Exhibit 10.14
SERIES D CONVERTIBLE PREFERRED STOCK PURCHASE
AGREEMENT
Dated as of April __, 1999
among
SKYLYNX COMMUNICATIONS, INC.
and
THE PURCHASERS LISTED ON EXHIBIT A
TABLE OF CONTENTS
Page
----
ARTICLE I Purchase and Sale of Preferred Stock............................................................ 1
Section 1.1 Purchase and Sale of Stock............................................................... 1
--------------------------
Section 1.2 The Conversion Shares.................................................................... 1
---------------------
Section 1.3 Purchase Price and Closing............................................................... 1
--------------------------
Section 1.4 Warrants................................................................................. 2
--------
ARTICLE II Representations and Warranties................................................................. 2
Section 2.1 Representation and Warranties of the Company............................................. 2
--------------------------------------------
(a) Organization, Good Standing and Power......................................................... 2
-------------------------------------
(b) Authorization; Enforcement.................................................................... 2
--------------------------
(c) Capitalization................................................................................ 3
--------------
(d) Issuance of Shares............................................................................ 4
------------------
(e) No Conflicts.................................................................................. 4
------------
(f) Commission Documents, Financial Statements.................................................... 5
------------------------------------------
(g) Subsidiaries.................................................................................. 5
------------
(h) No Material Adverse Change.................................................................... 6
--------------------------
(i) No Undisclosed Liabilities.................................................................... 6
--------------------------
(j) No Undisclosed Events or Circumstances........................................................ 6
--------------------------------------
(k) Indebtedness.................................................................................. 6
------------
(l) Title to Assets............................................................................... 7
---------------
(m) Actions Pending............................................................................... 7
---------------
(n) Compliance with Law........................................................................... 7
-------------------
(o) Taxes......................................................................................... 7
-----
(p) Certain Fees.................................................................................. 7
------------
(q) Disclosure.................................................................................... 8
----------
(r) Operation of Business......................................................................... 8
---------------------
(s) Environmental Compliance...................................................................... 8
------------------------
(t) Books and Record Internal Accounting Controls................................................. 9
---------------------------------------------
(u) Material Agreements........................................................................... 9
-------------------
(v) Transactions with Affiliates.................................................................. 9
----------------------------
(w) Securities Act of 1933........................................................................ 9
----------------------
(x) Governmental Approvals........................................................................ 10
----------------------
(y) Employees..................................................................................... 10
---------
(z) Absence of Certain Developments............................................................... 10
-------------------------------
(aa) Use of Proceeds............................................................................... 11
---------------
(ab) Public Utility Holding Company Act and Investment Company Act Status.......................... 12
--------------------------------------------------------------------
(ac) ERISA......................................................................................... 12
-----
(ad) Dilutive Effect............................................................................... 12
---------------
Section 2.2 Representations and Warranties of the Purchasers......................................... 12
------------------------------------------------
(a) Organization and Standing of the Purchasers................................................... 12
-------------------------------------------
(b) Authorization and Power....................................................................... 12
-----------------------
(c) No Conflicts.................................................................................. 13
------------
(d) Acquisition for Investment.................................................................... 13
--------------------------
(e) Accredited Purchasers......................................................................... 13
---------------------
(f) Rule 144...................................................................................... 13
--------
(g) Conversion Restrictions....................................................................... 14
-----------------------
(h) General....................................................................................... 14
-------
ARTICLE III Covenants..................................................................................... 14
Section 3.1 Securities Compliance.................................................................... 14
---------------------
Section 3.2 Registration and Listing................................................................. 15
------------------------
Section 3.3 Inspection Rights........................................................................ 15
-----------------
Section 3.4 Compliance with Laws..................................................................... 15
--------------------
Section 3.5 Keeping of Records and Books of Account.................................................. 15
---------------------------------------
Section 3.6 Reporting Requirements................................................................... 15
----------------------
Section 3.7 Amendments............................................................................... 16
----------
Section 3.8 Other Agreements......................................................................... 16
----------------
Section 3.9 Distributions............................................................................ 16
-------------
Section 3.10 Status of Dividends...................................................................... 16
-------------------
Section 3.11 Rule 144A................................................................................ 17
---------
Section 3.12 Regulation S............................................................................. 17
------------
Section 3.13 Reservation of Shares.................................................................... 18
---------------------
Section 3.14 Transfer Agent Instructions.............................................................. 18
---------------------------
Section 3.15 Lock-up Agreements by Company Stockholders............................................... 18
------------------------------------------
Section 3.16 Limitations on the Transfer of Shares by the Purchasers.................................. 19
-------------------------------------------------------
Section 3.17 Purchase Option.......................................................................... 19
---------------
Section 3.18 Release of Purchase Price................................................................ 19
-------------------------
ARTICLE IV Conditions..................................................................................... 19
Section 4.1 Conditions Precedent to the Obligation of the Company to Sell the Shares................. 19
------------------------------------------------------------------------
(a) Accuracy of each of the Purchaser's Representations and Warranties............................ 20
------------------------------------------------------------------
(b) Performance by the Purchasers................................................................. 20
-----------------------------
(c) No Injunction................................................................................. 20
-------------
Section 4.2 Conditions Precedent to the Obligation of the Purchasers to Purchase the Shares.......... 20
-------------------------------------------------------------------------------
(a) Accuracy of the Company's Representations and Warranties...................................... 20
--------------------------------------------------------
(b) Performance by the Company.................................................................... 20
--------------------------
(d) No Suspension, etc............................................................................ 20
------------------
(e) No Injunction................................................................................. 21
-------------
(f) No Proceedings or Litigation.................................................................. 21
----------------------------
(g) Certificate of Designations of Rights and Preferences......................................... 21
-----------------------------------------------------
(i) Registration Rights Agreement................................................................. 21
-----------------------------
(j) Preferred Stock Certificates.................................................................. 21
----------------------------
(k) Resolutions................................................................................... 21
-----------
(l) Reservation of Shares......................................................................... 21
---------------------
(m) Transfer Agent Instructions................................................................... 22
---------------------------
(n) Secretary's Certificate....................................................................... 22
-----------------------
ARTICLE V Registration Rights............................................................................. 22
ARTICLE VI Stock Certificate Legend....................................................................... 22
Section 6.1 Legend................................................................................... 22
------
ARTICLE VII Termination................................................................................... 23
Section 7.1 Termination by Mutual Consent............................................................ 23
-----------------------------
Section 7.2 Other Termination........................................................................ 23
-----------------
Section 7.3 Effect of Termination.................................................................... 23
---------------------
ARTICLE VIII Indemnification.............................................................................. 24
Section 8.1 General Indemnity........................................................................ 24
-----------------
Section 8.2 Indemnification Procedure................................................................ 24
-------------------------
ARTICLE IX Miscellaneous.................................................................................. 25
Section 9.1 Fees and Expenses........................................................................ 25
-----------------
Section 9.2 Specific Enforcement, Consent to Jurisdiction............................................ 25
---------------------------------------------
Section 9.3 Entire Agreement; Amendment.............................................................. 26
---------------------------
Section 9.4 Notices.................................................................................. 26
-------
Section 9.5 Waivers.................................................................................. 27
-------
Section 9.6 Headings................................................................................. 27
--------
Section 9.7 Successors and Assigns................................................................... 27
----------------------
Section 9.8 No Third Party Beneficiaries............................................................. 27
----------------------------
Section 9.9 Governing Law............................................................................ 27
-------------
Section 9.10 Survival................................................................................. 27
--------
Section 9.11 Counterparts............................................................................. 28
------------
Section 9.12. Publicity................................................................................ 28
---------
Section 9.13 Severability............................................................................. 28
------------
Section 9.14 Further Assurances....................................................................... 28
------------------
SERIES D CONVERTIBLE PREFERRED STOCK PURCHASE
AGREEMENT
This SERIES D CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (the
"Agreement") is dated as of April __, 1999 by and among SkyLynx Communications,
----------
Inc., a Colorado corporation (the "Company"), and each of the Purchasers of
-------
shares of Series D Convertible Preferred Stock of the Company whose name is set
forth on Exhibit A hereto (each a "Purchaser" and collectively, the
---------
"Purchasers").
----------
The parties hereto agree as follows:
ARTICLE I
Purchase and Sale of Preferred Stock
Section 1.1 Purchase and Sale of Stock. Upon the following terms and
--------------------------
conditions, the Company shall issue and sell to the Purchasers and the
Purchasers shall purchase from the Company, the number of shares of the
Company's Series D Convertible Preferred Stock, par value $.01 per share (the
"Preferred Shares"), at a purchase price of $1,000 per share, set forth with
-----------------
respect to such Purchaser on Exhibit A hereto. Upon the following terms and
conditions, the Purchasers shall be issued Warrants, in substantially the form
attached hereto as Exhibit B (the "Warrants"), to purchase the Company's Common
--------
Stock, par value $.001 per share (the "Common Stock"). The designation, rights,
------------
preferences and other terms and provisions of the Series D Convertible Preferred
Stock are set forth in the Certificate of Designations attached hereto as
Exhibit C (the "Certificate of Designations"). The Company and the Purchasers
---------------------------
are executing and delivering this Agreement in accordance with and in reliance
upon the exemption from securities registration afforded by Rule 506 of
Regulation D ("Regulation D") as promulgated by the United States Securities and
------------
Exchange Commission (the "Commission") under the Securities Act of 1933, as
----------
amended (the "Securities Act").
--------------
Section 1.2 The Conversion Shares. The Company has authorized and has
---------------------
reserved and covenants to continue to reserve, free of preemptive rights and
other similar contractual rights of stockholders, a sufficient number of its
authorized but unissued shares of its Common Stock, to effect the conversion of
the Preferred Shares and exercise of the Warrants. Any shares of Common Stock
issuable upon conversion of the Preferred Shares and exercise of the Warrants
(and such shares when issued) are herein referred to as the "Conversion Shares"
-----------------
and the "Warrant Shares", respectively. The Preferred Shares, the Conversion
--------------
Shares and the Warrant Shares are sometimes collectively referred to as the
"Shares".
-------
Section 1.3 Purchase Price and Closing. The Company agrees to issue and
--------------------------
sell to the Purchasers and, in consideration of and in express reliance upon the
representations, warranties, covenants, terms and conditions of this Agreement,
the Purchasers, severally but not jointly, agree to purchase that number of the
Preferred Shares set forth opposite their respective names
on Exhibit A. The aggregate purchase price of the Preferred Shares being
acquired by each Purchaser (the "Purchase Price") is set forth opposite such
Purchaser's name on Exhibit A. The closing of the purchase and sale of the
Preferred Shares to be acquired by the Purchasers from the Company under this
Agreement shall take place at the offices of Xxxxxx Xxxx & Xxxxxx LLP, 000 Xxxx
Xxxxxx Xxx Xxxx, Xxx Xxxx (the "Closing") at 11:00 a.m. New York Time on April
-------
__, 1999 or such other time and place or on such date as the Purchasers and the
Company may agree upon (the "Closing Date"). On the Closing Date, the Company
------------
shall deliver to each Purchaser a certificate for the number and series of
Preferred Shares set forth opposite such Purchaser's name under the heading
"Number of Preferred Shares to be Purchased" on Exhibit A hereto, registered in
such Purchaser's name (or its nominee) and such Purchaser shall pay the Purchase
Price by wire transfer of funds into the Company's account at Norwest Bank
Colorado, N.A., ABA #000000000, Account #1063047378.
Section 1.4 Warrants. The Company agrees to issue to the Purchasers the
--------
Warrants to purchase 30,588 shares of Common Stock per $1,000,000 purchased (or
such pro rata amount if more or less than $1,000,000 is purchased). The Warrants
shall have an exercise price of $8.17 (as such price may be adjusted from time
to time as shall result from the adjustments specified in Section 4 of the
Warrants) and shall expire at the later of (i) the date of the first anniversary
of the issuance date of such Warrant and (ii) the date six (6) months following
an underwritten public offering of any security of the Company (an "Offering").
--------
ARTICLE II
Representations and Warranties
Section 2.1 Representation and Warranties of the Company. The Company
--------------------------------------------
hereby makes the following representations and warranties to the Purchasers:
(a) Organization, Good Standing and Power. The Company is a
-------------------------------------
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Colorado and has the requisite corporate power to own,
lease and operate its properties and assets and to conduct its business as it is
now being conducted. The Company does not have any subsidiaries except as set
forth in the Company's Form 10-KSB for the year ended December 31, 1998,
including the accompanying financial statements (the "Form 10-KSB") or on
-----------
Schedule 2.1(a) hereto. The Company and each such subsidiary is duly qualified
---------------
as a foreign corporation to do business and is in good standing in every
jurisdiction in which the nature of the business conducted or property owned by
it makes such qualification necessary except for any jurisdiction(s) (alone or
in the aggregate) in which the failure to be so qualified will not have a
material adverse effect on the Company's financial condition.
(b) Authorization; Enforcement. The Company has the requisite
--------------------------
corporate power and authority to enter into and perform this Agreement, the
Irrevocable Transfer Agent Instructions (as defined in Section 3.14), the
Registration Rights Agreement attached hereto as Exhibit D (the "Registration
------------
Rights Agreement") and the Warrants (collectively, the
"Transaction Documents") and to issue and sell the Shares in accordance with the
---------------------
terms of this Agreement, the Certificate of Designations and the Warrants. The
execution, delivery and performance of the Transaction Documents and the
Certificate of Designations by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action, and no further consent or
authorization of the Company or its Board of Directors or stockholders is
required. This Agreement has been duly executed and delivered by the Company.
The Registration Rights Agreement will have been duly executed and delivered by
the Company at the Closing. Each of the Transaction Documents constitutes, or
shall constitute when executed and delivered, a valid and binding obligation of
the Company enforceable against the Company in accordance with its terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of, creditor's
rights and remedies or by other equitable principles of general application.
(c) Capitalization. The authorized capital stock of the Company
and the shares thereof currently issued and outstanding as of April 16, 1999 are
set forth on Schedule 2.1(c) hereto. All of the outstanding shares of the
--------------
Company's Common Stock and Series D Convertible Preferred Stock, and of any
other series of the Company's preferred stock, if any, have been duly and
validly authorized. Except as set forth in the Form 10-KSB, the Articles or on
Schedule 2.1(c) hereto, no shares of Common Stock or Series D Convertible
--------------
Preferred Stock or any other shares of any of series the Company's preferred
stock, if any, are entitled to preemptive rights or registration rights and
there are no outstanding options, warrants, scrip, rights to subscribe to, call
or commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company. Furthermore,
except as set forth in this Agreement and the Registration Rights Agreement and
as set forth in the Form 10-KSB, the Articles or on Schedule 2.1(c), there are
---------------
no contracts, commitments, understandings, or arrangements by which the Company
is or may become bound to issue additional shares of the capital stock of the
Company or options, securities or rights convertible into shares of capital
stock of the Company. Except for customary transfer restrictions contained in
agreements entered into by the Company in order to sell restricted securities or
as provided on Schedule 2.1 (c) hereto, the Company is not a party to any
----------------
agreement granting registration or anti-dilution rights to any person with
respect to any of its equity or debt securities. Except as provided on Schedule
--------
2.1(c), the Company is not a party to, and it has no knowledge of, any agreement
------
restricting the voting or transfer of any shares of the capital stock of the
Company. Except as set forth on Schedule 2.1(c) hereto, the offer and sale of
---------------
all capital stock, convertible securities, rights, warrants, or options of the
Company issued prior to the Closing complied with all applicable Federal and
state securities laws, and no stockholder has a right of rescission or damages
with respect thereto which would have a Material Adverse Effect (as defined in
Section 2.1(e) herein) on the Company's financial condition or operating
results. The Company has furnished to each Purchaser a true, complete and
correct copy of the Company's Articles of Incorporation, with any and all
amendments thereto, as in effect on the date hereof (the "Articles"), and the
--------
Company's Bylaws, with any and all amendments thereto, as in effect on the date
hereof (the "Bylaws").
------
(d) Issuance of Shares. The Preferred Shares to be issued at the
------------------
Closing have been duly authorized by all necessary corporate action and, when
paid for or issued in accordance with the terms hereof, the Preferred Shares
shall be validly issued and outstanding, fully paid and nonassessable and
entitled to the rights and preferences set forth in the Certificate of
Designations. When the Conversion Shares and the Warrant Shares are issued in
accordance with the terms of the Preferred Shares as set forth in the
Certificate of Designations and the Warrants, respectively, such shares will be
duly authorized by all necessary corporate action and validly issued and
outstanding, fully paid and nonassessable, and the holders shall be entitled to
all rights accorded to a holder of Common Stock. A sufficient number of shares
of Common Stock (subject to adjustment as pursuant to the Company's covenant set
forth in Section 3.13 below) has been duly authorized and reserved for issuance
upon conversion of the Preferred Shares and upon exercise of the Warrants.
(e) No Conflicts. The execution, delivery and performance of the
------------
Transaction Documents by the Company, the performance by the Company of its
obligations under the Certificate of Designations and the consummation by the
Company of the transactions contemplated herein and therein do not (i) violate
any provision of the Articles or Bylaws, (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, mortgage, deed of trust,
indenture, note, bond, license, lease agreement, instrument or obligation to
which the Company is a party, (iii) create or impose a lien, charge or
encumbrance on any property of the Company under any agreement or any commitment
to which the Company is a party or by which the Company is bound or by which any
of its respective properties or assets are bound, or (iv) to the best of the
Company's knowledge, result in a violation of any federal, state, local or
foreign statute, rule, regulation, order, judgment or decree (including Federal
and state securities laws and regulations) applicable to the Company or any of
its subsidiaries or by which any property or asset of the Company or any of its
subsidiaries are bound or affected, except, in all cases other than violations
pursuant to clause (i) above, for such conflicts, defaults, terminations,
amendments, acceleration, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect. For the
purposes of this Agreement, "Material Adverse Effect" means any adverse effet
-----------------------
on the business, operations, properties, prospects, or financial condition of
the Company or its subsidiaries and which is material to such entity or other
entities controlling or controlled by such entity. The business of the Company
and its subsidiaries is not being conducted in violation of any laws, ordinances
or regulations of any governmental entity, except for possible violations which
singularly or in the aggregate do not and will not have a Material Adverse
Effect. The Company is not required under Federal, state or local law, rule or
regulation to obtain any consent, authorization or order of, or make any filing
or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under the Transaction
Documents or the Certificate of Designations, or issue and sell the Preferred
Shares, the Conversion Shares and the Warrant Shares in accordance with the
terms hereof or thereof (other than any filings which may be required to be made
by the Company with the Commission or state securities administrators subsequent
to the Closing, any registration statement which may be filed pursuant hereto,
and the Certificate of Designations with the Secretary of State of the State of
Colorado); provided that, for purposes of the representation
made in this sentence, the Company is assuming and relying upon the accuracy of
the relevant representations and agreements of each Purchaser herein.
(f) Commission Documents, Financial Statements. The Common Stock of
------------------------------------------
the Company is registered pursuant to Section 12(b) or 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, except as disclosed
------------
in the Form 10-KSB or on Schedule 2.1(f) hereto, the Company has timely filed
---------------
all reports, schedules, forms, statements and other documents required to be
filed by it with the Commission pursuant to the reporting requirements of the
Exchange Act, including material filed pursuant to Section 13(a) or 15(d) of the
Exchange Act (all of the foregoing including filings incorporated by reference
therein being referred to herein as the "Commission Documents"). The Company
--------------------
has delivered or made available to each of the Purchasers true and complete
copies of the Commission Documents filed with the Commission since December 16,
1998. The Company has not provided to any of the Purchasers any material non-
public information or other information which, according to applicable law, rule
or regulation, should have been disclosed publicly by the Company but which has
not been so disclosed, other than with respect to the transactions contemplated
by this Agreement. As of their respective dates, the Form 10-KSB for the year
ended December 31, 1998 and the Form 10-QSB for the fiscal quarter ended
September 30, 1998 complied in all material respects with the requirements of
the Exchange Act and the rules and regulations of the Commission promulgated
thereunder and other federal, state and local laws, rules and regulations
applicable to such documents, and, as of their respective dates, none of the
Form 10-KSB and the Form 10-QSB referred to above contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the Commission Documents comply as to form
in all material respects with applicable accounting requirements and the
published rules and regulations of the Commission or other applicable rules and
regulations with respect thereto. Such financial statements have been prepared
in accordance with generally accepted accounting principles ("GAAP") applied on
----
a consistent basis during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto or (ii) in the case
of unaudited interim statements, to the extent they may not include footnotes or
may be condensed or summary statements), and fairly present in all material
respects the financial position of the Company and its subsidiaries as of the
dates thereof and the results of operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments).
(g) Subsidiaries. Schedule 2.1(g) hereto sets forth each subsidiary
------------ ---------------
of the Company, showing the jurisdiction of its incorporation or organization
and showing the percentage of each applicable person's ownership of the
outstanding stock or other interests of such subsidiary. Each subsidiary is a
corporation duly incorporated, validly existing and in good standing under the
laws of the state of its incorporation and has the requisite corporate power to
own, lease and operate its properties and assets and to conduct its business as
it is now being conducted. For the purposes of this Agreement, "subsidiary"
----------
shall mean any corporation or other entity of which at least a majority of the
securities or other ownership interest having ordinary voting power (absolutely
or contingently) for the election of directors or other persons performing
similar functions are at the time owned directly or indirectly by the Company
and/or
any of its other subsidiaries. All of the outstanding shares of capital stock of
each subsidiary have been duly authorized and validly issued, and are fully paid
and nonassessable. There are no outstanding preemptive, conversion or other
rights, options, warrants or agreements granted or issued by or binding upon any
subsidiary for the purchase or acquisition of any shares of capital stock of any
subsidiary or any other securities convertible into, exchangeable for or
evidencing the rights to subscribe for any shares of such capital stock. Neither
the Company nor any subsidiary is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of the
capital stock of any subsidiary or any convertible securities, rights, warrants
or options of the type described in the preceding sentence. Neither the Company
nor any subsidiary is party to, nor has any knowledge of, any agreement
restricting the voting or transfer of any shares of the capital stock of any
subsidiary.
(h) No Material Adverse Change. Since September 30, 1998, the date
--------------------------
through which the most recent quarterly report of the Company on Form 10-QSB has
been prepared and filed with the Commission, a copy of which is included in the
Commission Documents, the Company has not experienced or suffered any Material
Adverse Effect, except as disclosed on Schedule 2.1(h) hereto.
---------------
(i) No Undisclosed Liabilities. To the best of the Company's
--------------------------
knowledge, except as disclosed on Schedule 2.1(i) hereto, neither the Company
---------------
nor any of its subsidiaries has any liabilities, obligations, claims or losses
(whether liquidated or unliquidated, secured or unsecured, absolute, accrued,
contingent or otherwise) other than those incurred in the ordinary course of the
Company's or its subsidiaries respective businesses since December 31, 1998 and
which, individually or in the aggregate, do not or would not have a Material
Adverse Effect on the Company or its subsidiaries.
(j) No Undisclosed Events or Circumstances. No event or circumstance
--------------------------------------
has occurred or exists with respect to the Company or its subsidiaries or their
respective businesses, properties, prospects, operations or financial condition,
which, under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed.
(k) Indebtedness. The Form 10-KSB or Schedule 2.1(k) hereto sets
------------ ---------------
forth as of the date hereof all outstanding secured and unsecured Indebtedness
of the Company or any subsidiary, or for which the Company or any subsidiary has
commitments. For the purposes of this Agreement, "Indebtedness" shall mean (a)
------------
any liabilities for borrowed money or amounts owed in excess of $25,000 (other
than trade accounts payable incurred in the ordinary course of business), (b)
all guaranties, endorsements and other contingent obligations in respect of
Indebtedness of others, whether or not the same are or should be reflected in
the Company's balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (c) the present value of
any lease payments in excess of $25,000 due under leases required to be
capitalized in accordance with GAAP. Neither the Company nor any subsidiary is
in default with respect to any Indebtedness.
(l) Title to Assets. Each of the Company and the subsidiaries has
---------------
good title to all of its real and personal property reflected in the Commission
Documents, free of any mortgages, pledges, charges, liens, security interests or
other encumbrances, except as that, individually or in the aggregate, do not
cause a Material Adverse Effect on the Company's financial condition or
operating results. All said leases of the Company and each of its subsidiaries
are valid and subsisting and in full force and effect.
(m) Actions Pending. There is no action, suit, claim, investigation
---------------
or proceeding pending or, to the knowledge of the Company, threatened against
the Company or any subsidiary which questions the validity of this Agreement or
the transactions contemplated hereby or any action taken or to be taken pursuant
hereto or thereto. Except as set forth on Schedule 2.1(m) hereto, there is no
---------------
action, suit, claim, investigation or proceeding pending or, to the knowledge of
the Company, threatened, against or involving the Company, any subsidiary or any
of their respective properties or assets. There are no outstanding orders,
judgments, injunctions, awards or decrees of any court, arbitrator or
governmental or regulatory body against the Company or any subsidiary or any
officers or directors of the Company or subsidiary in their capacities as such.
(n) Compliance with Law. The business of the Company and the
-------------------
subsidiaries has been and is presently being conducted in accordance with all
applicable federal, state and local governmental laws, rules, regulations and
ordinances, except as that, individually or in the aggregate, do not cause a
Material Adverse Effect. The Company and each of its subsidiaries have all
franchises, permits, licenses, consents and other governmental or regulatory
authorizations and approvals necessary for the conduct of its business as now
being conducted by it unless the failure to possess such franchises, permits,
licenses, consents and other governmental or regulatory authorizations and
approvals, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.
(o) Taxes. The Company and each of the subsidiaries has accurately
-----
prepared and filed all federal, state and other tax returns required by law to
be filed by it, has paid or made provisions for the payment of all taxes shown
to be due and all additional assessments, and adequate provisions have been and
are reflected in the financial statements of the Company and the subsidiaries
for all current taxes and other charges to which the Company or any subsidiary
is subject and which are not currently due and payable, except for taxes, if
unpaid, individually or in the aggregate, do not and would not have a Material
Adverse Effect on the Company or its subsidiaries. None of the federal income
tax returns of the Company or any subsidiary for the years subsequent to
December 31, 1996 has been audited by the Internal Revenue Service. The Company
has no knowledge of any additional assessments, adjustments or contingent tax
liability (whether federal or state) pending or threatened against the Company
or any subsidiary for any period, nor of any basis for any such assessment,
adjustment or contingency.
(p) Certain Fees. Except as set forth on Schedule 2.1(p) hereto, no
------------ ---------------
brokers, finders or financial advisory fees or commissions will be payable by
the Company or any subsidiary or any of the Purchasers with respect to the
transactions contemplated by this Agreement.
(q) Disclosure. To the best of the Company's knowledge, neither this
----------
Agreement or the Schedules hereto nor any other documents, certificates or
instruments furnished to each of the Purchasers by or on behalf of the Company
or any subsidiary in connection with the transactions contemplated by this
Agreement contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made herein or therein,
in the light of the circumstances under which they were made herein or therein,
not misleading.
(r) Operation of Business. The Company and each of the subsidiaries
---------------------
owns or possesses all patents, trademarks, service marks, trade names,
copyrights, licenses and authorizations as set forth in the Form 10-KSB and on
Schedule 2.1(r) hereto, and all rights with respect to the foregoing, which are
---------------
necessary for the conduct of its business as now conducted without any conflict
with the rights of others.
(s) Environmental Compliance. Except as disclosed in the Form 10-KSB
------------------------
or on Schedule 2.1(s) hereto, the Company and each of its subsidiaries have
---------------
obtained all material approvals, authorization, certificates, consents,
licenses, orders and permits or other similar authorizations of all governmental
authorities, or from any other person, that are required under any
Environmental Laws. The Form 10-KSB or Schedule 2.1(s) hereto sets forth all
---------------
material permits, licenses and other authorizations issued under any
Environmental Laws to the Company or its subsidiaries. "Environmental Laws"
------------------
shall mean all applicable laws relating to the protection of the environment
including, without limitation, all requirements pertaining to reporting,
licensing, permitting, controlling, investigating or remediating emissions,
discharges, releases or threatened releases of hazardous substances, chemical
substances, pollutants, contaminants or toxic substances, materials or wastes,
whether solid, liquid or gaseous in nature, into the air, surface water,
groundwater or land, or relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances,
material or wastes, whether solid, liquid or gaseous in nature. Except as set
forth in the Form 10-KSB or on Schedule 2.1(s) hereto, the Company has all
---------------
necessary governmental approvals required under all Environmental Laws and used
in its business or in the business of any of its subsidiaries. The Company and
each of its subsidiaries are also in compliance with all other limitations,
restrictions, conditions, standards, requirements, schedules and timetables
required or imposed under all Environmental Laws. Except for such instances as
would not individually or in the aggregate have a Material Adverse Effect, there
are no past or present events, conditions, circumstances, incidents, actions or
omissions relating to or in any way affecting the Company or its subsidiaries
that violate or may violate any Environmental Law after the Closing or that may
give rise to any environmental liability, or otherwise form the basis of any
claim, action, demand, suit, proceeding, hearing, study or investigation (i)
under any Environmental Law, or (ii) based on or related to the manufacture,
processing, distribution, use, treatment, storage (including without limitation
underground storage tanks), disposal, transport or handling, or the emission,
discharge, release or threatened release of any hazardous substance.
"Environmental Liabilities" means all liabilities of a person (whether such
--------------------------
liabilities are owed by such person to governmental authorities, third parties
or otherwise) whether currently in existence or arising hereafter which arise
under or
relate to any Environmental Law.
(t) Books and Record Internal Accounting Controls. The records and
---------------------------------------------
documents of the Company and its subsidiaries accurately reflect in all material
respects the information relating to the business of the Company and the
subsidiaries, the location and collection of their assets, and the nature of all
transactions giving rise to the obligations or accounts receivable of the
Company or any subsidiary.
(u) Material Agreements. Except as set forth in the Form 10-KSB or
-------------------
on Schedule 2.1(u) hereto, neither the Company nor any subsidiary is a party to
---------------
any written or oral contract, instrument, agreement, commitment, obligation,
plan or arrangement, a copy of which would be required to be filed with the
Commission as an exhibit to a registration statement on Form S-3 or applicable
form (collectively, "Material Agreements") if the Company or any subsidiary were
-------------------
registering securities under the Securities Act. The Company and each of its
subsidiaries have in all material respects performed all the obligations
required to be performed by them to date under the foregoing agreements, have
received no notice of default and, to the best of the Company's knowledge are
not in default under any Material Agreement now in effect, the result of which
could cause a Material Adverse Effect. No written or oral contract, instrument,
agreement, commitment, obligation, plan or arrangement of the Company or of any
subsidiary limits or shall limit the payment of dividends on the Company's
Preferred Shares, other preferred stock, if any, or its Common Stock.
(v) Transactions with Affiliates. Except as set forth in the Form
----------------------------
10-KSB or on Schedule 2.1(v) hereto, there are no loans, leases, agreements,
---------------
contracts, royalty agreements, management contracts or arrangements or other
continuing transactions exceeding $50,000 between (a) the Company, any
subsidiary or any of their respective customers or suppliers on the one hand,
and (b) on the other hand, any officer, employee, consultant or director of the
Company, or any of its subsidiaries, or any person owning any capital stock of
the Company or any subsidiary or any member of the immediate family of such
officer, employee, consultant, director or stockholder or any corporation or
other entity controlled by such officer, employee, consultant, director or
stockholder, or a member of the immediate family of such officer, employee,
consultant, director or stockholder.
(w) Securities Act of 1933. The Company has complied and will comply
----------------------
with all applicable Federal and state securities laws in connection with the
offer, issuance and sale of the Preferred Shares and the Warrants hereunder.
Neither the Company nor anyone acting on its behalf, directly or indirectly, has
or will sell, offer to sell or solicit offers to buy the Preferred Shares, the
Warrants or similar securities to, or solicit offers with respect thereto from,
or enter into any preliminary conversations or negotiations relating thereto
with, any person, or has taken or will take any action so as to bring the
issuance and sale of the Preferred Shares and the Warrants under the
registration provisions of the Securities Act and applicable state securities
laws. Neither the Company nor any of its affiliates, nor any person acting on
its or their behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D under the Securities Act) in
connection with the offer or sale of the Preferred Shares and the Warrants.
(x) Governmental Approvals. Except as set forth in the Form 10-KSB
----------------------
or on Schedule 2.1(x) hereto, and except for the filing of any notice prior or
---------------
subsequent to the Closing that may be required under applicable state and/or
Federal securities laws (which if required, shall be filed on a timely basis),
including the filing of a registration statement or statements pursuant to the
Registration Rights Agreement, and the filing of the Certificate of Designations
with the Secretary of State for the State of Colorado, no authorization,
consent, approval, license, exemption of, filing or registration with any court
or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is or will be necessary for, or in
connection with, the execution or delivery of the Preferred Shares, or for the
performance by the Company of its obligations under the Transaction Documents or
the Certificate of Designations.
(y) Employees. Neither the Company nor any subsidiary has any
---------
collective bargaining arrangements or agreements covering any of its employees,
except as set forth in the Form 10-KSB or on Schedule 2.1(y) hereto. Except as
---------------
set forth in the Form 10-KSB or on Schedule 2.1(y) hereto, neither the Company
---------------
nor any subsidiary has any employment contract, agreement regarding proprietary
information, non-competition agreement, non-solicitation agreement,
confidentiality agreement, or any other similar contract or restrictive
covenant, relating to the right of any officer, employee or consultant to be
employed or engaged by the Company or such subsidiary. Since December 31, 1998,
no officer, consultant or key employee of the Company or any subsidiary whose
termination, either individually or in the aggregate, could have a Material
Adverse Effect, has terminated or, to the knowledge of the Company, has any
present intention of terminating his or her employment or engagement with the
Company or any subsidiary.
(z) Absence of Certain Developments. Except as provided in the Form
-------------------------------
10-KSB or on Schedule 2.1(z) hereto, since December 31, 1998, neither the
---------------
Company nor any subsidiary has:
(i) issued any stock, bonds or other corporate securities or
any rights, options or warrants with respect thereto;
(ii) borrowed any amount or incurred or become subject to any
liabilities (absolute or contingent) except current liabilities
incurred in the ordinary course of business which are comparable
in nature and amount to the current liabilities incurred in the
ordinary course of business during the comparable portion of its
prior fiscal year, as adjusted to reflect the current nature and
volume of the Company's or such subsidiary's business;
(iii) discharged or satisfied any lien or encumbrance or paid
any obligation or liability (absolute or contingent), other than
current liabilities paid in the ordinary course of business;
(iv) declared or made any payment or distribution of cash or
other property to stockholders with respect to its stock, or
purchased or redeemed, or made any
agreements so to purchase or redeem, any shares of its capital
stock;
(v) sold, assigned or transferred any other tangible assets,
or canceled any debts or claims, except in the ordinary course of
business;
(vi) sold, assigned or transferred any patent rights,
trademarks, trade names, copyrights, trade secrets or other
intangible assets or intellectual property rights, or disclosed
any proprietary confidential information to any person except to
customers in the ordinary course of business or to each of the
Purchasers or their representatives;
(vii) suffered any substantial losses or waived any rights of
material value, whether or not in the ordinary course of
business, or suffered the loss of any material amount of
prospective business;
(viii) made any changes in employee compensation except in the
ordinary course of business and consistent with past practices;
(ix) made capital expenditures or commitments therefor that
aggregate in excess of $100,000;
(x) other than the transactions contemplated by this
Agreement, entered into any other transaction other than in the
ordinary course of business, or entered into any other material
transaction, whether or not in the ordinary course of business;
(xi) made charitable contributions or pledges in excess of
$25,000;
(xii) suffered any material damage, destruction or casualty
loss, whether or not covered by insurance;
(xiii) experienced any material problems with labor or
management in connection with the terms and conditions of their
employment;
(xiv) effected any two or more events of the foregoing kind
which in the aggregate would be material to the Company or its
subsidiaries; or
(xv) entered into an agreement, written or otherwise, to take
any of the foregoing actions.
(aa) Use of Proceeds. The proceeds from the sale of the Preferred
---------------
Shares will be used by the Company for acquisitions of national and local
Internet Service Providers listed on Schedule 2.1(aa) attached hereto.
-----------------
(ab) Public Utility Holding Company Act and Investment Company Act
-------------------------------------------------------------
Status. The Company is not a "holding company" or a "public utility company" as
------ --------------- ----------------------
such terms are
defined in the Public Utility Holding Company Act of 1935, as amended. The
Company is not, and as a result of and immediately upon Closing will not be, an
"investment company" or a company "controlled" by an "investment--------------
company," within the meaning of the Investment Company Act of 1940, as amended.
-------
(ac) ERISA. No liability to the Pension Benefit Guaranty Corporation
-----
has been incurred with respect to any Plan by the Company or any of its
subsidiaries which is or would be materially adverse to the Company and its
subsidiaries. The execution and delivery of this Agreement and the issue and
sale of the Preferred Shares will not involve any transaction which is subject
to the prohibitions of Section 406 of ERISA or in connection with which a tax
could be imposed pursuant to Section 4975 of the Internal Revenue Code of 1986,
as amended, provided that, if any of the Purchasers, or any person or entity
that owns a beneficial interest in any of the Purchasers, is an "employee
--------
pension benefit plan" (within the meaning of Section 3(2) of ERISA) with respect
--------------------
to which the Company is a "party in interest" (within the meaning of Section
-----------------
3(14) of ERISA), the requirements of Sections 407(d)(5) and 408(e) of ERISA, if
applicable, are met. As used in this Section 2.1(ac), the term "Plan" shall
----
mean an "employee pension benefit plan" (as defined in Section 3 of ERISA) which
is or has been established or maintained, or to which contributions are or have
been made, by the Company or any subsidiary or by any trade or business, whether
or not incorporated, which, together with the Company or any subsidiary, is
under common control, as described in Section 414(b) or (c) of the Code.
(ad) Dilutive Effect. The Company understands and acknowledges that
---------------
the number of Conversion Shares issuable upon conversion of the Preferred Shares
and the Warrant Shares issuable upon exercise of the Warrants will increase in
certain circumstances. The Company further acknowledges that its obligation to
issue Conversion Shares upon conversion of the Preferred Shares in accordance
with this Agreement and the Certificate of Designations and its obligations to
issue the Warrant Shares upon the exercise of the Warrants in accordance with
this Agreement and the Warrants, is, in each case, absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership
interest of other stockholders of the Company.
Section 2.2 Representations and Warranties of the Purchasers. Each of
------------------------------------------------
the Purchasers hereby makes the following representations and warranties to the
Company with respect solely to itself and not with respect to any other
Purchaser:
(a) Organization and Standing of the Purchasers. If the Purchaser is
-------------------------------------------
an entity, such Purchaser is a corporation or partnership duly incorporated or
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization.
(b) Authorization and Power. The Purchaser has the requisite power
-----------------------
and authority to enter into and perform this Agreement and to purchase the
Preferred Shares being sold to it hereunder. The execution, delivery and
performance of this Agreement and the Registration Rights Agreement by such
Purchaser and the consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate or partnership
action (if the Purchaser is an entity), and no further consent or authorization
of such
Purchaser or its Board of Directors, stockholders, or partners, as the
case may be, is required. Each of this Agreement and the Registration Rights
Agreement has been duly authorized, executed and delivered by such Purchaser.
(c) No Conflicts. The execution, delivery and performance of this
------------
Agreement and the Registration Rights Agreement and the consummation by such
Purchaser of the transactions contemplated hereby and thereby or relating hereto
do not and will not (i) result in a violation of such Purchaser's charter
documents or bylaws or (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of any agreement, indenture or instrument to which such Purchaser
is a party, or result in a violation of any law, rule, or regulation, or any
order, judgment or decree of any court or governmental agency applicable to such
Purchaser or its properties (except for such conflicts, defaults and violations
as would not, individually or in the aggregate, have a Material Adverse Effect
on such Purchaser). Such Purchaser is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement or the Registration Rights Agreement or to
purchase the Preferred Shares in accordance with the terms hereof, provided that
for purposes of the representation made in this sentence, such Purchaser is
assuming and relying upon the accuracy of the relevant representations and
agreements of the Company herein.
(d) Acquisition for Investment. Such Purchaser is purchasing the
--------------------------
Preferred Shares solely for its own account for the purpose of investment and
not with a view to or for sale in connection with distribution. Such Purchaser
does not have a present intention to sell the Preferred Shares, nor a present
arrangement (whether or not legally binding) or intention to effect any
distribution of the Preferred Shares to or through any person or entity;
provided, however, that by making the representations herein and subject to
-------- --------
Section 2.2(f) below, such Purchaser does not agree to hold the Preferred Shares
for any minimum or other specific term and reserves the right to dispose of the
Preferred Shares at any time in accordance with Federal securities laws
applicable to such disposition. Such Purchaser acknowledges that it is able to
bear the financial risks associated with an investment in the Preferred Shares
and that it has been given full access to such records of the Company and the
subsidiaries and to the officers of the Company and the subsidiaries as it has
deemed necessary or appropriate to conduct its due diligence investigation.
(e) Accredited Purchasers. Such Purchaser is an "accredited
--------------------- ----------
investor" as defined in Regulation D promulgated under the Securities Act.
(f) Rule 144. Such Purchaser understands that the Shares must be
--------
held indefinitely unless such Shares are registered under the Securities Act or
an exemption from registration is available. Such Purchaser acknowledges that
such person is familiar with Rule 144 of the rules and regulations of the
Commission, as amended, promulgated pursuant to the Securities Act ("Rule 144"),
--------
and that such person has been advised that Rule 144 permits resales only under
certain circumstances. Such Purchaser understands that to the extent that Rule
144 is not available, such person will be unable to sell any Preferred Shares
without either registration under the Securities Act or the existence of another
exemption from such registration
requirement.
(g) Conversion Restrictions. Notwithstanding anything to the
-----------------------
contrary set forth herein or in the Certificate of Designations, in no event
shall any holder be entitled to convert Series D Preferred Stock in excess of
that number of shares of Series D Convertible Preferred Stock which, upon giving
effect to such conversion, would cause the aggregate number of shares of Common
Stock beneficially owned by the holder and its affiliates to exceed 4.99% of the
outstanding shares of the Common Stock following such conversion. For purposes
of the foregoing proviso, the aggregate number of shares of Common Stock
beneficially owned by the holder and its affiliates shall include the number of
shares of Common Stock issuable upon conversion of the shares of Series D
Convertible Preferred Stock with respect to which the determination of such
proviso is being made, but shall exclude the number of shares of Common Stock
which would be issuable upon (i) conversion of the remaining, nonconverted
shares of Series D Convertible Preferred Stock beneficially owned by the holder
and its affiliates, and (ii) exercise or conversion of the unexercised or
unconverted portion of any other securities of the Company (including, without
limitation, any warrants) subject to a limitation on conversion or exercise
analogous to the limitation contained herein beneficially owned by the holder
and its affiliates. Except as set forth in the preceding sentence, for purposes
of this Section 2(a), beneficial ownership shall be calculated in accordance
with Section 13(d) of the Securities Exchange Act of 1934, as amended.
(h) General. Such Purchaser understands that the Shares are being
-------
offered and sold in reliance on a transactional exemption from the registration
requirement of Federal and state securities laws and the Company is relying upon
the truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of such Purchaser set forth herein in order
to determine the applicability of such exemptions and the suitability of such
Purchaser to acquire the Shares.
ARTICLE III
Covenants
The Company covenants with each of the Purchasers as follows, which
covenants are for the benefit of the Purchasers and their permitted assignees
(as defined herein).
Section 3.1 Securities Compliance.
---------------------
(a) The Company shall notify the Commission in accordance with
their rules and regulations, of the transactions contemplated by any of the
Transaction Documents, including filing a Form D with respect to the Preferred
Shares, Warrants, Conversion Shares and Warrants Shares as required under
Regulation D, and shall take all other necessary action and proceedings as may
be required and permitted by applicable law, rule and regulation, for the legal
and valid issuance of the Preferred Shares and the Warrant Shares to each of the
Purchasers or subsequent holders.
(b) The Company is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings of
such Purchasers set forth herein in order to determine the applicability of
Federal and state securities laws exemptions and the suitability of such
Purchasers to acquire the Preferred Shares.
Section 3.2 Registration and Listing. The Company will cause its Common
------------------------
Stock to continue to be registered under Sections 12(b) or 12(g) of the Exchange
Act, will comply in all respects with its reporting and filing obligations under
the Exchange Act, will comply with all requirements related to any registration
statement filed pursuant to this Agreement or the Registration Rights Agreement,
and will not take any action or file any document (whether or not permitted by
the Securities Act or the rules promulgated thereunder) to terminate or suspend
such registration or to terminate or suspend its reporting and filing
obligations under the Exchange Act or Securities Act, except as permitted
herein. The Company will take all action necessary to continue the listing or
trading of its Common Stock on the over-the-counter electronic bulletin board
(the "OTC Bulletin Board") or any relevant market or system, if applicable, and
------------------
will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of NASD, the Nasdaq system or any relevant
market or system.
Section 3.3 Inspection Rights. The Company shall permit, during normal
-----------------
business hours and upon reasonable request and reasonable notice, each Purchaser
or any employees, agents or representatives thereof, so long as such Purchaser
shall be obligated hereunder to purchase the Preferred Shares or shall
beneficially own any Preferred Shares, or shall own Conversion Shares which, in
the aggregate, represent more than 2% of the total combined voting power of all
voting securities then outstanding, to examine and make reasonable copies of and
extracts from the records and books of account of, and visit and inspect the
properties, assets, operations and business of the Company and any subsidiary,
and to discuss the affairs, finances and accounts of the Company and any
subsidiary with any of its officers, consultants, directors, and key employees.
Section 3.4 Compliance with Laws. The Company shall comply, and cause
--------------------
each subsidiary to comply, with all applicable laws, rules, regulations and
orders, noncompliance with which could have a Material Adverse Effect.
Section 3.5 Keeping of Records and Books of Account. The Company shall
---------------------------------------
keep and cause each subsidiary to keep adequate records and books of account, in
which complete entries will be made in accordance with GAAP consistently
applied, reflecting all financial transactions of the Company and its
subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.
Section 3.6 Reporting Requirements. The Company shall furnish the
----------------------
following to each Purchaser so long as such Purchaser shall be obligated
hereunder to purchase the Preferred Shares or shall beneficially own any
Preferred Shares, or shall own Conversion Shares which, in the aggregate,
represent more than 2% of the total combined voting power of all voting
securities then outstanding:
(a) Quarterly Reports filed with the Commission on Form 10-QSB as
soon as available, and in any event within 45 days after the end of each of the
first three fiscal quarters of the Company or such later date pursuant to an
extension granted by the Commission;
(b) Annual Reports filed with the Commission on Form 10-KSB as
soon as available, and in any event within 90 days after the end of each fiscal
year of the Company or such later date pursuant to an extension granted by the
Commission; and
(c) Copies of all notices and information, including without
limitation notices and proxy statements in connection with any meetings, that
are provided to holders of shares of Common Stock, contemporaneously with the
delivery of such notices or information to such holders of Common Stock.
Section 3.7 Amendments. The Company shall not amend or waive any
----------
provision of the Articles or Bylaws of the Company, or Registration Rights
Agreement in any way that would adversely affect the liquidation preferences,
dividends rights, conversion rights, voting rights or redemption rights of the
holders of the Preferred Shares.
Section 3.8 Other Agreements. The Company shall not enter into any
----------------
agreement in which the terms of such agreement would restrict or impair the
right or ability to perform of the Company or any subsidiary under any
Transaction Document or the Certificate of Designations.
Section 3.9 Distributions. So long as any Preferred Shares or Warrants
--------------
remain outstanding, the Company agrees that it shall not (i) declare or pay any
dividends or make any distributions to any holder(s) of Common Stock or (ii)
purchase or otherwise acquire for value, directly or indirectly, any Common
Stock or other equity security of the Company.
Section 3.10 Status of Dividends. The Company covenants and agrees that
-------------------
(i) no Federal income tax return or claim for refund of Federal income tax or
other submission to the Internal Revenue Service will adversely affect the
Preferred Shares, any other series of its Preferred Stock, or the Common Stock,
and any deduction shall not operate to jeopardize the availability to Purchasers
of the dividends received deduction provided by Section 243(a)(1) of the Code or
any successor provision, (ii) in no report to shareholders or to any
governmental body having jurisdiction over the Company or otherwise will it
treat the Preferred Shares other than as equity capital or the dividends paid
thereon other than as dividends paid on equity capital unless required to do so
by a governmental body having jurisdiction over the accounts of the Company or
by a change in generally accepted accounting principles required as a result of
action by an authoritative accounting standards setting body, and (iii) other
than pursuant to this Agreement or the Certificate of Designations, it will take
no action which would result in the dividends paid by the Company on the
Preferred Shares out of the Company's current or accumulated earnings and
profits being ineligible for the dividends received deduction provided by
Section 243(a)(1) of the Code. The preceding sentence shall not be deemed to
prevent the Company from designating the Preferred Stock as "Convertible
Preferred Stock" in its annual and quarterly financial statements in accordance
with its prior practice concerning other series of
preferred stock of the Company. In the event that the Purchasers have reasonable
cause to believe that dividends paid by the Company on the Preferred Shares out
of the Company's current or accumulated earnings and profits will not be treated
as eligible for the dividends received deduction provided by Section 243(a)(1)
of the Code, or any successor provision, the Company will, at the request of the
Purchasers of 51% of the outstanding Preferred Shares, join with the Purchasers
in the submission to the Service of a request for a ruling that dividends paid
on the Shares will be so eligible for Federal income tax purposes. In addition,
the Company will reasonably cooperate with the Purchasers (at Purchasers'
expense) in any litigation, appeal or other proceeding challenging or contesting
any ruling, technical advice, finding or determination that earnings and profits
are not eligible for the dividends received deduction provided by Section
243(a)(1) of the Code, or any successor provision to the extent that the
position to be taken in any such litigation, appeal, or other proceeding is not
contrary to any provision of the Code or incurred in connection with any such
submission, litigation, appeal or other proceeding. Notwithstanding the
foregoing, nothing herein contained shall be deemed to preclude the Company from
claiming a deduction with respect to such dividends if (i) the Code shall
hereafter be amended, or final Treasury regulations thereunder are issued or
modified, to provide that dividends on the Preferred Shares or Conversion Shares
should not be treated as dividends for Federal income tax purposes or that a
deduction with respect to all or a portion of the dividends on the Shares is
allowable for Federal income tax purposes, or (ii) in the absence of such an
amendment, issuance or modification and after a submission of a request for
ruling or technical advice, the service shall rule or advise that dividends on
the shares should not be treated as dividends for Federal income tax purposes.
If the Service determines that the Preferred Shares or Conversion Shares
constitute debt, the Company may file protective claims for refund.
Section 3.11 Rule 144A. The Company covenants and agrees that if the
---------
Company fails to register the Conversion Shares within 150 days from the Closing
Date under the terms and conditions of the Registration Rights Agreement
attached hereto as Exhibit E, then for so long as any of the Preferred Shares
remain outstanding and continue to be "restricted securities" within the meaning
---------------------
of Rule 144 under the Securities Act, the Company shall make available to the
Purchasers in connection with any sale thereof, the information required by Rule
144A(d)(4) under the Securities Act in order to permit resales of the Preferred
Shares pursuant to Rule 144A, if applicable.
Section 3.12 Regulation S. The Company covenants and agrees that if the
------------
Company fails to (i) file a registration statement within 30 days from the
Closing Date and/or (ii) register the Conversion Shares within 90 days from the
Closing Date, under the terms and conditions of the Registration Rights
Agreement attached hereto as Exhibit E, then for so long as any of the Preferred
Shares or Conversion Shares remain outstanding and continue to be "restricted
----------
securities" within the meaning of Rule 144 under the Securities Act, the Company
----------
shall, in order to permit resales of the Preferred Shares or Conversion Shares
pursuant to Regulation S under the Securities Act, (a) continue to file all
material required to be filed pursuant to Section 13(a) or 15(d) of the Exchange
Act, and (b) not knowingly engage in directed selling efforts in connection with
the resale of securities by any Purchaser under Regulation S.
Section 3.13 Reservation of Shares. So long as any of the Preferred
---------------------
Shares or Warrants
remain outstanding, the Company shall take all action necessary to at all times
have authorized, and reserved for the purpose of issuance, no less than 200% of
the aggregate number of shares of Common Stock needed to provide for the
issuance of the Conversion Shares and the Warrant Shares.
Section 3.14 Transfer Agent Instructions. The Company shall issue
---------------------------
irrevocable instructions to its transfer agent, and any subsequent transfer
agent, to issue certificates, registered in the name of each Purchaser or its
respective nominee(s), for the Conversion Shares and the Warrant Shares in such
amounts as specified from time to time by each Purchaser to the Company upon
conversion of the Preferred Shares or exercise of the Warrants in the form of
Exhibit F attached hereto (the "Irrevocable Transfer Agent Instructions").
---------------------------------------
Prior to registration of the Conversion Shares and the Warrant Shares under the
Securities Act, all such certificates shall bear the restrictive legend
specified in Section 6.1 of this Agreement. The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred to
in this Section 3.14 will be given by the Company to its transfer agent and that
the Shares shall otherwise be freely transferable on the books and records of
the Company as and to the extent provided in this Agreement and the Registration
Rights Agreement. Nothing in this Section 3.14 shall affect in any way each
Purchaser's obligations and agreements set forth in Section 6.1 to comply with
all applicable prospectus delivery requirements, if any, upon resale of the
Shares. If a Purchaser provides the Company with an opinion of counsel, in a
generally acceptable form, to the effect that a public sale, assignment or
transfer of the Shares may be made without registration under the Securities Act
or the Purchaser provides the Company with reasonable assurances that the Shares
can be sold pursuant to Rule 144 without any restriction as to the number of
securities acquired as of a particular date that can then be immediately sold,
the Company shall permit the transfer, and, in the case of the Conversion Shares
and the Warrant Shares, promptly instruct its transfer agent to issue one or
more certificates in such name and in such denominations as specified by such
Purchaser and without any restrictive legend. The Company acknowledges that a
breach by it of its obligations under this Section 3.14 will cause irreparable
harm to the Purchasers by vitiating the intent and purpose of the transaction
contemplated hereby. Accordingly, the Company acknowledges that the remedy at
law for a breach of its obligations under this Section 3.14 will be inadequate
and agrees, in the event of a breach or threatened breach by the Company of the
provisions of this Section 3.14, that the Purchasers shall be entitled, in
addition to all other available remedies, to an order and/or injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required.
Section 3.15 Lock-up Agreements by Company Stockholders. The Company
------------------------------------------
shall have each of the current stockholders listed on Schedule 3.15 attached
-------------
hereto (the "Primary Stockholders") holding shares of Common Stock or other
--------------------
Company securities convertible into Common Stock, including, without limitation,
the Series A, B and C Convertible Preferred Stock to execute a lock-up
agreement, whereby each of such Primary Stockholders agrees not to sell, assign
or otherwise transfer (except as otherwise provided on Schedule 3.15) any of
-------------
his/her shares of Common Stock or other Company securities convertible into
Common Stock, including, without limitation, the Series A, B and C Convertible
Preferred Stock for a period beginning on the Closing Date and ending on
February 1, 2000,
Section 3.16 Limitations on the Transfer of Shares by the Purchasers.
-------------------------------------------------------
None of the Purchasers shall, without the prior written consent of the Company,
offer, sell, contract to sell, pledge, hypothecate, grant any option to purchase
or otherwise dispose of ("Transfer"), directly or indirectly, the Shares on or
--------
before the ninetieth (90th) day following the date on which the Commission
declares effective a registration statement filed by the Company on Form S-1
registering shares of Common Stock in an Offering; provided, however, the
-------- -------
Purchaser may Transfer any Preferred Shares so long as the transferees shall
agree to be bound by the terms and provisions of this Agreement, the Certificate
of Designations, the Registration Rights Agreement and the Irrevocable Transfer
Agent Instructions; and, provided further, that if on December 31, 1999 an
--- ----------------
Offering has not been completed, the Purchasers may sell their Shares without
any restriction.
Section 3.17 Purchase Option. If the Company (i) fails to complete an
---------------
Offering within one (1) year of the Closing Date and (ii) at such time the
Company's Common Stock has a five (5) Five Day Average Share Price of less than
$3.00 (which Five Day Average Share Price may be adjusted for stock splits,
subdivision or combination of shares of Common Stock, or reclassification), each
Purchaser shall have the option upon forty-five (45) days prior written notice
to purchase in an equitable manner any assets (other than those assets located
within the city limits of Fresno, California) acquired by the Company at any
time after the Closing Date, on a pro rata basis, for up to $the Purchase Price
paid by such Purchaser at a purchase price equal to the purchase price paid for
the assets by the Company at the time of acquisition. The Company shall not
sell any of the Assets on or before the second anniversary of the Closing Date
without the prior written consent of the Purchasers. Capitalized terms used in
this Section 3.17 and not otherwise defined in this Agreement shall have the
respective meanings specified in the Certificate of Designations.
Section 3.18 Release of Purchase Price. The Company shall place 58.3% of
-------------------------
the proceeds from the sale of the Preferred Shares to each Purchaser in a
segregated account at Norwest Bank Colorado, N.A. and shall apply such proceeds
solely to acquire the national and local Internet Service Providers listed on
Schedule 2.1(aa) attached hereto; provided, however, if upon the fifteenth
---------------- -------- -------
(15th) month anniversary of the Closing Date, the Company has not fully utilized
such proceeds, such proceeds shall be released from the segregated account at
Norwest Bank Colorado, N.A. solely for general corporate purposes to the
Company.
ARTICLE IV
Conditions
Section 4.1 Conditions Precedent to the Obligation of the Company to
--------------------------------------------------------
Sell the Shares. The obligation hereunder of the Company to issue and sell the
---------------
Preferred Shares and the Warrants to the Purchasers is subject to the
satisfaction or waiver, at or before the Closing, of each of the conditions set
forth below. These conditions are for the Company's sole benefit and may be
waived by the Company at any time in its sole discretion.
(a) Accuracy of each of the Purchaser's Representations and
-------------------------------------------------------
Warranties. The representations and warranties of each Purchaser shall be true
----------
and correct in all material respects as of the date when made and as of the
Closing as though made at that time, except for representations and warranties
that are expressly made as of a particular date, which shall be true and correct
in all material respects as of such date.
(b) Performance by the Purchasers. Each Purchaser shall have
-----------------------------
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by such Purchaser at or prior to the Closing.
(c) No Injunction. No statute, rule, regulation, executive
------------
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement.
Section 4.2 Conditions Precedent to the Obligation of the Purchasers to
-----------------------------------------------------------
Purchase the Shares. The obligation hereunder of each Purchaser to acquire and
-------------------
pay for the Preferred Shares and the Warrants is subject to the satisfaction or
waiver, at or before the Closing, of each of the conditions set forth below.
These conditions are for each Purchaser's sole benefit and may be waived by such
Purchaser at any time in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties.
--------------------------------------------------------
Each of the representations and warranties of the Company shall be true and
correct in all material respects as of the date when made and as of the Closing
as though made at that time (except for representations and warranties that
speak as of a particular date), which shall be true and correct in all material
respects as of such date.
(b) Performance by the Company. The Company shall have
--------------------------
performed, satisfied and complied in all respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing.
(c) No Suspension, etc. From the date hereof to the Closing
------------------
Date, trading in the Company's Common Stock shall not have been suspended by the
Commission (except for any suspension of trading of limited duration agreed to
by the Company, which suspension shall be terminated prior to Closing), and, at
any time prior to the Closing, trading in securities generally as reported by
Bloomberg Financial Markets ("Bloomberg") shall not have been suspended or
---------
limited, or minimum prices shall not have been established on securities whose
trades are reported by Bloomberg, or on the New York Stock Exchange, or on the
OTC Bulletin Board, nor shall a banking moratorium have been declared either by
the United States or New York State authorities, nor shall there have occurred
any material outbreak or escalation of hostilities or other national or
international calamity or crisis of such magnitude in its effect on, or any
material adverse change in any financial market which, in each case, in the
judgment of such Purchaser, makes it impracticable or inadvisable to purchase
the Preferred Shares.
(d) No Injunction. No statute, rule, regulation, executive order,
-------------
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(e) No Proceedings or Litigation. No action, suit or proceeding
----------------------------
before any arbitrator or any governmental authority shall have been commenced,
and no investigation by any governmental authority shall have been threatened,
against the Company or any subsidiary, or any of the officers, directors or
affiliates of the Company or any subsidiary seeking to restrain, prevent or
change the transactions contemplated by this Agreement, or seeking damages in
connection with such transactions.
(f) Certificate of Designations of Rights and Preferences. Prior to
-----------------------------------------------------
the Closing, the Certificate of Designations of the Rights and Preferences for
the Preferred Shares in the form of Exhibit C attached hereto shall have been
filed with the Secretary of State of Colorado.
(g) Registration Rights Agreement. At the Closing, the Company shall
-----------------------------
have executed and delivered the Registration Rights Agreement to each Purchaser.
(h) Preferred Stock Certificates. The Company shall have executed
----------------------------
and delivered to each Purchaser the stock certificates (in such denominations as
such Purchaser shall request) for the Preferred Shares being purchased by such
Purchaser at the Closing.
(i) Resolutions. The Board of Directors of the Company shall have
-----------
adopted resolutions consistent with Section 2.1(b) above in a form reasonably
acceptable to such Purchaser (the "Resolutions").
-----------
(j) Reservation of Shares. As of the Closing Date, the Company shall
---------------------
have reserved out of its authorized and unissued Common Stock, solely for the
purpose of effecting the conversion of the Preferred Shares and the exercise of
the Warrants, a number of shares of Common Stock equal to at least 200% of the
aggregate number of Conversion Shares issuable upon conversion of the Preferred
Shares outstanding on the Closing Date and the number of Warrant Shares issuable
upon exercise of the number of Warrants assuming such Warrants were granted on
the Closing Date (after giving effect to the Preferred Shares to be issued on
the Closing Date and assuming all such Preferred Shares and Warrants were fully
convertible or exercisable on such date regardless of any limitation on the
timing or amount of such conversions or exercises).
(k) Transfer Agent Instructions. The Irrevocable Transfer Agent
---------------------------
Instructions, in the form of Exhibit F attached hereto, shall have been
delivered to and acknowledged in writing by the Company's transfer agent.
(l) Secretary's Certificate. The Company shall have delivered to
-----------------------
such
Purchaser a secretary's certificate, dated as of the Closing Date, as to (i) the
Resolutions, (ii) the Articles, (iii) the Bylaws, (iv) the Certificate of
Designations, each as in effect at the Closing, and (iv) the authority and
incumbency of the officers of the Company executing the Transaction Documents
and any other documents required to be executed or delivered in connection
therewith.
ARTICLE V
Registration Rights
At the Closing, the Company and each Purchaser shall enter into a
Registration Rights Agreement in the form attached hereto as Exhibit E (the
"Registration Rights Agreement").
------------------------------
ARTICLE VI
Stock Certificate Legend
Section 6.1 Legend. Each certificate representing the Preferred Shares,
------
and, if appropriate, securities issued upon conversion thereof, shall be stamped
or otherwise imprinted with a legend substantially in the following form (in
addition to any legend required by applicable state securities or "blue sky"
laws):
THESE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES")
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER
THAT ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR SKYLYNX
COMMUNICATIONS, INC. (THE "COMPANY") SHALL HAVE RECEIVED AN OPINION OF
ITS COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THAT ACT AND
UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT
REQUIRED.
The Company agrees to reissue certificates representing the Preferred
Shares without the legend set forth above if at such time, prior to making any
transfer of any Preferred Shares or Conversion Shares, such holder thereof shall
give written notice to the Company describing the manner and terms of such
transfer and removal as the Company may reasonably request. Such proposed
transfer will not be effected until: (a) the Company has notified such holder
that either (i) in the opinion of Company counsel, the registration of such
Preferred Shares or Conversion Shares under the Securities Act is not required
in connection with such proposed transfer; or (ii) a registration statement
under the Securities Act covering such proposed disposition has been filed by
the Company with the Commission and has become effective under the Securities
Act; and (b) the Company has notified such holder that either: (i) in the
opinion of Company counsel,
the registration or qualification under the securities or "blue sky" laws of any
state is not required in connection with such proposed disposition, or (ii)
compliance with applicable state securities or "blue sky" laws has been
effected. The Company will use its best efforts to respond to any such notice
from a holder within ten (10) days. In the case of any proposed transfer under
this Section 6, the Company will use reasonable efforts to comply with any such
applicable state securities or "blue sky" laws, but shall in no event be
required, in connection therewith, to qualify to do business in any state where
it is not then qualified or to take any action that would subject it to tax or
to the general service of process in any state where it is not then subject. The
restrictions on transfer contained in Section 6.1 shall be in addition to, and
not by way of limitation of, any other restrictions on transfer contained in any
other section of this Agreement.
ARTICLE VII
Termination
Section 7.1 Termination by Mutual Consent. This Agreement may be
-----------------------------
terminated at any time prior to the Closing by the mutual written consent of the
Company and the Purchasers.
Section 7.2 Other Termination. This Agreement may be terminated by the
-----------------
action of the Board of Directors of the Company or by any one or more of the
Purchasers at any time if the Closing shall not have been consummated by the
Closing Date, as long as the failure to so consummate is not the fault of the
terminating party.
Section 7.3 Effect of Termination. In the event of termination by the
---------------------
Company or any one or more of the Purchasers, written notice thereof shall
forthwith be given to the other party and the transactions contemplated by this
Agreement and the Registration Rights Agreement shall be terminated without
further action by either party. If this Agreement is terminated as provided in
Section 7.1 or 7.2 herein, this Agreement shall become void and of no further
force and effect, except for Sections 9.1 and 9.2, and Article VIII herein.
Nothing in this Section 7.3 shall be deemed to release the Company or any
Purchaser from any liability for any breach under this Agreement or the
Registration Rights Agreement, or to impair the rights of the Company and the
Purchasers to compel specific performance by the other party of its obligations
under this Agreement and the Registration Rights Agreement.
ARTICLE VIII
Indemnification
Section 8.1 General Indemnity. The Company agrees to indemnify and hold
-----------------
harmless the Purchasers (and their directors, officers, affiliates, agents,
successors and assigns) from and against any and all losses, liabilities,
deficiencies, costs, damages and expenses (including, without limitation,
reasonable attorney's fees, charges and disbursements) incurred by the
Purchasers as a result of any inaccuracy in or breach of the representations,
warranties or
covenants made by the Company herein. Each Purchaser, severally but not jointly,
agrees to indemnify and hold harmless the Company and its directors, officers,
affiliates, agents, successors and assigns from and against any and all losses,
liabilities, deficiencies, costs, damages and expenses (including, without
limitation, reasonable attorneys fees, charges and disbursements) incurred by
the Company as result of any inaccuracy in or breach of the representations,
warranties or covenants made by such Purchaser herein.
Section 8.2 Indemnification Procedure. Any party entitled to
-------------------------
indemnification under this Article VIII (an "indemnified party") will give
-----------------
written notice to the indemnifying party of any matters giving rise to a claim
for indemnification; provided, that the failure of any party entitled to
indemnification hereunder to give notice as provided herein shall not relieve
the indemnifying party of its obligations under this Article VIII except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any action, proceeding or claim is brought against an
indemnified party in respect of which indemnification is sought hereunder, the
indemnifying party shall be entitled to participate in and, unless in the
reasonable judgment of the indemnified party a conflict of interest between it
and the indemnifying party may exist with respect of such action, proceeding or
claim, to assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. In the event that the indemnifying party advises an
indemnified party that it will contest such a claim for indemnification
hereunder, or fails, within thirty (30) days of receipt of any indemnification
notice to notify, in writing, such person of its election to defend, settle or
compromise, at its sole cost and expense, any action, proceeding or claim (or
discontinues its defense at any time after it commences such defense), then the
indemnified party may, at its option, defend, settle or otherwise compromise or
pay such action or claim. In any event, unless and until the indemnifying party
elects in writing to assume and does so assume the defense of any such claim,
proceeding or action, the indemnified party's costs and expenses arising out of
the defense, settlement or compromise of any such action, claim or proceeding
shall be losses subject to indemnification hereunder. The indemnified party
shall cooperate fully with the indemnifying party in connection with any
negotiation or defense of any such action or claim by the indemnifying party and
shall furnish to the indemnifying party all information reasonably available to
the indemnified party which relates to such action or claim. The indemnifying
party shall keep the indemnified party fully apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto. If
the indemnifying party elects to defend any such action or claim, then the
indemnified party shall be entitled to participate in such defense with counsel
of its choice at its sole cost and expense. The indemnifying party shall not be
liable for any settlement of any action, claim or proceeding effected without
its prior written consent. Notwithstanding anything in this Article VIII to the
contrary, the indemnifying party shall not, without the indemnified party's
prior written consent, settle or compromise any claim or consent to entry of any
judgment in respect thereof which imposes any future obligation on the
indemnified party or which does not include, as an unconditional term thereof,
the giving by the claimant or the plaintiff to the indemnified party of a
release from all liability in respect of such claim. The indemnification
required by this Article VIII shall be made by periodic payments of the amount
thereof during the course of investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred, so long as the
indemnified party irrevocably agrees to refund such moneys if it is ultimately
determined by a court of competent jurisdiction
that such party was not entitled to indemnification. The indemnity agreements
contained herein shall be in addition to (a) any cause of action or similar
rights of the indemnified party against the indemnifying party or others, and
(b) any liabilities the indemnifying party may be subject to pursuant to the
law.
ARTICLE IX
Miscellaneous
Section 9.1 Fees and Expenses. Except as otherwise set forth in this
-----------------
Agreement, the Registration Rights Agreement or the Certificate of Designations,
each party shall pay the fees and expenses of its advisors, counsel, accountants
and other experts, if any, and all other expenses, incurred by such party
incident to the negotiation, preparation, execution, delivery and performance of
this Agreement. The Company shall pay all stamp or other similar taxes and
duties levied in connection with issuance of the Preferred Shares pursuant
hereto.
Section 9.2 Specific Enforcement, Consent to Jurisdiction.
---------------------------------------------
(a) The Company and the Purchasers acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement or the Registration Rights Agreement were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent or
cure breaches of the provisions of this Agreement or the Registration Rights
Agreement and to enforce specifically the terms and provisions hereof or
thereof, this being in addition to any other remedy to which any of them may be
entitled by law or equity.
(b) Each of the Company and the Purchasers (i) hereby irrevocably
submits to the jurisdiction of the United States District Court sitting in the
Southern District of New York for the purposes of any suit, action or proceeding
arising out of or relating to this Agreement or the Registration Rights
Agreement and (ii) hereby waives, and agrees not to assert in any such suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of such court, that the suit, action or proceeding is brought in an
inconvenient forum or that the venue of the suit, action or proceeding is
improper. Each of the Company and the Purchasers consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address in effect for notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of process and
notice thereof. Nothing in this Section 9.2 shall affect or limit any right to
serve process in any other manner permitted by law.
Section 9.3 Entire Agreement; Amendment. This Agreement contains the
---------------------------
entire understanding of the parties with respect to the matters covered hereby
and, except as specifically set forth herein or in the Transaction Documents or
the Certificate of Designations, neither the Company nor any of the Purchasers
makes any representations, warranty, covenant or undertaking with respect to
such matters. No provision of this Agreement may be waived or amended other
than by a written instrument signed by the Company and the holders of at least
two-thirds (2/3) of the Preferred Shares then outstanding, and no provision
hereof may be waived
other than by an a written instrument signed by the party against whom
enforcement of any such amendment or waiver is sought. No such amendment shall
be effective to the extent that it applies to less than all of the holders of
the Preferred Shares then outstanding. No consideration shall be offered or paid
to any person to amend or consent to a waiver or modification of any provision
of any of the Transaction Documents or the Certificate of Designations unless
the same consideration is also offered to all of the parties to the Transaction
Documents or holders of Preferred Shares, as the case may be.
Section 9.4 Notices. Any notice, demand, request, waiver or other
-------
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery by telex (with correct answer back
received), telecopy or facsimile at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
If to the Company: SkyLynx Communications, Inc.
000 Xxxxx Xxxxxx Xxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, President and CEO
Fax: (000) 000-0000
with copies to: Xxxxxx Xxxx & Xxxxxx LLP
000 Xxxxxxx Xxxxxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: X. Xxxxxxx Xxxxxx
Telephone Number: (000) 000-0000
Fax: (000) 000-0000
If to any Purchaser: At the address of such Purchaser set forth on
Exhibit A to this Agreement, with copies to
Purchaser's counsel as set forth on Exhibit A or as
specified in writing by such Purchaser.
Any party hereto may from time to time change its address for notices by
giving at least ten (10) days written notice of such changed address to the
other party hereto.
Section 9.5 Waivers. No waiver by either party of any default with
-------
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provisions, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise
of any such right accruing to it thereafter.
Section 9.6 Headings. The article, section and subsection headings in
--------
this Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.
Section 9.7 Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of the parties and their successors and assigns. After
Closing, the assignment by a party to this Agreement of any rights hereunder
shall not affect the obligations of such party under this Agreement.
Section 9.8 No Third Party Beneficiaries. This Agreement is intended for
----------------------------
the benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
Section 9.9 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the internal laws of the State of New York, without
giving effect to the choice of law provisions.
Section 9.10 Survival. The representations and warranties of the Company
--------
and the Purchasers contained in: (i) Section 2.1(o) shall survive until the
expiration of the statute of limitations applicable to the matters covered
thereby (giving effect to any waiver, mitigation or extension thereof); (ii)
Section 2.1(s) shall survive until three years after the Closing Date; and (iii)
those contained in Article II, with the exception of Sections 2.1(o) and (s),
shall survive the execution and delivery hereof and the Closing until the date
two years from the Closing Date, and the agreements and covenants set forth in
Articles I, III, V, VII, VIII and IX of this Agreement shall survive the
execution and delivery hereof and the Closing hereunder until the Purchasers in
the aggregate beneficially own (determined in accordance with Rule 13d-3 under
the Exchange Act) less than 2% of the total combined voting power of all voting
securities then outstanding, provided, that Sections 3.1, 3.2, 3.4, 3.5, 3.7,
3.8, 3.9, 3.10, 3.11 and 3.12 shall not expire until the Registration Statement
required by Section 2 of the Registration Rights Agreement is no longer required
to be effective under the terms and conditions of Registration Rights Agreement.
Section 9.11 Counterparts. This Agreement may be executed in any number
------------
of counterparts, all of which taken together shall constitute one and the same
instrument and shall become effective when counterparts have been signed by each
party and delivered to the other parties hereto, it being understood that all
parties need not sign the same counterpart. In the event any signature is
delivered by facsimile transmission, the party using such means of delivery
shall cause four additional executed signature pages to be physically delivered
to the other parties within five days of the execution and delivery hereof.
Section 9.12. Publicity. The Company agrees that it will not disclose, and
---------
will not include in any public announcement, the name of the Purchasers, unless
and until such disclosure is required by law or applicable regulation, and then
only to the extent of such requirement.
Section 9.13 Severability. The provisions of this Agreement, the
------------
Certificate of Designations and the Registration Rights Agreement are severable
and, in the event that any court of competent jurisdiction shall determine that
any one or more of the provisions or part of the provisions contained in this
Agreement, the Certificate of Designations or the Registration Rights Agreement
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision or part of a provision of this Agreement, the Certificate of
Designations or the Registration Rights Agreement shall be reformed and
construed as if such invalid or illegal or unenforceable provision, or part of
such provision, had never been contained herein, so that such provisions would
be valid, legal and enforceable to the maximum extent possible.
Section 9.14 Further Assurances. From and after the date of this
------------------
Agreement, upon the request of any Purchaser or the Company, each of the Company
and the Purchasers shall execute and deliver such instrument, documents and
other writings as may be reasonably necessary or desirable to confirm and carry
out and to effectuate fully the intent and purposes of this Agreement, the
Preferred Shares, the Conversion Shares, the Warrants, the Warrant Shares, the
Certificate Designations, and the Registration Rights Agreement.
[Remainder of this page intentionally left blank.]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorize officer as of the date first above
written.
SKYLYNX COMMUNICATIONS, INC.
By:____________________________________
Name:
Title:
_______________________________________
By:____________________________________
Name:
Title:
_______________________________________
By:____________________________________
Name:
Title:
_______________________________________
By:____________________________________
Name:
Title:
EXHIBIT A to the
SERIES D CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
FOR SKYLYNX COMMUNICATIONS, INC.
Names and Address Number of Preferred Dollar Amount
of Purchasers Shares Purchased of Investment Issuance Date
------------------- -------------------- --------------- -------------
