Exhibit 10.3.1
STOCK PURCHASE AGREEMENT
This is a Stock Purchase Agreement (the "Agreement"), dated as of
August 13, 1998, between PAETEC CORP., a Delaware corporation with its principal
place of business at 000 Xxxxxxxxx Xxxxx, Xxxxxxxx, Xxx Xxxx 00000 (the
"Company"), and XXXXXXXXXXX X. XXXXXXXX, TRUSTEE OF THE XXXXXXXXXXX X. XXXXXXXX
LIVING TRUST DATED APRIL 25, 1998, whose mailing address is c/o Xxxxxxxxxxx X.
Xxxxxxxx, CEO, STAR Telecommunications, Inc., 000 Xxxx Xx Xx Xxxxxx, Xxxxx
Xxxxxxx, Xxxxxxxxxx 00000 ("Purchaser").
RECITALS
A. The Company is a Delaware corporation having 110,000,000 shares of
authorized capital stock, 10,000,000 of which are designated preferred stock,
75,000,000 of which are designated Class A common and 25,000,000 of which are
designated Class B common.
B. The Purchaser desires to purchase, and the Company agrees to sell,
shares of the Class B common stock of the Company pursuant to the terms and
conditions of this Agreement.
NOW, THEREFORE, in consideration of the following mutual promises, the
parties agree as follows:
1. Purchase of Shares.
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(a) The Company hereby agrees to sell 2,400,000 shares of Class B
common stock (the "Shares") to Purchaser at a price of $.833 per share payable
in full upon execution of this Agreement. A stock certificate evidencing the
Shares shall be issued in the name of Purchaser upon receipt of this executed
Agreement and payment in full of the purchase price.
2. Representations and Warranties of Purchaser In order to induce
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the Company to issue the Shares, Purchaser represents and warrants to the
Company as follows:
(a) Purchaser (i) understands that an investment in the Shares is
speculative due to factors including (but not limited to) the start-up nature of
the Company and the risk of economic loss from the operations of the Company,
but believes that such an investment is suitable for Purchaser based upon
Purchaser's financial needs, (ii) can withstand a complete loss of the
investment in the Shares, and (iii) has the net worth to undertake these risks.
(b) Purchaser is acquiring the Shares for his own account, with
no present intention of reselling, distributing or otherwise transferring the
Shares or any portion of the Shares to any third party.
(c) Purchaser understands and acknowledges that the Shares are
being offered and sold under one or more exemptions provided in the Securities
Act of 1933, as amended (the "Securities Act"), Regulation D promulgated
thereunder and applicable state securities laws, and that this transaction has
not been reviewed or passed upon by the United States Securities and Exchange
Commission, or any other federal or state agency.
(d) Purchaser is an "accredited investor" as defined under Rule
501 of Regulation D promulgated under the Securities Act in that Purchaser is a
trust with total assets in excess of $5,000,000, not formed for the specific
purpose of acquiring the securities offered, and the Trustee is an accredited
investor and a "sophisticated person" as described in Rule 506 (b)(ii) of
Regulation D.
(e) Purchaser realizes that Purchaser must bear the economic risk
of investment for an indefinite period of time because (i) the Shares have not
been registered under the Securities Act and cannot be resold by Purchaser
unless they are subsequently registered under the Securities Act or an exemption
from registration is available, and (ii) there currently is no public market for
the Shares, and Purchaser may not be able to liquidate the investment in the
Shares in the event of an emergency. Purchaser has no need for liquidity of
investment with respect to the Shares.
(f) Purchaser has substantial experience in evaluating and
investing in companies similar to the Company, and is capable of evaluating the
merits and risks of his investment in the Company and has the capacity to
protect his own interests.
(g) Purchaser is fully familiar with the business of the Company
and its present and proposed operations. Purchaser has been given reasonable
opportunity to ask representatives of the Company questions concerning the
Company and making an investment in the Shares. Purchaser has obtained
sufficient information to evaluate the merits and risks of an investment in the
Shares.
(h) Purchaser confirms that Purchaser has been advised to rely on
professional accounting, tax, legal and financial advisers with respect to an
investment in the Shares and has obtained, to the extent Purchaser deems it
necessary, professional advice with respect to the risks inherent in an
investment in the Shares and the suitability of an investment in the Shares in
light of Purchaser's financial condition and investment needs.
The foregoing representations and warranties of Purchaser, are true
and correct as of the date of this Agreement, shall be true and correct as of
the closing of the sale of the Shares, and shall survive the closing.
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3. Representations and Warranties of Company. In order to induce the
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Purchaser to purchase the Shares, the Company represents and warrants to the
Purchaser as follows:
(a) The Company's authorized capital consists of (i) 10,000,000
shares of preferred stock, no shares of which are issued and outstanding, (ii)
75,000,000 shares of Class A common stock, of which 2,000,000 shares are issued
and outstanding or are committed to be issued, (iii) and 25,000,000 shares of
Class B common stock, of which 2,500,000 shares are issued and outstanding or
are committed to be issued. A list of the current stockholders with the number
of class of shares owned by each is attached as Schedule 1. The Company intends
to issue 1,200,000 shares of Class A common stock and 2,600,000 shares of Class
B common stock concurrently with the sale of the Shares to Purchaser. In
addition, the Company has reserved an additional 500,000 shares of Class A
common stock for issuance to key executive employees of the Company and intends
to reserve an additional 4,300,000 shares of Class A common stock for issuance
under the Company's 1998 Incentive Compensation Plan. Except as described in
this Section Schedule 1, as of the date of the Agreement, there are no
outstanding subscriptions, options, warrants, calls, rights or other agreements
or commitments obligating the Company to issue, sell, deliver or transfer
(including any right of conversion or exchange under any outstanding security or
other instrument) any shares of the Company stock or any other securities. All
outstanding shares of Class A common stock and Class B common stock have been
duly and validly authorized and issued, are fully paid and non-assessable, and
have been issued free of any lien, security interest, pledge, charge or
encumbrance of any kind (collectively, "Encumbrances").
(b) The Company was incorporated on May 19, 1998 and has not yet
commenced business operations.
(c) The Company is a corporation duly organized and existing
under the laws of the State of Delaware and is in good standing under such laws.
The Company is duly qualified and licensed in each jurisdiction where the nature
of the business conducted by it requires such qualification, except where the
failure to qualify would not have a material adverse effect upon the Company's
financial condition or results of operations. The Company has the requisite
corporate power and authority to own or lease and operate its properties and
assets, and to carry on its business as proposed to be conducted. The Company
has delivered to the Purchaser true and complete copies of its Certificate of
Incorporation and Bylaws, as in effect as of the date hereof.
(d) The Company has all requisite corporate power to execute and
deliver this Agreement and to sell and issue the Shares hereunder, and to carry
out and perform its obligations under the terms of this Agreement.
(e) Neither the Company nor any subsidiary thereof owns, directly
or indirectly, of record or beneficially any capital stock or equity interest or
investment in any
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corporation, association or business entity, except with respect to PaeTec
Communications, Inc. and PaeTec International, Inc., each of which is a wholly
owned subsidiary of the Company (the"Subsidiaries"). Each of the Subsidiaries is
a corporation duly organized and existing under the laws of the State of
Delaware and is in good standing under such laws. Each Subsidiary has the
requisite corporate power and authority to own or lease and operate its
properties and assets, and to carry on its business as proposed to be conducted.
Neither the Company nor any Subsidiary is a partner or participant in any
partnership or joint venture.
(f) All corporate action on the part of the Company, its
directors and stockholders necessary for the authorization, execution, delivery
and performance by the Company of this Agreement and the consummation of the
transactions contemplated herein and for the authorization, issuance and
delivery of the Shares has been taken. This Agreement constitutes a valid and
binding obligation of the Company, enforceable in accordance with its terms,
subject to laws of general application relating to bankruptcy, insolvency, and
the relief of debtors and other laws of general application affecting
enforcement of creditors' rights generally, including rules of law governing
specific performance, injunctive relief or other equitable remedies. The Shares,
when issued in compliance with the provisions of this Agreement, will be validly
issued, fully paid and nonassessable and will be free of any Encumbrances, and
will be free of restrictions on transfer other than under state and/or federal
Securities laws.
(g) No consent, approval, qualification, order or authorization
of, or filing with, any governmental authority or any third party is required in
connection with Company's valid execution, delivery or performance of this
Agreement, or the offer, sale or issuance of the Shares by the Company, except
filings required pursuant to applicable federal and state securities laws and
blue sky laws, which filings the Company shall complete within the lesser of
fifteen (15) days of the date hereof or the required statutory period.
(h) The Company has good and marketable title to its properties
and assets and, with respect to the property and assets leased by the Company,
holds valid leasehold interests therein, in each case subject to no mortgage,
pledge, lien, security interest, conditional sale agreement, encumbrance or
charge, except (i) tax, materialmen's or like liens for obligations not yet due
or payable or being contested in good faith by appropriate proceedings, or (ii)
possible minor liens or encumbrances which do not materially detract from the
value of the property subject thereto or materially impair the operations of the
Company and which have arisen in the ordinary course of business.
(i) Subject to the truth and accuracy of the Purchaser's
representations set forth in this Agreement, the offer, sale and issuance of the
Shares as contemplated by this Agreement are exempt from the registration
requirements of the Securities Act, and from the qualification requirements of
the California and New York blue sky laws.
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(j) The Company is not in violation of any term of its
Certificate of Incorporation or its Bylaws, any term of any agreement to which
the Company is a party, or any judgment, decree, order, statute, rule or
regulation to which the Company is subject, that would have a material adverse
effect on the condition, financial or otherwise, prospects or operations of the
Company.
(k) The execution, delivery and performance by the Company of
this Agreement, and the issuance, sale and delivery of the Shares will not
violate any provision of law, the Certificate of Incorporation or Bylaws of the
Company or any order, judgment or decree of any court or any governmental
agency, or conflict with, result in a breach of, or constitute a default under,
any indenture, agreement or other instrument by which the Company, or any of its
respective assets, is bound, or result in the creation or imposition of any
Encumbrance on any of the assets of the Company.
(l) There are no actions, suits, proceedings or investigations
pending or threatened against the Company, and the Company is not aware of any
basis for the foregoing except for an action pending in Supreme Court, Monroe
County, New York titled ACC Corp., et al v. Xxxxxx X. Xxxxxxxx, Xxxxxxx
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Ottalagana, Xxxx Xxxxx, PaeTec Corporation, and PaeTec Communications, Inc.
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(Index No. 7466-98). A copy of the complaint in this action has been furnished
to Purchaser. The Company is not a party to or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or governmental agency.
(m) The Company is insured with reputable insurers against all
risks normally insured against by companies in similar lines of business, and
all of the insurance policies maintained by the Company are in full force and
effect. A schedule listing all insurance policies that are material to the
Business has been furnished to Purchaser. The Company is not in default under
any such policy. All insurance policies maintained by the Company will remain in
full force and effect and may reasonably be expected to be renewed on comparable
terms following consummation of the transactions contemplated by this Agreement
(subject to continuing compliance with the applicable terms thereof and any
right of insurers to terminate without cause), and the Company has received no
notice or other indication from any insurer or agent of any intent to cancel or
not so renew any of such insurance policies.
(n) The Company does not have employment agreements with any of
its employees. Since its inception, the Company has not experienced any labor
disputes, union organization attempts or any work stoppage due to labor
disagreements in connection with its business. There is no labor strike,
dispute, request for representation, slowdown or stoppage actually pending or
threatened against or affecting the Company or any of the Subsidiaries. All
workers' compensation and unemployment compensation insurance premiums due have
been fully paid or accrued in the Company's financial statements.
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(o) All employee benefit plans within the meaning of Section 3(3)
of the Employment Retirement Income Security Act of 197s4, as amended, and the
related regulations and published interpretations ("ERISA"), are in full
compliance with the applicable provisions of ERISA (as amended through the date
of this Agreement), the regulations and published authorities thereunder, and
all other laws applicable with respect to all such employee benefit plans,
agreements and arrangements. The Company has performed all of its obligations
under all such plans, agreements and arrangements. To the best knowledge of the
Company, there are no actions (other than routine claims for benefits) pending
or threatened against such plans or their assets, or arising out of such plans,
agreements or arrangements, and, to the best knowledge of the Company, no facts
exist which could give rise to any such Actions.
(p) All group health plans of the Company and any Subsidiary have
been operated in compliance with the group health plan continuation coverage
requirements of Section 162(k) of the Internal Revenue Code to the extent such
requirements are applicable.
(q) There has been no act or omission by the Company or any
Subsidiary that has given rise to or may give rise to fines, penalties, taxes,
or related charges under Section 502(c) or (k) or Section 4071 of ERISA or
Chapter 43 of the Internal Revenue Code.
(r) Schedule 2 sets forth a complete list of all governmental
licenses, permits and authorizations necessary for the Company and the
Subsidiaries to operate their businesses as presently conducted and proposed to
be conducted, including without limitation, those required by the U.S. Federal
Communications Commission and by all relevant state public utilities
commissions. Such licenses, permits and authorizations are in full force and
effect and the Company knows of no threatened suspension, cancellation or
invalidation thereof.
(s) The Company has not issued to any other holder of the
securities of the Company registration rights that are superior to the rights
set forth in Section 4 of this Agreement.
(t) The proceeds from the sale of the Shares will be used by the
Company to fund expansion of the Company's switched-based telecommunications
business including the purchase of equipment, the opening of new sales offices,
for additional working capital, and for general corporate purposes.
(u) The financial statements of the Company for the two month
period ended June 30, 1998, compiled by Xxxx X. XxXxxxx, CPA, a copy of which is
attached as Exhibit A, was prepared from the books and records of the Company
and fairly sets forth the financial position of the Company, subject to the
qualifications contained therein.
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(v) The foregoing representations and warranties of the Company
are true and correct as of the date of this Agreement, shall be true and correct
as of the closing of the sale of the Shares, and shall survive the closing. No
representation of warranty of the Company in this Agreement contains, or on the
closing date will contain, any untrue statement of material fact or omits, or on
the closing date will omit, any material fact necessary in order to make the
statements contained therein not misleading.
4. Piggy-Back Registration Rights.
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(a) If at any time or from time to time the Company shall
determine to register any of its equity securities, either for its own account
or the account of a security holder or holders (other than a registration of
securities relating solely to employee benefit plans or to effect a merger or
other reorganization), the Company will promptly give to Purchaser written
notice thereof and, upon the written request of Purchaser, include in such
registration (and any related qualification under blue sky laws or other
compliance), and in any underwriting involved therein, all the Shares specified
in the written request made within 10 days after receipt of such written notice
from the Company.
(b) If the registration of which the Company gives notice is for
a registered public offering involving an underwriting, the Company shall so
advise Purchaser as a part of the written notice given to Purchaser. In such
event the right of any Purchaser to registration pursuant to this Section 4
shall be conditioned upon Purchaser's participation in such underwriting, and
the inclusion of Shares in the underwriting shall be limited to the extent
provided herein. Purchaser (together with the Company and the other holders
distributing their securities through such underwriting) shall enter into an
underwriting agreement in customary form with the managing underwriter selected
for such underwriting by the Company. Notwithstanding any other provision of
this Section 4, if the managing underwriter determines that marketing factors
require a limitation of the number of shares to be underwritten, the managing
underwriter may exclude some or all of the Shares or securities of other holders
of similar registration rights from such registration. The Company shall so
advise Purchaser and other stockholders distributing their securities through
such underwriting, and the number of Shares or securities of other holders of
similar registration rights that may be included in the registration and
underwriting, as determined by the managing underwriter, shall be allocated on a
pro rata basis. If Purchaser disapproves of the terms of any such underwriting,
Purchaser may elect to withdraw therefrom by written notice to the Company and
the managing underwriter. Any securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration, and shall continue to be
subject to the terms of this Section.
(c) The Company shall have the right to terminate or withdraw any
registration initiated by it under this Section 4 prior to the effectiveness of
such registration whether or not Purchaser has elected to include securities in
such registration.
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(d) All expenses associated with the registration (including,
without limitation, registration, qualification and filing fees, printing
expenses, blue sky fees, and fees and disbursements of counsel and accountants
for the Company) shall be borne by the Company. Underwriters' discounts and
related charges, shall be borne by Purchaser pro rata in proportion to the
number of securities being registered.
(e) In the case of each registration under this Section, the
Company will:
(i) prepare and file a registration statement with respect
to such securities and use its best efforts to cause such registration statement
to become and remain effective for at least 45 days or until the distribution
described in the registration statement has been completed, whichever first
occurs;
(ii) furnish to Purchaser such reasonable number of copies
of the registration statement, preliminary prospectus, final prospectus and such
other documents as Purchaser may reasonably request in order to facilitate the
public offering of the Shares; and
(iii) use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
blue sky laws of such jurisdictions as shall be reasonably requested by
Purchaser, provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify as a foreign corporation or as a
dealer in securities or to file a general consent to service of process in any
such states or jurisdictions in which it has not already done so and except as
may be required by the Securities Act.
(f) The Company will indemnify Purchaser against all expenses,
claims, losses, damages or liabilities (or actions in respect thereof), arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any registration statement, prospectus, offering
circular or other document, or any amendment or supplement thereto, incident to
any such registration, or based on any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading, or any violation by the Company of the Securities Act of 1933, the
Securities Exchange Act of 1934, state securities law or any rule or regulation
promulgated under such laws applicable to the Company in connection with any
such registration, qualification or compliance, and the Company will reimburse
Purchaser for any legal and any other expenses reasonably incurred, as such
expenses are incurred, in connection with investigating, preparing or defending
any such claim, loss, damage, liability or action, provided that the Company
will not be liable in any such case to the extent that any such claim, loss,
damage, liability or expense arises out of or is based on any untrue statement
or omission, or alleged untrue statement or omission, made in reliance upon and
in conformity with written information relating to Purchaser furnished to the
Company by an instrument duly executed by Purchaser.
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(g) Purchaser will, if Shares held by such Purchaser are included
in the securities as to which such registration is being effected, indemnify the
Company, each of its directors and officers, each underwriter, if any, of the
Company's securities covered by such a registration statement against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement, prospectus, offering
circular or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company, such
Purchasers, such directors, officers, persons, underwriters or control persons
for any legal or any other expenses reasonably incurred, as such expenses are
incurred, in connection with investigating or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
relating to Purchaser furnished to the Company by an instrument duly executed by
Purchaser and stated to be specifically for use therein, provided that in no
event shall any indemnity under this Section 4(g) exceed the net proceeds from
the offering received by Purchaser.
(h) If for any reason the indemnity set forth in paragraphs (f)
or (g) above is unavailable or insufficient to hold harmless an indemnified
party in respect of any losses, claims, damages, liabilities or expenses (or
actions in respect thereof), then the indemnifying party shall contribute to the
amount paid or payable by the indemnified party as a result of such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and the indemnified party on the other hand in connection
with statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses (or actions in respect thereof), as well as any other
relevant equitable considerations. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the indemnifying party or the indemnified
party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission.
Notwithstanding the foregoing, Purchaser shall not be required to contribute any
amount in excess of the amount it would have been required to pay to an
indemnified party if the indemnity under paragraph (g) hereof was available. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(i) Purchaser shall furnish to the Company such information
regarding Purchaser, the Shares held by Purchaser, and the distribution proposed
by Purchaser
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as the Company may reasonably request in writing and as shall be reasonably
required in connection with any registration referred to in this Agreement.
(j) The registration rights granted to Purchaser in this Section
shall expire (a) at such time (if ever) as Purchaser is free to sell the Shares
under Rule 144 promulgated under the Securities Act (or any successor thereto)
without limitation as to volume or manner of sale restrictions, and (b) Shares
held by Purchaser constitute less than one percent (1%) of the outstanding
shares of the common stock of the Company. The foregoing notwithstanding,
Purchaser's registration rights under this Section 4 shall expire after the
Company has offered Purchaser the cumulative opportunity to register all of the
Shares in two registered offerings, irrespective of whether Purchaser elects to
participate in these registrations.
5. Proxy. Concurrently with the execution of this Agreement and the
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issuance of the Shares, Purchaser is executing and delivering a Stockholders'
Agreement and a proxy appointing Xxxxxx X. Xxxxxxxx, one of the founding
shareholders of the Company, Purchaser's attorney-in-fact and proxy to vote all
Shares now or hereafter owned by Purchaser at any meeting of shareholders,
regular or special, whenever called, and for whatever purpose. Copies of the
Stockholders' Agreement and of the proxy shall be filed with the Secretary of
the Company and the proxy shall be registered in the stock books of the Company.
Any transfer of the Shares is subject to the terms of the foregoing proxy.
6. Legend. Each certificate for Shares owned by Purchaser shall bear
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the following legends:
The shares represented by this certificate have not
been registered under the Securities Act of 1933, as
amended, and may not be transferred in the absence of
such registration unless the Company receives an
opinion of counsel reasonably acceptable to it stating
that such sale or transfer is exempt from registration.
The shares represented by this certificate are subject
to a Stockholders' Agreement and to a Proxy in favor of
Xxxxxx X. Xxxxxxxx, copies of which are on file with
the Company. Any transferee of the shares represented
by this certificate shall take the shares subject to
the terms of the Stockholders' Agreement and of the
Proxy.
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7. Share Adjustment
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(a) If the Company hereafter issues shares of Class B common
stock, or any security convertible into its Class B common stock, for a purchase
price per share less than the purchase price per share specified in Section 1 of
this Agreement, the Company shall issue to Purchaser additional shares of common
shares, or securities convertible into common stock, such that the total of such
additional shares and the shares purchased hereunder shall equal the total
number of shares that would have been issued to Purchaser at such lower price
per share for the total purchase price specified in Section 1, with such
issuance of additional shares to be at no cost to Purchaser. Example. The total
price for 2,400,000 shares of Class B stock at $.833 per share as provided in
Section 1 is $1,999,200. If the Company hereafter issues shares of Class B
common stock for $.75 per share, the Company shall issue 265,600 additional
shares of Class B common stock to Purchaser. ($1,999,200 / .75 = 2,665,600 minus
2,400,000 = 265,600).
(b) If the Company hereafter issues shares of Class A common
stock, or any securities convertible into its shares of Class A common stock,
for a purchase price of less than $.694 per share, the Company shall issue to
Purchaser shares of Class A common stock, or securities convertible into shares
of Class A common stock based upon the percentage of the deficiency between
$.694 per share and the actual price per share. Thus for example, if the Company
hereafter sells 1,000,000 shares of Class A common stock at $.50 per share, the
deficiency is $.194 per share or 28%. The Company will then issue shares of
Class A common stock to Purchaser equal to 28% of the total number of shares
issued at less than $.694 per share or 280,000 shares.
(c) The provisions for share adjustment in Sections 7(a) and (b)
shall not apply to (i) the issuance of additional shares of Class A common stock
by the company to its employees either directly or under the Company's 1998
Incentive Compensation Plan, (ii) to shares issued or issuable by the Company as
consideration for the acquisition by the Company of capital stock or assets of
another business entity or in connection with a merger or consolidation, or to
the acquisition of real or tangible property for the Company in arms length
transactions with unrelated third parties, or (iii) to any Class A shares issued
after the Company has completed an initial public offering ("IPO") of its
shares.
8. Subsequent Offerings.
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(a) The Company contemplates making an additional private
offering for shares of its Class A common stock to raise $10,000,000 of
additional capital during September 1998 ("Third Tier"). Purchaser shall have
the option to purchase up to 400,000 shares of Class A common stock in such
offering on the same terms and conditions as shares of Class A common stock are
offered to existing shareholders at the time of the offering provided that the
price per share to Purchaser shall not exceed $2.50 per share.
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(b) In addition to the Third Tier offering referred to above, the
Company presently anticipates making the following private offerings of its
Class A common shares prior to its IPO:
Number of Price Per
Tier Shares Share
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Fourth 800,000 $2.50
Fifth 200,000 $5.00
(c) The anticipated offerings referred to in subsections (a) and
(b) are preliminary and are subject to change based on market conditions, the
financial needs of the Company, and other factors. Purchaser will not have
preemptive rights and will not have the right to purchase shares in future
offerings other than the right to participate in the Third Tier offering as
provided in Section 8(a), except that if the Company hereafter offers more
shares than listed in subsections (a) and (b) prior to its IPO, or if shares are
offered at a price per share less than as scheduled in these Sections, Purchaser
shall have the right to purchase a pro rata portion of the excess shares, or of
the shares offered at less than the offering prices set forth above, at the same
purchase price per share offered to others. Purchaser's pro rata right of
participation shall be determined by comparing the number of shares of Class A
common stock held by Purchaser to the number of shares of Class A common stock
and Class B common stock then outstanding, without regarding to the relative
voting rights attributable to either such class.
9. Notices. All notices and communications under this Agreement
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shall be in writing and shall be given by personal delivery or by registered or
certified mail, return receipt requested, addressed to the respective addresses
of Purchaser and Company set forth above or to such other address as may be
designated by Purchaser or Company. Notice shall be deemed given upon personal
delivery or upon receipt.
10. Confidentiality. Except as may be required by law, neither
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Purchaser nor the Company will issue any press release or, make any public
announcement concerning the transactions contemplated by this Agreement without
the prior consent or approval of the other party.
11. Miscellaneous.
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(a) This Agreement may be modified or amended only upon the
written consent of all parties to the Agreement.
(b) This Agreement shall be interpreted, construed, and enforced
in accordance with the laws of the State of New York.
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(c) Neither this Agreement, nor any rights or obligations under
it, may be assigned by any party without the prior written consent of the other
party.
(d) This Agreement shall benefit and be binding upon the parties
and their successors, heirs, executors, personal representatives, and assigns.
(e) This Agreement sets forth the entire understanding and
agreement of the parties with respect to its subject matter and supersedes all
prior letters, agreements, covenants, communications, understandings,
representations, or warranties, whether oral or written, by any officer,
employee, or representative of either party.
(f) The waiver of any provision of this Agreement, or of any
breach of this Agreement, shall not constitute a subsequent waiver of any
provision or breach.
The parties' assent to the terms of this Agreement is confirmed by
their signatures below.
PAETEC CORP.
By: /s/ Xxxxxx X. Xxxxxxxx
-----------------------------
Title: Chairman & CEO
/s/ Xxxxxxxxxxx X. Xxxxxxxx
--------------------------------
XXXXXXXXXXX X. XXXXXXXX,
TRUSTEE OF THE XXXXXXXXXXX X.
XXXXXXXX LIVING TRUST DATED
APRIL 25, 1998
13
