EXHIBIT 10.01
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of June 8, 2001,
by and among At Home Corporation, a Delaware corporation, with headquarters
located at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Company"),
and the investors listed on the Schedule of Buyers attached hereto
(individually, a "Buyer" and collectively, the "Buyers").
WHEREAS:
A. The Company and the Buyers are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by Rule 506
of Regulation D ("Regulation D") as promulgated by the United States Securities
and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "1933 Act").
B. The Company has authorized convertible notes of the Company in the form
attached as Exhibit A (together with any convertible notes issued in replacement
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thereof in accordance with the terms thereof (the "Convertible Notes"), which
shall be convertible into shares of the Company's Series A common stock, par
value $0.01 per share (the "Common Stock") (as converted, the "Conversion
Shares"), in accordance with the terms of the Convertible Notes, which
Convertible Notes shall not bear interest except upon the failure of the Company
to comply with certain obligations thereunder as specified therein.
C. The Buyers wish to purchase, upon the terms and conditions stated in
this Agreement, notes in an aggregate principal amount of up to $100,000,000 in
the respective amounts set forth opposite each Buyer's name on the Schedule of
Buyers (the "Notes").
D. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
substantially in the form attached as Exhibit B (the "Registration Rights
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Agreement") pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act, the rules and regulations promulgated
thereunder, and applicable state securities laws.
E. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Security Agreement
substantially in the form attached as Exhibit C (the "Security Agreement")
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pursuant to which the Company has agreed to provide the Buyers with a security
interest in the assets of Company.
NOW THEREFORE, the Company and the Buyers hereby agree as follows:
1. PURCHASE AND SALE OF NOTES.
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a. Purchase of Notes. Subject to the satisfaction (or waiver) of the
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conditions set forth in Sections 6 and 7 below, the Company shall issue and sell
to each Buyer
and each Buyer severally agrees to purchase from the Company the Notes in the
principal amount set forth opposite such Buyer's name on the Schedule of Buyers
(the "Closing"). The purchase price (the "Purchase Price") of the Notes at the
Closing shall be equal to $1.00 for each $1.00 of principal amount of the Notes
purchased (not to exceed an aggregate principal amount of $100,000,000).
"Business Days" means any day other than Saturday, Sunday or other day on which
commercial banks in the city of New York are authorized or required by law to
remain closed.
b. The Closing Date. The date and time of the Closing (the "Closing
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Date") shall be 10:00 a.m. Central Time, on the date of this Agreement, subject
to the satisfaction (or waiver) of the conditions to the Closing set forth in
Sections 6 and 7 (or such later date as is mutually agreed to by the Company and
the Buyers). The Closing shall occur on the Closing Date at the offices of
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇.
c. Form of Payment. On the Closing Date, (A) each Buyer shall pay
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the Purchase Price to the Company for the Notes to be issued and sold to such
Buyer by wire transfer of immediately available funds in accordance with the
Company's written wire instructions, and (B) the Company shall deliver to each
Buyer, Notes (in the principal amounts as such Buyer shall request) (the "Note
Certificates") representing such principal amount of the Notes which such Buyer
is then purchasing hereunder, duly executed on behalf of the Company and
registered in the name of such Buyer or its designee.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
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Each Buyer represents and warrants to the Company with respect to only
itself that, as of the date hereof and at the time of the Closing:
a. Investment Purpose. Such Buyer (i) is acquiring the Notes and
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(ii) upon conversion of the Notes, will acquire the Conversion Shares then
issuable (the Notes and the Conversion Shares collectively are referred to
herein as the "Securities"), for its own account for investment only and not
with a view towards, or for resale in connection with, the public sale or
distribution thereof, except pursuant to sales (i) which are registered under
the 1933 Act or (ii) which are exempted under the 1933 Act and which do not
impair or negate the ability of the Company to rely on the exemption from
registration afforded by Rule 506 of Regulation D under the 1933 Act; provided,
however, that by making the representations herein, such Buyer does not agree to
hold any of the Securities for any minimum or other specific term and reserves
the right to dispose of the Securities at any time in accordance with or
pursuant to a registration statement or an exemption under the 1933 Act.
b. Accredited Investor Status. Such Buyer is an "accredited
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investor" as that term is defined in Rule 501(a)(3) of Regulation D under the
1933 Act, and was not formed for the specific purpose of acquiring the
Securities.
c. Reliance on Exemptions. Such Buyer understands that the
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Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of the United States federal and state
securities laws and that the Company is relying in part upon
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the truth and accuracy of, and such Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
such Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of such Buyer to acquire the Securities.
d. Information. Such Buyer and its advisors, if any, have had
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access to the SEC Documents (as defined in Section 3(f) below) and to all other
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Securities which have been
requested by such Buyer. Such Buyer and its advisors, if any, have been afforded
the opportunity to ask questions of the Company. Neither such inquiries nor any
other due diligence investigations conducted by such Buyer or its advisors, if
any, or its representatives shall modify, amend or affect such Buyer's right to
rely on the Company's representations and warranties contained in Sections 3 and
9(l) below. Such Buyer understands that its investment in the Securities
involves a high degree of risk. Such Buyer has sought such accounting, legal and
tax advice as it has considered necessary to make an informed investment
decision with respect to its acquisition of the Securities.
e. No Governmental Review. Such Buyer understands that no United
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States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
f. Transfer or Resale. While such Buyer has not agreed to hold the
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Securities for any minimum or other specific term, such Buyer understands that
except as provided in the Registration Rights Agreement: (i) the Securities have
not been and are not being registered under the 1933 Act or any state securities
laws, and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) such Buyer shall have delivered to the
Company an opinion of counsel, reasonably acceptable to the Company, to the
effect that such Securities to be sold, assigned or transferred may be sold,
assigned or transferred pursuant to an exemption from such registration, or (C)
such Buyer provides the Company with reasonable assurance that such Securities
can be sold, assigned or transferred pursuant to Rule 144 promulgated under the
1933 Act (or a successor rule thereto) ("Rule 144") or can be sold, assigned or
transferred pursuant to Rule 144(k) under the 1933 Act; (ii) any sale of the
Securities made in reliance on Rule 144 may be made only in accordance with the
terms of Rule 144 and further, if Rule 144 is not applicable, any resale of the
Securities under circumstances in which the seller (or the person through whom
the sale is made) may be deemed to be an underwriter (as that term is defined in
the ▇▇▇▇ ▇▇▇) may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (iii) neither the
Company nor any other person is under any obligation to register the Securities
under the 1933 Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder. Notwithstanding the foregoing but
subject to Section 4(j), the Securities may be pledged in connection with a bona
fide margin account or other loan or other financing transaction secured by the
Securities.
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g. Legends. Such Buyer understands that the certificates or other
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instruments representing the Notes and, until such time as the sale of the
Conversion Shares have been registered under the 1933 Act as contemplated by the
Registration Rights Agreement, the stock certificates representing the
Conversion Shares, except as set forth below, shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
QUALIFICATION UNDER ANY APPLICABLE STATE SECURITIES LAWS OR
(B) AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR (II) UNLESS SOLD
PURSUANT TO RULE 144 UNDER SAID ACT. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH
A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR OTHER FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped, if, unless otherwise required by state securities laws, (i) such
Securities are resold pursuant to an effective registration statement under the
1933 Act in accordance with applicable prospectus delivery requirements under
the 1933 Act, (ii) such Securities are registered for resale under the 1933 Act
and such Buyer provides the Company with reasonable assurances that such
Securities will be resold pursuant to an effective registration statement under
the 1933 Act and in accordance with applicable prospectus delivery requirements
under the 1933 Act, (iii) in connection with a sale transaction, such holder
provides the Company with an opinion of counsel, reasonably satisfactory to the
Company, to the effect that a public sale, assignment or transfer of the
Securities may be made without registration under the 1933 Act, or (iv) such
holder provides the Company with reasonable assurances (including, if requested
by the Company, delivering such reasonable assurances to the Company's counsel
in connection with such counsel rendering an opinion on the validity of a sale
by such Buyer pursuant to Rule 144) that the Securities can be sold pursuant to
Rule 144 without any restriction as to the number of securities offered as of a
particular date.
h. Authorization; Enforcement; Validity. This Agreement and the
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Registration Rights Agreement have been duly and validly authorized, executed
and delivered on behalf of such Buyer and are valid and binding agreements of
such Buyer enforceable against such Buyer in accordance with their terms,
subject as to enforceability to general principles of equity and to applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation and other
similar laws relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies.
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i. Residency. Such Buyer is a resident of that country specified
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in its address on the Schedule of Buyers.
j. No Related Parties. Such Buyer is not an affiliate (as defined
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below) of the Company. Based on a review of the current list of investors in
such Buyer, such Buyer does not have any actual knowledge of any affiliate (as
defined below) of the Company being an investor in such Buyer or an owner of all
or a part of such Buyer. Solely for purposes of this Section 2(j), "affiliate"
shall have the meaning ascribed thereto under Rule 144(a)(i) of the 1933 Act and
shall include, without limitation, (i) AT&T Corp., (ii) any affiliate of AT&T
Corp. whose name makes it obvious that it is an affiliate of AT&T Corp. and
(iii) directors and executive officers of the Company.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
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The Company represents and warrants to each of the Buyers that as of
the date hereof and as of the Closing:
a. Organization and Qualification. The Company and its "Material
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Subsidiaries" (which for purposes of this Agreement means any significant
subsidiary as defined in Rule 1-02(w) of Regulation S-X under the ▇▇▇▇ ▇▇▇) are
corporations duly organized and validly existing in good standing under the laws
of the jurisdiction in which they are incorporated, and have the requisite
corporate power and authorization to own their properties and to carry on their
business as now being conducted. Each of the Company and its Material
Subsidiaries is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which its ownership of property or the
nature of the business conducted by it makes such qualification necessary,
except to the extent that the failure to be so qualified or be in good standing
would not have a Material Adverse Effect. As used in this Agreement, "Material
Adverse Effect" means any material adverse effect on the business, properties,
assets, operations, results of operations or financial condition of the Company
and its Material Subsidiaries taken as a whole, or on the transactions
contemplated hereby or by the agreements and instruments to be entered into in
connection herewith, or on the authority or ability of the Company to perform
its obligations under the Transaction Documents (as defined below). A complete
list of the Company's Material Subsidiaries as of the date of this Agreement is
set forth on Schedule 3(a).
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b. Authorization; Enforcement; Validity. The Company has the
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requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Registration Rights Agreement, the
Irrevocable Transfer Agent Instructions (as defined in Section 5), the Notes,
the Security Agreement and each of the other agreements entered into by the
parties hereto in connection with the transactions contemplated by this
Agreement (collectively, the "Transaction Documents"), and to issue the
Securities in accordance with the terms hereof and thereof. The execution and
delivery of the Transaction Documents by the Company and the consummation by it
of the transactions contemplated hereby and thereby, including without
limitation the issuance of the Notes and the reservation for issuance and the
issuance of the Conversion Shares issuable upon conversion thereof, have been
duly authorized by the Company's Board of Directors and no further consent or
authorization is required by the
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Company, its Board of Directors or its stockholders (except to the extent that
stockholder approval may be required pursuant to the rules of the Nasdaq
National Market for the issuance of a number of Conversion Shares greater than
19.99% of the number of shares of Common Stock outstanding immediately prior to
the Closing Date (the "Nasdaq 19.99% Rule")). The Transaction Documents have
been duly executed and delivered by the Company. The Transaction Documents
constitute the valid and binding obligations of the Company enforceable against
the Company in accordance with their terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies.
c. Capitalization. As of the date hereof, the authorized capital
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stock of the Company consists of (i) 1,000,000,000 shares of Series A common
stock, of which as of June 1, 2001, 321,900,704 shares were issued and
outstanding and 92,582,099 shares were reserved for issuance pursuant to the
Company's stock option and purchase plans, 86,595,578 shares were reserved for
issuance pursuant to conversion of the Company's Series B common stock and
169,266,279 shares were issuable and reserved for issuance pursuant to
securities (other than the Notes, stock option and purchase plans and the
Company's Series B common stock) exercisable or exchangeable for, or convertible
into, shares of Common Stock, (ii) 110,000,000 shares of Series B common stock,
of which as of the date hereof 86,595,578 shares are issued and outstanding,
(iii) 10,673.549 shares of Series A preferred stock, of which as of the date
hereof, 5,567.098 are issued and outstanding, (iv) 1,006.29 shares of Series B
preferred stock, of which as of the date hereof, none are issued and
outstanding, (v) 1,279.065 shares of Series C preferred stock, of which as of
the date hereof, 650.727 are issued and outstanding and (vi) 9,637,041.096
shares of undesignated preferred stock, none of which is outstanding as of the
date hereof. As of the date of this Agreement, since June 1, 2001 the Company
has not issued or reserved for issuance any shares of Common Stock in excess of
100,000 shares, except pursuant to the exercise of options for which shares of
Common Stock were reserved as of June 1, 2001 and which are reflected in the
number of reserved shares set forth in clause (i) of the immediately preceding
sentence. All of such outstanding shares have been, or upon issuance will be,
validly issued and are fully paid and nonassessable. Except as disclosed in
Schedule 3(c), (A) no shares of the Company's capital stock are subject to
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preemptive rights or any other similar rights (arising under Delaware law, the
Company's Certificate of Incorporation or By-laws or any agreement or instrument
to which the Company is a party) or any liens or encumbrances granted or created
by the Company; (B) there are no outstanding securities or instruments of the
Company or any of its Material Subsidiaries which contain any redemption or
similar provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company or any of its Material Subsidiaries is or may
become bound to redeem a security of the Company or any of its Material
Subsidiaries; (C) there are no securities or instruments containing anti-
dilution or similar provisions that will be triggered by the issuance of the
Securities as described in this Agreement; and (D) the Company does not have any
stock appreciation rights or "phantom stock" plans or agreements or any similar
plan or agreement. Except as disclosed in Schedule 3(c), or in the SEC Documents
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which were filed with the SEC at least five (5) days prior to the date hereof,
(I) there are no outstanding debt securities issued by the Company; (II) there
are no outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
Material Subsidiaries, or contracts,
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commitments, understandings or arrangements by which the Company or any of its
Material Subsidiaries is or may become bound to issue additional shares of
capital stock of the Company or any of its Material Subsidiaries or options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares of
capital stock of the Company or any of its Material Subsidiaries; and (III)
there are no agreements or arrangements under which the Company or any of its
Material Subsidiaries is obligated to register the sale of any of their
securities under the 1933 Act (except the Registration Rights Agreement). The
Company has furnished to each Buyer (or has specifically identified to each such
Buyer, in writing or by email, where such document is available on the ▇▇▇▇▇
System) true and correct copies of the Company's Certificate of Incorporation,
as amended and as in effect on the date hereof (the "Certificate of
Incorporation"), and the Company's By-laws, as amended and as in effect on the
date hereof (the "By-laws"), and the terms of all securities convertible into or
exercisable or exchangeable for Common Stock (other than individual stock
options and warrants issued under an Approved Stock Plan (as defined in the
Notes)) and the material rights of the holders thereof in respect thereto.
d. Issuance of Securities. The Notes are duly authorized and, upon
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issuance in accordance with the terms hereof, shall be free from all taxes,
liens and charges with respect to the issuance thereof and entitled to the
rights set forth in the Notes. As of the Closing, such number of shares of
Common Stock as are issuable at the Conversion Rate (as defined in the Notes),
calculated using the Fixed Conversion Price (as defined in the Notes) as of the
Closing Date, (subject to adjustment pursuant to the Company's covenant set
forth in Section 4(f) below) will have been duly authorized and reserved for
issuance upon conversion of the Notes. Upon conversion in accordance with the
Notes, the Conversion Shares will be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, with the holders being entitled to all rights accorded to a
holder of Common Stock. The issuance by the Company of the Securities is exempt
from registration under the 1933 Act. That certain Loan and Security Agreement,
dated September 24, 1997, by and between the Company and Silicon Valley Bank, as
amended by that certain Loan Modification Agreement, dated October 19, 1998 by
the same parties, has been terminated by the parties thereto.
e. No Conflicts. The execution, delivery and performance of the
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Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation, the
reservation for issuance and issuance of the Conversion Shares) will not (i)
result in a violation of the Certificate of Incorporation or the By-laws; (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any material agreement,
indenture or instrument to which the Company or any of its Material Subsidiaries
is a party; (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including federal and state securities laws and regulations
and the rules and regulations of the Principal Market (as defined below))
applicable to the Company or any of its Material Subsidiaries or by which any
property or asset of the Company or any of its Material Subsidiaries is bound or
affected. The Company is not in violation of any term of its Certificate of
Incorporation or its By-laws. No Material Subsidiary is in violation of any
term of their organizational charter or by-laws, respectively, which would have,
either individually or in the aggregate, a Material Adverse Effect. Except as
disclosed in Schedule 3(e), neither the Company or any of its Material
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Subsidiaries is in violation
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of any term of or in default under any contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree or order or any statute,
rule or regulation applicable to the Company or its Material Subsidiaries,
except where such violations and defaults would not result, either individually
or in the aggregate, in a Material Adverse Effect. The business of the Company
and its Material Subsidiaries is not being conducted, and shall not be
conducted, in violation of any law, ordinance or regulation of any governmental
entity, except where such violations would not result, either individually or in
the aggregate, in a Material Adverse Effect. Except as specifically contemplated
by this Agreement and as required under the 1933 Act, and except for the Nasdaq
19.99% Rule, the Company is not required to obtain any consent, authorization or
order of, or make any filing or registration with, any court or governmental
agency or any regulatory or self-regulatory agency in order for it to execute,
deliver or perform any of its obligations under or contemplated by the
Transaction Documents in accordance with the terms hereof or thereof. Except as
disclosed in Schedule 3(e), all consents, authorizations, orders, filings and
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registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date hereof. The
Company is not in violation of the listing requirements of the Principal Market.
f. SEC Documents; Financial Statements. Since December 31, 1999,
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the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934 Act")
(all of the foregoing filed prior to the date hereof (including all exhibits
included therein and financial statements and schedules thereto and documents
incorporated by reference therein) being hereinafter referred to as the "SEC
Documents"). As of the dates thereof, the SEC Documents, as they may have been
subsequently amended or superseded by filings made by the Company with the SEC
prior to the date hereof, complied in all material respects with the
requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents. The SEC Documents, as of
the dates thereof and as they may have been subsequently amended or superseded
by filings made by the Company with the SEC prior to the date hereof, did not
contain any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company to
the Buyers which is not included in the SEC Documents, including, without
limitation, information referred to in Section 2(d), but excluding any
projections or forecasts, contains any untrue statement of a material fact or
omits to state any material fact necessary in order to make the statements
therein, in the light of the circumstance under which they are or were made, not
misleading. Neither the Company nor any of its Material Subsidiaries nor any of
their officers, directors, employees or agents have
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provided the Buyers with any material, nonpublic information other than as set
forth in the Schedules delivered as part of this Agreement which Schedules are
being filed by the Company along with the exhibits to the Form 8-K referred to
in Section 4(h). As of the date hereof, the Company meets the requirements for
use of Form S-3 for registration of the resale of Registrable Securities (as
defined in the Registration Rights Agreement). The Company is not required to
file and will not be required to file any agreement, note, lease, mortgage, deed
or other instrument entered into prior to the date hereof and to which the
Company is a party or by which the Company is bound which has not been
previously filed as an exhibit to its reports filed with the SEC under the 1934
Act.
g. Absence of Certain Changes. Except as disclosed in any SEC
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Documents which were filed with the SEC at least five (5) days prior to the date
hereof, since December 31, 2000, there has been no change or development that
has had or could reasonably be expected to have a Material Adverse Effect. The
Company has not taken any steps, and does not currently expect to take any
steps, to seek protection pursuant to any bankruptcy law nor does the Company or
any of its Material Subsidiaries have any knowledge or reason to believe that
its creditors intend to initiate involuntary bankruptcy proceedings or any
actual knowledge of any fact which would reasonably lead a creditor to do so.
Since December 31, 2000, the Company has not declared or paid any dividends,
sold any assets, individually or in the aggregate, in excess of $5 million
outside of the ordinary course of business.
h. Absence of Litigation. There is no action, suit, proceeding,
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inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company or any of its Material Subsidiaries, threatened against or affecting the
Company, the Common Stock or any of the Company's Material Subsidiaries or any
of the Company's or the Company's Material Subsidiaries' officers or directors
in their capacities as such, except where the same would not result, either
individually or in the aggregate, in a Material Adverse Effect, and except as
expressly set forth in the SEC Documents which were filed with the SEC at least
five (5) days prior to the date hereof. To the knowledge of the Company, none of
the directors or officers of the Company have been involved in securities
related litigation during the past five years which was required to be disclosed
in any SEC Documents other than as disclosed in any SEC Documents which was
filed at least five (5) days prior to the date hereof.
i. Acknowledgment Regarding Buyer's Purchase of Notes. The Company
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acknowledges and agrees that each of the Buyers is acting solely in the capacity
of an arm's length purchaser with respect to the Company in connection with the
Transaction Documents and the transactions contemplated hereby and thereby. The
Company further acknowledges that each Buyer is not acting as a financial
advisor or fiduciary of the Company (or in any similar capacity) with respect to
the Transaction Documents and the transactions contemplated hereby and thereby
and any advice given by any of the Buyers or any of their respective
representatives or agents in connection with the Transaction Documents and the
transactions contemplated hereby and thereby is merely incidental to such
Buyer's purchase of the Securities. The Company further represents to each
Buyer that the Company's decision to enter into the Transaction Documents has
been based solely on the independent evaluation by the Company and its
representatives.
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j. No Undisclosed Events, Liabilities, Developments or
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Circumstances. Except as disclosed in Schedule 3(j), other than the issuance of
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the Notes contemplated by this Agreement, no event, liability, development or
circumstance has occurred or exists, or is contemplated to occur, with respect
to the Company or its Material Subsidiaries or their respective business,
properties, prospects, operations or financial condition, that would be required
to be disclosed by the Company under its currently effective resale registration
statements on Form S-3, which has not been publicly disclosed.
k. No General Solicitation. Neither the Company, nor any of its
-----------------------
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the ▇▇▇▇ ▇▇▇) in connection with the offer or sale of the
Securities.
l. No Integrated Offering. Neither the Company, nor any of its
----------------------
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of the
issuance by the Company of any of the Securities under the 1933 Act or cause
this offering of the Securities to be integrated with prior offerings by the
Company for purposes of the 1933 Act or any applicable stockholder approval
provisions, including, without limitation, under the rules and regulations of
any exchange or automated quotation system on which any of the securities of the
Company are listed or designated, nor will the Company or any of its Material
Subsidiaries take any action or steps that would require registration of the
issuance by the Company of any of the Securities under the 1933 Act or cause the
offering of the Securities to be integrated with other offerings.
m. Employee Relations. Neither the Company nor any of its Material
------------------
Subsidiaries is involved in any union labor dispute nor, to the knowledge of the
Company or any of its Material Subsidiaries, is any such dispute threatened. No
material number of employees of the Company or its Material Subsidiaries is a
member of a union which relates to such employee's relationship with the
Company, neither the Company nor any of its Material Subsidiaries is a party to
a material collective bargaining agreement, and the Company and its Material
Subsidiaries believe that their relations with their employees are generally
good. Neither the Company's current chairperson and chief executive officer nor
its current chief financial officer has notified the Company that such officer
intends to leave the Company or otherwise terminate such officer's employment
with the Company. No executive officer, to the knowledge of the Company, is in
violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement, non-competition agreement, or
any other contract or agreement or any restrictive covenant, and the continued
employment of each such executive officer does not subject the Company or any of
its Material Subsidiaries to any liability with respect to any of the foregoing
matters.
n. Intellectual Property Rights. The Company and its Material
----------------------------
Subsidiaries own or possess or can acquire on reasonable terms adequate rights
or licenses to use all trademarks, trade names, service marks, patents,
copyrights, trade secrets and other intellectual property rights necessary to
conduct their respective businesses as now conducted, except where the absence
to own or possess the same would not result, either individually or in the
aggregate, in a Material Adverse Effect. To the Company's knowledge, none of the
Company's trademark
10
registrations, service ▇▇▇▇ registrations, patents, copyrights, or other
intellectual property rights have expired or terminated, or are expected to
expire or terminate within two years from the date of this Agreement, except
where such expiration or termination would not result, either individually or in
the aggregate, in a Material Adverse Effect. The Company and its Material
Subsidiaries do not have any knowledge of any infringement by the Company or its
Material Subsidiaries of trademarks, trade names, service marks, patents,
copyrights, trade secrets or other intellectual property rights of others,
except where such infringement would not result, either individually or in the
aggregate, in a Material Adverse Effect. There is no claim, action or proceeding
being made or brought against the Company or its Material Subsidiaries regarding
its trademarks, trade names, service marks, patents, copyrights, trade secrets,
or infringement of other intellectual property rights, except where such claim,
action, proceeding or infringement would not result either individually or in
the aggregate in a Material Adverse Effect. To the Company's knowledge there is
no claim, action or proceeding being overtly threatened against, but which has
not been made or brought against, the Company or its Material Subsidiaries
regarding its trademarks, trade names, service marks, patents, copyrights, trade
secrets, or infringement of other intellectual property rights which could
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect. The Company and its Material Subsidiaries have taken
reasonable security measures to protect the secrecy, confidentiality and value
of all of their intellectual property.
o. Title. The Company and its Material Subsidiaries have good and
-----
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its Material Subsidiaries, in each case free and clear of all
liens, encumbrances and defects except such as are described in the SEC
Documents filed with the SEC at least five (5) days prior to the date hereof, or
such as do not materially affect the value of such property and do not interfere
with the use made and proposed to be made of such property by the Company and
any of its Material Subsidiaries. Any real property and facilities held under
lease by the Company and any of its Material Subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property and facilities by the Company and its Material Subsidiaries.
p. Insurance. The Company and each of its Material Subsidiaries are
---------
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its Material
Subsidiaries are engaged. Neither the Company nor any such Material Subsidiary
has any reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business at a
cost that would not have a Material Adverse Effect, taken as a whole.
q. Regulatory Permits. Except for Permits (as defined below) the
------------------
absence of which would not result, either individually or in the aggregate, in a
Material Adverse Effect, the Company and its Material Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses (the "Permits"), and neither the Company nor any such Material
11
Subsidiary has received any notice of proceedings relating to the revocation or
modification of any such Permit.
r. Internal Accounting Controls. The Company and each of its
----------------------------
Material Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability and (iii) assets are amortized and depreciated, as
applicable, in accordance with generally accepted accounting principles.
s. Tax Status. The Company and each of its Material Subsidiaries
----------
(i) has made or filed all federal and state income and all other material tax
returns, reports and declarations required by any jurisdiction to which it is
subject (unless and only to the extent that the Company and each of its Material
Subsidiaries has set aside on its books provisions reasonably adequate for the
payment of all unpaid and unreported taxes), (ii) has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and for which the Company has made appropriate
reserves for on its books, and (iii) has set aside on its books provisions
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations (referred to in clause
(i) above) apply. There are no unpaid taxes in any material amount claimed to be
due by the taxing authority of any jurisdiction.
t. Transactions With Affiliates. Except as set forth on
----------------------------
Schedule 3(t) or in the SEC Documents filed at least five (5) days prior to the
-------------
date hereof, and other than the grant of stock options disclosed on Schedule
--------
3(c), none of the executive officers or directors of the Company is presently a
-----
party to any material transaction with the Company or any of its Material
Subsidiaries (other than for services as employees, officers and directors),
including any material contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring material payments to or from any
such officer, director or employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any such officer,
director, or employee has a substantial interest or is an officer, director,
trustee or partner.
u. Application of Takeover Protections. The Company and its board
-----------------------------------
of directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar anti-
takeover provision under the Certificate of Incorporation or the laws of the
state of its incorporation which is or could become applicable to the Buyers as
a result of the transactions contemplated by this Agreement, including, without
limitation, the Company's issuance of the Securities and the Buyers' ownership
of the Securities.
v. Rights Agreement. The Company has not adopted a shareholder
----------------
rights plan or similar arrangement relating to accumulations of beneficial
ownership of Common Stock or a change in control of the Company.
12
w. No Other Agreements. The Company has not, directly or
-------------------
indirectly, made any agreements with any Buyers relating to the terms or
conditions of the transactions contemplated by the Transaction Documents except
as set forth in the Transaction Documents.
x. Seniority. Payments of principal and other payments due under
---------
the Notes rank senior to the Company's Convertible Subordinated Debentures due
2018 and the Company's 4% Convertible Subordinated Notes due 2006 and any other
unsecured obligation that is ranked pari passu with either of the foregoing.
y. Exclusivity Extension. The extension granted by the Company (the
---------------------
"Extension Agreement") to each of Comcast Corporation ("Comcast") and ▇▇▇
Communications, Inc. ("Cox"), is as follows: [Cox/Comcast] shall have the right
to terminate the mutual exclusivity provisions of the Master Distribution
Agreement dated May 1997 ("1997 Agreement") effective December 4, 2001 by giving
the Company notice of termination of the exclusivity provisions prior to 11:59
p.m., Monday June 18, 2001. Neither Comcast nor Cox has the right, other than
for breach, to terminate the 1997 Agreement, or the letter agreement between
AT&T Corp., Comcast and Cox dated March 28, 2000 (the "March 28, 2000 Letter
Agreement") as of an effective date prior to June 4, 2002, except as set forth
in Section 1 of Annex C of the March 28 Letter Agreement or as otherwise
provided in the 1997 Agreement. The Extension Agreement does not by its terms
change or amend the Transition Service Level Plan.
4. COVENANTS.
---------
a. All Reasonable Efforts. Each party shall use all reasonable
----------------------
efforts to timely satisfy each of the conditions to be satisfied by it as
provided in Sections 6 and 7 of this Agreement.
b. Form D and Blue Sky. The Company agrees to file a Form D with
-------------------
respect to the Securities as required under Regulation D and to provide a copy
thereof to each Buyer promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for or to qualify the
Securities for, sale to the Buyers at the Closing pursuant to this Agreement
under applicable securities or "Blue Sky" laws of the states of the United
States, and shall provide evidence of any such action so taken to the Buyers on
or prior to the Closing Date. The Company shall make all filings and reports
relating to the offer and sale of the Securities required under applicable
securities or "Blue Sky" laws of the states of the United States following the
Closing Date.
c. Reporting Status. Until the later of (i) the date as of which
----------------
the Investors (as that term is defined in the Registration Rights Agreement) may
sell all of the Conversion Shares without restriction pursuant to Rule 144(k)
promulgated under the 1933 Act (or successor thereto) and (ii) the last date on
which any Notes remain outstanding (the "Reporting Period"), the Company shall
file all reports required to be filed with the SEC pursuant to the 1934 Act, and
the Company shall not terminate its status as an issuer required to file reports
under the 1934 Act even if the 1934 Act or the rules and regulations thereunder
would otherwise permit such termination, other than as a result of merger or
consolidation in which the Company is not the
13
surviving entity and with respect to which the Company is in compliance with
Section 4 of the Notes and Section 4(i) of this Agreement.
d. Use of Proceeds. The Company will use the proceeds from the
---------------
sale of the Note for substantially the same purposes and in substantially the
same amounts as indicated in Schedule 4(d). The Company shall not use the
-------------
proceeds from the sale of the Notes in violation of any applicable law.
e. Financial Information. The Company agrees to send the following
---------------------
to each Investor (as that term is defined in the Registration Rights Agreement)
during the Reporting Period: (i) within two (2) days after the filing thereof
with the SEC, a copy of its Annual Reports on Form 10-K, its Quarterly Reports
on Form 10-Q, any Current Reports on Form 8-K and any registration statements
(other than on Form S-8) or amendments filed pursuant to the 1933 Act, provided
that if any such report is filed with the SEC through ▇▇▇▇▇ then the Company
shall be deemed to have satisfied its obligation under this clause (i) by such
filing, (ii) on the same day as the release thereof, facsimile copies of all
material press releases issued by the Company or any of its Material
Subsidiaries, provided that if any such press release is filed with the SEC
through a Current Report on Form 8-K through ▇▇▇▇▇ then the Company shall be
deemed to have satisfied its obligations under this clause (ii) by such filing;
and (iii) copies of any notices and other information made available or given to
the stockholders of the Company generally, contemporaneously with the making
available or giving thereof to the stockholders.
f. Reservation of Shares. The Company shall take all action
---------------------
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than 100% of the number of shares of Common Stock needed to
provide for the issuance of the shares of Common Stock upon conversion of all
outstanding Notes (without regard to any limitations on conversions).
g. Listing. The Company shall promptly secure the listing of all
-------
of the Registrable Securities (as defined in the Registration Rights Agreement)
upon each national securities exchange and automated quotation system, if any,
upon which shares of Common Stock are then listed (subject to official notice of
issuance, as required by each such national securities exchange and automated
quotation system) and shall maintain, so long as any other shares of Common
Stock shall be so listed, such listing of all Registrable Securities from time
to time issuable under the terms of the Transaction Documents. The Company shall
use all reasonable efforts to maintain the Common Stock's authorization for
quotation on the Nasdaq National Market ("NASDAQ") or listing on The New York
Stock Exchange, Inc. ("NYSE") (as applicable, the "Principal Market"). Neither
the Company nor any of its Material Subsidiaries shall take any action which
would be reasonably expected to result in the delisting or suspension of the
Common Stock from the Principal Market. The Company shall pay all fees and
expenses in connection with satisfying its obligations under this Section 4(g).
h. Filing of Form 8-K. Before 9:00 am Eastern Time, on June 11,
------------------
2001, but in no event later than the first time the Company issues a press
release disclosing the transactions contemplated by this Agreement, the Company
shall file a Current Report on Form 8-K with the SEC describing the terms of the
transactions contemplated by the Transaction Documents and including as exhibits
to such Current Report on Form 8-K a form of each of this Agreement (including
the disclosure
14
schedules to the Agreement), the Notes, the Registration Rights Agreement and
the Security Agreement, in the form required by the 1934 Act.
i. Corporate Existence. For so long as a Buyer beneficially owns any
-------------------
Notes, if the Company fails to maintain its corporate existence or sells all or
substantially all of the Company's assets (except in the event of a merger or
consolidation or sale of all or substantially all of the Company's assets, where
the surviving or successor entity in such transaction (i) assumes the Company's
obligations hereunder and under the agreements and instruments entered into in
connection herewith, and (ii) is either (A) a publicly traded corporation whose
common stock is listed for trading on Nasdaq, NYSE or AMEX or (B) is a
subsidiary of a corporation described in the immediately preceding clause (B)
and upon the consummation of such transaction the Notes shall be convertible
into the common stock of such publicly traded corporation which is listed for
trading on Nasdaq, NYSE or AMEX) (each a "Corporate Termination Event"), no
sooner than twenty (20) Business Days nor later than ten (10) Business Days
prior to the consummation of such Corporate Termination Event, the Company shall
deliver written notice thereof ("Corporate Termination Notice") via facsimile
and overnight courier to each Buyer and, at the election of the Buyer, the
Company shall redeem any Notes held by such Buyer at a price equal to the
Corporate Termination Redemption Price (as defined below) simultaneously with
the consummation of the Corporate Termination Event. The Buyer shall exercise
its right to require the Company to redeem outstanding Notes pursuant to the
foregoing sentence of this Section 4(i) by delivering written notice to the
Company within ten (10) Business Days after the Buyer's receipt of the Corporate
Termination Notice. Payments for such redemption shall have priority to the
payments to stockholders of the Company in connection with such Corporate
Termination Event. The "Corporate Termination Price" shall mean (A) with
respect to a Corporate Termination Event during the period beginning on the date
hereof and ending on and including the date which is one (1) year after the
Closing Date, 135% of the Conversion Amount (as defined in the Notes), (B) with
respect to a Corporate Termination Event during the period beginning on but
excluding the date which is one (1) year after the Closing Date and ending on
and including the date which is two (2) years after the Closing Date, 125% of
the Conversion Amount, and (C) with respect to a Corporate Termination Event on
or after the day after the date which is two (2) years after the Closing Date,
100% of the Conversion Amount.
j. Pledge of Securities. The Company acknowledges and agrees that the
--------------------
Securities may be pledged by an Investor (as defined in the Registration Rights
Agreement) in connection with a bona fide margin agreement or other loan secured
by the Securities. The pledge of Securities shall not be deemed to be a
transfer, sale or assignment of the Securities hereunder, and no Investor
effecting any such pledge of Securities shall be required to provide the Company
with any notice thereof or otherwise make any delivery to the Company pursuant
to this Agreement or any other Transaction Document, including without
limitation, Section 2(f) of this Agreement; provided that an Investor and its
pledgee shall be required to comply with the provisions of Section 2(f) hereof
in order to effect a sale, transfer or assignment of Securities to such pledgee.
The Company hereby agrees to execute and deliver such documentation as a pledgee
of the Securities may reasonably request in connection with a pledge of the
Securities to such pledgee by an Investor, provided that such documentation does
not expand the nature of the Company's obligations under any Transaction
Document
15
k. UCC-1 Financing Statements. On or before June 11, 2001 the Company
--------------------------
will deliver to ▇▇▇▇▇▇ ▇▇▇▇▇▇ Zavis, to the attention of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, on
behalf of HFTP Investments L.L.C. (a Buyer) and Gaia Offshore Master Fund, Ltd.
(a Buyer) and to Akin, Gump, Strauss, ▇▇▇▇▇ & ▇▇▇▇, L.L.P., to the attention of
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, on behalf of ▇▇▇▇▇▇▇▇, L.P. (a Buyer) separate executed UCC-1
financing statements in the name of each such Buyer for each jurisdiction listed
on Schedule II to the Security Agreement and in a form reasonably satisfactory
to such Buyer.
l. Security Interest Opinion. On or prior to July 20, 2001, the Company
-------------------------
shall cause to be delivered to each Buyer the opinion of Fenwick & West LLP in
its customary form, dated as of a then current date, which opinion shall be a
Delaware UCC opinion as to the perfection under Delaware law of the security
interest in the Collateral (as defined in the Security Agreement) after giving
effect to the revised Article 9 of the UCC.
5. TRANSFER AGENT INSTRUCTIONS.
---------------------------
The Company shall issue irrevocable instructions to its transfer agent in
the form attached hereto as Exhibit D (the "Irrevocable Transfer Agent
---------
Instructions"), and any subsequent transfer agent, to issue certificates,
registered in the name of each Buyer or its respective nominee(s), for the
Conversion Shares in such amounts as specified from time to time by each Buyer
to the Company upon conversion of the Notes. Prior to registration of the
Conversion Shares under the 1933 Act, all such certificates shall bear the
restrictive legend specified in Section 2(g) of this Agreement. The Company
warrants that no instruction inconsistent with Section 2(f) hereof or this
Section 5 will be given by the Company to its transfer agent and that the
Securities shall otherwise be freely transferable on the books and records of
the Company as and to the extent provided in this Agreement and the Registration
Rights Agreement. If a Buyer provides the Company with an opinion of counsel
reasonably acceptable to the Company to the effect that a public sale,
assignment or transfer of Securities may be made without registration under the
1933 Act or the Buyer provides the Company with reasonable assurances that the
Securities can be sold, assigned or transferred pursuant to Rule 144 or can be
sold, assigned or transferred pursuant to Rule 144(k) under the 1933 Act, the
Company shall permit the transfer, and, in the case of the Conversion Shares,
promptly instruct its transfer agent to issue one or more certificates in such
name and in such denominations as specified by such Buyer and without any
restrictive legend. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Buyers by vitiating the
intent and purpose of the transaction contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Section 5 will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section 5, that the
Buyers shall be entitled, in addition to all other available remedies, to an
order and/or injunction restraining any breach and requiring immediate issuance
and transfer, without the necessity of showing economic loss and without any
bond or other security being required.
16
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
----------------------------------------------
The obligation of the Company to issue and sell the Notes to each Buyer at
the Closing is subject to the satisfaction, at or before the Closing Date, of
each of the following conditions, provided that these conditions are for the
Company's sole benefit and may be waived by the Company at any time in its sole
discretion by providing each Buyer with prior written notice thereof:
(a) Each Buyer shall have executed each of the Transaction Documents
to which it is a party and delivered the same to the Company.
(b) Each Buyer shall have delivered to the Company the Purchase Price
for the Notes being purchased by such Buyer at the Closing by wire transfer
of immediately available funds pursuant to the wire instructions provided
by the Company.
(c) The representations and warranties of each Buyer shall be true and
correct as of the date when made and as of the Closing Date as though made
at that time (except for representations and warranties that speak as of a
specific date), and such Buyer shall have performed, satisfied and complied
with the covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by such Buyer at or
prior to the Closing Date.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
-------------------------------------------------
The obligation of each Buyer hereunder to purchase the Notes from the
Company at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, provided that these conditions are
for each Buyer's sole benefit and may be waived by such Buyer at any time in its
sole discretion by providing the Company with prior written notice thereof:
(a) The Company shall have executed each of the Transaction Documents
and delivered the same to such Buyer.
(b) The Common Stock (x) shall be designated for quotation or listed
on the Principal Market and (y) shall not have been suspended by the SEC or
the Principal Market from trading on the Principal Market nor shall
suspension by the SEC or the Principal Market be threatened either (A) in
writing by the SEC or the Principal Market or (B) by falling below the
minimum listing maintenance requirements of the Principal Market; and the
Conversion Shares issuable upon conversion of the Notes shall be listed
upon the Principal Market.
(c) The representations and warranties of the Company shall be true and
correct as of the date when made and as of the Closing Date as though made
at that time (except for representations and warranties that speak as of a
specific date) and the Company shall have performed, satisfied and complied
with the covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by the Company at or
prior to the Closing Date. Such Buyer shall have
17
received a certificate, executed by the Chief Financial Officer of the
Company, dated as of the Closing Date, to the foregoing effect and as to
such other matters as may be reasonably requested by such Buyer, including,
without limitation, an update as of the Closing Date regarding the
representation contained in Section 3(c) above.
(d) Such Buyer shall have received the opinion of Fenwick & West LLP,
dated as of the Closing Date, in the form of Exhibit E, attached hereto.
---------
(e) The Company shall have executed and delivered to such Buyer the
Note Certificates (in such principal amounts as such Buyer shall request)
for the Notes being purchased by such Buyer at the Closing.
(f) The Board of Directors of the Company shall have adopted
resolutions consistent with Section 3(b) above and in a form reasonably
acceptable to such Buyer (the "Resolutions").
(g) As of the Closing Date, the Company shall have reserved out of its
authorized and unissued Common Stock, solely for the purpose of effecting
the conversion of the Notes, such number of shares of Common Stock as are
issuable at the Conversion Rate (as defined in the Note), as calculated
using the Fixed Conversion Price (as defined in the Notes) as of the
Closing Date.
(h) The Irrevocable Transfer Agent Instructions, in the form of
Exhibit D attached hereto, shall have been delivered to and acknowledged in
---------
writing by the Company's transfer agent.
(i) The Company shall have delivered to such Buyer a certificate
evidencing the incorporation and good standing of the Company in the State
of Delaware issued by the Secretary of State of the State of Delaware and a
certificate evidencing the qualification and good standing of the Company
in the State of California issued by the Secretary of State of the State of
California as of a date within ten days of the Closing Date.
(j) The Company shall have delivered to such Buyer a certified copy of
the Certificate of Incorporation as certified by the Secretary of State of
the State of Delaware as of a date within ten days of the Closing Date.
(k) The Company shall have delivered to such Buyer a secretary's
certificate, dated as of the Closing Date, certifying as to (A) the
Resolutions, (B) the Certificate of Incorporation and (C) the By-laws, each
as in effect at the Closing.
(l) The Company shall have made all filings under all applicable
federal and state securities laws necessary to consummate the issuance of
the Securities pursuant to this Agreement in compliance with such laws.
18
(m) The Company shall have delivered to such Buyer a letter from the
Company's transfer agent certifying the number of shares of Common Stock
outstanding as of a date within five days of the Closing Date.
(n) The Company shall have delivered to the Buyers such other
documents relating to the transactions contemplated by the Transaction
Documents as the Buyers or their counsel may reasonably request.
8. INDEMNIFICATION. In consideration of each Buyer's execution and
---------------
delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company's other obligations under the Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless each
Buyer and each other holder of the Securities and all of their stockholders,
officers, directors, employees and direct or indirect investors and any of the
foregoing persons' agents or other representatives (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the "Indemnitees") from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of
whether any such Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys' fees and disbursements
(the "Indemnified Liabilities"), incurred by any Indemnitee as a result of, or
arising out of, (a) any misrepresentation or breach of any representation or
warranty made by the Company in the Transaction Documents, (b) any breach of any
covenant, agreement or obligation of the Company contained in the Transaction
Documents, (c) any cause of action, suit or claim brought or made against such
Indemnitee (other than a cause of action, suit or claim which is (x) brought or
made by the Company and (y) is not a shareholder derivative suit) and arising
out of or resulting from the misrepresentation or alleged misrepresentation or
breach or alleged breach of any representation or warranty made by the Company
in the Transaction Documents, or the breach or alleged breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents.
To the extent that the foregoing undertaking by the Company may be unenforceable
for any reason, the Company shall make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities which is permissible
under applicable law. Except as otherwise set forth herein, the mechanics and
procedures with respect to the rights and obligations under this Section 8 shall
be the same as those set forth in Sections 6(a) and (d) of the Registration
Rights Agreement, including, without limitation, those procedures with respect
to the settlement of claims and the Company's rights to assume the defense of
claims.
9. MISCELLANEOUS.
-------------
a. Governing Law; Jurisdiction; Jury Trial. All questions concerning the
---------------------------------------
construction, validity, enforcement and interpretation of this Agreement shall
be governed by the internal laws of the State of New York, without giving effect
to any choice of law or conflict of law provision or rule (whether of the State
of New York or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of New York. Each party hereby
irrevocably submits to the non-exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed
19
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Such service shall be deemed effective
five (5) Business Days after mailing. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
b. Counterparts. This Agreement may be executed in two or more identical
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party; provided that a facsimile signature shall be
considered due execution and shall be binding upon the signatory thereto with
the same force and effect as if the signature were an original, not a facsimile
signature.
c. Headings. The headings of this Agreement are for convenience of
--------
reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. Severability. If any provision of this Agreement shall be invalid or
------------
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement supersedes all other
----------------------------
prior oral or written agreements between each Buyer, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be amended or waived other than by an instrument in writing signed
by the Company and the Buyers which purchased at least two-thirds (2/3) of the
aggregate principal amount the Notes on the Closing Date. Any such amendment
shall bind all holders of the Notes. No such amendment shall be effective to
the extent that it applies to less than all of the holders of the Notes then
outstanding. No consideration shall be offered or paid to any person to amend
or consent to a waiver or modification of any provision of any of the
Transaction Documents unless the same consideration also is offered to all of
the parties to the Transaction Documents or holders of the Notes, as the case
may be.
20
f. Notices. Except as otherwise specifically provided in this Agreement,
-------
any notices, consents, waivers or other communications required or permitted to
be given under the terms of this Agreement must be in writing and will be deemed
to have been delivered: (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
or (iii) one (1) Business Day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
If to the Company:
At Home Corporation
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
With a copy to:
Fenwick & West LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
If to the Transfer Agent:
Equiserve Trust Company
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Mr. ▇▇▇ ▇▇▇▇▇
If to a Buyer, to it at the address and facsimile number set forth on the
Schedule of Buyers, with copies to such Buyer's representatives as set forth on
the Schedule of Buyers, or at such other address and/or facsimile number and/or
to the attention of such other person as the recipient party has specified by
written notice given to each other party five (5) days prior to the
effectiveness of such change. The Company may modify its notice information or
the notice information for the Transfer Agent specified above by providing
written notice to each other party of such other address and/or facsimile number
and/or such other person whose attention a notice should be directed, five (5)
days prior to the effectiveness of such change. Written confirmation of receipt
(A) given by the recipient of such notice, consent, waiver or other
communication, (B) mechanically or electronically generated by the sender's
facsimile machine containing the time, date, recipient facsimile number and an
image of the first page of such
21
transmission or (C) provided by a nationally recognized overnight delivery
service shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
g. Successors and Assigns. This Agreement shall be binding upon and inure
----------------------
to the benefit of the parties and their respective successors and assigns,
including any purchasers of the Notes. The Company shall not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the holders of Notes representing at least two-thirds (2/3) of the
aggregate principal amount of the Notes then outstanding, including by merger or
consolidation, except pursuant to a Change of Control (as defined in Section
4(b) of the Note) with respect to which the Company is in compliance with
Section 4 of the Notes and Section 4(i) of this Agreement. A Buyer may assign
some or all of its rights hereunder without the consent of the Company,
provided, however, that the transferee has agreed in writing to be bound by the
applicable provisions of this Agreement. Notwithstanding anything to the
contrary contained in the Transaction Documents but subject to Section 4(j), the
Buyers shall be entitled to pledge the Securities in connection with a bona fide
margin account or other loan or other financing arrangement secured by the
Securities.
h. No Third Party Beneficiaries. This Agreement is intended for the
----------------------------
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. Survival. The representations and warranties of the Company and the
--------
Buyers contained in Sections 2 and 3, the agreements and covenants set forth in
Sections 4, 5 and 9, and the indemnification provisions set forth in Section 8,
shall survive the Closing. Each Buyer shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.
j. Publicity. The Company and each Buyer shall have the right to
---------
approve before issuance any press releases or any other public statements with
respect to the transactions contemplated hereby; provided, however, that the
Company shall be entitled, without the prior approval of any Buyer, to make any
press release or other public disclosure with respect to such transactions as is
required by applicable law and regulations (although each Buyer shall be
provided with a copy of any such disclosure and by consulted with by the Company
prior to its release other than disclosures in SEC filings that are
substantially similar to other disclosures previously made by the Company with
such prior consultation).
k. Further Assurances. Each party shall do and perform, or cause to be
------------------
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. Placement Agent. The Company agrees and acknowledges that it shall be
---------------
responsible for the payment of any placement agent's fees, financial advisory
fees, or brokers' commissions relating to or arising out of the transactions
contemplated hereby. The Company
22
shall pay, and hold each Buyer harmless against, any liability, loss or expense
(including, without limitation, attorney's fees and out-of-pocket expenses)
arising in connection with any such claim.
m. No Strict Construction. The language used in this Agreement will
----------------------
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
n. Remedies. Each Buyer and each holder of the Securities shall
--------
have all rights and remedies set forth in the Transaction Documents and all
rights and remedies which such holders have been granted at any time under any
other agreement or contract and all of the rights which such holders have under
any law. Any person having any rights under any provision of this Agreement
shall be entitled to enforce such rights specifically (without posting a bond or
other security), to recover damages by reason of any breach of any provision of
this Agreement and to exercise all other rights granted by law.
o. Payment Set Aside. To the extent that the Company makes a payment or
-----------------
payments to any Buyer hereunder or pursuant to the Registration Rights Agreement
or the Notes or the Buyers enforce or exercise their rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company by a
trustee, receiver or any other person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
* * * * * *
IN WITNESS WHEREOF, the Buyers and the Company have caused this Securities
Purchase Agreement to be duly executed as of the date first written above.
COMPANY: BUYERS:
AT HOME CORPORATION HFTP INVESTMENT L.L.C.
By: Promethean Asset Management, L.L.C.
Its: Investment Manager
By:________________________
Name:___________________
Title:__________________ By:_________________________
Name:____________________
Title:___________________
GAIA OFFSHORE MASTER FUND, LTD.
By: Promethean Asset Management L.L.C
Its: Investment Manager
By:_________________________
Name:____________________
Title:___________________
▇▇▇▇▇▇▇▇, L.P.
By: ▇▇▇▇▇▇, ▇▇▇▇▇▇ & Co., L.P.
Its: General Partner
By:_________________________
Name:____________________
Title:___________________
[Signature Page to Securities Purchase Agreement]
SCHEDULE OF BUYERS
Buyer Address Principal Buyers Representatives' Address
Buyer Name and Facsimile Number Amount of Notes and Facsimile Number
---------------------- ------------------------------------- --------------- ----------------------------------
HFTP Investment L.L.C. Promethean Asset Management, L.L.C. $30,000,000 Promethean Investment Group, L.L.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, 22/nd/ Floor ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇., ▇▇/▇▇/ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, ▇▇. Attn: ▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, ▇▇.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Residence: New York
▇▇▇▇▇▇ ▇▇▇▇▇▇ Zavis
▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Gaia Offshore Master Promethean Asset Management L.L.C. $20,000,000 Promethean Investment Group, L.L.C.
Fund, Ltd. ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, 22/nd/ Floor ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇., ▇▇/▇▇/ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, ▇▇. Attn: ▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, ▇▇.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Residence: New York
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇▇, L.P. c/o ▇▇▇▇▇▇, ▇▇▇▇▇▇ & Co., L.P. $50,000,000 Akin, Gump, Strauss, ▇▇▇▇▇ & ▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ - 26/th/ Floor ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇ Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Residence: Caymen Islands
SCHEDULES
---------
Schedule 3(a) - Material Subsidiaries
Schedule 3(c) - Capitalization
Schedule 3(e) - Conflicts
Schedule 3(f) - SEC Documents
Schedule 3(j) - Undisclosed Events
Schedule 3(t) - Transactions with Affiliates
Schedule 4(d) - Use of Proceeds
EXHIBITS
--------
Exhibit A - Form of Note
Exhibit B - Form of Registration Rights Agreement
Exhibit C - Form of Security Agreement
Exhibit D - Form of Irrevocable Transfer Agent Instructions
Exhibit E - Form of Company Counsel Opinion
AT HOME CORPORATION
DISCLOSURE LETTER TO
SECURITIES PURCHASE AGREEMENT
This Disclosure Letter (this "Letter") is made with reference to the
Securities Purchase Agreement dated June 8, 2001 (the "Agreement"), by and among
At Home Corporation, a Delaware corporation (the "Company") and the investors
listed on the Schedule of Buyers attached thereto. Unless otherwise defined
herein, any capitalized terms in this Letter shall have the same meanings
assigned to such terms in the Agreement. The disclosures in this Letter are
qualified in their entirety by reference to specific provisions of the
Agreement, and are not intended to be construed as nor shall they be construed
as constituting representations or warranties of the Company except as and to
the extent provided for in the Agreement.
Inclusion of information herein shall not be construed as: (1) an
admission that such information is material to the operations or financial
condition of the Company; (2) an admission of any liability or obligation of the
Company to any third party; or (3) an admission to any third party against the
Company's interests. Any disclosure made under the heading of one section of
this Letter may apply to and/or qualify disclosures made under one or more other
sections provided that such disclosure is cross-referenced elsewhere as
applicable or unless it is reasonably apparent from the express disclosure made
that an exception is being made to other representations or warranties. Section
and subsection headings are provided for convenience only, and section and
subsection numbers and letters relate and coincide to corresponding numbers and
letters in the Agreement.
Schedule 3(a) - Organization and Qualification
----------------------------------------------
1. As the Company's services are available in multiple states and foreign
countries, such jurisdictions may claim that it is required to qualify
to do business as a foreign corporation in these states and foreign
countries. The Company and its Material Subsidiaries are qualified to
do business in a limited number of states, and their failure to
qualify as a foreign corporation in a jurisdiction where it is
required to do so could subject the Company to taxes and penalties.
The application of the laws and regulations discussed above to the
business of the Company and its Material Subsidiaries is unclear. The
Company believes that if it is required to so qualify, it will be able
to do so.
2. List of Material Subsidiaries State of Incorporation
----------------------------- ----------------------
Classifieds2000, Inc. CA
DataInsight, Inc. CO
iMall, Inc. NV
Kendara, Inc. DE
Netbot, Inc. DE
MatchLogic, Inc. DE
Webshots Corporation CA
▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ International, Inc. CO
-1-
Schedule 3(c) - Capitalization
------------------------------
1. The number of shares of Series A Common Stock reserved for issuance
pursuant to the Company's stock option and purchase plans includes
amendments to the Company's 1997 Equity Incentive Plan to increase the
number of shares authorized for issuance thereunder by 13,500,000
shares, and to the Company's 1997 Employee Stock Purchase Plan to
increase the number of shares authorized for issuance thereunder by
1,500,000 shares. Both amendments are subject to approval by the
Company's stockholders at its 2001 annual meeting of stockholders.
2. Pursuant to Section 8.1 of the Company's Amended and Restated
Stockholders' Agreement dated as of July 16, 1997 (the "Stockholders
Agreement"), certain stockholders of the Company will have the right
to purchase their pro rata portion of securities with like terms to
the Securities, as well as future securities issued by the Company.
3. The Company currently has the following debt securities outstanding
which have not been filed by the Company with the SEC:
Promissory notes in the aggregate amount of $5,000,000 payable to
Itochu Corporation and affiliated entities (the "Itochu Promissory
Notes"), $2,500,000 of which is payable to Itochu Corporation,
$2,040,000 of which is payable to Itochu Techno-Science Corporation,
and $460,000 of which is payable to Dai Nippon Printing Co., Ltd.
4. The following instruments contain redemption provisions:
(a) Convertible Subordinated Notes due 2006
(b) Convertible Subordinated Debentures due 2018.
(c) Itochu Promissory Notes.
5. The Company currently has the following outstanding options, warrants
and other obligations to issue capital stock:
(a) The Company currently has options to purchase an aggregate of
70,252,544 shares of its Series A Common Stock outstanding,
issued pursuant to its 2000 Equity Incentive Plan, 1997 Equity
Incentive Plan (and succeeded plans), and assumed in connection
with acquisitions of other companies.
(b) The Company currently has warrants to purchase an aggregate of
120,487,159 shares of its Series A Common Stock and a warrant to
purchase an aggregate of 27,897,789 shares of its Series B Common
Stock outstanding, issued to cable companies, joint venture
partners, a strategic
-2-
investor, a commercial partner and a real estate lessor, and
assumed in connection with acquisitions of other companies.
(c) The Itochu Promissory Notes are convertible at maturity into the
number of shares having an aggregate market value equal to the
amount outstanding under the Itochu Promissory Notes, calculated
based on the average closing price for the 30 trading day period
ending on the date of conversion.
(d) The Company's currently outstanding shares of Preferred Stock are
convertible into shares of Series A Common Stock.
(e) The Company may be obligated to issue additional warrants to
purchase shares of Series A Common Stock or Series B Common Stock
to AT&T Corp., Comcast Corporation or ▇▇▇ Communications, Inc.
(the "Principal Cable Partners") pursuant to the terms of the
Letter Agreement dated March 28, 2000 between the Company and the
Principal Cable Partners (the "March 28, 2000 Letter Agreement"),
if any of the Principal Cable Partners increase the number of
"homes passed" by their cable systems and cause such homes passed
to come into compliance with the terms of the March 28, 2000
Letter Agreement.
(f) The Company is obligated to issue additional shares of its Series
A Common Stock pursuant to the terms of its 1997 Employee Stock
Purchase Plan in connection with each "purchase" under that plan.
(g) The Company has entered into a commercial agreement with SurePay,
LP that commits the Company, subject to Board approval, to grant
to SurePay, LP a warrant to purchase 200,000 shares of Series A
Common Stock at a price per share equal to the market price on
the date the warrant grant is approved by the Board of Directors,
subject to vesting based on SurePay's performance under the
agreement.
6. The Company is currently obligated to register the sale of its
securities under the 1933 Act under the following arrangements:
(a) The Company has provided demand, piggyback and S-3 registration
rights under the Third Amended and Restated Registration Rights
Agreement, dated April 11, 1997, between the Company and certain
stockholders of the Company (the "Stockholder Registration Rights
Agreement").
(b) The Company is obligated to register the resale of shares issued
upon the exercise of warrants issued to the Principal Cable
Partners pursuant to the terms of the March 28, 2000 Letter
Agreement.
-3-
(c) The Company is currently obligated to maintain the effectiveness
of S-3 registration statements currently effective and on file
with the Securities and Exchange Commission with respect to
shares of Series A Common Stock issuable upon conversion of its
Convertible Subordinated Notes due 2006, and shares issued in
connection with its acquisitions of DataInsight, Inc. and Join
Systems, Inc. (and currently maintains registration statements on
Form S-3 with respect to shares issued in connection with several
other acquisitions).
(d) The Company is obligated to register the resale of shares issued
upon conversion of the Itochu Promissory Notes.
7. The Company has not furnished copies of the following warrants to the
Buyers because the final forms of such warrants have not been
negotiated:
(a) Warrants granted to AT&T Corp. to purchase 27,897,789 shares of
Series A Common Stock and 27,897,789 shares of Series B Common
Stock at $29.54 per share pursuant to the terms of the March 28,
2000 Letter Agreement.
(b) Warrants granted to Comcast Corporation to purchase 25,502,222
shares of Series A Common Stock at $29.54 per share pursuant to
the terms of the March 28, 2000 Letter Agreement.
(c) Warrants granted to ▇▇▇ Communications, Inc. to purchase
19,158,774 shares of Series A Common Stock at $29.54 per share
pursuant to the terms of the March 28, 2000 Letter Agreement.
(d) Warrants granted to Intermedia/Insight/AT&T to purchase 1,592,400
shares of Series A Common Stock at $5.25 per share.
Schedule 3(e) - No Conflicts
----------------------------
1. The issuance of the Securities is subject to the preemptive rights
provided by Section 8.1 of the Stockholders Agreement.
2. The execution of the Registration Rights Agreement and the performance
of the Company's obligations under that Agreement do not comply with
Section 4(d) of the Stockholder Registration Rights Agreement.
3. The Company is in compliance with the Nasdaq Listing Requirements as
set forth in the interim rules described in SEC Release No. 34-44243
issued on May 1, 2001.
The identification of any agreement under any other schedule hereof shall
not be deemed to be disclosed under this Schedule 3(e) unless specifically
referenced hereunder.
-4-
Schedule 3(f) - SEC Documents; Financial Statements
---------------------------------------------------
As of the date hereof, the Company had entered into the following
agreements which have not previously been filed as an exhibit to the
Company's reports filed with the SEC:
(a) Separation and Release Agreement with ▇▇▇▇▇▇ ▇▇▇▇, dated April 23,
2001.
(b) Letter Agreements with each of Comcast and Cox, dated June 1, 2001.
Schedule 3(j) - No Undisclosed Events, Liabilities, Developments or
-------------------------------------------------------------------
Circumstances
-------------
1. In April 2001, the Company entered into a non-binding letter agreement
with AT&T to outsource its engineering and operations services, as
well as replace its backbone capacity agreement with AT&T. In the
course of negotiating toward definitive agreements, the Company and
AT&T determined that certain of the benefits of the proposed agreement
could be achieved by negotiating a simpler transaction under which the
Company and AT&T would develop and design an enhanced network
performance plan. If successfully negotiated, AT&T would, pursuant to
a multi-month consulting and support services agreement, on
commercially reasonable, arms-length terms, assist the Company in
implementing an updated network plan to augment performance levels in
the Company's network, instead of the outsourcing arrangement
contemplated in the letter agreement. In addition, the Company and
AT&T will continue to separately negotiate in good faith a
restructured backbone capacity agreement that would provide the
Company at least $75 million in financing. There can be no assurance
that the Company and AT&T will be successful in completing the
definitive agreements with respect to the arrangements described
above.
2. The Company has previously announced its intent to explore the
potential sale or restructuring of its media operations that do not
directly support its broadband strategy. The Company has been in
negotiations with several companies regarding potential sales of
portions of its media operations. The Company has not entered into
any formal agreements regarding any of these potential transactions.
There can be no assurance that the Company will be successful in
completing sale or restructuring of media operations.
3. On June 5, 2001, the Company announced that ▇▇▇▇ ▇▇▇▇▇ has been named
chief operating officer, a newly created position for Excite@Home. On
the same date the Company announced that ▇▇▇▇▇ ▇▇▇▇▇, Executive Vice
President, Excite Network and ▇▇▇▇ ▇'▇▇▇▇▇, Executive Vice President,
Broadband Services have resigned and will leave the Company in July to
pursue other opportunities, pending completion of projects.
4. Excite@Home announced that it is in discussions with Comcast
Corporation and ▇▇▇ Communications, Inc. to explore a restructuring of
its commercial relationships with these companies. Under the terms of
the March 28, 2000 letter agreement between these companies, Comcast
and/or Cox may provide six months notice of intent to terminate their
exclusivity obligations or their entire relationships with the Company
on each June 4 and December 4. Excite@Home has agreed to extend until
June 18, 2001 the time for Cox and Comcast to decide whether to give
notice to terminate the mutual exclusivity provisions effective
December 4, 2001. There can be no assurance that the parties will
reach agreement on a restructured relationship.
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5. On May 30, 2001, the Board approved a change, subject to stockholder
approval, in the Company's independent public accountants effective
during the third quarter of 2001 after a transition period with the
new independent accountants. The Company intends to engage
PricewaterhouseCoopers LLP as its new independent auditors to perform
the audit of the Company's consolidated financial statements for 2001.
6. On June 1, 2001, the Company entered into service level agreements
with each of Comcast and Cox. Under these agreements, the Company has
agreed that its network must meet specified performance levels, and
that it will pay each of Comcast and Cox preset liquidated damages for
failure to achieve these network performance levels during each
reporting period.
Schedule 3(t) - Transactions With Affiliates
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See Section 3(f).
Schedule 4(d) - Use of Proceeds
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The Company will use the net proceeds from the sale of the Notes for
working capital and general corporate purposes.
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