set forth in Section 6.01 above are either
satisfied (or waived by the Purchaser).
ARTICLE VII
INDEMNIFICATION
SECTION 7.01. Survival of Representations and Warranties. The
representations and warranties of the Company and the Purchaser contained in
this Agreement shall survive until 90 days after date on which the first annual
audited consolidated financial statements of the Company and the Company
Subsidiaries are filed with the SEC after the Time of Delivery, except that (i)
all representations and warranties contained in Section 3.02 shall survive
indefinitely; and (ii) all representations and warranties of the Company as to
any Tax Claim shall survive until 30 days after assessment of the liability to
which any such Tax Claim may relate is barred by all applicable statutes of
limitation (taking into account any applicable waivers or extensions). If
written notice of a claim has been given prior to the expiration of the
applicable representations and warranties by the Company or the Purchaser, then
the relevant representations and warranties of the other party shall survive as
to such claim, until such claim has been finally resolved.
46
SECTION 7.02. Indemnification. (a) The Purchaser, its Affiliates and
its successors and assigns and the officers, directors, employees and agents of
the Purchaser, its Affiliates and its successors and assigns shall be
indemnified and held harmless by the Company for any and all Liabilities,
losses, damages, claims, costs and expenses, interest, awards, judgments and
penalties (including, without limitation, reasonable attorneys' fees and
expenses) actually suffered or incurred by them (including, without limitation,
any Action brought or otherwise initiated by any of them) (hereinafter, a
"Purchaser Loss") arising out of or resulting from:
(i) the breach of any representation or warranty made by the Company
contained in this Agreement; or
(ii) the breach of any covenant or agreement by the Company contained
in this Agreement.
The amounts of any indemnification pursuant to this Section 7.02(a)
shall be increased by an additional amount to reflect an appropriate gross-up to
compensate the Purchaser for its indirect participation as a holder of capital
stock of the Company in any indemnification payment made pursuant to this
Section 7.02(a).
(b) The Company, its Affiliates and its successors and assigns and the
officers, directors, employees and agents of the Company, its Affiliates and its
successors and assigns shall be indemnified and held harmless by the Purchaser
for any and all Liabilities, losses, damages, claims, costs and expenses,
interest, awards, judgments and penalties (including, without limitation,
reasonable attorneys' fees and expenses) actually suffered or incurred by them
(including, without limitation, any Action brought or otherwise initiated by any
of them) (hereinafter, a "Company Loss", and each of a Company Loss and a
Purchaser Loss is hereinafter referred to as a "Loss" with respect to such
party) arising out of or resulting from:
(i) the breach of any representation or warranty made by the Purchaser
contained in this Agreement; or
(ii) the breach of any covenant or agreement by the Purchaser contained
in this Agreement.
(c) Whenever a claim shall arise for indemnification under this Article
VII, the party entitled to indemnification (the "Indemnified Party") shall give
notice to the other party (the "Indemnifying Party") of any matter that the
Indemnified Party has determined has given or could give rise to a right of
indemnification under this Agreement promptly, but in no event later than 30
days after the Indemnified Party first learns of such claim, stating the amount
of the Loss, if known, and method of computation thereof, and containing a
reference to the provisions of this Agreement in respect of which such right of
indemnification is claimed or arises. The obligations and Liabilities of the
Indemnifying Party under this Article VII with respect to Losses arising from
claims of any third party which are subject to the indemnification provided for
in
47
this Article VII ("Third Party Claims") shall be governed by and contingent upon
the following additional terms and conditions: if an Indemnified Party shall
receive notice of any Third Party Claim, the Indemnified Party shall give the
Indemnifying Party notice of such Third Party Claim following receipt by the
Indemnified Party of such notice in the time frame provided above; provided,
however, that the failure to provide such notice shall not release the
Indemnifying Party from any of its obligations under this Article VII and shall
not relieve the Indemnifying Party from any other obligation or Liability that
it may have to any Indemnified Party otherwise than under this Article VII. The
Indemnifying Party shall be entitled to assume and control the defense of such
Third Party Claim at its expense and through counsel of its choice if it gives
notice of its intention to do so to the Indemnified Party within ten days of the
receipt of such notice from the Indemnified Party; provided, however, that, if
there exists or is reasonably likely to exist a conflict of interest that would
prevent the same counsel from representing both the Indemnified Party and the
Indemnifying Party, then the Indemnified Party shall be entitled to retain its
own counsel at the expense of the Indemnifying Party. In the event the
Indemnifying Party exercises the right to undertake any such defense against any
such Third Party Claim as provided above, the Indemnified Party shall cooperate
with the Indemnifying Party in such defense and make available to the
Indemnifying Party, at the Indemnifying Party's expense, all witnesses,
pertinent records, materials and information in the Indemnified Party's
possession or under the Indemnified Party's control relating thereto as is
reasonably required by the Indemnifying Party. Similarly, in the event the
Indemnified Party is, directly or indirectly, conducting the defense against any
such Third Party Claim, the Indemnifying Party shall cooperate with the
Indemnified Party in such defense and make available to the Indemnified Party,
at the Indemnifying Party's expense, all such witnesses, records, materials and
information in the Indemnifying Party's possession or under the Indemnifying
Party's control relating thereto as is reasonably required by the Indemnified
Party. No such Third Party Claim may be settled by the Indemnifying Party
without the prior written consent of the Indemnified Party. No party shall be
entitled to indemnification under this Section 7.02 if such party receives
reasonable express written notice of a breach of any representation, warranty,
covenant or agreement and such party would be entitled to terminate this
Agreement pursuant to the terms hereof in respect of such breach and fails to do
so.
SECTION 7.03. Limits on Indemnification. Notwithstanding anything to
the contrary contained in this Agreement, (i) the maximum amount of
indemnifiable Purchaser Losses which may be recovered by the Purchaser from the
Company arising out of or resulting from the causes enumerated in Section
7.02(b) with respect to it shall be an amount equal to the Purchase Price, and
(ii) no claim may be made against the Company for indemnification pursuant to
Section 7.02(b) with respect to any individual item of a Purchaser Loss, unless
such item of Purchaser Losses exceed $1 million, and no claim may be made
against the Company pursuant to Section 7.02(a) unless the aggregate of all such
Purchaser Losses shall exceed $100 million, in which case the Company shall then
be required to pay or be liable for the full amount of Purchaser Losses.
SECTION 7.04. Indemnification for ConsumerCo's Liabilities. In the
event the Company incurs any Liabilities, losses, damages, claims, costs and
expenses, interests, awards,
48
judgments and penalties (including, without limitation, reasonable attorneys'
fees and expenses) actually suffered or incurred by it (including, without
limitation, any Action brought or otherwise initiated by it) as a result of any
Liability of ConsumerCo (other than a Liability of ConsumerCo that is subject to
indemnification of the Company by C&W under Schedule 23 of the Transaction
Agreement) which either (i) is not disclosed in Section 7.04 of the Disclosure
Schedule or (ii) is not reflected or reserved against in the pro forma balance
sheet of ConsumerCo as of March 31, 1999, in accordance with GAAP, (iii) is not
disclosed in reasonable express written notice to the Purchaser and the
Purchaser would be entitled to terminate this Agreement pursuant to the terms
hereof at such time and fails to do so, or (iv) is not reflected or reserved
against in the Net Asset Statement (as defined in the Transaction Agreement),
the Company will give a written notice to the Purchaser and will indemnify the
Purchaser by issuing to the Purchaser a number of shares of Common Stock with a
market value (based on the weighted average price of the Common Stock for the 25
trading days prior to issuance of such shares pursuant to this Section 7.04 but
in any event subsequent to the date such Loss is determined and such Liability
has been publicly disclosed) equal to a percentage of such Loss, which
percentage shall be the sum of (i) the percentage of Diluted Shares owned by the
Purchaser as of the date which is one trading day after such Liability becomes
generally known in the market and (ii) an additional percentage of Diluted
Shares to reflect an appropriate gross-up of the percentage determined pursuant
to clause (i) above to compensate the Purchaser for its indirect participation
as a holder of capital stock of the Company in any indemnification payment made
pursuant to this Section 7.04; provided, however, that any Loss must exceed
(pound)400 million in the aggregate (and each individual item of Loss must
exceed (pound)1 million to be included) after which, the entire amount of such
Loss shall be included. Any claim under this Section 7.04 must be made no later
than six months after the date of the first audited financial statements of
ConsumerCo prepared subsequent to the Time of Delivery.
ARTICLE VIII
TERMINATION
SECTION 8.01. Termination. This Agreement may be terminated and the
other transactions contemplated by this Agreement may be abandoned at any time
prior to the time at which the Company incurs an obligation to pay the
consideration payable to the holders of the New Crown Shares or, if earlier,
C&W, under the Transaction Agreement (or such other time as provided below),
notwithstanding any requisite approval and adoption of this Agreement and the
transactions contemplated by this Agreement, as follows:
(a) by mutual written consent of the Purchaser and the Company;
(b) by the Purchaser if prior to Completion (A) (i) the Company shall
have agreed to any amendment (other than insignificant, insubstantial or
minor amendments or amendments that do not adversely affect the Purchaser or
the value of the Purchaser's investment in the Company or the Purchaser's
rights, assuming that the transactions
49
contemplated by this Agreement have been consummated) to the Transaction
Agreement without the prior written consent of the Purchaser or (ii) the
Company shall (to the extent permitted by the Transaction Agreement) have
waived any Pre-Conditions, Conditions or Closing Conditions (as such terms
are defined in the Transaction Agreement) or any other provision of the
Transaction Agreement (other than insignificant, insubstantial or minor
provisions the waiver of which does not adversely affect the Purchaser or
the value of the Purchaser's investment in the Company or the Purchaser's
rights, assuming that the transactions contemplated by this Agreement have
been consummated) without the prior written consent of the Purchaser; or (B)
the representations and warranties of the Company contained in Sections
3.01(a) (with respect to the Company) and 3.07(b) (with respect to a general
assignment for the benefit of creditors by, or actual insolvency of, the
Company only) hereof shall not be true and correct as of the Time of
Delivery;
(c) by the Purchaser if prior to the obtaining of the approval of the
Company's stockholders referred to in Condition 3 of Part B of Schedule 4 of
the Transaction Agreement is to be sought, a Material Adverse Effect shall
have occurred, or if prior to such approval of stockholders the Company
shall not have delivered to the Purchaser a certificate signed by a duly
authorized officer thereof that a Material Adverse Effect had not occurred;
(d) by the Purchaser if prior to the sanctioning by the U.K. High Court
of the Scheme of Arrangement (as defined in the Transaction Agreement), a
ConsumerCo Material Adverse Effect shall have occurred or if prior to such
sanctioning CWC shall not have delivered to the Purchaser a certificate
signed by a duly authorized officer thereof that a ConsumerCo Material
Adverse Effect had not occurred;
(e) by either the Purchaser or the Company if prior to Completion the
Transaction Agreement shall have been terminated;
(f) by either the Purchaser or the Company if Completion shall not have
occurred on or prior to March 31, 2001;
(g) by the Purchaser if Completion shall not have occurred on or prior
to the day which is 165 days after the Posting Date; and
(h) by either the Purchaser or the Seller in the event that any
Governmental Authority shall have issued an order, decree or ruling or taken
any other action restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated by this Agreement and such
order, decree, ruling or other action shall have become final and
nonappealable.
The right of the Purchaser to terminate this Agreement pursuant to
Section 8.01(c) or 8.01(d) after the Posting Date are subject to the U.K. Panel
on Takeovers and Mergers consenting to the Purchaser invoking such right.
50
SECTION 8.02. Effect of Termination. In the event of termination of
this Agreement pursuant to Section 8.01, this Agreement shall forthwith become
void, there shall be no liability under this Agreement on the part of the
Purchaser or the Company or any of their respective officers or directors, and
all rights and obligations of each party hereto shall cease; provided, however,
that nothing herein shall relieve any party from liability for the breach of any
of its representations, warranties, covenants or agreements set forth in this
Agreement. Except as expressly provided in this Article VIII, the Purchaser does
not have any other rights under this Agreement, the breach of which will give
the Purchaser the right to terminate this Agreement.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Waiver. Either party to this Agreement may (i) extend the
time for the performance of any of the obligations or other acts of the other
party, (ii) waive any inaccuracies in the representations and warranties of the
other party contained herein or in any document delivered by the other party
pursuant hereto or (iii) waive compliance with any of the agreements or
conditions of the other party contained herein. Any such extension or waiver
shall be valid only if set forth in an instrument in writing signed by the party
to be bound thereby. Any waiver of any term or condition shall not be construed
as a waiver of any subsequent breach or a subsequent waiver of the same term or
condition, or a waiver of any other term or condition, of this Agreement. The
failure of any party to assert any of its rights hereunder shall not constitute
a waiver of any of such rights.
SECTION 9.02. Expenses. Except as otherwise specified in this
Agreement, all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses, whether or not the Closing
shall have occurred.
SECTION 9.03. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by courier service, by telecopy, by e-mail or by registered or certified
mail (postage prepaid, return receipt requested) to the respective parties at
the following addresses (or at such other address for a party as shall be
specified in a notice given in accordance with this Section 9.03):
51
(a) If to the Company:
NTL Incorporated
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
(e-mail: ▇▇▇▇▇▇▇@▇▇▇▇.▇▇▇)
with copies (which shall not constitute notice to the Company) to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
(e-mail: ▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇.▇▇▇)
(b) If to the Purchaser:
France Telecom, S.A.
208-212, ▇▇▇ ▇▇▇▇▇▇▇ Losserand
75505 ▇▇▇▇▇ ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇-▇▇-▇▇-▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇
(e-mail: ▇▇▇▇▇▇▇▇.▇▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇)
with a copy (which shall not constitute notice to the Purchaser)
to:
Shearman & Sterling
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
SECTION 9.04. Headings. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 9.05. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
52
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
SECTION 9.06. Entire Agreement. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof and
thereof and supersede all prior agreements and undertakings, both written and
oral, among the Company and the Purchaser with respect to the subject matter
hereof and thereof. The parties hereto agree that, except to the extent
otherwise expressly provided in this Agreement, the Purchase Agreement shall
continue to constitute the entire agreement between the parties with respect to
the subject matter thereof and, except to the extent otherwise expressly
provided in this Agreement, the provisions thereof shall remain in full force
and effect in accordance with their terms notwithstanding the execution and
delivery of this Agreement or any subsequent termination of this Agreement.
SECTION 9.07. Assignment. This Agreement may not be assigned by the
Purchaser without the express written consent of the Company, except that the
Purchaser may assign this Agreement to an Affiliate of the Purchaser without the
consent of the Company; provided, however, that no such assignment shall release
the Purchaser of its obligations hereunder, provided further, however, that the
Purchaser will not assign this Agreement to an Affiliate of the Purchaser if, in
the reasonable judgment of the Purchaser, such assignment would not result in an
adverse effect on the credit rating of the Company or NTL Communications.
SECTION 9.08. Holding Company. If, in connection with the consummation
of the transactions contemplated by the Transaction Agreement, the parties
thereto determine that it is desirable that a holding company be organized which
would own all of the capital stock of the Company ("HoldCo"), then HoldCo shall
succeed to and assume all of the Company's obligations under this Agreement and
the Purchase Agreement, and the obligation to deliver to the Purchaser the New
Securities hereunder shall be the obligation to deliver equivalent securities of
HoldCo, provided that (i) HoldCo shall be incorporated under the Delaware
General Corporation Law and be based in the United States, (ii) the Purchaser
shall receive with respect to such securities of HoldCo rights in or with
respect to HoldCo identical to the rights that the Purchaser would have
otherwise had in or with respect to the Company, with respect to the New
Securities and Securities and other rights that the Purchaser may have under
this Agreement, under the Purchase Agreement or otherwise and (iii) to the
extent permitted by applicable law, the certificates representing the Securities
and the New Securities prior to the formation of HoldCo shall be deemed to
represent the equivalent securities in HoldCo issued to the Purchaser, and the
Purchaser shall not be required to surrender or exchange its certificates
representing the Securities or the New Securities. The Company shall, and shall
cause HoldCo to, execute and deliver to the Purchaser such documents,
instruments, agreements or certificates as may be necessary to transfer the
obligations of the Company under this Agreement and under the Purchase Agreement
to HoldCo.
53
SECTION 9.09. No Third Party Beneficiaries. Except for the provisions
of Article VII relating to Indemnified Parties, this Agreement shall be binding
upon and inure solely to the benefit of the parties hereto and their respective
successors and assigns, and nothing herein, express or implied, is intended to
or shall confer upon any other Person any legal or equitable right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement. No
purchaser of any of the New Securities from the Purchaser shall be deemed a
successor or assign with respect to this Agreement by reason merely of such
purchase.
SECTION 9.10. Amendment. This Agreement may not be amended or modified
except (a) by an instrument in writing signed by the Company and the Purchaser
or (b) by a waiver in accordance with Section 9.01.
SECTION 9.11. Governing Law. (a) This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York applicable
to contracts executed in and to be performed entirely in that state and without
regard to any applicable conflicts of law principles.
(b) All actions and proceedings arising out of or relating to this
Agreement shall be heard and determined in any New York state or federal court
sitting in The City of New York.
SECTION 9.12. Counterparts. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts, and
by the different parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
SECTION 9.13. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
SECTION 9.14. Terms Generally. References in this Agreement to
articles, sections, paragraphs, clauses, schedules, annexes and exhibits are to
articles, sections, paragraphs, clauses, schedules, annexes and exhibits in or
to this Agreement unless otherwise indicated. Whenever the context may require,
any pronoun includes the corresponding masculine, feminine and neuter forms. Any
term defined by reference to any agreement, instrument or document has the
meaning assigned to it whether or not such agreement, instrument or document is
in effect. The words "include", "includes" and "including" are deemed to be
followed by the phrase "without limitation". Unless the context otherwise
requires, any agreement, instrument or other document defined or referred to
herein refers to such agreement, instrument or other document as from time to
time amended, supplemented or otherwise modified from time to time. Unless the
context otherwise requires, references herein to any Person include its
successors and assigns.
54
SECTION 9.15. References to the Company. Any references to the Company
in this Agreement and in the Purchase Agreement, as such references apply to the
periods prior to April 1, 1999 or such other time when the Company became the
holding company of NTL Communications, shall be references to NTL
Communications. Notwithstanding anything to the contrary contained herein, all
representations, warranties and covenants of the Company in this Agreement and
in the Purchase Agreement are representations, warranties and covenants of the
Company.
55
IN WITNESS WHEREOF, the Company and the Purchaser have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
NTL INCORPORATED
By: /s/ J. ▇▇▇▇▇▇▇ ▇▇▇▇▇
---------------------------------------------
Name: J. ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: President and Chief Executive Officer
FRANCE TELECOM, S.A.
By: /s/ ▇▇▇▇-▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
---------------------------------------------
Name: ▇▇▇▇-▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Title: Executive Director - Finance and
Human Resources
ATTACHMENT I
EXHIBIT A
PRO FORMA CAPITALIZATION
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
PRINCIPAL TERMS
EXHIBIT C
FORM OF LEGAL OPINION OF SKADDEN, ARPS, SLATE, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
