Exhibit B
XXX.XXX, INC.
SERIES Y PREFERRED STOCK PURCHASE AGREEMENT
DECEMBER 24, 2001
TABLE OF CONTENTS
Page
1. PURCHASE AND SALE OF STOCK ............................................1
1.1 SALE AND ISSUANCE OF SERIES Y PREFERRED STOCK.....................1
1.2 CLOSINGS..........................................................2
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY..........................3
2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION.....................3
2.2 CAPITALIZATION AND VOTING RIGHTS..................................3
2.3 SUBSIDIARIES......................................................4
2.4 AUTHORIZATION.....................................................5
2.5 VALID ISSUANCE OF PREFERRED AND COMMON STOCK......................6
2.6 GOVERNMENTAL CONSENTS.............................................6
2.7 OFFERING..........................................................7
2.8 LITIGATION........................................................7
2.9 PATENTS AND TRADEMARKS............................................7
2.10 CORPORATE POWER; COMPLIANCE WITH OTHER INSTRUMENTS................8
2.11 GOVERNMENT PERMITS................................................8
2.12 REGISTRATION RIGHTS...............................................8
2.13 REPORTING STATUS..................................................9
2.14 FINANCIAL STATEMENTS..............................................9
2.15 NO MATERIAL ADVERSE EFFECT........................................9
2.16 LISTING...........................................................9
2.17 COMPANY NOT AN "INVESTMENT COMPANY"...............................9
2.18 DIRECTOR DESIGNEE"...............................................10
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS.......................10
3.1 AUTHORIZATION....................................................10
3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT................................10
3.3 DISCLOSURE OF INFORMATION........................................10
3.4 INVESTMENT EXPERIENCE............................................10
3.5 ACCREDITED INVESTOR..............................................11
3.6 INVESTOR NOT AN INVESTMENT COMPANY...............................11
3.7 RESTRICTED SECURITIES............................................11
3.8 FURTHER LIMITATIONS ON DISPOSITION...............................11
3.9 SUSPENSION OF TRADING............................................11
3.10 RELIANCE; MATERIAL CHANGES.......................................12
3.11 LEGENDS..........................................................12
4. CONDITIONS OF INVESTORS' OBLIGATIONS AT CLOSING.......................12
4.1 INITIAL CLOSING..................................................12
4.2 SECOND CLOSING...................................................13
4.3 THIRD CLOSING....................................................13
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING....................14
5.1 REPRESENTATIONS AND WARRANTIES...................................14
5.2 PERFORMANCE......................................................14
5.3 COMPLIANCE CERTIFICATE...........................................14
5.4 QUALIFICATIONS...................................................14
5.5 REQUIRED STOCKHOLDER APPROVALS...................................14
6. COVENANTS.............................................................14
ii
6.1 DELIVERY OF MONTHLY FINANCIAL STATEMENTS.........................15
6.2 REQUIRED CORPORATE ACTION........................................15
6.3 BRIDGE LOAN......................................................15
6.4 VOTING AGREEMENTS................................................15
6.5 STOCKHOLDERS AGREEMENT...........................................15
6.6 NNM LISTING......................................................16
6.7 POSSIBLE CHANGE TO SERIES Y PREFERRED STOCK TERMS................16
7. MISCELLANEOUS.........................................................16
7.1 SURVIVAL.........................................................16
7.2 SUCCESSORS AND ASSIGNS...........................................16
7.3 GOVERNING LAW....................................................16
7.4 COUNTERPARTS.....................................................17
7.5 TITLES AND SUBTITLES.............................................17
7.6 NOTICES..........................................................17
7.7 EXPENSES.........................................................17
7.8 AMENDMENTS AND WAIVERS...........................................17
7.9 SEVERABILITY.....................................................17
7.10 ENTIRE AGREEMENT.................................................17
iii
SCHEDULE A Schedule of Investors
SCHEDULE B Schedule of Approved Transferees
SCHEDULE C Schedule of Exceptions
EXHIBIT A Form of Designation of Series Y Convertible Preferred Stock
EXHIBIT B Form of Opinion of Counsel for the Company
EXHIBIT C-1 Form of VantagePointVoting Agreement
EXHIBIT C-2 Form of Series Y Voting Agreement
EXHIBIT D Form of Bridge Note
EXHIBIT E Stockholders Agreement
iv
INDEX OF DEFINED TERMS
Act................................................................. 2.2(b)
Agreement........................................................... Preamble
Business Plan....................................................... 4.2(b)
Closing............................................................. 1.2(d)
Common Stock........................................................ 1.1(b)
Company............................................................. Preamble
Compliance with the Business Plan................................... 4.2(b)
Conversion Shares................................................... 1.1(b)
Disinterested Directors............................................. 1.1(c)
Exchange Act........................................................ 2.1
Exchange Act Documents.............................................. 2.1
GAAP................................................................ 2.14
Initial Closing..................................................... 1.2(a)
Intellectual Property............................................... 2.9
Investment Company Act.............................................. 2.17
Investor............................................................ Preamble
Laws................................................................ 2.10(b)
Material Adverse Effect............................................. 2.1
Monthly Financial Statements........................................ 4.2(b)
NNM................................................................. 2.16
Permits............................................................. 2.11
Preferred Stock..................................................... 2.2(a)
Prospectus.......................................................... 6.3(b)
Purchase Price...................................................... 1.1(c)(i)
Registrable Shares.................................................. 6.1(a)
Registration Statement.............................................. 6.1(a)
Restated Certificate................................................ 4.1(e)
Schedule of Exceptions.............................................. 2
SEC................................................................. 3.5
Second Closing...................................................... 1.2(b)
v
Second Closing Series Y Shares...................................... 1.1(c)(ii)
Securities.......................................................... 3.2
Series Y Designation................................................ 1.1(a)
Series Y Director................................................... 7.1
Series Y Preferred Stock............................................ 1.1(a)
Series Y Shares..................................................... 1.1(b)
Stock Plans......................................................... 2.2(c)
Subsidiary.......................................................... 2.3
Suspension.......................................................... 6.3(c)
Suspension Notice................................................... 6.3(c)
XXX.XXX, INC.
SERIES Y PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES Y PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is
made as of the 24th day of December, 2001, by and among XXX.xxx, Inc., a
Delaware corporation (the "Company"), and the investors listed on Schedule A
hereto, each of which is herein referred to as an "Investor" and together as the
"Investors."
THE PARTIES HEREBY AGREE AS FOLLOWS:
1 Purchase and Sale of Stock.
1.1 Sale and Issuance of Series Y Preferred Stock.
(a) Before the Initial Closing (as defined below), the Company
shall create and designate a new series of its authorized but unissued shares of
preferred stock, par value $0.001 per share, designated as the "Series Y
Convertible Preferred Stock" (the "Series Y Preferred Stock") with the rights,
preferences, privileges and restrictions set forth in, and shall file with the
Secretary of State of Delaware, the Certificate of Designation of Series Y
Convertible Preferred Stock, in the form attached hereto as Exhibit A, with any
revisions that may be required pursuant to Section 6.7 hereof (the "Series Y
Designation").
(b) Before the Initial Closing, the Company shall have
authorized the sale and issuance to the Investors of up to 15,000 shares (the
"Series Y Shares") of Series Y Preferred Stock.
(c) (i) Subject to the terms and conditions of this Agreement,
at the Initial Closing (as defined below) each Investor agrees, severally and
not jointly, to purchase, and the Company agrees to sell and issue to such
Investor, for $1,000 per share (the "Purchase Price") that number of Series Y
Shares equal to the Maximum Number of Initial Series Y Shares (as defined
below). As used herein, the "Maximum Number of Initial Series Y Shares" shall
mean the product obtained by multiplying (i) the maximum aggregate number of
Series Y Shares that may be issued to all Investors without violation of the
shareholder approval requirements of Section 4350(i)(1) of the Marketplace Rules
of The Nasdaq Stock Market, Inc. ("Nasdaq"), by (ii) the percentage set forth
opposite such Investor's name on Schedule A hereto under the heading "Investor
Percentage."
(ii) In the event that all of the conditions set forth in
Section 4.2 have been satisfied or waived at a time when not all of the
conditions set forth in Section 4.3 have been satisfied or waived, at the Second
Closing (as defined below) each Investor agrees, severally and not jointly, to
purchase, and the Company agrees to sell and issue to such Investor, for the
Purchase Price that number of Series Y Shares equal to the difference between
(i) the number of Series Y Shares purchased by the Investor at the Initial
Closing and (ii) the number of Series Y Shares set forth opposite such
Investor's name on Schedule A hereto under the heading "Number of Second Closing
Series Y Shares."
Stock Purchase Agreement - Page 2
(iii) In the event that all of the conditions set forth in
Section 4.3 have been satisfied or waived at or prior to the date when all of
the conditions set forth in Sections 4.2 have been satisfied or waived, at the
Second Closing each Investor agrees, severally and not jointly, to purchase, and
the Company agrees to sell and issue to such Investor, for the Purchase Price
that number of Series Y Shares equal to the difference between (i) the number of
Series Y Shares purchased by the Investor at the Initial Closing and (ii) the
number of Series Y Shares set forth opposite such Investor's name on Schedule A
hereto under the heading "Maximum Number of Series Y Shares."
(iv) In the event that the Second Closing has occurred as
described in Section 1.1(c)(ii), at the Third Closing each Investor agrees,
severally and not jointly, to purchase, and the Company agrees to sell and issue
to such Investor, for the Purchase Price that number of Series Y Shares set
forth opposite such Investor's name on Schedule A hereto under the heading
"Additional Series Y Shares."
1.2 Closings.
(a) Initial Closing. The purchase and sale of the Series Y
Shares as described in Section 1.1(c)(i) above shall take place at a closing
(the "Initial Closing") to be held at the offices of Xxxxx, Xxxxxxx & Xxxxxxxxx,
LLP, 000 Xxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, at 10:00 A.M., on December
31, 2001, or at such other location, on such other date and at such time as may
be mutually agreed upon by the Company and the Investors (the "Initial Closing
Date").
(b) Second Closing. The purchase and sale of the Series Y
Shares described in Section 1.1(c)(ii) or Section 1.1(c)(iii) above shall take
place at a closing (the "Second Closing") to be held at the offices of Xxxxx,
Xxxxxxx & Xxxxxxxxx, LLP, 000 Xxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, at 10:00
A.M. on a date within two business days after the date on which the last of the
conditions set forth in Section 4.2 has been satisfied or waived, or at such
other location, on such other date and at such time as may be mutually agreed
upon by the Company and the Investors (the "Second Closing Date").
(c) Third Closing. If required, the purchase and sale of the
Series Y Shares described in Section 1.1(c)(iv) above shall take place at a
closing (the "Third Closing") to be held at the offices of Xxxxx, Xxxxxxx &
Xxxxxxxxx, LLP, 000 Xxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, at 10:00 A.M. on a
date within two business days after the date on which the last of the conditions
set forth in Section 4.3 has been satisfied or waived, or at such other
location, on such other date and at such time as may be mutually agreed upon by
the Company and the Investors (the "Third Closing Date").
(d) Assignment of Right to Purchase Series Y Shares. Each
Investor may assign all or any portion of its right and obligation to purchase
the number of Series Y Shares set forth opposite such Investor's name under the
headings "Maximum Series Y Shares," on Schedule A to any person listed on
Schedule B or any other financial investor upon obtaining the prior written
consent of the Company; provided, however, that the assignee (if not at the
relevant time already a signatory hereto) executes a counterpart signature page
to this Agreement agreeing to be bound by all the terms of this Agreement.
Notwithstanding the foregoing, any Investor who
Stock Purchase Agreement - Page 3
assigns all or any portion of its right and obligation to purchase Series Y
Shares hereunder shall remain obligated to purchase such Series Y Shares and
perform its assigned obligations hereunder to the extent that the assignee fails
to do so. The Company shall, without the consent of the Investors, amend
Schedule A to provide for the sale and issuance of Series Y Shares to one or
more investors that shall become party to this Agreement in accordance with the
provisions of this Section 1.2(d). The terms "Investor" and "Investors" shall
include such additional investors as exist, from time to time.
(e) At each Closing, the Company shall deliver to each
Investor a certificate evidencing the Series Y Shares purchased by such Investor
at such Closing against payment of the full Purchase Price therefor by, at the
option of each Investor, (i) wire transfer of funds, (ii) delivery to the
Company for cancellation Bridge Notes with a principal amount equal to the
amount of such Purchase Price, or (iii) delivery or transfer of such sum to the
Company by any combination of such methods of payments. The Initial Closing, the
Second Closing and the Third Closing each may be referred to herein as a
"Closing."
2. Representations and Warranties of the Company. The Company hereby
represents and warrants to each Investor that, except as set forth on a Schedule
of Exceptions (the "Schedule of Exceptions") furnished to each Investor and
special counsel for the Investors, specifically identifying the relevant
subparagraph hereof, which exceptions shall be deemed to be representations and
warranties as if made hereunder:
2.1. Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
carry on its business as now conducted and as proposed to be conducted as
described in the documents filed by the Company under the Securities Exchange
Act of 1934 (the "Exchange Act"), since the end of its most recently completed
fiscal year through the date hereof, including, without limitation, its most
recent annual report on Form 10-K (the "Exchange Act Documents"). The Company is
duly qualified to transact business and is in good standing in each jurisdiction
in which the failure to so qualify would, either individually or in the
aggregate, have a material adverse effect upon the condition (financial or
otherwise), earnings, business or business prospects, properties or operations
of the Company and its Subsidiaries, considered as one enterprise (a "Material
Adverse Effect").
2.2. Capitalization and Voting Rights.
(a) The authorized capital stock of the Company consists, or
will consist immediately prior to the Initial Closing, of: (i) 20,000,000 shares
of Preferred Stock, par value $.001 per share (the "Preferred Stock"), of which
(i) 15,000 shares will have been designated Series Y Preferred Stock, all of
which may be issued pursuant to this Agreement, (ii) 20,000 shares of Series X
Convertible Preferred Stock (the "Series X Preferred Stock"), of which 10,000
shares were issued and outstanding as of the date hereof, and 10,000 shares are
subject to issuance pursuant to the terms of the Series X Convertible Preferred
Stock Purchase Agreement dated as of November 14, 2001 (the "Series X Purchase
Agreement") among the Company and the Investors listed on Schedule A thereto and
(iii) 200,000,000 shares of common stock, par value $0.0005 per share (the
"Common Stock"), of the Company, of which 64,763,709 shares
Stock Purchase Agreement - Page 4
were issued and outstanding as of November 9, 2001. The rights, privileges and
preferences of the Series Y Preferred Stock will be as stated in the Series Y
Designation.
(b) The outstanding shares of Common Stock are all duly and
validly authorized and issued, fully paid and nonassessable, and were issued in
accordance with the registration or qualification provisions of the Securities
Act of 1933, as amended (the "Act"), and any relevant state securities laws, or
pursuant to valid exemptions therefrom.
(c) Except for (i) the transactions contemplated by this
Agreement and the Series X Purchase Agreement, (ii) the conversion privileges of
the Series Y Preferred Stock to be issued under this Agreement, (iii) the
conversion privileges of the Series X Preferred Stock issued or to be issued
pursuant to the Series X Purchase Agreement, (iv) an aggregate of no more than
17,563,126 shares of its Common Stock reserved for issuance under the Company's
Amended and Restated 1999 Stock Plan, the Vector Internet Services Inc. 1997
Stock Option Plan, the Vector Internet Services Inc. 1999 Stock Option Plan, the
Company's 1999 Employee Stock Purchase Plan and the Company's 2001 Stock Option
and Incentive Plan (together, the "Stock Plans"), and (iii) an aggregate of
83,314 shares of its Common Stock reserved for issuance upon the exercise of
warrants issued to VantagePoint Venture Partners 1996, L.P. and VantagePoint
Communications Partners, L.P, there were no outstanding options, warrants,
rights (including conversion or preemptive rights) or agreements for the
purchase or acquisition from the Company of any shares of its capital stock as
of the date of this Agreement. Other than the Voting Agreements, the
Stockholders Agreement (as defined below) and the Series X Purchase Agreement,
the Company is not a party or subject to any agreement or understanding, and, to
the best of the Company's knowledge, there is no agreement or understanding
between any persons and/or entities, which affects or relates to the voting or
giving of written consents with respect to any security of the Company.
(d) The shares of Common Stock, the shares of Series X
Preferred Stock and the shares of Series Y Preferred Stock that are subject to
the Voting Agreements are sufficient, if voted in accordance with the Voting
Agreements, under the Delaware General Corporation Law and the Company's
certificate of incorporation and by-laws to obtain the Required Stockholder
Approvals (as defined in Section 2.4 below), assuming (i) the exercise of all
currently outstanding options, warrants, rights or agreements for the purchase
or acquisition of any shares of the Company's capital stock that may be
exercised on or after the date hereof and (ii) the transfer of all shares of
Common Stock which are permitted to be transferred under the VantagePoint Voting
Agreement without the consent or approval of the Investors and the Company.
2.3 Subsidiaries. Each of the Company's Subsidiaries (as defined in
Rule 405 under the Act) (each a "Subsidiary") is duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it was
formed and has all requisite corporate or limited liability company power and
authority to carry on its business as now conducted and as proposed to be
conducted as described in the Exchange Act Documents. Each of the Company's
Subsidiaries is duly qualified to transact business and is in good standing in
each jurisdiction in which the failure to so qualify or be in good standing
would have a Material Adverse Effect. The outstanding shares of capital stock or
limited liability company interests, as applicable, of each of
Stock Purchase Agreement - Page 5
the Subsidiaries have been duly authorized and validly issued, are fully paid
and nonassessable and are owned by the Company or another Subsidiary free and
clear of all liens, encumbrances and equities and claims; and no options,
warrants or other rights to purchase, agreements or other obligations to issue
or other rights to convert any obligations into shares of capital stock or
ownership interests in the Subsidiaries are outstanding.
2.4 Authorization. All corporate action on the part of the Company, its
officers, directors and stockholders necessary for the authorization, execution
and delivery of this Agreement, the performance of all obligations of the
Company to be performed by it at or before the Closings hereunder, and the
authorization, issuance (or reservation for issuance), sale and delivery of the
Series Y Preferred Stock being sold hereunder and the Conversion Shares has been
taken or will be taken prior to the Initial Closing, except that (i) the
issuance, sale and delivery of the Series Y Preferred Stock being sold hereunder
and the shares of Common Stock to be issued upon conversion of the Series Y
Shares (the "Conversion Shares") (other than the Series Y Preferred Stock being
sold at the Initial Closing and the related Conversion Shares) requires the
approval of the Company's stockholders pursuant to Nasdaq Marketplace Rule
4350(i)(1); (ii) the number of Conversion Shares issuable upon conversion of the
Series Y Preferred Stock exceeds the number of authorized, unissued and
unreserved shares of Common Stock on the date of this Agreement and, as a
result, all corporate action necessary to amend the certificate of incorporation
of the Company to authorize an additional number of shares of Common Stock
necessary to allow for the issuance of the Conversion Shares will need to be
taken, including the approval of such an amendment by the Company's stockholders
and the filing of an instrument necessary to implement such an amendment with
the Secretary of State of Delaware; (iii) all corporate action necessary to
amend the certificate of incorporation of the Company (including the Certificate
of Designation that created the Series X Preferred Stock (the "Series X
Designation")) (A) to increase the closing sale price of the Corporation's
Common Stock on the NNM necessary to cause an automatic conversion of the Series
X Preferred Stock referenced in Section 3(b) of the Series X Designation from
$2.00 per share to $2.50 per share, (B) to reflect that the Series X Preferred
Stock and Series Y Preferred Stock shall rank on parity with one another for
purposes of Sections 2 and 6 of the Series X Designation and (C) to reflect in
Section 5(a) of the Series X Designation that the Company can authorize or
issue, or obligate itself to issue, commencing six months after the date of
filing with the Secretary of State of Delaware of the Series Y Designation,
equity securities having rights, preferences or privileges pari passu with the
Series X Preferred Stock without the consent of the holders of at least a
majority of the then outstanding Series X Preferred Stock will need to be taken,
including the approval of such amendments by the holders of the Series X
Preferred Stock and the Company's stockholders and the filing of an instrument
necessary to implement such amendments with the Secretary of State of Delaware;
(iv) all corporate action necessary to amend the Series Y Designation to add the
clause contemplated by Section 6.7 will need to be taken, including the approval
of such an amendment by the Company's Board of Directors and the holders of the
Series X Preferred Stock and the filing of an instrument necessary to implement
such an amendment with the Secretary of State of Delaware (the stockholder
approvals specified in clauses (i), (ii), (iii) and (iv) of this sentence shall
constitute the "Required Stockholder Approvals"); and (v) to the extent that, as
a result of any anti-dilution adjustment to the Conversion Price (as defined in
both the Series X Designation and Series Y Designation), the
Stock Purchase Agreement - Page 6
number of shares of Common Stock issuable upon conversion of shares of Series X
Preferred Stock and Series Y Preferred Stock exceeds the number of authorized
and unissued shares of Common Stock on the date of such adjustment, corporate
action will need to be taken to amend the certificate of incorporation of the
Company to authorize an additional number of shares of Common Stock and to
reserve such number of shares of Common Stock necessary to allow for the
issuance of such excess number of shares of Common Stock. This Agreement
constitutes a valid and legally binding obligation of the Company, enforceable
in accordance with its terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, and other laws of general application
affecting enforcement of creditors' rights generally, (ii) as limited by laws
and principles relating to the availability of specific performance, injunctive
relief, or other equitable remedies, and (iii) to the extent the indemnification
and contribution provisions contained herein may be limited by applicable
federal or state securities laws.
2.5 Valid Issuance of Preferred and Common Stock. The Series Y
Preferred Stock that is being purchased by the Investors hereunder, when issued,
sold and delivered in accordance with the terms of this Agreement for the
consideration expressed herein, will be duly and validly issued, fully paid, and
nonassessable, and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement and under applicable state and
federal securities laws. Assuming the certificate of incorporation of the
Company is amended to authorize an additional number of shares of Common Stock
necessary to allow for the issuance of the Conversion Shares, the Conversion
Shares will be duly and validly reserved for issuance and, upon issuance in
accordance with the terms of the Series Y Designation, will be duly and validly
issued, fully paid, and nonassessable, and will be free of restrictions on
transfer other than restrictions on transfer under this Agreement and under
applicable state and federal securities laws; provided, however, that to the
extent that, as a result of any anti-dilution adjustment to the Conversion Price
(as defined in both the Series X Designation and Series Y Designation), the
number of shares of Common Stock issuable upon conversion of shares of Series X
Preferred Stock and Series Y Preferred Stock exceeds the number of authorized
and unissued shares of Common Stock on the date of such adjustment, corporate
action will need to be taken to amend the certificate of incorporation of the
Company to authorize an additional number of shares of Common Stock and to
reserve such number of shares of Common Stock necessary to allow for the
issuance of such excess number of shares of Common Stock.
2.6 Governmental Consents. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of the Company is
required in connection with the execution and delivery of this Agreement, the
issuance of shares of Series Y Preferred Stock pursuant to the terms of this
Agreement and the issuance of Conversion Shares upon conversion of shares of
Series Y Preferred Stock in accordance with the Series Y Designation, except (i)
the filing of the Series Y Designation and certificates of amendment or amended
and restated certificates of incorporation necessary to implement any amendments
to the certificate of incorporation of the Company (including the Series X
Designation) to increase the number of authorized shares of Common Stock, to
amend the terms of the Series X Preferred Stock and to implement any other
matter contemplated by this Agreement, (ii) such filings as may be required to
be made with Nasdaq, (iii) regulatory filings, approvals and notices, including
filings and notices with the Federal Communications Commission and state public
utility commissions, which either have
Stock Purchase Agreement - Page 7
been made or for which the failure to make would not have a Material Adverse
Effect, (iv) filings as are required pursuant to applicable federal and state
securities laws, which filings will be made within the required periods, and (v)
if and to the extent that, as a result of any anti-dilution adjustment to the
Conversion Price (as defined in both the Series X Designation and Series Y
Designation), the number of shares of Common Stock issuable upon conversion of
shares of Series X Preferred Stock and Series Y Preferred Stock exceeds the
number of authorized and unissued shares of Common Stock on the date of such
adjustment, corporate action will need to be taken to amend the certificate of
incorporation of the Company to authorize an additional number of shares of
Common Stock and to reserve such number of shares of Common Stock necessary to
allow for the issuance of such excess number of shares of Common Stock.
2.7 Offering. Subject in part to the truth and accuracy of each
Investor's representations set forth in Section 3 of this Agreement, the offer,
sale and issuance of the Series Y Preferred Stock as contemplated by this
Agreement is, and the issuance of the Conversion Shares in accordance with the
terms of the Series Y Designation will be, exempt from the registration
requirements of any applicable state and federal securities laws, and neither
the Company nor any authorized agent acting on its behalf will take any action
hereafter that would cause the loss of such exemption.
2.8 Litigation. There is no action, suit, proceeding or known
investigation pending or, to the Company's knowledge, currently threatened
against the Company or any of its Subsidiaries, officers or directors that
questions the validity of this Agreement, or the right of the Company to enter
into this Agreement, or to consummate the transactions contemplated hereby, or
that might result, either individually or in the aggregate, in any Material
Adverse Effect, or any change in the current equity ownership of the Company,
nor is the Company aware that there is any basis for the foregoing.
2.9 Patents and Trademarks. Each of the Company and its
Subsidiaries owns or possesses sufficient rights to use all material patents,
patent rights, trademarks, copyrights, licenses, inventions, trade secrets,
trade names and know-how (collectively, "Intellectual Property") owned or
possessed by it or that are necessary for the conduct of its business as now
conducted or as proposed to be conducted as described in the Exchange Act
Documents except where the failure to currently own or possess such rights would
not have a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries has received any notice of, or has any knowledge of, any asserted
infringement by the Company or any of its Subsidiaries of, any rights of a third
party with respect to any Intellectual Property that the Company believes,
individually or in the aggregate, would have a Material Adverse Effect. Neither
the Company nor any of its Subsidiaries has received any notice of, or has any
knowledge of, infringement by a third party with respect to any Intellectual
Property of the Company or of any Subsidiary that the Company believes,
individually or in the aggregate, would have a Material Adverse Effect.
2.10 Compliance with Other Instruments.
(a) Neither the Company nor any of its Subsidiaries is in
violation of (i) its respective organizational documents or (ii) any Laws which,
in the case of (ii), would have a Material Adverse Effect.
Stock Purchase Agreement - Page 8
(b) The execution and delivery of this Agreement, the issuance
and sale of the Series Y Preferred Stock under this Agreement, the issuance of
the Conversion Shares upon conversion of the Series Y Preferred Stock in
accordance with the Series Y Designation, the fulfillment of the terms of this
Agreement and the consummation of the transactions contemplated hereby will not
(a) conflict with or constitute a violation of, or default (with the passage of
time or otherwise) under, (i) any material bond, debenture, note or other
evidence of indebtedness, lease, contract, indenture, mortgage, deed of trust,
loan agreement, joint venture or other agreement or instrument to which the
Company or any Subsidiary is a party or by which it or any of its Subsidiaries
or their respective properties are bound, (ii) subject to the exceptions set
forth in the first sentence of Section 2.4, the charter, by-laws or other
organizational documents of the Company or any Subsidiary, or (iii) any law,
administrative regulation, ordinance or order of any court or governmental
agency, arbitration panel or authority (collectively, "Laws") applicable to the
Company or any Subsidiary or their respective properties, except in the case of
clauses (i) and (iii) for any such conflicts, violations or defaults which are
not reasonably likely to have a Material Adverse Effect or (b) result in the
creation or imposition of any lien, encumbrance, claim, security interest or
restriction whatsoever upon any of the material properties or assets of the
Company or any Subsidiary or an acceleration of indebtedness pursuant to any
obligation, agreement or condition contained in any material bond, debenture,
note or any other evidence of indebtedness or any material indenture, mortgage,
deed of trust or any other agreement or instrument to which the Company or any
Subsidiary is a party or by which any of them is bound or to which any of the
material property or assets of the Company or any Subsidiary is subject.
2.11 Government Permits. The Company and each of its Subsidiaries
has obtained all necessary franchises, permits, licenses, and any similar
authority (collectively, "Permits") necessary for the conduct of its business as
now being conducted and as proposed to be conducted by it, except where the
failure to obtain such Permit could not reasonably be expected to have a
Material Adverse Effect.
2.12 Registration Rights. Except as provided herein, in the Series
X Purchase Agreement and in the Amended and Restated Investors' Rights Agreement
dated as of July 16, 1999 between the Company and the purchasers named therein,
the Company has not granted to or agreed to grant to any holders of shares of
its Common Stock or securities convertible into Common Stock registration rights
with respect to such shares under the Act.
2.13 Reporting Status. The Company has filed in a timely manner all
documents that the Company was required to file under the Exchange Act during
the 12 months preceding the date of this Agreement. All such documents complied
in all material respects with the SEC's requirements as of their respective
filing dates, and the information contained therein as of the date thereof did
not contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made not misleading.
2.14 Financial Statements. The financial statements of the Company
and the related notes contained in the Exchange Act Documents present fairly, in
accordance with generally accepted accounting principles, the financial position
of the Company and its Subsidiaries as of
Stock Purchase Agreement - Page 9
the dates indicated, and the results of its operations and cash flows for the
periods therein specified consistent with the books and records of the Company
and its Subsidiaries except that the unaudited interim financial statements were
or are subject to normal and recurring year-end adjustments which are not
expected to be material in amount. Such financial statements (including the
related notes) have been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
periods therein specified, except as may be included in the notes to such
financial statements, or in the case of unaudited statements, as may be
permitted by the SEC on Form 10-Q under the Exchange Act and except as disclosed
in the Exchange Act Documents. The other financial information contained in the
Exchange Act Documents has been prepared on a basis consistent with the
financial statements of the Company.
2.15 No Material Adverse Effect. Except as disclosed in Exchange
Act Documents, since September 30, 2001, there has not been (i) any material
adverse change in the financial condition or earnings of the Company and its
Subsidiaries considered as one enterprise, (ii) any material adverse event
affecting the Company or its Subsidiaries, (iii) any obligation, direct or
contingent, that is material to the Company and its Subsidiaries considered as
one enterprise, incurred by the Company, except obligations incurred in the
ordinary course of business, (iv) any dividend or distribution of any kind
declared, paid or made on the capital stock of the Company or any of its
Subsidiaries, or (v) any loss or damage (whether or not insured) to the physical
property of the Company or any of its Subsidiaries which has been sustained
which has a Material Adverse Effect.
2.16 Listing. The Company's Common Stock is registered pursuant to
Section 12(g) of the Exchange Act and is listed on the Nasdaq Stock Market, Inc.
National Market (the "NNM").
2.17 Company not an "Investment Company." The Board of Directors of
the Company has taken all action which is necessary to cause Xxxxx X. Xxxxxx to
become a Class I Director of the Company immediately after the Initial Closing.
3. Representations and Warranties of the Investors. Each Investor
hereby represents and warrants that:
3.1 Authorization. Such Investor has full power and authority to
enter into this Agreement and such Agreement constitutes its valid and legally
binding obligation, enforceable in accordance with its terms except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium, and
other laws of general application affecting enforcement of
Stock Purchase Agreement - Page 10
creditors' rights generally, (ii) as limited by laws relating to the
availability of specific performance, injunctive relief, or other equitable
remedies, and (iii) to the extent the indemnification provisions contained
herein may be limited by applicable federal or state securities laws.
3.2 Purchase Entirely for Own Account. This Agreement is made with
such Investor in reliance upon such Investor's representation to the Company,
which by such Investor's execution of this Agreement such Investor hereby
confirms, that the Bridge Notes, the Series Y Shares and the Conversion Shares
(collectively, the "Securities") will be acquired for investment for such
Investor's own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof, and that such Investor has no
present intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, such Investor further
represents that such Investor does not have any contract, undertaking, agreement
or arrangement with any person to sell, transfer or grant participations to such
person or to any third person, with respect to any of the Securities.
3.3 Disclosure of Information. Such Investor represents that it
has had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Securities, and the
business, properties, prospects and financial condition of the Company.
3.4 Investment Experience. Such Investor is 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, and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Securities.
If other than an individual, such Investor also represents it has not been
organized for the purpose of acquiring the Securities. Such Investor has
carefully considered the potential risks relating to the Company and a purchase
of the Securities, and fully understands that the Securities are speculative
investments which involve a high degree of risk of loss of such Investor's
entire investment. Among others, such Investor has carefully considered each of
the risks identified under the caption "Risk Factors" and "Additional Risk
Factors" in the Exchange Act Documents.
3.5 Accredited Investor. Such Investor is an "accredited investor"
within the meaning of Securities and Exchange Commission ("SEC") Rule 501 of
Regulation D, as presently in effect.
3.6 Investor Not an Investment Company. Such Investor is not an
"investment company" or an entity "controlled" by an "investment company" within
the meaning of the Investment Company Act.
3.7 Restricted Securities. Such Investor understands that the
Securities are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Act only in certain limited circumstances. In this connection, such Investor
represents that it is
Stock Purchase Agreement - Page 11
familiar with SEC Rule 144, as presently in effect, and understands the resale
limitations imposed thereby and by the Act.
3.8 Further Limitations on Disposition. Without in any way
limiting the representations set forth above, such Investor further agrees not
to make any disposition of all or any portion of the Securities to any third
party unless and until the transferee has agreed in writing for the benefit of
the Company to be bound by this Section 3 to the extent this Section is then
applicable, and:
(a) There is then in effect a registration statement under the
Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(b) (i) Such Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
reasonably requested by the Company, such Investor shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the Act.
Notwithstanding the provisions of paragraphs (a) and (b)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by an Investor that is a partnership to any general or limited
partner of such partnership or to the estate of any such partner or to any
corporation, partnership, or other entity which is an affiliate of such
partnership or the transfer by gift, will or intestate succession by any such
partner to his or her spouse or to the siblings, lineal descendants or ancestors
of such partner or his or her spouse, if the transferee agrees in writing to be
subject to the terms hereof to the same extent as if he or she were an original
Investor hereunder.
3.9 Suspension of Trading. Such Investor acknowledges that there
may occasionally be times when the Company determines that it must suspend the
use of the prospectus forming a part of a registration statement covering the
Securities. Such Investor is aware that, in such event, the Securities will not
be subject to ready liquidation, and that any Securities purchased by the
Investor would have to be held during such suspension. The overall commitment of
such Investor to investments which are not readily marketable is not excessive
in view of such Investor's net worth and financial circumstances, and any
purchase of the Securities will not cause such commitment to become excessive.
3.10 Reliance; Material Changes. The information contained herein
is complete and accurate and may be relied upon by the Company, and such
Investor will notify the Company promptly of any material change in any of such
information occurring prior to each Closing.
3.11 Legends. It is understood that the certificates evidencing the
Securities may bear the following legend:
"These securities have not been registered under the
Securities Act of 1933, as amended, or any state securities
laws. They may not be sold,
Stock Purchase Agreement - Page 12
offered for sale, pledged or hypothecated in the absence of a
registration statement in effect with respect to the
securities under such Act and any applicable state securities
laws or pursuant to an exemption under such laws, together
with, in certain cases, an opinion of counsel satisfactory to
the Company that such registration is not required."
4. Conditions of Investors' Obligations at Closings.
4.1 Initial Closing. The obligations of each Investor to purchase
Series Y Shares at the Initial Closing are subject to the fulfillment on or
before the Initial Closing of each of the following conditions, unless such
condition or conditions are waived by the Investors purchasing at least a
majority of the Series Y Shares being purchased at the Initial Closing:
(a) Representations and Warranties. The representations and
warranties of the Company contained in Section 2 of this Agreement shall be true
in all material respects (other than representations and warranties subject to
"materiality" or "Material Adverse Effect" qualifiers, which shall be true in
all respects) on and as of the Initial Closing with the same effect as though
such representations and warranties had been made on and as of the date of such
Closing, except to the extent such representations and warranties are by their
express provisions made as of the date of this Agreement or another specified
date.
(b) Performance. The Company shall have performed and complied
with all agreements, obligations and conditions contained in this Agreement that
are required to be performed or complied with by it on or before the Initial
Closing.
(c) Compliance Certificate. The President or Chief Executive
Officer of the Company shall deliver to each Investor at the Initial Closing a
certificate stating that the conditions specified in Section 4.1(a) and Section
4.1(b) have been fulfilled.
(d) Qualifications. All Permits, if any, that are required in
connection with the lawful issuance and sale of the Series Y Preferred Stock
pursuant to this Agreement shall be duly obtained and effective as of the
Initial Closing except any regulatory filings, approvals and notices, including
filings and notices with the Federal Communications Commission and state public
utility commissions, which the failure to obtain or to be effective would not
have a Material Adverse Effect.
(e) Proceedings and Documents. All corporate and other proceedings
in connection with the transactions contemplated at the Initial Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to Investors, and they shall have received all such counterpart
original and certified or other copies of such documents as they may reasonably
request. This may include, without limitation, good standing certificates and
certification by the Company's Secretary regarding the Amended and Restated
Certificate of Incorporation (the "Restated Certificate") and Bylaws and Board
of Directors and stockholder resolutions (if any) relating to this transaction.
Stock Purchase Agreement - Page 13
(f) Opinion of Company Counsel. Each Investor shall have received
from Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP, counsel for the Company, an opinion, dated
as of the Initial Closing, in the form attached hereto as Exhibit B.
(g) Management Rights Agreement. The Company shall execute and
deliver to The Lafayette Investment Fund, L.P. a management rights agreement
reasonably acceptable to both parties to allow The Lafayette Investment Fund,
L.P. to maintain the status of a "venture capital operating company," as defined
in the Department of Labor Regulations, Section 2501.3-101(d).
4.2 Second Closing. The obligations of each Investor to purchase
Series Y Shares at the Second Closing are subject to the fulfillment on or
before the Second Closing of each of the following conditions, unless such
condition or conditions are waived with respect to such Closing by Investors
purchasing at least a majority of the Series Y Shares being purchased at such
Closing:
(a) Initial Closing. The Initial Closing shall have occurred.
(b) Required Stockholder Approvals. The Company shall have obtained the
Required Shareholder Approvals.
(c) No proceeding shall have been instituted which has not been
withdrawn or dismissed (i) seeking to have an order for relief entered in
respect of the Company, or seeking a declaration or entailing a finding that the
Company is insolvent or a similar declaration or finding, or seeking
dissolution, winding-up, charter revocation or forfeiture, liquidation,
reorganization, arrangement, adjustment or composition or other similar relief
with respect to the Company, its assets or its debts under any law relating to
bankruptcy, insolvency, relief of debtors or protection of creditors,
termination of legal entities or any other similar law, or (ii) seeking
appointment of a receiver, trustee, custodian, liquidator, assignee,
sequestrator or other similar person for the Company or for all or any
substantial part of its property.
(d)......The Company shall not have (i) after taking into effect the
proposed Closing, become generally unable to pay its debts as they become due,
(ii) voluntarily suspended transaction of its business, (iii) made a general
assignment for the benefit of creditors, (iv) instituted a proceeding described
in Section 4.2(c), (v) consented to any order for relief, declaration, finding
or relief described in Section 4.2(c), (vi) consented to the appointment or to
the taking of possession by, any such official or all or any substantial part of
this property whether or not any proceeding is instituted, dissolves winds-up or
liquidates itself or any substantial part of its property, or (vii) taken any
action in furtherance of any of the foregoing.
4.3 Third Closing. The obligations of each Investor to purchase
Series Y Shares at the Third Closing, if required, are subject to the
fulfillment on or before the Third Closing of each of the following conditions,
unless such condition or conditions are waived with respect to such Closing by
Investors purchasing at least a majority of the Series Y Shares being purchased
at such Closing:
(a) Initial Closing. The Initial Closing shall have occurred.
Stock Purchase Agreement - Page 14
(b) Series X Preferred Stock Investment. The Company shall have
received not less than $14,990,000 from the sale of Series X Preferred Stock
pursuant to the terms of the Series X Purchase Agreement.
5. Conditions of the Company's Obligations at Closing. The
obligations of the Company to each Investor under this Agreement are subject to
the fulfillment on or before each Closing (except in the case of Section 5.5,
which section shall only apply to the Second Closing and the Third Closing) in
which such Investor participates of each of the following conditions by that
Investor, unless waived in writing by the Company:
5.1 Representations and Warranties. The representations and
warranties of such Investor contained in Section 3 shall be true on and as of
each Closing in which each such Investor purchases shares of Series Y Preferred
Stock with the same effect as though such representations and warranties had
been made on and as of each such Closing.
5.2 Performance. Such Investor shall have performed and complied
with all agreements, obligations and conditions contained in this Agreement that
are required to be performed or complied with by it on or before each Closing.
5.3 Compliance Certificate. Such Investor shall deliver to the
Company at each Closing a certificate stating that the conditions specified in
Sections 5.1 and 5.2 have been satisfied.
5.4 Qualifications. All Permits, if any, that are required in
connection with the lawful issuance and sale of the Series Y Preferred Stock
pursuant to this Agreement shall be duly obtained and effective as of each
Closing.
5.5 Required Stockholder Approvals.. The Company shall have obtained
the Required Shareholder Approvals on or prior to the Second Closing.
6. Covenants.
6.1 Delivery of Monthly Financial Statements. As soon as practicable,
but in any event within twenty (20) business days after the end of each month,
up to and until the later of (i) the Second Closing or (ii) June 30, 2002, the
Company shall deliver to each Investor holding at least 20% of the then
outstanding shares of Series Y Preferred Stock an unaudited statement of
operations for the month then ended and for the portion of the fiscal year to
the end of such month, and a balance sheet as of the close of such month. Each
Investor shall maintain the confidentiality of any information so obtained by
it. All such statements and balance sheets shall be prepared by the Company in
accordance with GAAP applied on a consistent basis throughout the periods
therein specified and with past practice, except as may be set forth in the
notes to such financial statements or as may be permitted by the SEC on Form
10-Q under the Exchange Act and shall present fairly the financial condition of
the Company and its results of operation for the period specified, subject to
year-end adjustment.
Stock Purchase Agreement - Page 15
6.2 Required Corporate Action. The Company shall take all action
required under the Delaware General Corporation Law and the Company's
certificate of incorporation and its by-laws to convene a meeting of the
stockholders of the Company to consider and obtain the Required Stockholder
Approvals. The Company shall promptly prepare and file a proxy statement with
the SEC to solicit the consents of the Company's stockholders necessary to
obtain the Required Stockholder Approvals. The Company shall use its reasonable
best efforts to hold the meeting of the stockholders to obtain the Required
Stockholder Approvals as promptly as possible following the filing of such proxy
with the SEC but in no event later than June 30, 2002. If, at any time or from
time to time, the Company's certificate of incorporation needs to be amended to
increase the number of authorized but unissued shares of Common Stock to permit
full conversion of the outstanding shares of Series X Preferred Stock or Series
Y Preferred Stock or any other action of the Company's shareholders is required
to fully implement the transactions contemplated by this Agreement (including
the actions necessary to obtain the Required Stockholder Approvals), each
Investor shall vote all shares of capital stock of the Company (including shares
of Series Y Preferred Stock and Common Stock) in favor of such action.
6.3 Bridge Loan. In the event that the aggregate purchase price of
the Series Y Shares purchased by the Investors at the Initial Closing is less
than $10,000,000, then at the Initial Closing each Investor agrees, severally
and not jointly, to loan to the Company an amount equal to the product obtained
by multiplying (A) the difference between (i) the purchase price of the Series Y
Shares purchased by such Investor at the Initial Closing and (ii) $10,000,000,
by (B) the percentage set forth opposite such Investor's name on Schedule A
hereto under the heading "Investor Percentage" (each, a "Bridge Loan"). Each
Bridge Loan shall be evidenced by a Bridge Note in the form attached hereto as
Exhibit D (collectively, the "Bridge Notes").
6.4 Voting Agreements. Simultaneously with the execution and delivery
of this Agreement, each of the Company, the Investors, VantagePoint Venture
Partners III (Q), L.P., VantagePoint Venture Partners III, L.P., VantagePoint
Communications Partners, L.P. and VantagePoint Venture Partners 1996, L.P. has
executed and delivered a Voting Agreement in the form of Exhibit C-1 (the
"VantagePoint Voting Agreement"). Simultaneously with the execution and delivery
of this Agreement, each of the Company and the Investors has executed and
delivered a Voting Agreement in the form of Exhibit C-2 (the "Series Y Voting
Agreement," and together with the VantagePoint Voting Agreement, the "Voting
Agreements"). Neither Company nor its Board of Directors shall take any action
that would cause any of the Voting Agreements to be unenforceable in accordance
with its terms under applicable law.
6.5 Stockholders Agreement. Simultaneously with the execution and
delivery of this Agreement, each of the Company, the Investors, VantagePoint
Venture Partners III (Q), L.P., VantagePoint Venture Partners III, L.P.,
VantagePoint Communications Partners, L.P. and VantagePoint Venture Partners
1996, L.P. has executed and delivered a Stockholders Agreement, in the form of
Exhibit E (the "Stockholders Agreement"), which agreement shall be effective as
of the Initial Closing.
Stock Purchase Agreement - Page 16
6.6 NNM Listing. The Company shall use commercially reasonable efforts
to comply with all requirements of the NNM with respect to the listing of the
Conversion Shares on the NNM.
6.7 Possible Change to Series Y Preferred Stock Terms. Promptly after
the execution and delivery of this Agreement, the Company shall use its
commercially reasonable efforts to seek the clearance of Nasdaq under the
Nasdaq's voting rights policy to include in Section 5 of the Series Y
Designation an additional clause (c), which shall read as follows: "(c)
authorize or issue, or obligate itself to issue, (i) any other equity security,
including any other security convertible into or exercisable for any equity
security, having rights, preferences or privilegessenior to the Series Y
Preferred Stock or (ii) during the six month period beginning on the Filing
Date, any other equity security, including any other security convertible into
or exercisable for any equity security, having rights, preferences or privileges
pari passu with the Series Y Preferred Stock." To the extent practicable, single
counsel to the Investors shall have the right to participate in all discussions
with the Nasdaq. If the Company obtains such clearance prior to the scheduled
date of the Initial Closing set forth in Section 1.2(a), the Series Y
Designation shall be revised to include such additional clause. If the Company
does not obtain such clearance prior to the scheduled date of the Initial
Closing set forth in Section 1.2(a), the Series Y Designation shall not be
revised to include such additional clause.
7. Miscellaneous.
7.1 Survival. The warranties, representations and covenants of the
Company and Investors contained in or made pursuant to this Agreement shall
survive the execution and delivery of this Agreement and the Closings for a
period of twelve months following the last Closing held pursuant to this
Agreement and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Investors or the Company; provided,
however, the representations and warranties in Section 2.5 and the terms in
Section 6 shall survive indefinitely, and provided that representations and
warranties speak only as of the time they are made.
7.2 Successors and Assigns. Except as otherwise provided herein,
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any Securities); provided, however, (i) the transferor shall,
within ten (10) days after such transfer, furnish to the Company written notice
of the name and address of such transferee or assignee and the securities with
respect to which such registration rights are being assigned, and (ii) such
transferee shall agree to be subject to all applicable terms and restrictions
set forth in this Agreement. Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
7.3 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Connecticut as applied to agreements among
Connecticut residents entered into and to be performed entirely within
Connecticut.
Stock Purchase Agreement - Page 17
7.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.5 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.6 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof, or at such other address
as such party may designate by ten (10) days' advance written notice to the
other parties.
7.7 Expenses. Irrespective of whether a particular Closing is
effected, the Company and the Investors shall bear their own costs and expenses
incurred with respect to the negotiation, execution, delivery and performance of
this Agreement, provided, however, that upon each Closing, the Company shall,
reimburse the reasonable fees and expenses of a single counsel for the Investors
(not to exceed an aggregate of $100,000 for all Closings).
7.8 Amendments and Waivers. Except as otherwise set forth in this
Agreement, any term of this Agreement may be amended and the observance of any
term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and holders of a majority of the Conversion Shares
(including Conversion Shares issuable upon conversion of the Series Y Preferred
Stock). Any amendment or waiver effected in accordance with this paragraph shall
be binding upon each holder of any securities purchased under this Agreement at
the time outstanding (including securities into which such securities are
convertible), each future holder of all such securities, and the Company.
Notwithstanding anything to the contrary contained herein, the Investors holding
the right to purchase a majority of the Series Y Shares hereunder shall have the
right to waive any condition in order to effectuate the purchase of the Series Y
Shares contemplated herein.
7.9 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
7.10 Entire Agreement. This Agreement and the documents referred to
herein constitute the entire agreement among the parties with respect to the
subject matter hereof and no party shall be liable or bound to any other party
in any manner by any warranties, representations, or covenants with respect to
such subject matter except as specifically set forth herein or therein.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
Stock Purchase Agreement - Page 18
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMPANY:
XXX.xxx, Inc.
By: /s/ Xxxxx Xxxxxxx
---------------------------------------
Title: Chairman and CEO
Address: 000 Xxxx Xxxxx Xxxxx
Xxx Xxxxx, XX 00000
[ADDITIONAL SIGNATURES FOLLOW]
Stock Purchase Agreement - Page 19
COLUMBIA CAPITAL EQUITY PARTNERS III
(QP), L.P.
By: Columbia Capital Equity Partners III, L.P.
its general partner
By: Columbia Capital III, LLC
its general partner
By: /s/ Xxxxx Xxxxxx
Name: Xxxxx Xxxxxx
Manager
COLUMBIA CAPITAL EQUITY PARTNERS II (QP), L.P.
By: Columbia Capital Equity Partners, LLC
its general partner
By: /s/ Xxxxx Xxxxxx
Name: Xxxxx Xxxxxx
Manager
COLUMBIA CARDINAL PARTNERS, LLC
By: Columbia Capital, L.L.C.
Managing Member
By: /s/ Xxxxxx X. Xxxxxxx
---------------------
Name: Xxxxxx X. Xxxxxxx
Chief Financial Officer
COLUMBIA BROADSLATE PARTNERS, LLC
By: Columbia Capital III, L.L.C.
Managing Member
By: /s/ Xxxxxx X. Xxxxxxx
---------------------
Name: Xxxxxx X. Xxxxxxx
Chief Financial Officer
Stock Purchase Agreement - Page 20
COLUMBIA CAPITAL EQUITY PARTNERS III (AI), L.P.
By: Columbia Capital Equity Partners III, L.P.
its general partner
By: Columbia Capital III, LLC
its general partner
By: /s/ Xxxxxx X. Xxxxxxx
---------------------
Name: Xxxxxx X. Xxxxxxx
Chief Financial Officer
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Stock Purchase Agreement - Page 21
XXXXXXX RIVER PARTNERSHIP X,
A LIMITED PARTNERSHIP
By: Xxxxxxx River X GP, LLC
General Partner
By:/s/ Xxxx Xxxxxx, Xx.
--------------------
Name: Xxxx Xxxxxx, Xx.
Title: General Partner
XXXXXXX RIVER PARTNERSHIP X-A,
A LIMITED PARTNERSHIP
By: Xxxxxxx River X GP, LLC,
General Partner
By:/s/ Xxxx Xxxxxx, Xx.
--------------------
Name: Xxxx Xxxxxx, Xx.
Title: General Partner
XXXXXXX RIVER FRIENDS X-B, LLC
By: Xxxxxxx River Friends, Inc.
Manager
By:/s/ Xxxx Xxxxxx, Xx.
--------------------
Name: Xxxx Xxxxxx, Xx.
Title: General Partner
XXXXXXX RIVER FRIENDS X-C, LLC
By: Xxxxxxx River Friends, Inc.
Manager
By:/s/ Xxxx Xxxxxx, Xx.
--------------------
Name: Xxxx Xxxxxx, Xx.
Title: General Partner
Stock Purchase Agreement - Page 22
THE LAFAYETTE INVESTMENT FUND, L.P.
By: Lafayette Investment Partners, L.P.,
its sole general partner
By: Lafayette Private Equities, Inc.,
its sole general partner
By: /s/ Xxxxxx Xxxxxxx
------------------------------------
Xxxxxx Xxxxxxx
Vice President
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Stock Purchase Agreement - Page 23
N.I.G. - BROADSLATE, LTD.
By: /s/ Xxxxxx Xxxxx
----------------------------------------
Name: Xxxxxx Xxxxx
Title: Managing Director
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
Stock Purchase Agreement - Page 24
Each undersigned Investor hereby executes the XXX.xxx, Inc. Series Y
Preferred Stock Purchase Agreement dated as of December 24, 2001, by and among
the Company and the investors listed on Schedule A thereto (the "Agreement") and
hereby agrees to all of the provisions of the Agreement and hereby authorizes
this signature page to be attached to a counterpart of such Agreement executed
by the other parties thereto.
By:
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Name:
--------------------------------
Title:
-------------------------------
Address:
Dated:
Accepted and Agreed:
XXX.xxx, Inc.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Dated:
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SCHEDULE A
SCHEDULE OF INVESTORS
------------------------------------------------------------------------------------------------------------------------------
NAME AND ADDRESS INVESTOR NUMBER OF SECOND MAXIMUM NUMBER ADDITIONAL SERIES Y SHARES
PERCENTAGE CLOSING SERIES Y OF SERIES Y
SHARES SHARES
------------------------------------------------------------------------------------------------------------------------------
Columbia Capital Equity Partners III 25.846% 2,584.6 3,876.9 1,292.3
(QP), L.P.
c/o Columbia Capital Corporation
000 Xxxxx Xxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxxx, XX 00000
Columbia Capital Equity Partners II 3.380% 338 507 169
(QP), L.P.
c/o Columbia Capital
000 Xxxxx Xxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxxx, XX 00000
Columbia Cardinal Partners, LLC 3.626% 362.6 543.9 181.3
c/o Columbia Capital Corporation
000 Xxxxx Xxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxxx, XX 00000
Columbia Broadslate Partners, LLC 20.720% 2,072 3,108 1,036
c/o Columbia Capital Corporation
000 Xxxxx Xxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxxx, XX 00000
Columbia Capital Equity Partners III 1.428% 142.8 214.2 71.4
(AI), L.P.
c/o Columbia Capital Corporation
000 Xxxxx Xxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxxx, XX 00000
The Lafayette Investment Fund, L.P. 25.0% 2,500 3,750.0 1,250
Fountain Place
0000 Xxxx xx Xxxxx
Xxxxxx, XX 00000-0000
Xxxxxxx River Partnership X, 6.034% 603.4 905.0 301.6
A Limited Partnership
c/o Xxxxxxx River Ventures
0000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Xxxxxxx River Partnership X-A, .165% 16.5 24.8 8.3
A Limited Partnership
c/o Xxxxxxx River Ventures
0000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Xxxxxxx River Friends X-B, LLC .398% 39.8 59.7 19.9
c/o Xxxxxxx River Ventures
0000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
SCHEDULE A - CON'T
SCHEDULE OF INVESTORS
------------------------------------------------------------------------------------------------------------------------------
NAME AND ADDRESS INVESTOR NUMBER OF SECOND MAXIMUM NUMBER ADDITIONAL SERIES Y SHARES
PERCENTAGE CLOSING SERIES Y OF SERIES Y
SHARES SHARES
------------------------------------------------------------------------------------------------------------------------------
Xxxxxxx River Friends X-C, LLC .070% 7.0 10.5 3.5
c/o Xxxxxxx River Ventures
0000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
N.I.G. - Broadslate, Ltd. 13.333% 1,333.3 2,000.0 666.7
c/o National Bank of Kuwait
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
--------------- -------------------- ----------------- -----------------------------
TOTAL 100% 10,000 15,000 5,000
SCHEDULE B
Columbia Cardinal Partners, LLC, and its affiliates
Columbia Broadslate Partners, LLC, and its affiliates
X.X. Xxxxxx Partners (SBIC), LLC, and its affiliates
Bessemer Venture Partners IV, L.P. , and its affiliates
Bessec Ventures IV, L.P. , and its affiliates
Xxxxxxx River Partnership X-A, A Limited Partnership, and its affiliates
Xxxxxxx River Friends X-B, LLC, and its affiliates
Xxxxxxx River Friends X-C, LLC, and its affiliates
Court Square Ventures I, LLC, and its affiliates
Tall Oaks Broadslate Partners LP, and its affiliates
Village Ventures, Inc., and its affiliates
Sixty Wall Street SBIC Fund, L.P., and its affiliates
C-1
EXHIBIT A:
FORM OF DESIGNATION OF THE SERIES Y CONVERTIBLE PREFERRED STOCK
C-2
Exhibit A to Purchase Agreement
DESIGNATION OF SERIES Y
CONVERTIBLE PREFERRED STOCK
OF
XXX.XXX, INC.
XXX.xxx, Inc., a company organized and existing under the General
Corporation Law of the State of Delaware (hereinafter called the "Corporation"),
hereby certifies that the following resolution was adopted by the Board of
Directors of the Corporation as required by Section 151 of the General
Corporation Law by action of the Board of Directors of the Corporation at a
meeting held on December __, 2001:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation and in accordance with the General Corporation Law
of the State of Delaware and the provisions of the Corporation's Amended and
Restated Certificate of Incorporation, a new series of preferred stock, par
value $.00l per share, of the Corporation is hereby created and designated as
the "Series Y Convertible Preferred Stock," and the designation and number of
shares thereof and the voting powers, preferences and relative, participating,
optional and other special rights of the shares of such series, and the
qualifications, limitations and restrictions thereof, are as follows:
A. Designation and Amount. A total of 15,000 shares of the
Corporation's previously undesignated preferred stock, par value $.001 per
share, shall be designated as "Series Y Convertible Preferred Stock" (the
"Series Y Preferred Stock"). Such number of shares may be increased or decreased
by resolution of the Board of Directors; provided, that no decrease shall reduce
the number of shares of Series Y Preferred Stock to a number less than the
number of shares then outstanding plus the number of shares reserved for
issuance (i) upon the exercise of outstanding options, rights or warrants for
the purchase of Series Y Preferred Stock or (ii) upon the conversion of any
outstanding securities issued by the Corporation convertible into Series Y
Preferred Stock.
1. Dividend Provisions. The holders of shares of Series Y
Preferred Stock shall be entitled to receive dividends out of funds legally
available therefor, in cash or, at the sole option of the Corporation, but only
in case of a dividend payment under clause (ii) below, in shares of the
Corporation's common stock, par value $.0005 per share (the "Common Stock"),
measured at the fair market value of the Common Stock at the time the dividend
is declared, prior and in preference to any declaration or payment of any
dividend (payable other than in Common Stock or other securities and rights
convertible into or entitling the holder thereof to receive, directly or
indirectly, additional shares of Common Stock) on the Common Stock, at the rate
of $120 per share per annum (the "Accruing Dividends") (as adjusted for any
stock splits, stock dividends, recapitalizations or the like affecting the
Series Y Preferred Stock after the date of the filing of this Designation of
Series Y Convertible Preferred Stock (the "Series Y Certificate of Designation")
with the Secretary of State of the State of Delaware), when and if declared by
the Board of Directors. Accruing Dividends shall accrue on a monthly basis on
each share of the
Series Y Preferred Stock from the date of original issuance of such share,
whether or not earned or declared and shall be cumulative. Notwithstanding the
foregoing, accrued but unpaid dividends shall be paid on each outstanding share
of the Series Y Preferred Stock upon the earliest to occur of (i) any
liquidation, dissolution, winding up or Change of Control (as defined in
subsection 2(c)(i)), which payment shall be made as provided in Section 2; (ii)
any conversion of such share of the Series Y Preferred Stock into Common Stock;
or (iii) any redemption of such share of the Series Y Preferred Stock, which
payment shall be made as provided in Section 6. The holders of a majority of the
then outstanding shares of Series Y Preferred Stock may waive any dividend or
dividend preference that such holders shall be entitled to receive under this
Section 1 by giving the Corporation written notice of such waiver. For the
purpose of this Section 1, "fair market value" shall be determined in accordance
with Section 2(c)(ii) hereof.
2. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up
of the Corporation, either voluntary or involuntarily, the holders of Series Y
Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of any of the assets of the Corporation to the holders of Common
Stock and any other class or series of preferred stock (whenever designated or
created) that is junior to the Series Y Preferred Stock with respect to the
liquidation, dissolution or winding up of the Corporation by reason of their
ownership thereof, an amount per share equal to the sum of $1,000.00 (the
"Original Series Y Issue Price") plus, in the case of each share, an amount
equal to all Accruing Dividends thereon unpaid (whether or not declared)
computed to the date payment thereon is made (subject to adjustment of such
fixed dollar amounts for any stock splits, stock dividends, combinations,
recapitalizations or the like affecting the Series Y Preferred Stock after the
date of the filing of this Series Y Certificate of Designation with the
Secretary of State of the State of Delaware). If upon the occurrence of such
event, the assets and funds available for distribution to the holders of shares
of Series Y Preferred Stock and any other class or series of preferred stock
(whenever designated or created) that is on parity with the Series Y Preferred
Stock shall be insufficient to permit the payment to such holders of the full
aforesaid preferential amounts, then the entire assets and funds of the
Corporation legally available for distribution shall be distributed ratably
among the holders of the Series Y Preferred Stock and any other such class or
series of Preferred Stock in proportion to the amount of such preferential
amounts due on the shares of Series Y Preferred Stock and any other such class
or series of Preferred Stock owned by each such holder. The Corporation's Series
X Convertible Preferred Stock, par value $.001 per share (the "Series X
Preferred Stock"), shall rank on parity with the Series Y Preferred Stock with
respect to the liquidation, dissolution or winding up of the Corporation.
(b) Upon completion of the distribution required by subsection
(a) of this Section 2 and any other distribution required by the Corporation's
certificate of incorporation (including any certificate of designation for
another class or series of preferred stock), all of the remaining assets of the
Corporation available for distribution to stockholders, if any, shall be
distributed among the holders of shares of Series X Preferred Stock, Series Y
Preferred Stock, Common Stock and any other class or series of stock of the
Corporation (whenever designated or created) that is not
2
limited to a fixed sum or percentage in respect of the rights of the holders
thereof to participate on the distribution of assets upon the liquidation,
dissolution or winding up of the Corporation pro rata based on the number of
shares of Common Stock then held by each such holder (assuming full conversion
of all convertible or exchangeable stock, including the Series X Preferred Stock
and Series Y Preferred Stock, into shares of Common Stock, regardless of whether
or not such shares are then convertible).
(c) (i) For purposes of this Section 2, a liquidation,
dissolution or winding up of the Corporation shall be deemed to be occasioned
by, or to include, (A) the acquisition of the Corporation by another entity by
means of any transaction or series of related transactions (including, without
limitation, any reorganization, merger or consolidation) if, following such
transaction, the holders of the outstanding voting power of the Corporation
prior to the transaction cease to hold, directly or indirectly, a majority of
the outstanding voting power of the surviving entity or (B) a sale of all or
substantially all of the assets of the Corporation, unless in case of either
clause (A) or (B) the holders of a majority of the then outstanding shares of
Series Y Preferred Stock elect to the contrary by giving written notice thereof
to the Corporation at least three days before the effective date of such event.
If such notice is given, the provisions of subsection 3(h) below shall apply. In
connection with any such transaction contemplated by the first sentence of this
paragraph, all consideration payable to the stockholders of the Corporation, in
connection with a merger or consolidation, or all consideration payable to the
Corporation, together with all other available assets of the Corporation (net of
obligations owed by the Corporation), in the case of an asset sale, shall be
paid to and deemed (to the fullest extent permitted by law) distributed (in the
case of a merger or consolidation) or available for distribution and payment as
provided herein (in the case of a sale of assets), as applicable, to the holders
of capital stock of the Corporation in accordance with the preference and
priorities set forth in this Section 2, with such preferences and priorities
specifically intended to be applicable in any such Change of Control transaction
as if the same were a liquidation, dissolution or winding up. If applicable, the
Corporation shall either (x) cause the agreement and plan of merger or
consolidation to provide as a consequence of such merger or consolidation for
the conversion of the outstanding shares of Series Y Preferred Stock into the
right to receive an amount either in cash, or, in the case of a merger or
consolidation for stock, stock of the surviving corporation equal to the
applicable amount payable under this Section 2; or (y) immediately concurrent
with the consummation with the sale of all or substantially all of the assets of
the Corporation, cause the redemption of all outstanding shares of the Series Y
Preferred Stock for an amount either in cash or, in the case of a sale of assets
for stock, stock of the surviving corporation equal to the applicable amount
payable under this Section 2. The occurrence of any event set forth in clause
(A) or (B) of the first sentence of this subsection 2(c)(i) is sometimes
referred to as a "Change of Control."
(ii) In any of such events, if the consideration received by the
Corporation or its stockholders is other than cash or securities, its value will
be deemed its fair market value, as determined in good faith by the Board of
Directors. Any securities shall be valued as follows:
3
(A) Securities not subject to investment letter or other
similar restrictions on free marketability covered by (B) below:
(1) If traded on a securities exchange or through the
Nasdaq Stock Market, the value shall be deemed to be the
average of the closing prices of the securities on such
exchange or system over the ten (10) day period ending three
(3) days prior to the closing;
(2) If actively traded over-the-counter, the value
shall be deemed to be the average of the closing bid or sale
prices (whichever is applicable) over the ten (10) day period
ending three (3) days prior to the closing; and
(3) If there is no active public market, the value
shall be the fair market value thereof, as determined in good
faith by the Board of Directors.
(B) The method of valuation of securities subject to
investment letter or other restrictions on free marketability (other than
restrictions arising solely by virtue of a stockholder's status as an affiliate
or former affiliate or by virtue of any securities law or regulation) shall be
to make an appropriate discount from the market value determined as above in (A)
(1), (2) or (3) to reflect the approximate fair market value thereof, as
determined in good faith by the Board of Directors.
(iii) In the event the requirements of this subsection 2(c)
are not complied with, the Corporation shall forthwith either:
(A) cause such closing to be postponed until such time as the
requirements of this Section 2 have been complied with; or
(B) cancel such transaction, in which event the rights,
preferences and privileges of the holders of shares of Series Y Preferred Stock
shall revert to and be the same as such rights, preferences and privileges
existing immediately prior to the date of the first notice referred to in
subsection 2(c)(iv) hereof.
(iv) The Corporation shall give each holder of record of shares of
Series Y Preferred Stock written notice of such impending transaction not later
than twenty (20) days prior to the stockholders' meeting called to approve such
transaction, or twenty (20) days prior to the closing of such transaction,
whichever is earlier, and shall also notify such holders in writing of the final
approval of such transaction. The first of such notices shall describe the
material terms and conditions of the impending transaction and the provisions of
this Section 2, and the Corporation shall thereafter give such holders prompt
notice of any material changes. The transaction shall in no event take place
sooner than twenty (20) days after the Corporation has given the first notice
provided for herein or sooner than ten (10) days after the Corporation has given
notice of any material changes provided for herein; provided, however, that such
periods
4
may be shortened upon the written consent of the holders of a majority of the
then outstanding shares of Series Y Preferred Stock.
3. Conversion. From and after the date on which the Corporation's
certificate of incorporation is amended to increase the number of authorized
shares of Common Stock to at least 250,000,000 shares, the holders of shares of
the Series Y Preferred Stock shall have conversion rights as follows (the
"Conversion Rights"):
(a) Right to Convert.
(i) Each share of Series Y Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share, at the office of the Corporation or any transfer agent
for such stock, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing the Original Series Y Issue Price by
the Conversion Price applicable to such share, determined as hereafter provided,
in effect on the date the certificate is surrendered for conversion. The initial
Conversion Price per share for shares of Series Y Preferred Stock shall be
$0.50; provided, however, that the Conversion Price shall be subject to
adjustment as set forth in subsection 3(d).
(b) Automatic Conversion. Each share of Series Y Preferred Stock shall
automatically be converted into shares of Common Stock at the applicable
Conversion Price at the time in effect immediately upon the close of business on
the date on which the closing sale price of the Corporation's Common Stock on
the Nasdaq Stock Market has exceeded $2.50 per share (as adjusted for any stock
splits, stock dividends, recapitalizations or the like affecting the Common
Stock after the date of the filing of this Series Y Certificate of Designation
with the Secretary of State of the State of Delaware (the "Filing Date")) for a
period of 45 consecutive trading days; provided, however, that such period of 45
consecutive trading days must commence and end following the date that is 180
days after the Filing Date.
(c) Mechanics of Conversion. Before any holder of shares Series Y
Preferred Stock shall be entitled to convert the same into shares of Common
Stock, he or she shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Corporation or of any transfer agent for such
Series Y Preferred Stock, and shall give written notice to the Corporation at
its principal corporate office of the election to convert the same and shall
state therein the name or names in which the certificate or certificates for
shares of Common Stock are to be issued. The Corporation shall, as soon as
practicable thereafter, issue and deliver at such office to such holder of
shares of Series Y Preferred Stock, or to the nominee or nominees of such
holder, a certificate or certificates for the number of shares of Common Stock
to which such holder shall be entitled as aforesaid. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the shares of Series Y Preferred Stock to be converted, and
the person or persons entitled to receive the shares of Common Stock issuable
upon such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock as of such date. If the conversion is in
connection with an underwritten offering of securities registered pursuant to
the Securities Act of 1933, the conversion may, at the option of
5
any holder tendering shares of Series Y Preferred Stock for conversion, be
conditioned upon the closing with the underwriters of the sale of securities
pursuant to such offering, in which event the persons entitled to receive the
Common Stock upon conversion of shares of Series Y Preferred Stock shall not be
deemed to have converted such shares until immediately prior to the closing of
such sale of securities.
(d) Adjustment of Price Upon Issuance of Common Stock. Except as
provided in subsection 3(e), if and whenever the Corporation shall issue or
sell, or is, in accordance with subsections 3(d)(i) through 3(d)(vii), deemed to
have issued or sold, any shares of Common Stock for a consideration per share
less than the Conversion Price in effect immediately prior to the time of such
issue or sale, then, immediately upon such issue or sale, the Conversion Price
shall be reduced to the price per share at which the Corporation issued or sold,
or is deemed to have issued or sold, such shares of Common Stock.
For purposes of this subsection (d), the following subsections 3(d)(i)
through 3(d)(vii)) shall also be applicable:
(i) Issuance of Rights or Options. In case at any time the
Corporation shall in any manner grant any warrants or other rights to subscribe
for or to purchase, or any options for the purchase of, Common Stock or any
stock or security convertible into or exchangeable for Common Stock (such
warrants, rights or options being called "Options" and such convertible or
exchangeable stock or securities being called "Convertible Securities") whether
or not such Options or the right to convert or exchange any such Convertible
Securities are immediately exercisable, and the price per share for which Common
Stock is issuable upon the exercise of such Options or upon the conversion or
exchange of such Convertible Securities (determined by dividing (A) the total
amount, if any, received or receivable by the Corporation as consideration for
the granting of such Options, plus the minimum aggregate amount of additional
consideration payable to the Corporation upon the exercise of all such Options,
plus, in the case of such Options which relate to Convertible Securities, the
minimum aggregate amount of additional consideration, if any, payable upon the
issue or sale of such Convertible Securities and upon the conversion or exchange
thereof, by (B) the total maximum number of shares of Common Stock issuable upon
the exercise of such Options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such Options) shall be less
than the Conversion Price in effect immediately prior to the time of the
granting of such Options, then the total maximum number of shares of Common
Stock issuable upon the exercise of such Options or upon conversion or exchange
of the total maximum amount of such Convertible Securities issuable upon the
exercise of such Options shall be deemed to have been issued for such price per
share as of the date of granting of such Options or the issuance of such
Convertible Securities and thereafter shall be deemed to be outstanding. Except
as otherwise provided in subsection 3(d)(iii), no adjustment of the Conversion
Price shall be made upon the actual issue of such Common Stock or of such
Convertible Securities upon exercise of such Options or upon the actual issue of
such Common Stock upon conversion or exchange of such Convertible Securities.
6
(ii) Issuance of Convertible Securities. In case the
Corporation shall in any manner issue or sell any Convertible Securities,
whether or not the rights to exchange or convert any such Convertible Securities
are immediately exercisable, and the price per share for which Common Stock is
issuable upon such conversion or exchange (determined by dividing (A) the total
amount received or receivable by the Corporation as consideration for the issue
or sale of such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Corporation upon the conversion
or exchange thereof, by (B) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities)
shall be less than the Conversion Price in effect immediately prior to the time
of such issue or sale, then the total maximum number of shares of Common Stock
issuable upon conversion or exchange of all such Convertible Securities shall be
deemed to have been issued for such price per share as of the date of the issue
or sale of such Convertible Securities and thereafter shall be deemed to be
outstanding, provided that (a) except as otherwise provided in subsection
3(d)(iii), no adjustment of the Conversion Price shall be made upon the actual
issue of such Common Stock upon conversion or exchange of such Convertible
Securities and (b) if any such issue or sale of such Convertible Securities is
made upon exercise of any Options to purchase any such Convertible Securities
for which adjustments of the Conversion Price have been or are to be made
pursuant to other provisions of this subsection 3(d)(iii), no further adjustment
of the Conversion Price shall be made by reason of such issue or sale.
(iii) Change in Option Price or Conversion Rate. Upon the
happening of any of the following events, namely, if the purchase price provided
for in any Option referred to in subsection 3(d)(i), the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in subsection 3(d)(i) or 3(d)(ii), or the
rate at which Convertible Securities referred to in subsection 3(d)(i) or
3(d)(ii) are convertible into or exchangeable for Common Stock shall change at
any time (including, but not limited to, changes under or by reason of
provisions designed to protect against dilution), the Conversion Price in effect
at the time of such event shall forthwith be readjusted to the Conversion Price
which would have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed purchase price,
additional consideration or conversion rate, as the case may be, at the time
initially granted, issued or sold, but only if as a result of such adjustment
the Conversion Price then in effect hereunder is thereby reduced; and on the
termination of any such Option or any such right to convert or exchange such
Convertible Securities, the Conversion Price then in effect hereunder shall
forthwith be increased to the Conversion Price which would have been in effect
at the time of such termination had such Option or Convertible Securities, to
the extent outstanding immediately prior to such termination, never been issued.
(iv) Stock Dividends. In case the Corporation shall declare a
dividend or make any other distribution upon any stock of the Corporation (other
than the Common Stock) payable in Common Stock, Options or Convertible
Securities, then any Common Stock, Options or Convertible Securities, as the
case may be, issuable in payment of such dividend or distribution shall be
deemed to have been issued or sold at a price per share equal to $.0005;
provided, however, that no adjustment shall be made in connection with (i)
dividends payable in shares of Common Stock payable pro rata to holders of the
Series Y Preferred Stock and to holders of any
7
other class or series of stock, whether or not paid to holders of any other
class of stock, or (ii) dividends payable in shares of Series Y Preferred Stock.
(v) Consideration for Stock. In case any shares of Common
Stock, Options or Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the amount received by the
Corporation therefor, without deduction therefrom of any expenses incurred or
any underwriting commissions or concessions paid or allowed by the Corporation
in connection therewith. In case any shares of Common Stock, Options or
Convertible Securities shall be issued or sold for a consideration other than
cash, the amount of the consideration other than cash received by the
Corporation shall be deemed to be the fair value of such consideration as
determined in good faith by the Board of Directors of the Corporation, without
deduction of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Corporation in connection therewith. In case
any Options shall be issued in connection with the issue and sale of other
securities of the Corporation, together comprising one integral transaction in
which no specific consideration is allocated to such Options by the parties
thereto, such Options and other securities shall each be deemed to have been
issued for such consideration as determined in good faith by the Board of
Directors of the Corporation.
(vi) Record Date. In case the Corporation shall take a record
of the holders of shares of its Common Stock for the purpose of entitling them
(A) to receive a dividend or other distribution payable in shares of Common
Stock, Options or Convertible Securities or (B) to subscribe for or purchase
shares of Common Stock, Options or Convertible Securities, then such record date
shall be deemed to be the date of the issue or sale of the shares of Common
Stock deemed to have been issued or sold upon the declaration of such dividend
or the making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be; provided, however, if
such dividend or distribution is not fully made on the date fixed therefor, the
Conversion Price for the Series Y Preferred Stock shall be recomputed
accordingly and thereafter the Conversion Price for the Series Y Preferred Stock
shall be adjusted pursuant to this paragraph as of the time of actual payment of
such dividends, distributions or granting of rights, if any.
(vii) Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Corporation, and the disposition of any such shares shall be
considered an issue or sale of Common Stock for the purpose of this subsection
3(d).
(e) Certain Issues of Common Stock Excepted. Anything herein to the
contrary notwithstanding, the Corporation shall not be required to make any
adjustment of the Conversion Price in the case of (A) the issuance, or deemed
issuance, of shares of Common Stock to directors, officers, employees or
consultants of the Corporation or a subsidiary of the Corporation in connection
with their service as directors of the Corporation or a subsidiary of the
Corporation, their employment by the Corporation or a subsidiary of the
Corporation or their retention as consultants by the Corporation or a subsidiary
of the Corporation under the Corporation's Amended and Restated 1999 Stock Plan,
the Vector Internet Services Inc. 1997
8
Stock Option Plan, the Vector Internet Services Inc. 1999 Stock Option Plan, the
Corporation's 1999 Employee Stock Purchase Plan or the Company's 2001 Stock
Option and Incentive Plan (the "Plans"), plus such additional number of shares
issued or issuable to directors, officers, employees or consultants of the
Corporation or a subsidiary of the Corporation under any amendment of the Plans,
or under other plans, adopted or assumed by the Corporation with the approval of
the Board of Directors of the Corporation (including a majority of the Series X
Directors (as defined in Section 4(b) of the Certificate of Designation of
Series X Convertible Preferred Stock filed with the Secretary of State of the
State of Delaware on November 14, 2001) (the "Series X Certificate of
Designation")), plus such number of shares of Common Stock which are repurchased
by the Corporation from such persons pursuant to contractual rights held by the
Corporation and at repurchase prices not exceeding the respective original
purchase prices paid by such persons to the Corporation therefor, (B) the
issuance of shares of Common Stock upon exercise of the warrant to purchase
27,770 shares of Common Stock (appropriately adjusted to reflect the occurrence
of any event described in subsection 3(f)) issued to VantagePoint Venture
Partners 1996, L.P., (C) the issuance of shares of Common Stock upon exercise of
the warrant to purchase 55,544 shares of Common Stock (appropriately adjusted to
reflect the occurrence of any event described in subsection 3(f)) issued to
VantagePoint Communications Partners, L.P., (D) the issuance, or deemed
issuance, of shares of Common Stock pursuant to a merger, consolidation or stock
or asset acquisition approved by the Corporation's Board of Directors, including
a majority of the Series X Directors; (E) the issuance of shares of Common Stock
upon the conversion of the Series X Preferred Stock or Series Y Preferred Stock;
(F) the issuance of up to an aggregate of 20,000 shares of Series X Preferred
Stock (including the 10,000 shares issued prior to the Filing Date) ; and (G)
the issuance, or deemed issuance, of securities of the Corporation for any
purpose and in any amount as approved by the Corporation's Board of Directors,
which approval shall include a majority of the Series X Directors and the
approval of the Series Y Director (as defined in the Stockholders Agreement
dated as of December 24, 2001 among the Company, holders of the Series X
Preferred Stock and holders of the Series Y Preferred Stock).
(f) Subdivision or Combination of Common Stock. In case the Corporation
shall at any time subdivide (by any stock split, stock dividend or otherwise)
its outstanding shares of Common Stock into a greater number of shares, the
Conversion Price in effect immediately prior to such subdivision shall be
proportionately reduced, and, conversely, in case the outstanding shares of
Common Stock shall be combined into a smaller number of shares, the Conversion
Price in effect immediately prior to such combination shall be proportionately
increased.
(g) Recapitalizations. If at any time or from time to time there shall
be a recapitalization of the Common Stock (other than a subdivision, combination
or merger or sale of assets transaction provided for elsewhere in this Section 3
or in Section 2), provision shall be made so that the holders of the Series Y
Preferred Stock shall thereafter be entitled to receive upon conversion of the
Series Y Preferred Stock the number of shares of stock or other securities or
property of the corporation or otherwise, to which a holder of Common Stock
deliverable upon conversion of such Series Y Preferred Stock would have been
entitled on such recapitalization. In any such case, appropriate adjustment
shall be made in the application of the provisions of this Section 3 with
respect to the rights of the holders of the Series Y Preferred Stock after the
9
recapitalization to the end that the provisions of this Section 3 (including
adjustment of the Conversion Price then in effect and the number of shares
purchasable upon conversion of the Series Y Preferred Stock) shall be applicable
after that event in as nearly equivalent a way as practicable.
(h) Adjustment for Merger or Reorganization. In case of any
consolidation or merger of the Corporation with or into another corporation or
the sale of all or substantially all of the assets of the Corporation to another
corporation (other than a consolidation, merger, or sale that is treated as a
liquidation under subsection 2(c) above), each share of Series Y Preferred Stock
shall thereafter be convertible into the number of shares of stock or other
securities or property to which a holder of the number of shares of Common Stock
of the Corporation deliverable upon conversion of such Series Y Preferred Stock
would have been entitled upon such consolidation, merger or conveyance.
(i) No Impairment. Without the approval of the holders of a majority of
the then outstanding shares of Series Y Preferred Stock, the Corporation will
not, by amendment of its certificate of incorporation or through any
reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Series Y Certificate of
Designation and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of shares
of Series Y Preferred Stock against impairment.
(j) No Fractional Shares. No fractional shares shall be issued upon the
conversion of any share or shares of the Series Y Preferred Stock, and the
number of shares of Common Stock to be issued shall be rounded to the nearest
whole share, determined on the basis of the total number of shares of Series Y
Preferred Stock the holder is at the time converting into Common Stock and the
number of shares of Common Stock issuable upon such aggregate conversion.
(k) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the applicable Conversion Price for the Series Y
Preferred Stock pursuant to this Section 3, the Corporation, at its expense,
shall promptly compute such adjustment or readjustment in accordance with the
terms hereof and prepare and furnish to each holder of Series Y Preferred Stock
a certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based. The
Corporation shall, upon the written request at any time of any holder of Series
Y Preferred Stock, furnish or cause to be furnished to such holder a like
certificate setting forth (1) such adjustment and readjustment, (2) the
applicable Conversion Price for the Series Y Preferred Stock at the time in
effect, and (3) the number of shares of Common Stock and the amount, if any, of
other property that at the time would be received upon the conversion of a share
of the Series Y Preferred Stock.
(l) Notices of Record Date. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof
10
who are entitled to receive any dividend (other than a cash dividend) or other
distribution, 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, the Corporation shall mail to each holder of Series Y Preferred
Stock, at least ten (10) days prior to the date specified therein or such
shorter period agreed upon by written consent of the holders of a majority of
the outstanding shares of the Series Y Preferred Stock, a notice specifying the
date on which any such record is to be taken for the purpose of such dividend,
distribution or right, and the amount and character of such dividend,
distribution or right.
(m) Reservation of Stock Issuable Upon Conversion. From and after the
date on which the Corporation's certificate of incorporation is amended to
increase the number of authorized shares of Common Stock to at least 250,000,000
shares, the Corporation shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the shares of the Series Y Preferred Stock, such
number of its shares of Common Stock as shall from time to time be sufficient to
effect the conversion of all outstanding shares of the Series Y Preferred Stock;
and if at any time the number of authorized but unissued shares of Common Stock
shall not be sufficient to effect the conversion of all then outstanding shares
of the Series Y Preferred Stock, in addition to such other remedies as shall be
available to the holder of such Series Y Preferred Stock, the Corporation will
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 purposes, including, without limitation,
engaging in best efforts to obtain the requisite shareholder approval of any
necessary amendment to this Series Y Certificate of Designation or its
certificate of incorporation.
(n) Notices. Any notice required by the provisions of this Series Y
Certificate of Designation to be given to the holders of shares of Series Y
Preferred Stock shall be deemed given if delivered in person, certified or
registered mail, return receipt requested, telecopier or telex, addressed to
each holder of any shares of Series Y Preferred Stock at the address of such
holder as shown on the books of the Corporation.
4. Voting Rights. The holder of each share of Series Y Preferred Stock
shall have the right to 978.5 votes (appropriately adjusted to reflect the
occurrence of any event described in subsection 3(f)). Each holder of Series Y
Preferred Stock shall be entitled, notwithstanding any provision hereof, to
notice of any stockholders' meeting in accordance with the by-laws of the
Corporation. Except as may otherwise be provided in the Corporation's
certificate of incorporation (including this Series Y Certificate of
Designation) or required by law, the Series Y Preferred Stock shall vote or act
together with all other classes and series of capital stock of the Corporation
(including the Common Stock) as a single class on all actions to be taken by the
stockholders of the Corporation.
5. Protective Provisions. So long as at least 25% of the shares of
Series Y Preferred Stock originally issued are outstanding, the Corporation
shall not, nor shall it allow any
11
of its subsidiaries, without first obtaining the approval of the holders of at
least a majority of the then outstanding shares of Series Y Preferred Stock,
voting as a separate series:
(a) alter or change the rights, preferences or privileges of the shares
of Series Y Preferred Stock as set forth in this Series Y Certificate of
Designation, so as to affect adversely the shares; or
(b) authorize any reclassification of the Series Y Preferred Stock.
6. Redemption. The shares of Series Y Preferred Stock shall be redeemed
as follows:
(a) Optional Redemption. At any time on or after January 1, 2005, the
holders of at least a majority of the then outstanding shares of the Series Y
Preferred Stock may request that the Corporation redeem all (and not less than
all) of the outstanding shares of Series Y Preferred Stock pursuant to the terms
of this Section 6 (the "Series Y Redemption Request"). Upon receipt of the
Series Y Redemption Request, the Corporation shall promptly notify the holders
of the Series X Preferred Stock of the Series Y Redemption Request. Upon receipt
of a Redemption Request (in such case as defined under the Series X Certificate
of Designation), the Corporation shall promptly notify the holders of the Series
Y Preferred Stock of such Redemption Request. Upon receipt of the Series Y
Redemption Request, the Corporation shall redeem from any source of funds
legally available therefor the outstanding shares of the Series Y Preferred
Stock in full on a date that is no more than 120 days after the date of the
Redemption Notice, as defined in Section 6(c) below (the "Redemption Date").
(b) Redemption Price and Payment. The Series Y Preferred Stock to be
redeemed on the Redemption Date shall be redeemed by paying for each share in
cash an amount (such amount being referred to as the "Redemption Price") equal
to $1,000 (as such amount may be adjusted for any stock splits, stock dividends,
recapitalizations or the like affecting the Series Y Preferred Stock) plus, in
the case of each share, an amount equal to all Accruing Dividends unpaid thereon
(whether or not declared) and any other dividends declared but unpaid thereon,
computed to the date payment thereof is made available.
(c) Redemption Mechanics. At least 20 but not more than 60 days prior
to the Redemption Date, written notice (the "Redemption Notice") shall be given
by the Corporation to each holder of record (at the close of business on the
business day next preceding the day on which the Redemption Notice is given) of
shares of Series Y Preferred Stock notifying such holder of the redemption and
specifying the Redemption Price, such Redemption Date, the number of shares of
Series Y Preferred Stock to be redeemed from such holder and the place where
said Redemption Price shall be payable and calling upon such holder to surrender
to the Corporation, in the manner and at the place designated his certificate or
certificates representing the shares to be redeemed. On or after the Redemption
Date, each holder of Series Y Preferred Stock shall surrender to the Corporation
the certificate or certificates representing such shares, in the manner and at
the place designated in the Redemption Notice, and thereupon the Redemption
12
Price of such shares shall be payable to the order of the person whose name
appears on such certificate or certificates as the owner thereof and each
surrendered certificate shall be canceled. The Redemption Notice shall be
addressed to each holder at his address as shown by the records of the
Corporation. From and after the close of business on the Redemption Date, unless
there shall have been a default in the payment of the Redemption Price, all
rights of holders of shares of Series Y Preferred Stock (except the right to
receive the Redemption Price) shall cease with respect to the shares to be
redeemed on such Redemption Date, and such shares shall not thereafter be
transferred on the books of the Corporation or be deemed to be outstanding for
any purpose whatsoever. If, on the Redemption Date, the funds of the Corporation
legally available for redemption of shares of (A) Series Y Preferred Stock, (B)
Series X Preferred Stock and (C) any other class or series of preferred stock
(whenever designated or created) that (1) entitles the holders thereof to cause
the Corporation to redeem such shares and (2) is on parity with the Series Y
Preferred Stock with respect to redemption by the Corporation, are insufficient
to redeem the total number of shares of Series Y Preferred Stock, Series X
Preferred Stock and any other class or series of preferred stock to be redeemed
on such Redemption Date, the holders of such shares shall share ratably in any
funds legally available for redemption of such shares according to the
respective amounts which would be payable to them if the full number of shares
to be redeemed on such Redemption Date were actually redeemed. The shares of
Series Y Preferred Stock, Series X Preferred Stock and any other class or series
of preferred stock required to be redeemed but not so redeemed shall remain
outstanding and entitled to all rights and preferences provided herein. At any
time thereafter when additional funds of the Corporation are legally available
for the redemption of such shares of Series Y Preferred Stock, Series X
Preferred Stock and any other class or series of preferred stock, such funds
will be used, at the end of the next succeeding fiscal quarter, to redeem the
balance of such shares, or such portion thereof for which funds are then legally
available, on the basis set forth above. The Series X Preferred Stock shall rank
on parity with the Series Y Preferred Stock with respect to redemption by the
Corporation.
(d) Redeemed or Otherwise Acquired Shares to be Retired. Any shares of
Series Y Preferred Stock redeemed pursuant to this Section 6 or otherwise
acquired by the Corporation in any manner whatsoever shall be canceled and shall
not under any circumstances be reissued; and the Corporation may from time to
time take such appropriate corporate action as may be necessary to reduce
accordingly the number of authorized shares of Series Y Preferred Stock.
(e) Waiver of Redemption. Any redemption of shares of Series Y
Preferred Stock required to be made by the Corporation by the Redemption Date
may be waived or postponed by the vote or written consent of the holders of at
least a majority of the shares of Series Y Preferred Stock then outstanding.
7. Status of Converted Stock. In the event any shares of Series Y
Preferred Stock shall be converted pursuant to Section 3 hereof, the shares so
converted shall be canceled and shall not be issuable by the Corporation.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
13
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation to be signed by a duly authorized officer of the Corporation as of
this ____ day of _________, 200_.
XXX.xxx, Inc.
By:
-------------------------------
14
EXHIBIT B:
FORM OF OPINION OF COUNSEL FOR THE COMPANY
[omitted]
C-3
EXHIBIT C-1:
FORM OF VANTAGEPOINT VOTING AGREEMENT
[See Exhibit D
to
Schedule 13D]
EXHIBIT C-2:
FORM OF SERIES Y VOTING AGREEMENT
[See Exhibit E
to
Schedule 13D]
EXHIBIT D:
FORM OF BRIDGE NOTE
[omitted]
EXHIBIT E:
FORM OF STOCKHOLDERS AGREEMENT
[See Exhibit C
to
Schedule 13D]
