EXHIBIT 10.28
EXECUTION COPY
STOCKHOLDERS AGREEMENT (THIS "AGREEMENT") DATED AS OF AUGUST 15, 1997.
BY AND AMONG: VPC CORPORATION, a Delaware corporation
("VPC");
AND: CAPITAL COMMUNICATIONS CDPQ INC., a
Quebec company
("CDPQ");
AND: OPTEL, INC., a Delaware corporation
(the "Corporation").
WHEREAS, as of the date hereof and after Vanguard's exercise in full of
the Vanguard Option, VPC owns of record and beneficially (i) 1,923,977 shares of
Class B Stock which represents approximately 74.62% of the issued and
outstanding shares of Common Stock and approximately 81.75% of the issued and
outstanding shares of Voting Common Stock and (ii) Convertible Notes having an
outstanding balance (including principal and accrued interest) of approximately
$128,145,213 as of July 31, 1997 (the "Convertible Notes Outstanding Balance");
WHEREAS, as of June 27, 1997, Vanguard and CDPQ entered into a Stock
Purchase Agreement (the "Stock Purchase Agreement"), pursuant to which CDPQ is
purchasing all of Vanguard's equity interest in the Corporation which consists
of 429,521 shares of Class B Stock and represents approximately 16.66% of the
issued and outstanding shares of Common Stock and approximately 18.25% of the
issued and outstanding shares of Voting Common Stock;
WHEREAS, it is a condition precedent to CDPQ's consummation of the
transactions contemplated by the Stock Purchase Agreement that each of the
parties hereto enter into this Agreement; and
In consideration of the foregoing recitals, the mutual agreements contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereby agree as follows:
1. CONSTRUCTION.
1.1 Definitions. As used herein:
1.1.1 "Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act of
1934, as amended.
1.1.2 "Alternative Strategic Investment" means (i) a one time issuance
(the "alternative original issuance") by the Corporation to a
single alternative strategic investor (i.e., any issuance of
securities by the Corporation to any other alternative strategic
investor shall not qualify as an "Alternative Strategic
Investment" hereunder) which is not an Affiliate of VPC or
Videotron of shares of Common Stock at a price which is not less
than $82.18 per share (which is the price per share paid by CDPQ
pursuant to the Stock Purchase Agreement), such number to be
appropriately adjusted for any stock split, reverse stock split,
stock dividend or other subdivision or combination of Common
Stock after the date hereof and (ii) a subsequent issuance,
which meets the requirements of the alternative original
issuance, if such subsequent issuance is pursuant to obligations
incurred by, or the exercise of options, warrants or rights
issued or granted to the alternative strategic investor at the
time of the alternative original issuance. For purposes of this
Agreement, a "single alternative strategic investor" shall be
the operator of a business (or a group of such operators acting
as a consortium) which is not a single strategic investor for
purposes of Section 1.1.25 and shall not be a financial
institution or a passive investor.
1.1.3 "Board" means the Board of Directors of the Corporation.
1.1.4 "CDPQ Shares" means all Stockholder Shares held directly
or indirectly by CDPQ.
1.1.5 "Class A Stock" means the Class A Common Stock, par value
$.01 per share, of the Corporation.
1.1.6 "Class B Stock" means the Class B Common Stock, par value
$.01 per share, of the Corporation.
1.1.7 "Class C Stock" means the Class C Common Stock, par value
$.01 per share, of the Corporation.
1.1.8 "Xxxx Warrant" means an option or warrant to be issued to
Xxxx Xxxx, a former officer of the Corporation, to
purchase not more than 9406.36 shares of Class A Stock at
an exercise price of $74.42 per share, subject to
adjustment.
1.1.9 "Common Stock" means the Class A Stock, the Class B Stock
the Class C Stock or other common stock of the
Corporation.
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1.1.10 "Convertible Notes" means the Corporation's 15%
convertible subordinated promissory notes issued or to
be issued to VPC and all notes issued directly or
indirectly in replacement of, substitution for or as
interest on any such note in whole or in part. For
purposes of this Agreement, whenever a calculation of
the Common Stock or other common equity of the
Corporation on a fully diluted basis is required, the
Convertible Notes shall be deemed to be convertible into
a number of shares of Common Stock or other common
equity, as the case may be, using the assumption set
forth in the definition of "Stockholder Shares"
hereunder.
1.1.11 "Corporation Shares" means all issued and outstanding
shares of capital stock of the Corporation (including
the Common Stock and any preferred stock) and all rights
to acquire any capital stock of the Corporation
(including the rights contained in the Convertible
Notes).
1.1.12 "Director" means any member of the Board or a Sub Board,
as the context requires.
1.1.13 "Xxxxx Warrant" means the Warrant Agreement dated as of
July 3, 1997 granted by the Corporation to Xxxxxx Xxxxx
pursuant to which Xxxxxx Xxxxx has the right to purchase
up to 728.86 share of Class A Stock at an exercise price
of $85.75 per share, subject to adjustment.
1.1.14 "Indenture" means the Indenture dated as of February 14,
1997 between the Corporation and U.S. Trust Company of
Texas, N.A., as trustee and as escrow agent as such
Indenture is in effect on the date hereof.
1.1.15 "IPO Date" means the first date on which the Corporation
receives the net proceeds of a Public Offering.
1.1.16 "Kofalt Warrant" means the Warrant Agreement dated as of
September 1, 1996 granted by the Corporation to Xxxxx X.
Xxxxxx pursuant to which Xxxxx X. Xxxxxx has the right
to purchase up to 24,992 shares of Class A Stock at an
exercise price of $53.55 per share, subject to
adjustment.
1.1.17 "Person" means an individual, a partnership, a
corporation, an association, a joint stock company, a
trust, a joint venture, a limited liability company, an
unincorporated organization, or a governmental entity
(or any department, agency, or political subdivision
thereof).
1.1.18 "Public Offering" means any sale of shares of Voting
Common Stock to the public pursuant to an offering
registered under the Securities Act, if immediately
thereafter such Voting Common Stock is listed on a
national securities exchange or quoted on the NASDAQ
National Market System.
1.1.19 "Repayment Date" has the meaning set forth in Exhibit A.
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1.1.20 "SEC" means the Securities and Exchange Commission.
1.1.21 "Securities Act" means the Securities Act of 1933, as
amended.
1.1.22 "Stockholder" means any of the Stockholders.
1.1.23 "Stockholder Shares" means (i) any Common Stock held,
directly or indirectly, by the Stockholders, including
without limitation any Common Stock issued or issuable
upon conversion of the Convertible Notes (assuming a
conversion price of $83.38), whether or not the
Convertible Notes are at the time convertible in
accordance with their terms, and (ii) any equity
securities issued or issuable directly or indirectly
with respect to the securities referred to in clause (i)
above by way of any stock split, reverse stock split,
stock dividend or other subdivision or combination.
1.1.24 "Stockholders" mean collectively VPC and CDPQ.
1.1.25 "Strategic Investment" means (i) a one time issuance
(the "original issuance") by the Corporation to a single
strategic investor (i.e., any issuance of securities by
the Corporation to any other strategic investor shall
not qualify as a "Strategic Investment" hereunder) which
is not an Affiliate of VPC or Videotron of shares of
Common Stock at a price which is not less than $82.18
per share (which is the price per share paid by CDPQ
pursuant to the Stock Purchase Agreement), such number
to be appropriately adjusted for any stock split,
reverse stock split, stock dividend or other subdivision
or combination of Common Stock after the date hereof and
(ii) a subsequent issuance, which meets the requirements
of the original issuance, if such subsequent issuance is
pursuant to obligations incurred by, or the exercise of
options, warrants or rights issued or granted to the
strategic investor at the time of the original issuance.
For purposes of this Agreement, a "single strategic
investor" shall mean (a) any company (or a group of such
companies acting as a consortium) which is engaged
principally in a Cable/Telecommunications Business (as
defined in the Indenture as in effect on the date
hereof) and which has a rating from Xxxxx'x of Baa3 (or
the equivalent thereof) or higher or from S&P of BBB-
(or the equivalent thereof) or higher or (b) any
controlled Affiliate of such company or consortium
referred to in the preceding clause (a).
1.1.26 "Subsidiary" means, with respect to any Person, any
corporation, limited liability company, partnership,
association or other business entity of which (i) if a
corporation, association or other business entity, a
majority of the total voting power of securities
entitled (without regard to the occurrence of any
contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or
one or more of the other Subsidiaries of that Person or
a combination thereof, or (ii) if a limited liability
company or partnership, a majority of the partnership
or other similar ownership interest thereof is at the
time owned
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or controlled, directly or indirectly, by any Person or
one or more Subsidiaries of that Person or a combination
thereof. For purposes hereof, a Person or Persons shall
be deemed to have a majority ownership interest in a
limited liability company or partnership if such Person
or Persons shall control any managing member or general
partner of such limited liability company or
partnership.
1.1.27 "Transfer" as to any security means any sale, exchange,
assignment, the creation of any option or right to
purchase, security interest or other encumbrance, and
any other disposition of any kind, whether voluntary or
involuntary, affecting title to, possession of or voting
rights in respect of such security, or any interest
therein.
1.1.28 "Vanguard" means Vanguard Communications, L.P., a
California limited partnership.
1.1.29 "Vanguard Option" means the Option dated August 1, 1996
granted by the Corporation to Vanguard.
1.1.30 "Videotron" means Le Groupe Videotron Ltee, a Quebec
corporation that is the indirect ultimate parent of VPC.
1.1.31 "VPC Shares" means all Stockholder Shares held directly
or indirectly by VPC.
1.1.32 "Voting Common Stock" means the Class A Stock and the
Class B Stock.
1.1.33 "Voting Ratio" means, as to a Stockholder at the time of
determination, the percentage obtained by dividing the
number of votes to which such Stockholder and its
Affiliates are entitled with respect to the number of
shares of Voting Common Stock held by such Stockholder
and its Affiliates on a fully-diluted basis at such time
by the aggregate number of votes to which all holders of
Voting Common Stock are entitled with respect to all of
the shares of Voting Common Stock held by all such
holders of Voting Common Stock on a fully-diluted
basis, in each case, assuming all holders of then
outstanding warrants, options and convertible securities
of the Corporation which are in the money had converted
such convertible securities or exercised such warrants
or options immediately prior to such time. For purposes
of this Section 1.1.33, the Convertible Notes shall be
deemed at all times to be "in the money".
1.2 Interpretation. When the context in which words are used in this
Agreement indicates that such is the intent, singular words
include the plural and vice versa. References herein to
Sections, Exhibits or Schedules are to the appropriate sections,
exhibits or schedules of this Agreement unless otherwise
expressly so stated. The words "herein", "hereof", and
"hereunder" and other words of similar import refer to this
Agreement as a whole and not to any particular Section, Exhibit,
Schedule or
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other subdivision. All Schedules and Exhibits attached hereto are
incorporated herein by reference and are deemed a part hereof.
2. DIRECTORS
2.1 Voting for Directors. The Corporation agrees to take all required
actions and each Stockholder agrees to vote all Corporation Shares now
or hereafter owned by it, at any regular or special meeting of
stockholders called for the purpose of, or shall otherwise consent to,
the election to the Board of the Person or Persons designated pursuant
to Section 2.2 ("Designee" or the "Designees") and to take all other
required or requested actions so that at all times the provisions of
Section 2.2 are complied with.
2.2 Designees
2.2.1 For so long as CDPQ's Voting Ratio is at least 5%, CDPQ shall
be entitled to designate a number of Designees which shall
result in such Designees representation on the Board being at
least as great as CDPQ's Voting Ratio, but in no event shall
CDPQ have less than one (1) Designee. VPC shall be entitled to
designate a number of Designees which shall result in such
Designees representation on the Board being as close as
possible (after CDPQ designates its Designees) to VPC's Voting
Ratio.
2.2.2 The right granted to CDPQ under Section 2.2.1 is in temporary
substitute of all rights to designate Directors with respect to
the Corporation and its Subsidiaries that are held by Caisse de
depot et placement du Quebec ("Caisse") under the Consolidated
Agreement (the "Consolidated Agreement") dated as of May 10,
1995 among Caisse, Xxxxx Xxxxxxx and Sojecci Ltee. By
separate agreement being executed concurrently herewith, such
rights under the Consolidated Agreement have been suspended for
so long as the right of CDPQ under Section 2.2.1 remains in
effect.
2.2.3 The composition of the board of directors or similar governing
board of each of the Corporation's Subsidiaries (a "Sub Board")
shall be subject to determination in the same manner as that of
the Board.
2.2.4 Any committees of the Board or a Sub Board shall be created
only upon the approval of a majority of the Directors, and the
number of Directors which have been designated by CDPQ on any
such committee shall be proportionately equivalent to the
number of such Directors on the Board or Sub Board, as the case
may be, which have been designated by CDPQ; provided, that so
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long as CDPQ's Voting Ratio is at least 5%, CDPQ shall be
entitled to name at least one Designee to every committee of
the Board and any Sub Board.
2.3 Substitution. If any Designee designated by either Stockholder shall
be unable or unwilling to serve on the Board or any Sub Board or any
committee thereof, or shall
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resign or be removed therefrom, the Stockholder which designated such
Designee shall be entitled (if such Stockholder would then be entitled
to designate such Designee pursuant to Section 2.2.1) to designate a
replacement who then shall be a Designee for purposes of this
Agreement.
2.4 Removal. Each Stockholder at the written request of the other
Stockholder shall vote all Corporation Shares now or hereafter owned
by it, at any regular or special meeting of stockholders called for
the purpose of, or shall otherwise consent to, the removal from the
Board, any Sub Board or any committee thereof, of any Designee
designated by the other Stockholder, whether such removal is with or
without cause.
2.5 Meetings and Actions of the Board and each Sub Board
2.5.1 Meetings of the Board and each Sub Board shall be held in
accordance with the applicable corporation's bylaws.
2.5.2 A simple majority of the Board shall constitute a quorum for
the transaction of any business at a meeting of the Board;
provided that proper prior notice of such meeting has been
delivered to or waived in writing by each member of the Board
(or any member who has not received such notice or executed
such a waiver is present at such meeting). A simple majority of
a Sub Board shall constitute a quorum for the transaction of
any business at a meeting of such Sub Board; provided that
proper prior notice of such meeting has been delivered to or
waived in writing by each member of such Sub Board (or any
member who has not received such notice or executed such a
waiver is present at such meeting).
2.5.3 The affirmative vote of a simple majority of the directors
present at a meeting at which a quorum is present, or a
unanimous written consent without a meeting, shall be
sufficient to effect Board or Sub Board action with respect to
any matter.
2.5.4 The Board shall meet at least quarterly.
2.5.5 The Stockholders shall take or cause to be taken any and all
actions which may be necessary or desirable and proper to carry
out the provisions of this Section 2.5.
2.6 Decisions Requiring Prior Stockholder Approval
2.6.1 Actions and decisions concerning the conduct of the business
and internal affairs of the Corporation and its Subsidiaries
regarding any of the matters mentioned in Exhibit A hereto
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shall not be undertaken or decided, as the case may be, unless
the subject to be dealt with has been specifically disclosed in
reasonable detail in a notice previously sent by, the
Corporation to CDPQ, and only to the extent that such action or
decision is approved by CDPQ in writing. In the event that the
Corporation gives notice of any proposed such
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action or decision in accordance with the preceding sentence
and such notice expressly requests CDPQ's written approval
thereof, then if CDPQ fails, within twenty (20) days after
CDPQ's receipt of such notice, to give written notice to the
Corporation stating that CDPQ does not approve such action or
decision or stating the extent to which CDPQ does not approve
such action or decision, CDPQ shall be deemed to have given its
written approval of such action or decision.
2.6.2 If the Corporation consummates a Public Offering or if CDPQ and
its Affiliates cease to own any Corporation Shares, Section
2.6.1 shall become null and void.
2.6.3 By separate agreement being executed concurrently herewith,
Caisse has agreed that the right granted to CDPQ in Section
2.6.1 amends and supersedes the rights of Caisse contained in
Section 3 of the Consolidated Agreement insofar as such rights
of Caisse concern the Corporation and any Subsidiary thereof.
2.6.4 The Stockholders shall take or cause to be taken any and all
actions which may be necessary or desirable and proper to carry
out the provisions of this Section 2.6.
2.7 Covenants by VPC.
2.7.1 VPC hereby covenants that it will use its reasonable best
efforts to cause the Corporation not to enter into any
Affiliate Transactions (as such term is defined in the
Indenture as of the date hereof whether or not such Indenture
remains in effect) except in accordance with and as permitted
by the Indenture.
2.7.2 VPC hereby covenants that it will and that it will cause the
Corporation to notify CDPQ at least five (5) business days
prior to the grant by either VPC or the Corporation to any
other holder of Corporation Shares (whether such shares are
issued before or after the date hereof including any issuance
of Corporation Shares pursuant to a Strategic Investment or an
Alternative Strategic Investment) of any rights or privileges
which are of the type granted to CDPQ pursuant to Sections 6.1,
6.2 and 10, as they may be amended from time to time (the "CDPQ
Rights"), and such notice shall include a reasonable
description of the rights or privileges to be granted to such
other holder (the "Proposed Rights"). If, within 30 days after
CDPQ's receipt of such notice, CDPQ determines, in its sole
discretion acting reasonably, that any of the Proposed Rights
are more advantageous to such other holder than the CDPQ Rights
then held by CDPQ and so notifies VPC, then VPC hereby
covenants that it will and it will cause the Corporation to
amend the CDPQ Rights then held by CDPQ to conform to the
Proposed Rights either (i) contemporaneously with the actual
grant of the Proposed Rights to such other holder or (ii) as
soon as reasonably possible after the actual grant of the
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Proposed Rights to such other holder, provided that such
amendment shall be deemed to be effective as of the time of
such actual grant of the Proposed Rights to such other holder.
The CDPQ Rights in force at any time under any of Sections
6.1, 6.2 and 10 shall cease to be CDPQ Rights and shall not be
subject to modification pursuant to this Section 2.7.2 from and
after such time, if ever, as the provisions of Section 6.1, 6.2
or 10 cease to be effective or shall be terminated in
accordance with the provisions hereof.
2.7.3 VPC acknowledges that it no longer has any right to receive an
annual $350,000 management fee from the Corporation or any of
its Subsidiaries pursuant to any agreement or arrangement in
force at or prior to the date hereof. Except as listed on
Exhibit B-1 hereto, none of VPC, Videotron or any of their
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respective Affiliates (collectively, the "VPC Affiliates")
provides any services to or has any other contractual
relationship (whether written or oral) (the "Related Party
Services") with the Corporation or any of its Subsidiaries.
After the date hereof, except pursuant to approval of the Board
and in compliance with Section 2.7.1, the VPC Affiliates shall
not provide any services to the Corporation or any of its
Subsidiaries for a fee or enter into any other contractual
relationship (whether oral or written) with the Corporation or
any of its Subsidiaries other than the Related Party Services,
and the VPC Affiliates shall only provide the Related Party
Services to the Corporation and its Subsidiaries pursuant to
the terms described on Exhibit B-2 hereto.
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2.7.4 If at any time VPC makes use of any of the Corporation's and
its Subsidiaries' tax losses or credits (whether by carry-over,
carry-back or otherwise) (collectively "Tax Items") for any
fiscal year ending subsequent to the fiscal year ending August
31, 1997, VPC hereby agrees to fully compensate the
Corporation, at the end of any such fiscal year, as provided in
Exhibit C.
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2.7.5 Neither VPC nor any of its Affiliates shall at any time convert
any of the Convertible Notes for a conversion price less than
$82.18 for each share of Common Stock (such number to be
appropriately adjusted for any stock split, reverse stock
split, stock dividend or other subdivision or combination of
Common Stock after the date hereof).
2.8 Representations and Warranties by VPC. VPC represents and warrants to
CDPQ that (i) neither VPC nor any of its Affiliates is bound by any
contractual provision (other than the provisions of this Agreement,
the Consolidated Agreement and financial covenants and similar
financial restrictions contained in instruments governing indebtedness
for borrowed money and provisions of agreements entered into by the
Corporation and its Subsidiaries in the ordinary course of business)
in favor of any other Person which restricts the ability of the
Corporation and its Subsidiaries to freely engage in the business of
acquiring, developing and operating cable television systems and
telecommunications services in the United States (a "Restrictive
Covenant") and (ii) in particular, and without limitation of clause
(i), neither the Corporation nor any of its Subsidiaries is bound by
any provision in the
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nature of a Restrictive Covenant with VPC or any of VPC's Affiliates
or Subsidiaries that are not also Subsidiaries of the Corporation or
which is enforceable by or for the benefit of VPC or any of VPC's
Affiliates or Subsidiaries that are not also Subsidiaries of the
Corporation. CDPQ acknowledges that an Affiliate of VPC holds an
interest in Wireless Holdings Inc. and Videotron (Bay Area) Inc. and
VPC holds an interest in County Cable Corp.
2.9 Supervoting and Preemptive Rights. If in connection with (i) a Public
Offering, (ii) the first to occur of a Strategic Investment or an
Alternative Strategic Investment, or (iii) an amalgamation or merger
of the Corporation, VPC determines that it would be in the
Corporation's best interests that the supervoting rights of the Series
B Stock be terminated or that the preemptive rights granted pursuant
to Sections 8.1 through 8.3 be waived with respect to such
transaction, CDPQ shall promptly cooperate with VPC in taking all
actions necessary to terminate such supervoting rights and/or waive
such preemptive rights, provided that CDPQ and VPC are treated in the
same manner (including the receipt of any consideration) by such
termination or waiver (except for differences based solely on the
magnitude of CDPQ's and VPC's relative ownership interests in the
Corporation). In particular and without limitation of the foregoing,
VPC and CDPQ each agrees that it will waive all such preemptive rights
with respect to a Strategic Investment and will promptly execute an
appropriate acknowledgment of such waiver as may be required or
appropriate in connection with a Strategic Investment.
2.10 Early Conversion of Convertible Notes. CDPQ hereby consents to and
agrees that, on one occasion at or prior to March 31, 1998, VPC may
convert the minimum portion of the Convertible Notes necessary so that
VPC will be entitled to include the Corporation and its Subsidiaries
in VPC's consolidated income tax return for U.S. Federal Income Tax
reporting purposes from the time of such conversion, as determined on
the assumption that, without duplication, all outstanding options,
warrants and other rights (other than those held by VPC or CDPQ) to
acquire Common Stock from the Corporation or issuable pursuant to the
Corporation's Incentive Stock Option Plan as in effect on the date
hereof (which Plan has not been amended between February 7, 1997 and
the date hereof) were then exercised, provided that such conversion
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complies with the requirements of the Indenture and the conversion
price is not less than the greater of (i) $82.18 per share of Common
Stock (such number to be appropriately adjusted for any stock split,
reverse stock split, stock dividend or other subdivision or
combination of Common Stock after the date hereof) or (ii) the price
per share of Common Stock received by the Corporation in connection
with any Strategic Investment or Alternative Strategic Investment
which has been agreed to prior to such conversion (such number to be
appropriately adjusted for any stock split, reverse stock split, stock
dividend or other subdivision or combination of Common Stock after the
date of such agreement).
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3. AVAILABILITY OF FINANCIAL STATEMENTS UNDER CERTAIN CIRCUMSTANCES
3.1 During the period beginning on the date hereof and ending on the IPO
Date, the Corporation shall deliver to each Stockholder the following
information:
3.1.1 Within 45 days after the last day of each fiscal quarter,
unaudited consolidated quarterly financial statements of the
Corporation, including a consolidated balance sheet and
consolidated statements of income and cash flow, and, to the
extent they are regularly prepared, the individual unaudited
quarterly financial statements of each of its Subsidiaries,
including a balance sheet and statements of income and cash
flow;
3.1.2 Within 120 days after the last day of the Corporation's fiscal
year, audited consolidated financial statements of the
Corporation, including a consolidated balance sheet and
consolidated statements of income and cash flow; to the extent
they are regularly prepared, the individual audited financial
statements of each of its Subsidiaries, including a balance
sheet and statements of income and cash flow; and the report, if
any, on such financial statements by the independent auditors
engaged by the Corporation to audit such financial statements;
and
3.1.3 Within a reasonable period of time, a copy of any document sent
(i) to any Director, in his capacity as a Director, and (ii) to
any member of a committee of the Board or any Sub Board, in his
capacity as a member of such committee, subject, however, to
applicable requirements of confidentiality and provided that the
Corporation shall not be required to provide any such copy if it
is advised by its counsel that doing so would waive the
attorney-client privilege or any other applicable legal right or
privilege.
3.2 All financial statements delivered pursuant to Section 3.1 shall be
prepared in accordance with generally accepted accounting principles
consistently applied, and shall fairly present the financial condition,
assets, liabilities, results of operations and cash flow of the
Corporation and its consolidated Subsidiaries, subject in the case of
quarterly statements to the omission of certain footnotes and year end
adjustments.
4. CONSTITUENT DOCUMENTS AND LIABILITY INSURANCE
The Stockholders shall take or cause to be taken all necessary actions to
cause the certificate of incorporation and bylaws of the Corporation to
contain the most favorable provisions in respect of indemnification and
director exculpation permitted under the Delaware General Corporation Law.
CDPQ acknowledges and agrees that such certificate of incorporation and
bylaws of the Corporation as in force on the date hereof comply with the
foregoing requirement. The Stockholders shall take or cause to be taken all
necessary actions to cause the applicable organizational documents of each
Subsidiary of the Corporation for which any Designee is designated by CDPQ
to contain the most favorable provisions in respect of indemnification and
director (or any similar position) exculpation permitted under the laws of
the jurisdiction of its incorporation or other creation. The Stockholders
shall be entitled
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at all times to rely on the advice of legal counsel in satisfying their
obligations with respect to the foregoing requirements. The Corporation
shall maintain and shall maintain on behalf of its Subsidiaries customary
officers and directors liability insurance coverage. CDPQ acknowledges and
agrees that the provision of such coverage through policies maintained by
Videotron as in force on the date hereof is sufficient for such purpose.
5. TRANSFERABILITY OF STOCKHOLDER SHARES
5.1 Transfer in Violation of this Agreement. Any Transfer or attempted
Transfer of any Stockholder Shares in violation of any provision of this
Agreement shall be null and void, and the Corporation shall not record such
Transfer on its books or treat any purported transferee of such Stockholder
Shares as the owner of such shares for any purpose.
5.2 Transfer of Stockholder Shares.
5.2.1 Stockholder Shares are transferable only pursuant to (i) public
offerings registered under the Securities Act, (ii) Section 9
and 10, (iii) subject to the provisions of Section 6,
transactions under Rule 144 or Rule 144A (or any similar rule or
rules then in effect) of the SEC if such rule is available, (iv)
subject to Sections 5.2.2, 6 and 7, any other legally available
means of Transfer to any Person that is not an Affiliate of the
transferor, (v) subject to Section 5.3, Transfers by CDPQ to any
of its Affiliates, and (vi) subject to Section 5.4, Transfers by
VPC to any of its wholly-owned Subsidiaries or to any
wholly-owned Subsidiary of Videotron.
5.2.2 In connection with the proposed Transfer of any Stockholder
Shares described in clause (iv) of Section 5.2.1, the holder
thereof shall deliver written notice to the Corporation
describing in reasonable detail the proposed Transfer, together
with an opinion of counsel reasonably acceptable to the
Corporation to the effect that such proposed Transfer of
Stockholder Shares may be effected without registration of such
Stockholder Shares under the Securities Act. In addition, if the
holder of the Stockholder Shares delivers to the Corporation an
opinion of counsel reasonably acceptable to the Corporation that
no subsequent Transfer of such Stockholder Shares shall require
registration under the Securities Act, the Corporation shall
promptly upon such proposed Transfer deliver new certificates
for such Stockholder Shares which do not bear the securities
legend set forth in Section 11. If the Corporation is required
to deliver new certificates for such Stockholder Shares bearing
such legend, the holder thereof shall not consummate a Transfer
of the same until the prospective transferee has confirmed to
the Corporation in writing its agreement to be bound by the
conditions contained in this Section 5.2.2 and Section 11.
5.2.3 Upon the request of a holder of Stockholder Shares, the
Corporation shall promptly supply to such Person or its
prospective transferees all information regarding the
Corporation required to be delivered by an issuer pursuant to
paragraph (d)(4)(i) of Rule 144A of the SEC in connection with
a Transfer
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pursuant to Rule 144A (or comparable information under any
similar rule or rules then in effect) of the SEC.
5.2.4 Upon the request of any holder of Stockholder Shares, the
Corporation shall remove the legend set forth in Section 11 from
the certificates for such holder's Stockholder Shares; provided,
that such Stockholder Shares are, in the opinion of counsel
reasonably satisfactory to the Corporation, eligible for sale
pursuant to Rule 144(k) (or any similar rule or rules then in
effect) of the SEC.
5.3 Transfer to CDPQ Affiliates. Prior to CDPQ's Transfer of any
Stockholder Shares to any of its Affiliates (other than the Corporation)
pursuant to a Transfer permitted under clause (v) of Section 5.2.1, CDPQ shall
cause such Affiliate to execute a joinder to this Agreement and shall deliver
such executed joinder to the Secretary of the Corporation. Thereafter, for
purposes of this Agreement, the term "CDPQ" shall be deemed to include CDPQ and
such Affiliate.
5.4 Transfer to VPC Affiliates. Prior to VPC's Transfer of any Stockholder
Shares to any of its Affiliates (other than the Corporation) pursuant to a
Transfer permitted under clause (vi) of Section 5.2.1, VPC shall cause such
Affiliate to execute a joinder to this Agreement and shall deliver such
executed joinder to the Secretary of the Corporation. Thereafter, for purposes
of this Agreement, the term "VPC" shall be deemed to include VPC and such
Affiliate.
6. RESTRICTIONS ON TRANSFERABILITY OF STOCKHOLDER SHARES
6.1 Tag Along Rights.
6.1.1 Subject to the Threshold (as defined below), at least 15 days
prior to any Transfer by VPC (other than a Transfer permitted by
clause (i) or (vi) of Section 5.2.1 or a Transfer pursuant to
Rule 144 of the SEC) of any VPC Shares then held by VPC, VPC
shall deliver a written notice (the "Sale Notice") to CDPQ,
specifying in reasonable detail the identity of the prospective
transferee(s) and the terms and conditions of the Transfer. CDPQ
may elect to participate in the contemplated Transfer by
delivering written notice to VPC within 10 days after CDPQ's
receipt of the Sale Notice. If CDPQ has elected to participate in
such Transfer, each of VPC and CDPQ shall be entitled to sell in
the contemplated Transfer, at the same price (if VPC is selling
Convertible Notes, CDPQ shall receive the highest implicit value
attributable to the VPC Shares contained in such Convertible
Notes) and on the same terms, a number of VPC Shares and CDPQ
Shares equal to the product of (i) the quotient determined by
dividing the number of VPC Shares and CDPQ Shares held by VPC or
CDPQ, as the case may be, by the aggregate number of Stockholder
Shares at the time held by VPC and CDPQ and (ii) the aggregate
number of Stockholder Shares to be sold in the contemplated
Transfer. This Section 6.1.1 shall not apply to a Transfer of VPC
Shares by VPC to the extent the sum of the number of VPC Shares
to be Transferred and the aggregate number of all VPC Shares
previously Transferred (other than as permitted by clause (i) or
(vi) of Section 5.2.1 or
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pursuant to Rule 144 of the SEC) does not exceed 10% of the total
of all VPC Shares now held by VPC or subsequently acquired by it
(including all shares and other equity securities issued,
Transferred, paid, or distributed in respect of VPC Shares, or
otherwise acquired by VPC, whether by way of purchase, split,
combination, or distribution made otherwise than in cash with
respect to the Stockholder Shares, provided such shares or other
equity securities are not acquired by VPC in violation of this
Agreement) (the "Threshold"). This Section 6.1.1 shall not apply
to a Transfer to which Section 6.1.2 applies.
6.1.2 At least 15 days prior to any Transfer (or series of related
Transfers) by VPC (other than a Transfer permitted by clause (i)
or (vi) of Section 5.2.1 or a Transfer pursuant to Rule 144 of
the SEC) (a) prior to the IPO Date, of at least 50% of the VPC
Shares then held by VPC (representing in the aggregate at least
10% of the Common Stock on a fully diluted basis assuming all
holders of then outstanding warrants, options, and convertible
securities of the Corporation which are in the money had
converted such convertible securities or exercised such warrants
or options immediately prior to such Transfer), (c) prior to the
IPO Date, of a number of VPC Shares which when added to the
number of VPC Shares previously Transferred would cause the
aggregate number of VPC Shares Transferred after the date hereof
to exceed 50% of the largest number of VPC Shares held by VPC
between the date hereof and the date of such Transfer or
Transfers, as appropriately adjusted for any stock split, reverse
stock split, stock dividend or other division or combination of
Common Stock after the date hereof, or (c) on or after the IP0
Date, of a number of VPC Shares which represents a majority of
VPC's Voting Ratio immediately prior to such Transfer or
Transfers. VPC shall deliver a written notice (the "Fifty Percent
Sale Notice") to CDPQ, specifying in reasonable detail the
identity of the prospective transferee(s) and the terms and
conditions of the Transfer or Transfers. CDPQ may elect to
participate in the contemplated Transfer or Transfers by
delivering written notice to VPC within 10 days after CDPQ's
receipt of the Fifty Percent Sale Notice. If CDPQ has elected to
participate in the contemplated Transfer or Transfers, CDPQ shall
be entitled to sell in such Transfer or Transfers, at the same
price (if VPC is selling Convertible Notes, CDPQ shall receive
the highest implicit value attributable to the VPC Shares
contained in such Convertible Notes) and on the same terms as
VPC, up to all of the CDPQ Shares then held by CDPQ. For purposes
of this Section 6.1.2, the Convertible Notes shall be deemed at
all times to be "in the money".
6.2 First Offer Rights. At least 30 days prior to any Transfer (other than a
Transfer permitted by clause (i), (ii), (v) or (vi) of Section 5.2.1) of
Corporation Shares or Convertible Notes by either CDPQ or VPC, the
Stockholder proposing to make such Transfer (the "Offering Stockholder")
shall deliver a written notice (the "Transfer Notice") to the other
Stockholder (the "Offered Stockholder"), specifying in reasonable detail
the number of Corporation Shares and, if applicable, the principal
amount of Convertible Notes proposed to be transferred, the proposed
purchase
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price (which shall be payable solely in cash) (the "Proposed Purchase
Price") and the other terms and conditions of the Transfer. The Offered
Stockholder may elect to purchase all (but not less than all) of the
Corporation Shares and Convertible Notes to be Transferred, upon the
same terms and conditions as those set forth in the Transfer Notice, by
delivering a written notice of such election to the Offering Stockholder
within 30 days after the Transfer Notice has been received by the
Offered Stockholder. If the Offered Stockholder has not elected within
such 30-day period (the "Offer Period") to purchase all of the
Corporation Shares and Convertible Notes to be Transferred, then,
provided the Offering Shareholder has also complied with the provisions
of Section 6.1, if applicable, and no transferee is an Affiliate of the
Offering Stockholder, the Offering Stockholder may, during the 120-day
period immediately following the expiration of the Offer Period (the
"Third Party Offer Period"), Transfer the Corporation Shares and
Convertible Notes specified in the Transfer Notice at an aggregate price
which is not less than 90% of the Proposed Purchase Price and on other
terms which are not more favorable to the transferee(s) than specified
in the Transfer Notice. Corporation Shares and Convertible Notes not
Transferred within the Third Party Offer Period as permitted by the
foregoing provisions may not be Transferred thereafter except upon
further compliance with the provisions of this Section 6.2 as if a
Transfer Notice had never been given with respect thereto.
6.3 Termination of Restrictions. The provisions of Section 6.2 shall
terminate upon the IPO Date.
7. DRAG-ALONG RIGHTS
7.1 Prior to the IPO Date, if VPC elects to sell VPC Shares representing (or
Videotron elects to sell shares of the capital stock of VPC indirectly
representing) a majority of the votes of the Voting Common Stock on a
fully diluted basis for cash and/or readily marketable securities
(provided that (i) any such marketable securities are listed on a
recognized national securities exchange or quoted on NASDAQ National
Market System and are issued by a corporation whose market
capitalization is at least U.S. $1 billion and (ii) the amount of such
marketable securities that would be issuable to CDPQ in connection with
such sale would represent not more than 5% of the public float of such
corporation), then VPC (or Videotron, as the case may be) shall have the
right to require CDPQ to join in such sale by selling all (but not less
than all) of its CDPQ Shares on the same terms and at the same price as
the sale to be effected by VPC (or on the same terms and at the same
price as the sale to be effected by Videotron with respect to its
indirect ownership of the Corporation Shares only), provided that CDPQ
shall not be obligated to join in any such sale unless CDPQ shall
receive a payment in cash or readily marketable securities (as described
above) of at least $82.18 per CDPQ Share (such number to be
appropriately adjusted for any stock split, reverse stock split, stock
dividend or other subdivision or combination of Common Stock after the
date hereof) at the closing of such sale. Such right of VPC (or
Videotron, as the case may be) may be exercised by the delivery by VPC
(or Videotron, as the case may be) to CDPQ, at least fifteen (15) days
prior to the consummation of the proposed sale, of notice of the
proposed
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sale setting forth a description of the terms of such sale in reasonable
detail and stating that VPC (or Videotron, as the case may be) requires
the CDPQ Shares be included in such sale. Such a sale is referred to
herein as a "Disposition".
7.2 In connection with a Disposition, CDPQ will, if requested by the
purchasers, execute, deliver and perform agreements with the purchasers
relating to such Disposition containing terms and conditions that are
the same in all material respects as those contained in the comparable
agreements to be executed, delivered and performed by VPC (or Videotron,
as the case may be), subject only to the limitations that (i) VPC and
its Affiliates will not be obligated to make representations or
warranties regarding CDPQ or any of its Affiliates and (ii) CDPQ will
not be obligated to make representations or warranties regarding VPC or
any of its Affiliates including the Corporation and its Subsidiaries, or
(except as expressly provided herein) to assume or otherwise become
liable in any way for any obligations requiring performance or
containing any restrictions during any period after the consummation of
such Disposition, or to indemnify any party or third party beneficiary
to the applicable agreements in connection with such Disposition
(excluding indemnities with respect to matters regarding CDPQ
exclusively) except that CDPQ will be obligated to indemnify the
applicable purchasers on a pro rata basis (based on the then
--- ----
Corporation's stockholders' respective ownership of the outstanding
Common Stock as of such Disposition assuming the conversion in full of
all then outstanding Convertible Notes) with respect to representations
and warranties as to the Corporation or any of its Subsidiaries made by
VPC in connection with such Disposition in the same manner as VPC will
be obligated to indemnify such applicable purchasers, provided, however,
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that the effect of all such indemnities provided by CDPQ in connection
with such Disposition (excluding indemnities with respect to matters
regarding CDPQ exclusively) will not reduce the net payment received by
CDPQ in cash or readily marketable securities (as described in Section
7.1) for the sale of all CDPQ Shares to an amount less than $74 per
share (such number to be appropriately adjusted for any stock split,
stock dividend or other subdivision or combination of Common Stock after
the date hereof), and provided, further, that CDPQ shall in no event be
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required to become jointly and severally liable with VPC or any other
Person for any indemnities, liabilities or obligations arising out of
such Disposition.
8. PREEMPTIVE RIGHTS
8.1 Subject to Sections 2.9 and 8.4, if at any time the Corporation wishes
to issue and sell any equity securities (whether preferred stock or
common stock) or any options, warrants or other rights to acquire
equity securities or any notes or other securities convertible into
equity securities (all such equity securities and other rights and
securities, collectively, the "Equity Equivalents") to any Person or
Persons, the Corporation shall promptly deliver a notice of intention
to issue and sell (the "Corporation's Notice of Intention to Sell") to
each Stockholder setting forth a description of the Equity Equivalents
to be issued and the proposed purchase price and terms of sale. Upon
receipt of the Corporation's Notice of Intention to Sell, each
Stockholder shall have the right to elect to purchase, at the price and
on the terms
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stated in the Corporation's Notice of Intention to Sell, a number of
the Equity Equivalents equal to the product of (i) such Stockholder's
proportionate ownership (expressed as a fraction) of the aggregate
Common Stock and rights to acquire Common Stock (calculated on a
fully-diluted basis assuming all holders of then outstanding warrants,
options and convertible securities of the Corporation which are in the
money had converted such convertible securities or exercised such
warrants or options immediately prior to the taking of the record of
the holders of Common Stock for the purpose of determining whether they
are entitled to receive such offer) held by all Stockholders multiplied
by (ii) the number of Equity Equivalents to be issued. Such election
shall be made by the electing Stockholder by written notice to the
Corporation within five (5) business days after receipt by such
Stockholder of the Corporation's Notice of Intention to Sell (the
"Acceptance Period for Equity Equivalents"). For purposes of this
Section 8.1, the Convertible Notes shall be deemed at all times to be
"in the money".
8.2 If effective elections to purchase shall not be received pursuant to
Section 8.1 in respect of all the Equity Equivalents to be issued and
sold, then the Corporation may, at its election, during a period of one
hundred and twenty (120) days following the expiration of the
Acceptance Period for Equity Equivalents, issue and sell the remaining
Equity Equivalents to another Person or Persons at a price and upon
terms not more favorable to such Person than those stated in the
Corporation's Notice of Intention to Sell; provided, however, that
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failure by a Stockholder to exercise its right to purchase with respect
to the issuance and sale of Equity Equivalents pursuant to one
Corporation's Notice of Intention to Sell shall not affect its right to
acquire Equity Equivalents pursuant to any subsequent issuance and sale
for which a separate Corporation's Notice of Intention to Sell would be
required hereunder. In the event the Corporation has not sold the
Equity Equivalents covered by a Corporation's Notice of Intention to
Sell, or entered into a binding agreement to sell the Equity
Equivalents, within such one hundred and twenty (120) day period, the
Corporation shall not thereafter issue or sell such Equity Equivalents
without again first offering such securities to each Stockholder in the
manner provided in Section 8.1.
8.3 If a Stockholder gives the Corporation notice pursuant to Section 8.1
that such Stockholder desires to purchase Equity Equivalents offered by
the Corporation, payment therefor shall be made by wire transfer of
immediately available funds, against delivery of the securities at the
executive offices of the Corporation within ten (10) days after the
giving of such notice, or, if later, not later than the closing date
fixed by the Corporation for the sale of all such Equity Equivalents.
8.4 The preemptive rights contained in Sections 8.1 through 8.3 shall not
apply to (i) the issuance of shares of Common Stock as a stock dividend
or upon any subdivision, stock split or combination of the outstanding
shares of Common Stock or in exchange for outstanding shares of Common
Stock pursuant to any conversion right or obligation contained in the
Corporation's Certificate of Incorporation (e.g., the conversion of
Class B Stock or Class C Stock into Class A Stock); (ii) the issuance
of Convertible Notes as cumulative interest payments on the Convertible
Notes Outstanding Balance in accordance with the terms of the
Convertible Notes (and any
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other applicable governing documents) as in effect on the date hereof;
(iii) provided VPC and its Affiliates comply with the provisions of
Section 2.7.5, the issuance of Common Stock upon the conversion of
Convertible Notes; (iv) the grant of options, warrants or rights to
subscribe for shares of Common Stock, and the issuance of shares of
Common Stock upon the exercise of such options, warrants or rights to
subscribe for shares of Common Stock (including such options, warrants
or rights issued prior to the date hereof), to officers, directors and
employees of the Corporation or any of its Subsidiaries pursuant to the
Corporation's Incentive Stock Option Plan or pursuant to any other plan
or arrangement for the grant of options and other rights to acquire
Common Stock to such officers, directors and employees adopted by the
Corporation with the approval of the Board; (v) the issuance of Common
Stock upon the exercise of the Kofalt Warrant, the Xxxx Warrant or the
Xxxxx Warrant; (vi) the issuance of Equity Equivalents pursuant to an
offering registered under the Securities Act; (vii) the issuance of
Common Stock or options or warrants exercisable for Common Stock or
securities convertible or exchangeable for Common Stock (collectively,
"Common Stock Equivalents") for other than cash, provided that any such
issuance shall give rise to the rights provided to CDPQ under Section
8.5; (viii) provided a Strategic Investment has not been consummated,
the issuance of Common Stock Equivalents pursuant to an Alternative
Strategic Investment, provided that any such issuance shall give rise
to the rights provided to CDPQ under Section 8.5; and (ix) and the
issuance of Common Stock Equivalents to CDPQ pursuant to Section 8.5.
8.5 Subject to Section 2.9, if at any time the Corporation issues and sells
any Common Stock Equivalents (a) pursuant to an Alternative Strategic
Investment or (b) for other than cash to any Person (other than to VPC
or any of its Affiliates) (any such issuance, an "Alternative
Issuance"), then, within five (5) business days after such Alternative
Issuance, the Corporation shall deliver a notice of issuance and sale
(the "Corporation's Notice of Issuance") to CDPQ setting forth a
description and the amount of and the number of shares of Common Stock
represented by the Common Stock Equivalents issued, a description of
the consideration received by the Corporation for the issuance of such
Common Stock Equivalents (as well as an estimate of the fair market
value of any non-cash consideration) and a description of the other
material terms of the issuance and sale. Upon receipt of the
Corporation's Notice of Issuance, CDPQ shall have the right to elect to
purchase from the Corporation an amount or number of the Common Stock
Equivalents which would restore CDPQ to its proportionate ownership of
Common Stock (calculated on a fully diluted basis) immediately prior to
such Alternative Issuance for a cash purchase price equal to the then
fair market value of the Common Stock Equivalents to be purchased by
CDPQ (which fair market value will be based upon and will be no more
than the implicit fair market value of the consideration received by
the Corporation for such Common Stock Equivalents in such Alternative
Issuance). Such election shall be made by CDPQ by written notice to the
Corporation within five (5) business days after receipt by CDPQ of the
Corporation's Notice of Issuance. If CDPQ gives the Corporation notice
pursuant to this Section 8.5 that CDPQ desires to purchase the Common
Stock Equivalents offered by the Corporation, payment therefor shall be
made by wire transfer of immediately available funds, against
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delivery of the securities at the executive offices of the Corporation
within ten (10) days after the giving of such notice.
8.6 The Corporation represents and warrants to each Stockholder, and each
Stockholder represents and warrants to the Corporation, that, except as
provided herein, the Person making such representation and warranty is
not a party to any agreement or other arrangement under which any other
Person has a preemptive right or right of first refusal to acquire
Corporation Shares or other Equity Equivalents from the Person making
such representation and warranty.
9. PUT ARRANGEMENT
9.1 Unless the IPO Date shall have occurred on or prior to the fifth
anniversary of the date hereof, at any time during the Put Exercise
Period (as defined below), CDPQ shall have the right and option to
require VPC to purchase all, but not less than all, of the Corporation
Shares held by CDPQ (the "Put") at the Put Price (as defined below);
provided, however, that CDPQ shall not exercise the Put (and any prior
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exercise of the Put shall be suspended, if not previously consummated)
during one 90 day period beginning on the date CDPQ receives a letter
from a reputable underwriter stating that such underwriter has
undertaken to consummate a Public Offering. The "Put Exercise Period"
shall be the period beginning on the fifth anniversary of the date
hereof and ending on the first to occur of (i) the tenth anniversary of
the date hereof and (ii) the IPO Date.
9.2 The Put shall be exercisable by delivery to VPC during the Put
Exercise Period of written notice of such exercise specifying the
number of shares to be purchased (the "Put Notice"). Upon the delivery
of the Put Notice, VPC and CDPQ shall be firmly bound to consummate
the purchase and sale of shares in accordance with the Put Notice and
the terms hereof and shall, in good faith, promptly determine the Put
Price as provided hereunder. Subject to the provisions hereof, within
ten (10) days after the determination of the Put Price, VPC shall
purchase and CDPQ shall sell all of the Corporation Shares held by
CDPQ at a mutually agreeable time and place (the "Put Closing").
9.3 At the Put Closing, CDPQ shall deliver to VPC certificates
representing the Corporation Shares to be purchased by VPC, and VPC
shall deliver to CDPQ the Put Price, by wire transfer of immediately
available funds to an account designated by CDPQ. CDPQ agrees that, at
the request of Videotron effected by delivery of written notice to
CDPQ at least ten (10) days prior to the Put Closing, CDPQ shall apply
all (or such part as Videotron shall have specified in such notice) of
the Put Price, immediately upon receipt by CDPQ, to the purchase from
Videotron of freely tradeable shares (such shares shall have, without
limitation, no restrictions on resale) of Videotron duly listed on the
Toronto Stock Exchange and/or the Montreal Stock Exchange (or any
other Exchange acceptable to CDPQ), at a purchase price per share
equal to the weighted average closing sale price of shares of the same
class as the shares of Videotron to be delivered to CDPQ during the
twenty (20) most recent
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trading days, as of the day prior to the Put Closing, on the Exchange
with the largest trading volume of such shares during such period.
9.4 The "Put Price" shall be the Market Value of the Corporation Shares to
be purchased by VPC pursuant to a Put Notice (such shares, the
"Purchase Shares"). Promptly after the giving of a Put Notice, VPC and
CDPQ shall each designate an investment bank to be engaged by them to
determine such Market Value; provided that if VPC or CDPQ does not
--------
designate an investment bank within 30 days after the giving of a Put
Notice, the other party shall select and engage two separate
investment banks to make such determinations. The expenses of all
investment banks engaged pursuant to this Section 9.4 shall be borne
equally by VPC and CDPQ. The "Market Value" of the Purchase Shares for
purposes of determining the Put Price shall be the fair market value
of the Purchase Shares as of the date of the delivery of the Put
Notice to VPC as determined by (i) first determining the all-cash
price that an informed and willing buyer would pay to an informed and
willing seller, neither being under any compulsion to buy or sell, in
an arms-length transaction arranged in an orderly manner over a
reasonable period of time under then prevailing market conditions, to
purchase all of the outstanding Common Stock of the Corporation as a
going concern (the "Company Value"), (ii) then multiplying the result
(as adjusted to reflect the assumed exercise of rights to acquire
Corporation Shares pursuant to outstanding options, warrants and
convertible securities of the Corporation to the extent such rights
are in-the-money) by the percentage of the Common Stock of the
Corporation represented by the Purchase Shares, determined on a fully
diluted basis but without regard to the dilutive effects of out-of-
the-money rights to acquire Corporation Shares pursuant to outstanding
options, warrants and convertible securities of the Corporation, and
(iii) then making adjustments, if appropriate, based on differences
(such as voting rights) among the various classes of Common Stock. In
the event that Company Value as determined by either of the two
investment banks is not greater than 120% of Company Value as
determined by the other investment bank, the Put Price will be the
average of the two amounts determined by the investment banks to be
the Market Value. In the event Company Value as determined by one of
the investment banks is greater than 120% of Company Value as
determined by the other investment bank, the two investment banks
shall promptly engage a third investment bank to choose one of the two
Market Values determined by them (without modification) within 30 days
of its engagement, and the Market Value chosen by such third
investment bank shall be the Put Price. The determination of the Put
Price in accordance with this Section 9.4 shall be binding and
conclusive. For purposes of this Section 9.4, the Convertible Notes
shall be deemed at all times to be "in the money".
10. CHANGE IN CONTROL
10.1 If at any time prior to the IPO Date any transaction is proposed
whereby Videotron would cease to own, directly or indirectly,
Corporation Shares representing at least a majority of the
outstanding Common Stock on a fully-diluted basis assuming the
holders of then outstanding warrants, options and convertible
securities of the Corporation which are in the money had converted
such convertible securities or
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exercised such warrants or options immediately prior to such
transaction, Videotron shall deliver or cause to be delivered to CDPQ
a notice of such proposal at least thirty (30) days prior to entering
into any agreement or other arrangement (the "CC Agreement") pursuant
to which such transaction would be effected. CDPQ shall have the
right and option for a period of fifteen (15) days after receipt of
such notice to require VPC to purchase all or any part of CDPQ's
Corporation Shares, contemporaneously with and as a condition to the
consummation of the transactions contemplated by the CC Agreement, at
a price to be determined in the same manner as the Put Price in
Section 9.4; provided, that each investment banker designated to
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determine a Market Value and a Company Value shall give appropriate
consideration to the terms of the proposed transaction and any
previous transactions pursuant to which Videotron directly or
indirectly disposed of Corporation Shares in determining such Market
Value and such Company Value. For purposes of this Section 10.1, the
Convertible Notes shall be deemed at all times to be "in the money".
11. LEGENDS
Each certificate or note representing directly or indirectly Stockholder
Shares now or hereafter registered in the name of any Stockholder shall be
endorsed with a legend substantially as follows:
"THE SECURITY REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ARE
SUBJECT TO THE RESTRICTIONS CONTAINED IN A STOCKHOLDERS AGREEMENT
DATED AS OF AUGUST 15, 1997, AMONG THE CORPORATION, VPC CORPORATION
AND CAPITAL COMMUNICATIONS CDPQ INC., A COPY OF WHICH IS ON FILE IN
THE OFFICES OF THE CORPORATION AND WILL BE FURNISHED TO THE HOLDER
OF THIS INSTRUMENT UPON WRITTEN REQUEST AND WITHOUT CHARGE.
OWNERSHIP, VOTING AND TRANSFER OF SUCH SECURITY ARE SUBJECT TO THE
TERMS OF SUCH AGREEMENT. THE HOLDER OF THIS INSTRUMENT, BY
ACCEPTANCE HEREOF, AGREES TO BE BOUND BY ALL THE TERMS OF SUCH
AGREEMENT, AS THE SAME IS IN EFFECT FROM TIME TO TIME. NO VOTE,
SALE, ASSIGNMENT, ENCUMBRANCE, PLEDGE, TRANSFER OR OTHER
HYPOTHECATION OR DISPOSITION OF SUCH SECURITY MAY BE MADE EXCEPT IN
COMPLIANCE WITH SUCH AGREEMENT."
The Stockholders agree to present all certificates and notes evidencing directly
or indirectly Stockholder Shares as of the date hereof so that the Corporation
may imprint the foregoing legend on such certificates or notes. The legend set
forth above shall be removed from the certificates or notes, as the case may be,
evidencing any securities which cease directly or indirectly to be Stockholder
Shares.
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12. TERM AND TERMINATION
12.1 Term. This Agreement is effective as of the date hereof and shall
continue in force until either VPC and its permitted transferees who
have executed a joinder to this Agreement and their respective
permitted assigns no longer own any VPC Shares or CDPQ and its
permitted transferees who have executed a joinder to this Agreement
and their respective permitted assigns no longer own any CDPQ Shares.
12.2 Effect of Termination. Termination of this Agreement pursuant to
Section 12.1 or otherwise shall not affect or impair any rights or
obligations that arise prior to or at the time of the termination of
this Agreement, or which may arise by reason of an event causing the
termination of this Agreement, and all such rights and obligations,
including the rights and obligations under any provision of this
Agreement, which by their terms are to survive termination, shall also
survive. The rights and remedies provided in this Agreement and in
such other agreements shall be cumulative and not exclusive and shall
be in addition to any other remedies which the Stockholders may have
under this Agreement or otherwise.
13. MISCELLANEOUS
13.1 Entire Agreement. This Agreement supersedes all prior oral and written
agreements between the parties with respect to the subject matter
hereof, and this Agreement and the other documents and agreements
between the parties which are referred to herein or executed
contemporaneously herewith set forth the entire agreement among the
parties with respect to the transactions contemplated hereby.
13.2 Amendment. This Agreement may not be modified, amended or terminated,
nor may any provision hereof be waived, except by an instrument in
writing executed by or on behalf of each party or, in the case of any
such waiver, by the party or parties entitled to the benefit of the
provision to be waived.
13.3 Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective permitted assigns.
Neither this Agreement nor any rights or obligations hereunder shall
be assignable or otherwise transferrable by any party, voluntarily or
by operation of law, without the prior written consent of the other
parties hereto, and any assignment or transfer without such consent
shall be null and void.
13.4 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original and all
of which taken together shall constitute a single agreement.
13.5 Further Assurances. Each party shall, at any time and from time to
time after the date hereof, do, execute, acknowledge and deliver, or
cause to be done, executed, acknowledged and delivered, all such
further acts, deeds, assignments, transfers, conveyances, powers of
attorney, receipts, acknowledgments, acceptances and
-22-
assurances as may be reasonably required to procure for any party,
its successors and assigns, its rights as set forth herein.
13.6 Severability. If any provision of this Agreement is held to be
invalid, unlawful or incapable of being enforced by reason of rule
of law or public policy, all other conditions and provisions of this
Agreement which can be given effect without such invalid, unlawful or
unenforceable provisions shall, nevertheless, remain in full force
and effect.
13.7 Notices. All notices, consents, instructions and other communications
required or permitted under this Stockholders Agreement
(collectively, "Notice") shall be effective only if given in writing
and shall be considered to have been duly given and received when (i)
delivered by hand, (ii) sent by telecopier (with receipt confirmed),
provided that a copy is mailed (on the same date) by certified or
registered mail, return receipt requested, postage prepaid, or (iii)
delivered to the addressee, if sent by Express Mail, Federal Express
or other reputable express delivery service (receipt requested), or
by first class certified or registered mail, return receipt
requested, postage prepaid. Notice shall be sent in each case to the
appropriate addresses or telecopier numbers set forth below (or to
such other addresses and telecopier numbers as a party may from time
to time designate as to itself by notice similarly given to the other
parties in accordance herewith, which shall not be deemed given until
received by the addressee). Notice shall be given:
13.7.1 If to VPC:
VPC CORPORATION
46th Floor
1114 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx
00000-0000
Attention: Xxxxxxx X. Xxxxxx Esq.
Telecopier: (000) 000-0000
copy to:
Le Groupe Videotron Ltee
000 Xxxxx Xxxxxx Xxxx
Xxxxxxxx, Xxxxxx X0X0X0
Attention: Senior Vice President--Legal Affairs
and Secretary
Telecopier: (000) 000-0000
13.7.2 If to the Corporation:
OPTEL, INC.
0000 X. Xxxxxxxxxxx Xxxx
Xxxxxx, Xxxxx 00000
Attention: General Counsel
Telecopier: (000) 000-0000
-23-
13.7.3 If to CDPQ:
CAPITAL COMMUNICATIONS CDPQ INC.
0000 XxXxxx Xxxxxxx Xxxxxx
0xx Xxxxx
Xxxxxxxx, Xxxxxx
X0X 0X0
Attention: President, Xxxx XxXxxxxx and Xxxxxx Xxxx, Esq.
Telecopier: (000) 000-0000 and (000)000-0000
copies to:
XXXXXXXX & XXXXX
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxx X. Xxxxxxx, Esq.
Telecopier: (000) 000-0000
and
---
XXXXXXXXX XXXXXX
Stock Exchange Tower
Suite 3400
P.O. Box 242
800 Place Victoria
Xxxxxxxx, Xxxxxx
X0X 0X0
Attention: Xxxxxxx Xxxxxxxxx, Esq.
Telecopier: (000) 000-0000
13.7.4 If to Videotron:
Le Groupe Videotron Ltee
000 Xxxxx Xxxxxx Xxxx
Xxxxxxxx, Xxxxxx X0X0X0
Attention: Senior Vice President--Legal Affairs and
Secretary
Telecopier: (000) 000-0000
13.8 Governing Law; Consent to Exclusive Jurisdiction
THIS STOCKHOLDERS AGREEMENT IS BEING DELIVERED AND IS INTENDED TO BE
PERFORMED IN THE STATE OF NEW YORK, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE
GOVERNED BY, THE LAW OF SUCH STATE APPLICABLE TO CONTRACTS ENTERED
INTO AND TO BE
-24-
PERFORMED WHOLLY WITHIN SUCH STATE. ANY LEGAL ACTION OR PROCEEDING
WITH RESPECT TO ANY MATTER ARISING UNDER OR IN CONNECTION WITH THIS
STOCKHOLDERS AGREEMENT OR THE SUBJECT MATTER HEREOF THAT IS PERMITTED
UNDER SECTION 13.9 OR 13.10 MAY BE BROUGHT EXCLUSIVELY IN THE COURTS
OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE
SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS
STOCKHOLDERS AGREEMENT, VPC, THE CORPORATION AND CDPQ HEREBY ACCEPT
FOR THEMSELVES AND IN RESPECT OF THEIR PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS.
EACH OF VPC, THE CORPORATION, AND CDPQ HEREBY WAIVES, AND AGREES NOT
TO ASSERT, AS A DEFENSE IN ANY ACTION, SUIT OR PROCEEDING PROVIDED
FOR IN THIS SECTION 13.8 THAT IT IS NOT SUBJECT THERETO OR THAT SUCH
ACTION, SUIT OR PROCEEDING MAY NOT BE BROUGHT OR IS NOT MAINTAINABLE
IN SAID COURTS OR THAT THIS STOCKHOLDERS AGREEMENT MAY NOT BE
ENFORCED IN OR BY SAID COURTS OR THAT ITS PROPERTY IS EXEMPT OR
IMMUNE FROM EXECUTION, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT
IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR
PROCEEDING IS IMPROPER OR (PROVIDED THAT PROCESS SHALL BE SERVED IN
ANY MANNER REFERRED TO IN THE FOLLOWING SENTENCE) THAT SERVICE OR
PROCESS UPON SUCH PARTY IS INEFFECTIVE. EACH OF CDPQ, THE CORPORATION
AND VPC AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION, SUIT OR
PROCEEDING MAY BE MADE UPON IT IN ANY MANNER PERMITTED BY THE LAWS OF
THE STATE OF NEW YORK OR THE FEDERAL LAWS OF THE UNITED STATES OR AS
FOLLOWS: (I) BY PERSONAL SERVICE OR BY CERTIFIED OR REGISTERED MAIL
TO THE PARTY'S DESIGNATED AGENT FOR SUCH SERVICE IN SUCH STATE, OR
(II) BY CERTIFIED OR REGISTERED MAIL TO THE PARTY FOR WHICH INTENDED
AT ITS ADDRESS SET FORTH HEREIN. SERVICE OF PROCESS IN ANY MANNER
REFERRED TO IN THE PRECEDING SENTENCE SHALL BE DEEMED, IN EVERY
RESPECT, EFFECTIVE SERVICE OF PROCESS UPON SUCH PARTY.
13.9 Binding Arbitration
13.9.1 Subject to the rights granted in Section 13.9.2 and 13.10,
any controversy, claim or dispute arising out of or relating
to this Agreement or the breach, termination, enforceability
or validity thereof, including without limitation the
determination of the scope or applicability of this Agreement
to arbitrate, shall be determined exclusively by binding
arbitration in New York City before three arbitrators. The
arbitration shall be governed by the American Arbitration
Association ("AAA") under its Commercial Arbitration Rules
and its Supplementary Procedures for large, Complex Disputes,
provided that Persons eligible to be selected as arbitrators
shall be limited to attorneys-at-law who (a) are on the AAA's
Large, Complex Case Panel or a
-25-
Center for Public Resources ("CPR") Panel of Distinguished
Neutrals, or who have professional credentials similar to the
attorneys listed on such AAA and CPR Panels, and (b) who
practiced law for at least 15 years as an attorney in New
York specializing in either general commercial litigation or
general corporate and commercial matters.
13.9.2 No provision of, nor the exercise of any rights under,
Section 13.9.1 shall limit the right of any party to request
and obtain from a court having jurisdiction before, during or
after the pendency of any arbitration, provisional or
ancillary remedies and relief including, but not limited to,
injunctive or mandatory relief or the appointment of a
receiver. The institution and maintenance of an action or
judicial proceeding for, or pursuit of, provisional or
ancillary remedies shall not constitute a waiver of the right
of any party hereto, even if such party is the plaintiff, to
submit the dispute to arbitration if such party would
otherwise have such right.
13.9.3 In any such arbitration proceeding, the arbitrator shall not
have the power or authority to award punitive damages to any
party. Judgment upon the award rendered may be entered in any
court having jurisdiction (which shall not be restricted by
Section 13.8).
13.9.4 Each of the parties (other than the Corporation in any
instance where it is joined in the proceeding as a nominal
party) shall, subject to the award of the arbitrators, pay an
equal share of the arbitrators' fees. The arbitrators shall
have the power to award recovery of all costs and fees
(including attorneys' fees, administrative fees, arbitrators'
fees, and court costs) to the prevailing party.
13.10 Equitable Relief. Since the Corporation or a Stockholder may sustain
irreparable harm in the event there is a breach of the covenants
provided in this Agreement, in addition to any other rights or
remedies which the Corporation or any Stockholder may have under this
Agreement or otherwise, the Corporation or a Stockholder shall be
entitled to obtain specific performance or injunctive relief against
the breaching or defaulting party hereto in any court of competent
jurisdiction for the purposes of restraining such breaching or
defaulting party from any actual or threatened breach of such
covenants or to compel such breaching or defaulting party to perform
such covenants, without the necessity of proving irreparable injury
or the inadequacy of remedies at law or posting bond or other
security.
13.11 Consequential Damages. In no event shall any party be liable to the
other for any consequential, punitive or speculative damages
(including but not limited to damages for lost profits) arising from
performance or breach of this Agreement.
13.12 Currency. Unless expressly set forth to the contrary, all references
to currency contained in this Agreement are to United States dollars.
-26-
13.13 Conflicting Agreements. Each Stockholder represents that such
Stockholder has not granted and is not a party to any proxy, voting
trust or other agreement which is inconsistent with or conflicts with
the provisions of this Agreement, and no holder of Stockholder Shares
shall grant any proxy or become party to any voting trust or other
agreement which is inconsistent with or conflicts with the provisions
of this Agreement.
13.14 Confidentiality. Each Stockholder acknowledges that, in connection
with its relationship with the Corporation, the officers, directors,
agents and/or employees of such Stockholder and Caisse will have
access to trade secrets and other confidential information (including
marketing data and strategic planning information) pertaining to the
business of the Corporation and its Subsidiaries. For purposes of
this Section 13.14, confidential information shall not include any
information which is now known by or readily available to the general
public or which hereafter becomes known by or readily available to
the general public other than as a result of any breach of this
Section 13.14. Accordingly, each Stockholder agrees that so long as
it shall continue to own any Corporation Shares and for a period of
12 months after it ceases to own any Corporation Shares it will
neither disclose nor use any of such trade secrets or confidential
information, and will use its best efforts to prevent any of its
officers, directors, agents or employees from doing so, except in
each case for the benefit of the Corporation and its Subsidiaries;
provided, however, that nothing herein shall be construed to prevent
-------- -------
any Stockholder or Caisse from disclosing information pursuant to
court or governmental order or subpoena or in any action or
proceeding between parties hereto or from disclosing any information
as required by applicable law or regulation (including all applicable
disclosure requirements). Notwithstanding the foregoing: (a) CDPQ and
Caisse and the officers, directors, agents and employees of each of
them, may engage or invest in, own and/or manage, independently or
with others, any business activity of any type or description,
including without limitation those that might be in direct or
indirect competition with the Corporation or any of its Subsidiaries;
(b) neither the Corporation nor any of its Subsidiaries shall have
any right in or to any of such other ventures or activities or to the
income or proceeds derived therefrom; (c) neither CDPQ nor Caisse nor
the officers, directors, agents or employees of any of them shall be
obligated to present any investment opportunity or prospective
economic advantage to the Corporation or any of its Subsidiaries,
even if the opportunity is of the character that, if presented to the
Corporation or any of its Subsidiaries, could be taken advantage of
by the Corporation or any of its Subsidiaries; and (d) CDPQ and
Caisse and the officers, directors, agents and employees of each of
them shall have the right to hold any investment opportunity or
prospective economic advantage for their own account or to recommend
such opportunity to Persons other than the Corporation or any of its
Subsidiaries; provided that this sentence shall not in any way
--------
relieve any Designee designated by CDPQ of his or her fiduciary
responsibilities in his or her capacity as a member of the Board or
any Sub Board (including responsibilities with respect to the
doctrine of corporate opportunity).
-27-
IN WITNESS WHEREOF the parties hereto have executed this Stockholders
Agreement as of the date first written above.
OPTEL, INC. CAPITAL COMMUNICATIONS
CDPQ INC.
By: /s/ XXXXX XXXXXX By: /s/ XXXXXX XXXXXXX
---------------------------------- ------------------------------------
Name: Xxxxx Xxxxxx Name:
Title: President and CEO Title:
By: /s/ XXXXXXX X. KETTERSTEIN By: /s/ XXXX X. XxXXXXXX
---------------------------------- ------------------------------------
Name: Xxxxxxx X. Ketterstein Name:
Title: VP and General Counsel Title:
VPC CORPORATION
By: /s/ XXXXXXX RENAULT
----------------------------------
Name: Xxxxxxx Renault
Title: Vice President Legal Affairs
and Secretary
Le Groupe Videotron Ltee hereby
agrees to be bound by Sections 9 and
10 and hereby agrees that it is
jointly and severally liable with VPC
Corporation for all of VPC
Corporation's obligations under
Sections 9 and 10.
LE GROUPE VIDEOTRON LTEE
By: /s/ XXXXXX XXXXXXX
----------------------------------
Name: Xxxxxx Xxxxxxx
Title: President and
Chief Operating Officer
By: /s/ XXXXXXX RENAULT
----------------------------------
Name: Xxxxxxx Renault
Title: Senior Vice President Legal Affairs
and Secretary
EXHIBIT A
---------
(a) Any modification, amendment or deletion to the certificate of incorporation
or bylaws (or any similar organizational documents) of the Corporation or
any Subsidiary thereof.
(b) Any subdivision, consolidation, conversion, reclassification or
modification of any kind to the authorized or outstanding capital stock of
the Corporation or any Subsidiary thereof.
(c) Except for the contemplated acquisition of Phonoscope and other
acquisitions which in the aggregate do not exceed US$ 25,000,000, the
acquisition by the Corporation or any Subsidiary thereof of shares,
partnership interests, indebtedness or other securities of any Person which
is not the Corporation or a Subsidiary of the Corporation or of all or
substantially all of the assets or any business thereof for consideration
in excess of US$ 10,000,000 in any single such transaction or in excess of
US$ 40,000,000 in the aggregate in all such transactions in the same fiscal
year.
(d) The merger, amalgamation or other business combination (if such combination
results in an acquisition or transfer of assets or causes important changes
in the affairs of the Corporation or any Subsidiary thereof) between the
Corporation or any Subsidiary thereof and any other Person which is not the
Corporation or a Subsidiary of the Corporation if the consideration in such
transaction is in excess of US$ 10,000,000 or if the consideration in all
such transactions in the same fiscal year is in excess of US$ 40,000,000 in
the aggregate.
(e) The disposal of or transfer of any shares the Corporation may directly or
indirectly hold in the capital stock of any other company, or all or
substantially all the assets of the Corporation or of any Subsidiary
thereof or of a business thereof if for a consideration in excess of US$
10,000,000 in any transaction or in excess of US$ 40,000,000 in the
aggregate in all such transactions in the same fiscal year.
(f) From the date hereof until the date all obligations for borrowed money
under the Indenture have been repaid by the Corporation and its
Subsidiaries (the "Repayment Date"), the incurrence by the Corporation or a
Restricted Subsidiary (as defined in the Indenture) of any indebtedness
which is not permitted to be incurred under the Indenture.
(g) After the Repayment Date, the granting by the Corporation or any Subsidiary
thereof of loans (excluding loans made to their employees as authorized
under the Indenture) or guarantees, the guaranteeing of any debt or
obligation of a third party, or any borrowing except for Permitted
Indebtedness (as defined in the Indenture) if; in either case, after giving
pro forma effect to such occurrence (including the application of the net
proceeds therefrom), the ratio of (x) Total Consolidated Indebtedness (as
of the date of occurrence) to (y) Annualized Pro Forma Consolidated
Operating Cash Flow (based upon the two most recent fiscal quarters for
which consolidated financial statements of the Corporation are available
preceding the date of such occurrence) would be more than (i) 8.0 to 1.0 if
such occurrence is prior to August 31, 2000 or (ii) 7.0 to 1.0 if such
occurrence is on or after August 3l, 2000 and prior to August 31, 2002 or
(iii) 6.0 to 1.0 if such occurrence is on or after August 31, 2002.
EXHIBITS B-1 and B-2 to Stockholders Agreement dated as of August 15, 1997
The following services are provided by VPC and its Affiliates to the Corporation
and/or its Subsidiaries as of the date of the Agreement:
1. Strategic Planning Services: Personal services rendered by senior corporate
management of Videotron in providing consultation and guidance to the
Corporation's management regarding long-term corporate goals and
strategies. Compensation for these services is calculated based on an
assumed 72 person days per year, at cost (without allowance for profit),
and is estimated at US$80,000 per year.
2. Board Participation: Reimbursement of expenses of VPC designees to the
Board for attendance at Board and committee meetings. This covers most
travel and lodging costs for strategic planning services.
3. Treasury Functions: Videotron's director and vice president of treasury
communicate with the Corporation on an almost daily basis regarding
financing matters. Videotron's chief financial officer is involved in this
work for coordination and direction. Compensation for these services is
based on an assumed 125 person days per year, at cost (without allowance
for profit), and is estimated at US$85,000 per year.
4. Internal Audit: conducted three times in each year by Videotron's
accounting staff. The estimated cost is US$92,000 per year (without
allowance for profit), including an estimated US$30,000 for travel and
lodging expense.
5. Additional Services: as and when requested by the Corporation, charged to
recover costs for personnel engaged and materials used (without allowance
for profit), calculated on the basis of a daily rate, up to an aggregate
amount of US$50,000 per year.
EXHIBIT C to Stockholders Agreement dated as of August 15, 1997
Compensation Formula for Use by VPC for Consolidated Federal Income Tax
Reporting Purposes of Tax Losses Generated by the Corporation
-------------------------------------------------------------
Compensation is required to reflect the economic difference to the Corporation
between the Base Case and the Consolidated Case, where:
(i) the Base Case is the assumed result of continued independent tax
reporting by VPC and the Corporation, the conversion to Common Stock of all
outstanding Convertible Notes (and accrued interest) on August 31, 1998,
and the presumed use of tax losses by the Corporation commencing in 2001
based on the Corporation's former business plan (as reflected in the
attached Schedule C-1), and
(ii) the Consolidated Case results from VPC's actual conversion of a
portion of the Convertible Notes on a date prior to March 31, 1998, with
the effects that (x) the Corporation's interest deductions are reduced from
the date of conversion until August 31, 1998 and (y) VPC includes the
Corporation in VPC's consolidated tax return for one or more fiscal years
and actually uses a portion or all of the Corporation's tax losses as of
the last day of one or more of such years to reduce VPC's U.S. income
taxes. In this case, the Corporation benefits from a current reduction in
interest expense but is deprived of the value of the future tax use of its
losses and a portion of the interest expense deduction for interest on the
Convertible Notes as included in the Base Case.
The amount of compensation due to the Corporation for each fiscal year in which
tax losses of the Corporation are used by VPC and its consolidated subsidiaries
is the excess, if any, of (a) the present value at the end of such fiscal year
of the Corporation's presumed use of the Adjusted Losses to reduce its federal
income tax liability in a future fiscal year at a tax rate of 35%, using an
annual discount factor of 15% with respect to presumed future uses (it being
agreed that the timing of the presumed future use of Adjusted Losses by the
Corporation will be determined by reference to the Base Case in all instances,
assuming that the Adjusted Losses will be used by the Corporation after all
carryforwards are exhausted), over (b) the Corporation's interest savings, if
----
any, for that fiscal year (as compared to the Base Case) due to the early
conversion of the Convertible Notes (it being acknowledged that the Corporation
would not have any such interest savings for any fiscal year ending after August
31, 1998). For this purpose, the term "Adjusted Losses" means, with respect to
---------------
each fiscal year, (x) the aggregate amount, if any, of the Corporation's losses
for such fiscal year and any carryforward losses from prior years, but only to
the extent such losses and carryforward losses are actually used by VPC to
reduce its consolidated federal income tax liability attributable to VPC and its
consolidated subsidiaries (excluding the Corporation) for that fiscal year,
plus, (y) with respect to fiscal years ending on or before August 31, 1998, if
----
any such losses or carryforward losses are so used in any such fiscal year, any
additional interest expense that would have been accrued by the Corporation in
that fiscal year if there had been no early conversion of the
Convertible Notes (that is, if the Convertible Notes had been converted on
August 31, 1998 rather than on the date of the actual early conversion).
All compensation payments owed by VPC to the Corporation in respect of any
fiscal year will be paid within 30 days after the filing of VPC's consolidated
federal income tax return for that fiscal year, subject to increase or decrease
based upon any subsequent adjustment of VPC's consolidated income tax return. In
no event will the Corporation be required to pay compensation to VPC pursuant to
this arrangement, but the Corporation will be obligated to repay promptly to VPC
without interest any excess amount received by the Corporation as determined
following any such adjustment and VPC will be obligated to pay promptly to the
Corporation without interest any additional compensation owing to the
Corporation as determined following any such adjustment. The calculation of
compensation payable by VPC to the Corporation pursuant to this arrangement is
demonstrated on the attached Schedule C-1, which would be modified in an actual
case to reflect the actual date of conversion and the actual utilization by VPC
of Adjusted Losses.
VPC 6/1/97
Estimated Cost of Use of OpTel Tax Losses
In Millions (U.S.$)
OpTel Stand Alone Tax Status
----------------------------
Aug-97 Aug-98 Aug-99 Aug-00 Aug-01 Aug-02 Aug-03 Aug-04 Aug-05 Aug-06 Total
(5)
Net Income Before Tax (6) (41.1) (56.5) (30.0) (6.0) 28.4 68.3 119.8 184.7 237.7 312.7 820.0
First Year Interest Charge (1.1) (1.8)
Other Restriction of VPC Interest 0.0
(already taken into account above) 0.0
---------------------------------------------------------------------------------------------
Net Income (loss) B/4 NOL (4) (41.1) (57.3) (30.0) (6.0) 28.4 68.3 119.8 184.7 237.7 312.7 818.2
NOL Carryforward (8) (28.0) (28.0) (89.1) (126.4) (156.4) (162.4) (134.0) (64.7) 0.0 0.0 0.0
---------------------------------------------------------------------------------------------------
Net Income (Loss) (28.0) (69.1) (126.4) (158.4) (162.4) (134.0) (64.7) (85.1) 184.7 237.7 312.7
Tax Rate (3), (7) 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% 35%
S ---------------------------------------------------------------------------------------------
C Tax 0.0 0.0 0.0 0.0 0.0 0.0 18.3 64.6 83.2 109.4 270.8
H
E NPV of Tax at 8/98 104.8
D Discount Rate 15%
U
L OpTel and VPC Consolidated
E --------------------------
OpTel Taxable Income (per above) (5) (57.0) (30.0) (8.0) 28.4 89.3 119.0 184.7 237.7 312.7 868.0
C First Year Interest Charge (1.1) (1.8)
1 NOL Carryforward from 8/97 (5) (59.1) (109.0) (139.0) (145.8) (117.5) 46.2 0.0 0.0 0.0
VPC Income (2) (5) 14.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 14.7
---------------------------------------------------------------------------------------------
Consolidated Taxable Income 0.0 (109.9) (139.9) (145.9) (117.5) (48.2) 71.8 154.7 237.7 312.7 245.3
Tax Rate (3), (7) 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% 35%
---------------------------------------------------------------------------------------------
Tax 0.0 0.0 0.0 0.0 0.0 0.0 25.1 64.6 83.2 109.4 282.0
NPV of Tax at 8/98 104.0
Discount Rate 15%
Difference
----------
NPV of Incremental Tax (1) 2.9 Unaccounted Tax Cost 5.8
=========
Footnotes and Assumptions:
-------------------------
1 Assumes that OpTel would otherwise be able to use its tax losses, but
only at a future time, so the economic cost in OpTel is the NPV of the
additional taxes it will bear in the future.
2 Assumes an VPC expense and only income is note from Optel ($110 million
principal less conversion of 12 million to such time 15% interest
rate). On 9/1/98 convert remaining notes.
3 Considers only US Federal Income taxes; state taxes ignored.
4 Assumes no material book-tax difference in OpTel's Income, or that any
material depreciation differences will reverse by the time the NOLs are
estimated.
5 Model does not take into account VPC's separate 8/97 Income, since the
tax sharing of that amount has already been taken into account in the
prior shareholder settlement.
6 Per projections provided by Xxxxxx Xxxxxxx on 4/23/97.
7 This model ignores the affect of alternative minimum tax, which is
believed to be immaterial.
8 The August, 1998 tax returns are not yet finished, thus the NOL
carryforward amounts are estimates.
