Exhibit 99.1
INVESTMENT AGREEMENT
LOG ON AMERICA, INC.
This Investment Agreement (this "Agreement") is entered into as of
December 10, 1999 by and between Log On America, Inc., a Delaware corporation
(the "Company") and Nortel Networks Inc., a Delaware corporation (the
"Investor").
RECITALS
WHEREAS, the Company is engaged in business as an internet service
provider and competitive local exchange carrier;
WHEREAS, the Investor's affiliates provide technical support and
telecommunications equipment to the Company;
WHEREAS, the Company desires to sell, and the Investor desires to acquire
an aggregate of Two Hundred Fifty Six Thousand, Four Hundred and Ten (256,410)
shares of the Company's Common Stock $.01 par value (the "Securities") for the
purchase price set forth herein subject to the terms and conditions of this
Agreement and subject to the terms of a registration rights agreement
("Registration Rights Agreement") which will be entered into concurrently with
the execution of this Agreement;
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. Investment. On the closing date the Investor shall purchase
from the Company and the Company shall sell to the Investor, Two Hundred Fifty
Six Thousand Four Hundred and Ten(256,410) shares of the Securities (the
"Investment") at a price of $19.50 per share and Four Million Nine Hundred
Ninety Nine Thousand and Nine Hundred Ninety five Dollars ($4,999,995) in the
aggregate (the "Purchase Price"). The Purchase Price shall be paid by wire
transfer in immediately available funds to the account indicated at closing.
Section 2. Closing. The closing of the Investment will take place on
December 10, 1999 (the "Closing Date") (the "Closing"). At the Closing, subject
to the satisfaction or waiver of the conditions set forth in Section 6(a),
payment of the Purchase Price by the Investor will be made by wire transfer of
immediately available funds to an account designated by the Company and the
Company will issue to the Investor an appropriate certificate or certificates
representing 256,410 shares of the Company's Common Stock. The Closing may be
conducted by mail, facsimile and delivery service.
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Section 3. Representations and Warranties of the Company. The Company
represents and warrants to the Investor as follows and the Company acknowledges
that it has, full knowledge that the Investor intends to rely on such
representations and warranties:
3.1 Organization and Standing. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Company is qualified as a foreign corporation and is in
good standing in each jurisdiction in which the conduct of its business or the
assets and properties owned or leased by it require such qualification. The
Company has previously delivered to investors complete and correct copies of its
certificate of incorporation.
3.2 Authorization. The Company is fully authorized to execute
this Agreement, and to complete the transactions contemplated herein. All
corporate action on the part of the Company and its shareholders necessary for
the authorization, execution, delivery, and performance of all its obligations
under this Agreement, and for the authorization, issuance, and delivery of the
Common Stock being sold under this Agreement has been taken. This Agreement
constitutes the valid and binding obligation of the Company enforceable by the
Investor against the Company in accordance with its terms.
3.3 Binding Agreement. This Agreement has been duly executed
and delivered and constitutes a legal, valid and binding obligation enforceable
in accordance with its terms.
3.4 No Conflicts. The execution and delivery of this Agreement
and the issuance of the Securities to the Investor as contemplated hereby will
not (i) require any consent authorization or approval of or filing with any
governmental entity or third party, or (ii) result in any violation of, be in
conflict with or constitute a default under, the charter or by-laws of the
Company or any law, statute, regulation, ordinance, contract, agreement,
instrument, judgment, decree or order to which the Company is a party or by
which the Company is bound.
3.5 Compliance with Securities Laws. Subject to the accuracy
of the representations and warranties of the Investor contained in Section 4
hereof, the offer and sale of the Securities to the Investor hereunder
constitute transactions exempt from the registration and prospectus delivery
requirements of the Securities Act of 1933, as amended (the "1933 Act"), and any
applicable state securities and blue sky laws.
3.6 Brokers. The Company and the Investor has not dealt with
any broker, finder, commission agent or other similar person other than Credit
Suisse First Boston Corporation (the "Investment Bank") in connection with the
offer or sale of the securities to the Investor, and, except for the fees
payable to the Investment Bank, the Company and the Investor is under no
obligation to pay any broker's fee, finder's fee, or commission in connection
with such offer and sale.
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3.7 Access to Information. The Company has made available to
the Investor, during the course of this transaction and prior to the acquisition
of any Securities, the financial statements, registration statements and
quarterly reports as filed with the Securities and Exchange Commission and has
afforded the Investor the opportunity to ask questions of and receive answers
from representatives of the Company concerning the terms and conditions of the
Securities and the business, affairs, operations and finances of the Company and
any other matters relevant to the investment made hereunder.
3.8 Capitalization. The authorized capital stock of the
Company, as of the Closing Date, will consist of 125,000,000 shares of Common
Stock, $0.01 par value per share (the "Common Stock"), of which 8,013,383 shares
are issued and outstanding and 15,000,000 shares of undesignated Preferred
Stock, none of which are outstanding. Schedule 3.8 sets forth the name and, to
the Company's knowledge, the current address of each holder of more than 5% of
the outstanding shares of Common Stock. Of the Common Stock, 2,249,867 shares
are reserved for issuance pursuant to employee stock purchase or stock option
plans adopted by the Company for directors, officers and employees and prior
stock option grants. All of the outstanding shares of the Common Stock are duly
authorized and validly issued in accordance with applicable law, fully paid and
non-assessable. Except as set forth on Schedule 3.8 hereto, or as otherwise
contemplated by this Agreement, as of the date hereof there are, and immediately
following the Closing, there will be (i) no outstanding options, warrants,
agreements, conversion rights, preemptive rights or other rights to subscribe
for, purchase or acquire any issued or unissued shares of capital stock of the
Company, or any securities convertible or exchangeable for such stock, and (ii)
no restrictions upon the voting or transfer of any shares of capital stock of
the Company pursuant to its Certificate of Incorporation, Bylaws or other
governing documents or any agreement or other instruments to which it is a party
or by which it is bound, and (iii) there are no agreements to which the Company
is a party or of which the Company has knowledge regarding the issuance,
registration, voting or transfer of or obligation (contingent or otherwise) of
the Company to repurchase or otherwise acquire or retire or redeem any of its
outstanding shares of capital stock. No dividends are accrued but unpaid on any
capital stock of the Company.
3.9 Validity of Stock. The Common Stock, when issued, sold and
delivered in accordance with the terms of this Agreement, will be duly and
validly authorized and issued, fully paid, non-assessable and free and clear of
all encumbrances or restrictions on transfer except those imposed by applicable
securities laws, the Certificate of Incorporation, and this Agreement. All
existing Common Stock preemptive rights have been waived for purposes of the
issuance of the Common Stock to Investor.
3.10 Subsidiaries. Except as set forth on Schedule 3.10
hereto, the Company does not control, directly or indirectly, or own any equity
interest in, any other corporation, partnership, joint venture, association or
business entity.
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3.11 Financial Statements. The Company's financial statements
for the three months and nine months ended September 30, 1998 and 1999 and the
audited financial statements for the years ended December 31, 1997 and 1998, as
filed in the Company's filings with the SEC (collectively, the "Financial
Statements"), have been prepared in accordance with the books and records of the
Company and generally accepted accounting principles ("GAAP") (except the
interim financial statements are subject to normal and recurring year-end audit
adjustments which are not expected to be material in amount) and fairly and
accurately reflect the financial condition and the results of operations of the
Company as of the respective dates thereof or for the periods covered in
accordance with GAAP.
3.12 Absence of Undisclosed Liabilities. Except as provided in
the Financial Statements, the Company has no material debt, liability or
obligation, absolute or contingent (including without limitation obligations in
any capacity as guarantor or surety), other than obligations incurred in the
ordinary course of business since September 30, 1999 (the "Balance Sheet Date").
Without limiting the generality of the foregoing, the Company knows of no basis
for the assertion against the Company as of the date hereof of any material
liabilities (not reflected in the Financial Statements) of the Company.
3.13 Absence of Certain Changes. Except as set forth in
Schedule 3.13 and except as set forth in the Company's SEC filings, since the
Balance Sheet Date, the Company has not:
(i) suffered any material adverse change, whether or
not caused by any deliberate act or omission of the Company or any shareholder
of the Company, in its condition (financial or otherwise), operations, assets,
liabilities, business or prospects, taken as a whole;
(ii) contracted for the purchase of any capital assets
having a cost in excess of $100,000 or paid any capital expenditures in excess
of $100,000;
(iii) incurred any indebtedness for borrowed money or
issued or sold any debt securities in excess of $100,000;
(iv) incurred or discharged any liabilities or
obligations, except in the ordinary course of business;
(v) mortgaged, pledged or subjected to any security
interest, lien, lease or other charge or encumbrance any of its properties or
assets;
(vi) suffered any damage or destruction to or loss of
any assets (whether or not covered by insurance) that has materially and
adversely affected, or could reasonably be expected to, materially and adversely
affect, its business;
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(vii) acquired or disposed of any assets except in the
ordinary course of business;
(viii)waived any material rights or forgiven any
material claims;
(ix) lost, terminated or, to the Company's knowledge,
experienced any change in the relationship with any employee, customer or
supplier, which termination or change has materially and adversely affected, or
could reasonably be expected to materially and adversely affect, its business or
assets;
(x) loaned any money to any person or entity in
excess of $50,000;
(xi) redeemed, purchased or otherwise acquired, or
sold, granted or otherwise disposed of, directly or indirectly, any of its
capital stock or securities or any rights to acquire such capital stock or
securities, or agreed to change the terms and conditions of any such rights or
paid any dividends or made any distribution to the holders of the Company's
capital stock other than stock options granted to employees under the Company's
1999 Stock Option Plan; or
(xii) committed to do any of the foregoing.
3.14 Approvals. The Company has obtained or will obtain
prior to the Closing Date all necessary consents, authorizations, approvals and
orders from any federal, state or other relevant governmental authority and from
any individual, corporation, partnership, trust, incorporated or unincorporated
association, joint venture, joint stock company or other entity, and has made
all registrations, qualifications, designations, declarations or filings with
all federal, state, or other relevant governmental authorities, all as may be
required on the part of the Company in connection with the consummation of the
transactions contemplated by this Agreement, except for filings pursuant to
applicable securities laws which will be made after the Closing Date.
3.15 Title to Properties; Liens and Encumbrances.
(i) Except as disclosed on Schedule 3.15, the Company
has good and marketable title to its assets, including, without limitation,
those reflected on the September 30, 1999 balance sheet (other than those since
disposed of in the ordinary course of business), free and clear of all security
interests, liens, charges and other encumbrances, except for (i) liens for taxes
not yet due and payable or being contested in good faith in appropriate
proceedings, and (ii) encumbrances that are incidental to the conduct of their
respective businesses or ownership of property, not incurred in connection with
the borrowing of money or the obtaining of credit, and which do not in the
aggregate materially detract from the value of the assets affected or materially
impair their use by the Company. With respect to the assets of the Company that
are leased, the
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Company is in compliance with all material provisions of such leases. All
facilities, machinery, equipment, fixtures, vehicles and other properties owned,
leased or used by the Company are in good operating condition and repair, normal
wear and tear excepted, and are adequate and sufficient for the Company's
business.
(ii) The Company enjoys peaceful and undisturbed
possession under all real property leases under which the Company is operating,
and all such leases are valid and subsisting and none of them is in default.
(iii) The Company does not own any real property.
3.16 Patents, Trademarks and Other Intangible Assets.
(i) Schedule 3.16 hereto sets forth the true and
correct list of all registered patents, trademarks and copyrights (or
applications therefor) held by the Company. Except as set forth on Schedule
3.16, the Company possesses ownership or has the right to use all patents,
copyrights, trademarks, service marks, trade secrets and other proprietary
intellectual property rights necessary for the operation of its business except
where the failure of the Company to own or have such right to use such
intellectual property would not have a material adverse effect on the Company
(the "Intellectual Property"). To the Company's knowledge, the Company (a) is
not infringing upon the intellectual property rights of others in connection
with its business; (b) does not require the consent of any person which has not
been obtained to use the Intellectual Property; or (c) has not received any
written notice of conflict with respect to the intellectual property rights of
any other person or entity. All of the Intellectual Property is valid and
subsisting, has not been canceled, abandoned or otherwise terminated and, if
applicable, has been duly issued or filed. The employees and consultants of the
Company, who, either alone or in concert with others, developed, invested,
discovered, derived, programmed or designed any of the Company's owned
Intellectual Property have entered into written agreements to protect the
confidentiality of the Company's owned Intellectual Property and to assign to
the Company all rights therein.
(ii) The Company has no knowledge of any claim that, or
inquiry as to whether, any product, activity or operation of the Company
infringes upon or involves, or has resulted in the infringement of, any
proprietary right of any other person, corporation or other entity; and no
proceedings have been instituted, are pending or are threatened that challenge
the rights of the Company with respect thereto.
3.17 Trade Secrets and Customer Lists. The Company has the
right to use, free and clear of any claims or rights of others all trade
secrets, customer lists and proprietary information required for the marketing
of all merchandise and services formerly or presently sold or marketed by the
Company. To the Company's knowledge, it is not using, or in any way making use
of, any confidential information or trade secrets of any third party, including,
without limitation, any past or present employee of the Company.
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3.18 Tax Matters.
(i) All required foreign, federal, state, local and
other tax returns, notices and reports (including, without limitation, income,
property, sales, use, franchise, capital stock, excise, added value, employees'
income withholding, social security and unemployment tax returns) of the Company
have been accurately prepared in all material respects and duly and timely
filed, and all foreign, federal, state, local and other taxes required to be
paid with respect to the periods covered by such returns have been paid. The
Company is not and has not been delinquent in the payment of any tax, assessment
or governmental charge. The Company is not a party to any agreement, contract,
arrangement or plan that has resulted or would result, separately or in the
aggregate, in the payment of any "excess parachute payments" within the meaning
of Section 280G of the Code. The Company does not have and has not had a
permanent establishment in any foreign country, as defined in any applicable tax
treaty or convention between the United States and such foreign country.
(ii) The Company has not had any tax deficiency
proposed or assessed against it and has not executed any waiver of any statute
of limitations on the assessment or collection of any tax or governmental
charge. None of the Company's tax returns has ever been audited by governmental
authorities. No tax audit, action, suit, proceeding, investigation or claim is
now pending nor, to the best knowledge of the Company, threatened against the
Company, and no issue or question has been raised (and is currently pending) by
any taxing authority in connection with any of the Company's tax returns or
reports.
(iii) To the Company's knowledge, the reserves for
taxes, assessments and governmental charges reflected on the Balance Sheet are
and will be sufficient for the payment of all unpaid taxes and governmental
charges payable by the Company with respect to the period ended on the Balance
Sheet Date. Since the Balance Sheet Date, the Company has made adequate
provisions on its books of account for all taxes, assessments and governmental
charges with respect to business, properties and operations for such period. The
Company withheld or collected from each payment made to its employees, the
amount of all taxes (including, but not limited to, federal income taxes,
Federal Insurance Contribution Act taxes and Federal Unemployment Tax Act taxes)
required to be withheld or collected therefrom, and has paid the same to the
proper tax receiving officers or authorized depositories.
3.19 Litigation. No action, proceeding or investigation is
pending or threatened against the Company, or any of its properties before any
court, arbitration board or tribunal or administrative or other governmental
agency (including, without limitation, unfair labor practices or discrimination
charges or complaints), that might result, either individually or in the
aggregate, in any material adverse change in the business, prospects, condition,
affairs, operations, or assets of the Company or in any material liability on
the part of the Company. The foregoing includes, without limiting its
generality, actions pending or threatened involving the prior employment of any
of the Company's employees or use by any of them in connection with the
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Company's business of any information, property or techniques allegedly
proprietary to any of their former employers.
3.20 Insurance. The Company carries property, liability,
workers' compensation and such other types of insurance as is customary in the
Company's industry. A list of all insurance policies of the Company is set forth
in Schedule 3.20. All of such policies are valid and enforceable policies,
issued by insurers of recognized responsibility in amounts and against such
risks and losses as are customary in the Company's industry. All casualty
insurance is sufficient in amount to allow the Company to replace any of its
properties that might be damaged or destroyed.
3.21 Employee Benefit Plans.
(i) Schedule 3.21 contains a true and complete list of
any bonus, incentive, insurance (including any self-insured arrangements),
compensation plan, welfare, retirement, defined benefit, 401(k), pension, profit
sharing, salary reduction, deferred compensation, stock purchase, stock option,
workers' compensation, disability benefits, supplemental unemployment benefits
(including without limitation any "voluntary employees' beneficiary association"
as defined in Section 501(C)(9) of the Code) (as hereinafter defined), vacation,
holiday and sick pay or other similar benefit plans, programs or arrangements
(whether written or oral) (said plans, programs or arrangements being referred
to as the "Plans") in which any employees of the Company participate. All
obligations of the Company, whether arising by operation of law, by contract or
by past custom, for payment by it to trusts, retirement plans or other funds or
any governmental agency with respect to unemployment compensation benefits,
social security benefits or any other benefits for employees of the Company have
been paid or shall be paid by the Company at the time the Company is obligated
to make such payments. All benefits payable directly to the Company's employees
have been paid or shall be paid by the Company at the time the Company is
obligated to make such payments. All reasonably anticipated obligations of the
Company, whether arising by operation of law, by contract or by past custom, for
vacation and holiday pay, bonuses and other forms of compensation or benefits
which are or may become payable to employees or any of them have been paid, or
shall be paid, in accordance with the provisions of applicable laws,
regulations, benefit plans or policies.
(ii) All Plans, related trust agreements, annuity
contracts or other funding arrangements comply in all substantial respects and
the Company has administered and operated each such Plan, related trust
agreements, annuity contracts or other funding arrangements in substantial
compliance with the requirements of applicable law, including, without
limitation, the Employee Retirement Income Security Act of 1974 as amended
("ERISA"), and the Code, and no such Plan that is subject to Part 3 of Subtitle
B of Title I of ERISA has incurred any "accumulated funding deficiency" within
the meaning of Section 302 of ERISA or Section 412 of the Code, whether or not
waived.
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(iii) The Company does not maintain and is not required
to contribute to any multi-employer plan (as defined in Section 3(37) of ERISA)
for the benefit of employees or former employees of the Company. The Company
does not maintain a self-insured "multiple employer welfare arrangement" as
defined in Section 3(40) of ERISA.
(iv) The Pension Benefit Guaranty Corporation ("PBGC")
has not instituted proceedings to terminate any of the Company's defined benefit
plans and no condition exists that presents a risk that such proceedings shall
be instituted. There has been no "reportable event" within the meaning of
Section 4043(b) of ERISA with respect to any defined benefit plan and no defined
benefit plan has been terminated within the preceding six years or is expected
to be terminated. No liability (other than for the payment of premiums) to the
PBGC has been or is expected to be incurred by the Company or any officer,
director, shareholder or employee of the Company with respect to any defined
benefit plan.
(v) The Company has no liability with respect to any
transaction which relates to any Plan and which is in violation of Sections 404
or 406 of ERISA or constitutes a "prohibited transaction," as defined in Section
4975(c)(1) of the Code, and for which no exemption exists under Section 408 of
ERISA or Section 4975(c)(2) or (d) of the Code. To the Company's knowledge, the
Company has not participated in a violation of Part 4 of Title I, Subtitle B of
ERISA by any plan fiduciary of any Plan and has no unpaid civil penalty under
Section 502(1) of ERISA.
(vi) There is no material action, order, writ,
injunction, judgment or decree outstanding or claim, suit, litigation,
proceeding, arbitral action, governmental audit or investigation (including,
without limitation, any such audit or investigation by the Internal Revenue
Service, Department of Labor, or PBGC) relating to or seeking benefits under any
Plan that is pending or, to the Company's knowledge, threatened or anticipated
against the Company other than routine claims for benefits.
3.22 Material Contracts and Commitments.
(i) Material Contracts and Commitments. Except as
filed as exhibits to the Company's filings with the SEC or as set forth in
Schedule 3.22 , the Company has not entered into, nor is the capital stock, the
assets or the business of the Company bound by, whether or not in writing, any
(1) deed of trust securing a lien in any real
property owned by the Company;
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(2) security agreement granting a security
interest in connection with the Company's
incurrence of indebtedness for borrowed money;
(3) guaranty or suretyship agreement or
performance bond, in each case involving a
contingent obligation of the Company in excess
of $50,000;
(4) consulting or compensation agreement or
similar arrangement that is not an Employment
Agreement and that involves compensation
payable by the Company in excess of $50,000
annually or an agreement relating to the
election or retention in office of any
director or officer;
(5) debt instrument, loan agreement or other
obligation relating to indebtedness for
borrowed money;
(6) money lent or to be lent by the Company to
another in an amount in excess of $50,000;
(7) lease of real property, whether as lessor,
lessee, sublessor or sublessee ;
(8) lease of personal property, whether as lessor,
lessee, sublessor or sublessee involving lease
payments in an annual amount in excess of
$40,000;
(9) any agreement for the acquisition of services,
supplies, equipment or other personal property
(excluding leases of real or personal
property) and involving more than $100,000 in
the aggregate;
(10) contracts containing noncompetition covenants
restricting the Company's ability to compete;
(11) agreement providing for the purchase from a
supplier of all or substantially all of the
requirements of the Company of a particular
product or service; or
(12) agreement or commitment a copy of which would
be required to be filed with the SEC as an
exhibit to a
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registration statement on Form S-1, or a
successor form, pursuant to Paragraph 10 of
Item 601 of Regulation S-K, if the Company
were registering securities under the
Securities Act of 1933, as amended (the
"Securities Act").
All of the documents listed on Schedule 3.22 hereof and the contracts listed as
exhibits to the Company's filings with the SEC are hereinafter collectively
referred to as the "Commitments." To the knowledge of the Company, the
Commitments are in full force and effect and are valid and enforceable
obligations of the parties thereto in accordance with their respective terms
(except as may be limited by the laws of bankruptcy, insolvency or creditors
rights generally and subject to the enforceability and availability of equitable
remedies), and to the knowledge of the Company, no defenses, off-sets or
counterclaims have been asserted by any party thereto, nor has the Company
waived in writing any rights thereunder, except as described in Schedule 3.22.
The Company has not received written notice of any default with respect to any
Commitment.
(ii) No Cancellation or Termination of Commitments.
Except as contemplated hereby, the Company has not received written notice of
any plan or intention of any other party to any Commitment to exercise any right
to cancel or terminate any Commitment.
3.23 Conflict of Interest Transactions. Except as set forth on
Schedule 3.23, no director, member of management of the Company, or their
spouses or children (and to the best of our knowledge no shareholder) owns
directly or indirectly, on an individual or joint basis, any interests, has any
investment in or serves as an officer, partner or director in any corporation,
business or other person that is a customer, supplier or competitor of the
Company, or that has a material contract or arrangement with the Company or its
competitor, other than the ownership of less than one percent (1%) of the
securities of any company that are publicly traded on any national exchange or
over the counter market.
3.24 Environmental Matters. To the Company's knowledge,
neither the Company nor any of its assets is currently in material violation of,
or subject to any material existing, pending or threatened investigation or
inquiry by any governmental authority or to any remedial obligations under any
environmental laws, and this representation and warranty would continue to be
true and correct following disclosure to the applicable governmental authorities
of all relevant facts, conditions and circumstances, if any, pertaining to the
assets and operations of the Company. To the Company's knowledge, the assets of
the Company have never been used in a manner that would be in material violation
of any of the environmental laws. To the Company's knowledge, the Company is not
required to obtain any permits, licenses or similar authorizations to construct,
occupy, operate or use any buildings, improvements, fixtures and equipment owned
or leased by the Company by reason of any environmental laws. None of the assets
owned or leased by the Company are on any federal or state "Superfund" list or
subject to any environmentally related liens.
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3.25 No Bankruptcies. For the past five years, neither the
Company nor any of its officers, directors or its or their affiliates, have been
subject to criminal investigation, adjudication or conviction or have
voluntarily sought, consented to or acquiesced in the benefits of, or become the
subject of a proceeding under the Bankruptcy Code of the United States or any
other applicable liquidation, conservatorship, bankruptcy, moratorium,
rearrangement, receivership, insolvency, reorganization or similar debtor relief
laws from time to time in effect affecting the rights of creditors generally.
3.26 Year 2000 Compliance. To the Company's knowledge, the
computer systems used by the Company are Year 2000 compliant, meaning that such
systems will continue to function, and functionality and accuracy will not be
affected as a result of the run date or the dates being processed in the
twentieth or twenty-first century, including the advent of the Year 2000, or
from the extra day occurring in any leap year.
3.27 Legal Compliance. (a) the Company has all material
franchises, permits, licenses and other rights and privileges necessary to
permit them to own their respective properties and to conduct their respective
businesses as presently conducted and (b) the Company, and the business and
operations of the Company, have been and are being conducted in all material
respects in accordance with all applicable laws, rules and regulations
(including, without limitation, all employment, labor practices, safety and
health laws and regulations), and the Company is not in violation of any
judgment, order or decree. There is no existing law, rule, regulation or order
which would prohibit or restrict the Company from, or otherwise materially
adversely affect the Company in, conducting its business in any jurisdiction in
which it is now conducting business or, to the Company's knowledge, in which it
proposes to conduct business.
3.28 Disclosure. This Agreement and the exhibits and schedules
hereto do not contain any untrue statement of material fact or omit any material
fact necessary in order to make the statements therein not misleading. There is
no fact known to the Company that has not been disclosed to the Investor prior
to the date of this Agreement that materially and adversely affects the
business, assets, properties, prospects or condition (financial or otherwise) of
the Company, taken as a whole, or the ability of the Company to perform under
this Agreement or the other agreements contemplated hereby or to consummate the
transactions contemplated hereby or thereby.
Section 4. Representations and Warranties of the Investor. The Investor
hereby represents and warrants to the Company as follows:
(a) Review of Agreement. THE INVESTOR HAS READ CAREFULLY
AND UNDERSTANDS THIS AGREEMENT AND HAS CONSULTED THE INVESTOR'S OWN ATTORNEY,
ACCOUNTANT OR INVESTMENT ADVISER WITH RESPECT TO THE INVESTMENT CONTEMPLATED
HEREBY AND ITS SUITABILITY FOR THE INVESTOR.
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(b) Long-Term Investment. The Investor understands that the
Investor must bear the economic risk of its investment for an indefinite period
of time; that the Securities have not been registered under the 1933 Act and,
therefore, cannot be resold unless they are subsequently registered under the
1933 Act or unless exemption from such registration is available; that the
Investor is purchasing the Securities for investment for the account of the
Investor and not with a view toward resale or other distribution thereof, that
the Investor agrees not to resell or otherwise dispose of all or any part of the
Securities acquired by the Investor, except as permitted by law, including,
without limitation, any regulations under the 1933 Act ; and that Rule 144 under
the 1933 Act may not be available as a basis for exemption from registration of
any Securities thereunder until at least one (1) year from the date of
acquisition of the Securities.
(c) Accredited Investor. The Investor is an "accredited
investor" within the meaning of Regulation D promulgated under the 1933 Act.
Section 5. Restrictions on Transfer.
Legends. The Investor hereby agrees that each outstanding
certificate representing the Securities acquired hereunder shall bear the
following legend required by applicable securities laws:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED,
HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT (i)
PURSUANT TO A REGISTRATION STATEMENT UNDER THE
SECURITIES ACT WHICH HAS BECOME EFFECTIVE AND IS CURRENT
WITH RESPECT TO THESE SECURITIES, OR (ii) PURSUANT TO A
SPECIFIC EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT BUT ONLY UPON A HOLDER HEREOF FIRST
HAVING OBTAINED THE WRITTEN OPINION OF COUNSEL TO THE
CORPORATION, OR OTHER COUNSEL REASONABLY ACCEPTABLE TO
THE CORPORATION, THAT THE PROPOSED DISPOSITION IS
CONSISTENT WITH ALL APPLICABLE PROVISIONS OF THE
SECURITIES ACT AS WELL AS ANY APPLICABLE "BLUE SKY" OR
SIMILAR SECURITIES LAW."
Section 6. Conditions to Closing. The obligation of the Investor
hereunder to make the Investment and purchase the Securities therefore, is
subject to the satisfaction at or prior to the Closing of the following
conditions:
6.1 Representations and Warranties True. The representations
and warranties contained in Section 3 shall be true and accurate in all material
respects on and as of the Closing Date with the same effect as though made on
and as of such date.
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6.2 All Proceedings to be Satisfactory. All covenants and
agreements, corporate and other proceedings and actions to be taken by the
Company in connection with the transactions contemplated hereby and all
documents incident thereto shall be satisfactory in form and substance to the
Investor and its counsel, and the Investor and its counsel shall have received
all such counterpart originals or certified or other copies of such documents as
they reasonably may request.
6.3 Execution of Related Agreement. The Company and the
Investor shall have executed and delivered the Registration Rights Agreement.
6.4 Company Consents, etc. The Company shall have secured
all permits, consents and authorizations that shall be necessary or required
lawfully to consummate this Agreement and to issue the Common Stock to be
purchased by the Investor.
6.5 Compliance Certificates. The Company shall have
delivered to the Investor at the Closing an Officer's Certificate to the effect
that the representations and warranties of the Company continue to be true and
accurate in all material respects on the Closing Date, that all conditions
specified in this section have been fulfilled, that the Company shall have
performed and complied with all agreements and covenants contained in this
Agreement required to be performed or complied with by it prior to or at the
Closing, and that there has been no materially adverse change in the business,
affairs, prospects, operations or condition of the Company since the Balance
Sheet Date.
6.6 Legal Opinion. Counsel for the Company, Xxxxxxxxx,
Xxxxxxx & Xxxxxxx, P.C., shall have delivered to the Investor a legal opinion,
dated as of the Closing Date and substantially in the form attached hereto as
Exhibit 6.6.
6.7 Company Deliveries. The Company shall have delivered to
the Investor (i) copies of the resolutions of the Company's Board of Directors
authorizing and approving this Agreement and all of the transactions and
agreements contemplated hereby and thereby, (ii) the Bylaws of the Company,
(iii) the Certificate of Incorporation and all amendments thereto of the
Company, and (iv) the names of the officer or officers of the Company authorized
to execute this Agreement and any and all documents, agreements and instruments
contemplated herein, all certified by the Secretary of the Company to be true,
correct, complete and in full force and effect and unmodified as of the Closing
Date; together with a certificate of existence and good standing for the Company
from the Delaware Secretary of State.
6.8 Due Diligence Completion. Investor and its legal counsel
and representatives shall have completed their due diligence review of the
Company, its books and records and other documents pertinent to the Company's
business, financial condition and results of
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operation; provided, however, any such due diligence review of the materials and
documents provided in that connection shall not affect the representations,
warranties or covenants contained in this Agreement.
Section 7. Affirmative Covenants. The Company agrees to comply with the
following covenants after the Closing:
(a) Financial Information. In the event the Company fails to
timely comply with the reporting obligations to the SEC, the Company will
deliver to Investor:
(i) within forty-five (45) days of the end of each
calendar quarter, quarterly and year-to-date balance
sheet and statements of income, changes in
stockholders equity, and cash flow prepared in
accordance with GAAP and certified by the Company's
Chief Financial Officer, except such financial
statements shall not contain normal and recurring
year-end audit adjustments;
(ii) within one hundred twenty (120) days after the
fiscal year end, an annual independent certified
audit from an outside accounting firm reasonably
designated by the Company, together with the annual
financial statements of the Company; and
(iii) as soon as practicable, but no later than thirty
(30) days after the beginning of each fiscal year,
beginning January 1, 2000, the Company shall provide
to the Investor a copy of the annual budget and plan
for such year which shall include, without
limitation, plans for incurrences of indebtedness
for borrowed money and projections regarding types
of sources of funds, monthly projected capital and
operating expense budgets and cash flow projections.
(b) Board Observer. If and when an employee of Nortel ceases
to serve as a member of the Board of Directors of the Company for any reason and
provided that at such time (and for so long as) the Investor continues to own at
least 90% of the Securities, the Investor may designate one person to serve as
an observer (an "Observer"). An observer shall be entitled (i) to receive the
same notice in respect of all meetings (both regular and special) of the Board
of Directors and each committee thereof as required to be furnished to members
of the Board of Directors or such committee by law or by the Certificate of
Incorporation or the Bylaws of the Company, (ii) to attend all meetings of the
Board of Directors and each committee thereof, (iii) to receive all information
and reports which are furnished to members of the Board of Directors and each
committee thereof,
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and (iv) to participate in all discussions conducted at meetings of the Board of
Directors and each committee thereof. An Observer may share any information
gained from presence at such meetings with the Investor and its employees,
officers, directors, attorneys and advisors (collectively, the "Investor's
Representatives").
(c) Access to Information. The Company will permit the
Purchasers to inspect at the Purchasers' expense any of the properties or books
and records of the Company, and to discuss the affairs and condition of the
Company with representatives of the Company during normal business hours and
upon at least 24 hours prior notice to the Company, but no more frequent than
once each calendar quarter.
Section 8. Miscellaneous.
(a) This Agreement is governed by and construed in
accordance with the internal laws of the State of New York (excluding its
conflicts of laws principles).
(b) The representations and warranties contained in this
Agreement shall survive the execution, delivery and performance of this
Agreement.
(c) This Agreement or any term hereof may not be amended or
waived except with the written consent of the Company and the Investor.
(d) Unless otherwise specifically provided herein, all
communications under this Agreement shall be in writing and shall be deemed to
have been duly given (i) on the date of service if served personally on the
party to whom notice is to be given, (ii) on the day of transmission if sent by
facsimile transmission to the number given below, and telephonic confirmation of
receipt is obtained promptly after completion of transmission, (iii) on the day
after delivery to Federal Express or similar overnight courier, or (iv) on the
fifth day after mailing, if mailed to the party to whom notice is to be given,
by first class mail, registered or certified, postage prepaid, and properly
addressed, return receipt requested, to the party as follows:
If to the Company: Log On America, Inc.
0 Xxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxx Xxxxxx 00000
Fax No.:000-000-0000
Attn: Xxxxx Paolo, President
with a copy to: Xxxxxxxxx, Xxxxxxx, Xxxxxxx & Xxxxxxx, X,X.
000 Xxxx Xxxxxx Xxxxx Xxxxx 0000
Xxx Xxxx, XX 00000
Fax No. 000 000-0000
Attn: Xxxxx Xxxxxxxxx
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If to the Investor: Nortel Networks Inc.
GMS 991 15 A40
0000 Xxxxxxxx Xxxx.
Xxxxxxxxxx, Xxxxx 00000-0000
Fax No.: 000-000-0000
Attn: Xxxx X. Day, Vice President
Customer Finance
(e) This Agreement may be executed in two (2) or more
counterparts, and with counterpart signature pages, each of which shall be
deemed an original, and all of such counterparts together constitute but one (1)
and the same agreement. One (1) or more counterparts may be delivered by
facsimile with the same force and effect as an original.
IN WITNESS WHEREOF, the parties have executed this Investment Agreement as
of the date set forth above.
LOG ON AMERICA, INC.
By: s/Xxxxx Paolo
-------------------------------
Name: Xxxxx Paolo
Title: President
NORTEL NETWORK INC.
By: s/Xxxx X. Day
-------------------------------
Name: Xxxx X. Day
Title: VP, Customer Finance
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