PURCHASE AGREEMENT
DATED AS OF JUNE 22, 1995
BY AND AMONG
CIBC WOOD GUNDY VENTURES, INC.,
CHEMICAL VENTURE CAPITAL ASSOCIATES,
XXXXXXX VENTURE PARTNERS IV - DIRECT FUND, L.P.,
BT CAPITAL PARTNERS, INC.,
NORTHWOOD CAPITAL PARTNERS LLC,
NORTHWOOD VENTURES
AND
UNITED USN, INC.
TABLE OF CONTENTS
Page
Section 1. Authorization and Closing......................1
1A. Authorization of the Stock......................1
1B. Purchase and Sale of Stock......................1
1C. The Closing.....................................1
1D. The Additional Purchase.........................2
Section 2. Conditions to Each Purchaser's
Obligation at the Closing......................4
2A. Representations and Warranties: Covenants.......4
2B. Certificate of Designation......................4
2C. Certificate of Incorporation and Bylaws.........4
2D. Amended Registration Agreement..................4
2E. Stockholders Agreement..........................4
2F. Employment Agreements...........................5
2G. Sale of Stock to Each Purchaser.................5
2H. Blue Sky Clearance..............................5
2I. Amendment to First Purchase Agreement...........5
2J. Closing Documents...............................5
2K. Opinion of Network's Counsel....................6
2L. Compliance with Applicable Laws.................6
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2M. Due Diligence.................................................................... 7
2N. Investment Committee Approval.................................................... 7
2O. Proceedings...................................................................... 7
2P. Waiver........................................................................... 7
Section 3. Covenants...................................................................... 7
3A. Financial Statements and Other Information....................................... 7
3B. Attendance at Board Meetings..................................................... 11
3C. Inspection of Property........................................................... 11
3D. Restrictions..................................................................... 11
3E. Affirmative Covenants............................................................ 16
3F. Compliance with Agreements....................................................... 17
3G. Current Public Information....................................................... 17
3H. Amendment of UTS Agreement, Xxxxxxxx
Agreement and Employment Agreements.............................................. 18
3I. Proprietary Rights and CAP Agreements............................................ 18
3J. Preemptive Rights................................................................ 18
3K. Regulatory Compliance Cooperation................................................ 19
3L. Public Disclosures............................................................... 20
3M. Management Option Pool........................................................... 20
3N. Key-Man Life Insurance........................................................... 21
3O. SBIC Regulatory Provisions....................................................... 21
Section 4. Transfer of Restricted Securities.............................................. 23
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Section 5. Representations and Warranties of the Company.................................. 24
5A. Organization and Corporate Power................................................. 24
5B. Capital Stock and Related Matters................................................ 24
5C. Subsidiaries; Investments........................................................ 26
5D. Authorization; No Breach......................................................... 26
5E. Financial Statements............................................................. 27
5F. Absence of Undisclosed Liabilities............................................... 27
5G. No Material Adverse Change....................................................... 28
5H. Absence of Certain Developments.................................................. 28
5I. Assets........................................................................... 29
5J. Tax Matters...................................................................... 30
5K. Contracts and Commitments........................................................ 30
5L. Proprietary Rights............................................................... 33
5M. Litigation, etc.................................................................. 34
5N. Brokerage........................................................................ 34
5O. Governmental Consent, etc........................................................ 34
5P. Insurance........................................................................ 35
5Q. Employees........................................................................ 35
5R. ERISA............................................................................ 35
(a) Multiemployer Plans.......................................................... 35
(b) Retiree Welfare Plans........................................................ 35
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(c) Defined Benefit Plans........................................................ 36
(d) Defined Contribution Plans................................................... 36
(e) Other Plans.................................................................. 36
(f) The Company.................................................................. 36
5S. Compliance with Laws............................................................. 36
5T. Small Business Matters........................................................... 36
5U. Affiliated Transactions.......................................................... 37
5V. New York Telephone Company Agreement............................................. 37
5W. Disclosure....................................................................... 37
5X. Knowledge........................................................................ 38
5Y. Closing Date..................................................................... 38
5Z. Projections and Pro Forma Financial Statements................................... 38
Section 6. Put Arrangements............................................................... 39
6A. The Put.......................................................................... 39
6B. Put Closing...................................................................... 39
6C. Put Payment...................................................................... 39
6D. Put Price........................................................................ 41
6E. Put Termination.................................................................. 41
Section 7. Additional Protections for Holders of Investor Common Stock.................... 42
7A.................................................................................... 42
7B.................................................................................... 42
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Section 8. Definitions.................................................................... 42
Section 9. Miscellaneous.................................................................. 50
9A. Expenses.......................................................................... 50
9B. Remedies.......................................................................... 50
9C. Purchaser's Investment Representations............................................ 51
9D. Treatment of the Preferred Stock.................................................. 51
9E. Consent to Amendments............................................................. 51
9F. Survival of Representations and Warranties........................................ 52
9G. Successors and Assigns............................................................ 52
9H. Capital and Surplus; Special Reserves............................................. 52
9I. Generally Accepted Accounting Principles.......................................... 52
9J. Severability...................................................................... 53
9K. Counterparts...................................................................... 53
9L. Descriptive Headings; Interpretation.............................................. 53
9M. Governing Law..................................................................... 53
9N. Notices........................................................................... 53
9O. Understanding Among the Purchasers................................................ 54
9P. Indemnification................................................................... 54
9Q. No Solicitation, Etc.............................................................. 54
9R. Insurance Proceeds................................................................ 55
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Schedules and Exhibits and Appendices
-------------------------------------
Schedule of Purchasers
List of Exhibits
List of Disclosure Schedules
Attachment A
Appendix I
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PURCHASE AGREEMENT
THIS AGREEMENT is made as of June 22, 1995 by and among United USN,
Inc., a Delaware corporation (the "Company"), CIBC Wood Gundy Ventures, Inc., a
Delaware corporation ("CIBC"), Chemical Venture Capital Associates, a California
limited partnership ("Chemical"), Xxxxxxx Venture Partners IV - Direct Fund,
L.P., a Delaware limited partnership ("Xxxxxxx"), BT Capital Partners, Inc., a
Delaware corporation ("BT"), Northwood Capital Partners LLC, a New York limited
liability company ("Northwood Capital") and Northwood Ventures, a New York
limited partnership ("Northwood Ventures," and collectively with CIBC, Chemical,
Xxxxxxx and Northwood Capital, the "Purchasers"). Capitalized terms used herein
are defined in Section 8 hereof.
The Company, CIBC, Chemical and Xxxxxxx are parties to a Purchase
Agreement dated as of April 20, 1994, as amended as of June 10, 1994, and
November 1, 1994 (as so amended, the "First Purchase Agreement"), pursuant to
which CIBC, Chemical and Xxxxxxx purchased from the Company certain shares of
the Company's Preferred Stock - Series 1 and Common Stock. The Purchasers desire
to purchase from the Company and the Company desires to sell to the Purchasers
shares of Preferred Stock - Series 2 and additional shares of Common Stock.
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. Authorization and Closing.
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1A. Authorization of the Stock. The Company shall authorize the
issuance and sale to the Purchasers of an aggregate of 22,869 shares of
Preferred Stock - Series 2 having the rights and preferences set forth in
Exhibit A attached hereto, and 118,462 shares of Common Stock.
1B. Purchase and Sale of Stock. At the Closing, the Company shall
sell to each Purchaser and, subject to the terms and conditions set forth
herein, each Purchaser shall purchase from the Company the number of shares of
Preferred Stock - Series 2 set forth opposite such Purchaser's name on the
Schedule of Purchasers attached hereto at a price of $1,000 per share and the
number of shares of Common Stock set forth opposite such Purchaser's name on
the Schedule of Purchasers attached hereto at a price of $1.95 per share.
1C. The Closing. Subject to the satisfaction of the conditions set
forth in Section 2, the closing of the transactions contemplated by Sections 1A
and 1B (the "Closing") shall take place at the offices of Xxxxxxxx & Xxxxx,
Citicorp Center, 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000 at 10:00
a.m. on June 22, 1995, or at such other place as may be mutually agreeable to
the Company and each Purchaser. At the Closing, the Company shall deliver to
each Purchaser stock certificates evidencing the Stock to be purchased by such
Purchaser, registered in such Purchaser's or its nominee's name, upon payment of
the purchase price thereof by a cashier's or certified check, or by wire
transfer of immediately available funds to the Company's account at Madison Bank
& Trust, in the amounts set forth opposite such Purchaser's name on the Schedule
of Purchasers. The Company hereby acknowledges receipt of $1,000,000 from each
of CIBC, Chemical and Xxxxxxx, which amount was delivered to the Company by each
of such parties on or prior to May 26, 1995 as an advance payment of a portion
of the purchase price payable pursuant to this Agreement, and which amount will
be deducted from amounts otherwise payable by each such Purchaser at the
Closing.
1D. The Additional Purchase.
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(i) The Company shall authorize the issuance and sale to Prime
Cable and/or one or more of its controlled Affiliates (such purchaser(s),
the "Additional Purchaser") of an aggregate of 2,475 shares of Preferred
Stock - Series 2 and 12,821 shares of Common Stock (the "Additional
Stock"); provided, that the Company will authorize the issuance and sale of
such Additional Stock to CIBC, Xxxxxxx and Chemical in the event that the
Additional Purchaser fails for any reason to consummate such purchase by
July 15, 1995. In the event that the Additional Purchaser executes and
delivers a counterpart to this Agreement and consummates the purchase of
Additional Stock by July 15, 1995 and otherwise in accordance with this
Agreement, the Additional Purchaser will be deemed to be a "Purchaser" for
all purposes hereof.
(ii) In the event that the Additional Purchaser fails for any
reason to purchase the Additional Stock by July
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15, 1995, each of CIBC, Xxxxxxx and Chemical will purchase, by not later
than August 1, 1995 and for the same price and on the same terms as it will
purchase the other shares of Preferred Stock and Common Stock as
contemplated by Section 1B above, the Residual Preferred Number of Shares
of Preferred Stock and the Residual Common Number of Shares of Common
Stock; provided that, so long as the sale of Stock contemplated to occur at
the Closing is consummated, the only condition to the obligations of each
of CIBC, Xxxxxxx and Chemical to consummate such purchase will be that such
Purchaser's investment committee or similar authority shall have approved
the purchase contemplated by this Section 1D. In such event, each of CIBC,
Xxxxxxx and Chemical will be permitted to rely on all documents and
certificates delivered to the Purchasers at the Closing, including the
legal opinion delivered pursuant to Section 2 below, in connection with its
purchase of such additional Stock. For purposes of this Section 1D, the
"Residual Preferred Number" means (a) one-third multiplied by (b) the
excess, if any, of (x) 1,881, minus (b) the aggregate number of shares of
Preferred Stock sold to the Additional Purchaser as contemplated by this
Section 1D, or to any other Person, at a price of $1,000 or more per share,
at or prior to the Second Closing; and the "Residual Common Number" means
5.180202 multiplied by the Residual Preferred Number.
(iii) The closing of the purchase and sale of the Additional
Stock (the "Second Closing") shall take place at the offices of Xxxxxxxx &
Xxxxx, Citicorp Center, 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000
at 10:00 a.m. on July 15, 1995 (if to the Additional Purchaser) or August
1, 1995 (if to CIBC, Xxxxxxx and/or Chemical), or at such other place as
may be mutually agreeable to the Company and the Additional Purchaser (or
CIBC, Xxxxxxx and/or Chemical, as appropriate). At the Second Closing, the
Company shall deliver to the Additional Purchaser (or CIBC, Xxxxxxx and/or
Chemical, as appropriate) stock certificates evidencing the Additional
Stock to be purchased by the Additional Purchaser (or CIBC, Xxxxxxx and/or
Chemical, as appropriate), registered in such Purchaser's or its nominee's
name, upon payment of the purchase price thereof by a cashier's or
certified check, or by wire transfer of immediately available funds to the
Company's account at Madison Bank & Trust, in the amounts of
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the purchase price for such Additional Stock. AT THE SECOND CLOSING, THE
ADDITIONAL PURCHASER WILL BECOME A PARTY TO THE AMENDED REGISTRATION
AGREEMENT AND THE AMENDED STOCK TRANSFER AGREEMENT by executing
counterparts thereto.
(iv) Northwood Capital and Northwood Ventures Additional
Purchase. Northwood Capital and Northwood Ventures shall have certain
obligations and rights to purchase 891 shares of Preferred Stock - Series 2
and 4,616 shares of Common Stock on the terms and subject to the conditions
set forth in Appendix I attached hereto. The terms of Appendix I are
incorporated into this Agreement. Except as set forth in such Appendix, any
such purchase will be on the terms set forth in this Agreement, except
that, so long as the Closing is consummated hereunder, none of the
conditions set forth in Section 2 hereof will apply to the obligations of
Northwood Capital and Northwood Ventures as described in such Appendix.
Northwood Capital and Northwood Ventures each represents and warrants that
they collectively hold title to the Notes (as defined in Appendix I hereto)
free and clear of all liens, charges and encumbrances, and they jointly and
severally agree not to transfer any interest in the Notes to any Person,
other than the Company, prior to the 91st day following the Closing.
Section 2. Conditions to Each Purchaser's Obligation at the Closing.
The obligation of each Purchaser to purchase and pay for the Stock at the
Closing is subject to the satisfaction as of the Closing of the following
conditions:
2A. Representations and Warranties: Covenants. The representations
and warranties contained in Section 5 hereof shall be true and correct at and as
of the Closing as though then made, except to the extent of changes caused by
the transactions expressly contemplated herein, and the Company shall have
performed in all material respects all of the covenants required to be performed
by them hereunder prior to the Closing.
2B. Certificate of Designation. The Company shall have duly adopted,
executed and filed with the Secretary of State of the State of Delaware the
Certificate of Designation, and the Company shall not have adopted or filed any
other document designating terms, relative rights or preferences of its
preferred stock. The Certificate of Designation shall be in full force and
effect as of
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the Closing under the laws of the State of Delaware and shall not have been
amended or modified.
2C. Certificate of Incorporation and Bylaws. The Company's bylaws
shall permit the Company's stockholders to establish the size of the board from
6 to 11 directors and permit the stockholders to fill any vacancies on the board
of directors and the Company's bylaws shall each be in full force and effect as
of the Closing and shall not have been otherwise amended or modified. The
Company shall have duly adopted, executed and filed with the Secretary of State
of the State of Delaware the Certificate of Amendment and, as amended thereby,
the Company's Certificate of Incorporation shall be in full force and effect as
of the Closing and shall not have been otherwise amended or modified.
2D. Amended Registration Agreement. The Company and the Purchasers
shall have entered into the Amended Registration Agreement, and the Amended
Registration Agreement shall be in full force and effect as of the Closing.
2E. Stockholders Agreement. The Company, each Purchaser, Xxxxxx X.
Xxxxxxxxxxx and Xxxxxx X. Xxxxxxxxxxx as Trustee for Xxxxx X. Xxxxxxxxx shall
have authorized, executed and delivered the Amended Stockholders Agreement, and
the Amended Stockholders Agreement shall be in full force and effect as of the
Closing.
2F. Employment Agreements. The Employment Agreements shall be in full
force and effect as of the Closing.
2G. Sale of Stock to Each Purchaser. The Company shall have
consummated the sale to each other Purchaser of all Stock contemplated by
Section 1B to be sold to each such other Purchaser and the Company shall have
tendered duly executed certificates for the Stock to be purchased by such
Purchaser hereunder at the Closing.
2H. Blue Sky Clearance. The Company shall have made all pre-sale
filings under applicable state securities laws necessary, if any, to consummate
the issuance of the Stock pursuant to this Agreement in compliance with such
laws.
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2I. Amendment to First Purchase Agreement. The Company and the
Purchasers (other than BT, Northwood Capital and Northwood Ventures) shall have
entered into the Fourth Amendment to Purchase Agreement, and the First Purchase
Agreement, as amended by such amendment, shall be in full force and effect as of
the Closing.
2J. Closing Documents. The Company shall have delivered to each
Purchaser all of the following documents:
(i) an Officer's Certificate, dated the date of the Closing,
stating that the conditions specified in Section 1 and paragraphs 2A
through 2I, inclusive, have been fully satisfied;
(ii) certified copies of the resolutions duly adopted by the
Company's board of directors authorizing the execution, delivery and
performance of this Agreement, the Amended Registration Agreement, the
Amended Stockholders Agreement, the Fourth Amendment to Purchase Agreement
and each of the other agreements contemplated hereby, the filing of the
Certificate of Designation, the filing of the Certificate of Amendment, the
issuance and sale of the Stock, and the consummation of all other
transactions contemplated by this Agreement;
(iii) certified copies of the Certificate of Incorporation (as
amended by the Certificate of Amendment), the Certificate of Designation
and the Company's bylaws, each as in effect at the Closing;
(iv) copies of all third party and governmental consents,
approvals and filings required in connection with the consummation of the
transactions hereunder (including, without limitation, all blue sky law
filings and waivers of all preemptive rights and rights of first refusal);
(v) duly completed and executed SBA Forms 480, 652 and Part A of
1031;
(vi) a business plan showing the Company's financial projections
(including balance sheets and income and cash flow statements) for a 5-year
period;
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(vii) a written statement from the Company regarding its intended
use of the proceeds of the Financing;
(viii) a list, after giving effect to the transactions
contemplated by this Agreement, of (a) the name of each of the Company's
directors, (b) the name and title of each of the Company's officers, and
(c) the name of each of the Company's stockholders setting forth the number
and class of shares held;
(ix) a duly executed Amendment to Plan of Divestiture in the
form set forth in Exhibit I attached hereto; and
(x) such other documents relating to the transactions
contemplated by this Agreement as any Purchaser or its special counsel may
reasonably request.
2K. Opinion of Company's Counsel. Each Purchaser shall have received
from Xxxxx & Xxxxxxxxx, counsel for Company, an opinion with respect to the
matters set forth in Exhibit H attached hereto, which shall be addressed to each
Purchaser, dated the date of the Closing and in form and substance satisfactory
to each of the Purchasers in its sole discretion.
2L. Compliance with Applicable Laws. The purchase of Stock by each
Purchaser hereunder shall not be prohibited by any applicable law or
governmental regulation, shall not subject such Purchaser to any penalty,
liability or, in such Purchaser's sole judgment, other onerous condition under
or pursuant to any applicable law or governmental regulation, and shall be
permitted by laws and regulations of the jurisdictions to which such Purchaser
is subject.
2M. Due Diligence. BT shall be reasonably satisfied with the results
of its continuing business, legal and accounting due diligence review of the
Company and each of its Subsidiaries.
2N. Investment Committee Approval. Each Purchaser's investment
committee or similar authority shall have approved the transactions contemplated
by this Agreement.
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2O. Proceedings. All corporate and other proceedings taken or
required to be taken by the Company in connection with the transactions
contemplated hereby to be consummated at or prior to the Closing and all
documents incident thereto shall be satisfactory in form and substance to the
Purchasers and their special counsel.
2P. Waiver. Any condition specified in this Section 2 may be waived
if consented to by all Purchasers; provided that no such waiver shall be
effective against any Purchaser unless it is set forth in a writing executed by
such Purchaser.
Section 3. Covenants.
---------
3A. Financial Statements and Other Information. The Company shall
deliver to the Purchasers, and if the Purchasers have transferred any part of
its interest in the Company, also to any other holder of Investor Preferred
Stock or Investor Common Stock (other than any such holder actively engaged in
the telecommunications industry and in good faith determined by the Company's
board of directors to be a competitor of the company or any of its
Subsidiaries):
(i) As soon as available but in any event within 30 days after
the end of each monthly accounting period in each fiscal year (other than
the fourth such quarterly accounting period of any year), unaudited
consolidating and consolidated statements of income and cash flows of the
Company and its Subsidiaries for such monthly period and for the period
from the beginning of the fiscal year to the end of such month, and
consolidating and consolidated balance sheets of the Company and its
Subsidiaries as of the end of such monthly period, setting forth in each
case comparisons to the annual budget and to the corresponding period in
the preceding fiscal year;
(ii) As soon as available but in any event within 45 days after
the end of each quarterly accounting period in each fiscal year (other than
the fourth such quarterly accounting period of any year), unaudited
consolidating and consolidated statements of income and cash flows of the
Company and its Subsidiaries for such quarterly period and for the period
from the beginning of the fiscal year to the end of such quarter, and
consolidating and consolidated balance sheets of the
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Company and its Subsidiaries as of the end of such quarterly period,
setting forth in each case comparisons to the annual budget and to the
corresponding period in the preceding fiscal year;
(iii) accompanying the financial statements referred to in
subparagraph (ii), an Officer's Certificate, in the form attached to the
First Purchase Agreement, stating that there is no Event of Noncompliance
in existence and that neither the Company nor any of its Subsidiaries is in
default under any of its other material agreements or, if any Event of
Noncompliance or any such default exists, specifying the nature and period
of existence thereof and what actions the Company and its Subsidiaries have
taken and propose to take with respect thereto; and a management discussion
and analysis of such financial statements and comparisons;
(iv) within the 90 days after the end of each fiscal year,
unaudited consolidating and audited consolidated statements of income and
cash flows of the Company and its Subsidiaries for such fiscal year, and
unaudited consolidating and audited consolidated balance sheets of the
Company and its Subsidiaries as of the end of such fiscal year, setting
forth in each case comparisons to the preceding fiscal year and comparisons
to budget will be provided under separate cover, and accompanied by (a)
with respect to the consolidated portions of such statements, an opinion
containing no exceptions or qualifications (except for qualifications
regarding specified contingent liabilities) of an independent accounting
firm of recognized national standing acceptable to the holders of at least
66 2/3% of the Investor Preferred Stock and the holders of at least 66 2/3%
of the Investor Common Stock, (b) a certificate from such accounting firm,
addressed to the Company's board of directors, stating that in the course
of its examination nothing came to its attention that caused it to believe
that there was an Event of Noncompliance in existence or that there was any
other default by the Company or any Subsidiary in the fulfillment of or
compliance with any of the terms, covenants, provisions or conditions of
any other material agreement to which the Company or any Subsidiary is a
party or, if such accountants have reason to believe any Event of
Noncompliance or other default by the company or any Subsidiary exists, a
certificate
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specifying the nature and period of existence thereof, and (c) a copy of
such firm's annual management letter to the board of directors;
(v) promptly upon receipt thereof, any additional reports,
management letters or other detailed information concerning significant
aspects of the Company's or its Subsidiaries, operations or financial
affairs given to the Company or its Subsidiaries by its independent
accountants (and not otherwise contained in other materials provided
hereunder);
(vi) at least 30 days prior to the beginning of each fiscal year,
an annual budget prepared on a monthly basis for the Company and its
Subsidiaries for such fiscal year (displaying anticipated statements of
income and cash flows and balance sheets), and promptly upon preparation
thereof any other significant budgets prepared by the Company or its
Subsidiaries and any revisions of such annual or other budgets, and within
30 days after any monthly period in which there is a material adverse
deviation from the annual budget, an Officer's Certificate explaining the
deviation and what actions the Company has taken and proposes to take with
respect thereto;
(vii) promptly (but in any event within five business days) after
the discovery or receipt of notice of any Event of Noncompliance, any
default under any material agreement to which the Company or any of its
Subsidiaries is a party or any other material adverse event or circumstance
affecting the Company or any Subsidiary (including the filing of any
material litigation against the Company or any Subsidiary or the existence
of any dispute with any Person which involves a reasonable likelihood of
such litigation being commenced), an Officer's Certificate specifying the
nature and period of existence thereof and what actions the Company and its
Subsidiaries have taken and propose to take with respect thereto;
(viii) within 10 days after transmission thereof, copies of all
financial statements, proxy statements, reports and any other general
written communications which the Company sends to its stockholders and
copies of all registration
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statements and all regular, special or periodic reports which it files, or
any of its officers or directors file with respect to the Company, with the
Securities and Exchange Commission or with any securities exchange on which
any of its securities are then listed, and copies of all press releases and
other statements made available generally by the Company or its
Subsidiaries to the public concerning material developments in the business
of the Company or its Subsidiaries;
(ix) unless included the unaudited consolidating financial
statements, otherwise delivered pursuant to this Section 3A, within 10 days
after receipt thereof, copies of all financial statements provided by UTS
to the Company unless such financial statements have been forwarded to each
Purchaser by UTS; and
(x) with reasonable promptness, such other information and
financial data concerning the Company and its Subsidiaries as any Person
entitled to receive information under this paragraph 3A may reasonably
request.
Each of the financial statements referred to in any of subparagraphs (i), (ii)
and (iv) shall be true and correct in all material respects as of the dates and
for the periods stated therein, be prepared in accordance with generally
accepted accounting principles consistently applied, subject in the case of the
unaudited financial statements to changes resulting from normal year-end audit
adjustments (none of which would, alone or in the aggregate, be materially
adverse to the financial condition, operating results, assets, operations or
business prospects of the Company and its Subsidiaries taken as a whole) and
except for the absence of footnotes.
Notwithstanding the foregoing, the provisions of this paragraph 3A, other
than subparagraph 3A(x), shall cease to be effective so long as the Company (a)
is subject to the periodic reporting requirements of the Securities Exchange Act
and continues to comply with such requirements and (b) promptly provides to each
Person otherwise entitled to receive information pursuant to this paragraph 3A
all reports and other materials filed by the Company with the Securities and
Exchange Commission pursuant to the periodic reporting requirements of the
Securities Exchange Act;
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provided that so long as any Investor Preferred Stock remains outstanding, the
Company shall continue to deliver to each Qualified Holder the information
specified in subparagraphs 3A(i), (ii), 3A(iv)(b) and 3A(vii).
Except as otherwise required by law or judicial order or decree or by any
governmental agency or authority, each Person entitled to receive information
regarding the Company and its Subsidiaries under paragraph 3A shall use its best
efforts to maintain the confidentiality of all nonpublic information obtained by
it hereunder which the Company or its Subsidiaries has reasonably designated as
proprietary or confidential in nature; provided that each such Person may, to
the extent required by law, disclose such information in connection with the
sale or transfer of any Stock if such Person's transferee agrees in writing to
be bound by the provisions hereof.
3B. Attendance at Board Meetings. The Company shall give each
Qualified Holder who does not have a representative on the Company's board of
directors written notice of each meeting of its board of directors and each
committee thereof at least three business days prior to the date of each such
meeting, and the Company shall permit representatives of all Qualified Holders
to attend as observers all meetings of its board of directors and committees
thereof; provided that in the case of telephonic meetings conducted in
accordance with the Company's bylaws and applicable law, each such Qualified
Holder need receive only actual notice thereof at least 48 hours prior to any
such meeting, and each such Qualified Holder's representative shall be given the
opportunity to listen to such telephonic meetings. Each representative shall be
entitled to receive all written materials and other information (including,
without limitation, copies of meeting minutes) given to directors in connection
with such meetings at the same time such materials and information are given to
the directors. If the Company proposes to take any action by written consent in
lieu of a meeting of its board of directors or of any committee thereof, the
Company shall give written notice thereof to each such Qualified Holder prior to
the effective date of such consent describing in reasonable detail the nature
and substance of such action. The Company shall pay the reasonable out-of-pocket
expenses of each representative incurred in connection with attending such board
and committee meetings.
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3C. Inspection of Property. The Company shall permit any
representatives designated by any Qualified Holder, upon reasonable notice and
during normal business hours and such other times as any such holder may
reasonably request, to (i) visit and inspect any of the properties of the
Company and its Subsidiaries, (ii) examine the corporate and financial records
of the Company and its Subsidiaries and make copies thereof or extracts
therefrom and (iii) discuss the affairs, finances and accounts of any such
corporations with the directors, officers, key employees and independent
accountants of the Company and its Subsidiaries. The presentation of an executed
copy of this Agreement by any Qualified Holder to the Company's independent
accountants shall constitute the Company's permission to its independent
accountants to participate in discussions with such Qualified Holder.
3D. Restrictions. So long as a Purchaser holds any Investor Common
Stock or any Investor Preferred Stock, the Company shall not, without the
Required Approval:
(i) directly or indirectly declare or pay any dividends or make
any distributions upon any of its equity securities except for dividends
and distributions on the Preferred Stock pursuant to the terms of the
Certificate of Incorporation (as amended by the Certificate of Amendment)
or Certificate of Designation or dividends payable in shares of Common
Stock issued upon the outstanding shares of Common Stock;
(ii) directly or indirectly redeem, purchase or otherwise
acquire, or permit any Subsidiary to redeem, purchase or otherwise
acquire, any of the Company's equity securities (including, without
limitation, warrants, options and other rights to acquire equity
securities) other than (a) the Preferred Stock pursuant to the terms of
the Certificate of Incorporation (as amended by the Certificate of
Amendment) or the Certificate of Designation, (b) pursuant to any Put
under Section 6 of this Agreement, or (c) shares of Common Stock pursuant
to Section 7 of the First Purchase Agreement, so long as the Company also
offers to repurchase from each holder of Investor Common Stock the number
of shares of Investor Common Stock held by such holder which represents
the same proportion of such holder's Investor Common Stock as the Company
would offer to repurchase from such holder pursuant to Section 7 of the
First Purchase Agreement if such shares of Investor Common
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Stock were "Investor Common Stock" within the meaning of the First Purchase
Agreement, on the same terms as the Company repurchases such shares of
Common Stock, and consummates such purchase of shares of Investor Common
Stock concurrently with such repurchase (it being understood that each such
holder may elect to sell to the Company all or any portion of the number of
shares which the Company offers to purchase);
(iii) except as expressly contemplated by this Agreement,
authorize, issue or enter into any agreement providing for the issuance
(contingent or otherwise) of, (a) any notes or debt securities containing
equity features (including, without limitation, any notes or debt
securities convertible into or exchangeable for equity securities, issued
in connection with the issuance of equity securities or containing profit
participation features) or (b) any equity securities (or any securities
convertible into or exchangeable for any equity securities) which are
senior to or on a parity with the Preferred Stock with respect to the
payment of dividends, redemptions or distributions upon liquidation or
otherwise;
(iv) except as contemplated by the UTS Agreement and the Xxxxxxxx
Agreement, permit any Subsidiary to authorize, issue or enter into any
agreement providing for the issuance (contingent or otherwise) of any notes
or debt securities containing equity features (including, without
limitation, any notes or debt securities convertible into or exchangeable
for equity securities, issued in connection with the issuance of equity
securities or containing profit participation features);
(v) make, or permit any Subsidiary to make, any loans or advances
to, guarantees for the benefit of or Investments in any Person (other than
a wholly-owned Subsidiary established under the laws of a jurisdiction of
the United States or any of its territorial possessions), except for (a)
reasonable advances to employees in the ordinary course of business, (b)
acquisitions permitted pursuant to subparagraph (x) below, (c) Investments
in UTS pursuant to the UTS Agreement or as approved by a majority of the
members of the Company's board of directors, (d) Investments having a
stated maturity no greater than one year from the date the Company makes
such Investment in (1) obligations of the United States government or any
-14-
agency thereof or obligations guaranteed by the United States government,
(2) certificates of deposit of commercial banks having combined capital and
surplus of at least $50 million, (3) commercial paper with a rating of at
least "Prime-1" by Xxxxx'x Investors Service, Inc., or (4) certificates of
deposit or interest-bearing demand deposits of Madison Bank and Trust
Company, and (e) Investments made in accordance with cash investment
policies approved by the Company's board of directors from time to time;
(vi) merge or consolidate with any Person or, except as permitted
by subparagraph (x) below, permit any Subsidiary to merge or consolidate
with any Person (other than a wholly-owned Subsidiary);
(vii) sell, lease or otherwise dispose of more than 10% of the
consolidated assets of the Company and its Subsidiaries (computed on the
basis of book value, determined in accordance with generally accepted
accounting principles consistently applied, or fair market value,
determined by the Company's board of directors in its reasonable good faith
judgment) in any transaction or series of related transactions (other than
sales in the ordinary course of business) or sell, transfer, assign or
otherwise dispose of, or pledge or encumber, any of its CAP Agreements or
Proprietary Rights;
(viii) permit any Subsidiary to sell, lease or otherwise dispose
of more than 15% of the assets of such Subsidiary (computed on the basis of
book value, determined in accordance with generally accepted accounting
principles consistently applied, or fair market value, determined by the
Company's board of directors in its reasonable good faith judgment) in any
transaction or series of related transactions (other than sales in the
ordinary course of business) or sell, transfer, assign or otherwise dispose
of, or pledge or encumber (other than pursuant to the UTS Agreement), any
of such Subsidiary's CAP Agreements or Proprietary Rights;
(ix) liquidate, dissolve or effect a recapitalization or
reorganization in any form of transaction (including, without limitation,
any reorganization into partnership form);
-15-
(x) except for CAP Agreements approved by a majority of the
members of the Company's board of directors and of investments in UTS
pursuant to the UTS Agreement or as approved by a majority of the members
of the Company's board of directors, acquire, or permit any Subsidiary to
acquire, any interest in any business (whether by a purchase of assets,
purchase of stock, merger or otherwise), or enter into any joint venture,
involving an aggregate consideration (including the assumption of
liabilities whether direct or indirect) exceeding $500,000 in any one
transaction or exceeding $1,000,000 in any twelve-month period;
(xi) enter into, or permit any Subsidiary to enter into, the
ownership, active management or operation of any business other than as a
provider of telecommunications services and related software and equipment;
(xii) become subject to, or permit any of its Subsidiaries to
become subject to, any agreement or instrument which by its terms would
(under any circumstances) restrict (a) the right of any Subsidiary to make
loans or advances or pay dividends to, transfer property to, or repay any
Indebtedness owed to, the Company or another Subsidiary or (b) the
Company's right to perform the provisions of this Agreement, the Amended
Registration Agreement, the Amended Stockholders Agreement, the Certificate
of Designation, the Certificate of Incorporation (as amended by the
Certificate of Amendment) or the Company's bylaws (including, without
limitation, provisions relating to payment of dividends on and making
redemptions of any series of the Preferred Stock);
(xiii) except as expressly contemplated by this Agreement, make
any amendment to the Certificate of Incorporation (as amended by the
Certificate of Amendment), the Certificate of Designation or the Company's
bylaws, or file any resolution of the board of directors with the Secretary
of State of the State of Delaware containing any provisions which would
increase the number of authorized shares of any series of the Preferred
Stock or adversely affect or otherwise impair the rights or relative
priority of the holders of any series of the Preferred Stock or the
Investor Common Stock under this Agreement, the Certificate of
Incorporation, the Certificate of
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Designation, the Company's bylaws, the Amended Registration Agreement or the
Amended Stockholders Agreement;
(xiv) enter into, or permit any Subsidiary to enter into, any
transaction with the Company's or any Subsidiary's officers, directors,
employees or Affiliates or any individual related by blood or marriage to
any such Person or any entity in which any such Person or individual owns a
beneficial interest, except (a) pursuant to the UTS Agreement, (b) the
Xxxxxxxx Agreement, (c) normal employment arrangements and benefit programs
on reasonable terms, (d) agreements for consulting services, other
services, office space or the purchase of goods on terms and conditions no
less favorable than available in arm's length transactions with unrelated
third parties if such agreements are approved by the Company's Chief
Financial Officer, and (e) as otherwise expressly contemplated by this
Agreement;
(xv) except pursuant to the UTS Agreement and except for debt
financing secured solely by accounts receivable of the company and its
Subsidiaries as approved by the Company's board of directors, create,
incur, assume or suffer to exist, or permit any Subsidiary to create,
incur, assume or suffer to exist, Indebtedness exceeding in the aggregate
$1,500,000 outstanding at any time on a consolidated basis;
(xvi) except pursuant to CAP Agreements approved by a majority of
the members of the Company's board of directors, make, or permit any
Subsidiary to make, any capital expenditures (including, without
limitation, payments with respect to capitalized leases, as determined in
accordance with generally accepted accounting principles consistently
applied) exceeding $4,500,000 in the aggregate on a consolidated basis
during any twelve-month period;
(xvii) except pursuant to CAP Agreements approved by a majority
of the members of the Company's board of directors, enter into, or permit
any Subsidiary to enter into, any leases or other rental agreements
(excluding capitalized leases, as determined in accordance with generally
accepted accounting principles consistently applied) under which the amount
of the aggregate lease payments for all such agreements for both the
-17-
Company and its Subsidiaries exceeds $4,500,000 on a consolidated basis for
any twelve-month period;
(xviii) change its fiscal year;
(xix) increase the authorized size of its board of directors
above 11 members or decrease the authorized size of its board of directors
below 6 members;
(xx) adopt any new stock option plan or employee stock
ownership plan or issue any shares of Common Stock to any of its employees
or any employees of any of its Subsidiaries, other than as approved by a
majority of the members of the Company's board of directors in connection
with the Management Option Pool;
(xxi) except pursuant to the UTS Agreement, issue or sell any
shares of the capital stock, or rights to acquire shares of the capital
stock, of any Subsidiary to any Person other than the Company or another
Subsidiary; or
(xxii) borrow against, pledge, assign, modify, cancel or
surrender any key-man life insurance policies required to be maintained
under paragraph 3E hereof.
3E. Affirmative Covenants. So long as a Purchaser holds any
Investor Common Stock or any Investor Preferred Stock, the Company shall, and
shall cause each Subsidiary to:
(i) at all times cause to be done all things necessary to
maintain, preserve and renew its corporate existence and all material
licenses, authorizations and permits necessary to the conduct of its
businesses;
(ii) maintain and keep its properties in good repair, working
order and condition, and from time to time make all necessary or desirable
repairs, renewals and replacements, so that its businesses may be properly
and advantageously conducted at all times;
(iii) pay and discharge when payable all taxes, assessments and
governmental charges imposed upon its properties or upon the income or
profits therefrom (in each
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case before the same becomes delinquent and before penalties accrue
thereon) and all claims for labor, materials or supplies which if unpaid
would by law become a lien upon any of its property, unless and to the
extent that the same are being contested in good faith and by appropriate
proceedings and adequate reserves (as determined in accordance with
generally accepted accounting principles, consistently applied) have been
established on its books with respect thereto;
(iv) comply with all other obligations which it incurs pursuant
to any contract or agreement, whether oral or written, express or implied,
as such obligations become due, unless and to the extent that the same are
being contested in good faith and by appropriate proceedings and adequate
reserves (as determined in accordance with generally accepted accounting
principles, consistently applied) have been established on its books with
respect thereto;
(v) comply with all applicable laws, rules and regulations of
all governmental authorities, including the Federal Communications
Commission, the Public Utilities Commission of Ohio, the New York Public
Service Commission, and all similar governmental authorities of the State
of Massachusetts, the violation of which would reasonably be expected to
have a material adverse effect upon the financial condition, operating
results, assets, operations or business prospects of the Company and its
Subsidiaries taken as a whole;
(vi) apply for and continue in force with good and responsible
insurance companies adequate insurance covering risks of such types and in
such amounts as are customary for well-insured corporations of similar size
engaged in similar lines of business;
(vii) maintain the key-man life insurance policies referred to
in paragraph 3N hereof and maintain officers and directors liability
insurance coverage of at least $2,500,000; and
(viii) maintain proper books of record and account which fairly
present its financial condition and results of operations and make
provisions on its financial statements for all such proper reserves as in
each case are required in
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accordance with generally accepted accounting principles, consistently
applied.
3F. Compliance with Agreements. The Company shall perform and observe
(i) all of its obligations to each holder of the Stock set forth in the
Certificate of Incorporation (as amended by the Certificate of Amendment), the
Certificate of Designation and the Company's bylaws, (ii) all of its obligations
to each holder of Registrable Securities set forth in Amended Registration
Agreement, and (iii) all of its obligations under the Amended Stockholders
Agreement.
3G. Current Public Information. At all times after the Company has
filed a registration statement with the Securities and Exchange Commission
pursuant to the requirements of either the Securities Act or the Securities
Exchange Act, the Company shall file all reports required to be filed by it
under the Securities Act and the Securities Exchange Act and the rules and
regulations adopted by the Securities and Exchange Commission thereunder and
shall take such further action as any holder or holders of Restricted Securities
may reasonably request, all to the extent required to enable such holders to
sell Restricted Securities pursuant to (i) Rule 144 adopted by the Securities
and Exchange Commission under the Securities Act (as such rule may be amended
from time to time) or any similar rule or regulation hereafter adopted by the
Securities and Exchange Commission or (ii) a registration statement on Form S-2
or S-3 or any similar registration form hereafter adopted by the Securities and
Exchange Commission. Upon request, the Company shall deliver to any holder of
Restricted Securities a written statement as to whether it has complied with
such requirements.
3H. Amendment of UTS Agreement, Xxxxxxxx Agreement and Employment
Agreements. The Company shall not amend, modify or waive any provision of the
UTS Agreement, the Xxxxxxxx Agreement or the Employment Agreements without the
Required Approval, and the Company shall enforce the provisions of the UTS
Agreement, the Xxxxxxxx Agreement and the Employment Agreements and shall
exercise all of its rights, and remedies thereunder (including, without
limitation, any repurchase options and first refusal rights) unless it otherwise
receives the Required Approval.
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3I. Proprietary Rights and CAP Agreements. The Company shall, and
shall cause each Subsidiary to, possess and maintain all material Proprietary
Rights necessary to the conduct of their respective businesses and own all
right, title and interest in and to, or have a valid license for, all material
Proprietary Rights used by the Company and each Subsidiary in the conduct of
their respective businesses. Neither the Company nor any Subsidiary shall take
any action, or fail to take any action, which would result in the invalidity,
abuse, misuse or unenforceability of any of its Proprietary Rights or CAP
Agreements or which would infringe upon any rights of other Persons.
3J. Preemptive Rights.
(i) Except for the issuance of Common Stock (a) pursuant to the
Management Option Pool as contemplated by this Agreement, (b) in connection
with the acquisition of another business as contemplated by paragraph
3D(x), or (c) pursuant to a public offering registered under the Securities
Act, if the Company authorizes the issuance or sale of any of its equity
securities, any securities containing options or rights to acquire any
shares of its equity securities (other than as a dividend on outstanding
equity securities), the Company shall first offer to sell to each holder of
Investor Common Stock a portion of such stock or securities equal to the
quotient determined by dividing (1) the number of shares of Investor Common
Stock held by such holder by (2) the sum of the total number of shares of
outstanding Investor Common Stock and the number of shares of Common Stock
outstanding which are not shares of Investor Common Stock. Each holder of
Investor Common Stock shall be entitled to purchase such stock or
securities at the most favorable price and on the most favorable terms as
such stock or securities are to be offered to any other Persons. The
purchase price for all stock and securities offered to the holders of the
Investor Common Stock shall be payable in cash or, to the extent otherwise
required hereunder, notes issued by such holders.
(ii) In order to exercise its purchase rights hereunder, a holder
of Investor Common Stock must, within 30 days after receipt of written
notice from the Company describing in reasonable detail the stock or
securities being offered, the purchase price thereof, the payment terms, a
management
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financial forecast, use of proceeds and such holder's percentage allotment,
deliver a written notice to the Company describing its election hereunder.
If all of the stock and securities offered to the holders of Investor
Common Stock is not fully subscribed by such holders, the remaining stock
and securities shall be reoffered by the Company to the holders purchasing
their full allotment upon the terms set forth in this paragraph (i.e., pro-
rata among such holders, except that such holders must exercise their
purchase rights within five days after receipt of such reoffer).
(iii) Upon the expiration of the offering periods described above
the Company shall be entitled to sell such stock or securities which the
holders of Investor Common Stock have not elected to purchase during the 30
days following such expiration on terms and conditions no more favorable to
the purchasers thereof than those offered to such holders. Any stock or
securities offered or sold by the Company after such 30-day period must be
reoffered to the holders of Investor Common Stock pursuant to the terms of
this paragraph.
3K. Regulatory Compliance Cooperation.
---------------------------------
(i) In the event that any SBIC Holder determines that it has a
Regulatory Problem (as defined below), such SBIC Holder shall have the right to
transfer any securities of the Company without regard to any restriction on
transfer set forth in this Agreement other than the securities laws restrictions
set forth in Section 5 (provided that the transferee agrees to become a party to
this Agreement), and the Company shall take all such actions as are reasonably
requested by such SBIC Holder in order to (a) effectuate and facilitate any
transfer by such SBIC Holder of any securities of the Company then held by such
SBIC Holder to any Person designated by such SBIC Holder, (b) permit such SBIC
Holder (or any of its affiliates) to exchange all or any portion of any voting
security then held by it on a share-for-share basis for shares of a nonvoting
security of the Company, which nonvoting security shall be identical in all
respects to the voting security exchanged for it, except that it shall be
nonvoting and shall be convertible into a voting security on such terms as are
requested by such SBIC Holder in light of regulatory considerations then
prevailing, (c) continue and preserve the respective allocations of the voting
interests with respect to the Company arising out of the SBICs'
-22-
aggregate ownership of voting securities and/or provided in the Amended
Stockholders Agreement before the transfers and amendments referred to above
(including entering into such additional agreements as are requested by such
SBIC Holder to permit any Person(s) designated by such SBIC Holder reasonably
acceptable to the Company to exercise any voting power which is relinquished by
such SBIC Holder), and (d) amend this Agreement, the Certificate of
Incorporation, the Bylaws and related agreements and instruments to effectuate
and reflect the foregoing. The parties to this Agreement agree to vote their
securities in favor of such amendments and actions.
(ii) For purposes of this Agreement, a "Regulatory Problem" means any
set of facts or circumstances wherein it has been asserted by any governmental
regulatory agency (or any SBIC Holder believes that there is a substantial risk
of such assertion) that such SBIC Holder is not entitled to hold, or exercise
any significant right with respect to, all or any portion of the Stock.
3L. Public Disclosures. The Company shall not, nor shall it permit
any Subsidiary to, disclose any Purchaser's name or identify as an investor in
the Company in any press release or other public announcement or in any document
or material filed with any governmental entity, without the prior written
consent of such Purchaser, unless such disclosure is required by applicable law
or governmental regulations or by order of a court of competent jurisdiction, in
which case prior to making such disclosure the Company shall give written notice
to such Purchaser describing in reasonable detail the proposed content of such
disclosure and shall permit the Purchaser to review and comment upon the form
and substance of such disclosure.
3M. Management Option Pool. Prior to the Closing, the Company shall
reserve for issuance pursuant to the Management Option Pool shares of Common
Stock such that the total number of shares so reserved plus the total number
subject to outstanding employee stock options, plus the total number previously
issued upon exercise of employee stock options, equals 15% of the outstanding
shares of Common Stock on a fully diluted basis after giving prospective effect
to the issuance of Common Stock contemplated hereby, assuming the issuance of
all shares reserved under the Management Option Pool. The Company shall issue
options in the Management Option Pool to senior management of the Company
-23-
as incentive compensation at such times and with such terms as determined by the
Company's board of directors.
3N. Key-Man Life Insurance. The Company shall maintain a key-man
life insurance policy on the life of Xxxxxx X. Xxxxxxxxxxx, and shall diligently
pursue and in good faith attempt to obtain within 90 days following the Closing
and thereafter at all times maintain key-man life insurance policies on the
lives of Xxxxxx X. Xxxx and Xxxxxx X. Xxxxxxxx, in the face amount of $2,500,000
each. Such insurance policies shall name the Purchasers as beneficiary and shall
provide that such insurance policies may not be cancelled unless the insurance
carrier gives at least 30 days prior written notice of such cancellation to each
Purchaser.
3O. SBIC Regulatory Provisions.
(i) The Company shall notify each holder of Stock which is an SBIC
(an "SBIC Holder") as soon as practicable (and, in any event, not later than 15
days) prior to taking any action after which the number of record holders of the
Company's voting stock would be increased from fewer than 50 to 50 or more, and
the Company shall notify each SBIC Holder of any other action or occurrence
after which the number of record holders of the Company's voting stock was
increased (or would increase) from fewer than 50 to 50 or more, as soon as
practicable after the Company becomes aware that such other action or occurrence
has occurred or is proposed to occur. Upon the occurrence of any such event or
transaction, the Company shall enter into a Plan of Divestiture with each SBIC
Holder as required by the SBIC Regulations.
(ii) Within 75 days after the Closing and each subsequent Financing
hereunder by an SBIC Holder and at the end of each month thereafter until all of
the proceeds from the Financing hereunder have been used by the Company and its
Subsidiaries, the Company shall deliver to each SBIC Holder a written statement
certified by the Company's president or chief financial officer describing in
reasonable detail the use of the proceeds of the Financing hereunder by the
Company and its Subsidiaries. In addition to any other rights granted hereunder,
the Company shall grant each SBIC Holder and the United States Small Business
Administration (the "SBA") access to the Company's records for the purpose of
verifying the use of such proceeds.
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(iii) Upon the occurrence of a Regulatory Violation or in the event
that any SBIC Holder determines in its reasonable good faith judgment that a
Regulatory Violation has occurred, in addition to any other rights and remedies
to which it may be entitled as a holder of Class A Preferred or Underlying
Common Stock (whether under this Agreement, the Certificate of Incorporation or
otherwise), each SBIC Holder shall have the right, to the extent required under
the SBIC Regulations, to demand the immediate repurchase of all of the
outstanding shares of Stock owned by such SBIC Holder at a price per share equal
to the purchase price paid for such stock hereunder, plus (in the case of the
Preferred Stock) all accrued or declared and unpaid dividends thereon, by
delivering written notice of such demand to the Company. The Company shall pay
the purchase price for such stock by a cashier's or certified check or by wire
transfer of immediately available funds to each SBIC Holder demanding repurchase
within 30 days after the Company's receipt of the demand notice, and upon such
payment, each such SBIC Holder shall deliver the certificates evidencing the
Stock to be repurchased duly endorsed for transfer or accompanied by duly
executed forms of assignment.
(iv) For purposes of this paragraph, "Regulatory Violation" means,
with respect to any SBIC Holder providing Financing under this Agreement, (a) a
diversion of the proceeds of such Financing from the reported use thereof on SBA
Form 1031 delivered at the Closing, if such diversion was effected without
obtaining the prior written consent of the SBIC Holders (which may be withheld
in their sole discretion) or (b) a change in the principal business activity of
the Company and its Subsidiaries to an ineligible business activity (within the
meaning of the SBIC Regulations) if such change occurs within one year after the
date of the initial Financing hereunder; "SBIC Regulations" means the Small
Business Investment Act of 1958 and the regulations issued thereunder as set
forth in 13 CFR 107 and 121, as amended; and the term "Financing" shall have the
meaning set forth in the SBIC Regulations.
(vi) Promptly after the end of each fiscal year (but in any event
prior to February 28 of each year) the Company shall deliver to each SBIC Holder
a written assessment of the economic impact of each SBIC Holder's investment in
the Company, specifying the full-time equivalent jobs created or retained in
connection with the
-25-
investment, the impact of the investment on the businesses of the Company in
terms of expanded revenue and taxes, and other economic benefits resulting from
the investment, including but not limited to, technology development or
commercialization, minority business development, urban or rural business
development, expansion of exports.
Section 4. Transfer of Restricted Securities.
---------------------------------
(i) Restricted Securities are transferable only pursuant to (a)
public offerings registered under the Securities Act, (b) Rule 144 or Rule
144A of the Securities and Exchange Commission (or any similar rule or
rules then in force) if such rule is available, and (c) subject to the
conditions specified in subparagraph (ii) below, any other legally
available means of transfer.
(ii) In connection with the transfer of any Restricted Securities
(other than a transfer described in subparagraph 5(i)(a) or (b) above), the
holder thereof shall (unless such requirement is waived in writing by the
Company) deliver written notice to the Company describing in reasonable
detail the transfer or proposed transfer, together with an opinion of
Xxxxxxxx & Xxxxx or other counsel which (to the Company's reasonable
satisfaction) is knowledgeable in securities law matters to the effect that
such transfer of Restricted Securities may be effected without registration
of such Restricted Securities under the Securities Act. In addition, if the
holder of the Restricted Securities delivers to the Company an opinion of
Xxxxxxxx & Xxxxx or such other counsel that no subsequent transfer of such
Restricted Securities shall require registration under the Securities Act,
the Company shall promptly upon such contemplated transfer deliver new
certificates for such Restricted Securities which do not bear the
Securities Act legend set forth in paragraph 8C. If the Company is not
required to deliver new certificates for such Restricted Securities not
bearing such legend, the holder thereof shall not transfer the same until
the prospective transferee has confirmed to the Company in writing its
agreement to be bound by the conditions contained in this subparagraph and
paragraph 8C.
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(iii) Upon the request of any holder of Restricted Securities
which are eligible for sale pursuant to Rule 144(k) together with the
delivery to the Company of an opinion of Xxxxxxxx & Xxxxx or such other
counsel that no subsequent transfer of such Restricted Securities shall
require registration under the Securities Act, the Company shall remove the
foregoing legend from the certificates for such holder's Restricted
Securities.
Section 5. Representations and Warranties of the Company. As a
material inducement to the Purchasers to enter into this Agreement and purchase
the Stock, the Company hereby represents and warrants that:
5A. Organization and Corporate Power. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and is qualified to do business in every
jurisdiction in which its ownership of property or conduct of business requires
it to qualify. The Company has all requisite corporate power and authority and
all licenses, permits and authorizations necessary to own and operate its
properties, to carry on its businesses as now conducted and presently proposed
to be conducted and to carry out the transactions contemplated by this
Agreement. The copies of the Company's and each Subsidiary's charter documents
and bylaws which have been furnished to the Purchasers' special counsel reflect
all amendments made thereto at any time prior to the date of this Agreement and
are correct and complete.
5B. Capital Stock and Related Matters.
---------------------------------
(i) As of the Closing and immediately thereafter, the authorized
capital stock of the Company shall consist of (a) 50,000 shares of
preferred stock, of which 20,000 shares shall be designated as Series A
10% Senior Cumulative Preferred Stock, 16,230 of which shall be issued and
outstanding, and 30,000 shares shall be designated as Series A-2 10%
Senior Cumulative Preferred Stock, 22,869 of which shall be issued and
outstanding, and (b) 500,000 shares of Common Stock, of which 296,302
shares shall be issued and outstanding, 54,551 shares shall be reserved
for issuance in connection with the Management Option Pool subsequent to
the Closing. As of the Closing and immediately thereafter, the
stockholders of the
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Company shall be as set forth in the "Capitalization Schedule" hereto.
(ii) As of the Closing, neither the Company nor any Subsidiary
shall have outstanding any stock or securities convertible or exchangeable
for any shares of its capital stock or containing any profit participation
features, nor shall it have outstanding any rights or options to subscribe
for or to purchase its capital stock or any stock or securities convertible
into or exchangeable for its capital stock or any stock appreciation rights
or phantom stock plans, except as set forth on the attached Capitalization
Schedule or as provided in this Agreement or the Subscription Agreement.
The Capitalization Schedule accurately sets forth the following information
with respect to all outstanding options and rights to acquire the Company's
capital stock: the holder, the number of shares covered, the exercise price
and the expiration date. As of the Closing, neither the Company nor any
Subsidiary shall be subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of its capital stock
or any warrants, options or other rights to acquire its capital stock,
except as provided in the Amended Stockholders Agreement, as set forth on
the Capitalization Schedule, pursuant to the Certificate of Designation and
the Certificate of Incorporation (as amended by the Certificate of
Amendment), pursuant to Section 7 of the First Purchase Agreement or
pursuant to Section 6 of this Agreement. As of the Closing, all of the
outstanding shares of the Company's capital stock shall be validly issued,
fully paid and nonassessable.
(iii) There are no statutory or contractual stockholders'
preemptive rights or rights of refusal with respect to the issuance of the
Stock hereunder. The Company and its Subsidiaries have not violated any
applicable federal or state securities laws in connection with the offer,
sale or issuance of any of their capital stock, and the offer, sale and
issuance of the Stock hereunder does not require registration under the
Securities Act or any applicable state securities laws. Except as set forth
on the Capitalization Schedule and pursuant to the Amended Stockholders
Agreement, to the best of the Company's knowledge, there are no agreements
between the stockholders of the Company or its Subsidiaries with respect to
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the voting or transfer of the capital stock of the Company or its
Subsidiaries or with respect to any other aspect of the affairs of the
Company or its Subsidiaries.
(iv) As of the Closing, the outstanding capital stock of UTS
shall consist of (a) 1,000,000 shares of common stock, of which the Company
owns 501,000 shares and (b) 2,025 shares of preferred stock, of which the
Company owns 2,025 shares. The Company paid an aggregate of $2,000,000 in
exchange for all such shares held as of the Closing. The Company has the
right, but is not obligated, to purchase additional shares of UTS common
stock and preferred stock, at a price of $1,000 for units ("Units") each
comprised of one share of preferred stock and 250 shares of UTS common
stock. The Company and UTS are parties to an agreement pursuant to which
the Company has agreed to purchase from UTS and UTS has agreed to sell to
the Company Units of additional UTS common stock and UTS preferred stock in
exchange for an aggregate purchase price of $1,350,000. Such purchase
agreement, and the transactions contemplated thereby, have been approved by
the board of directors and stockholders of UTS, and the sale of stock
contemplated thereby will be consummated at such time as such sale has been
approved by the New York Public Service Commission (the "NYPSC"). As of the
Closing, in addition to the $1,350,000 advanced pursuant to such purchase
agreement, the Company has advanced an aggregate $1,800,000 to UTS,
evidenced by promissory notes issued by UTS and which amounts the Company
may, at its sole discretion, convert into Units at the price indicated
above (subject only to the prior approval thereof by the NYPSC).
5C. Subsidiaries; Investments. The attached "Subsidiary Schedule"
correctly sets forth the name of each Subsidiary, the jurisdiction of its
incorporation and the Persons owning the outstanding capital stock of such
Subsidiary. Each Subsidiary is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, has all
requisite corporate power and authority and all material licenses, permits and
authorizations necessary to own its properties and to carry on its businesses as
now being conducted and as presently proposed to be conducted and is qualified
to do business in every jurisdiction in which its ownership of property or the
conduct of business requires it to qualify. All of the outstanding shares of
capital
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stock of each Subsidiary are validly issued, fully paid and nonassessable and,
except as set forth on the Subsidiary Schedule, all such shares are owned by the
Company or another Subsidiary free and clear of any lien, charge or encumbrance.
Except as set forth on the Subsidiary Schedule, neither the Company nor any
Subsidiary owns or holds the right to acquire any shares of stock or any other
security or interest in any other Person, except as provided in the UTS
Agreement.
5D. Authorization; No Breach. The execution, delivery and
performance of this Agreement, the Amended Registration Agreement, the Amended
Stockholders Agreement and all other agreements contemplated hereby to which the
Company is a party, and the filing of the Certificate of Designation and the
Certificate of Amendment have been duly authorized by the Company. This
Agreement, the Amended Registration Agreement, the Amended Stockholders
Agreement, the Certificate of Amendment, the Certificate of Incorporation, the
Certificate of Designation and all other agreements contemplated hereby each
constitutes a valid and binding obligation of the Company, enforceable in
accordance with its terms. The execution and delivery by the Company of this
Agreement, the Amended Registration Agreement, the Amended Stockholders
Agreement and all other agreements contemplated hereby to which the Company is a
party, the offering, sale and issuance of the Stock hereunder, the filing of the
Certificate of Amendment and the Certificate of Designation, and the fulfillment
of and compliance with the respective terms hereof and thereof by the Company do
not and shall not (i) conflict with or result in a breach of the terms,
conditions or provisions of, (ii) constitute a default under, (iii) result in
the creation of any lien, security interest, charge or encumbrance upon the
Company's or any Subsidiary's capital stock or assets pursuant to, (iv) give any
third party the right to modify, terminate or accelerate any obligation under,
(v) result in a violation of, or (vi) require any authorization, consent,
approval, exemption or other action by or notice to any court or administrative
or governmental body pursuant to, the Certificate of Amendment or the
Certificate of Designation or the charter or bylaws of the Company or any
Subsidiary, or any law, statute, rule or regulation to which the Company or any
Subsidiary is subject, or any agreement, instrument, order, judgment or decree
to which the Company or any Subsidiary is subject.
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5E. Financial Statements. Attached hereto as the "Financial
Statements Schedule" are the following financial statements:
(i) the audited consolidated and unaudited consolidating balance
sheets of the Company and its Subsidiaries as of December 31, 1994, and the
related statements of income and cash flows (or the equivalent) for the
respective period then ended; and
(ii) the unaudited consolidated and consolidating balance sheet
of the Company and its Subsidiaries as of April 30, 1995 (the "Latest
Balance Sheet"), and the related statements of income and cash flows (or
the equivalent) for the four-month period then ended.
Each of the foregoing financial statements (including in all cases the notes
thereto, if any) is accurate and complete in all material respects, is
consistent with the books and records of the Company (which, in turn, are
accurate and complete in all material respects) and has been prepared in
accordance with generally accepted accounting principles, consistently applied,
subject in the case of the unaudited financial statements to the absence of
footnote disclosure and changes resulting from normal year-end adjustments (none
of which would, alone or in the aggregate, be materially adverse to the
financial condition, operating results, assets, operations or business prospects
of the Company and its Subsidiaries taken as a whole).
5F. Absence of Undisclosed Liabilities. Except as set forth on the
attached "Liabilities Schedule," the Company and its Subsidiaries do not have
any obligation or liability (whether accrued, absolute, contingent, unliquidated
or otherwise, whether or not known to the Company or any Subsidiary, whether due
or to become due and regardless of when asserted), arising out of transactions
entered into at or prior to the Closing, or any action or inaction at or prior
to the Closing, or any state of facts existing at or prior to the Closing other
than: (i) liabilities set forth on the Latest Balance Sheet (including any notes
thereto), (ii) liabilities and obligations which have arisen after the date of
the Latest Balance Sheet in the ordinary course of business (none of which is a
liability resulting from breach of contract, breach of warranty, tort,
infringement, claim or lawsuit)
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and (iii) other liabilities and obligations expressly disclosed in the other
Schedules to this Agreement.
5G. No Material Adverse Change. Since the date of the Latest Balance
Sheet, there has been no material adverse change in the financial condition,
operating results, assets, operations, business prospects or employee relations
of the Company and its Subsidiaries taken as a whole.
5H. Absence of Certain Developments.
(i) Except as expressly contemplated by this Agreement or as set
forth in the "Developments Schedule" hereto, since the date of the Latest
Balance Sheet, neither the Company nor any Subsidiary has:
(a) issued any notes, bonds or other debt securities or any
equity securities or any securities convertible, exchangeable or
exercisable into any equity securities;
(b) borrowed any amount or incurred or become subject to any
liabilities, except current liabilities incurred in the ordinary course of
business and liabilities under contracts entered into in the ordinary
course of business;
(c) discharged or satisfied any lien or encumbrance or paid any
obligation or liability, other than current liabilities paid in the
ordinary course of business;
(d) declared or made any payment or distribution of cash or other
property to its stockholders with respect to its stock or purchased or
redeemed any shares of its stock or any warrants, options or other rights
to acquire its stock;
(e) mortgaged or pledged any of its properties or assets or
subjected them to any lien, security interest, charge or other encumbrance,
except liens for current property taxes not yet due and payable;
(f) sold, assigned or transferred any of its tangible assets,
except in the ordinary course of business, or cancelled any debts or
claims;
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(g) sold, assigned or transferred any patents or patent
applications, trademarks, service marks, trade names, corporate names,
copyrights or copyright registrations, trade secrets or other intangible
assets, or disclosed any proprietary confidential information to any
Person;
(h) suffered any extraordinary losses or waived any rights of
material value, whether or not in the ordinary course of business or
consistent with past practice;
(i) made capital expenditures or commitments therefor that
aggregate in excess of $250,000;
(j) entered into any other transaction other than in the ordinary
course of business or entered into any other material transaction, whether
or not in the ordinary course of business;
(k) made any loans or advances to, guarantees for the benefit of,
or any Investments in, any Persons in excess of $250,000 in the aggregate;
(1) made any charitable contributions or pledges;
(m) any damage, destruction or casualty loss exceeding in the
aggregate $100,000, whether or not covered by insurance; or
(n) made any Investment in or taken steps to incorporate any
Subsidiary.
(ii) Neither the Company nor any Subsidiary has at any time made
any payments for political contributions or made any bribes, kickback
payments or other illegal payments.
5I. Assets. Except as set forth on the attached "Assets Schedule," the
Company and each Subsidiary have good and marketable title to, or a valid
leasehold interest in, the properties and assets used by them, located on their
premises or shown on the Latest Balance Sheet or acquired thereafter, free and
clear of all liens, security interests, charges and encumbrances, except for
properties and assets disposed of in the ordinary course of business since the
date of the Latest Balance Sheet and except for
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liens disclosed on the Latest Balance Sheet (including any notes thereto) and
liens for current property taxes not yet due and payable. Except as described on
the Assets Schedule, the Company's and each Subsidiary's buildings, equipment
and other tangible assets are in good operating condition in all material
respects and are fit for use in the ordinary course of business. The Company
and each Subsidiary own, or have a valid leasehold interest in, all assets
necessary for the conduct of their respective businesses as presently conducted
and as presently proposed to be conducted.
5J. Tax Matters. Except as set forth in the attached "Taxes Schedule,"
the Company and each Subsidiary have filed all tax returns which they are
required to file under applicable laws and regulations (or have obtained
extensions for such filings); all such returns are complete and correct in all
material respects; the Company and each Subsidiary in all material respects have
paid all taxes due and owing by them and have withheld and paid over all taxes
which they are obligated to withhold from amounts paid or owing to any employee,
stockholder, creditor or other third party; neither the Company nor any
Subsidiary has waived any statute of limitations with respect to taxes or agreed
to any extension of time with respect to a tax assessment or deficiency; the
accrual for current taxes on the Latest Balance Sheet would be adequate to pay
all of the Company's and its Subsidiaries' current tax liabilities if their
current tax year were treated as ending on the date of the Latest Balance Sheet;
the assessment of any additional taxes for periods for which returns have been
filed shall not exceed the recorded liability therefor on the Latest Balance
Sheet; no foreign, federal, state or local tax audits are pending or being
conducted with respect to the Company or any Subsidiary, no information related
to tax matters has been requested by any foreign, federal, state or local taxing
authority and no notice indicating an intent to open an audit or other review
has been received by the Company or its Subsidiaries from any foreign, federal,
state or local taxing authority; and there are no material unresolved questions
or claims concerning the Company's or any Subsidiary's tax liability. Neither
the Company nor any of its Subsidiaries has made an election under (S) 341(f) of
the Internal Revenue Code of 1986, as amended.
5K. Contracts and Commitments.
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(i) Except as expressly contemplated by this Agreement or as set forth
on the attached "Contracts Schedule" or the attached "Employee Benefits
Schedule," neither the Company nor any Subsidiary is a party to or bound by any
written or oral:
(i) pension, profit sharing, stock option, employee stock
purchase or other plan or arrangement providing for deferred or other
compensation to employees or any other employee benefit plan or
arrangement, or any collective bargaining agreement or any other contract
with any labor union, or severance agreements, programs, policies or
arrangements;
(ii) contract for the employment of any officer, individual
employee or other Person on a full-time, part-time, consulting or other
basis providing annual compensation in excess of $100,000 or having a
remaining term of 3 years or longer, or contract relating to loans to
officers, directors or Affiliates;
(iii) contract under which the Company or any Subsidiary has
advanced or loaned any other Person amounts in the aggregate exceeding
$10,000;
(iv) agreement or indenture relating to borrowed money or other
Indebtedness or the mortgaging, pledging or otherwise placing a Lien on any
material asset or material group of assets of the Company and its
Subsidiaries;
(v) guarantee of any obligation in excess of $10,000 (other than
by the Company of a Wholly-Owned Subsidiary's debts or a guarantee by a
Subsidiary of the Company's debts or another Subsidiary's debts);
(vi) lease or agreement under which the Company or any Subsidiary
is lessee of or holds or operates any property, real or personal, owned by
any other party, except for any lease of real or personal property under
which the aggregate annual rental payments do not exceed $100,000;
(vii) lease or agreement under which the Company or any
Subsidiary is lessor of or permits any third party to
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hold or operate any property, real or personal, owned or controlled by the
Company or any Subsidiary;
(viii) contract or group of related contracts with the same party
or group of affiliated parties the performance of which involves payments
in any period of 12 consecutive months in excess of $100,000;
(ix) assignment, license, indemnification or agreement with
respect to any intangible property (including, without limitation, any
Intellectual Property);
(x) warranty agreement with respect to its services rendered or
its products sold or leased;
(xi) agreement under which it has granted any Person any
registration rights (including, without limitation, demand and piggyback
registration rights);
(xii) sales, distribution or franchise agreement;
(xiii) agreement with a term of more than six months which is not
terminable by the Company or any Subsidiary upon less than 30 days notice
without penalty;
(xiv) contract, agreement or other arrangement (A) with any
officer, director, stockholder, employee or (B) involving an aggregate of
$50,000 or more in any period of 12 consecutive months, with Affiliate, or
any Affiliate of any officer, director, stockholder or employee;
(xv) contract or agreement prohibiting it from freely engaging in
any business or competing anywhere in the world; or
(xvi) any other agreement which is material to its operations and
business prospects or involves a consideration in excess of $120,000
annually (excluding any purchase order involving less than $250,000).
(ii) All of the contracts, agreements and instruments set forth on the
Contracts Schedule are valid, binding and enforceable
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in accordance with their respective terms. The Company and each Subsidiary have
performed all material obligations required to be performed by them, including
under the contracts, agreements and instruments listed on the Contracts
Schedule, and are not in default under or in breach of nor in receipt of any
claim of default or breach under any material contract, agreement or instrument
to which the Company or any Subsidiary is subject; no event has occurred which
with the passage of time or the giving of notice or both would result in a
default, breach or event of noncompliance by the Company or any Subsidiary under
any material contract, agreement or instrument to which the Company or any
Subsidiary is subject, including any listed on the Contracts Schedule; neither
the Company nor any Subsidiary has any present expectation or intention of not
fully performing all such obligations; neither the Company nor any Subsidiary
has knowledge of any breach or anticipated breach by the other parties to any
material contract, including any agreement, instrument or commitment listed on
the Contracts Schedule; and neither the Company nor any Subsidiary is a party to
any material contract or commitment requiring it to purchase or sell goods or
services or lease property above or below (as the case may be) prevailing market
prices and rates.
(iii) The Purchasers' special counsel has been supplied with a true
and correct copy of each of the written instruments, plans, contracts and
agreements and an accurate description of each of the oral arrangements,
contracts and agreements which are referred to on the Contracts Schedule,
together with all amendments, waivers or other changes thereto.
5L. Proprietary Rights. The attached "Proprietary Rights Schedule"
contains a complete and accurate list of (i) all patented and registered
Proprietary Rights owned by the Company or any Subsidiary, (ii) all pending
patent applications and applications for registrations of other Proprietary
Rights filed by the Company or any Subsidiary, (iii) all unregistered trade
names and corporate names owned or used by the Company and its Subsidiaries and
(iv) all unregistered trademarks, service marks and copyrights and computer
software which are material to the financial condition, operating results,
assets, operations or business prospects of the Company and its Subsidiaries
taken as a whole. The Proprietary Rights Schedule also contains a complete and
accurate list of all licenses and other rights granted by the
-37-
Company or any Subsidiary to any third party with respect to any Proprietary
Rights and all licenses and other rights granted by any third party to the
Company or any Subsidiary with respect to any Proprietary Rights. The Company or
one of its Subsidiaries owns or has the right to use pursuant to a valid license
all Proprietary Rights necessary for the operation of the businesses of the
Company and its Subsidiaries as presently conducted and as presently proposed to
be conducted. The loss or expiration of any Proprietary Right or related group
of Proprietary Rights would not have a material adverse effect on the conduct of
the Company's and its Subsidiaries' respective businesses, and no such loss or
expiration is threatened, pending or reasonably foreseeable. The Company and its
Subsidiaries have taken all necessary and desirable actions to maintain and
protect the Proprietary Rights which they own and use. To the best of the
Company's knowledge, the owners of any Proprietary Rights licensed to the
Company or any Subsidiary have taken all necessary and desirable actions to
maintain and protect the Proprietary Rights which are subject to such licenses.
Except as indicated on the Proprietary Rights Schedule, (i) the Company and its
Subsidiaries own all right, title, and interest in and to all of the Proprietary
Rights listed on such schedule and all other Proprietary Rights material to the
operation of the businesses of the Company and its Subsidiaries, (ii) there have
been no claims made against the Company or any Subsidiary asserting the
invalidity, misuse or unenforceability of any of such rights, and there are no
grounds for the same, (iii) neither the Company nor any Subsidiary has received
a notice of conflict with the asserted rights of others within the last five
years, and (iv) the conduct of the Company's and each Subsidiary's business,
including the use of their Proprietary Rights, has not infringed or
misappropriated and does not infringe or misappropriate any Proprietary Rights
of other Persons, nor would any future conduct as presently contemplated
infringe any Proprietary Rights of other Persons and, to the best of the
Company's knowledge, the Proprietary Rights owned by the Company or any
Subsidiary have not been infringed or misappropriated by other Persons.
5M. Litigation, etc. Except as set forth on the attached "Litigation
Schedule," there are no actions, suits, proceedings, orders, investigations or
claims pending or threatened against or affecting the Company or any Subsidiary
(or pending or threatened against or affecting any of the officers, directors or
employees of the Company and its Subsidiaries with respect to their
-38-
businesses or proposed business activities) at law or in equity, or before or by
any governmental department, commission, board, bureau, agency or
instrumentality (including, without limitations, any actions, suit, proceedings
or investigations with respect to the transactions contemplated by this
Agreement); neither the Company nor any Subsidiary is subject to any arbitration
proceedings under collective bargaining agreements or otherwise or any
governmental investigations or inquiries (including inquiries as to the
qualification to hold or receive any license or permit); and there is no basis
for any of the foregoing. Neither the Company nor any Subsidiary is subject to
any judgment, order or decree of any court or other governmental agency. Except
as set forth on the attached Litigation Schedule, neither the Company nor any
Subsidiary has received any opinion or memorandum or legal advice from legal
counsel to the effect that it is exposed, from a legal standpoint, to any
liability or disadvantage which may be material to its business.
5N. Brokerage. Except as described on the attached "Brokerage
Schedule," there are no claims for brokerage commissions, finders' fees or
similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement or agreement binding upon the Company or any
Subsidiary. The Company shall pay, and hold each Purchaser harmless against, any
liability, loss or expense (including, without limitation, reasonable attorneys'
fees and out-of-pocket expenses) arising in connection with any such claim.
5O. Governmental Consent, etc. No permit, consent, approval or
authorization of, or declaration to or filing with, any governmental authority
is required in connection with the execution, delivery and performance by the
Company of this Agreement or the other agreements contemplated hereby, or the
consummation by the Company of any other transactions contemplated hereby or
thereby, except as expressly contemplated herein or in the exhibits hereto.
5P. Insurance. The attached "Insurance Schedule" contains a
description of each insurance policy maintained by the Company and its
Subsidiaries with respect to its properties, assets and businesses, and each
such policy is in full force and effect as of the Closing. Neither the Company
nor any Subsidiary is in default with respect to its obligations under any
insurance policy
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maintained by it. The insurance coverage of the Company and its Subsidiaries is
customary for well-insured corporations of similar size engaged in similar lines
of business.
5Q. Employees. The Company is not aware that any executive or key
employee of the Company or any Subsidiary or any group of employees of the
Company or any Subsidiary has any plans to terminate employment with the Company
or any Subsidiary. The Company and each Subsidiary has complied in all material
respects with all laws relating to the employment of labor, including provisions
thereof relating to wages, hours, equal opportunity, collective bargaining and
the payment of social security and other taxes, and the Company and its
Subsidiaries have no material labor relations problems (including any union
organization activities, threatened or actual strikes or work stoppages or
material grievances). Neither the Company, its Subsidiaries nor any of their
employees is subject to any noncompete, nondisclosure, confidentiality,
employment, consulting or similar agreements relating to, affecting or in
conflict with the present or proposed business activities of the Company and its
Subsidiaries, except for agreements between the Company and its present and
former employees.
5R. ERISA.
(a) Multiemployer Plans. The Company does not have any obligation
to contribute to (or any other liability, including current or
potential withdrawal liability, with respect to) any "multiemployer
plan" (as defined in Section 3(37) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")).
(b) Retiree Welfare Plans. The Company does not maintain or have
any obligation to contribute to (or any other liability with respect
to) any plan or arrangement whether or not terminated, which provides
medical, health, life insurance or other welfare-type benefits for
current or future retired or terminated employees (except for limited
continued medical benefit coverage required to be provided under
Section 4980B of the IRC or as required under applicable state law).
-40-
(c) Defined Benefit Plans. The Company does not maintain,
contribute to or have any liability under (or with respect to) any
employee plan which is a tax-qualified "defined benefit plan" (as
defined in Section 3(35) of ERISA), whether or not terminated.
(d) Defined Contribution Plans. The Company does not maintain,
contribute to or have any liability under (or with respect to) any
employee plan which is a tax-qualified "defined contribution plan" (as
defined in Section 3(34) of ERISA), whether or not terminated.
(e) Other Plans. The Company does not maintain, contribute to or
have any liability under (or with respect to) any plan or arrangement
providing benefits to current or former employees, including any bonus
plan, plan for deferred compensation, employee health or other welfare
benefit plan or other arrangement, whether or not terminated.
(f) The Company. For purposes of this paragraph 6S, the term
"Company" includes all organizations under common control with the
Company pursuant to Section 414(b) or (c) of the IRC.
5S. Compliance with Laws. Except as set forth on the attached
"Compliance Schedule," neither the Company nor any Subsidiary has violated any
law or any governmental regulation or requirement which violation would
reasonably be expected to have a material adverse effect upon the financial
condition, operating results, assets, operations or business prospects of the
Company and its Subsidiaries taken as a whole, and neither the Company nor any
Subsidiary has received notice of any such violation. Neither the Company nor
any Subsidiary is subject to any clean up liability, or has reason to believe it
may become subject to any clean up liability, under any federal, state or local
environmental law, rule or regulation.
5T. Small Business Matters. The Company, together with its
"affiliates" (as that term is defined in Title 13, Code of Federal Regulations,
(S)121.401), is a "small business concern" within the meaning of the Small
Business Investment Act of 1958 and the regulations thereunder, including Title
13, Code of Federal
-41-
Regulations, (S)121.802. The information regarding the Company and its
affiliates set forth in the Small Business Administration Form 480, Form 652 and
Section A of Form 1031 delivered at the Closing is accurate and complete. Copies
of such forms shall have been completed and executed by the Company and
delivered to each Purchaser at the Closing together with a written statement of
the Company regarding its planned use of the proceeds from the sale of the
Stock. Neither the Company nor any Subsidiary presently engages in, and it shall
not hereafter engage in, any activities, nor shall the Company or any Subsidiary
use directly or indirectly the proceeds from the sale of the Stock hereunder for
any purpose, for which a Small Business Investment Company is prohibited from
providing funds by the Small Business Investment Act of 1958 and the regulations
thereunder (including Title 13, Code of Federal Regulations, (S)107.804 and
(S)107.901).
5U. Affiliated Transactions. Except as set forth on the attached
"Affiliated Transactions Schedule" and pursuant to the UTS Agreement, the
Xxxxxxxx Agreement, the Amended Stockholders Agreement, the Subscription
Agreement and the Employment Agreements, and except for arrangements with any
Person which will not directly or indirectly involve more than an aggregate of
$50,000 for any such Person in any period of 12 consecutive months, no officer,
director, shareholder or Affiliate of the Company or any Subsidiary or any
individual related by blood or marriage to any such Person or any entity in
which any such Person or individual owns any beneficial interest, is a party to
any agreement, contract, commitment or transaction with the Company or any
Subsidiary or has any material interest in any material property used by the
Company or any Subsidiary.
5V. New York Telephone Company Agreement. As of the Closing, the
Price Quote - Intellipath II Digital Centrex Service with Specialized Route
Selection Arrangement (100 or more lines), dated as of December 29, 1993 (the
"NYTC Agreement"), by and between UTS and New York Telephone Company is in full
force and effect, AS AMENDED BY THE FIRST AMENDMENT TO PRICE QUOTE, DATED AS OF
FEBRUARY 24, 1994, without further amendment or modification thereto, and
represents the full agreement between the parties concerning the provision by
New York Telephone Company to UTS of Service (as that term is defined in the
NYTC Agreement).
-42-
5W. Disclosure. Neither this Agreement nor any of the schedules,
attachments, written statements, documents, certificates or other items prepared
or supplied to any Purchaser by or on behalf of the Company and its Subsidiaries
with respect to the transactions contemplated hereby contain any untrue
statement of a material fact or omit a material fact necessary to make each
statement contained herein or therein not misleading; provided that with respect
to the financial projections furnished to the Purchasers by the Company and its
Subsidiaries, the Company represents only that such projections were based upon
assumptions reasonably believed by the Company and its Subsidiaries to be
reasonable and fair as of the date the projections were prepared in the context
of the Company's and its Subsidiaries' history and current and reasonably
foreseeable business conditions. There is no fact which the Company and its
Subsidiaries have not disclosed to the Purchasers in writing and of which any of
their officers, directors or executive employees is aware (other than matters of
a general economic nature) and which has had or would reasonably be anticipated
to have a material adverse effect upon the existing or expected financial
condition, operating results, assets, customer or supplier relations, employee
relations or business prospects of the Company and its Subsidiaries taken as a
whole.
5X. Knowledge. As used in this Section 5, the terms "knowledge" or
"aware", shall mean and include (i) the actual knowledge or awareness of the
Company and its Subsidiaries (which shall include the actual knowledge and
awareness of any of the officers, directors and key employees of the Company and
its Subsidiaries, including Xxxxxx X. Xxxxxxxxxxx, Xxxxxx X. Xxxx, Xxxxxx X.
Xxxxxxxx, Xxxxxxx Xxxxxxx and Xxxxxxx X. Xxxxxxxxxxx), and (ii) the knowledge or
awareness which a prudent business person would have obtained in the conduct of
his business after making reasonable inquiry and reasonable diligence with
respect to the particular matter in question.
5Y. Closing Date. The representations and warranties of the Company
contained in this Section 5 and elsewhere in this Agreement and all information
contained in any exhibit, schedule or attachment hereto or in any writing
delivered by, or on behalf of, the Company and its Subsidiaries to any Purchaser
shall be true and correct in all material respects (provided that any
projections shall be based on underlying assumptions which provide a reasonable
basis for such projections) on the date of the Closing as though
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then made, except as affected by the transactions expressly contemplated by this
Agreement.
5Z. Projections and Pro Forma Financial Statements.
(a) The projections and pro-forma financial statements contained in
the United USN, Inc. Confidential Business Overview dated April 6, 1995 and
previously delivered to purchasers are true and complete copy of the latest
projections of the consolidated income and cash flows of the Company and its
Subsidiaries for the fiscal years ending 2004. Such projections are based on
underlying assumptions of the Company which provide a reasonable basis for the
projections contained therein. Such projections have been prepared on the basis
of the assumptions set forth therein, which the Company reasonably believes are
fair and reasonable in light of the historical financial performance of the
Company and its Subsidiaries and of current and reasonably foreseeable business
conditions.
(b) The previously delivered pro forma consolidated balance sheet of
the Company and its Subsidiaries as of April 30, 1995 is complete and correct in
all material respects and presents fairly in all material respects the
consolidated financial condition of the Company and its Subsidiaries as of such
date.
Section 6. Put Arrangements.
----------------
6A. The Put. At any time, and from time to time, after the Put
Trigger Date, Purchasers holding 30% of the Investor Common Stock shall have the
right to Put any or all of the Investor Common Stock held by such Purchasers at
the Put Price by delivering the Put Notice; provided, however, that no Purchaser
shall have the right to Put an amount of Investor Common Stock which is less
than 25% of the amount of Investor Common Stock held by such Purchaser on the
date hereof after giving effect to the Closing or to deliver any Put Notice
within six months of the delivery of any previous Put Notice. Within five days
after receipt of a Put Notice, the Company shall deliver the Exercise Notice to
all other Purchasers. Any Purchaser receiving an Exercise Notice may request to
participate in the Put by delivering a Participation Notice to the Company
within five days after receipt of the Exercise Notice. The right to exercise the
Put will inure to the benefit of all transferees of the Investor Common Stock.
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6B. Put Closing. Upon the delivery of the Put Notice and any
Participation Notice, the Company and the Purchasers participating in the Put
shall in good faith promptly determine the Put Price as provided hereunder, and,
subject to the provisions hereof, within ten days after the determination of the
Put Price, the Company will purchase and such Purchasers will sell the number of
shares of Investor Common Stock specified in the Put Notice and any
Participation Notice at a mutually agreeable time and place.
6C. Put Payment. At the Put Closing, the Purchasers participating in
the Put shall deliver to the Company certificates representing the Investor
Common Stock to be repurchased by the Company and the Company shall deliver to
such Purchasers the Put Price for all shares of Investor Common Stock to be
repurchased by the Company by cashier's or certified check payable to each such
Purchaser or by wire transfer of immediately available funds to an account
designated by each such Purchaser; provided that if the Company does not have
sufficient funds to pay the Put Price for any shares of Investor Common Stock to
be repurchased by the Company, then:
(i) the Company promptly will pay to the Purchasers participating
in the Put (pro rata, according to the aggregate amount of Put Price owing
to each such Purchaser) such funds as are then available or which later
become available for the payment of the Put Price, until the Put Price of
all such shares has been paid in full;
(ii) the Board of Directors of the Company will use its best
efforts to effect a sale of the Company's assets or stock, or a merger,
consolidation, share exchange or similar transaction, or obtain debt or
equity financing, which will result in cash proceeds to the Company which
will be sufficient to pay the portion of the Put Price which is then
unpaid; and
(iii) the Put Price will increase at the rate of 25% per annum
(or the maximum rate allowable by applicable law, whichever is less)
multiplied by the sum of (A) the portion of the Put Price not paid in cash
at the Put Closing, plus (B) the additional Put Price which remains accrued
and unpaid as of the end of each calendar month following such Put Closing;
provided that, at the election of the holder of any
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shares of Investor Common Stock subject to a Put hereunder in respect of
which a Put Price has not been paid in full in cash at a Put Closing, the
Company will issue to such holder, in lieu of all or any portion of the
additional Put Price calculated pursuant to this subparagraph (iii) (the
"Converted Portion"), a number of shares of Common Stock equal to the
quotient determined by dividing (x) the Converted Portion, by (y) the
lesser of $1.95 (as adjusted for any subdivision or combination of shares
of Common Stock or similar recapitalization) or the fair market value of
one share of Common Stock at such time.
If the Company does not have sufficient funds to pay the Put Price for any
shares of Investor Common Stock to be repurchased by the Company at the Put
Closing and subsequently such funds become available, the Company shall deliver
a written notice to each of the Purchasers participating in the Put indicating
that such funds have become available. Upon receipt of such notice, each
Purchaser participating in the Put shall have the right to rescind the exercise
of the Put with respect to the shares of Investor Common Stock for which the Put
Price has not been paid by delivering written notice of such rescission to the
Company within five days of the receipt of the Company's notice regarding the
availability of funds to pay the Put Price. If a Purchaser has delivered a
rescission notice to the Company as set forth above, such Purchaser may deliver
a subsequent Put Notice without regard to the six month time period set forth in
paragraph 6A.
6D. Put Price. The "Put Price" of the Investor Common Stock to be
repurchased shall mean the product of (A) the sum of the Market Value of the
Company and the total exercise price to be paid to the Company assuming the
exercise or conversion of all outstanding options, warrants or convertible
securities of the Company, multiplied by (B) a fraction, the numerator of which
will be the number of shares of Investor Common Stock to be repurchased and the
denominator of which will be the total number of shares of Common Stock
outstanding on a fully diluted basis. Unless otherwise agreed by the Company and
the Purchasers participating in the Put, Market Value shall be determined by an
investment banking firm reasonably acceptable to the Company and such
Purchasers, which firm shall submit to the Company and such Purchasers a written
report setting forth such determination. If the parties are unable to agree on
an investment banking firm within 15 days
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after delivery of a Put Notice, a firm shall be selected by lot from the
investment banking firms listed on Attachment A to the First Purchase Agreement
(as in effect on April 20, 1994), after the Company and such Purchasers have
each eliminated one such firm. The expenses of such firm will be borne equally
by the Company and the Purchasers participating in the Put, and the
determination of such firm will be final and binding upon all parties, except
that after the determination of Market Value following the exercise of the Put,
such Purchasers may rescind their exercise of such Put.
6E. Put Termination. The Put rights contained in this Section 6
shall terminate upon a Qualified Public Offering.
Section 7. Additional Protections for Holders of Investor Common
-----------------------------------------------------
Stock.
-----
7A. Anti-Dilution Protection. Each holder of Investor Common Stock
will benefit from certain rights to protect them against issuances, or deemed
issuances, of stock of the Company which may otherwise have the effect of
diluting such holders' equity interests in the Company, as set forth in Exhibit
I hereto.
7B. "Most Favored Nations" Protection. In the event that, in
connection with the issuance of any Common Stock or Preferred Stock - Series 2
to the Additional Purchaser or any Person other than a Purchaser hereunder at
any time after the Closing, the Company enters into any agreement containing any
term or provision which is more favorable to the Additional Purchaser, or such
Person than any corresponding term or provision of this Agreement or any other
agreement applicable to the holders of Investor Common Stock or Investor
Preferred Stock, or for which there is no corresponding term or provision of
this Agreement or any other agreement applicable to the holders of Investor
Common Stock or Investor Preferred Stock, then the Company will promptly notify
each of such holders thereof and, upon the request of any holder of Investor
Common Stock or Investor Preferred Stock, will enter into agreements
satisfactory to such holder which will ensure that such holder will benefit from
such favorable term or provision as if such term or provision had been included
in this Agreement (or any other appropriate agreement applicable to such
holder).
Section 8. Definitions. For the purposes of this Agreement, the
following terms have the meanings set forth below:
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"Affiliate" of any particular person or entity means any other person
or entity controlling, controlled by or under common control with such
particular person or entity.
"Amended Registration Agreement" means the Amended and Restated
Registration Agreement between the Company and the Purchasers in form and
substance as set forth in Exhibit C hereto.
"Amended Stock Transfer Agreement" means the Amended and Restated
Stock Transfer Agreement dated as of June 22, 1995 between the Company and the
Purchasers.
"Amended Stockholders Agreement" means the Amended and Restated
Stockholders Agreement between the Company and the holders of Common Stock in
form and substance as set forth in Exhibit E attached hereto.
"BT" means BT Capital Partners, Inc., a Delaware corporation.
"BT Common Stock" has the meaning given such term in the Amended
Stockholders Agreement.
"CAP Agreements" means agreements to provide telephone services within
and between local access transport areas, such services to be provided primarily
on facilities owned or leased by the Company.
"Certificate of Amendment" means an amendment to the Company's
Certificate of Incorporation in the form set forth in Exhibit A-l hereto.
"Certificate of Incorporation" means the Company's Certificate of
Incorporation in the form set forth in Exhibit B hereto.
"Certificate of Designation" means the Company's Amended and Restated
Certificate of Designation of rights and preferences of Series A-1 Preferred
Stock establishing the terms and the relative rights and preferences of the
Preferred Stock - Series 1 and Preferred Stock - Series 2 in the form set forth
in Exhibit A hereto.
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"Change of Control" shall be deemed to have occurred at such time as
any of the following events shall occur:
(i) There shall be consummated any sale or issuance or series of
sales and/or issuances of shares of Common Stock by the Company or any
holders thereof which results in any Person or affiliated Persons (other
than the owners of Common Stock or their Affiliates as of the date of the
Purchase Agreement after giving effect to the transactions contemplated
hereby) owning Common Stock of the Company possessing the voting power
(under ordinary circumstances) to elect a majority of the Company's board
of directors.
(ii) There shall be consummated a sale or transfer of more than
30% of the assets of the Company and its Subsidiaries on a consolidated
basis in any transaction or series of transactions (other than sales in the
ordinary course of business).
(iii) There shall be consummated any merger or consolidation to
which the Company is a party, except for a merger in which the Company is
the surviving corporation and, after giving effect to such merger, the
holders of Common Stock immediately prior to the merger shall own Common
Stock possessing the voting power (under ordinary circumstances) to elect a
majority of the Company's board of directors.
"Chemical" means Chemical Venture Capital Associates, a California
limited partnership.
"CIBC" means CIBC Wood Gundy Ventures, Inc., a Delaware corporation.
"Closing" has the meaning given such term in Section 1 above.
"Common Stock" means the Company's common stock, par value $.01 per
share.
"Company" means United USN, Inc., a Delaware corporation.
"Employment Agreements" means Network's employment agreements with
Xxxxxx X. Xxxxxxxxxxx, Xxxxxx X. Xxxx, Xxxxxx X.
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Gavillet and Xxxxxxx Xxxxxxxxxxx, each in the form previously delivered to the
Purchasers.
"Event of Noncompliance" has the meaning set forth in the Certificate
of Designation.
"Exercise-Notice" means a written notice of the Company indicating
that the Put has been exercised and specifying each Purchaser exercising the Put
and the number of shares to be purchased from each such Purchaser.
"Xxxxxxx" means Xxxxxxx Venture Partners IV - Direct Fund L.P., a
Delaware limited partnership.
"Indebtedness" shall mean at a particular time, without duplication,
(i) indebtedness for borrowed money or for the deferred purchase price of
property or services in respect of which any Person is liable, contingently or
otherwise, as obligor or otherwise (other than trade payables and other current
liabilities incurred in the ordinary course of business) or any commitment by
which any Person assures a creditor against loss, including contingent
reimbursement obligations with respect to letters of credit, (ii) indebtedness
guaranteed in any manner by any Person, including guarantees in the form of an
agreement to repurchase or reimburse, (iii) obligations under capitalized leases
in respect of which obligations any Person is liable, contingently or otherwise,
as obligor, guarantor or otherwise, or in respect of which obligations any
Person assures a creditor against loss and (iv) any unsatisfied obligation of
any Person for "withdrawal liability" to a "multiemployer plan" as such terms
are defined under ERISA.
"Investment" as applied to any Person means (i) any direct or indirect
purchase or other acquisition by such Person of any notes, obligations,
instruments, stock, securities or ownership interest (including partnership
interests and joint venture interests) of any other Person and (ii) any capital
contribution by such Person to any other Person.
"Investor Common Stock" means (i) the Common Stock issued pursuant to
this Agreement, (ii) for all purposes hereof other than Section 6 above, Section
3D(ii) above, Section 7 above or the definition of "Put" below, the Common Stock
issued pursuant to the First Purchase Agreement and (iii) any Common Stock
issued or
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issuable with respect to the Common Stock referred to in clause (i) above (and,
for all purposes hereof other than Section 6 or the definition of "Put" below,
also the Common Stock referred to in clause (ii) above) by way of stock
dividends or stock splits or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. As to any
particular shares of Investor Common Stock, such shares shall cease to be
Investor Common Stock when they have been (a) effectively registered under the
Securities Act and disposed of in accordance with the Registration statement
covering them or (b) distributed to the public through a broker, dealer or
market maker pursuant to Rule 144 under the Securities Act (or any similar rule
then in force).
"Investor Preferred Stock" means (i) the Preferred Stock issued
pursuant to this Agreement or the First Purchase Agreement and (ii) any
Preferred Stock issued or issuable with respect to the Preferred Stock referred
to in clause W above by way of stock dividends or stock splits or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular shares of Investor Preferred Stock, such
shares shall cease to be Investor Preferred Stock when they have been (a)
effectively registered under the Securities Act and disposed of in accordance
with the Registration statement covering them or (b) distributed to the public
through a broker, dealer or market maker pursuant to Rule 144 under the
Securities Act (or any similar rule then in force).
"IRC" means the Internal Revenue Code of 1986, as amended, and any
reference to any particular IRC section shall be interpreted to include any
revision of or successor to that section regardless of how numbered or
classified.
"IRS" means the United States Internal Revenue Service.
"Management Option Pool" means options to purchase shares of Common
Stock to be issued by the Company to senior management as incentive compensation
upon terms to be determined by the Company's board of directors.
"Market Value" means the highest price for which all of the
outstanding Common Stock of the Company could be sold in an orderly sale as
between a willing buyer and a willing seller within
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the 12 months prior to the date of delivery of the Put Notice to the Company.
"Network" means U.S. Network Corporation, a Delaware corporation.
"Northwood Capital" means Northwood Capital Partners LLC, a New York
limited liability company.
"Northwood Ventures" means Northwood Ventures, a New York limited
partnership.
"NYNEX" means NYNEX Corp. and its Subsidiaries, including New York
Telephone Company.
"Officer's Certificate" means a certificate signed by the Company's
president or its chief financial officer, stating that (i) the officer signing
such certificate has made or has caused to be made such investigations as are
necessary in order to permit him to verify the accuracy of the information set
forth in such certificate and (ii) to the best of such officer's knowledge, such
certificate does not misstate any material fact and does not omit to state any
fact necessary to make the certificate not misleading.
"Participation Notice" means a written notice delivered to the Company
by a Purchaser specifying the number of shares to be purchased from such
Purchaser pursuant to the Put.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a limited liability company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Preferred Stock" means the Preferred Stock - Series 1 and the
Preferred Stock - Series 2.
"Preferred Stock - Series 1" means the Company's Series A 10% Senior
Cumulative Preferred Stock, par value $1.00 per share.
"Preferred Stock - Series 2" means the Company's Series A-2 10% Senior
Cumulative Preferred Stock, par value $1.00 per share.
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"Proprietary Rights" means all (i) patents, patent applications,
patent disclosures and inventions, (ii) trademarks, service marks, trade dress,
trade names and corporate names and registrations and applications for
registration thereof, (iii) copyrights and registrations and applications for
registration thereof, (iv) mask works and registrations and applications for
registration thereof, (v) computer software, data and documentation, (vi) trade
secrets and other confidential information (including, without limitation, the
"U.S. Network Corporation, Competitive Access Project, Outline of Project
Requirements" dated October 1993, ideas, formulas, compositions, inventions
(whether patentable or unpatentable and whether or not reduced to practice),
know-how, manufacturing and production processes and techniques, research and
development information, drawings, specifications, designs, plans, proposals,
technical data, copyrightable works, financial and marketing plans and customer
and supplier lists and information), (vii) other intellectual property rights,
and (viii) copies and tangible embodiments thereof (in whatever form or medium).
"Purchasers" means CIBC, Chemical, Xxxxxxx, XX, Northwood Capital,
Northwood Ventures and the Additional Purchaser, if any, collectively and
"Purchaser" means CIBC, Chemical, Xxxxxxx, XX, Northwood Capital, Northwood
Ventures or the Additional Purchaser, if any, individually; provided that the
Additional Purchaser will not be deemed to be a Purchaser for any purpose unless
and until it consummates the purchase of Additional Stock on the terms set forth
herein.
"Put" means the right of the Purchasers to require the Company to
repurchase all or any portion of the Investor Common Stock.
"Put Closing" means the closing of the Put.
"Put Notice" means a written notice delivered by the Purchasers to the
Company specifying the number of shares to be purchased from each Purchaser
pursuant to the Put.
"Put Price" means the price for Common Stock to be paid by the Company
to a Purchaser pursuant to the Put determined in accordance with paragraph 7D.
-53-
"Put Trigger Date" means the earlier of the fifth anniversary of the
Closing or the date upon which a Change of Control of the Company occurs.
"Qualified Holder" means any (i) Purchaser, so long as such Purchaser
holds Investor Preferred Stock or Investor Common Stock, (ii) holder of at least
15% of the outstanding Investor Preferred Stock or (iii) holder of at least
12,821 shares of Investor Common Stock (as such number is adjusted for stock
splits, stock dividends, combinations of shares and similar recapitalizations).
"Qualified Public Offering" means the sale in an underwritten public
offering registered under the Securities Act of shares of Common Stock which
would result in at least 20% of the shares of Common Stock outstanding after
such offering having been registered pursuant to the Securities Act, with such
shares outstanding having an aggregate value of at least $20 million; provided
that upon consummation thereof the Common Stock is listed on a national
securities exchange or the NASDAQ National Market System.
"Regulatory Problem" means any set of facts or circumstances wherein
it has been asserted by any governmental regulatory agency (or the Purchaser
believes that there is a substantial risk of such assertion) that the Purchaser
is not entitled to hold, or exercise any significant right with respect to, the
Stock.
"Required Approval" means the Company must have delivered a written
notice to the Purchasers stating the action proposed to be taken by the Company
and Purchasers holding at least 66 2/3% of the outstanding Investor Common Stock
must have approved such action by a written approval delivered to the Company.
"Restricted Securities" means (i) the Investor Preferred Stock and the
Investor Common Stock issued hereunder, and (ii) any securities issued with
respect to the securities referred to in clause (i) above by way of a stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. As to any
particular Restricted Securities, such securities shall cease to be Restricted
Securities when they have (a) been effectively registered under the
-54-
Securities Act and disposed of in accordance with the registration statement
covering them, (b) become eligible for sale pursuant to Rule 144 (or any similar
provision then in force) under the Securities Act or (c) been otherwise
transferred and new certificates for them not bearing the Securities Act legend
set forth in paragraph 8C have been delivered by the Company in accordance with
paragraph [5 (ii)]. Whenever any particular securities cease to be Restricted
Securities, the holder thereof shall be entitled to receive from the Company,
without expense, new securities of like tenor not bearing a Securities Act
legend of the character set forth in paragraph 8C.
"SBIC" means a small business investment company licensed under the
Small Business Investment Act of 1958, as amended.
"Xxxxxxxx Agreement" means an agreement between the Company, Xxxxxxx
X. Xxxxxxxx and UTS that, in the sole discretion of each of the Purchasers,
positions the Company and its Subsidiaries to pursue arrangements similar to
that entered into by UTS and NYNEX with regional Xxxx operating companies other
than NYNEX on terms acceptable to the Purchasers.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal law then in force.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended, or any similar federal law then in force.
"Securities and Exchange Commission" includes any governmental body or
agency succeeding to the functions thereof.
"Stock" means the Preferred Stock and the Common Stock collectively.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association or other business entity of which (i) if a corporation,
a majority of the total voting power of shares of stock entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or (ii) if a partnership, association or other
business entity, a majority of the partnership
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or other similar ownership interest thereof is at the time owned or controlled,
directly or indirectly, by any Person or one or more Subsidiaries of that Person
or a combination thereof. For purposes hereof, a Person or Persons shall be
deemed to have a majority ownership interest in a partnership, association or
other business entity if such Person or Persons shall be allocated a majority of
partnership, association or other business entity gains or losses or shall be or
control the managing director or general partner of such partnership,
association or other business entity.
"Treasury Regulations" means the United States Treasury Regulations
promulgated under the IRC, and any reference to any particular Treasury
Regulation section shall be interpreted to include any final or temporary
revision of or successor to that section regardless of how numbered or
classified.
"UTS" means United Telemanagement Service, Inc., a Delaware
corporation.
"UTS Agreement" means the Note and Stock Purchase Agreement dated as
of April 20, 1994 by and between the Company and UTS, as amended.
Section 9. Miscellaneous.
9A. Expenses. The Company agrees to pay, and hold each Purchaser
harmless against liability for the payment of, (i) the fees and expenses of
their special counsel arising in connection with the negotiation and execution
of this Agreement and the consummation of the transactions contemplated by this
Agreement which shall be payable at the Closing or, if the Closing does not
occur, payable upon demand, (ii) all out-of-pocket costs and expenses and
consultants, fees in connection with the negotiation and execution of this
Agreement and the consummation of the transactions contemplated by this
Agreement which shall be payable at Closing or, if the Closing does not occur,
payable upon demand, (iii) the fees and expenses incurred with respect to any
amendments or waivers (whether or not the same become effective) under or in
respect of this Agreement, the agreements contemplated hereby, the Certificate
of Incorporation (as amended by the Certificate of Amendment) or the Certificate
of Designation, (iv) stamp and other taxes which may be payable in respect of
the execution and delivery of this Agreement or the issuance, delivery or
acquisition of any
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shares of Stock, (v) the fees and expenses incurred with respect to the
enforcement of the rights granted under this Agreement, the agreements
contemplated hereby, the Certificate of Incorporation (as amended by the
Certificate of Amendment) or the Certificate of Designation, (vi) the fees and
expenses incurred by each such Person in any filing with any governmental agency
with respect to its investment in the Company or in any other filing with any
governmental agency with respect to the Company or its Subsidiaries which
mentions such Person, and (vii) the reasonable fees and expenses incurred by any
such Person in connection with any transaction, claim or event which such Person
believes affects the Company or its Subsidiaries and as to which such Person
seeks advice of counsel.
9B. Remedies. Each holder of Stock shall have all rights and remedies
set forth in this Agreement, the Certificate of Incorporation and the (as
amended by the Certificate of Amendment) 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.
9C. Purchaser's Investment Representations. Each Purchaser hereby
represents that it is an "accredited investor" within the meaning of Rule 501(a)
of Regulation D promulgated under the Securities Act, it is acquiring the
Restricted Securities purchased hereunder or acquired pursuant hereto for its
own account with the present intention of holding such securities for purposes
of investment, and that it has no intention of selling such securities in a
public distribution in violation of the federal securities laws or any
applicable state securities laws; provided that nothing contained herein shall
prevent any Purchaser and subsequent holders of Restricted Securities from
transferring such securities in compliance with the provisions of Section 5
hereof. Each certificate for Restricted Securities shall be imprinted with a
legend in substantially the following form:
"The securities represented by this certificate were originally issued on
June 22, 1995, and have not been
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registered under the Securities Act of 1933, as amended. The transfer of
the securities represented by this certificate is subject to the conditions
specified in the Purchase Agreement, dated as of June 22, 1995, between the
issuer (the "Company") and certain investors, and the Company reserves the
right to refuse the transfer of such securities until such conditions have
been fulfilled with respect to such transfer. A copy of such conditions
shall be furnished by the Company to the holder hereof upon written request
and without charge."
9D. Treatment of the Preferred Stock. The Company covenants and agrees
that (i) so long as federal income tax laws prohibit a deduction for
distributions made by the Company with respect to preferred stock, it shall
treat all distributions paid by it on the Preferred Stock as non-deductible
dividends on all of its tax returns and (ii) it shall treat the Preferred Stock
as preferred stock in all of its financial statements and other reports and
shall treat all distributions paid by it on the Preferred Stock as dividends on
preferred stock in such statements and reports. The Company acknowledges and
agrees that the increased dividend rate on the Preferred Stock provided for in
the Certificate of Designation upon the occurrence of certain Events of
Noncompliance has been negotiated by (and is intended by) the Company and the
Purchasers as a reasonable increase in yield necessitated by the increased risk
to the holders of the Preferred Stock which would arise upon any such
occurrence.
9E. Consent to Amendments. Except as otherwise expressly provided
herein, the provisions of this Agreement may be amended or waived and the
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company has obtained the Required
Approval; provided that no amendment of Section 3D(ii) which would have the
effect of permitting the company to repurchase directly or indirectly, shares of
Common Stock pursuant to Section 7 of the First Purchase Agreement without
offering to purchase Investor Common Stock on the terms set forth in Section
3D(ii)(c) will be effective without the prior written consent of the holders of
a majority of the BT Common Stock then outstanding. No other course of dealing
between the Company and the holder of any Stock or any delay in exercising any
rights hereunder or under the Certificate of Incorporation (as amended by the
Certificate of Amendment) or Certificate of Designation shall operate as a
waiver of any rights
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of any such holders. For purposes of this Agreement, shares of Stock held by the
Company or any Subsidiaries shall not be deemed to be outstanding.
9F. Survival of Representations and Warranties. All representations
and warranties contained herein or made in writing by any party in connection
herewith shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, regardless of any
investigation made by any Purchaser or on its behalf.
9G. Successors and Assigns. Except as otherwise expressly provided
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so expressed or
not. In addition, and whether or not any express assignment has been made, the
provisions of this Agreement which are for any Purchaser's benefit as a
purchaser or holder of Stock are also for the benefit of, and enforceable by,
any subsequent holder of such Stock.
9H. Capital and Surplus; Special Reserves. The Company agrees that
the capital of the Company (as such term is used in Section 154 of the General
Corporation Law of the State of Delaware) in respect of the Stock issued
pursuant to this Agreement shall be equal to the aggregate par value of such
shares and that it shall not increase the capital of the Company with respect to
any shares of the Company's capital stock at any time on or after the date of
this Agreement. The Company also agrees that it shall not create any special
reserves under Section 171 of the General Corporation Law of the State of
Delaware without the prior written consent of each of the Purchasers.
9I. Generally Accepted Accounting Principles. Where any accounting
determination or calculation is required to be made under this Agreement or the
exhibits hereto, such determination or calculation (unless otherwise provided)
shall be made in accordance with generally accepted accounting principles,
consistently applied, except that if because of a change in generally accepted
accounting principles the Company would have to alter a previously utilized
accounting method or policy in order to remain in compliance with generally
accepted accounting principles, such determination or calculation shall continue
to be made in
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accordance with the Company's previous accounting methods and policies, unless
otherwise directed by each of the Purchasers.
9J. Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
9K. Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together shall constitute
one and the same Agreement.
9L. Descriptive Headings; Interpretation. The descriptive headings of
this Agreement are inserted for convenience only and do not constitute a Section
of this Agreement. The use of the word "including" in this Agreement shall be by
way of example rather than by limitation.
9M. Governing Law. The corporate law of the State of Delaware shall
govern all issues concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity and
interpretation of this Agreement and the exhibits and schedules hereto shall be
governed by the internal law, and not the law of conflicts, of the State of New
York.
9N. Notices. All notices, demands or other communications to be given
or delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally to the
recipient, dispatched by telegram or electronic facsimile transmission
(confirmed in writing by mail simultaneously dispatched), sent to the recipient
by reputable express courier service (charges prepaid) or mailed to the
recipient by certified or registered mail, return receipt requested and postage
prepaid. Such notices, demands and other communications shall be sent to each
Purchaser at the address indicated on the Schedule of Purchasers and to the
Company at the address indicated below:
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United USN, Inc.
00 Xxxxx Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
9O. Understanding Among the Purchasers. The determination of each
Purchaser to purchase the Stock pursuant to this Agreement has been made by such
Purchaser independent of any other Purchaser and independent of any statements
or opinions as to the advisability of such purchase or as to the properties,
business, prospects or condition (financial or otherwise) of the Company and its
Subsidiaries which may have been made or given by any other Purchaser or by any
agent or employee of any other Purchaser.
9P. Indemnification. The Company agrees to indemnify and hold each
Purchaser harmless against and in respect of any and all direct out-of-pocket
damages, losses, liabilities, obligations, costs and expenses (including
reasonable attorneys' fees) which the Purchasers, or any of them, may suffer or
incur as a result of a breach of any of the representations, warranties or
agreements by the Company set forth herein (notwithstanding any investigations
or verifications made by or on behalf of the Purchasers).
9Q. No Solicitation, Etc.
During such time as this Agreement is in effect and prior to the
Closing, neither the Company, its Subsidiaries or any of their stockholders,
directors, officers, employees, agents or representatives (collectively, the
"Company Parties"), without the prior written approval of the Company's board of
directors, (a) will solicit, initiate, encourage or discuss any proposal or
offer from any person other than the Purchasers relating to an equity financing
of the Company or its Subsidiaries (other than as contemplated by Section 2L and
other than any communications necessary to advise investors of the Company's or
its Subsidiaries, lack of interest in such proposal), or (b) furnish any
information
-61-
with respect to, or assist or participate in, or facilitate in any other manner,
any effort or attempt by any person to do or seek the foregoing. Promptly after
execution of this Agreement, all Company Parties will terminate all discussions
with any third party regarding the foregoing and will notify each of the
Purchasers immediately after any Company Party learns that any person has made
any proposal, offer, inquiry or contact with respect to the foregoing. The
Company's acknowledgement of and agreement with the terms and conditions set
forth in this Agreement will constitute a representation and warranty that
neither the Company, its Subsidiaries nor, to their knowledge, any other Company
Party, has entered into any executory agreement or accepted any commitment with
respect to the foregoing transactions.
9R. Insurance Proceeds.
The Purchasers agree that following the payment to Purchasers of any
insurance proceeds under paragraph 3N, (i) the Purchasers shall remit to the
Company an amount of such proceeds, if any, which is equal to (a) the aggregate
amount of proceeds received under paragraph 3N by the Purchasers, less (b) the
Liquidation Value of any Investor Preferred Stock then outstanding, together
with accrued and unpaid dividends, plus the purchase price of any Investor
Common Stock then outstanding; and (ii) the Purchasers agree to return to the
Company for cancellation the shares of Investor Preferred Stock for which
payment in full (including accrued and unpaid dividends) has been received from
such insurance proceeds.
* * * * *
-62-
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
UNITED USN, INC.
/s/ Xxxxxx X. Xxxxxxxxxxx
-----------------------------
By: Xxxxxx X. Xxxxxxxxxxx
Its: Chief Executive Officer
BT CAPITAL PARTNERS, INC.
-----------------------------
By:
--------------------------
Its:
-------------------------
CIBC WOOD GUNDY VENTURES, INC.
-----------------------------
By: Xxxxxxx X. Xxxxxx
Its: President
CHEMICAL VENTURE CAPITAL ASSOCIATES
-----------------------------
By:
--------------------------
Its:
-------------------------
XXXXXXX VENTURE PARTNERS IV - DIRECT FUND
L.P.
By: Back Bay Partners XII L.P.
By: Xxxxxxx Venture Partners, Inc.
-----------------------------
By:
--------------------------
Its:
-------------------------
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first written above.
UNITED USN, INC.
/s/ Xxxxxx X. Xxxxxxxxxxx
------------------------------
By: Xxxxxx X. Xxxxxxxxxxx
Its: Chief Executive Officer
BT CAPITAL PARTNERS, INC.
/s/ Xxxx X. Xxxxxxxxx
------------------------------
By:
---------------------------
Its:
--------------------------
CIBC WOOD GUNDY VENTURES, INC.
/s/ Xxxxxxx X. Xxxxxx
------------------------------
By: Xxxxxxx X. Xxxxxx
Its: President
CHEMICAL VENTURE CAPITAL ASSOCIATES
/s/ Xxxxxx X. Xxxxxxx, Xx.
------------------------------
By:
---------------------------
Its:
--------------------------
XXXXXXX VENTURE PARTNERS IV - DIRECT FUND
L.P.
By: Back Bay Partners XII L.P.
By: Xxxxxxx Venture Partners, Inc.
/s/ Xxxxxxx X. Xxxxxxxx
------------------------------
By:
---------------------------
Its:
--------------------------
NORTHWOOD CAPITAL PARTNERS LLC
/s/ Xxxxx X. Xxxxxx
------------------------------------
By: XXXXX X. XXXXXX
---------------------------------
Its: PRESIDENT
--------------------------------
NORTHWOOD VENTURES
/s/ Xxxxx X. Xxxxxx
------------------------------------
By: XXXXX X. XXXXXX, Attorney in Fact
for Xxxxx X. Xxxxxx
---------------------------------
Its: GENERAL PARTNER
--------------------------------
-2-
SCHEDULE OF PURCHASERS
----------------------
Total Total
No. of Purchase No. of Purchase
Shares Price Shares Price
of for of for
Names and Preferred Preferred Common Common
Addresses Stock Stock Stock Stock
Chemical Venture Capital 4,950 $ 4,950,000 25,641 $ 49,999.95
Associates
000 Xxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
CIBC Wood Gundy Ventures, Inc. 4,950 $ 4,950,000 25,641 $ 49,999.95
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
BT Capital Partners, Inc. 7,425 $ 7,425,000 38,462 $ 75,000.90
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Xxxxxxx Venture Partners IV - 4,950 $ 4,950,000 25,641 $ 49,999.95
Direct Fund L.P.
Xxx Xxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Northwood Ventures 594 $ 594,000 3,077 $ 6,000.15
000 Xxxxxxxxx Xxxx.
Xxxxxxx, XX 00000
Additional Purchaser 2,475 $ 2,475,000 12,821 $ 25,000.95
Total 25,344 $25,344,000 131,283 $256,001.85
Purchasers Pursuant to Appendix I
---------------------------------
Northwood Capital Partners LLC 356 $ 356,000 1,846 $ 3,599.75
000 Xxxxxxxxx Xxxx.
Xxxxxxx, XX 00000
Northwood Ventures 535 $ 535,000 2,770 $ 5,401.50
000 Xxxxxxxxx Xxxx.
Xxxxxxx, XX 00000
Total 891 $ 891,00 4,616 $ 9,001.25
GRAND TOTAL 26,235 $26,235,000 135,899 $265,003.10
-64-
ADHERENCE AGREEMENT
(PLAN OF DIVESTITURE)
June 22, 1995
CIBC Wood Gundy Ventures, Inc., a Delaware corporation ("CIBC") and
Chemical Venture Capital Associates, a California limited partnership
("Chemical") entered into an Agreement and Plan of Divestiture with United USN,
Inc., a Delaware corporation (the "Company") dated as of April 20, 1994, in
connection with their initial investment in the Company. A copy of the Plan of
Divestiture is attached as Exhibit A hereto (the "Plan of Divestiture").
Capitalized terms used herein and not otherwise defined herein have the meanings
assigned to such terms in the Plan of Divestiture.
CIBC and Chemical are both SBICs. As of immediately after their initial
investment in the Company, CIBC and Chemical held, in the aggregate, 58.8% of
the Company's outstanding voting stock. As a result of investments by other
investors since that date, their aggregate percentage of the Company's voting
stock declined to 54.2%. However, on the date hereof, BT Capital Partners, Inc.,
a Delaware corporation which is also an SBIC ("BT Capital"), made an investment
in the Company. As of immediately after BT Capital's investment (and add-on
investments by other shareholders, including CIBC and Chemical), the three SBIC
investors, CIBC, Chemical, and BT Capital, hold approximately 62.7% of the
Company's outstanding voting stock and, under Section 107.801 of the SBA
Regulations, the SBICs may be presumed to be in control of the Company.
NOW THEREFORE, in consideration of the premises and the mutual and
dependent promises hereinafter set forth, the undersigned parties agree to amend
the Plan of Divestiture to include BT Capital as a party thereto, as follows:
1. Adherence by BT Capital. BT Capital hereby becomes a party to the Plan
of Divestiture, and agrees to perform all the obligations of an SBIC thereunder
as if it had been an original party thereto.
2. Agreement of Other Parties. The other parties to the Plan of Divestiture
hereby agree to BT Capital's becoming a party thereto with all the rights and
obligations of an original SBIC party thereto.
3. Approval by SBA. This Adherence Agreement will be effective as of the
date hereof but will be subject to approval by SBA as hereinafter provided and
to renegotiation in the event that SBA at any time determines that renegotiation
is appropriate. A fully executed copy of this Agreement will be filed with SBA
within 30 days after the date hereof. Following receipt of such executed copy of
this Agreement, SBA will have, pursuant to Section 107.801 of the SBA
Regulations, 90 days within which to notify the SBICs that the amendment of the
Plan of Divestiture provided herein has not been approved. In the absence of
such notice, this Agreement and the
amendment of the Plan of Divestiture contained herein will be deemed to have
been approved by SBA.
4. Affirmation of Plan. All provisions of the Plan of Divestiture not
expressly amended hereby are hereby confirmed. In particular, and without
limiting the generality of the foregoing, all time periods for divestiture by
the SBICs of voting control of the Company pursuant to the Plan of Divestiture
as amended hereby shall begin as of the original date of the Plan of
Divestiture, April 20, 1994, and not as of the date of this Adherence Agreement.
5. Miscellaneous. Sections 6-9 (Binding Agreement, Assignment; Governing
Law, Amendments; Headings; Counterparts) of the Plan of Divestiture are hereby
incorporated herein by reference and made a part hereof.
* * * * * * * * * * * *
I.
-2-
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above written.
UNITED USN, INC.
/s/ Xxxxxx X. Xxxx
-----------------------------------------
By: Xxxxxx X. Xxxx
Its: Executive Vice President
CIBC WOOD GUNDY VENTURES, INC.
-----------------------------------------
By: Xxxxxxx X. Xxxxxx
Its: President
CHEMICAL VENTURE CAPITAL ASSOCIATES
-----------------------------------------
By:
--------------------------------------
Its:
-------------------------------------
BT CAPITAL PARTNERS, INC.
By:
--------------------------------------
Its:
-------------------------------------
-3-
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above written.
UNITED USN, INC.
-----------------------------------------
By: Xxxxxx X. Xxxxxxxxxxx
Its: Chief Executive Officer
CIBC WOOD GUNDY VENTURES, INC.
/s/ Xxxxxxx X. Xxxxxx
-----------------------------------------
By: Xxxxxxx X. Xxxxxx
Its: President
CHEMICAL VENTURE CAPITAL ASSOCIATES
-----------------------------------------
By:
--------------------------------------
Its:
-------------------------------------
BT CAPITAL PARTNERS, INC.
By:
--------------------------------------
Its:
-------------------------------------
-4-
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above written.
UNITED USN, INC.
---------------------------------
By: Xxxxxx X. Xxxxxxxxxxx
Its: Chief Executive Officer
CBIC WOOD GUNDY VENTURES, INC.
---------------------------------
By: Xxxxxxx X. Xxxxxx
Its: President
CHEMICAL VENTURE CAPITAL ASSOCIATES
/s/ XXXXXX X. XXXXXXX, XX.
---------------------------------
By:
Its:
BT CAPITAL PARTNERS, INC.
---------------------------------
By:
------------------------------
Its:
-----------------------------
-5-
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above written.
UNITED USN, INC.
---------------------------------------
By: Xxxxxx X. Xxxxxxxxxxx
Its: Chief Executive Officer
CIBC WOOD GUNDY VENTURES, INC.
---------------------------------------
By: Xxxxxxx X. Xxxxxx
Its: President
CHEMICAL VENTURE CAPITAL ASSOCIATES
---------------------------------------
By:
------------------------------------
Its:
-----------------------------------
BT CAPITAL PARTNERS, INC.
/s/ XXXX XXXXXXXXX
------------------------------------
By: Xxxx Xxxxxxxxx
Its: Managing Director
-6-
APPENDIX I
THIS APPENDIX I (this "Appendix I") is an appendix to the Purchase
Agreement, dated as of June 22, 1995 (the "Agreement"). Each capitalized term
used and not otherwise defined in this Appendix I has the meaning given such
term in the Agreement. Northwood Ventures and Northwood Capital are the holders
of certain promissory notes (collectively, the "Notes") in the aggregate
principal amount of $835,000 issued by Quest America, L.P., a Delaware limited
partnership ("Quest"). UTS is a party to an Asset Purchase Agreement dated as of
June 13, 1995 (the "Asset Purchase Agreement") by and among Quest, UTS and
certain other parties.
1. Purchase of Stock if Quest Acquisition Consummated. Upon consummation
of the transactions contemplated by the Asset Purchase Agreement (the
"Acquisition"), Northwood Ventures and Northwood Capital will jointly and
severally be obligated to purchase from the Company, and the Company will sell
to, Northwood Ventures and Northwood Capital, an aggregate of an additional 891
shares of Preferred Stock - Series 2 and 4,616 shares of Common Stock, for an
aggregate purchase price of $900,001.20 and on the other terms of the Agreement.
Northwood Ventures, Northwood Capital and the Company will consummate such
transactions not later than two business days after consummation of such
transactions, and Northwood Capital and Northwood Ventures will be permitted to
assign to the Company all or any portion of their rights to receive amounts of
principal and interest payable under the Notes in payment of their obligations
to pay corresponding amounts of such additional purchase price. The closing for
such purchases shall take place at the offices of Xxxxxxxx & Xxxxx, Citicorp
Center, 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000, or at such other
place as may be mutually agreeable to the Company, Northwood Capital and
Northwood Ventures. At such closing, the Company shall deliver to each of
Northwood Capital and Northwood Ventures stock certificates evidencing the Stock
to be purchased by each Purchaser, registered in such Purchaser's or its
nominee's name, upon delivery by such Purchaser of the purchase price thereof;
provided that, if any portion of such purchase price is to be paid by assignment
of all or any portion of the Notes, Northwood Ventures and Northwood Capital
shall deliver the Notes to the Company, free and clear of all liens, charges and
encumbrances and with forms of assignment thereof reasonably satisfactory to the
Company. Northwood Ventures and Northwood Capital will cease to
have any rights or obligations pursuant to this paragraph l upon termination of
the Asset Purchase Agreement.
2. Purchase of Stock if Quest Acquisition Not Consummated. Upon
termination of the Asset Purchase Agreement, and termination of the rights and
obligations of Northwood Capital and Northwood Ventures pursuant to paragraph 1
above, then Northwood Capital and Northwood Ventures shall have the right (but
not the obligation) to purchase from the Company an aggregate of 891 shares of
Preferred Stock - Series 2 and 4,616 shares of Common Stock issued by the
Company for an aggregate purchase price of $900,001.20 (but may not purchase any
of such shares unless they purchase all of such shares of Preferred Stock -
Series 2 and Common Stock). To exercise a right to purchase Stock pursuant to
this paragraph 2, Northwood Ventures and/or Northwood Capital must deliver a
written notice thereof within 10 business days after termination of the Asset
Purchase Agreement, and upon delivery of such notice the delivering party will
be bound to purchase Stock from the Company as described therein. The closing
for such purchases shall take place at the offices of Xxxxxxxx & Xxxxx, Citicorp
Center, 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000, or at such other
place as may be mutually agreeable to the Company and Northwood Capital and
Northwood Ventures, on a business day designated by the Company not less than
two days after delivery of such notice. At such closing, the Company shall
deliver to each of Northwood Capital and Northwood Ventures stock certificates
evidencing the Stock to be purchased by each Purchaser, registered in such
Purchaser's or its nominee's name, upon payment of the purchase price thereof by
such Purchaser by a cashier's or certified check, or by wire transfer of
immediately available funds to the Company's account at Madison Bank & Trust, in
the amounts of the purchase price for such Purchaser.
3. Stock Issued Pursuant to Agreement. Any Stock issued by the Company to
Northwood Capital or Northwood Ventures hereunder shall be deemed for all
purposes to have been issued under and pursuant to the Agreement.
-2-
