1
EXHIBIT (a)
SECURITIES PURCHASE AGREEMENT
BY AND BETWEEN
PROVIDENCE EQUITY PARTNERS III L.P.
J K & B CAPITAL III L.P.
WIND POINT PARTNERS III, L.P.
AND
MGC COMMUNICATIONS, INC.
DATED AS OF APRIL 5, 1999
2
TABLE OF CONTENTS
ARTICLE I - DEFINITIONS......................................................1
SECTION 1.1. DEFINITIONS......................................................1
SECTION 1.2. HEREOF, HEREIN, ETC..............................................6
SECTION 1.3. COMPUTATION OF TIME PERIODS......................................6
ARTICLE II - SALE AND PURCHASE OF PURCHASED SECURITIES........................7
SECTION 2.1. SALE AND PURCHASE OF THE PURCHASED SECURITIES....................7
SECTION 2.2. CLOSING..........................................................7
SECTION 2.3. USE OF PROCEEDS..................................................7
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................7
SECTION 3.1. ORGANIZATION AND EXISTENCE.......................................7
SECTION 3.2. AUTHORIZATION; NO CONFLICTS......................................8
SECTION 3.3. ENFORCEABILITY...................................................8
SECTION 3.4. CAPITALIZATION...................................................9
SECTION 3.5. SUBSIDIARIES; OTHER OWNERSHIP INTERESTS..........................9
SECTION 3.6. REPORTS AND FINANCIAL STATEMENTS.................................9
SECTION 3.7. INDEBTEDNESS AND LIENS..........................................10
SECTION 3.8. ACCOUNTS RECEIVABLE AND BAD DEBTS...............................10
SECTION 3.9. TAXES...........................................................10
SECTION 3.10. TITLE TO ASSETS.................................................11
SECTION 3.11. MATERIAL CONTRACTS AND OBLIGATIONS..............................11
SECTION 3.12. PROPRIETARY RIGHTS..............................................13
SECTION 3.13. NECESSARY PROPERTY..............................................13
SECTION 3.14. NECESSARY LICENSES..............................................13
SECTION 3.15. COMPLIANCE WITH LAW.............................................14
SECTION 3.16. ENVIRONMENTAL COMPLIANCE........................................15
SECTION 3.17. NO MATERIAL ADVERSE CHANGES.....................................17
SECTION 3.18. NO BROKERS......................................................17
SECTION 3.19. NETWORK.........................................................17
SECTION 3.20. CUSTOMERS AND SUPPLIERS.........................................18
SECTION 3.21. YEAR 2000 COMPLIANCE............................................18
SECTION 3.22. FINANCIAL REPORTS AND SEC DOCUMENTS.............................18
SECTION 3.23. DISCLOSURE......................................................19
ARTICLE IV - PURCHASERS' REPRESENTATIONS......................................19
SECTION 4.1. ORGANIZATION AND GOOD STANDING...................................19
SECTION 4.2. AUTHORIZATION....................................................19
SECTION 4.3. ENFORCEABILITY...................................................19
SECTION 4.4. INVESTMENT INTENT................................................19
ARTICLE V - CONDITIONS TO PURCHASERS' OBLIGATION TO PURCHASE AND THE
COMPANY'S OBLIGATION TO SELL..................................................20
SECTION 5.1. PURCHASERS' CLOSING CONDITIONS...................................20
SECTION 5.2 COMPANY'S CLOSING CONDITIONS.....................................22
ARTICLE VI - COVENANTS APPLICABLE TO THE COMPANY WHILE ANY
PURCHASED SECURITIES ARE OUTSTANDING..........................................22
SECTION 6.1. FURTHER ASSURANCES...............................................22
-i-
3
ARTICLE VII - DELIVERY OF FINANCIAL AND OTHER REPORTS WHILE ANY
PURCHASED SECURITIES ARE OUTSTANDING..........................................22
SECTION 7.1. MONTHLY STATEMENTS...............................................23
SECTION 7.2. OTHER FINANCIAL INFORMATION......................................23
SECTION 7.5. OFFICERS' CERTIFICATES...........................................23
SECTION 7.6. NOTICE OF LITIGATION, DEFAULTS, ETC..............................23
SECTION 7.7. OTHER INFORMATION................................................24
ARTICLE VIII - EXPENSES; INDEMNITY............................................24
SECTION 8.1. EXPENSES.........................................................24
SECTION 8.2. INDEMNIFICATION..................................................25
SECTION 8.3. BROKERS' FEES....................................................25
ARTICLE IX - NOTICES..........................................................26
ARTICLE X - SURVIVAL OF COVENANTS, AGREEMENTS, REPRESENTATIONS
AND WARRANTIES, TRANSFER......................................................27
ARTICLE XI - AMENDMENTS AND WAIVERS...........................................27
ARTICLE XII - WAIVER OF JURY TRIAL............................................27
ARTICLE XIII - GOVERNING LAW..................................................27
ARTICLE XIV - PUBLIC ANNOUNCEMENTS............................................28
ARTICLE XV - TIME OF THE ESSENCE..............................................28
ARTICLE XVI - ENTIRE AGREEMENT; COUNTERPARTS; SECTION HEADINGS................28
-ii-
4
LIST OF EXHIBITS AND SCHEDULES
Exhibit A Certificate of Designation
Exhibit B Form of Registration Rights Agreement
Exhibit C Form of Securityholders' Agreement
Exhibit D Form of Opinion of Counsel to the Company
Exhibit E Form of Opinion of Regulatory Counsel to the Company
Schedule 2.1: List of Purchasers
Schedule 3.1(a): Company's Foreign Qualification
Schedule 3.1(b): Subsidiaries' Qualification
Schedule 3.4(a): Capitalization
Schedule 3.4(b): Options, Etc.
Schedule 3.4(c): Registration Rights
Schedule 3.5: Subsidiaries; Other Interests
Schedule 3.6(a)(i): Historical Financial Statements
Schedule 3.6(a)(ii) February Balance Sheet
Schedule 3.6(a)(iii) Projections
Schedule 3.8: Accounts Receivable
Schedule 3.9: Taxes
Schedule 3.10: Title to Assets
Schedule 3.11(a): Material Contracts
Schedule 3.11(b): Material Contracts Exceptions
Schedule 3.12(a): Proprietary Rights
Schedule 3.12(c): Proprietary Rights Exceptions
Schedule 3.13: Necessary Property
-i-
5
Schedule 3.14: Licenses
Schedule 3.15: Compliance with Law
Schedule 3.17: No Material Adverse Change
Schedule 3.18: Brokers
Schedule 3.19: Network
Schedule 3.20: Customers and Suppliers
Schedule 3.21: Year 2000 Compliance Plan
-ii-
6
SECURITIES PURCHASE AGREEMENT
MGC COMMUNICATIONS, INC.
0000 Xxxxx Xxxxxxx Xxxxx
Xxx Xxxxx, Xxxxxx 00000
As of April 5, 1999
Providence Equity Partners III L.P.
000 Xxxxx Xxxxxx
00 Xxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxx Xxxxxx 00000
JK&B Capital III L.P.
000 X. Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Wind Point Partners III, L.P.
Xxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
Ladies and Gentlemen:
The undersigned, MGC Communications, Inc., a Nevada corporation (the
"Company"), hereby agrees with you as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITIONS. Capitalized terms used herein and not
otherwise defined herein shall have the meanings set forth in this Article I:
Affiliate. The term "Affiliate" shall mean with respect to any Person,
any other Person that would be considered to be an affiliate of such Person
under Rule 144(a) of the Rules and Regulations of SEC, as in effect on the date
hereof.
February Balance Sheet. The term "February Balance Sheet" shall have
the meaning specified in Section 3.6(a)(ii).
7
Balance Sheet Date. The term "Balance Sheet Date" shall have the
meaning specified in Section 3.6(a)(i).
Business Day. The term "Business Day" shall mean any day other than
Saturday, Sunday, a federal holiday or other day on which commercial banks in
the State of Rhode Island or Las Vegas, Nevada are required or permitted to
close by law.
Capital Expenditures. The term "capital expenditures" means capital
expenditures determined in accordance with GAAP, including in any event capital
lease obligations.
Charter. The term "Charter" means the certificate or articles of
incorporation, by-laws, statute, constitution, joint venture, certificate of
limited partnership, partnership agreement, articles of organization, limited
liability company operating agreement or other organizational document of any
Person other than an individual, each as from time to time amended or modified.
Closing Date. The term "Closing Date" shall have the meaning specified
in Section 2.2 or such other date as the Company and the Purchasers may agree
upon.
Code. The term "Code" shall mean the Internal Revenue Code of 1986, as
amended.
Common Stock. The term "Common Stock" shall mean the Common Stock,
$.001 par value, of the Company.
Company. The term "Company" shall mean MGC Communications, Inc., a
Nevada corporation.
Current Financial Statements. The term "Current Financial Statements"
shall have the meaning specified in Section 3.6(a)(ii).
Environment. The term "Environment" shall mean soil, surface waters,
groundwater, land, stream sediments, surface or subsurface strata, ambient air
and any environmental medium, whether indoors or outdoors.
Environmental Laws. The term "Environmental Laws" shall mean all
federal, foreign, state, local or municipal environmental, health or
safety-related laws, regulations, by-laws, rules, ordinances, judicial or
administrative decrees or decisions, orders or requirements applicable to the
Company or any of its Subsidiaries relating to the physical or environmental
condition or use of their respective properties, their respective businesses or
pollution or protection of human health or the Environment, including, without
limitation, the Comprehensive Environmental Response Compensation and Liability
Act, 42 U.S.C., ss.9601, et seq., as amended ("CERCLA"), the Resource
Conservation and Recovery Act, 42 U.S.C. ss.6901, et seq., as amended, the Clean
Air Act, 42 U.S.C. ss. 7401 et seq., as amended, the Clean Water Act, 33 U.S.C
ss.1251, et seq., the Toxic Substance Control Act, 15 U.S.C ss.2601 et seq., the
Occupational Safety and Health Act, laws relating to Releases or threatened
Releases of Hazardous Substances into the Environment or
2
8
otherwise relating to the manufacture, generation, processing, distribution,
use, treatment, storage, abatement, existence, holding, Release, transport or
handling of Hazardous Substances, and all laws and regulations with regard to
recordkeeping, notification, disclosure and reporting requirements respecting
Hazardous Substances.
Environmental Permit. The term "Environmental Permit" shall have the
meaning specified in Section 3.15(a).
Equity Securities. The term "Equity Securities" means all shares of
capital stock of the Company, including (i) all classes of shares of capital
stock, voting and non-voting (including, without limitation, the Purchased
Securities), (ii) any warrants, options or other rights to subscribe for or to
acquire, directly or indirectly, whether pursuant to any division or split of
any class of shares of capital stock of the Company or in connection with a
combination, exchange, reorganization, recapitalization, reclassification,
merger, consolidation or similar business combination transaction involving the
Company or otherwise, (iii) any other equity interests in the Company or any
bonds, notes, debentures, or other securities convertible into or exchangeable
for, directly or indirectly, any shares of capital stock or equity interests of
the Company and (iv) any interests in any of the foregoing in each case
outstanding at any time.
Family Members. The term "Family Members" shall mean, as applied to any
individual, a spouse, child, grandchild, parent, brother or sister thereof or
any spouse of any of the foregoing, and each trust created for the benefit of
one or more of such Persons and each custodian of a property of one or more such
Persons.
FCC. The term "FCC" shall mean the Federal Communications Commission.
GAAP. The term "GAAP" shall mean generally accepted accounting
principles applied on a basis consistent with prior periods and such that a
chartered accountant would, insofar as the use of accounting principles is
pertinent, be in a position to deliver an unqualified opinion as to financial
statements in which such principles have been properly applied.
Governmental Authority. The term "Governmental Authority" shall mean
any government or any agency, bureau, board, commission, court, department,
official, political subdivision, tribunal or other instrumentality of any
government (foreign, federal, local or otherwise) and shall include any
international regulatory or trade body or organization and the FCC and any State
Regulatory Agency.
Hazardous Substances. The term "Hazardous Substances" means any
pollutant, contaminant, toxic substance, hazardous waste, hazardous material, or
hazardous substance, or any oil, petroleum or petroleum product, each as defined
or listed in, or classified pursuant to, any Environmental Laws.
Historical Financial Statements. The term "Historical Financial
Statements" shall have the meaning specified in Section 3.6(a)(i).
3
9
Income Statement. The term "Income Statement" shall have the meaning
specified in Section 3.6(a)(ii).
Indebtedness. The term "Indebtedness" shall mean all obligations,
contingent (to the extent required to be reflected in financial statements
prepared in accordance with GAAP) and otherwise, which in accordance with GAAP
should be classified on the obligor's balance sheet as liabilities, including
without limitation, in any event and whether or not so classified: (i) all debt
and similar monetary obligations, whether direct or indirect; (ii) all
liabilities secured by any mortgage, pledge, security interest, lien, charge or
other encumbrance existing on property owned or acquired subject thereto,
whether or not the liability secured thereby shall have been assumed; (iii) all
guarantees, endorsements and other contingent obligations whether direct or
indirect in respect of Indebtedness or performance of others, including any
obligation to supply funds to or in any manner to invest in, directly or
indirectly, the debtor, to purchase Indebtedness, or to assure the owner of
Indebtedness against loss, through an agreement to purchase goods, supplies or
services for the purpose of enabling the debtor to make payment of the
Indebtedness held by such owner or otherwise and (iv) obligations to reimburse
issuers of any letters of credit.
Intellectual Property Rights. The term "Intellectual Property Rights"
shall mean all right, title and interest of the Company or any of its
Subsidiaries in and to all licenses (other than licenses with respect to the
Company's or any of its Subsidiaries' use of off-the-shelf software programs),
trademarks, tradenames, service marks, patents, copyrights, processes of every
kind and description, manufacturing and technical know-how and information,
production and technical data, computer data, printouts and software, trade
names, logos, trade secrets and similar properties (including, without
limitation, all registrations, renewals or applications for registration or
renewal of any of them, in each case whether completed, pending or in the
process of preparation), and all licenses, royalty agreements, permits and
authorizations with respect to any of the foregoing, in the United States or
anywhere else in the world, now or previously used, acquired or developed by or
for the Company or any of its Subsidiaries, together with the goodwill of the
Company's or any of its Subsidiaries' business associated with the foregoing.
IRU. The term "IRU" shall mean the right to use a telecommunications
system with most of the rights and duties of ownership but without the right to
control or manage the facility.
Leased Real Property. The term "Leased Real Property" shall have the
meaning specified in Section 3.11(a)(iii).
Licenses. The term "Licenses" shall mean all licenses, permits,
consents, approvals, concessions and authorizations of all Governmental
Authorities, whether foreign, federal, state or local, including, without
limitation, the Federal Communications Commission and any State Regulatory
Agency and their equivalents in foreign countries.
Lien. The term "Lien" shall mean (a) any encumbrance, mortgage, pledge,
lien, charge or other security interest of any kind upon any property or assets
of any character, or upon the income or profits therefrom; (b) any acquisition
of or agreement to have an option to acquire any property or assets upon
conditional sale or other title retention agreement, device or arrangement
4
10
(including a capitalized lease); or (c) any sale, assignment, pledge or other
transfer for security of any accounts, general intangibles or chattel paper,
with or without recourse.
Majority Purchasers. The term "Majority Purchasers" shall mean, at any
time, the holders of more than fifty percent (50%) of the outstanding Purchased
Securities.
Material Adverse Effect. The term "Material Adverse Effect" shall mean,
with respect to any Person, any effect that is, or series of related effects
that are, in the aggregate, materially adverse to the business, assets,
properties, condition (financial or otherwise) or prospects of such Person.
Person. The term "Person" shall mean an individual, partnership,
limited liability company, corporation, association, trust, joint venture,
unincorporated organization and any Governmental Authority.
Purchased Securities. The term "Purchased Securities" shall mean the
Series B Preferred being purchased by the Purchasers pursuant to Section 2.1 of
this Agreement, the Common Stock issuable upon conversion of the Series B
Preferred or otherwise and any capital stock or other securities of the Company
issued or issuable in exchange therefor upon an exchange, conversion,
reorganization, reclassification, recapitalization, merger, consolidation or
other similar business transaction involving the Company, its Subsidiaries or
otherwise.
Purchaser. The term "Purchaser" shall mean the several purchasers named
in Schedule 2.1 (individually, a "Purchaser" and collectively, the "Purchasers")
and their respective successors and assigns.
Related Agreements. The term "Related Agreements" shall mean the
Securityholders' Agreement and the Registration Rights Agreement.
Release. The term "Release" shall mean a "Release" as defined in any
Environmental Laws, including, but not limited to, any releasing, spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, disposing or dumping into the Environment in violation of any
Environmental Laws.
Registration Rights Agreement. The term "Registration Rights Agreement"
shall mean that certain Registration Rights Agreement, dated the Closing Date,
by and among the Company, and the Purchasers, in the form of Exhibit B attached
hereto, as the same may be amended, modified or supplemented from time to time.
Securities Act. The term "Securities Act" shall mean all applicable
securities laws, rules, regulations, notices and policies in force in the United
States, as amended, modified or supplemented from time to time.
SEC. The term "SEC" shall mean the Securities and Exchange Commission.
5
11
Securityholders' Agreement. The term "Securityholders' Agreement" shall
mean that certain Securityholders' Agreement among the Company, the Purchasers
and certain holders of the Company's outstanding Common Stock, in the form of
Exhibit C attached hereto, as the same may be amended, modified or supplemented
from time to time.
Series B Preferred. The term "Series B Preferred" shall mean the Series
B Preferred Stock, $.001 par value, of the Company.
Senior Secured Notes. The term "Senior Secured Notes" shall mean the
$160,000,000 principal amount of 13% Senior Secured Notes due 2004 that have
been issued pursuant to an Indenture dated as of September 29, 1997.
State Regulatory Agencies. The term "State Regulatory Agencies" means
any of the various state regulatory agencies with primary regulatory
jurisdiction over telecommunications matters.
Subsidiary. The term "Subsidiary" shall mean any Person of which the
Company or other specified Person now or hereafter shall at the time own,
directly or indirectly through a Subsidiary, at least a majority of the
outstanding Equity Securities (or other shares of beneficial interest) entitled
to vote generally.
"Tax" or "Taxes". The term "Tax" or "Taxes" shall mean all taxes,
charges, fees, levies, imposts and other assessments, including all income,
sales, use, goods and services, value added, capital, capital gains, alternative
net worth, transfer, profits, withholding, payroll, employer health, excise,
real property and personal property taxes, and any other taxes, customs duties,
fees, assessments or similar charges in the nature of a tax, including, without
limitation, pension plan contributions and workers compensation premiums,
together with any interest, fines and penalties imposed by any Governmental
Authority, and whether disputed or not.
SECTION 1.2. HEREOF, HEREIN, ETC. The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. Unless otherwise specified herein, the term "or" has the inclusive
meaning represented by the term "and/or" and the term "including" is not
limiting. All references as to "Sections", "Subsections", "Articles",
"Schedules" and "Exhibits" shall be to Section, Subsections, Articles, Schedules
and Exhibits, respectively, of this Agreement unless otherwise specifically
provided.
SECTION 1.3. COMPUTATION OF TIME PERIODS. In the computation of periods
of time from a specified date to a later specified date, unless otherwise
specified herein the words "commencing on" mean "commencing on and including",
the word "from" means "from and including" and the words "to" and "until" each
means "to and including".
6
12
ARTICLE II
SALE AND PURCHASE OF PURCHASED SECURITIES
SECTION 2.1. SALE AND PURCHASE OF THE PURCHASED SECURITIES. Subject to
all of the terms and conditions hereof and in reliance on the representations
and warranties set forth or referred to herein, the Company agrees to issue and
sell to each Purchaser and each Purchaser agrees to purchase, on the Closing
Date, the number of Purchased Securities set forth opposite the name of such
Purchaser on Schedule 2.1, at a purchase price per share equal to $9.00.
SECTION 2.2. CLOSING. The closing of the purchase and sale of the
Purchased Securities contemplated by Section 2.1 (the "Closing") will take place
at the offices of Xxxxxxx & Xxxxxx, 0000 XxxxXxxxxx Xxxxx, Xxxxxxxxxx, Xxxxx
Xxxxxx 00000 at 10:00 a.m. on a mutually agreeable date within five (5) business
days of satisfaction of the Conditions to Closing contained in Article V (the
"Closing Date"). Subject to the satisfaction of the conditions to Closing set
forth in Article V, as payment in full for the Purchased Securities being
purchased by the Purchasers under this Agreement on the Closing Date, each
Purchaser shall deliver to the Company, in immediately available funds, the
amount set forth opposite such Purchaser's name under the heading "Aggregate
Purchase Price of the Purchased Securities" on Schedule 2.1.
SECTION 2.3. USE OF PROCEEDS. Proceeds from the sale of the Purchased
Securities hereunder shall be used for the expansion of the Company's
telecommunications network and sales and marketing program and for working
capital and general corporate purposes, as determined from time to time by the
Company's Board of Directors and consistent with the Company's business plan in
effect at such time.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce the Purchasers to enter into this Agreement and to
purchase the Purchased Securities, the Company hereby represents and warrants
that:
SECTION 3.1. ORGANIZATION AND EXISTENCE. (a) The Company is duly
organized, validly existing and in good standing in its jurisdiction of
organization and is duly qualified as a foreign corporation and authorized to do
business in all other jurisdictions in which the nature of its business or
property makes such qualification necessary except where the failure to so
qualify would not have a Material Adverse Effect. Schedule 3.1(a) lists all of
the jurisdictions in which the Company is qualified as a foreign corporation and
the dates of such qualifications. The Company has the power to own its
properties and to carry on its business as now conducted and as proposed to be
conducted. The corporate headquarters, chief executive office and principal
place of business of the Company is located in the United States.
(b) Each of the Company's Subsidiaries is duly organized, validly
existing and in good standing in its jurisdiction of incorporation and is duly
qualified as a foreign entity and
7
13
authorized to do business in all other jurisdictions in which the nature of its
business or property makes such qualification necessary and where the failure to
so qualify would not have a Material Adverse Effect. Schedule 3.1(b) lists all
of Company's Subsidiaries and their states of incorporation. Each of the
Subsidiaries has the power to own its properties and to carry on its business as
now conducted and as proposed to be conducted. The Company holds of record all
outstanding shares of each Subsidiary.
SECTION 3.2. AUTHORIZATION; NO CONFLICTS. The execution, delivery and
performance by the Company of this Agreement and of each Related Agreement, and
the issuance and sale by the Company of the Purchased Securities hereunder, (a)
are within its power and authority, and (b) have been duly authorized by all
necessary action of the Company and its stockholders and by all other requisite
proceedings. Neither the execution and delivery by the Company of this Agreement
or any Related Agreement nor the consummation by the Company of the transactions
contemplated thereby (including, without limitation, the purchase and sale of
the Purchased Securities hereunder) (a) will violate any provision of the
Charter of the Company or any of its Subsidiaries, (b) will violate or conflict
with any applicable statute, law, ordinance, rule, regulation, order, judgment,
writ, injunction, license, permit or decree applicable to the Company or any of
its Subsidiaries, (c) will conflict with or constitute a violation of or a
default (or an event which with notice or lapse of time or both, would
constitute a default) under, or will result in the termination of, or accelerate
performance required by, any Contract to which the Company or any of its
Subsidiaries is a party or to which any of the assets or properties of the
Company or any of its Subsidiaries are subject, (d) will result in the creation
of any Lien upon any of the Equity Securities of the Company or any of its
Subsidiaries or upon any of the property or assets of the Company or any of its
Subsidiaries, or (e) will require the consent, authorization or approval of, or
notice to or filing or registration with, any Person, other than the filing
under the Xxxx-Xxxxx Act, as described in Section 5.1(h) and stockholder
approval, if required by Nasdaq.
SECTION 3.3. ENFORCEABILITY. The execution and delivery by the Company
of this Agreement and of each of the Related Agreements, and the issuance and
sale by the Company of the Purchased Securities hereunder, will result in
legally binding obligations of the Company enforceable against the Company in
accordance with the respective terms and provisions hereof and thereof, subject,
however, to limitations with respect to enforcement imposed by law in connection
with bankruptcy or similar proceedings, or to the extent that equitable remedies
such as specific performance and injunction are in the discretion of the court
from which they are sought.
SECTION 3.4. CAPITALIZATION.
(a) Schedule 3.4(a) accurately sets forth the number, type and class of
Equity Securities the Company is authorized to issue, the name and address of
those Persons owning 5% or more of the Company's outstanding Equity Securities
immediately prior to giving effect to the transactions contemplated hereby and
the number and class of Equity Securities owned by each such record owner. All
of the Company's issued Equity Securities have been duly authorized, validly
issued and outstanding and are fully paid and non-assessable.
8
14
(b) Options, Etc. Except as set forth on Schedule 3.4(b) and except for
the rights of the Purchasers hereunder, no Person has any rights (either
pre-emptive or otherwise) or options to subscribe for or purchase from the
Company, or any warrants or other agreements providing for or requiring the
issuance by the Company of, any Equity Securities or other securities
convertible into or exchangeable for, or exercisable into Equity Securities of
the Company, or any voting trusts, proxies or agreements relating to the voting
of the Company's or any Subsidiary's Equity Securities. The number of shares of
Common Stock available for issuance under the Company's Stock Option Plan is
2,640,000. Schedule 3.4(b) sets forth the (i) name of each Person holding such
convertible or exchangeable securities, (ii) the type of security, (iii) the
amount of shares of Common Stock issuable upon exercise of such securities, and
(iv) the exercise price of such securities.
(c) Registration Rights. Except as set forth on Schedule 3.4(c) and as
provided under the Registration Rights Agreement, no other holder of Equity
Securities has registration rights with respect to such Equity Securities.
SECTION 3.5. SUBSIDIARIES; OTHER OWNERSHIP INTERESTS. Except as set forth
on Schedule 3.5 hereto, the Company does not have any Subsidiaries (foreign or
domestic) and does not own or hold of record and/or beneficially own or hold,
directly or through a Subsidiary, any Equity Securities of any corporation,
general or limited partnership, limited liability company, business trust or
joint venture or in any other unincorporated trade or business enterprise.
Except as set forth on Schedule 3.5 hereto, all outstanding Equity Securities of
each such Subsidiary and such other business enterprises is owned by the Company
or another Subsidiary of the Company as set forth on such Schedule 3.5, free and
clear of any Lien, is validly issued and outstanding, and is fully paid and
non-assessable, and there are no commitments for the purchase or sale of, and no
options, warrants or other rights to subscribe for or purchase, any Equity
Securities of any such Subsidiary.
SECTION 3.6. REPORTS AND FINANCIAL STATEMENTS.
(a) Each Purchaser has heretofore been furnished with the
following:
(i) true and complete copies of the audited
consolidated balance sheet of the Company as of December 31,
1998 (the "Balance Sheet Date"), December 31, 1997 and
December 31, 1996 and the related audited statements of
earnings, retained earnings and cash flows for the years then
ended prepared by Xxxxxx Xxxxxxxx LLP (with the exception of
the financial statements for 1996, which were audited by KPMG
LLP) and certified without qualification by such accounting
firm to have been prepared in accordance with GAAP, such
balance sheets and income statements being attached hereto as
Schedule 3.6(a)(i) (collectively, the "Historical Financial
Statements");
9
15
(ii) the consolidated balance sheet and statement
of income and cash flow of the Company and its subsidiaries as
of February 28, 1999 (the "February Balance Sheet") and
statement of income for the two-month period ended February
28, 1999 (the "Income Statement", and together with the
February Balance Sheet, the "Current Financial Statements"),
such February Balance Sheet being attached hereto as Schedule
3.6(a)(ii); and
(iii) the budget for the Company and its
Subsidiaries for 1999 and the projections of the future
performance of the Company and its Subsidiaries, on a
consolidated basis, including annual income, net profits and
cash flows for each year of the three-year period ending 2001
and attached hereto as Schedule 3.6(a)(iii) (collectively, the
"Projections").
(b) The Projections have been prepared in good faith and are based
on what the Company and its management believe to be a reasonable assessment of
the future performance of the Company and its Subsidiaries. All material
assumptions used in the preparation of the Projections are set forth in the
notes thereto. Notwithstanding the foregoing, no representation is made that the
projections will be attained.
SECTION 3.7. INDEBTEDNESS AND LIENS. Neither the Company nor any of its
Subsidiaries has Indebtedness or Liens upon any of their properties other than
those which are reflected on the February Balance Sheet and Indebtedness
incurred in the ordinary course of business since February 28, 1999.
SECTION 3.8. ACCOUNTS RECEIVABLE AND BAD DEBTS. All notes and accounts
receivable of the Company and its Subsidiaries shown on the February Balance
Sheet were generated for valid consideration in the ordinary course of business.
Attached as Schedule 3.8 is a true, complete and accurate list as of February
28, 1999 of (i) the amount of accounts receivable of the Company and its
Subsidiaries which had not been paid within sixty (60) days of the date due and
the amount thereof and which had not been paid within ninety (90) days of the
date due and the amount thereof, (ii) the aggregate amount of accounts
receivable of the Company and its Subsidiaries that were written off in each of
fiscal year 1997 and fiscal year 1998 and (iii) the aggregate amount of
obligations owed to the Company or any of its Subsidiaries which have been
classified as bad debts, and with respect to each such obligation in excess of
$1,000, the name of each debtor and the total amount due from each such debtor.
SECTION 3.9. TAXES.
(a) Each of the Company and its Subsidiaries has prepared and
filed on time with all appropriate Governmental Authorities all Tax returns and
other material documents that it has been required to file in respect of any
Taxes for all fiscal periods ending on or prior to the Closing Date and all such
returns or other material documents are correct and complete in all material
respects.
10
16
(b) Each of the Company and its Subsidiaries has paid in full all
Taxes due on or before the date hereof and, in the case of such Taxes accruing
on or before such date that are not due on or before such date, the Company has
made adequate provision in its books and records and financial statements
including the February Balance Sheet referred to in Section 3.6(a)(ii) for such
payment.
(c) Each of the Company and its Subsidiaries has withheld from
each payment made to any of its present or former employees, officers, directors
and managers all amounts required by law to be withheld or remitted. Each of the
Company and its Subsidiaries has remitted all pension plan and social security
contributions and other Taxes payable by it in respect of its employees. Each of
the Company and its Subsidiaries has charged, collected and remitted all Taxes
as required under applicable legislation on any sale, supply or delivery
whatsoever, made by the Company or any of its Subsidiaries.
(d) Except as set out in Schedule 3.9, there are no material
reassessments of Taxes of the Company or any of its Subsidiaries that have been
issued and are outstanding. No Governmental Authority has challenged, disputed
or questioned the Company or any of its Subsidiaries in respect of any Taxes or
of any Tax returns, filings or other reports filed under any statute providing
for such Taxes.
SECTION 3.10. TITLE TO ASSETS. Except as disclosed on Schedule 3.10,
the Company and its Subsidiaries own all of their assets, and have good and
marketable title with respect thereto, reflected in the February Balance Sheet,
subject to no Liens.
SECTION 3.11. MATERIAL CONTRACTS AND OBLIGATIONS. (a) Attached hereto
as Schedule 3.11(a) is a true, complete and accurate list, categorized by
subject matter, of all of the following material outstanding contracts, plans,
leases, and commitments and other agreements (collectively "Contracts") entered
into by the Company or any of its Subsidiaries which are in writing or have been
orally agreed to by the Company or any of its Subsidiaries:
(i) each operating agreement with a long-distance provider or
local exchange carrier providing for the carriage and/or
exchange of telecommunications traffic;
(ii) each Contract relating to the lease of or right to use, either
as lessor or lessee, (x) fiber optic cable, (y) collocating
equipment and (z) switches, setting forth the names of the
lessor and lessee and a description of the property and
property interest leased, in each case involving an amount in
excess of $50,000 for a given year;
(iii) each Contract relating to the lease of real property (the
"Leased Real Property"), either as lessor or lessee setting
forth the names of the lessor and lessee, the location of the
real property, and its use;
11
17
(iv) all Contracts for the purchase or sale of services, materials,
products or supplies which involve aggregate payments by the
Company or any of its Subsidiaries of more than $100,000 or
involve aggregate payments to the Company or any of its
Subsidiaries of more than $100,000, or which were entered into
other than in the ordinary course of business of the Company
or any of its Subsidiaries;
(v) all Contracts or arrangements providing for stock options or
stock purchases, bonuses, pensions, deferred or incentive
compensation, retirement or severance payments,
profit-sharing, insurance or other benefit plans or programs
for any officer, consultant, director or employee of the
Company or any of its Subsidiaries;
(vi) all Contracts for construction or for the purchase of real
estate, improvements, fixtures, equipment, machinery and other
items which under GAAP constitute capital expenditures and
which individually or in the aggregate for any related group
of items involve expenditures of the Company or any of its
Subsidiaries in excess of $100,000;
(vii) all Contracts relating in any way to Indebtedness of the
Company or its Subsidiaries, except for contracts individually
involving less than $100,000;
(viii) all Contracts substantially restricting the Company or any of
its Subsidiaries from engaging in any line of business or
competing with any Person or in any geographical area, or from
using or disclosing any information in its possession (other
than routine supplier and customer confidentiality
agreements);
(ix) all joint venture Contracts and other Contracts involving a
sharing of profits, revenue or cash flow, including any such
Contracts related to the sharing of revenue, profit or cash
flow from the lease of towers or space on towers;
(x) all other Contracts, except those which are (A) cancelable on
30 days' or less notice without any penalty or other financial
obligation or (B) if not so cancelable, involve annual
aggregate payments by or to the Company or any of its
Subsidiaries of $100,000 or less;
(xi) all written Contracts of employment with any officer,
consultant, director or employee and any such oral Contracts
which are not terminable at will by the Company or any of its
Subsidiaries; and
(xii) all other "material contracts" within the meaning of Item 601
of the SEC's Regulation S-K.
(b) Except as set forth on Schedule 3.11(b) hereto, all Contracts
required to be disclosed to the Purchaser pursuant to this Section 3.11 are
valid, binding and in full force and effect as to the Company or its
Subsidiaries, and neither the Company nor, to the Company's knowledge
12
18
after inquiring of its officers and employees, any other party thereto, is in
breach or violation of, or default under, nor is there any reasonable basis for
a claim of such breach or violation by the Company or its Subsidiaries or such
default by the Company or its Subsidiaries under, the terms of any such
Contract, and no event has occurred which constitutes or, with the lapse of time
or the giving of notice or both, would constitute, such a breach, violation or
default by the Company or its Subsidiaries thereunder. None of the rights of the
Company or its Subsidiaries under any of the Contracts is subject to termination
or modification as a result of the transactions contemplated by any Purchase
Document.
SECTION 3.12. PROPRIETARY RIGHTS.
(a) Schedule 3.12(a) lists: (i) all registered Intellectual
Property Rights, together with applications therefor that are pending or in the
process of preparation specifying (A) the owner thereof, and (B) the date of
expiration, if any, thereof; (ii) all licenses (other than licenses with respect
to the Company's or its Subsidiaries' use of off-the-shelf software programs)
and other agreements allowing the Company to use the Intellectual Property
Rights; (iii) all unregistered Intellectual Property Rights which are material
to the business of the Company or any of its Subsidiaries; and (iv) all royalty
agreements relating to any Intellectual Property Rights and to which the Company
or any of its Subsidiaries is a party.
(b) To the knowledge of the Company, each of the Company and its
Subsidiaries is the sole and exclusive owner of the Intellectual Property Rights
listed on Schedule 3.12(a) set forth opposite its name, free and clear of any
claims or Liens, other than as set forth on such Schedule 3.12(a). To the
knowledge of the Company, none of the Intellectual Property Rights infringes
upon the rights of any third party nor does any use by any third party of any of
the Intellectual Property Rights infringe upon any of the rights of the Company
of any of its Subsidiaries therein, and there are no claims pending or
threatened in connection with any such infringement with respect to any of the
Intellectual Property Rights.
(c) Except as listed on Schedule 3.12(c), neither the Company nor
any Subsidiary pays any royalty to any Person with respect to any of the
Intellectual Property Rights or any of the expertise relating thereto, nor does
the Company or any of its Subsidiaries receive royalties with respect thereto.
Neither the Company nor any of its Subsidiaries has licensed or sublicensed any
of the Intellectual Property Rights to any Person except as set forth on
Schedule 3.12(c).
SECTION 3.13. NECESSARY PROPERTY. Except as may be set forth in
Schedule 3.13 and the other Schedules hereto, the properties and assets owned,
leased by or licensed to the Company or any of its Subsidiaries and reflected in
the Current Financial Statements and any properties or assets acquired since
February 28, 1999, constitute all of the material real and personal properties,
tangible and intangible, which are necessary, used or useful in the conduct of
its business in the manner and to the extent presently conducted by them.
SECTION 3.14. NECESSARY LICENSES. (a) Schedule 3.14 sets forth a list
of each License used by the Company or any of its Subsidiaries in the conduct of
its business. True and correct copies of each License set forth on Schedule
3.14, and all amendments thereto to the date hereof,
13
19
have been delivered by the Company to the Purchasers. Except as set forth on
Schedule 3.14, the Company and its Subsidiaries holds all necessary Licenses
which are required in connection with the ownership and operation of its
business, except for such Licenses, the lack of which would not have a Material
Adverse Effect. All Licenses are in full force and effect. The Company and its
Subsidiaries have complied in all material respects with the terms of the
Licenses which they hold and there are no pending modifications, amendments or
revocations of the Licenses which would adversely affect the ownership or the
operation of its business. All fees due and payable from the Company or any of
its Subsidiaries to Governmental Authorities pursuant to the Licenses have been
paid. All reports required of the Company or any of its Subsidiaries to be filed
in connection with the Licenses have been timely filed and are accurate and
complete.
(b) Except as specified in Schedule 3.14, no registrations,
filings, applications, notices, transfers, consents, approvals, audits,
qualifications, waivers or other action of any kind is required by virtue of the
execution and delivery of this Agreement or any Related Agreement, or of the
consummation of the transactions contemplated hereby or thereby (a) to avoid the
loss of any License or any asset, property or right pursuant to the terms
thereof or the violation or breach of any law applicable thereto, or (b) to
enable the Company and its Subsidiaries to hold and enjoy the same after the
Closing Date in the conduct of its business as conducted immediately prior to
the Closing Date. In particular, except as set forth in Schedule 3.14, execution
and delivery of this Agreement and the Related Agreements, and consummation of
the transactions contemplated therein, will not constitute a change of control
in the Company or its Subsidiaries, or otherwise require authorization,
approval, consent, or filing of registration with any Governmental Authority,
and will not violate or conflict with any applicable provision of the laws,
rules, and regulations administered by any Governmental Authority.
SECTION 3.15. COMPLIANCE WITH LAW.
(a) Except as may be set forth in Schedule 3.15, neither the
Company nor any Subsidiary is in default under, or in violation of, any laws,
rules or regulations (including, without limitation, foreign, federal, state or
local laws, rules or regulations relating to the issuance or sale of securities,
telecommunications, anti-trust, occupational safety, the protection of the
environment, transportation, storage or disposal of hazardous waste,
anti-pollution and air and water quality laws), or any Licenses, granted by, or
any judgment, decree, writ, injunction or order of, any Governmental Authority,
applicable to its business or any of its properties or assets, which defaults
and violations would in the aggregate expose the Company and its Subsidiaries to
liabilities in excess of an aggregate of $250,000 or otherwise materially
adversely affect the assets or properties or business or operations of the
Company and its Subsidiaries or requiring or prohibiting future activities.
Neither the Company nor any Subsidiary has received any notification alleging
any violations of any of the foregoing with respect to which adequate corrective
action has not been taken.
(b) Except as set forth on Schedule 3.15, There are no proceedings
or investigations pending or threatened, before the FCC or any State Regulatory
Agency directed specifically at the Company or, in the case of matters of
general applicability to the telecommunications industry, in which the Company
is identified for possible disparate treatment or whose outcome
14
20
may have a disparate impact on the Company in which any of the following matters
are being considered which are reasonably likely to have a material adverse
effect on the Company, nor has the Company or any of its Subsidiaries received
written notice or inquiry from the FCC or any State Regulatory Agency,
indicating that any of such matters should be considered or may become the
object of consideration or investigation specifically regarding the Company
which are reasonably likely to have a material adverse effect on the Company or,
in the case of matters of general applicability to the telecommunications
industry, in which the Company is identified for possible disparate treatment or
whose outcome may have a disparate impact on the Company: (a) increases or
reductions in access charges, universal service contributions or the like; (b)
traffic routing restrictions or restrictions on use of facilities; (c) reduction
or restriction of rates charged to customers; (d) reduction of earnings; (e)
refunds or other forfeitures of amounts previously charged to customers; (f) use
of NXX codes; or (g) failure to meet any expense, infrastructure, service
quality or other commitments previously made to or imposed by the FCC or any
State Regulatory Agency.
(c) Except as set forth on Schedule 3.15, neither the Company nor
any of its Subsidiaries has any outstanding commitments made in the context of a
matter or proceeding related specifically to the Company or, in the case of
matters of general applicability to the telecommunications industry, in which
the Company is identified for possible disparate treatment or whose outcome may
have a disparate impact on the Company (and no such obligations have been
imposed upon the Company and remain outstanding), regarding: (a) increases or
reductions in access charges, universal service contributions or the like; (b)
traffic routing restrictions or restrictions on use of facilities; (c) reduction
or restriction of rates charged to customers; (d) reduction of earnings; (e)
refunds or other forfeitures of amounts previously charged to customers; (f) use
of NXX codes; or (g) expenses, infrastructure expenditures, service quality or
other regulatory requirements, to or by the FCC or any State Regulatory Agency,
in each case which are reasonably likely to have a material adverse effect on
the Company.
SECTION 3.16. ENVIRONMENTAL COMPLIANCE.
(a) All Licenses which are required under Environmental Laws (each
an "Environmental Permit") for the conduct of the Company's and its
Subsidiaries' business or the operation of any property owned, leased or
occupied by the Company or any of its Subsidiaries which are required to be
obtained or applied for by the Company or any of its Subsidiaries have been so
obtained or applied for.
(b) Neither the Company nor any Subsidiary has failed to comply
with any Environmental Laws or any Environmental Permit and neither the Company
nor any Subsidiary has been notified by any Governmental Authority of any such
non-compliance and, to the best knowledge of the Company after inquiring of its
officers and employees, there are no facts indicating, that any Environmental
Permit will be modified, suspended, canceled or revoked or cannot be renewed in
the ordinary course of business.
(c) No Hazardous Substance is presently or has been in the past
generated, stored, handled, treated, transported to or from or disposed of on
any property currently or formerly owned
15
21
by the Company or any of its Subsidiaries, or operated or leased by the Company
or any of its Subsidiaries (during the period of such operation or lease) and,
to the best knowledge of the Company after inquiring of its officers and
employees, no property currently or formerly owned, operated or leased by the
Company or any of its Subsidiaries has been used by others, including but not
limited to prior owners, lessees and operators, for the generation, storage,
handling, treatment, transportation or disposal of any Hazardous Substance.
Neither the Company nor any Subsidiary has generated, disposed of, transported
or arranged for the transportation (directly or indirectly) of any Hazardous
Substances to any location that is listed or, to the best knowledge of the
Company after inquiring of its officers and employees, proposed for listing on
the National Properties List or the CERCLA Information System under CERCLA, or
under any similar state, local or foreign list, or where there has been a
Release or suspected Release of a Hazardous Substance. To the best knowledge of
the Company after inquiring of its officers and employees, no part of any
property owned, operated or leased by the Company or any of its Subsidiaries
ever was used as (i) a gasoline service station or for the purpose of selling,
dispensing, storing, transferring or handling petroleum or petroleum products,
or (ii) as a dry-cleaning establishment.
(d) Neither the Company nor any Subsidiary has received any notice
or order from any Person advising it that it is responsible for or potentially
responsible for cleanup or remediation of any Hazardous Substances and neither
the Company nor any Subsidiary has entered into any agreements concerning such
cleanup. No work, repair, construction or capital expenditure is planned or
required in respect of the assets of the Company or any of its Subsidiaries
pursuant to or to comply with any Environmental Law, nor has the Company or any
of its Subsidiaries received any notice of any such requirement.
(e) There is no Environmental claim pending or, to the best
knowledge of the Company after inquiring of its officers and employees,
threatened against the Company or any of its Subsidiaries or pending or, to the
best knowledge of the Company after inquiring of its officers and employees,
threatened against any other Person whose liability for any Environmental claim
the Company or any of its Subsidiaries has or may have retained or assumed
either contractually or by operation of law. No real property currently or
formerly owned by the Company or any of its Subsidiaries, or operated or leased
by the Company or any of its Subsidiaries (during the period of such operation
or lease) has been impacted by any Release or threatened Release of any
Hazardous Substance and no condition exists which may result in a claim, right
of action, or recovery by any Person under any Environmental Law.
(f) Each of the Company and its Subsidiaries has delivered or
otherwise made available for inspection to the Purchasers true, accurate and
complete copies and results of any reports, studies, analyses, tests or
monitoring possessed or initiated by the Company or any of its Subsidiaries
pertaining to Hazardous Substances in, on, beneath or adjacent to any property
or regarding compliance by the Company or any of its Subsidiaries with
applicable Environmental Laws.
(g) No transfers of permits or other governmental authorizations
under Environmental Laws, and no additional permits or other governmental
authorizations under Environmental Laws, will be required to permit the Company
and its Subsidiaries to conduct the business of the
16
22
Company and its Subsidiaries in full compliance with all applicable
Environmental Laws immediately following the Closing, as conducted by the
Company and its Subsidiaries immediately prior to the Closing.
(h) There are no underground or above-ground storage tanks
(whether or not currently in use) located on or under any real property
currently owned or operated by the Company or any of its Subsidiaries, and no
underground tank previously located on any real property currently owned or
operated by the Company or any of its Subsidiaries has been removed from that
property. To the best of the Company's knowledge, there are no underground or
above-ground storage tanks (whether or not currently in use) located on or under
any Leased Real Property.
(i) Neither the Company nor any Subsidiary nor any of the
currently or formerly owned or operated property used by the Company or any
Subsidiary is the subject of any pending or, to the best knowledge of the
Company after inquiring of its officers and employees, threatened federal, state
or local enforcement action, investigation, remedial action, litigation, claim
or notice by any Person under any Environmental Laws.
SECTION 3.17. NO MATERIAL ADVERSE CHANGES. Except as set forth on
Schedule 3.17, since the Balance Sheet Date, there has occurred no material
adverse change in the business, assets, properties, prospects, operations, or
condition (financial or otherwise) of the Company or any of its Subsidiaries,
whether or not in the ordinary course of business, whether separately or in the
aggregate with other occurrences or developments, and whether insured against or
not.
SECTION 3.18. NO BROKERS. Except as set forth on Schedule 3.18, the
Company has not employed any broker, finder, advisor or intermediary in
connection with the transactions contemplated hereby which would be entitled to
a broker's, finder's or similar fee or commission in connection therewith or
upon the consummation of the transactions contemplated by this Agreement or any
Related Agreement.
SECTION 3.19. NETWORK.
(a) Schedule 3.19 sets forth, as of February 28, 1999 (i) the
location of each switch owned by the Company and the switch's make and model and
(ii) the location of all of the Company's colocation sites.
(b) The Company's switches are (i) fully installed, (ii)
interconnected to the incumbent telephone company's local network and (iii)
capable of carrying commercial traffic.
(c) The Company's colocation sites possess all of the necessary
equipment to carry commercial traffic and are linked via leased or owned
transmission cable to a switch owned by the Company.
17
23
SECTION 3.20. CUSTOMERS AND SUPPLIERS.
(a) Schedule 3.20(a) sets forth the ten largest telecommunications
customers of the Company and its Subsidiaries for the Las Vegas, Atlanta and
Southern California markets and the gross revenues and percentage of
consolidated net sales for each such customer for 1998.
(b) Schedule 3.20(b) sets forth as of February 28, 1999 (i) the
total number of lines sold and (ii) the total number of lines in service.
(c) Less than three percent (3%) of the Company's consolidated
revenues is derived from local resale of telecommunications services.
SECTION 3.21. YEAR 2000 COMPLIANCE. The Company has performed an audit
to determine if the material hardware and software systems used by the Company
and the Company's key vendors and suppliers are Year 2000 Compliant or will be
Year 2000 Compliant by December 31, 1999, and, based on that, has formulated a
plan to make such systems Year 2000 Compliant, as more particularly described on
Schedule 3.21 (the "Year 2000 Compliance Plan"). The term "Year 2000 Compliant"
as used herein means that the computer systems at issue will accurately process,
provide, and receive date data from, into, and between the twentieth and
twenty-first centuries, including the years 1999 and 2000, and leap year
calculations. The Company represents that it is using its best efforts to
achieve the goals set forth in its Year 2000 Compliance Plan, and that if such
goals are achieved, the material hardware and software systems used by the
Company will be Year 2000 Compliant by December 31, 1999.
SECTION 3.22. FINANCIAL REPORTS AND SEC DOCUMENTS. The Company's Annual
Reports on Form 10-K for the fiscal years ended December 31, 1998 and December
31, 1997, and all other reports, registration statements, definitive proxy
statements or information statements filed or to be filed by it under the
Securities Act, or under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act,
in the form filed or to be filed with the SEC (collectively, "SEC Documents"),
as of the date filed, (A) complied or will comply as to form with the applicable
requirements under the Securities Act or the Exchange Act, as the case may be,
and (B) did not and will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading; and each of the balance sheets contained in or
incorporated by reference into any of the Company's SEC Documents (including the
related notes and schedules thereto) fairly presents, or will fairly present,
the financial position of the Company and its Subsidiaries as of its date, and
each of the statements of income and changes in stockholders' equity and cash
flows or equivalent statements in the Company's SEC Documents (including any
related notes and schedules thereto) fairly presents, or will fairly present,
the results of operations, changes in stockholders' equity and changes in cash
flows, as the case may be, of the Company and its Subsidiaries for the period to
which they relate, in each case, in compliance with applicable accounting
requirements and with the published rules of the SEC with respect thereto and in
accordance with GAAP consistently applied during the periods
18
24
involved, except, in each case, as may be noted herein, subject to normal
year-end audit adjustments in the case of unaudited statements.
SECTION 3.23. DISCLOSURE. No representation, warranty or statement made
in this Agreement, any Purchased Security, any Related Agreement or any
agreement, certificate, statement or document furnished by or on behalf of the
Company in connection herewith or therewith when considered as a whole contains
any untrue statement of material fact or omits to state a material fact
necessary in order to make the statements contained herein or therein, in light
of the circumstances in which they were made, not misleading.
ARTICLE IV
PURCHASERS' REPRESENTATIONS
Each of the Purchasers hereby, severally and not jointly, represents
and warrants to the Company as follows:
SECTION 4.1. ORGANIZATION AND GOOD STANDING. Such Purchaser is validly
existing and in good standing under the laws of the state of its formation.
SECTION 4.2. AUTHORIZATION. This Agreement and the Related Agreements
to which such Purchaser is a party have been executed by a duly authorized
Person on its behalf and the execution, delivery and performance hereof and
thereof (a) have been duly authorized by all appropriate action, and (b) will
not violate the provision of any material law or regulation of any Governmental
Authority applicable to it or constitute a violation of any material agreement
or instrument by which it is bound.
SECTION 4.3. ENFORCEABILITY. The execution and delivery of this
Agreement and the Related Agreements and the transactions contemplated
thereunder will result in legally binding obligations of such Purchaser
enforceable against such Purchaser in accordance with the respective terms and
provisions hereof and thereof, subject, however, to limitations with respect to
enforcement imposed by law in connection with bankruptcy or similar proceedings
or to the extent that equitable remedies such as specific performance and
injunction are in the discretion of the court from which they are sought.
SECTION 4.4. INVESTMENT INTENT. Such Purchaser (i) is an "accredited
investor" as defined in Regulation D of the Securities Act, (ii) is acquiring
the Purchased Securities to be purchased by such Purchaser pursuant to Section
2.1 hereof for investment and not with a view to the distribution thereof, and
(iii) has not engaged any broker, agent or finder who may claim a fee in
connection with the acquisition of the Purchased Securities.
19
25
ARTICLE V
CONDITIONS TO PURCHASERS' OBLIGATION TO PURCHASE AND THE
COMPANY'S OBLIGATION TO SELL
SECTION 5.1. PURCHASERS' CLOSING CONDITIONS. Each Purchaser's
obligation to purchase the Purchased Securities pursuant to Section 2.1 is
subject to compliance by the Company with its agreements herein contained, and
to the satisfaction, on or prior to the Closing Date of the following
conditions:
(a) Related Agreements. Each of the Related Agreements shall have
been executed and delivered in the form attached hereto or in such other form
satisfactory to the Purchasers. All covenants, agreements and conditions
contained in the Related Agreements which are to be performed or complied with
on or prior to the Closing Date shall have been performed or complied with in
all material respects.
(b) Charter Documents. The Purchasers shall have received from the
Company a copy, certified by the appropriate Governmental Authority to be true
and complete as of a date no more than twenty (20) days prior to the Closing
Date, of (a) the certificate of incorporation of the Company and each of its
Subsidiaries and (b) a certificate, dated not more than twenty (20) days prior
to the Closing Date, of the relevant Governmental Authority or other appropriate
official of each State in which each of the Company and its Subsidiaries is
incorporated or qualified to do business, as to such Person's good standing in
such State or qualification to do business, as the case may be.
(c) Proof of Action. The Purchasers shall have received from the
Company copies, certified by a duly authorized officer thereof to be true and
complete as of the Closing Date, of the records of all action taken to authorize
the execution, delivery and performance of this Agreement and each of the
Related Agreements to which the Company is a party.
(d) Incumbency Certificate. The Purchasers shall have received
from the Company an incumbency certificate, dated the Closing Date, signed by a
duly authorized officer thereof and giving the name and bearing a specimen
signature of each individual who shall be authorized to sign, in the name and on
behalf of the Company, this Agreement and each of the Related Agreements to
which the Company is or is to become a party, and to give notices and to take
other action on behalf of the Company under each of such documents.
(e) Legal Opinion. The Purchasers shall have received from Ellis,
Funk, Xxxxxxxx, Xxxxxxxx & Dokson, P.C., counsel to the Company, an opinion
substantially in the form of Exhibit D attached hereto.
(f) Regulatory Opinion. The Purchasers shall have received from
Xxxxxx Xxxx & Xxxxxx LLP, regulatory counsel to the Company, an opinion
reasonably satisfactory to the Purchasers, or otherwise substantially in the
form of Exhibit E attached hereto.
20
26
(g) Representations and Warranties; Covenants; Officers'
Certificates. The representations and warranties contained or incorporated by
reference herein shall be true and correct in all material respects (except
those representations and warranties qualified by materiality, which shall be
true and correct in all respects) on and as of the Closing Date. The Company
shall have performed and complied with all conditions and agreements required to
be performed or complied with by it prior to the Closing. The Purchasers shall
have received on the Closing Date a certificate with respect to the foregoing
executed by an authorized officer of the Company.
(h) Legality; Governmental and Other Authorizations. The purchase
of the Purchased Securities shall not be prohibited by any law or governmental
order or regulation, and shall not subject any Purchaser to any penalty, special
Tax, or other onerous condition. All necessary consents, approvals, Licenses,
orders and authorizations of, and registrations, declarations and filings with,
any Governmental Authority (including the FCC and any State Regulatory Agency)
or any other Person, with respect to any of the transactions contemplated by
this Agreement or any of the Related Agreements, shall have been duly obtained
or made and shall be in full force and effect. The applicable waiting periods
shall have expired or been terminated and no objection shall have been made by
the Federal Trade Commission ("FTC"), the United States Department of Justice
("DOJ") or other applicable governmental agency with respect to the
Xxxx-Xxxxx-Xxxxxx Anti-Trust Improvements Act of 1976, as amended (the
"Xxxx-Xxxxx Act"). The Nasdaq Stock Market ("Nasdaq") shall have issued written
confirmation to the Company satisfactory to the Purchasers stating that
stockholder approval of the transactions contemplated hereby is not required by
Nasdaq's rules and regulations.
(i) Filing of Certificate of Designation. The Purchasers shall
have received satisfactory evidence of the filing of the Certificate of
Designation with the Secretary of State of Nevada.
(j) Payment of Certain Fees and Disbursements. The Purchasers
shall have been paid their pro rata portion of the $500,000 investment fee and
shall have been reimbursed for all reasonable costs and expenses (including, but
not limited to, legal, consulting and accounting) incurred by them through the
Closing Date in connection with the transactions contemplated by this Agreement.
(k) Registration Rights Agreement. The Company and the Purchasers
shall have executed the Registration Rights Agreement in the form of Exhibit B
hereto.
(l) General. All instruments and corporate proceedings in
connection with the transactions contemplated by this Agreement and the Related
Agreements shall be satisfactory in form and substance to the Purchasers and
their counsel, and the Purchasers shall have received copies of all documents,
including, without limitation, records of corporate or other proceedings,
opinions of counsel and consents which the Purchaser may have reasonably
requested in connection therewith.
21
27
The agreements, certificates, documents, other evidence of compliance
and opinions described in this Section 5.1 shall be in form and substance
reasonably acceptable to each Purchaser, and shall, except as otherwise
provided, be delivered to the Purchasers at the Closing; provided, however, any
one or more of the foregoing conditions may be waived with the prior written
consent of each Purchaser.
SECTION 5.2. COMPANY'S CLOSING CONDITIONS. The Company's obligation to
sell the Purchased Securities pursuant to Section 2.1 is subject to the
satisfaction, on or prior to the Closing Date, of the following conditions:
x. Xxxx-Xxxxx Act. The applicable waiting periods shall have
expired or been terminated and no objection shall have been made by the FTC, DOJ
or other applicable governmental agency with respect to the Xxxx-Xxxxx Act.
b. Representations and Warranties. The representations and
warranties of the Purchasers contained herein shall be true and correct in all
material respects (except those representations and warranties qualified by
materiality, which shall be true and correct in all respects) on and as of the
Closing Date.
(c) Sufficient Investment. The Purchasers shall be prepared to
purchase at least $40,000,000 of Purchased Securities pursuant to Section 2.1.
ARTICLE VI
COVENANTS APPLICABLE TO THE COMPANY WHILE ANY
PURCHASED SECURITIES ARE OUTSTANDING
The Company covenants that while any of the Purchased Securities are
held by any of the Purchasers or an assignee thereof, other than a transferee
pursuant to a public sale, the Company will comply with the following provisions
unless otherwise consented to in writing by the Purchasers:
SECTION 6.1. FURTHER ASSURANCES. The Company will cooperate with the
Purchasers and will execute, acknowledge and deliver, or cause to be executed,
acknowledged or delivered, all such further acts, deeds, documents, assignments,
transfers, conveyances, powers of attorney and assurances as the Purchasers
shall reasonably request to carry out to the satisfaction of the Purchasers the
transactions contemplated by this Agreement and the Related Agreements.
ARTICLE VII
DELIVERY OF FINANCIAL AND OTHER REPORTS WHILE ANY
PURCHASED SECURITIES ARE OUTSTANDING
The Company hereby agrees that so long as 500,000 shares of Series B
Preferred are outstanding (subject to adjustment for stock splits, stock
dividends and similar events) it will
22
28
provide to each Purchaser holding at least 500,000 shares of Series B Preferred
and/or Common Stock (subject to adjustment for stock splits, stock dividends and
similar events) (a "Qualified Purchaser") the information called for by the
following provisions, so long as such Qualified Purchaser has acknowledged in
writing that it will be precluded from trading in the Company's stock while in
possession of material information concerning the Company that has not been
disclosed to the public:
SECTION 7.1. MONTHLY STATEMENTS. Within thirty (30) days after the end
of each month, commencing with the month ending March 31, 1999, the Company will
deliver to each Qualified Purchaser internal, unaudited consolidated balance
sheet and statement of income and retained earnings and of cash flow of the
Company and its Subsidiaries as of the end of each such month, together with
comparative information to the results for the same month of the prior year, and
to the budget for such month and year to date results with a comparison of such
year-to-date information to budget and to the comparable period of the prior
year.
SECTION 7.2. OTHER FINANCIAL INFORMATION. The Company will deliver to
each Qualified Purchaser prior to the commencement of each fiscal year, an
annual budget and projected monthly balance sheets and statements of income and
quarterly statements of cash flow for such fiscal year, prepared on a
comparative basis to the Projections and as soon as practical after preparation
thereof, complete copies of all quarterly (if any) or annual budgetary analyses
or forecasts of the Company and its Subsidiaries in the form customarily
prepared by management for its own internal use or the use of the Board of
Directors of the Company.
SECTION 7.3. OFFICERS' CERTIFICATES. Together with delivery of the
financial statements of the Company and its Subsidiaries pursuant to Sections
7.1 and 7.2, the Company shall deliver to each Qualified Purchaser a certificate
of the President, chief financial officer or Treasurer of the Company to the
effect that (a) such statements have been prepared in accordance with GAAP and
present fairly the financial position of the Company and its Subsidiaries as of
the dates specified and the results of its operations and cash flow with respect
to the periods specified (subject in the case of interim financial statements
and the year-end financials, when delivered prior to their having been audited,
only to normal year-end audit adjustments), and (b) such officers have caused
the provisions of this Agreement and the Purchased Securities to be reviewed and
have no knowledge of any default, or if either such officer has such knowledge,
specifying such default and the nature thereof, and what action the Company has
taken, is taking or proposes to take with respect thereto.
SECTION 7.4. NOTICE OF LITIGATION, DEFAULTS, ETC. The Company will
promptly give notice to each Qualified Purchaser of any litigation or any
administrative proceeding to which the Company or any of its Subsidiaries may
hereafter become a party which may result in a Material Adverse Effect on the
Company or any of its Subsidiaries. Forthwith upon any officer of the Company
obtaining knowledge of any material default under a material agreement or any
default or event of default under this Agreement or any Related Agreement, the
Company will furnish a notice specifying the nature and period of existence
thereof, what action the Company has taken, is taking or proposes to take with
respect thereto. Promptly after the receipt thereof, the
23
29
Company will provide copies of any reports as to adequacies in accounting
controls submitted by independent accountants with respect to the Company and
its Subsidiaries.
SECTION 7.5. OTHER INFORMATION. The Company will deliver to each
Qualified Purchaser copies of all papers distributed from time to time to the
members or stockholders of the Company at such time as such papers are so
distributed to them. In addition, from time to time upon the request of a
Qualified Purchaser, the Company will furnish such information regarding the
business, affairs, prospects and financial condition of the Company and its
Subsidiaries as the representatives or officers of a Qualified Purchaser may
reasonably request. Each such representative and officers shall have the right
during normal business hours to examine the books and records of the Company or
any of its Subsidiaries to make copies, notes and abstracts therefrom, and to
make an independent examination, at such Qualified Purchaser's cost, of the
books and records of the Company or any of its Subsidiaries, all at such
reasonable times and intervals as the applicable Qualified Purchaser may
reasonably request.
ARTICLE VIII
EXPENSES; INDEMNITY
SECTION 8.1. EXPENSES. The Company hereby agrees to pay at the Closing
all reasonable fees, costs and expenses incurred by the Purchasers in connection
with the transactions hereunder and in connection with any amendments or waivers
(whether or not the same become effective) hereof and all reasonable expenses
incurred by the Purchasers in connection with the enforcement of any rights
hereunder or with respect to any Purchased Security, including without
limitation (i) the cost and expenses of preparing and duplicating this
Agreement, each Related Agreement and the Purchased Securities; (ii) the cost of
delivering to each Purchaser's principal office, insured to such Purchaser's
satisfaction, the Purchased Securities sold to such Purchaser hereunder and any
securities delivered to such Purchaser in exchange therefor or upon any
exercise, conversion or substitution thereof; (iii) the reasonable fees,
expenses and disbursements of one corporate and one regulatory counsel for the
Purchasers, in connection with the preparation, administration or interpretation
of this Agreement and the Related Agreements and other agreements, documents and
instruments mentioned herein or therein, the Closing, any amendments,
modifications, approvals, consents or waivers hereto, thereto, hereunder or
thereunder; (iv) the out-of-pocket fees, expenses and costs incurred by the
Purchasers in connection with the Purchasers' due diligence investigation of the
Company and its Subsidiaries; and (v) all Taxes (other than Taxes determined
with respect to income and Taxes relating to any transfer of the Purchased
Securities to any Person other than to the Company) including, without
limitation, any recording fees, filing fees and documentary stamp and similar
Taxes at any time payable in respect of this Agreement or any Related Agreement
or the issuance of any of the Purchased Securities and any securities issued in
exchange therefor or upon any exercise, conversion or substitution thereof.
Further, the Company agrees to pay all reasonable legal, consulting, accounting,
appraisal and investment banking fees and charges incurred by any holder of the
Purchased Securities or their representatives in connection with the enforcement
of or preservation of rights under this Agreement or any Related Agreement in
the event of a breach or reasonably alleged breach by the Company of its
obligations hereunder or thereunder.
24
30
SECTION 8.2. INDEMNIFICATION. The Company hereby further agrees to
indemnify, exonerate and hold each Purchaser and its (if applicable) general and
limited partners and their respective shareholders, officers, directors,
employees and agents free and harmless from and against any and all actions,
causes of action, suits, losses, liabilities, damages and expenses, including,
without limitation, reasonable attorneys' fees and disbursements, incurred in
any capacity by any of the indemnitees as a result of or relating to (i) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with proceeds from the sale of any of the Purchased Securities, (ii)
the execution, delivery, performance or enforcement of this Agreement, the
Related Agreements or any agreement, document or instrument contemplated hereby
or thereby (including, without limitation, any failure by the Company to comply
with any of the covenants thereunder), or (iii) any breach of any representation
or warranty of the Company in this Agreement or any Related Agreement.
SECTION 8.3. BROKERS' FEES. The Company hereby indemnifies each
Purchaser against and agrees that it will hold it harmless from any claim,
demand or liability for any broker's, finder's or similar fee or commission
alleged to have been incurred by the Company (and not by a Purchaser) in
connection with the transactions contemplated by this Agreement or any Related
Agreement.
ARTICLE IX
NOTICES
Any notices or other communications required to be given pursuant to
this Agreement shall be in writing and shall be deemed given: (i) upon delivery,
if by hand; (ii) three (3) Business Days after mailing, if sent by registered or
certified mail, postage prepaid, return receipt requested; (iii) one (1)
Business Day after mailing, if sent via overnight courier; or (iv) upon
transmission, if sent by telex or facsimile except that if such notice or other
communication is received by telex or facsimile after 5:00 p.m. on a Business
Day at the place of receipt, it shall be effective as of the following Business
Day. All notices and other communications hereunder shall be given as follows:
(a) If to the Company, to it at:
MGC Communications, Inc.
0000 Xxxxx Xxxxxxx Xxxxx
Xxx Xxxxx, Xxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxx, Xx.
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
25
31
with a copy to:
Ellis, Funk, Xxxxxxxx, Xxxxxxxx & Dokson, P.C.
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Facsimile: 000-000-0000
Telephone: 000-000-0000 X000
(b) If to Providence Equity Partners III L.P., to it at:
c/o Providence Equity Partners L.L.C.
000 Xxxxx Xxxxxx
00 Xxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxx Xxxxxx 00000
Attention: Xxxx Xxxxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
with a copy to:
Xxxxxxx & Xxxxxx, LLP
0000 XxxxXxxxxx Xxxxx
Xxxxxxxxxx, Xxxxx Xxxxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
Facsimile: 000-000-0000
Telephone: 000-000-0000
(c) If to another Purchaser, to it at the address set forth on
Schedule 2.1.
Any party may change its address for receiving notice by written notice given to
the other names above in the manner provided above.
ARTICLE X
SURVIVAL OF COVENANTS, AGREEMENTS,
REPRESENTATIONS AND WARRANTIES, TRANSFER
All covenants, agreements, representations and warranties made herein
to the Purchasers or the Company or in any other document referred to herein or
delivered to the Purchasers or the Company pursuant hereto shall be deemed to
have been relied on by each of the Purchasers and the Company, notwithstanding
any investigation made by any of the Purchasers or on their behalf, or by the
Company, and shall survive the execution and delivery of this Agreement and
other such documents and the delivery to the Purchasers of the Purchased
Securities for a period of eighteen (18) months after the Closing Date, except
for the representations and warranties contained in Sections 3.1, 3.2, 3.3, 3.9
and 3.16, which shall survive the Closing and continue in full force and effect
forever thereafter (subject to any applicable statute of limitations). Whether
or not any express assignment has been made in this Agreement, the provisions of
this Agreement that are for the benefit of any Purchaser as the holder of any
Purchased Securities are also for the benefit of, and enforceable by, all
subsequent holders of the Purchased Securities,
26
32
and the provisions of this Agreement that subject any Purchaser to obligations
as the holder of any Purchased Securities also subject all subsequent holders of
Purchased Securities thereto.
ARTICLE XI
AMENDMENTS AND WAIVERS
No modification to or amendment of any provision of this Agreement
shall be effective against the Company or any Purchaser unless such modification
or amendment is approved in writing by the Majority Purchasers and the Company.
No waiver of the rights and obligations hereunder of any party hereto shall be
effective unless such waiver is in writing and duly executed and delivered by
(a) the Majority Purchasers (in the event such waiver is sought by the Company),
or (b) the Company (in the event such waiver is sought by any Purchaser). The
failure of any party hereto to enforce any of provision of this Agreement shall
in no way be construed as a waiver of such provision and shall not affect the
right of such party thereafter to enforce each and every provision of this
Agreement in accordance with its terms. Any amendment or waiver effected in
accordance with this Article XI shall be binding upon the Company and each
holder of any Purchased Security sold pursuant to this Agreement.
ARTICLE XII
WAIVER OF JURY TRIAL
EACH OF THE COMPANY AND THE PURCHASERS HEREBY EXPRESSLY WAIVES ANY
RIGHT IT MAY HAVE TO A JURY TRIAL IN ANY SUIT, ACTION OR PROCEEDING EXISTING
UNDER OR RELATING TO THIS AGREEMENT, THE PURCHASED SECURITIES OR ANY OF THE
RELATED AGREEMENTS.
ARTICLE XIII
GOVERNING LAW
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF RHODE ISLAND WITHOUT GIVING EFFECT TO ANY CHOICE OR
CONFLICT OF LAW PROVISION OR RULE THAT WOULD CAUSE THE APPLICATION OF THE
SUBSTANTIVE LAWS OF ANY OTHER STATE, AND SHALL BIND AND INURE TO THE BENEFIT OF
THE PARTIES HERETO AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS.
27
33
ARTICLE XIV
PUBLIC ANNOUNCEMENTS
The Company hereby acknowledges that each Purchaser will have the right
to publicize its investment in the Company as contemplated hereby by means of a
press release reasonably acceptable to the Company, a tombstone advertisement or
other customary advertisement in newspapers and other periodicals. The Majority
Purchasers shall have the right to reasonably approve in advance the content of
any public announcement by the Company regarding the transactions contemplated
hereby.
ARTICLE XV
TIME OF THE ESSENCE
Time shall be of the essence of this Agreement.
ARTICLE XVI
ENTIRE AGREEMENT; COUNTERPARTS; SECTION HEADINGS
This Agreement, the Purchased Securities and the Related Agreements set
forth the entire understanding of the parties hereto with respect to the
transactions contemplated hereby and supersede any prior written or oral
understandings with respect thereto. This Agreement may be executed
simultaneously in one or more counterparts thereof, each of which shall be
deemed an original but all of which together shall constitute one and the same
instrument. Signatures sent by telecopy shall be deemed to constitute original
signatures. The headings in this Agreement are for convenience of reference only
and shall not alter or otherwise affect the meaning hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
28
34
If the foregoing corresponds with your understanding of our agreement,
kindly sign this letter and the accompanying copies thereof in the appropriate
space below.
Very truly yours,
MGC COMMUNICATIONS, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
-----------------------------
Title: Chairman of the Board
-----------------------------
Accepted and agreed to:
PROVIDENCE EQUITY PARTNERS III L.P.
By: Providence Equity Partners III L.L.C., its general partner
By: /s/ Xxxx X. Xxxxx
---------------------------------
Name: Xxxx X. Xxxxx
----------------------------
Title: Managing Director
---------------------------
J K & B CAPITAL III L.P.
By: J K & B Capital, LLC its General Partner
By: /s/ Xxxxx Xxxxxxxx
---------------------------------
Name: Xxxxx Xxxxxxxx
----------------------------
Title: Manager
---------------------------
WIND POINT PARTNERS III, L.P.
By: /s/ Xxxxx X. XxxXxxxx
---------------------------------
Name: Xxxxx X. XxxXxxxx
----------------------------
Title: Managing Director - Wind Point Investors, L.L.C., its general partner
---------------------------
[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]
29
35
SCHEDULE 2.1
LIST OF PURCHASERS
Aggregate Purchase
Number of Purchased Price of
Securities to be the Purchased
Name and Address Purchased Securities
---------------- --------- ----------
1. Providence Equity 4,166,667 shares of Series $37,500,003
Partners III L.P. B Convertible Preferred
Suite 900, Fleet Center Stock
00 Xxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
2. JK&B Capital III L.P. 555,556 shares of Series B $5,000,004
000 X. Xxxxxxxx Xxxxxx Convertible Preferred Stock
Xxxxx 000
Xxxxxxx, XX 00000
3. Wind Point Partners III, L.P. 555,556 shares of Series B $5,000,004
One Towne Square Convertible Preferred Stock
Xxxxx 000
Xxxxxxxxxx, XX 00000
TOTAL: 5,277,779 $47,500,011
