EXHIBIT 3
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is made and entered into as
of the 16th day of July, 2002, by and among U.S. REALTEL, INC., a Delaware
corporation (the "U.S. RealTel"), Cypress Communications, Inc., a wholly-owned
subsidiary of the Issuer ("Cypress" and together with U.S. RealTel, the
"Issuers") and the parties listed on Schedule I attached hereto (being referred
to individually as a "Purchaser" and collectively herein as the "Purchasers").
Annex A hereto contains certain defined terms used herein.
WHEREAS, Cypress has agreed to purchase certain assets (the "Assets")
for providing shared tenant telecommunications services in various locations
utilizing in-building distribution networks (the "Business") pursuant to that
certain Asset Purchase Agreement, dated May 31, 2002, by and among Cypress and
Intermedia Communications, Inc., Shared Technologies Xxxxxxxxx, Inc., Shared
Technologies Xxxxxxxxx Telecom, Inc., MCI Worldcom Communications, Inc. and
Worldcom, Inc. (collectively, the "Worldcom Parties"), as amended by Amendment
No. 1 to Asset Purchase Agreement, dated July 16, 2002 (the "Asset Purchase
Agreement");
WHEREAS, in connection with the Asset Purchase Agreement, Cypress and
certain of the Worldcom Parties shall execute and deliver certain agreements to
provide and perform certain services in connection therewith (together will all
documents and agreement executed in connection with the Asset Purchase
Agreement being referred to herein, collectively, the "Worldcom Agreements");
WHEREAS, the Purchasers desire to purchase from the Issuers, and the
Issuer desires to issue to the Purchasers, Fixed Rate Convertible Notes due
July 1, 2009 in the form attached hereto as Exhibit A (the "Notes"), and Series
A Preferred Stock, par value $.001 per share of U.S. RealTel (the "Preferred
Stock") with such rights, preferences and privileges as set forth in the
Certificate of Designations filed with the Secretary of State in the form
attached hereto as Exhibit B (the "Certificate of Designation") the proceeds of
which shall be used to purchase the Assets and Business pursuant to the Asset
Purchase Agreement (the "Worldcom ABN Transaction");
WHEREAS, in connection with the sale and issuance of the Notes and
Preferred Stock hereunder, U.S. RealTel shall issue to the Purchasers warrants,
in the form attached hereto as Exhibit C (the "Warrants"), to purchase shares
of U.S. RealTel's common stock, par value $.001 per share (the "Common Stock"),
under the terms and conditions as set forth herein; and
WHEREAS, in connection with the Worldcom ABN Transaction and the
execution and delivery of this Agreement, the Issuers desire to execute a Loan
Agreement, dated as of the date hereof, by and among the Issuers and the
Lenders stated therein (the "Mezzanine Lenders") pursuant to which the Issuers
shall issue term notes to the Mezzanine Lenders with an aggregate principal
amount of Eight Million Dollars ($8,000,000) (the "Mezzanine Loans").
NOW, THEREFORE in consideration of the premises and the mutual
covenants
contained herein, the Issuers and the Purchasers hereby agree as follows:
1. PURCHASE AND SALE OF THE NOTES, WARRANTS AND PREFERRED STOCK.
1.1 Authorization of Issuance of the Notes, Warrants and
Preferred Stock.
1.1.1 Notes. The Boards of Directors of the Issuers have
authorized the issuance and sale, on the terms and conditions set forth herein,
of the Notes, dated July 16, 2002 in the aggregate principal amount of up to
Ten Million Dollars ($10,000,000).
1.1.2 Warrants. The Board of Directors of U.S. RealTel has
authorized the issuance and sale of Warrants to purchase shares of Common Stock
on the terms and conditions set forth herein.
1.1.3 Preferred Stock. The Board of Directors of U.S.
RealTel has designated 10 shares of its blank check preferred stock as Series A
Preferred Stock and authorized the issuance and sale of the Preferred Stock on
the terms and conditions set forth herein. The Preferred Stock will be
transferable only with the Notes as provided herein.
1.2 Issuance of Notes and Preferred Stock. Subject to the terms
and conditions of this Agreement, the Issuers hereby issue and sell to the
Purchasers the Notes and Preferred Stock, with each Purchaser purchasing a Note
with the principal amount of such Note that is indicated opposite of such
Purchaser's name on Schedule I hereto and the number of shares of Preferred
Stock indicated opposite of such Purchaser's name on Schedule I hereto.
1.2.1 Purchase Price. The purchase price for each Note and
the shares of Preferred Stock issued to each Purchaser shall be as indicated
opposite such Purchaser's name on Schedule I hereto (the "Purchase Price").
1.3 Issuance of Warrants. U.S. RealTel hereby issues to each
Purchaser Warrants to purchase that number of shares of Common Stock into which
such Purchaser's Note would be convertible immediately prior to the redemption
of the Notes by the Issuers pursuant to Section 2.8 hereof, at which time the
Warrants shall become exercisable at an exercise price of $1.13 per share, as
adjusted pursuant to Section 2.7 hereof (the "Exercise Price"). The date on
which the Warrants are exercised is hereinafter referred to as the "Exercise
Date." The Warrants shall expire on July 1, 2009.
1.4 Closing Deliveries. The closing of the issuance of the Notes,
Preferred Stock and Warrants (the "Closing") shall take place at the offices of
King & Spalding, on the date hereof (the "Closing Date"), or at such other
location or in such other manner including fax or mail as may be agreed by the
parties hereto. At the Closing, the parties shall deliver the agreements,
instruments, documents and certificates described in Section 5 and Section 6
hereof.
1.5 Reservation of Shares. From and after the date hereof, U.S.
RealTel shall reserve and keep available for issuance such number of its
authorized but unissued shares of its Common Stock as will be sufficient to
permit the conversion in full of the Notes into Common Stock or the
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issuance of Common Stock upon the exercise of the Warrants in full, as
applicable, and in each case in accordance with this Agreement and the terms of
the Notes and the Warrants. All shares of Common Stock that are so issuable
shall, when issued upon conversion or exercise, be duly and validly issued and
fully paid and non-assessable. If at any time the number of authorized but
unissued shares of Common Stock shall be insufficient to effect the conversion
or exercise of all the outstanding Notes or Warrants, U.S. RealTel shall use
its best efforts to take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.
1.6 Use of Cash Proceeds. The Issuers hereby agree to use the
cash proceeds from the sale of the Notes, the Warrants and the Preferred Stock
exclusively for the purchase of the Assets and the Business, together with the
proceeds of the Mezzanine Loans and the proceeds from that certain loan from
Silicon Valley Bank pursuant to that certain Loan and Security Agreement dated
July 12, 2002, in connection with the Worldcom ABN Transaction pursuant to the
Asset Purchase Agreement. If the Worldcom ABN Transaction does not close within
two (2) days of the date hereof, the Issuers shall pay within three (3) days of
the date hereof to each Purchaser the Purchase Price paid by each Purchaser
pursuant to this Agreement in accordance with the wire transfer instructions
provided to the Issuers by each Purchaser.
1.7 Agreements. Each of the parties hereto has delivered the
respective agreements and other documents described in Section 5 and Section 6
of this Agreement.
2. OTHER PROVISIONS RELATING TO THE NOTES AND THE WARRANTS.
2.1 Interest on the Notes. Subject to Section 2.2, interest on
the Notes shall accrue at a rate per annum equal to seven and one-half percent
(7.50%) compounding quarterly. Interest shall be payable at maturity of the
Notes, whether on July 1, 2009 (the "Maturity Date"), by acceleration or
otherwise or upon redemption of the Notes pursuant to Section 2.8, unless the
Notes are converted into shares of Common Stock pursuant to Section 2.5.
2.2 Default Rate of Interest. If the Issuers fail to pay on the
due date therefor, whether on the Maturity Date, by acceleration or otherwise,
any principal owing under the Notes, then interest shall accrue on such unpaid
principal from the due date to but excluding the date on which such principal
is paid in full at a rate per annum equal to ten percent (10%) (the "Default
Rate"). Interest calculated at the Default Rate shall be due and payable upon
demand by the Purchasers.
2.3 Calculation of Interest. Interest payable on the Notes shall
be calculated on the basis of a year of 360 days consisting of twelve 30-day
months. If the date for any payment of principal is extended (whether by
operation of this Agreement, any provision of law or otherwise), interest shall
be payable for such extended time at the rates provided herein. Whenever any
payment hereunder shall be stated to be due on a day other than a Business Day,
such payment shall be due on the next succeeding Business Day. For purposes of
this Agreement, "Business Day" shall mean any day on which commercial banks
located in Atlanta, Georgia are required or permitted by law to be open for the
purpose of conducting a commercial banking business.
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2.4 Usury. In no event shall the amount of interest due or
payable on any Note, when aggregated with all amounts payable by the Issuers
under any of the Transaction Agreements (as hereinafter defined) that are
deemed or construed to be interest, exceed the maximum rate of interest allowed
by applicable law and, in the event any such payment is made by the Issuer or
received by a Purchaser, then such excess sum shall be credited as a payment of
principal and the balance, if any, returned to the Issuers. It is the express
intent of the parties hereto that the Issuers not pay, and the Purchasers not
receive, directly or indirectly, in any manner whatsoever, interest in excess
of that which may be lawfully paid by the Issuers under applicable law.
2.5 Conversion of Notes. At any time on or prior to the Maturity
Date, at the election of any Purchaser, a Note held by such Purchaser may be
converted in whole or in part into that number of fully paid and non-assessable
shares of Common Stock equal to (A) the principal amount of the Note being
converted plus all accrued interest with respect to such converted principal
amount divided by (B) $1.13, as adjusted pursuant to Section 2.7 hereof (the
"Conversion Price"). The date on which such conversion occurs is hereinafter
referred as the "Conversion Date."
2.5.1 Conversion Procedure. Each Purchaser that elects to
convert its Note pursuant to Section 2.5 shall give prompt written notice of
its election to convert to the Issuers (the "Conversion Notice"), specifying
the amount to be converted into shares of Common Stock. Each such Purchaser
shall promptly surrender its Note for conversion to the Issuers. Upon receipt
by the Issuers of such Note, the Issuers shall issue a certificate or
certificates for the applicable number of shares of Common Stock and cash in
lieu of fractional shares, if applicable. In the event that a Purchaser
converts less than the entire principal amount of a Note pursuant to this
Section 2.5, the Issuers shall issue to such Purchaser a replacement Note equal
to the remaining principal amount of the surrendered Note which was not
converted. Each replacement Note shall be dated as of the date of the
surrendered Note. Each conversion pursuant to Section 2.5 shall be deemed to
have been effected on the date of the Conversion Notice and at such time the
rights of holders of such Notes shall cease with respect to the Notes so
converted, and all Notes (or portions thereof) subject to such conversion
outstanding on such date shall be deemed to constitute the shares of Common
Stock into which such Notes are convertible as provided herein, and each
Purchaser in whose name any Note is registered shall be deemed to have become
on said date the holder of record of the shares of Common Stock represented
thereby.
2.6 Exercise of Warrants. Upon the redemption of the Notes
pursuant to Section 2.8, each Purchaser's Warrant shall become exercisable in
whole or in part for that number of fully paid and non-assessable shares of
Common Stock equal to (A) the principal amount of such Purchaser's Note being
redeemed plus all accrued interest thereon divided by (B) the Exercise Price
then in effect.
2.7 Adjustments to Conversion Price and Exercise Price. The
Conversion Price and the Exercise Price shall be subject to adjustment as
follows:
2.7.1 Adjustment for Subdivisions or Combinations of
Common Stock; Stock Dividends. In the event U.S. RealTel at any time or from
time to time after the date hereof effects a subdivision or split of its Common
Stock into a greater number of shares of Common Stock or shall issue a stock
dividend on the outstanding Common Stock, then on the Conversion
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Date or the Exercise Date, as applicable, the Conversion Price or Exercise
Price, as applicable, shall be proportionately decreased for all such
subdivisions or splits or the issuance of such dividend which shall have
occurred in the period between the date hereof and the Conversion Date or the
Exercise Date, as applicable. In the event U.S. RealTel at any time or from
time to time after the date hereof effects a combination of the outstanding
Common Stock into a lesser number of shares of Common Stock, then on the
Conversion Date or the Exercise Date, as applicable, the Conversion Price or
Exercise Price, as applicable, shall be proportionately increased for all such
combinations which shall have occurred in the period between the date hereof
and the Conversion Date or the Exercise Date, as applicable.
2.7.2 Recapitalizations, Reclassifications,
Reorganizations, etc. In the event of any recapitalization, reclassification,
reorganization, consolidation, merger or similar transaction of U.S. RealTel
with or into another Person or the sale, transfer or other disposition of all
or substantially all of the assets of U.S. RealTel and its Subsidiaries (viewed
as a whole) to another Person, each Note shall thereafter be convertible into,
and each Warrant shall thereafter be exercisable for, the kind and amount of
shares of stock or other securities or property that a holder of the number of
shares of Common Stock of U.S. RealTel deliverable upon conversion of the Notes
or upon exercise of the Warrants would have been entitled upon such
recapitalization, reorganization, consolidation, merger, sale or similar
transaction; and, in such case, appropriate adjustment (as determined in good
faith by the Board of Directors, including the approval of the directors
designated by the Purchasers) shall be made in the application of the
provisions set forth in this Section 2.7 with respect to the rights and
interests thereafter of the Purchasers, to the end that the provisions set
forth in this Section 2.7 shall thereafter be applicable, as nearly as
reasonably may be, in relation to any shares of stock or other property
thereafter deliverable upon conversion of the Notes or upon exercise of the
Warrants.
2.7.3 Certificate as to Adjustments. Upon the occurrence
of each determination or readjustment of the Conversion Price and the Exercise
Price pursuant to this Section 2.7, U.S. RealTel at its expense shall promptly
compute such determination or readjustment in accordance with the terms hereof
and shall prepare and furnish to each Purchaser a certificate setting forth (i)
such determination or readjustments, (ii) the Conversion Price and Exercise
Price in effect, (iii) the number of shares of Common Stock that at that time
would be received upon the conversion of the Notes and upon exercise of the
Warrants; and (iv) reasonable detail regarding the facts upon which such
determination or readjustment is based.
2.7.4 Notices of Record Date. In the event of any taking
by U.S. RealTel of a record of the holders of any class of securities other
than the Notes and the Warrants for the purpose of determining the holders
thereof who are entitled to receive any dividend or other distribution, any
rights convertible into, exchangeable for, or entitling the holder thereof to
receive shares of Common Stock ("Common Stock Equivalents") or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class
or any other securities or property, or to receive any other right, U.S.
RealTel shall mail to each Purchaser, at least twenty (20) days prior to the
date specified therein, a notice specifying the date on which any such record
is to be taken for the purpose of such dividend, distribution or rights, and
the amount and character of such dividend, distribution or rights.
2.8 Redemption of the Notes.
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2.8.1 Optional Redemption. The Issuers may, at their
option at any time after the date hereof (the "Redemption Date"), upon notice
as provided in Subsection 2.8.2, redeem the Notes in whole or in part, at the
principal amount of the Notes so prepaid, plus accrued interest to and
including the date of redemption; provided, that any such redemption pursuant
to this Section 2.8 shall be pro rata among the Notes held by the Purchasers.
2.8.2 Notice of Optional Redemption. The Issuers shall
provide each Purchaser written notice of any optional redemption of Notes
pursuant to Section 2.8 not less than 10 days and not more than 30 days prior
to the Redemption Date. Such notice shall specify (i) the Redemption Date, (ii)
the principal amount of each Note and the accrued interest thereon, and (iii)
the Conversion Price in effect as of the date of such notice.
2.8.3 Effect of Redemption. Notwithstanding anything to
the contrary, it is the intention of the parties that the terms and conditions
of this Agreement, including the covenants contained in Section 7 hereof, shall
remain in effect upon the redemption of the Notes until the earlier to occur of
(i) the exercise of the Warrants in full, or (ii) the expiration of the
Warrants.
2.9 Maturity of Notes. Unless the Notes are converted into shares
of Common Stock in accordance with Section 2.5 hereof or redeemed by the
Issuers in accordance with Section 2.8 hereof prior to the Maturity Date, the
outstanding principal amount of the Notes, together with the accrued interest
thereon, shall become due and payable on the Maturity Date.
2.10 Fractional Shares. No fractional shares of Common Stock or
scrip representing fractional shares shall be issued upon conversion of the
Notes or upon exercise of the Warrants. In lieu of fractional shares, the
Issuers shall pay cash in an amount equal to the closing price of a share of
Common Stock of U.S. RealTel on the Conversion Date or Exercise Date, as
applicable, multiplied by the fraction of a full share of Common Stock
represented by such fractional share.
3. REPRESENTATIONS AND WARRANTIES OF THE ISSUER.
The Issuers hereby represents and warrants to the Purchasers as set forth
below.
3.1 Organization and Standing; Charter and Bylaws. The Issuers
are corporations duly organized and validly existing under, and by virtue of,
the laws of the State of Delaware and are in good standing under such laws. The
Issuers are qualified to do business as a foreign corporation in every
jurisdiction in which the failure to so qualify would have a material adverse
effect upon the business, assets, liabilities, properties, financial condition,
results of operation or business prospects of the Issuers (a "Material Adverse
Effect"). The Issuers have the requisite corporate power and authority to own
and operate their properties and assets and to carry on their business as
presently conducted and as proposed to be conducted. The Issuers have
previously delivered to the Purchasers complete and accurate copies of their
respective Certificates of Incorporation and bylaws, as presently in effect.
3.2 Corporate Power. The Issuers have all requisite legal and
corporate power and authority to enter into this Agreement, the agreements to
be delivered pursuant to Section 5 hereof and all other documents, certificates
and agreements to be delivered in connection herewith and therewith
(collectively, the "Transaction Agreements") to which it is a party and, in
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the case of the Issuer, to issue the Notes, the Preferred Stock and the
Warrants and to issue the Common Stock upon conversion of the Notes or upon
exercise of the Warrants, as applicable, and to carry out and perform their
respective other obligations under the terms of this Agreement.
3.3 Subsidiaries and Affiliates. Except as disclosed on Schedule
3.3, the Issuers do not own or control, directly or indirectly, any interest or
investment in any corporation, partnership, association or other form of
business entity. Except as disclosed on Schedule 3.3, the Issuers owns all of
the outstanding capital stock of their respective Subsidiaries.
3.4 Capitalization. The authorized capital stock of U.S. RealTel
immediately prior to Closing consists of Fifty-Five Million (55,000,000)
shares, consisting of (i) Fifty Million (50,000,000) shares of Common Stock, of
which Five Million Eight Hundred Seventy-Three Thousand Three Hundred
Ninety-Five (5,873,395) are issued and outstanding and (ii) Five Million
(5,000,000) undesignated shares of preferred stock, par value $0.001 per share,
none of which are outstanding. The authorized capital stock of Cypress consists
of One Hundred (100) shares of common stock, par value $0.01 per share, One
Hundred (100) shares of which are issued and outstanding and owned by U.S.
RealTel. All such issued and outstanding shares of the Issuers have been duly
authorized and validly issued, are fully paid and nonassessable, and have been
offered, issued, sold and delivered in transactions exempt from registration
under the Securities Act of 1933, as amended (the "Securities Act"), and all
applicable state securities or "blue sky" laws or pursuant to an effective
registration statement in accordance with the Securities Act. Except as shown
on Schedule 3.4(a), there are no outstanding rights, options, warrants,
conversion rights or agreements for the purchase or acquisition from the
Issuers or their Subsidiaries of any shares of its capital stock other than the
rights created by this Agreement and the Transaction Agreements. Except as
expressly contemplated by this Agreement, there are no preemptive or similar
rights to purchase or otherwise acquire shares of capital stock of the Issuers
or their Subsidiaries pursuant to any provision of law, the Certificate of
Incorporation of Issuers or their Subsidiaries, the bylaws of the Issuers or
their Subsidiaries or any agreement to which the Issuers or their Subsidiaries
is a party, and there is no agreement or restriction (such as a right of first
refusal, right of first offer, proxy, voting trust or voting agreement) with
respect to the sale or voting of any shares of capital stock of the Issuers or
their Subsidiaries (whether outstanding or issuable upon conversion or exercise
of outstanding securities), except as expressly contemplated by this Agreement
and the Transaction Agreements. Attached hereto as Schedule 3.4(b) is a pro
forma capitalization table of the Issuers giving effect to the transactions
contemplated hereby, including the capitalization of each of the Subsidiaries
of the Issuers.
3.5 Authorization. All corporate action on the part of the
Issuers and their Subsidiaries and their directors, officers and stockholders
necessary for the authorization, execution, delivery and performance of all
obligations of the Issuers and their Subsidiaries under the Transaction
Agreements and for the authorization, issuance and delivery by the Issuers of
the Notes, and for the authorization, issuance and delivery by U.S. RealTel of
the Preferred Stock and Warrants, and for the authorization, issuance and
delivery by U. S. RealTel of the Common Stock issuable upon conversion of the
Notes or upon exercise of the Warrants, as applicable, has been taken. The
Transaction Agreements constitute the valid and binding obligations of the
Issuers and are enforceable against the Issuers in accordance with their
respective terms, except as enforceability may be limited by bankruptcy,
insolvency or other laws affecting the
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enforcement of creditors' rights generally, and except that the availability of
the remedy of specific performance or other equitable relief is subject to the
discretion of the court before which any proceeding therefor may be brought.
3.6 Validity of the Notes, Warrants and Common Stock. The Notes
are valid, binding and enforceable obligations of the Issuers, free of all
mortgages, pledges, liens, leases, security interests, conditional sales
agreements, encumbrances and charges ("Encumbrances") and are not subject to
any redemption rights, other than as provided herein. The Common Stock issuable
upon conversion of the Notes or upon exercise of the Warrants, as applicable,
has been duly and validly reserved, and neither it nor the issuance thereof is
subject to any preemptive rights, rights of first refusal or redemption rights,
and, upon issuance, it will be validly issued, fully paid and nonassessable.
3.7 Disclosure. Each of the documents filed by U.S. RealTel with
the SEC complied when filed with all of the requirements of the Securities Act
and the Securities and Exchange Act of 1934, as amended (the "Exchange Act"),
as applicable, and did not and does not contain any untrue statement of a
material fact or omit to state any material fact required to be contained
therein or necessary in order to make the statements therein not misleading.
The Executive Summary of Cypress, Inc. dated March 2002 and the pro forma
financial statements delivered to the Purchasers did not and do not contain any
untrue statement of a material fact or omit to state any material fact required
to be contained therein or necessary in order to make the statements therein
not misleading and the projections and assumptions stated therein were made in
good faith with reasonable basis therefor. Notwithstanding the foregoing, the
Issuers make no representations and warranties as to the accuracy of the
projections stated therein except as expressly set forth herein.
3.8 Financial Statements. The annual report on Form 10-K filed by
U.S. RealTel on April 16, 2002 (the "Form 10-K"), contains consolidated balance
sheets of U.S. RealTel and its consolidated Subsidiaries, and the consolidated
statements of income, stockholders' equity, and cash flows of U.S. RealTel and
its consolidated Subsidiaries for each of the three years ended December 31,
1999, December 31, 2000 and December 31, 2001, including notes thereto, and the
opinion of BDO Xxxxxxx, LLP, independent certified public accountants with
respect to such financial statements. The quarterly report on Form 10-Q filed
by U.S. RealTel on May 20, 2002 (the "Form 10-Q"), contains the unaudited
consolidated balance sheet of U.S. RealTel and its consolidated Subsidiaries
at, and the unaudited consolidated statements of income, stockholders' equity,
and cash flows of the Issuer and its consolidated Subsidiaries for the period
ended, March 31, 2002. All of the foregoing financial statements are complete
and correct in all material respects and fairly present in all material
respects the consolidated financial condition of U.S. RealTel and its
consolidated Subsidiaries at the respective dates of said balance sheets and
the consolidated results of operations of U.S. RealTel and its consolidated
Subsidiaries for the respective periods covered thereby. Such financial
statements have been prepared in accordance with GAAP applied on a consistent
basis throughout the periods involved (except as otherwise noted therein) and
in accordance with all applicable requirements of the SEC. There were no
material liabilities, direct or indirect, fixed or contingent, of U.S. RealTel
and its consolidated Subsidiaries as of the respective dates of such balance
sheets that are not reflected therein or in the notes thereto. The Issuers
hereby represent and warrant that the Issuers have Seven Million
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Dollars ($7,000,000) in immediately available funds in the accounts of the
Issuers as of the date hereof.
3.9 Changes. Except as disclosed on Schedule 3.9, since March 31,
2002, there has not been:
3.9.1 any material change in the business, assets,
liabilities, financial condition, or results of operations of the Issuers
considered in the aggregate, except changes in the ordinary course of business
that have not had, or are reasonably likely to have, either individually or in
the aggregate, a Material Adverse Effect;
3.9.2 any change (individually or in the aggregate),
except in the ordinary course of business, in the contingent obligations of the
Issuers by way of guaranty, endorsement, indemnity, warranty, or otherwise;
3.9.3 any damage, destruction, or loss, whether or not
covered by insurance, materially and adversely affecting the properties or
business of the Issuers;
3.9.4 any loans made by the Issuers to its employees,
officers, or directors, or members of their immediate families;
3.9.5 any transaction by or involving the Issuers that was
not in the ordinary course of business;
3.9.6 any change or amendment to any Material Contract (as
hereinafter defined) by which either Issuer or any of their assets is bound or
subject, except as contemplated by this Agreement;
3.9.7 any Encumbrance, sale, assignment or transfer of any
tangible or intangible assets of the Issuers, except, with respect to tangible
assets, in the ordinary course of business consistent with past practice;
3.9.8 any increases in the compensation of any of the
Issuers' employees, officers, or directors, other than ordinary bonuses and
raises consistent with past practices which have been approved by the Board of
Directors;
3.9.9 any declaration or payment of any dividend or other
distribution of the assets of the Issuers;
3.9.10 any issuance or sale by the Issuers of any shares of
Common Stock or other securities, other than in connection with compensation
and/or benefit plans of the Issuers which have been approved by the Board of
Directors;
3.9.11 any resignation or termination of employment of any
key officer, employee or independent contractor of the Issuers, and, to the
knowledge of the Issuers, any impending or threatened resignation or
termination of employment of any such officer, employee or independent
contractor;
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3.9.12 any other event or condition of any character that
has had, or is reasonably likely to have, a Material Adverse Effect with
respect to the Issuers; or
3.9.13 any agreement or commitment by the Issuers to do any
of the things described in this Section 3.9.
3.10 Contracts and Commitments. Other than this Agreement or as
set forth on Schedule 3.10, the Issuers do not have any contracts, agreements
or instruments to which either Issuer is a party that involve a commitment by,
or revenue to, the Issuers in excess of $100,000 annually or which are
otherwise material to the business and operations of the Issuers (each, a
"Material Contract"). All contracts, agreements or instruments (including those
indicated on Schedule 3.10) to which either Issuer is a party are valid and
binding upon such Issuer, and, to the Issuers' knowledge, the other parties
thereto and are in full force and effect and enforceable in accordance with
their terms, and neither the Issuers nor, to the knowledge of Issuers, any
other party to any such Material Contract, agreement or instrument has breached
any provision of, or is in default under, the terms thereof, and there are no
existing facts or circumstances that would prevent the work in process of the
Issuers or their contracts and agreements from maturing in due course into
fully collectible accounts receivable. The Issuers have entered into all
Material Contracts necessary to conduct its business as presently conducted and
as proposed to be conducted.
3.11 Intellectual Property. All of the intellectual property
rights which are owned by or registered in the name of the Issuers, or of which
either Issuer is the licensor or licensee or in which either Issuer has any
material right (other than with respect to "off-the-shelf" or other third party
software which is generally commercially available) or which is otherwise
material to the conduct of the Issuers' business as presently conducted or
proposed to be conducted, including all patents, patent applications, patent
rights, trademarks, trademark applications, trade names, service marks, service
xxxx applications, uniform resource locators (URLs), Internet domain names,
copyrights (both registered and unregistered, the "Copyrights"), copyright
applications, computer programs and other computer software (including, without
limitation, all source and object code, algorithms, architecture, structure,
display screens, layouts and development tools), inventions, designs, samples,
specifications, schematics, know-how, trade secrets, proprietary processes and
formulae, and development tools, promotional materials, databases, customer
lists, supplier, vendor and dealer lists and marketing research, and all
documentation and media constituting, describing or relating to the foregoing,
including, without limitation, manuals, memoranda and records, all collectively
constitute the Issuers' "Intellectual Property Rights" for purposes of this
Agreement. Schedule 3.11 contains a true and complete list of all of the
Issuers' patents, patent applications, trademark registrations, trademark
applications, material unregistered trademarks, service marks, registered
copyrights, uniform resource locators (URLs), Internet domain names, and
computer software (other than off-the-shelf software purchased in the ordinary
course of business) owned or used by the Issuers.
3.11.1 Rights to Intellectual Property. Except as set forth
on Schedule 3.11.1, the Intellectual Property Rights consist solely of items
and rights (i) which are owned by the Issuers free and clear of all
Encumbrances other than Permitted Liens; or (ii) for which the Issuers have a
valid license or other right of use. To the Issuers' knowledge, the Issuers do
not currently, and in connection with those products under development by the
Issuers it will not be necessary to,
10
utilize any inventions of any of its current or former employees or consultants
made prior to or outside the scope of their employment with the Issuers, except
for inventions that have been assigned or licensed to the Issuers.
3.11.2 No Adverse Claims. No claim is pending or, to the
Issuers' knowledge, threatened against the Issuers and/or their officers,
employees, and consultants relating to the Issuers' right, title and interest
in and to the Intellectual Property Rights. To the Issuers' knowledge (after
due inquiry of its employees), no officer or employee of the Issuers has
entered into any agreement (other than agreements with the Issuers) that
restricts or limits in any way the scope or type of work in which the officer
or employee is engaged by the Issuers or requires the officer or employee to
transfer, assign, or disclose information concerning his work to anyone other
than the Issuers.
3.11.3 Trade Secrets. The Issuers have taken reasonable
security measures to protect the secrecy, confidentiality and value of all
trade secrets. To the knowledge of the Issuers, there has not been any breach
by any party to any such confidentiality or non-disclosure agreement. The trade
secrets have not been disclosed by the Issuers to any person or entity other
than employees, contractors of the Issuers or persons who have confidentiality
agreements who had a need to know and use the trade secrets in the course of
their employment, contract performance or business relationship or proposed
business relationship with the Issuer. The Issuers have the right to use, free
and clear of claims of third parties, all trade secrets utilized by the
Issuers.
3.11.4 Licenses Received. All licenses (other than with
respect to "off-the-shelf" or other third party software which is generally
commercially available) or other agreements under which the Issuers are granted
rights by others in Intellectual Property Rights are listed in Schedule 3.11.4.
All such licenses are in full force and effect and, to the knowledge of the
Issuers, there is no violation or default by any party thereto.
3.11.5 Third Party Claims. To the Issuers' knowledge, the
conduct of the Issuers' business as now conducted does not infringe on any
patent, copyright, trade secret, trademark, service xxxx, trade dress, or
Internet domain name of any third party. The Issuers have not received any
notices of, and is not aware of any facts which indicate a reasonable
likelihood, of any infringement or misappropriation by, or conflict with, any
third party with respect to such Intellectual Property Rights (including,
without limitation, any demand or request that the Issuers license any rights
from a third party). To the Issuers' knowledge, there is no unauthorized use,
infringement or misappropriation of any of the Issuers' Intellectual Property
Rights by any third party, employee or former employee. There have been no
pending, or to the Issuers' knowledge, threatened proceedings or litigation or
other claims made against the Issuers asserting the invalidity, misuse or
unenforceability of any such Intellectual Property Rights, and, to the best of
the Issuers' knowledge, there are no valid grounds for the same.
3.11.6 Personnel. All personnel, including employees,
agents, consultants and contractors, who have contributed to or participated in
the conception and development of the Issuers' Intellectual Property Rights on
behalf of the Issuers either (i) have been a party to a "work for hire"
arrangement or agreements with the Issuers in accordance with applicable
national and state law that has accorded the Issuers full, effective and
original ownership of all
11
tangible and intangible property thereby arising, or (ii) have executed
appropriate instruments of assignment in favor of the Issuers as assignee that
have been conveyed to the Issuers effective and exclusive ownership of all
tangible and intangible property thereby arising.
3.12 Compliance with Other Instruments. Except as disclosed on
Schedule 3.12, neither the Issuers not their Subsidiaries are in violation of
any term of their respective Certificates of Incorporation or Bylaws, of any
provision of any Material Contract, or any judgment, decree or order binding
upon the Issuers or their Subsidiaries which individually or in the aggregate
would have a Material Adverse Effect. The execution, delivery and performance
of and compliance with the Transaction Agreements, the issuance of the Notes
and the Warrants, and the issuance of the Common Stock issuable upon conversion
of the Notes or upon exercise of the Warrants, as applicable, will not result
in any such violation or be in conflict with or constitute a default under any
of the terms or provisions of any document described in the first sentence of
this section, or result in the creation of any Encumbrance upon any of the
properties or assets of the Issuers pursuant to any such term or provision. To
the knowledge of the Issuers, no employee of the Issuers or their Subsidiaries
is in violation of any term of any employment contract, patent or trade secret
disclosure agreement or any other contract or agreement relating to the right
of any such employee to be employed by the Issuers or any Subsidiary because of
the nature of the business conducted or to be conducted by the Issuers or any
Subsidiary.
3.13 Litigation and Other Proceedings. Except as disclosed on
Schedule 3.13, there are no actions, proceedings or investigations pending
against the Issuers or their Subsidiaries, their respective properties or
stockholders (or, to the knowledge of the Issuers, any basis therefor or threat
thereof) that, either individually or in the aggregate, can reasonably be
expected to result in a Material Adverse Effect, or in any material impairment
of the right or ability of the Issuers to carry on their business as now
conducted or as proposed to be conducted, or in any material liability on the
part of the Issuers, and none that challenges the validity of this Agreement or
any action taken or to be taken in connection herewith. The foregoing includes,
without limiting its generality, actions pending or, to the knowledge of the
Issuers, threatened involving the prior employment of any of the Issuers'
employees or their use in connection with the Issuers' business of any
information or techniques allegedly proprietary to any of their former
employers.
3.14 Employees. Schedule 3.14 lists all employment contracts to
which the Issuers or their Subsidiaries are a party. Except as disclosed on
Schedule 3.14, neither the Issuers nor their Subsidiaries has any employment
contracts with any of its employees not expressly terminable at will and no
collective bargaining agreements covering any of its employees. Further,
neither the Issuers nor their Subsidiaries has any policies, procedures or
handbooks providing for other than at-will employment. Neither the Issuers nor
their Subsidiaries is aware of any proposed, threatened or actual union
organization activity affecting the Issuers' current or prospective operations.
3.15 Governmental Consents. No consent, approval or authorization
of, or registration, declaration, designation, qualification or filing with,
any governmental authority on the part of the Issuers or their Subsidiaries is
required in connection with the valid execution and delivery of the Transaction
Agreements, the offer, sale or issuance of the Notes by the Issuers, or with
respect to the Preferred Stock and the Warrants by U.S. RealTel, the issuance
of the Common
12
Stock issuable upon conversion of the Notes or upon exercise of the Warrants,
as applicable, or the consummation of any other transaction contemplated
hereby, other than as provided by applicable securities laws.
3.16 Title to Property and Assets. Except as disclosed on Schedule
3.16, the Issuers and their Subsidiaries have good and marketable title to
their owned properties and assets and have valid leasehold interests in their
leased properties and assets, in each case subject to no Encumbrance, other
than Permitted Liens.
3.17 Customers and Suppliers. Except as disclosed on Schedule
3.17, no customer or supplier has taken, and neither the Issuers nor their
Subsidiaries has received any notice, or has any reasonable cause to believe,
that any customer or supplier of the Issuers or their Subsidiaries contemplate
taking any steps that could disrupt the business relationship of the Issuers or
their Subsidiaries with such customer or supplier or could result in a
diminution in the value of the Issuers or their Subsidiaries in a manner that,
in either event, would have a Material Adverse Effect.
3.18 Licenses and Permits; Compliance with Law; Environmental
Laws. Except as disclosed on Schedule 3.18:
(a) The Issuers and their Subsidiaries hold all
licenses, certificates, permits, franchises and rights from all appropriate
federal, state or other public authorities necessary for the conduct of their
respective business and the use of their respective assets as presently
conducted or as proposed to be conducted. The Issuers and their Subsidiaries
have conducted, and are presently conducting, their business so as to comply in
all material respects with all applicable statutes, ordinances, rules,
regulations and orders of any governmental authority. Further, neither the
Issuers nor their Subsidiaries are presently charged with or, to the knowledge
of the Issuer, under governmental investigation with respect to, any actual or
alleged violation of any statute, ordinance, rule or regulation. Neither the
Issuers nor their Subsidiaries are presently the subject of any pending or, to
their knowledge, threatened adverse proceeding by any regulatory authority
having jurisdiction over their respective business, properties or operations
which is reasonably likely to have a Material Adverse Effect. Neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will result in the termination of any such
license, certificate, permit, franchise or right held by the Issuers or their
Subsidiaries.
(b) The Issuers and their Subsidiaries (x) have
conducted, and are presently conducting, their business so as to comply with
any and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety or emissions, discharges,
releases, threatened releases, removal, remediation or abatement of pollutants,
contaminants, chemicals or industrial, hazardous or toxic substances or wastes
into or in the environment (including, without limitation, air, surface water,
ground water or land) or otherwise used in connection with the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, hazardous or toxic substances or wastes,
as defined under such applicable laws (collectively, "Environmental Laws"); (y)
have received all permits, licenses or other approvals required of it under
applicable Environmental
13
Laws to conduct its business; and (z) are in compliance with all terms and
conditions of any such permit, license or approval.
(c) The Issuers and their Subsidiaries have obtained and
complied with all necessary permits and other approvals necessary to store,
dispose of and otherwise handle "hazardous substances", including without
limitation asbestos, petroleum, urea formaldehyde insulation and petroleum
by-products ("Hazardous Substance") present at any of the real property
currently owned or leased by the Issuers or their Subsidiaries and have
otherwise stored, disposed and handled such Hazardous Substances in compliance
with applicable Environmental Laws; and, with respect to such real property
there has not occurred (x) any release or any threatened release of a Hazardous
Substance or (y) any discharge or threatened discharge of any Hazardous
Substance into the ground, surface or navigable waters, which discharge or
threatened discharge violates any federal, state, local or foreign laws, rules
or regulations concerning water pollution.
(d) Neither the Issuers nor their Subsidiaries have
disposed of, transported or arranged for the transportation or disposal of any
Hazardous Substance where such disposal, transportation or arrangement would
give rise to liability pursuant to any Environmental Law.
3.19 Tax Matters. Except as disclosed on Schedule 3.19, the
Issuers and their Subsidiaries have accurately prepared and timely filed all
income and other tax returns, if any, that are required to be filed, and has
paid, or made provision for the payment of, all taxes that have or may have
become due pursuant to said returns or pursuant to any assessment that has been
received from any taxing authority for the period through the date hereof.
Except as disclosed on Schedule 3.19, there are no outstanding agreements by
the Issuers or their Subsidiaries for the extension of time for the assessment
of any tax. Except as disclosed on Schedule 3.19, the United States federal
income tax returns of the Issuers and their Subsidiaries, if any, have not been
audited by the Internal Revenue Service. Except as disclosed on Schedule 3.19,
no material deficiency assessment or proposed adjustment of the Issuers' or
their Subsidiaries' United States federal income tax or state or municipal
taxes, if any, is pending, and the Issuers have no knowledge of any proposed
liability for any tax to be imposed upon the Issuer's properties or assets for
which there is not an adequate reserve reflected in the financial statements.
The Issuers and their Subsidiaries have satisfied all tax liens which have been
filed against the Issuers or their Subsidiaries and the Issuers and their
Subsidiaries have provided the Purchasers with evidence that such tax liens
have been satisfied and removed.
3.20 Employment; No Conflicting Agreements. Except as disclosed on
Schedule 3.20, to the knowledge of the Issuers after due inquiry, none of the
officers, directors, and key employees of the Issuers or their Subsidiaries is
obligated under any contract (including licenses, covenants, or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would conflict with his or her
obligation to use his or her best efforts to promote the interests of the
Issuers or their Subsidiaries, or that would conflict with the business of the
Issuers or their Subsidiaries as presently conducted or as proposed to be
conducted.
3.21 Indebtedness to Directors and Officers; Interested Party
Transactions. Except as disclosed on Schedule 3.21, neither the Issuers nor
their Subsidiaries are indebted to any of their
14
directors or officers or party to any contract with any Affiliate of their
directors or officers, and none of the Issuers' or Subsidiaries' directors or
officers has a claim of any nature against the Issuers or a Subsidiary except
for compensation due for current pay periods. Except as disclosed on Schedule
3.21, no officer, director or Stockholder of the Issuers or their Subsidiaries
or any Affiliate or Associate of any such person or entity or the Issuers has
or has had, either directly or indirectly, (a) an interest in any person or
entity that (i) furnishes or sells services or products that are furnished or
sold or are proposed to be furnished or sold by the Issuers or their
Subsidiaries, or (ii) purchases from or sells or furnishes to the Issuers or
their Subsidiaries any goods or services, or (b) a beneficial interest in any
contract or agreement to which the Issuers or their Subsidiaries are a party or
by which they may be bound or affected. Except as disclosed on Schedule 3.21,
there are no existing arrangements or proposed transactions between the Issuers
or their Subsidiaries and any officer, director, manager or Stockholder, or any
Affiliate or Associate of any such person.
3.22 Certain Indebtedness. Except as disclosed in the Issuers'
financial statements or on Schedule 3.22, as of the date hereof, neither the
Issuers nor their Subsidiaries has any obligations in respect of indebtedness
which (a) is for borrowed money (other than drawings under lines of credit in
the ordinary course of business and in an aggregate amount outstanding not
exceeding the maximum committed amounts of such lines of credit as of the date
hereof), or (b) is not incurred in the ordinary course of the business of the
Issuers or their Subsidiaries in a manner and to the extent consistent with
past practice, or (c) is material to the financial condition, operations,
businesses, properties or prospects of the Issuers or their Subsidiaries.
3.23 Employee Plans. Schedule 3.23 lists all employee benefit
plans as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974 ("ERISA") and all severance, bonus, retirement, pension,
profit-sharing, deferred compensation plans and other similar fringe or
employee benefit plans, programs or arrangements, and all employee or
compensation agreements, written or otherwise, for the benefit of, or relating
to, any employee of the Issuers or their Subsidiaries (collectively, "Employee
Plans"). Neither the Issuers nor their Subsidiaries, nor any of their officers
or directors has taken any action, directly or indirectly, to obligate the
Issuers or their Subsidiaries to adopt any additional Employee Plans. The
Issuers have furnished to the Purchasers true, correct and complete copies of
the Employee Plans referred to as "Qualified Plans" on Schedule 3.23, including
any amendments thereto, together with true, correct and complete copies of any
related trust agreements and other related documents. The Issuers and their
Subsidiaries have complied in all material respects with all terms and
conditions of the Employee Plans.
3.24 Minute Books. The minute books of the Issuers and their
Subsidiaries contain a true, correct and complete summary of all meetings of
directors and stockholders since the time of its organization and accurately
reflects all transactions referred to in such minutes.
3.25 Offering Valid. Assuming the accuracy of the representations
and warranties of the Purchasers set forth in Section 4 hereof, the offer, sale
and issuance of the Notes, the Warrants and the Preferred Stock, and the
issuance of the Common Stock upon conversion of the Notes or upon exercise of
the Warrants, as applicable, will be exempt from the registration requirements
of the Securities Act and will have been registered or qualified (or are exempt
from registration and qualification) under the registration, permit or
qualification requirements of all
15
applicable state securities laws. Neither the Issuers nor their Subsidiaries
nor any agent on their behalf has solicited or will solicit any offers to sell
or has offered to sell or will offer to sell all or any part of the Notes, the
Warrants, the Preferred Stock or other equity securities of the Issuers or
their Subsidiaries to any person or persons so as to bring the sale of such
Notes, Warrants or Preferred Stock by the Issuers within the registration
provisions of the Securities Act or any state securities laws. Neither the
acquisition of the Notes, the Warrants nor the Preferred Stock by the
Purchasers will be "integrated" with any other offering or sale of securities
of the Issuers or their Subsidiaries required to be registered under the
Securities Act, or the rules and regulations promulgated thereunder.
3.26 Registration Rights. Except as disclosed on Schedule 3.26,
except as provided for in the Registration Rights Agreement referenced in
Section 5 hereof, the Issuers are under no obligation to register any of its
presently outstanding securities or any of its securities that may hereafter be
issued pursuant to this or any other existing agreement.
4. REPRESENTATIONS OF THE PURCHASERS.
Each of the Purchasers, individually and severally, and not jointly,
hereby represents and warrants to the Issuer as follows:
4.1 Investment. Purchaser is acquiring the Notes, the Preferred
Stock and the Warrants for its own account, not as a nominee or agent, and not
with a view to, or for sale in connection with, any distribution thereof.
Purchaser understands that (a) the Notes, the Preferred Stock, the Warrants and
the Common Stock issuable upon conversion of the Notes or upon exercise of the
Warrants (collectively, the "Securities"), as applicable, have not been and may
not be, registered under the Securities Act, or any state securities laws, by
reason of specific exemptions from the registration provisions of the
Securities Act and such laws that may depend upon, among other things, the bona
fide nature of Purchaser's investment intent as expressed herein; (b) the
Notes, the Preferred Stock and the Warrants must be held indefinitely unless a
subsequent disposition thereof is registered under the Securities Act or is
exempt from such registration; (c) the Notes, the Preferred Stock and the
Warrants will bear a legend to such effect; and (d) the Issuers will make a
notation on their transfer books to such effect. Purchaser is an "accredited
investor" within the meaning of Regulation D promulgated by the Securities and
Exchange Commission under the Securities Act.
4.2 Authorization. All action on the part of Purchaser necessary
for the authorization, execution, delivery and performance of all obligations
of Purchaser under the Transaction Agreements has been taken. The Transaction
Agreements constitute Purchaser's valid and binding obligation, except as
enforceability may be limited by bankruptcy, insolvency or other laws affecting
the enforcement of creditors' rights generally, and except that the
availability of the remedy of specific performance or other equitable relief is
subject to the discretion of the court before which any proceeding therefor may
be brought.
4.3 Issuers' Information. Purchaser has had an opportunity to ask
questions and receive answers from the Issuers regarding the information it
considers necessary or appropriate to make an informed investment decision with
respect to the Securities and the terms and conditions of the offering of the
Securities and has been given all such information as has been
16
requested and necessary to evaluate the risks and merits of investment in the
Securities and to verity any information furnished to Purchaser or to which
Purchaser had access. The foregoing, however, does not limit or modify the
representations and warranties of the Issuer in Section 3 of this Agreement or
the right of Purchasers to rely thereon.
4.4 Investment Experience. Purchaser understands that the
acquisition of the Securities involves substantial risk. Purchaser has
sufficient knowledge and experience as an investor in securities of companies
in the development stage and acknowledges that it is able to fend for itself,
can bear the economic risk of its investment in the Securities and has such
knowledge and experience in financial or business matters that it is capable of
evaluating the merits and risks of this investment in the Securities and of
protecting its own interests in connection with this investment.
5. DELIVERIES BY THE ISSUER. Simultaneously with the execution of this
Agreement, the Issuers hereby deliver:
5.1 Secretary's Certificate of the Issuer. A certificate duly
executed by the Secretary of each Issuer, dated as of July 16, 2002, certifying
(i) the resolutions of its Board of Directors, then in full force and effect
authorizing the execution, delivery and performance of this Agreement and the
issuance of the Notes, the Warrants and the Preferred Stock, and (ii) the
incumbency and signatures of those of its officers authorized to act with
respect to this Agreement;
5.2 Opinion of Issuer's Counsel. An opinion from Ungaretti &
Xxxxxx, counsel to the Issuers, addressed to the Purchasers, dated as of July
16, 2002, in the form attached hereto as Exhibit D;
5.3 Subordination Agreement. The Subordination Agreement, dated
July 16, 2002, between the Issuers and Silicon Valley Bank, in the form
attached hereto as Exhibit E, duly executed by the Issuers;
5.4 Registration Rights Agreement. The Registration Rights
Agreement, dated July 16, 2002, by and among the Issuers and the Purchasers in
the form attached hereto as Exhibit F (the "Registration Rights Agreement")
duly executed by the Issuers;
5.5 Notes. A Note for each Purchaser, in the form attached hereto
as Exhibit A, registered in each Purchaser's name representing the principal
amount set forth opposite the name of such Purchaser on Schedule I attached
hereto;
5.6 Warrants. A Warrant for each Purchaser in the form attached
hereto as Exhibit B, registered in each Purchaser's name;
5.7 Certificates. A stock certificate duly executed in each
Purchaser's name, representing the number of shares of Preferred Stock being
purchased by such Purchaser at the Closing, which shares shall be registered on
the books of U.S. RealTel in the Purchaser's name or as otherwise designated by
the Purchaser; and
17
5.8 Amendment to Certificate of Incorporation. The Amendment to
the Certificate of Incorporation of U.S. RealTel setting forth the Certificate
of Designations, as file stamped by the Delaware Secretary of Sate.
6. DELIVERIES BY THE PURCHASERS. Simultaneously with the execution of
this Agreement, each Purchaser hereby delivers:
6.1 Registration Rights Agreement. The Registration Rights
Agreement duly executed by such Purchaser; and
6.2 Purchase Price. The Purchase Price as set forth opposite such
Purchaser's name on Schedule I hereto by wire transfer of immediately available
funds to an account designated by the Issuers.
7. COVENANTS OF THE ISSUERS.
7.1 SEC Documents; Financial Statements.
7.1.1 SEC Documents. The Issuers shall provide the
Purchasers with copies of all financial statements and reports, if any, sent by
the Issuers to its Stockholders and copies of all regular and periodic reports,
if any, filed by the Issuers with the SEC.
7.1.2 Financial Statements. The Issuers shall deliver to
the Board of Directors monthly unaudited financial statements, including a
balance sheet and a statement of income and cash flows.
7.2 Related Party Transactions. The Issuers and their
Subsidiaries shall not enter into any related-party transactions with any of
their Affiliates (other than wholly-owned Subsidiaries, if any), whether or not
in the ordinary course of business without the prior approval of a majority of
the disinterested members of the Board of Directors.
7.3 Operating Budget; Capital Expenditures. Thirty (30) days
prior to the beginning of each fiscal year, the Issuers shall provide the Board
of Directors with a comprehensive operating budget forecasting the revenues,
expenses and cash position on a month to month basis for the upcoming fiscal
year for the Issuers. The capital budget of the Issuers shall be approved by
the Board of Directors and any capital expenditure in excess of $250,000 shall
be approved by the Board of Directors.
7.4 Additional Affirmative Covenants. The Issuers shall, and
shall cause each of their Subsidiaries, if any and as applicable, to:
7.4.1 promptly pay and discharge, or cause to be paid and
discharged, when due and payable, all lawful taxes, assessments and
governmental charges or levies imposed upon the income, profits, property or
business of the Issuers or any Subsidiary; provided, however, that any such
tax, assessment, charge or levy need not be paid if the validity thereof shall
currently be contested in good faith by appropriate proceedings and if the
Issuers shall have set aside on its books adequate reserves with respect
thereto; and provided, further, that the Issuers shall pay all
18
such taxes, assessments, charges or levies forthwith upon the commencement of
proceedings to foreclose any lien that may have attached as security therefor;
7.4.2 promptly pay, or cause to be paid, when due, in
conformance with customary trade terms, all other indebtedness incident to the
operations of the Issuers and their Subsidiaries, if any, except for such
amounts which have been contested in good faith by the Issuers or their
Subsidiaries, as applicable;
7.4.3 keep its properties and those of the Subsidiaries,
if any, in good repair, working order and condition, reasonable wear and tear
excepted, and from time to time make all necessary and proper repairs,
renewals, replacements, additions and improvements thereto;
7.4.4 comply, and cause the Subsidiaries, if any, to
comply, in all material respects, at all times with the provisions of all
leases to which any of the Issuers and their Subsidiaries is a party or under
which any of them occupies real property;
7.4.5 keep true records and books of account in which
full, true and correct entries will be made of all dealings or transactions
in relation to its business and affairs in accordance with GAAP applied on a
consistent basis;
7.4.6 duly observe and conform to, and cause their
Subsidiaries, if any, to so observe and conform to, in all material respects,
all valid requirements of governmental authorities relating to the conduct of
their businesses or to their property or assets;
7.4.7 duly observe and comply with their Certificate of
Incorporation, Bylaws and Material Contracts;
7.4.8 maintain in full force and effect its corporate
existence, rights and franchises; and
7.4.9 within sixty (60) days of the date hereof, cause
each officer and key employee of the Issuers or their Subsidiaries to enter
into an Employee Agreement Regarding Confidentiality, Inventions and
Noncompetition with the Issuer.
7.5 Board of Directors. U.S. RealTel shall cause the Board of
Directors to consist of seven (7) directors in accordance with its Certificate
of Incorporation and Bylaws of U.S. RealTel. U.S. RealTel hereby agrees to
appoint two (2) directors designated by the Purchasers to fill current
vacancies on the Board of Directors and U.S. RealTel shall take all such action
as may be necessary to provide that the holders of the Preferred Stock shall be
entitled to elect two (2) directors at each annual meeting of Stockholders. The
directors designated by the Purchasers and elected by the holders of the
Preferred Stock shall not be removed without cause without the prior written
consent of the Purchasers. The remaining five (5) directors shall consist of
the Chief Executive Officer of U.S. RealTel (whom shall initially be Xxxxxxx
XxXxxxx), Xxxx Xxxxxxx, Xxxxx Xxxxxx, and two (2) Independent Directors who
shall be designated by the Board of Directors after the date hereof.
"Independent Directors" means directors who (i) are not employed by the
Issuers, (ii) have not received compensation or other payments from the Issuers
(or an Affiliate of the Issuers) in excess of $60,000 in the aggregate, and
(iii) do not own more than a 1% ownership interest in the Issuers.
19
7.5.1 Compensation Committee; Nominating Committee. The
Issuers shall cause the Compensation Committee and the Nomination Committee of
the Board of Directors to consist of four (4) directors. One (1) of the
directors on the Compensation Committee and the Nomination Committee shall be a
director designated by the Purchasers in accordance with Section 7.5, one (1)
of the directors on the Compensation Committee and the Nomination Committee
shall be designated by the Issuers and one (1) of the directors on the
Compensation Committee and the Nomination Committee shall be an Independent
Director. Compensation for senior management shall not exceed that which is
reasonable and customary.
7.5.2 Board of Directors of the Subsidiaries. The Issuers
shall cause the board of directors of Cypress to be comprised of the same
directors as the Board of Directors of U.S. RealTel as set forth in this
Section 7.5. The Issuers shall cause the compensation committee and nominating
committee of each Subsidiary, if any, to be comprised of the same directors as
the Compensation Committee and Nominating Committee of the Issuer. Within
thirty (30) days of the date hereof, the board of directors of each Subsidiary
other than Cypress shall be comprised of Xxxx Xxxxxxx and one (1) of the
directors designated by the Purchasers.
7.6 Liens. The Issuers will not, and will not permit any of their
Subsidiaries to, create, incur, assume or suffer to exist any lien upon any of
its property, revenues or assets, whether now owned or hereafter acquired,
except for the following (collectively, the "Permitted Liens");
7.6.1 liens for taxes, assessments or other governmental
charges or levies not at the time delinquent or thereafter payable with penalty
or being contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP shall have been set aside on its
books;
7.6.2 statutory liens of carriers, warehousemen,
mechanics, and materialmen incurred in the ordinary course of business for sums
not overdue or being contested in good faith by appropriate proceedings and for
which adequate reserves shall have been set aside on its books;
7.6.3 liens (other than liens arising under ERISA or
Section 412(n) of the Internal Revenue Code) incurred in the ordinary course of
business in connection with workmen's compensation, unemployment insurance or
other forms of governmental insurance or benefits, or to secure performance of
tenders, statutory obligations, leases and contracts (other than for borrowed
money) entered into in the ordinary course of business or to secure obligations
on surety or appeal bonds;
7.6.4 liens which arise by operation of law under Article
2 of the Uniform Commercial Code in favor of unpaid sellers of goods, or liens
in items or any accompanying documents or proceeds of either arising by
operation of law under Article 4 of the Uniform Commercial Code in favor of a
collecting bank;
7.6.5 easements (including, without limitation, reciprocal
easement agreements and utility agreements), rights-of-way, covenants,
consents, reservations, encroachments, variations and other restrictions,
charges or encumbrances (whether or not recorded) affecting
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the use of property, which do not materially detract from the value of such
property or impair the use thereof or interfere with the ordinary conduct of
the Issuers' business;
7.6.6 leases and subleases granted to others in the
ordinary course of business not interfering in any material respect with any
business of the Issuers or any of their Subsidiaries and which in the aggregate
do not exceed $25,000 per annum;
7.6.7 rights of set-off of a customary nature or bankers'
liens with respect to amounts on deposit, whether arising by operation of law
or by contract, in connection with arrangements entered into with banks in the
ordinary course of business; and
7.6.8 liens created pursuant to the Transaction Agreements
or pursuant to that certain Loan and Security Agreement, dated July 16, 2002,
by and between the Issuers and Silicon Valley Bank or described on Schedule
3.16.
7.7 Insurance. The Issuers shall obtain and maintain key person
insurance in the amount of $5,000,000 for each of Xxxxxxx XxXxxxx and Xxxx
XxXxxx. The Issuers shall maintain directors and officers insurance in the
amount of at least $10,000,000.
7.8 Professional Advisors. The corporate counsel and bankers of
the Issuers shall be mutually agreed upon by the Issuers and the holders of a
majority of the outstanding principal amount of the Notes issued hereunder.
7.9 Restricted Payments, etc. Except as contemplated by the
Transaction Agreements, the Issuers will not, and will not permit any of their
Subsidiaries to, declare, pay or make any dividend or distribution (in cash,
property or obligations) on any shares of any class of its stock or on any
warrants, options or other rights in respect of any class of its stock. The
Issuers will not, and will not permit any of their Subsidiaries to, apply any
of its funds, property or assets to the purchase, redemption, sinking fund or
other retirement of any shares of any class of stock of the Issuer or any of
its Subsidiaries (including pursuant to any stock repurchase plan), or make any
deposit for any of the foregoing in excess of $750,000, other than with respect
to the Preferred Stock.
7.10 Transfer to Subsidiaries or Affiliates The Issuers will not,
and will not permit any of their Subsidiaries to, create any Subsidiary or
transfer any assets to any Subsidiary other than a Subsidiary that is or
becomes a party to this Agreement as a guarantor immediately upon creation or
immediately before such transfer of assets, as the case may be.
7.11 Asset Dispositions, etc. The Issuers will not, and will not
permit any of their Subsidiaries to, sell, transfer, lease or otherwise dispose
of any of their assets (including accounts receivable and capital stock of
Subsidiaries, if any) to any person or entity, unless such disposition is made
in the ordinary course of business and consists of inventories or such
disposition constitutes a disposition of obsolete or retired assets not used in
the business of the Issuers and their Subsidiaries or as such assets are
replaced by Issuers prior to, or within thirty (30) days after such
disposition.
7.12 Inconsistent Agreements. The Issuers will not, and will not
permit any of their Subsidiaries to, enter into any material agreement
containing any provision which would be
21
violated or breached in any material respect by any Note or Warrant or by the
performance by the Issuers under any Transaction Agreement.
7.13 Actions Requiring Approval of the Purchasers. In addition to
any other rights provided by law without first obtaining the affirmative
written consent of Purchasers representing more than 50% of the aggregate
principal amount of the Notes purchased hereunder (without giving effect to
whether such Notes have been redeemed, but not including Notes which have been
converted into Common Stock), the Issuers shall not:
7.13.1 increase or decrease the size of the Board of
Directors from seven (7) directors;
7.13.2 change or alter the terms of the Notes, the Warrants
or the Preferred Stock;
7.13.3 incur indebtedness for borrowed money (including in
connection with capitalized leases and similar financing arrangements and
guaranties of the obligations of others) or evidenced by a note, bond,
debenture or similar instrument in excess of the debt contemplated in the 2002
business plan or which is senior to the Notes, other than (i) as described in
Schedule 3.22; or
7.13.4 impair or circumvent a right of the Notes, the
Warrants or the Preferred Stock or any other rights of the Purchasers in the
Transaction Agreements.
7.14 Issuances of Stock. Each time either Issuer propose to offer
any shares of, or securities convertible into or exercisable for any shares of,
any class of its capital stock ("Issuer Securities"), such Issuer shall first
offer such Issuer Securities to each Purchaser in accordance with the following
provisions:
7.14.1 Such Issuer shall deliver a notice by certified mail
("Issuance Notice") to Purchasers stating (i) its bona fide intention to offer
such Issuer Securities, (ii) the number of such Issuer Securities to be
offered, and (iii) the price and terms, if any, upon which it proposes to offer
such Issuer Securities.
7.14.2 By written notification received by such Issuer
within 20 days after receipt of the Issuance Notice, each Purchaser may elect
to purchase or obtain, at the price and on the terms specified in the Issuance
Notice, up to that portion of such Issuer Securities which equals the
proportion that the number of shares of Common Stock then held by such
Purchaser including the number of shares of Common Stock into which such
Purchaser's Notes could then be converted or for which such Purchaser's Warrant
could be exercised ("Conversion Stock"), bears to the total number of shares of
Common Stock of such Issuer then outstanding (assuming full conversion and
exercise of all outstanding convertible or exercisable securities as of the
date of the Issuance Notice). Such Issuer shall thereafter, in writing,
promptly inform each Purchaser which purchases all of the Issuer Securities
that such Purchaser is entitled to purchase hereunder ("Fully-Exercising
Purchaser") of any other Purchaser's failure to purchase all of the Issuer
Securities that it is entitled to purchase hereunder. During the ten-day period
commencing after receipt of such information, each Fully-Exercising Purchaser
shall be entitled to obtain that portion of the Issuer Securities that
Purchasers did not elect to purchase or obtain hereunder which is equal to the
proportion that the number of shares of Common Stock and Conversion
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Stock issued and held by such Fully-Exercising Purchaser bears to the total
number of shares of Common Stock and Conversion Stock issued and held by all
Fully-Exercising Purchasers who wish to purchase a portion of the unsubscribed
Issuer Securities. Promptly following the completion of the foregoing process
and determination of the number of Issuer Securities elected to be obtained by
Purchasers, such Issuer and such Purchasers shall consummate and close the
purchase and sale of the Issuer Securities.
7.14.3 If all Issuer Securities which Purchasers are
entitled to obtain pursuant to Subsection 7.14.2 are not elected to be obtained
as provided in Subsection 7.14.2 hereof, such Issuer may, during the 30-day
period following the expiration of the period provided in Subsection 7.14.2
hereof, offer the remaining unsubscribed portion of such Issuer Securities to
any person or persons at a price not less than, and upon terms no more
favorable to the offeree than those specified in the Issuance Notice. If such
Issuer does not enter into an agreement for the sale of the Issuer Securities
within such period, or if such agreement is not consummated within thirty (30)
days of the execution thereof, the right provided hereunder shall be deemed to
be revived and such Issuer Securities shall not be offered unless first
reoffered to Purchasers in accordance with this Section 7.14.
7.14.4 The right to purchase Securities pursuant to this
Section 7.14 shall not be applicable to (i) the issuance or sale of up to
3,200,000 as it may be increased as provided in the First Amendment to the
Issuer's 1999 Employee Equity Incentive Plan as approved by the Board of
Directors shares of Common Stock (or options therefor) to employees, officers
and directors of, or advisors or consultants to, the Issuer, pursuant to a
stock option plan duly approved by the Board of Directors, (ii) any issuance of
Issuer Securities to the Purchasers pursuant to the Transaction Agreements,
(iii) to the extent required by the underwriter, the issuance of Issuer
Securities in an underwritten public offering of Issuer Securities pursuant to
an effective registration statement, and (iv) the issuance of Issuer Securities
pursuant to options, warrants and other rights to acquire Issuer Securities
outstanding as of the date hereof.
7.15 Dissolution of Subsidiaries. As soon as practicable after the
date hereof, the Issuers shall dissolve the following Subsidiaries: (i) RealTel
de Argentina, S.A.; (ii) RealTel do Brasil, S.A.; and (iii) SiteConnect, Inc.
7.16 Qualifications; Good Standings. As soon as practicable after
the date hereof, but in any event within ninety (90) days of the date hereof,
the Issuers shall become qualified to do business in each jurisdiction where
qualification is required (including the State of Georgia) and the Issuers
shall be in good standing in the State of Illinois.
7.17 Termination of Certain Covenants. The covenants set forth in
Section 7 shall terminate upon the earlier to occur of (i) the issuance of
Common Stock upon conversion of all of at least seventy-five percent (75%) of
the outstanding principal amount of the Notes, (ii) the exercise in full of at
least seventy-five percent (75%) of the outstanding Warrants, or (iii) the
expiration of the Warrants.
8. MISCELLANEOUS.
8.1 Governing Law; Jurisdiction.
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8.1.1 THIS AGREEMENT SHALL BE DEEMED TO BE MADE UNDER AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF GEORGIA.
8.1.2 THE PARTIES HEREBY IRREVOCABLY SUBMIT TO THE
JURISDICTION OF ANY GEORGIA STATE OR FEDERAL COURT SITTING IN XXXXXX COUNTY,
GEORGIA, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OTHER TRANSACTION AGREEMENT, AND THE PARTIES HEREBY
IRREVOCABLY AGREE THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY
BE HEARD AND DETERMINED IN SUCH GEORGIA STATE OR FEDERAL COURT. THE PARTIES
HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT THEY MAY EFFECTIVELY DO SO, THE
DEFENSE OF ANY INCONVENIENT FORUM (FORUM NON CONVENIENS) TO THE MAINTENANCE OF
SUCH ACTION OR PROCEEDING IN ANY SUCH COURT ARISING OUR OF OR RELATING TO THIS
AGREEMENT OR ANY OTHER TRANSACTION AGREEMENT.
8.2 Survival. The representations, warranties, covenants and
agreements made herein shall survive the closings of the transactions
contemplated hereby.
8.3 Successors and Assigns. Except as otherwise expressly
provided in this Section 8.3, the provisions of this Agreement shall inure to
the benefit of, and be binding upon, the successors, assigns, heirs, executors
and administrators of the Purchasers; provided, however, that the Purchasers
shall not sell, assign or otherwise dispose of all or any part of the Notes,
the Preferred Stock, the Warrants, rights, remedies or other entitlements of
the Purchasers under this Agreement unless and until (i) the transferee has
executed and delivered to the Issuers in writing an agreement that it will
receive and hold the Notes, the Preferred Stock, the Warrants and other rights
subject to the applicable provisions of this Agreement, (ii) the Issuers are
given written notice at the time of the assignment, or within a reasonable time
after such assignment, stating the name and address of said transferee and
identifying the Notes, the Preferred Stock, the Warrants and the other rights
that are being assigned, and (iii) the Issuers have either received the written
opinion of counsel to the Issuers that such transfer is permitted under the
federal and applicable state securities laws, rules and regulations, or such
Purchaser has provided the Issuers with certificates executed by appropriate
officers certifying the factual matters necessary to confirm that the proposed
transfer will not violate the provisions of the Securities Act or the rules and
regulations promulgated thereunder. Notwithstanding the foregoing, if any
Purchaser transfers its Note in accordance with this Section 8.3, such
Purchaser shall transfer therewith (i) one (1) share of Preferred Stock for
each $100,000 of principal amount of the Note so transferred and (ii) the
Warrant issued to such Purchaser; provided, that if such Purchaser does not
transfer the entire principal balance of the Note, the Issuers agree to issue
to the transferee a Warrant to purchase that number of shares of Common Stock
into which the portion of the Note so transferred would be convertible
immediately prior to the redemption of the Notes pursuant to Section 2.8
hereof. Upon the consummation of any transfer of the Notes, the Preferred Stock
and the Warrants hereunder, such subsequent holder of the Notes, the Preferred
Stock and the Warrants shall be deemed to be a "Purchaser" hereunder, and all
such references to "Purchaser" shall include such subsequent holder of the
Notes, the Preferred Stock and he Warrants.
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8.4 Entire Agreement; Amendment. This Agreement and the other
documents delivered pursuant hereto constitute the full and entire
understanding and agreement among the parties with regard to the subjects
hereof and thereof. Neither this Agreement nor any term hereof may be amended,
waived, discharged or terminated orally, but only by a written instrument
signed by the holders representing at least fifty percent (50%) of the
principal amount of the Notes issued hereunder and a representative of the
Issuers so authorized by their Board of Directors. Any such amendment effected
in accordance with this Section 8.4 shall be effective with respect to the
Issuers and each Purchaser.
8.5 Notices. All notices and other communications required or
permitted hereunder shall be given in writing and shall be deemed effectively
given upon personal delivery or three (3) business days following upon deposit
with the United States Postal Service, by certified mail, return receipt
requested, postage prepaid, or otherwise delivered by hand or by messenger,
addressed
(a) if to any Purchaser, to the address set forth on the
Schedule of Purchasers attached hereto as Schedule I.
with a courtesy copy (which shall not constitute notice) to:
King & Spalding
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx
or at such other address as such Purchaser shall have furnished to the Issuer
in writing, or
(b) if to the Issuers at:
U.S. RealTel, Inc.
Fifteen Piedmont Center
0000 Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: President
with a courtesy copy (which shall not constitute notice) to:
Ungaretti & Xxxxxx
0000 Xxxxx Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxxxxxx
or at such other address as the Issuers shall have furnished to the Purchasers
and each such other holder in writing.
8.6 Delays or Omissions; Remedies Cumulative. No delay or
omission to exercise any right, power or remedy accruing to any party, upon any
breach or default under this Agreement, shall impair any such right, power or
remedy of such party or be construed to be a
25
waiver of any such breach or default, or an acquiescence therein, or of or in
any similar breach or default thereafter occurring; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. All of a party's remedies, either under
this Agreement, or by law or otherwise afforded to such party, shall be
cumulative and not alternative.
8.7 Agent's Fees. Each party (i) represents and warrants that,
except for the fees contemplated in that certain consulting agreement between
the Issuers and Salisbury Ventures, LLC, which fees shall be paid by the
Issuers, it has retained no finder or broker in connection with the
transactions contemplated by this Agreement and (ii) hereby agrees to indemnify
and to hold the other parties harmless of and from any liability for
commissions or compensation in the nature of an agent's, finder's or broker's
fee to any broker or other person or firm (and the cost and expenses of
defending against such liability or asserted liability) for which said party is
responsible.
8.8 Payment of Fees and Expenses. The Issuers shall bear its own
expenses and legal fees (and expenses and disbursements of its legal counsel)
incurred on its behalf with respect to this Agreement and the transactions
contemplated hereby. The Issuers shall pay at Closing all out-of-pocket fees
and expenses of the Purchasers with respect to the transactions contemplated by
this Agreement, including the legal fees and expenses of counsel to the
Purchasers and due diligence fees and expenses incurred by the Purchasers.
8.9 Construction of Certain Terms. The titles of the articles,
sections, and subsections of this Agreement are for convenience of reference
only and are not to be considered in construing this Agreement. Wherever the
words "including," "include" or "includes" are used in this Agreement, they
shall be deemed followed by the words "without limitation." References to any
gender shall be deemed to mean any gender. All references herein to the
Issuer's knowledge or awareness shall mean the knowledge of managers and key
employees of the Issuer.
8.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
8.11 Legends. In addition to any legends required by the
Securities Act or any applicable state securities laws, the U.S. RealTel shall
place the following legends on the front or back of each Warrant:
"THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED
UNDER SUCH ACT, OR, EXCEPT AS OTHERWISE AGREED BY U.S.
REALTEL, UNLESS THE CORPORATION HAS RECEIVED AN OPINION OF
COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO U.S.
REALTEL AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT
REQUIRED.
THIS WARRANT MAY ONLY BE TRANSFERRED WITH THE NOTE ISSUED TO
THE HOLDER OF THIS WARRANT AS REQUIRED BY
26
SECTION 8.3 OF THE PURCHASE AGREEMENT PURSUANT TO WHICH THE
NOTES AND WARRANTS WERE ISSUED, A COPY OF WHICH WILL BE
PROVIDED BY THE U.S. REALTEL UPON REQUEST."
In addition to any legends required by the Securities Act or any
applicable state securities laws, the Issuers shall place the following legends
on the front or back of each Note:
"THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY APPLICABLE
STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED UNTIL (I) A
REGISTRATION STATEMENT UNDER THE ACT OR SUCH APPLICABLE
SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD
THERETO, OR (II) EXCEPT AS OTHERWISE AGREED BY THE ISSUERS,
UNLESS THE ISSUERS HAVE RECEIVED AN OPINION OF COUNSEL OR
OTHER EVIDENCE REASONABLY ACCEPTABLE TO THE ISSUERS, THAT
REGISTRATION UNDER SUCH ACT OR SUCH APPLICABLE STATE
SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH
PROPOSED TRANSFER.
THIS NOTE MAY ONLY BE TRANSFERRED WITH THE SHARES OF SERIES A
PREFERRED STOCK ISSUED TO THE HOLDER OF THIS NOTE AS REQUIRED
BY SECTION 8.3 OF THE PURCHASE AGREEMENT PURSUANT TO WHICH
THE NOTES AND SERIES A PREFERRED STOCK WERE ISSUED, A COPY OF
WHICH WILL BE PROVIDED BY THE ISSUERS UPON REQUEST.
THIS NOTE IS SUBJECT TO SUBORDINATION AGREEMENTS WITH CERTAIN
SENIOR LENDERS AND BRIDGE LENDERS OF THE ISSUER, COPIES OF
WHICH WILL BE PROVIDED BY THE ISSUERS UPON REQUEST."
In addition to any legends required by the Securities Act or any
applicable state securities laws, U.S. RealTel shall place the following
legends on the front or back of each certificate of Preferred Stock:
"THE SERIES A PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE
HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY APPLICABLE STATE
SECURITIES LAWS AND MAY NOT BE TRANSFERRED UNTIL (I) A
REGISTRATION STATEMENT UNDER THE ACT OR SUCH APPLICABLE
SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD
THERETO, OR (II) EXCEPT AS OTHERWISE AGREED BY U.S. REALTEL,
UNLESS THE ISSUER HAS RECEIVED AN OPINION OF COUNSEL OR OTHER
EVIDENCE REASONABLY ACCEPTABLE TO U.S. REALTEL, THAT
REGISTRATION UNDER SUCH ACT OR SUCH APPLICABLE STATE
SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH
PROPOSED TRANSFER.
27
THE SERIES A PREFERRED STOCK MAY ONLY BE TRANSFERRED WITH THE
NOTES ISSUED TO THE HOLDER OF THIS SERIES A PREFERRED STOCK
AS REQUIRED BY SECTION 8.3 OF THE PURCHASE AGREEMENT PURSUANT
TO WHICH THE NOTES AND THE SERIES A PREFERRED STOCK WAS
ISSUED, A COPY OF WHICH WILL BE PROVIDED BY THE U.S. REALTEL
UPON REQUEST."
The Issuer shall place legends on each certificate evidencing ownership of
shares of Common Stock issuable upon conversion of the Notes or upon exercise
of the Warrants, as applicable, substantially identical to those initially
placed on the Notes and Warrants relating to the Securities Act and all
applicable state securities laws.
8.12 Enforcement.
8.12.1 Events of Default. For purposes of this Agreement,
an event of default (an "Event of Default") shall occur if:
(a) the Issuers (i) fail to pay the principal
and accrued interest on the Notes when due and such failure to pay interest
shall continue unremedied for a period of five (5) days;
(b) any representation or warranty made by or
on behalf of the Issuers in this Agreement or in any certificate, report or
other document delivered pursuant to any term thereof or hereof shall prove to
have been untrue or incorrect in any material respect as of such date made;
(c) the Issuers default in the due and punctual
performance or observance of any covenant or agreement contained in any of the
Transaction Agreements, and such default shall remain unremedied for ten (10)
Business Days after the earlier of (i) any officer of the Issuers becoming
aware of such default, or (ii) notice thereof shall have been given to either
Issuers by any Purchaser;
(d) the Issuers fail to pay its debts generally
as they become due or if the Issuers dissolve or become insolvent, a voluntary
or involuntary petition in bankruptcy, receivership or other action concerning
creditors' rights shall be filed or the Issuers make an assignment for the
benefit of creditors;
(e) any judgment or judgments which in the
aggregate exceed $50,000 is obtained against either Issuer, and either (i)
enforcement proceedings shall have been commenced by any creditor upon such
judgment or order or (ii) there shall be a period of fifteen (15) consecutive
days during which a stay of enforcement of such judgment or order, by reason of
a pending appeal or otherwise, shall not be in effect;
(f) any injunction or attachment is obtained
against either Issuer or the property of either Issuer, and either (i) in the
case of an attachment, enforcement proceedings shall have been commenced by any
creditor upon such attachment or (ii) in the case of an injunction or an
attachment, there shall be a period of thirty (30) consecutive days during
which a stay of enforcement of such injunction or attachment, by reason of a
pending appeal or otherwise, shall not be in effect;
28
(g) any of the Worldcom Parties shall dissolve
or become insolvent, a voluntary or involuntary petition in bankruptcy,
receivership or other action concerning creditors' rights shall be filed with
respect to any of the Worldcom Parties or any of the Worldcom Parties shall
make an assignment for the benefit of creditors or any of the Worldcom Parties
shall breach any of the Worldcom Agreements, in each case which has a material
adverse effect on the Assets or the Business, or the ability of the Worldcom
Parties to satisfy their obligations under any of the Worldcom Agreements is
otherwise impaired in a manner which has a material adverse effect on the
Assets or the Business, or an event of default shall occur under the Worldcom
Agreements which has a material adverse effect on the Assets or the Business
(collectively, a "Worldcom Default"); or
(h) any "Event of Default" shall occur under
this Agreement or any other Transaction Agreement.
8.12.2 Remedies upon Default.
(a) Upon the occurrence and during the
continuation of an Event of Default (other than an Event of Default described
in clause (d) or clause (g) of Subsection 8.12.1 hereof), Purchasers holding
Notes representing at least fifty percent (50%) of the aggregate outstanding
principal amount of all Notes purchased hereunder may declare all amounts
payable by the Issuers under the Notes to be forthwith due and payable and the
same shall thereupon become immediately due and payable without demand,
presentment, protest or further notice of any kind, all of which are hereby
expressly waived.
(b) Upon the occurrence of any Event of Default
set forth in clause (d) of Subsection 8.12.1 hereof, without any notice to the
Issuer or any other act by the Purchasers, all amounts payable by the Issuers
under the Notes shall be immediately due and payable, without presentment,
demand, protest or notice of any kind, all of which are hereby expressly waived
by the Issuers.
(c) Upon the occurrence of any Event of Default
set forth in clause (g) of Subsection 8.12.1 hereof, without any notice to the
Issuers or any other act by the Purchasers, all amounts payable by the Issuers
under the Notes and under the Mezzanine Notes shall be immediately due and
payable, pro rata among the Purchasers and the Mezzanine Lenders on a pari
passu basis without presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived by the Issuers.
(d) Upon the occurrence of an Event of Default,
the Purchasers may proceed to protect and enforce their rights by the
procedures set forth in the Transaction Agreements or by suit in equity or
action at law, whether for the specific performance of any term contained in
the Transaction Agreements or injunction against the breach of any such term or
in furtherance of the exercise of any such power granted in the Transaction
Agreements, or to enforce any other legal or equitable right of the Purchasers
or to take any one or more of such actions.
8.13 Remedies Cumulative; Waiver. No remedy referred to herein, in
the Transaction Agreements, or in any exhibit hereto is intended to be
exclusive, but each shall be cumulative and in addition to any other remedy
referred to above or otherwise available to the Purchasers at
29
law or in equity. No express or implied waiver by the Purchasers of any default
shall be a waiver of any future or subsequent default. The failure or delay of
the Purchasers in exercising any rights granted to them hereunder shall not
constitute a waiver of any such right and any single or partial exercise of any
particular right by a Purchaser shall not exhaust the same or constitute a
waiver of any other right provided herein.
8.14 Timely Performance. Time is of the essence as to the
performance of the obligations required of the respective parties under this
Agreement.
8.15 Registration; Exchange; Substitution of Notes.
8.15.1 Registration of Notes. The Issuers shall keep at its
principal executive office a register for the registration of transfers of
Notes. The name and address of each Purchaser, each transfer thereof and the
name and address of each transferee of one or more Notes shall be registered in
such register. Prior to due presentment for registration of transfer, the
Person in whose name any Note shall be registered shall be deemed and treated
as the owner and holder thereof for all purposes hereof, and the Issuers shall
not be affected by any notice or knowledge to the contrary. The Issuers shall
give to any Purchaser, promptly upon request therefor, a complete and correct
copy of the names and addresses of all Purchasers.
8.15.2 Transfer and Exchange of Notes. Upon surrender of
any Note at the principal executive office of the Issuers for registration of
transfer or exchange (and in the case of a surrender for registration of
transfer, duly endorsed or accompanied by a written instrument of transfer duly
executed by the registered holder or its attorney duly authorized in writing
and accompanied by the address for notices of each transferee of such Note, or
part thereof), the Issuers shall execute and deliver, at its expense, one or
more (as requested by the registered holder thereof) new Notes, as applicable,
in exchange therefor. Any such replacement Notes shall be in an aggregate
principal amount of the surrendered Note. Each such new Note shall be payable
to such Person or Persons as such registered holder shall request and shall be
substantially in the form of Exhibit A. Each such new Note shall be dated and
bear interest from the date to which interest shall have been paid on the
surrendered Note or dated the date of the surrendered Note if no interest shall
have been paid thereon. The Notes must be transferred in denominations of
$100,000 in accordance with Section 8.3 of this Agreement; provided, however,
that the Notes may be transferred in denominations of less than $100,000 with
respect to transfers to affiliates of the Purchasers (as such term is defined
in Rule 405 of the Securities Act). Transfers hereunder shall be made by the
Issuers to the extent permitted by applicable law.
8.15.3 Replacement of Notes. Upon receipt by the Issuers of
a certificate from any Purchaser of the loss, theft, destruction or mutilation
of any Note held by such Purchaser and (a) in the case of loss, theft or
destruction, of security reasonably satisfactory to the Issuers, or (b) in the
case of mutilation, upon surrender and cancellation thereof, the Issuers, at
its own expense, shall execute and deliver, in lieu thereof, a new Note, dated
and bearing interest from the date to which interest shall have been paid on
such lost, stolen, destroyed or mutilated Note or dated the date of such lost,
stolen, destroyed or mutilated Note if no interest shall have been paid
thereon.
30
9. CROSS-GUARANTY.
9.1 Cross-Guaranty. Each Issuer hereby agrees that such Issuer is
jointly and severally liable for, and hereby absolutely and unconditionally
guarantees to each Purchaser and their respective successors and assigns, the
full and prompt payment (whether at stated maturity, by acceleration or
otherwise) and performance of, all obligations owed or hereafter owing to each
Purchaser by each other Issuer (the "Liabilities"). Each Issuer agrees that its
guaranty obligation hereunder is a continuing guaranty of payment and
performance and not of collection, that its Liabilities under this Section 9
shall not be discharged until payment and performance, in full, of the
Liabilities has occurred, and that its obligations under this Section 9 shall
be absolute and unconditional, irrespective of, and unaffected by, the
genuineness, validity, regularity, enforceability or any future amendment of,
or change in, this Agreement, any other Transaction Agreement or any other
agreement, document or instrument to which any Issuer is or may become a party;
the absence of any action to enforce this Agreement (including this Section 9)
or any other Transaction Agreement or the waiver or consent by each Purchaser
with respect to any of the provisions thereof; the existence, value or
condition of, or failure to perfect its Lien against, any security for the
Liabilities or any action, or the absence of any action, by each Purchaser in
respect thereof (including the release of any such security); the insolvency of
any Issuer; or any other action or circumstances that might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor.
Each Issuer shall be regarded, and shall be in the same position, as principal
debtor with respect to the Liabilities guaranteed hereunder.
9.2 Waivers by Issuers. Each Issuer expressly waives all rights
it may have now or in the future under any statute, or at common law, or at law
or in equity, or otherwise, to compel any Purchaser to marshal assets or to
proceed in respect of the Liabilities guaranteed hereunder, against any other
party or against any security for the payment and performance of the
Liabilities before proceeding against, or as a condition to proceeding against,
such Issuer. It is agreed among each Issuer and each Purchaser that the
foregoing waivers are of the essence of the transaction contemplated by this
Agreement and the Transaction Agreements and that, but for the provisions of
this Section 9.2 and such waivers, the Purchasers would decline to enter into
this Agreement.
9.3 Benefit of Guaranty. Each Issuer agrees that the provisions
of this Article 8 are for the benefit of each Purchaser and their respective
successors, transferees, endorsees and assigns, and nothing herein contained
shall impair, as between any other Issuer or any Purchaser, the obligations of
such other Issuer under this Agreement and the Transaction Agreements.
9.4 Subordination of Subrogation, Etc. Notwithstanding anything
to the contrary in this Agreement or in any Transaction Agreement, and except
as set forth in Section 9.7, each Issuer hereby expressly and irrevocably
subordinates to payment of the Liabilities any and all rights at law or in
equity to subrogation, reimbursement, exoneration, contribution,
indemnification or set off and any and all defenses available to a surety,
guarantor or accommodation co-obligor until the Liabilities are indefeasibly
paid in full in cash. Each Issuer acknowledges and agrees that this
subordination is intended to benefit each Purchaser and shall not limit or
otherwise affect such Issuer's liability hereunder or the enforceability of
this Section 9.4, and that each Purchaser and their respective successors and
assigns are intended third party beneficiaries of the waivers and agreements
set forth in this Section 9.4.
31
9.5 Election of Remedies. If any Purchaser may, under applicable
law, proceed to realize its benefits under this Agreement or any Transaction
Agreement giving such Purchaser a Lien upon any Collateral, whether owned by
any Issuer or by any other Person, either by judicial foreclosure or by
non-judicial sale or enforcement, any Purchaser may, at its sole option,
determine which of its remedies or rights it may pursue without affecting any
of its rights and remedies under this Section 9. If, in the exercise of any of
its rights and remedies, any Purchaser shall forfeit any of its rights or
remedies, including its right to enter a deficiency judgment against any Issuer
or any other Person, whether because of any applicable laws pertaining to
"election of remedies" or the like, each Issuer hereby consents to such action
by such Purchaser and waives any claim based upon such action, even if such
action by such Purchaser shall result in a full or partial loss of any rights
of subrogation that each Issuer might otherwise have had but for such action by
such Purchaser. Any election of remedies that results in the denial or
impairment of the right of any Purchaser to seek a deficiency judgment against
any Issuer shall not impair any other Issuer's obligation to pay the full
amount of the Liabilities. In the event any Purchaser shall bid at any
foreclosure or trustee's sale or at any private sale permitted by law or this
Agreement or any Transaction Agreements, such Purchaser may bid all or less
than the amount of the Liabilities and the amount of such bid need not be paid
by such Purchaser but shall be credited against the Liabilities. The amount of
the successful bid at any such sale, whether such Purchaser or any other party
is the successful bidder, shall be conclusively deemed to be the fair market
value of the Collateral and the difference between such bid amount and the
remaining balance of the Liabilities shall be conclusively deemed to be the
amount of the Liabilities guaranteed under this Section 9, notwithstanding that
any present or future law or court decision or ruling may have the effect of
reducing the amount of any deficiency claim to which any Purchaser might
otherwise be entitled but for such bidding at any such sale.
9.6 Limitation. Notwithstanding any provision herein contained to
the contrary, each Issuer's liability under this Section 9 (which liability is
in any event in addition to amounts for which such Issuer is primarily liable
under Section 2) shall be limited to an amount not to exceed as of any date of
determination the greater of: (i) the net amount of all Loans advanced to any
other Issuer under this Agreement and then re-loaned or otherwise transferred
to, or for the benefit of, such Issuer; and (ii) the amount that could be
claimed by Purchasers from such Issuer under this Section 9 without rendering
such claim voidable or avoidable under Section 548 of Chapter 11 of the
Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act,
Uniform Fraudulent Conveyance Act or similar statute or common law after taking
into account, among other things, such Issuer's right of contribution and
indemnification from each other Issuer under Section 9.7.
9.7 Contribution with Respect to Guaranty Obligations. To the
extent that any Issuer shall make a payment under this Section 9 of all or any
of the Liabilities (other than Loans made directly to that Issuer) (a
"Guarantor Payment") that exceeds the amount such Issuer would otherwise have
paid if each Issuer had paid the aggregate Liabilities satisfied by such
Guarantor Payment in the same proportion that such Issuer's "Allocable Amount"
(as defined below) (as determined immediately prior to such Guarantor Payment)
bore to the aggregate Allocable Amounts of each of the Issuers as determined
immediately prior to the making of such Guarantor Payment, then, following
indefeasible payment in full in cash of the Liabilities and termination of the
Commitments) such Issuer shall be entitled to receive contribution and
indemnification payments from, and be reimbursed by, each other Issuer for the
amount of such excess, pro rata
32
based upon their respective Allocable Amounts in effect immediately prior to
such Guarantor Payment. As of any date of determination, the "Allocable Amount"
of any Issuer shall be equal to the maximum amount of the claim that could then
be recovered from such Issuer under this Section 9.7 without rendering such
claim voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy
Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform
Fraudulent Conveyance Act or similar statute or common law. This Section 9.7 is
intended only to define the relative rights of Issuers and nothing set forth in
this Section 9.7 is intended to or shall impair the obligations of Issuers,
jointly and severally, to pay any amounts as and when the same shall become due
and payable in accordance with the terms of this Agreement, including Section
9.7. Nothing contained in this Section 9.7 shall limit the liability of any
Issuer to pay the Loans made directly or indirectly to that Issuer and accrued
interest, fees and expenses with respect thereto for which such Issuer shall be
primarily liable. The parties hereto acknowledge that the rights of
contribution and indemnification hereunder shall constitute assets of the
Issuer to which such contribution and indemnification is owing. The rights of
the indemnifying Issuers against other Issuer under this Section 9.7 shall be
exercisable upon the full and indefeasible payment of the Liabilities and the
termination of the commitments by the Purchasers.
9.8 Liability Cumulative. The liability of Issuers under this
Section 9 is in addition to and shall be cumulative with all liabilities of
each Issuer to each Purchaser under this Agreement and the Transaction
Agreements to which such Issuer is a party or in respect of any Liabilities or
obligation of the other Issuers, without any limitation as to amount, unless
the instrument or agreement evidencing or creating such other liability
specifically provides to the contrary.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
33
[SIGNATURES TO NOTE PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the day and year first above written.
THE ISSUER:
U.S. REALTEL, INC.
By:
----------------------------------------
Printed Name:
---------------------------
Title:
----------------------------------
CYPRESS COMMUNICATIONS, INC.
By:
----------------------------------------
Printed Name:
---------------------------
Title:
----------------------------------
[SIGNATURES TO NOTE PURCHASE AGREEMENT]
THE PURCHASERS:
NORO XXXXXXX PARTNERS V, L.P.
By:
----------------------------------------
Printed Name:
---------------------------
Title:
----------------------------------
[SIGNATURES TO NOTE PURCHASE AGREEMENT]
THE PURCHASERS:
WAKEFIELD GROUP III, LLC
By:
----------------------------------------
Printed Name:
---------------------------
Title:
----------------------------------
THE PURCHASERS:
J. XXXXXX XXXXXXXXXX TRUST, dated
February 26, 1971, an Indiana trust
By:
-----------------------------------------
Name: Xxxx X. Xxxxxxx
Title: Trustee
XXXX. X. XXXXXXX TRUST, dated February 26,
1971, an Illinois trust
By:
-----------------------------------------
Name: Xxxx X. Xxxxxxx
Title: Trustee
XXXX X. XXXXXXXX TRUST, dated February 26,
1971, an Indiana trust
By:
-----------------------------------------
Name: Xxxx X. Xxxxxxx
Title: Trustee
SCHEDULE I
PURCHASER PRINCIPAL
AMOUNT OF SHARES OF AGGREGATE
NOTE PREFERRED PURCHASE PRICE
STOCK
---------------------------------------------------------------------------------------------
Noro-Xxxxxxx Partners V, LP $7,290,000 72.9 $7,290,000
0 Xxxxx Xxxxxxx Xxxxxx
0000 Xxxxxxxxx Xxxxxxx
Xxxxxxx, XX 00000
The Wakefield Group III, LLC $1,670,000 16.7 $1,670,000
0000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
J. Xxxxxx Xxxxxxxxxx Trust $ 346,667 3.47 $ 346,667
000 X. Xxxxxxxxx Xxxx.
Xxxxx 000
Xxxxx Xxxx, XX 00000
Xxxx X. XxXxxxx Trust $ 346,667 3.46 $ 346,667
000 X. Xxxxxxxxx Xxxx.
Xxxxx 000
Xxxxx Xxxx, XX 00000
Xxxx X. Xxxxxxxx Trust $ 346,666 3.47 $ 346,666
000 X. Xxxxxxxxx Xxxx.
Xxxxx 000
Xxxxx Xxxx, XX 00000
ANNEX A
"AFFILIATE" shall have the meaning ascribed to such term under Rule 405
of the Securities Act.
"AGREEMENT" shall have the meaning set forth in the introduction.
"ASSET PURCHASE AGREEMENT" shall have the meaning set forth in the
recitals.
"ASSOCIATE" shall have the meaning ascribed to such term under Rule 405
of the Securities Act.
"BOARD OF DIRECTORS" shall mean the Board of Directors of the Issuer.
"BUSINESS" shall have the meaning set forth in the recitals.
"BUSINESS DAY" shall have the meaning set forth in Section 2.3.
"COMMON STOCK" shall have the meaning set forth in the Recitals.
"COMMON STOCK EQUIVALENTS" shall have the meaning set forth in Section
2.7.4.
"CONVERSION DATE" shall have the meaning set forth in Section 2.5.
"CONVERSION NOTICE" shall have the meaning set forth in Section 2.5.1.
"CONVERSION PRICE" shall have the meaning set forth in Section 2.5.
"CONVERSION STOCK" shall have the meaning set forth in Section 7.14.2.
"COPYRIGHT" shall have the meaning set forth in Section 3.11.
"DEFAULT RATE" shall have the meaning set forth in Section 2.2.
"EMPLOYEE PLANS" shall have the meaning set forth in Section 3.23
"ENCUMBRANCES" shall have the meaning set forth in Section 3.6.
"ENVIRONMENTAL LAWS" shall have the meaning set forth in Section 3.18.
"ERISA" shall have the meaning set forth in Section 3.23
"EVENT OF DEFAULT" shall have the meaning set forth in Section 8.12.1.
"EXCHANGE ACT" has the meaning set forth in Section 3.7.
"EXERCISE DATE" shall have the meaning set forth in Section 1.3.
"EXERCISE PRICE" shall have the meaning set forth in Section 1.3.
"FORM 10-K" shall have the meaning set forth in Section 3.8.
"FORM 10-Q" shall have the meaning set forth in Section 3.8.
"FULLY EXERCISING PURCHASER" shall have the meaning set forth in
Section 7.14.2
"GAAP" shall mean generally accepted accounting principles.
"HAZARDOUS SUBSTANCE" shall have the meaning set forth in Section 3.18.
"INDEPENDENT DIRECTORS" shall have the meaning set forth in Section
7.5.
"INTELLECTUAL PROPERTY RIGHTS" shall have the meaning set forth in
Section 3.11.
"ISSUANCE NOTICE" shall have the meaning set forth in Section 7.14.
"ISSUER" shall have the meaning set forth in the introduction.
"ISSUER SECURITIES" shall have the meaning set forth in Section 7.14.
"MATERIAL ADVERSE EFFECT" shall have the meaning set forth in Section
3.1.
"MATERIAL CONTRACT" shall have the meaning set forth in Section 3.10.
"MATURITY DATE" shall have the meaning set forth in Section 2.1.
"NOTE" shall have the meaning set forth in the recitals.
"PERMITTED LIENS" shall have the meaning set forth in Section 7.6
hereof.
"PERSON" includes an individual, a corporation, a partnership, a trust,
an unincorporated organization, and the executors, administrators or other legal
representatives of an individual.
"PREFERRED STOCK" shall have the meaning set forth in the recitals.
"PROPOSED ISSUANCE" shall have the meaning set forth in Section 7.14.
"PURCHASE PRICE" shall have the meaning set forth in Section 1.2.
"PURCHASER" shall mean each Purchaser on the signature page hereto and
any subsequent holders of the Notes or Warrants purchased by the Purchasers
hereunder. For purposes of determining the aggregate amount of Notes owned by a
Purchaser, such amount shall include the aggregate amount of all Notes held by
Affiliates of such Purchaser.
"QUALIFIED PLANS" shall have the meaning set forth is Section 3.23
"REDEMPTION DATE" shall have the meaning set forth in Section 2.8.1.
"REGISTRATION RIGHTS AGREEMENT" shall have the meaning set forth in
Section 5.4.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall have the meaning set forth in Section 3.4.
"STOCKHOLDER" shall mean any holder of the capital stock of the Issuer.
"SUBSIDIARY" shall mean any entity in which the Issuer owns or
controls, directly or indirectly, 50% or more of the capital stock or other
equity securities of such entity.
"TRANSACTION AGREEMENTS" shall have the meaning set forth in Section
3.4.
"VOTING AGREEMENT" shall have the meaning set forth in Section 5.3.
"WARRANTS" shall have the meaning set forth in the recitals.
"WORLDCOM ABN TRANSACTION" shall have the meaning set forth in the
recitals.
