EXHIBIT 10.31
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT, dated as of July 19, 1999 (this
"AGREEMENT"), is among TELSCAPE INTERNATIONAL, INC., a Texas corporation
("HOLDINGS"), TELSCAPE USA, INC., a Texas corporation ("TELSCAPE USA), TSCP
INTERNATIONAL INC., a Texas corporation ("TSCP"), and MSN COMMUNICATIONS, INC.,
a California corporation ("MSN" together with Holdings, Telscape USA and TSCP,
collectively referred to as the "COMPANIES" and each a "COMPANY") and LUCENT
TECHNOLOGIES INC., a Delaware corporation (the "PURCHASER").
In consideration of the mutual covenants and agreements contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, and intending to be legally bound hereby, the
parties hereto hereby agree as follows:
SECTION 1. ISSUANCE OF SECURITIES.
SECTION 1.1 AUTHORIZATION. (a) The Company has duly authorized the
issuance of a Demand Note in the aggregate principal amount of U.S.$3,000,000,
(the "DEMAND NOTE"), substantially in the form of EXHIBIT A hereto, and (b)
Holdings has duly authorized the issuance of a Warrant (the "WARRANT") to
purchase an aggregate of up to 85,000 shares of common stock of Holdings, US
$.001 par value per share (the "COMMON STOCK"), subject to adjustment,
substantially in the form of EXHIBIT B hereto. The Demand Note shall bear
interest and shall be payable upon demand and shall as otherwise be provided
herein and in EXHIBIT A. The Warrant shall be exercisable, transferable and
subject to adjustment and shall be otherwise as provided herein and in EXHIBIT
B. The Demand Note, the Warrant, the Warrant Shares (as defined in the Warrant)
and certificates and other instruments from time to time evidencing the same,
are herein sometimes collectively called the "SECURITIES."
SECTION 1.2 PURCHASE AND SALE OF THE SECURITIES; THE CLOSING. In
reliance upon the representations of the Company contained in SECTION 1.5 hereof
and subject to the terms and conditions set forth herein, the Purchaser shall
purchase the Securities from the Company and the Company shall sell the
Securities to the Purchaser for an aggregate purchase price of US$3,000,000 (the
"PURCHASE PRICE"). The closing (the "CLOSING") of the Purchaser's purchase of
the Securities shall be held at 10:00 a.m., New York time on July 19, 1999 (the
"CLOSING DATE"), at the offices of the Xxxxxx Xxxx and Xxxxxx, LLP, 000 Xxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other time or place as the parties
hereto may mutually agree.
On the Closing Date, the Company will deliver to the Purchaser the
Demand Note in the aggregate amount specified above and the Warrant, registered
in the Purchaser's name or in the name(s) of its respective nominee(s), as may
be specified by the Purchaser, duly executed and dated the Closing Date, against
the Purchaser's delivery to the Company (or to persons at the direction of the
Company) of immediately available funds in the amount of the Purchase Price (net
of any costs or expenses to be paid by the Company to the Purchaser or its
counsel). For purposes of this Agreement, "BUSINESS DAY" shall mean any day,
except a Saturday, Sunday or
other day on which commercial banks in the State of New York are authorized or
required by law to close.
SECTION 1.3 THE DEMAND NOTE.
(a) RATE OF INTEREST. The Demand Note shall bear interest from the
Closing Date on the unpaid balance at the rate of ten percent (10.0%) per annum
(the "INTEREST RATE").
(b) PAYMENT. Upon the Demand of the Purchaser, the Company shall pay
to the Purchaser the full amount of the unpaid principal balance plus accrued
interest at the rate specified herein.
(c) NO FURTHER OBLIGATION. Other than the payment of the Purchase
Price, which payment is subject to the terms and conditions hereof, and
notwithstanding whether or not the Company has repaid such amounts in whole or
in part, the Purchaser shall have no obligation whatsoever to lend, advance or
otherwise pay any monies to or on behalf of the Company.
(d) OPTIONAL PREPAYMENTS. The Company may prepay the Demand Note in
full so long as the Company has given the Purchaser one (1) or more Business
Days written notice of such optional prepayment. Any such optional prepayment of
principal shall be without premium or penalty.
SECTION 1.4 THE WARRANT.
Concurrently herewith, Holdings and the Purchaser are entering into
the Warrant, pursuant to which Holdings shall execute and deliver to the
Purchaser a Warrant on the Closing Date. The Warrant shall be dated as of the
Closing Date and shall only be exercisable from and after such date for the
purchase of shares of Common Stock of Holdings and ending on the date that is
the third anniversary of the date hereof.
SECTION 1.5 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Purchaser that on the
date hereof and as of the Closing Date:
(a) Each of Holdings, Telscape USA, TSCP and MSN is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Texas or California, as the case may be, and is duly qualified as a
foreign corporation in each jurisdiction in which the character of the
properties owned or held under lease by it or the nature of the business
transacted by it requires such qualification. The Company has all requisite
power to transact the business it transacts and proposes to transact, to execute
and deliver this Agreement, the Securities and all other documents and
agreements contemplated hereby and thereby, and to perform the provisions hereof
and thereof and to consummate the transactions contemplated hereby and thereby.
(b) The execution, delivery and performance of this Agreement, the
Securities, and all other documents and agreements contemplated hereby and
thereby, and the consummation of the transactions contemplated hereby or
thereby, have been duly authorized and approved by the Company. This Agreement,
the Securities, and all other documents and
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agreements contemplated hereby and thereby have each been duly authorized,
executed and delivered by, and each is the valid and binding obligation of, the
Company enforceable against the Company in accordance with its terms, except as
may be limited by applicable bankruptcy, reorganization, insolvency, moratorium
or other similar laws or by legal or equitable principles relating to or
limiting creditors' rights generally.
(c) Except as set forth in Holding's most recent Securities Exchange
Act of 1934 (as amended, the "EXCHANGE ACT") filings with the Securities and
Exchange Commission (the "SEC"), copies of which have been provided to the
Purchaser by the Company, the Company has no actual knowledge of any fact that
materially adversely affects, or could reasonably be expected to materially
adversely affect, the business, prospects, properties, assets, operations or
financial condition of the Company, or the ability of the Company to perform its
respective obligations under this Agreement, the Securities or any other
documents or agreements contemplated hereby and thereby.
(d) On the Closing Date, the authorized capital stock of Holdings
will consist of 25,000,000 shares of Common Stock, 5,000,000 shares of preferred
stock and 1,000,000 shares of series A preferred stock. As of the Closing Date,
Holdings has issued and outstanding 6,916,958 shares of Common Stock, no shares
of preferred stock and no shares of series A preferred stock. The shares of
Common Stock issuable upon the exercise of the Warrant have been duly authorized
and reserved for issuance by all necessary corporate action and when issued and
delivered in accordance with the terms of this Agreement will be duly and
validly issued, fully paid and nonassessable. Except as set forth in SCHEDULE
1.5(D) hereto, there are no other outstanding options, warrants or similar
rights of any person to acquire any of the capital stock of Holdings and
Holdings has no contingent obligations to issue additional shares. Except as set
forth in SCHEDULE 1.5(D) hereto, Holdings is not subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire any of
its capital stock or other securities or obligation evidencing the right of any
holder thereof to purchase any of its capital stock or other securities.
(e) The consummation of the transactions contemplated by this
Agreement and the performance of the terms and provisions of this Agreement, the
Securities and any other documents or agreements contemplated hereby and thereby
will not (i) contravene, result in any breach of, or constitute a default under
any indenture, mortgage, deed of trust, bank loan or credit agreement, corporate
charter, by-laws or other material agreement or instrument to which the Company
is a party or by which the Company or any of its properties is bound, (ii)
conflict with or result in a breach of any of the terms, conditions or
provisions of any order of any court, arbitrator or Federal, State, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign (collectively, "GOVERNMENTAL PERSON")
applicable to the Company or (iii) violate any material provision of any statute
or other law, rule or regulation of any Governmental Person applicable to the
Company.
(f) The Company has obtained or will obtain prior to closing all
necessary consents, approvals and authorizations and has made all registrations,
filings or declarations with all Governmental Persons required for the issuance
of the Securities or the valid execution and delivery of the Securities or for
the performance by the Company of this Agreement, the Securities, and any other
documents or agreements contemplated hereby and thereby, other than the filings,
registrations or qualifications under the securities laws or "blue
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sky" laws of any State that may be required to be made or obtained in connection
with the offer, issuance, sale or delivery of the Securities or any interest
therein.
(g) No employee benefit plan established or maintained by the
Company or to which the Company has made contributions is subject to Part 3 of
Subtitle B of Title 1 of the Employee Retirement Income Security Act of 1974, as
amended, or Section 412 of the Internal Revenue Code of 1986, as amended.
(h) Neither the Company nor anyone acting on its behalf has offered
the Securities, or any interest or participation therein, for sale to or
solicited any offer to buy the Securities, or any interest or participation
therein, from, or otherwise approached or negotiated in respect thereof with,
any person other than the Purchaser, and its partners, officers, affiliates and
representatives. Neither the Company nor anyone acting on its behalf has taken
and will not take any action that would require the offer, issuance or sale of
the Securities or any interest or participation therein to be registered under
Section 5 of the Securities Act of 1933 (as amended, the "SECURITIES ACT"), or
applicable state securities laws. The Company has not authorized or appointed
any person to act on its behalf in connection with the offering of the
Securities. No broker or finder has acted for the Company in connection with
this Agreement or the transactions contemplated hereby, and no broker or finder
is entitled to any brokerage or finder's fees or other commission in respect of
such transaction based in any way on agreements, arrangements or understandings
made by or on behalf of the Company.
(i) The Company is not an investment company subject to registration
under the Investment Company Act of 1940, as amended.
(j) At Closing, the Purchaser shall acquire good and marketable
title to the Securities free and clear of all covenants, conditions,
restrictions, liens, pledges, charges, encumbrances, options and adverse claims
or rights of any kind whatsoever.
(k) Holdings has registered its Common Stock pursuant to Section
12(b) or 12(g) of the Exchange Act and is in full compliance with all reporting
requirements of the Exchange Act, and Holdings has maintained all requirements
for the continued listing or quotation of its Common Stock, and such Common
Stock is currently listed or quoted on the Principal Market. As of the date
hereof, the Principal Market is the NASDAQ National Market.
(l) Holdings has furnished or made available or will furnish and
make available prior to the Closing Date to the Purchaser true and correct
copies of the Company's articles or certificate of incorporation, as amended and
in effect on the date hereof, and the Company's by-laws, as amended and in
effect on the date hereof.
(m) As of their respective dates, all registration statements,
reports and documents, including proxy statements filed by or on behalf of
Holdings with the SEC pursuant to the Securities Act or Exchange Act (the "SEC
DOCUMENTS") complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and rules and
regulations of the SEC promulgated thereunder and other federal, state and local
laws, rules and regulations applicable to such SEC Documents, and none of the
SEC Documents 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 Holdings included in the SEC
Documents comply as to form in all material respects with generally accepted
accounting principles, consistently applied, and the published rules and
regulations of the SEC or other applicable rules and regulations with respect
thereto. Such financial statements have been prepared in accordance with
generally accepted accounting
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principles 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 Holdings 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).
SECTION 1.6 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The Purchaser represents and warrants to the Company that on the
date hereof and as of the Closing Date:
(a) The Purchaser has all requisite power to execute and deliver
this Agreement, and all other documents and agreements contemplated hereby and
thereby, and to perform the provisions hereof and thereof and to consummate the
transactions contemplated hereby and thereby.
(b) The execution, delivery and performance of this Agreement, and
all other documents and agreements contemplated hereby and thereby, and the
consummation of the transactions contemplated hereby or thereby, have been duly
authorized and approved by the Purchaser. This Agreement, and all other
documents and agreements contemplated hereby and thereby have each been duly
authorized, executed and delivered by, and each is the valid and binding
obligation of the Purchaser enforceable against such Purchaser in accordance
with its terms, except as may be limited by applicable bankruptcy,
reorganization, insolvency, moratorium or other similar laws or by legal or
equitable principles relating to or limiting creditors' rights generally.
(c) The Purchaser is an "accredited investor" within the meaning of
Rule 501 of Regulation D promulgated under the Securities Act of 1933, as
amended.
(d) The Purchaser acknowledges that the Securities being acquired by
it are not being acquired pursuant to a transaction registered under the
Securities Act of 1933, as amended, in that the issuance of the Securities does
not involve any public offering.
(e) The Purchaser represents that it is acquiring the Securities for
investment for its own account, and not with a view to distribution.
(f) The Purchaser has received from the Company access to
information as it deems necessary for the purchase of the Securities.
(g) The Purchaser will not sell or otherwise transfer the Securities
without registration of such Securities under the Securities Act of 1933, as
amended, or an exemption therefrom, and fully understands and agrees that the
Purchaser must bear the economic risk of its purchase for an indefinite period
of time.
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(h) The Purchaser represents that it is willing and able to bear the
economic risk of its investment in the Securities issued hereunder, and has no
need for liquidity with respect thereto, is able to sustain a complete loss of
its investment, and purchasing such Securities for its own account for
investment and not with a view for resale or distribution thereof except in
compliance with the Securities Act of 1933, as amended.
SECTION 2. CONDITIONS TO OBLIGATIONS OF THE PURCHASER. The obligations of
the Purchaser to purchase and pay for the Securities on the Closing Date shall
be subject to the satisfaction on or before the Closing Date of the conditions
hereinafter set forth:
SECTION 2.1 PROCEEDINGS SATISFACTORY. All proceedings taken on or
prior to the Closing Date in connection with the issuance of the Securities and
the consummation of the transactions contemplated hereby and all documents and
papers relating thereto shall be satisfactory in form and substance to the
Purchaser and its counsel.
SECTION 2.2 REPRESENTATIONS TRUE. All representations and warranties
of the Company contained herein shall be true and correct in all respects on and
as of the Closing Date with the same effect as though such representations and
warranties had been made on and as of the Closing Date; the Company shall have
performed in all respects all agreements on its part required to be performed
under this Agreement on or prior to the Closing Date.
SECTION 2.3 THE PURCHASE BY THE PURCHASER PERMITTED BY APPLICABLE
LAWS. The sale by the Company and the payment for the Securities to be purchased
by the Purchaser (i) shall not be prohibited by any applicable law or
governmental regulation, release, interpretation or opinion, (ii) shall not
subject the Purchaser to any penalty under or pursuant to any applicable law or
governmental regulation, and (iii) shall be permitted by the laws and
regulations of the jurisdictions to which the Purchaser is subject.
SECTION 2.4 EXECUTION AND DELIVERY OF DOCUMENTS: GRANTING OF
SECURITY INTEREST. The Purchaser shall have received the following at its
offices, duly executed and delivered and in form and substance satisfactory to
the Purchaser and its counsel: the Agreement and the Securities, and such other
documents and information as the Purchaser may reasonably request, in connection
herewith, including without limitation, (a) a Security Agreement in the form of
Exhibit C hereto, (b) an Omnibus Secretary's Certificate in the form of Exhibit
D hereto, and (c) an opinion of counsel to the Company.
SECTION 2.5 PAYMENT OF EXPENSES. Whether or not the transactions
contemplated by this Agreement are consummated, the Company shall promptly pay
to the Purchaser all reasonable costs and out-of-pocket expenses incurred by any
of it, including without limitation reasonable attorneys' fees, incurred in
connection with the negotiation, preparation, execution and delivery of this
Agreement and the Securities, any administration costs in connection therewith,
and defense or enforcement costs related thereto.
SECTION 3. COVENANTS. The Company covenants and agrees that on and after
the date hereof, so long as the Demand Note shall be outstanding:
SECTION 3.1 PAYMENT OF THE NOTE. The Company shall pay to the
Purchaser the principal of and interest on the Demand Note on demand of the
Purchaser as provided in the Demand Note and in this Agreement. The obligation
of the Company described in the preceding
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sentence is absolute and unconditional, irrespective of any tax or accounting
treatment of such obligation including without limitation any documentary stamp,
transfer, ad valorem or other taxes assessed by any jurisdiction in connection
with this transaction.
SECTION 3.2 STAY, EXTENSION AND USURY LAWS. The Company agrees (to
the extent it may lawfully do so) that it will not at any time insist upon,
plead or in any manner whatsoever claim or take the benefit or advantage of, any
stay or extension law or any usury law or other law that would prohibit or
forgive the Company from paying all or a portion of the principal of, or
interest on, the Demand Note as contemplated herein, wherever enacted, now or at
any time hereinafter in force, or that may materially affect the covenants or
the performance of this Agreement in any manner inconsistent with the provisions
of this Agreement. The Company expressly waives all benefit or advantage of any
such law. If a court of competent jurisdiction prescribes that the Company may
not waive its rights to take the benefit or advantage of any stay or extension
law or any usury law or other law in accordance with the prior sentence, then
the obligation to pay interest on the Demand Note shall be reduced to the
maximum legal limit under applicable law governing the interest payable in
connection with the Demand Note, and any amount of interest paid by the Company
that is deemed illegal shall be deemed to have been a prepayment of principal on
such Note.
SECTION 3.3 CORPORATE EXISTENCE. The Company will do or cause to be
done all things necessary to preserve and keep in full force and effect its
corporate existence, as the case may be, in accordance with the rights (charter
and statutory), licenses and franchises of the Company.
SECTION 3.4 REPURCHASE OF SECURITIES. Except with the written
consent of all the Purchasers (which may be granted or withheld in its sole
discretion), the Company shall not repurchase or otherwise acquire or retire any
of its capital stock or other securities or obligation evidencing the right of
any holder thereof to purchase any of its capital stock or other securities in
an aggregate amount in excess of US$10,000.00 so long as the Demand Note shall
be outstanding.
SECTION 3.5 COMPLIANCE WITH LAWS. The Company shall comply in all
material respects with all applicable laws, statutes and regulations of any
Governmental Person, a violation of which would have a material adverse effect
on the financial condition, operations, business, profits, prospects or
properties of the Company or the validity or enforceability of this Agreement,
the Securities or any other documents or agreements contemplated hereby or
thereby or any of the transactions contemplated hereby or thereby.
SECTION 4. MISCELLANEOUS
SECTION 4.1 RELIANCE ON AND SURVIVAL OF REPRESENTATIONS. All
representations, warranties, and agreements of the Company herein shall be
deemed to be material and to have been relied upon by the Purchaser and shall
survive the execution and delivery of this Agreement and of the Securities so
long as the Demand Note shall be outstanding.
SECTION 4.2 SUCCESSORS AND ASSIGNS. This Agreement shall bind and
inure to the benefit of and be enforceable by the Company, and the Purchaser and
each of their respective successors and assigns. The Purchaser shall be
permitted to transfer the Securities in accordance
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with its terms and in accordance with applicable restrictions under applicable
federal and state securities laws.
SECTION 4.3 NOTICES. All notices and other communications provided
for in this Agreement shall be in writing and delivered by registered or
certified mail, postage prepaid, or delivered by overnight courier (for next
Business Day delivery) or telecopied, addressed as follows, or at such other
address as any of the parties hereto may hereafter designate by notice to the
other parties given in accordance with this SECTION:
1) if to the Company:
Telscape International, Inc.
0000 Xxxx Xxx Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Xxxx X. Xxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Telscape USA, Inc.
0000 Xxxx Xxx Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Xxxx X. Xxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
TSCP International, Inc.
0000 Xxxx Xxx Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Xxxx X. Xxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
MSN Communications, Inc.
0000 Xxxx Xxx Xxxxxxxxx
Xxxxxxx, XX 00000
Attn: Xxxx X. Xxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
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2) if to the Purchaser:
Lucent Technologies, Inc.
000 Xxxx Xxxxxx Xxxx
Xxxxxx, Xxx Xxxxxx
Attn: General Counsel
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Any such notice or communication shall be deemed to have been duly
given on the fifth day after being so mailed, the next Business Day after
delivery by overnight courier, when received when sent by telecopy or upon
receipt when delivered personally.
SECTION 4.4 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. Signatures may be
exchanged by telecopy, with original signatures to follow. Each of the parties
hereto agrees that it will be bound by its own telecopied signature and that it
accepts the telecopied signatures of the other parties to this Agreement. The
original signature pages shall be forwarded to the Purchaser's counsel and the
Purchaser or its counsel will provide all of the parties hereto with a copy of
the entire Agreement.
SECTION 4.5 AMENDMENTS. This Agreement may only be amended by a
writing duly executed by the parties hereto.
SECTION 4.6 SEVERABILITY. If any term or provision of this Agreement
or any other document executed in connection herewith shall be determined to be
illegal or unenforceable, all other terms and provisions hereof and thereof
shall nevertheless remain effective and shall be enforced to the fullest extent
permitted by applicable law.
SECTION 4.7 GOVERNING LAW; SUBMISSION TO PROCESS. EXCEPT TO THE
EXTENT THAT THE LAW OF ANOTHER JURISDICTION IS EXPRESSLY SELECTED IN A DOCUMENT
OR SECURITY, THIS AGREEMENT AND THE SECURITIES AND ALL AMENDMENTS, SUPPLEMENTS,
WAIVERS AND CONSENTS RELATING HERETO OR THERETO SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW THAT WOULD CAUSE THE GOVERNING LAW OF ANOTHER
JURISDICTION TO BE APPLIED. THE COMPANY HEREBY IRREVOCABLY SUBMITS ITSELF TO THE
NON-EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE STATE
OF NEW YORK AND AGREES AND CONSENTS THAT SERVICE OF PROCESS MAY BE MADE UPON IT
IN ANY LEGAL PROCEEDINGS RELATING HERETO BY ANY MEANS ALLOWED UNDER NEW YORK OR
FEDERAL LAW. THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF
VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH COURT AND ANY CLAIM THAT ANY SUCH
PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
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SECTION 4.8 AGENT FOR SERVICE OF PROCESS. The Company shall appoint
CT Corporation System, 0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 as its agent for
service of process in New York and shall notify the Purchaser of any future
change therein.
SECTION 4.9 ENTIRE AGREEMENT. This Agreement contains the entire
Agreement of the parties hereto with respect to the transactions contemplated
hereby and supersedes all previous oral and written, and all previous
contemporaneous oral negotiations, commitments and understandings.
SECTION 4.10 FURTHER ASSURANCES. The Company agrees promptly to
execute and deliver such documents and to take such other acts as are reasonably
necessary to effectuate the purposes of this Agreement.
SECTION 4.11 HEADINGS. The headings contained herein are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 4.12 ASSIGNMENTS. The Company may not assign its rights or
obligations hereunder without the prior written consent of the Purchaser. The
Purchaser may assign all or any portion of the Demand Note or other Securities
without the prior consent of the Company.
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IN WITNESS WHEREOF, the parties hereto execute this Agreement as of the date
first set forth above.
THE COMPANY:
TELSCAPE INTERNATIONAL, INC.,
a Texas corporation
By: ________________________________
Name: Xxxx X. Xxxxx
Title: President
TELSCAPE USA, INC.,
a Texas corporation
By: ________________________________
Name: Xxxx X. Xxxxx
Title: Executive Vice President and Secretary
TSCP INTERNATIONAL, INC.,
a Texas corporation
By: ________________________________
Name: Xxxx X. Xxxxx
Title: Executive Vice President and Secretary
MSN COMMUNICATIONS, INC.
a California corporation
By: ________________________________
Name: Xxxx X. Xxxxx
Title: Executive Vice President and Secretary
THE PURCHASER:
LUCENT TECHNOLOGIES INC.,
a Delaware corporation
By: ________________________________
Name:
Title:
EXHIBIT A
FORM OF DEMAND NOTE
DEMAND NOTE
$3,000,000.00 July 19, 1999
FOR VALUE RECEIVED, TELSCAPE INTERNATIONAL, INC., a Texas
corporation, TELSCAPE USA, INC., a Texas corporation, MSN COMMUNICATIONS, INC.,
a California corporation and TSCP INTERNATIONAL, INC., a Texas corporation
(collectively, the "MAKERS" and each a "MAKER"), jointly and severally, hereby
unconditionally promises to pay to or to the order of LUCENT TECHNOLOGIES INC.,
a Delaware corporation (the "PAYEE"), upon demand, the principal sum of THREE
MILLION DOLLARS ($3,000,000.00), together with interest, if any, which shall
accrue on and after July 19, 1999 on the unpaid balance at the rate of ten
percent (10.0%) per annum (the "INTEREST RATE").
Each Maker agrees that its obligations under this Note are joint and
several. Payment of principal and interest shall be made in lawful money of the
United States of America, and shall be made at the office of the Payee at 000
Xxxx Xxxxxx Xxxx, Xxxxxx, Xxx Xxxxxx 00000, or at such other place or bank
account as the Payee or any holder hereof may from time to time designate.
Said sums shall be payable together with all costs and expenses,
including attorneys' fees and legal expenses, incurred by the Payee or any
holder hereof in seeking to enforce payment of this Note.
This Note shall be senior to all subordinated debt and at least PARI
PASSU with all other senior debt of the Makers.
Upon the commencement of any proceeding under any bankruptcy or
insolvency laws by or against any Maker, or upon an assignment for the benefit
of creditors by any Maker, the whole of the principal sum of this Note then
outstanding, and the interest accrued thereon, and any other sums due hereunder,
shall immediately become due and payable automatically, without demand or notice
of any kind, all of which are expressly waived by each Maker.
Each Maker hereby waives presentment for payment, demand, protest,
notice of dishonor and nonpayment of this Note and notice of any kind. Each
Maker (i) waives diligence, demand, presentment, protest and notice of any kind,
(ii) agrees that it will not be necessary for Payee to first institute suit in
order to enforce payment of this Note and (iii) consents to any one or more
extensions or postponements of time of payment, release, surrender or
substitution of collateral security, or forbearance or other indulgence, without
notice or consent. The pleading of any statute of limitations as a defense to
any demand against each Maker is expressly hereby waived by such Maker.
This Note shall be secured by that certain Security Agreement made
by the Makers and State Street Bank and Trust Company, a Massachusetts banking
corporation, as U.S. Collateral Agent for the sole benefit of the Payee, on the
date hereof. The Payee shall not be required to resort to any collateral for
payment, but may proceed against the Makers and any guarantor or endorser hereof
in such order and manner as the Payee may choose. None of the rights of the
Payee shall be waived or diminished by any failure or delay in the exercise
thereof.
Each Maker hereby waives personal service of any and all process
upon it and consents that all such service of process may be made by registered
or certified mail (return receipt requested) directed to it and service so made
shall be deemed to be completed five (5) days after the same shall have been so
deposited in the U.S. mails, or, at the Payee's option, by service upon the
Makers in any other manner provided under the rules of any such courts. Within
thirty (30) days after such service, the Makers shall appear in answer to such
process, failing which the Makers shall be deemed in default and judgment may be
entered by the Payee against the Makers for the amount of the claim and other
relief requested.
Each Maker consents and submits to the non-exclusive jurisdiction of
the courts of the State of New York and the United States District Court for the
Southern District of New York and waives any objection based on venue or FORUM
NON CONVENIENS with respect to any action instituted therein arising under this
Note or in any way connected with or related or incidental to the dealings among
the Makers and the Payee in respect of this Note or the transaction related
hereto or thereto, in each case whether now existing or hereafter arising, and
whether in contract, tort, equity or otherwise.
EACH MAKER HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION (1) ARISING UNDER THIS NOTE OR (2) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS AMONG THE MAKERS AND THE
PAYEE IN RESPECT OF THIS NOTE OR THE TRANSACTIONS RELATED HERETO OR THERETO IN
EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT,
TORT, EQUITY OR OTHERWISE. EACH MAKER AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A
JURY.
This Note shall be binding upon the successors and assigns of each
Maker and inure to the benefit of the Payee and its successors, endorsees and
assigns. Whenever used herein, the term "Maker" shall be deemed to include its
successors and assigns and the term "Payee" shall be deemed to include their
successors, endorsees and assigns. If any term or provision of this Note shall
be held invalid, illegal or unenforceable, the validity of all other terms and
provisions hereof shall in no way be affected thereby.
2
The rights and obligations of the parties hereunder shall be
governed by, and construed and enforced in accordance with, the laws of the
State of New York, without regard to the conflicts of law principles thereof.
TELSCAPE INTERNATIONAL, INC.,
as a Maker
_______________________________________
Name:
Title:
ADDRESS: 0000 Xxxx Xxx Xxxx.
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
TELSCAPE USA, INC.,
as a Maker
_______________________________________
Name:
Title:
ADDRESS: 0000 Xxxx Xxx Xxxx.
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
MSN COMMUNICATIONS, INC.,
as a Maker
_______________________________________
Name:
Title:
ADDRESS: 0000 Xxxx Xxx Xxxx.
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
3
TSCP INTERNATIONAL, INC.,
as a Maker
_______________________________________
Name:
Title:
ADDRESS: 0000 Xxxx Xxx Xxxx.
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
4
EXHIBIT B
FORM OF WARRANT
WARRANT
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE
SOLD, TRANSFERRED OR OFFERED FOR SALE EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AS TO THE SECURITIES UNDER THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS.
Warrant 1
July 19, 1999
Warrant to Purchase 85,000 Shares of Common Stock of
TELSCAPE INTERNATIONAL, INC.
Telscape International, Inc., a Texas corporation (the "COMPANY"), hereby
acknowledges that Lucent Technologies Inc., a Delaware corporation ("INVESTOR"),
or any other Warrant Holder is entitled, on the terms and conditions set forth
below, to purchase from the Company, at any time after the date hereof and
ending on the date that is the third anniversary of the date hereof, the above
number of fully paid and nonassessable shares of Common Stock, par value $0.001
per share, of the Company (the "COMMON STOCK") at the Purchase Price
(hereinafter defined), as the same may be adjusted pursuant to SECTION 5 herein.
1. DEFINITIONS. All terms not otherwise defined herein shall have the
meanings given such terms in the Agreement.
(a) "AGREEMENT" shall mean the Securities Purchase Agreement of even
date herewith between the Company and the Investor.
(b) "INVESTOR" shall mean Lucent Technologies Inc., a Delaware
corporation.
(c) "PURCHASE PRICE" shall be $8.50 per share.
(d) "WARRANT HOLDER" shall mean the Investor or any permitted assignee
of all or any portion of this Warrant.
(e) "WARRANT SHARES" shall mean the shares of Common Stock or other
securities issuable upon exercise of this Warrant.
(f) Other capitalized terms used herein which are defined in the
Agreement shall have the same meanings herein as therein.
2. EXERCISE OR EXCHANGE OF WARRANT.
(a) This Warrant may be exercised by the Warrant Holder, in whole or
in part, at any time and from time to time by surrender of this Warrant,
together with the form of exercise attached hereto as Exhibit A (the "EXERCISE
FORM") duly executed by Warrant Holder, together with the full Purchase Price
(as defined in SECTION 1) for each share of Common Stock as to which this
Warrant is exercised, to the Company at the address set forth in SECTION 15
hereof. At the option of the Warrant Holder, payment of the Purchase Price may
be made either by (i) certified check payable to the order of the Company, (ii)
surrender of certificates then held representing, or deduction from the number
of shares issuable upon exercise of this Warrant, of that number of shares which
has an aggregate fair market value (as defined below) on the date of exercise
equal to the aggregate Purchase Price for all shares to be purchased pursuant to
this Warrant or (iii) by any combination of the foregoing methods.
In the event that the Warrant is not exercised in full, the number of
Warrant Shares shall be reduced by the number of such Warrant Shares for which
this Warrant is exercised, and the Company, at its expense, shall forthwith
issue and deliver to or upon the order of the Warrant Holder a new Warrant of
like tenor in the name of the Warrant Holder or as the Warrant Holder may
request, reflecting such adjusted Warrant Shares.
(b) The "DATE OF EXERCISE" of the Warrant shall be the date that the
completed Exercise Form is delivered to the Company, together with the original
Warrant and payment in full of the Purchase Price.
3. DELIVERY OF STOCK CERTIFICATES.
(a) Subject to the terms and conditions of this Warrant, as soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within five (5) Business Days thereafter, the Company at its expense
(including, without limitation, the payment by it of any applicable issue taxes)
will cause to be issued in the name of and delivered to the Warrant Holder, or
as the Warrant Holder may lawfully direct, a certificate or certificates for the
number of fully paid and non-assessable shares of Common Stock to which the
Warrant Holder shall be entitled on such exercise, together with any other stock
or other securities or property (including cash, where applicable) to which the
Warrant Holder is entitled upon such exercise in accordance with the provisions
hereof.
(b) This Warrant may not be exercised as to fractional shares of
Common Stock. In the event that the exercise of this Warrant, in full or in
part, would result in the issuance of any fractional share of Common Stock, then
in such event the Warrant Holder shall be entitled to cash equal to the fair
market value of such fractional share. For purposes of this Warrant, "FAIR
MARKET VALUE" shall equal the closing bid price of the Common Stock on the
Nasdaq National Market or Small-Cap Market, the American Stock Exchange or the
New York Stock Exchange, whichever is the principal trading exchange or market
for the
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Common Stock (the "PRINCIPAL MARKET") on the date of exercise hereof, or if the
Common Stock is not listed or admitted to trading on any national securities
exchange or quoted on the Nasdaq National Market or Small-Cap Market, the
closing bid price on the over-the-counter market as furnished by any New York
Stock Exchange member firm that makes a market in the Common Stock reasonably
selected from time to time by the Company for that purpose, or, if the Common
Stock is not traded over-the-counter and the average price cannot be determined
as contemplated above, the fair market value of the Common Stock shall be as
reasonably determined in good faith by the Company's Board of Directors.
4. COVENANTS OF THE COMPANY.
(a) The Company shall take all necessary action and proceedings as
may be required and permitted by applicable law, rule and regulation, including,
without limitation, the notification of the Principal Market, for the legal and
valid issuance of this Warrant and the Warrant Shares to the Warrant Holder.
(b) From the date hereof through the last date on which this Warrant
is exercisable, the Company shall take all steps necessary and within its
control to insure that the Common Stock remains listed or quoted on the
Principal Market and shall not amend its Articles of Incorporation or By-Laws so
as to adversely affect any rights of the Warrant Holder under this Warrant;
provided, however, that increasing the number of authorized shares shall not be
deemed a material adverse effect.
(c) The Company shall at all times reserve and keep available, solely
for issuance and delivery as Warrant Shares hereunder, such shares of Common
Stock as shall from time to time be issuable as Warrant Shares.
(d) The Warrant Shares, when issued in accordance with the terms
hereof; will be duly authorized and, when paid for or issued in accordance with
the terms hereof, shall be validly issued, fully paid and non-assessable. The
Company has authorized and reserved for issuance to the Warrant Holder the
requisite number of shares of Common Stock to be issued pursuant to this
Warrant.
(e) With a view to making available to the Warrant Holder the benefits
of Rule 144 promulgated under the Securities Act ("RULE 144") and any other rule
or regulation of the Securities and Exchange Commission (the "SEC"), that may at
any time permit Warrant Holder to sell securities of the Company to the public
without registration, the Company agrees to use its best efforts to: (i) make
and keep public information available, as those terms are understood and defined
in Rule 144, at all times; and (ii) file with the SEC in a timely manner all
reports and other documents required of the Company under the Securities Act and
the Exchange Act.
5. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES. The number of and kind
of securities purchasable upon exercise of this Warrant and the Purchase Price
shall be subject to adjustment from time to time as follows:
-3-
(a) SUBDIVISIONS, COMBINATIONS AND OTHER ISSUANCES. If the Company
shall at any time after the date hereof but prior to the expiration of this
Warrant subdivide its outstanding securities as to which purchase rights under
this Warrant exist, by split-up, spin-off, or otherwise, or combine its
outstanding securities as to which purchase rights under this Warrant exist, the
number of Warrant Shares as to which this Warrant is exercisable as of the date
of such subdivision, split-up, spin-off or combination shall forthwith be
proportionately increased in the case of a subdivision, or proportionately
decreased in the case of a combination. Appropriate adjustments shall also be
made to the Purchase Price, but the aggregate purchase price payable for the
total number of Warrant Shares purchasable under this Warrant as of such date
shall remain the same.
(b) STOCK DIVIDEND. If at any time after the date hereof the Company
declares a dividend or other distribution on Common Stock payable in Common
Stock or other securities or rights convertible into or exchangeable for Common
Stock ("COMMON STOCK EQUIVALENTS"), without payment of any consideration by
holders of Common Stock for the additional shares of Common Stock or the Common
Stock Equivalents (including the additional shares of Common Stock issuable upon
exercise or conversion thereof), then the number of shares of Common Stock for
which this Warrant may be exercised shall be increased as of the record date (or
the date of such dividend distribution if no record date is set) for determining
which holders of Common Stock shall be entitled to receive such dividends, in
proportion to the increase in the number of outstanding shares (and shares of
Common Stock issuable upon conversion of all such securities convertible into
Common Stock) of Common Stock as a result of such dividend, and the Purchase
Price shall be adjusted so that the aggregate amount payable for the purchase of
all the Warrant Shares issuable hereunder immediately after the record date (or
on the date of such distribution, if applicable), for such dividend shall remain
the same.
(c) OTHER DISTRIBUTIONS. If at any time after the date hereof the
Company distributes to holders of its Common Stock, other than as part of a
dissolution or liquidation or the winding up of its affairs, any shares of its
capital stock, any evidence of indebtedness or any of its assets without payment
of any consideration by holders of Common Stock (other than cash, Common Stock
or securities convertible into or exchangeable for Common Stock), then, in any
such case, the Warrant Holder shall be entitled to receive, upon exercise of
this Warrant, with respect to each share of Common Stock issuable upon such
exercise, the amount of cash or evidences of indebtedness or other securities or
assets which such Warrant Holder would have been entitled to receive with
respect to each such share of Common Stock as a result of the happening of such
event had this Warrant been exercised immediately prior to the record date or
other date determining the shareholders entitled to participate in such
distribution (the "DETERMINATION DATE").
(d) MERGER, CONSOLIDATION, ETC. If at any time after the date hereof
there shall be a merger or consolidation of the Company with or into, or a
transfer of all or substantially all of the assets of the Company to, another
entity (a "CONSOLIDATION EVENT"), then the Warrant Holder shall be entitled to
receive upon such transfer, merger or
-4-
consolidation becoming effective, and upon payment of the aggregate Purchase
Price then in effect, the number of shares or other securities or property of
the Company or of the successor corporation resulting from such merger or
consolidation, which would have been received by Warrant Holder for the shares
of stock subject to this Warrant had this Warrant been exercised immediately
prior to such transfer, merger or consolidation becoming effective or to the
applicable record date thereof, as the case may be. The Company shall not effect
any Consolidation Event unless the resulting successor or acquiring entity (if
not the Company) assumes by written instrument the obligation to deliver to the
Warrant Holder such shares of stock and/or securities as the Warrant Holder is
entitled to receive had this Warrant been exercised in accordance with the
foregoing.
(e) RECLASSIFICATION, ETC. If at any time after the date hereof there
shall be a reclassification of any securities as to which purchase rights under
this Warrant exist, into the same or a different number of securities of any
other class or classes, then the Warrant Holder shall thereafter be entitled to
receive upon exercise of this Warrant, during the period specified herein and
upon payment of the Purchase Price then in effect, the number of shares or other
securities or property resulting from such reorganization or reclassification,
which would have been received by the Warrant Holder for the shares of stock
subject to this Warrant had this Warrant at such time been exercised.
(f) PURCHASE PRICE ADJUSTMENT. In the event that the Company issues or
sells any Common Stock or securities which are convertible into or exchangeable
for its Common Stock or any convertible securities, or any warrants or other
rights to subscribe for or to purchase or any options for the purchase of its
Common Stock or any such convertible securities (other than issuance of shares
of Common Stock upon conversion thereof, shares or options issued or which may
be issued to employees, directors or consultants pursuant to the Company's stock
option or stock purchase plans as of the date hereof or shares issued upon
exercise of options, warrants or rights outstanding as of the date hereof) at an
effective purchase price per share which is less than the Purchase Price then in
effect and more than fifteen percent (15%) less than the fair market value (as
hereinabove defined) of the Common Stock on the trading day next preceding such
issue or sale, then the Purchase Price in effect immediately prior to such issue
or sale shall be reduced effective concurrently with such issue or sale to an
amount determined by multiplying the Purchase Price then in effect by a
fraction, (x) the numerator of which shall be the sum of (1) the number of
shares of Common Stock outstanding immediately prior to such issue or sale,
including, without duplication, those deemed to have been issued under the
Warrants plus (2) the number of shares of Common Stock which the aggregate
consideration received by the Company for such additional shares would purchase
at such fair market value then in effect, and (y) the denominator of which shall
be the number of shares of Common Stock of the Company outstanding immediately
after such issue or sale including, without duplication, those deemed to have
been issued under the Warrants. For purposes of the foregoing fraction, Common
Stock outstanding shall include, without limitation, any equity offerings then
outstanding, whether or not they are exercisable or convertible when such
fraction is to be determined.
-5-
The foregoing price adjustment shall not apply to the issuance of shares of
Common Stock which may be issued upon exercise of options under the Company's
employee or director stock option plans, upon the conversion or exchange of
convertible or exchangeable securities or upon the exercise of warrants, or
other rights, which options, convertible or exchangeable securities, warrants or
other rights are outstanding on the date of execution and delivery of this
Warrant.
The number of shares which may be purchased shall be increased
proportionately to any reduction in Purchase Price pursuant to this paragraph
5(f), so that after such adjustments the aggregate Purchase Price payable
hereunder for the increased number of shares of Common Stock shall be the same
as the aggregate Purchase Price in effect immediately prior to such adjustments.
Notwithstanding anything else contained in this Warrant to the contrary,
there shall be no adjustment of the Purchase Price or the number of shares of
Common Stock issuable pursuant to the exercise of this Warrant in the event that
during the term of this Warrant, the Company issues shares of Common Stock, or
securities convertible into Common Stock to the Purchaser.
(g) ADJUSTMENTS; ADDITIONAL SHARES, SECURITIES OR ASSETS. In the event
that at any time, as a result of an adjustment made pursuant to this SECTION 5,
the Warrant Holder shall, upon exercise of this Warrant, become entitled to
receive shares and/or other securities or assets (other than Common Stock) then,
wherever appropriate, all references herein to shares of Common Stock shall be
deemed to refer to and include such shares and/or other securities or assets;
and thereafter the number of such shares and/or other securities or assets shall
be subject to adjustment from time to time in a manner and upon terms as nearly
equivalent as practicable to the provisions of this SECTION 5.
6. REGISTRATION RIGHTS.
(a) "PIGGYBACK" REGISTRATION RIGHTS. If at any time after the date hereof
the Company shall determine to register under the Securities Act (including
pursuant to a demand of any security holder of the Company exercising
registration rights) any of its Common Stock (except pursuant to the
registration statement on Form S-3 filed with the SEC on April 30, 1999 (file
No. 333-77443), securities to be issued solely in connection with any
acquisition of any entity or business, shares issuable solely pursuant to
employee benefit plans eligible for registration on SEC Form S-8 or shares to be
registered on any registration form that does not permit secondary sales), it
shall send to each of the Warrant Holder(s) written notice of such determination
at least thirty (30) days prior to each such filing and, if within twenty (20)
days after receipt of such notice, any Warrant Holder shall so request in
writing, the Company shall use its best efforts to include in such registration
statement (to the extent permitted by applicable regulation) all or any part of
the Warrant Shares (collectively referred to in this SECTION 6 as "REGISTRABLE
SECURITIES") that such Warrant Holder requests to be registered, provided,
however, that if, in connection with any offering involving an underwriting of
Common
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Stock to be issued by the Company, the managing underwriter shall impose a
limitation on the amount of Registrable Securities included in any such
registration statement, then, to the extent that any Registrable Securities
remain available for registration after the underwriter's cutback, the Company
shall be obligated to include in such registration statement with respect to
each Warrant Holder requesting inclusion only the product of : (i) the number of
Registrable Securities with respect to which such Warrant Holder has requested
inclusion hereunder and (ii) such Warrant Holder's pro rata share of the sum of
all Registrable Securities permitted to be registered and all other securities
of the Company, the holders of which Registrable Securities and other securities
have requested that such securities be registered. Any Registrable Securities
which are included in any underwritten offering under this SECTION 6(A) shall be
sold upon such terms as the managing underwriters shall reasonably request but
in any event shall be upon terms not less favorable than those upon which any
other selling security holder shall sell any of its securities. If any Warrant
Holder disapproves of the terms of such underwriting, such Warrant Holder may
elect to withdraw therefrom by written notice to the Company and the
underwriter. The Company shall use its best efforts to cause the managing
underwriter or underwriters of a proposed underwritten offering (the "COMPANY
UNDERWRITER") to permit the Warrant Holders who have requested to participate in
the registration for such offering to include such Registrable Securities in
such offering on the same terms and conditions as the securities of the Company
included therein. Notwithstanding the foregoing, if the Company Underwriter
delivers a written opinion to the Warrant Holders that the total amount or kind
of securities which they, the Company and any other Persons intend to include in
such offering (the "TOTAL SECURITIES") is sufficiently large so as to prevent
the Company from effecting a successful offering of the Total Securities, then
the amount or kind of securities to be offered for the account of any members of
management shall be reduced pro rata to the extent necessary to reduce the Total
Securities to the amount recommended by the Company Underwriter, and if the
amount or kind of Total Securities is still sufficiently large so as to prevent
the Company from effecting a successful offering of the Total Securities, then
the amount or kind of securities to be offered for the account of the Warrant
Holders and any other Persons shall be reduced pro rata to the extent necessary
to reduce the Total Securities to the amount recommended by the Company
Underwriter. Notwithstanding the provisions of this SECTION 6(A), the Company
shall have the right, at any time after it shall have given written notice
pursuant to this SECTION 6(A) (irrespective of whether a written request for
inclusion of Registrable Securities shall have been made), to elect not to file
any such proposed registration statement or to withdraw the same after the
filing and prior to the effective date thereof whether or not any Warrant Holder
has elected to include securities in such registration.
(b) EFFECTIVENESS. If necessary to permit distribution of the
Registrable Securities, the Company shall use its best efforts to maintain the
effectiveness for up to one (1) year of the registration pursuant to which any
of the Registrable Securities are being offered, and from time to time will
amend or supplement such registration statement and the prospectus contained
therein as and to the extent necessary to comply with the Securities Act and any
applicable state securities statute or
-7-
regulation. Notwithstanding the foregoing, if the registration by the Company of
the resale of Registrable Securities is eligible for SEC Form S-3 or any
successor to such form, the Company shall use its best efforts to maintain the
effectiveness of the registration until all registered Registrable Securities
are sold. Each Warrant Holder shall notify the Company promptly of the
completion of the offering of its Registrable Securities under any such
effective registration statement.
If requested by the Company or a representative of the underwriters
of Common Stock (or other securities) of the Company, each Warrant Holder shall
not sell or otherwise transfer or dispose of any Common Stock (or other
securities) of the Company held by such Warrant Holder (other than those
included in registration) for a period specified by the representative of the
underwriters, not to exceed one hundred twenty (120) days following the
effective date of a registration statement of the Company filed under the
Securities Act for the Company's initial public offering of the Company's Common
Stock.
(c) FURTHER OBLIGATIONS OF THE COMPANY. Whenever, under the preceding
provisions of this SECTION 6, the Company is required hereunder to register
Registrable Securities, it agrees that it shall also do the following:
(i) Furnish to each selling Warrant Holder such copies of each preliminary
and final prospectus and any other documents as such Warrant Holder may
reasonably request to facilitate the public offering of its Registrable
Securities;
(ii) Use its best efforts to register or qualify the Registrable
Securities to be registered pursuant to this SECTION 6 under the applicable
securities or blue sky laws of such jurisdictions as any selling Warrant Holder
may reasonably request;
(iii) Furnish to each selling Warrant Holder: (A) a signed counterpart of
an opinion of counsel for the Company, dated the effective date of the
registration statement; and (B) a copy of any "comfort" letters signed by the
Company's independent public accountants who have examined and reported on the
Company's financial statements included in the registration statement, covering
substantially the same matters as are customarily covered in opinions of
issuer's counsel and in accountants' "comfort" letters delivered to the
underwriters in underwritten public offerings of securities;
(iv) Permit each selling Warrant Holder or such Warrant Holder's counsel
or other representatives to inspect and copy such corporate documents and
records as may reasonably be requested by them in connection with such
registration; and
(v) Furnish to each selling Warrant Holder, upon request, a copy of
all documents filed and all correspondence from or to the Commission in
connection with any such offering.
-8-
(d) EXPENSES. Except for underwriters' discounts and brokerage commissions
allocable to the Registrable Securities, the Company shall bear all costs and
expenses of each registration contemplated in this SECTION 6, including, but not
limited to, printing, legal and accounting fees and expenses, SEC and NASD
filing fees and blue sky fees and expenses in any jurisdiction in which the
securities to be offered are to be registered or qualified.
(e) TRANSFER OF REGISTRATION RIGHTS. The registration rights of the
Warrant Holders of Registrable Securities under this SECTION 6 shall inure to
the benefit of and be exercisable by any transferee of Registrable Securities.
7. INDEMNIFICATION.
The Company agrees to defend, indemnify and hold harmless each
Warrant Holder, any underwriter(s) and their respective directors, officers,
employees, attorneys and agents, as well as each other Person (if any)
controlling any of the foregoing Persons within the meaning of Section 15 of the
Securities Act, or Section 20 of the Exchange Act, from and against any and all
claims, liabilities, losses and expenses (including, without limitation, the
disbursements, expenses and fees of their respective attorneys) that may be
imposed upon, incurred by, or asserted against any of them, any of their
respective directors, officers, employees, attorneys and agents, or any such
control Person, under the Securities Act, the Exchange Act or any other statute
or at common law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof), arise out of or are related directly or indirectly
to: (i) the Warrants or the Warrant Shares, (ii) any registration statement or
prospectus, (iii) any alleged untrue statement of any material fact contained,
on the effective date thereof, in any registration statement under which such
securities were registered under the Securities Act or the Exchange Act, or in
any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereto, or (iv) any alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and shall reimburse such Persons for any legal or any
other expenses reasonably incurred by such Persons in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon any alleged untrue statement or alleged omission made in such registration
statement, preliminary prospectus, prospectus or amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company through an instrument duly executed by such respective Person
specifically for use therein. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of any such
indemnified Person, and shall survive the transfer of such securities by such
Person. Promptly after receipt of notice of the commencement of any action in
respect of which indemnity may be sought against the Company, the Company shall
assume the defense of such action (including the employment of counsel, who
shall be counsel reasonably satisfactory to the party seeking indemnity
hereunder) and the payment of expenses insofar as such action shall relate to
any alleged liability in respect
-9-
of which indemnity may be sought against the Company. The Company shall not,
except with the approval of each party being indemnified under this SECTION
7(A), consent to entry of any judgment or enter into any settlement that does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to the parties being so indemnified of a release from all liability in
respect to such claim or litigation.
8. NO IMPAIRMENT. The Company will not, by amendment of its Articles of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Warrant Holder against
impairment. Without limiting the generality of the foregoing, the Company (a)
will not increase the par value of any Warrant Shares above the amount payable
therefor on such exercise, and (b) will take all such action as may be
reasonably necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares on the exercise of
this Warrant.
9. NOTICE OF ADJUSTMENTS; NOTICES. Whenever the Purchase Price or number of
Warrant Shares purchasable hereunder shall be adjusted pursuant to SECTION 5
hereof, the Company shall execute and deliver (by first class mail, postage
prepaid) to the Warrant Holder a certificate setting forth, in reasonable
detail, the event requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated and the Purchase Price and number
of shares purchasable hereunder after giving effect to such adjustment.
10. RIGHTS AS SHAREHOLDER. Prior to exercise of this Warrant, the Warrant
Holder shall not be entitled to any rights as a shareholder of the Company with
respect to the Warrant Shares, including (without limitation) the right to vote
such shares, receive dividends or other distributions thereon or be notified of
stockholder meetings. However, in the event of any taking by the Company of a
record of the holders of any class of securities for the purpose of determining
the holders thereof who are entitled to receive any dividend (other than a cash
dividend) or other distribution, any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities or
property, or to receive any other right, the Company shall mail to each Warrant
Holder, at least 10 days prior to the date specified therein, a notice
specifying the date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right.
11. REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of the Warrant and,
in the case of any such loss, theft or destruction of the Warrant, upon delivery
of an indemnity agreement or security reasonably satisfactory in form and amount
to the Company or, in the case of any such mutilation, on surrender and
cancellation of such Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
-10-
12. CONSENT TO JURISDICTION. THE COMPANY (I) HEREBY IRREVOCABLY SUBMITS TO
THE NON-EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK OR ANY XXXXX XXXXX XX XXX XXXXX XX XXX XXXX FOR
THE PURPOSES OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS WARRANT 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. THE COMPANY 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 WARRANT AND AGREES THAT SUCH SERVICE SHALL
CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING IN
THIS PARAGRAPH SHALL AFFECT OR LIMIT ANY RIGHT TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW.
13. ENTIRE AGREEMENT; AMENDMENTS. This Warrant and the Agreement contain the
entire understanding of the parties with respect to the matters covered hereby
and thereby. No provision of this Warrant may be waived or amended other than by
a written instrument signed by the party against whom enforcement of any such
amendment or waiver is sought.
14. RESTRICTED SECURITIES.
(a) REGISTRATION OR EXEMPTION REQUIRED. This Warrant has been issued
in a transaction exempt from the registration requirements of the Securities Act
in reliance upon the provisions of Section 4(2) of the Securities Act of 1933.
This Warrant and the Warrant Shares issuable upon exercise of this Warrant may
not be resold except pursuant to an effective registration statement or an
exemption to the registration requirements of the Securities Act and applicable
state laws.
(b) LEGEND. The Warrant and any Warrant Shares issued upon exercise
thereof (until a registration statement has been declared effective by the SEC
with respect to the Warrant Shares, at which time, such legend shall be removed,
and the Warrant Shares shall be freely tradeable), shall bear the following
legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
THEY MAY NOT BE SOLD OR OFFERED FOR SALE EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER THE
SECURITIES ACT AND
-11-
ANY APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION FROM
SUCH REGISTRATION REQUIREMENTS.
(c) ASSIGNMENT. Assuming the conditions of (a) above regarding
registration or exemption have been satisfied, the Warrant Holder may sell,
transfer, assign, pledge or otherwise dispose of this Warrant, in whole or in
part. The Warrant Holder shall deliver a written notice to Company,
substantially in the form of the Assignment attached hereto as Exhibit B,
indicating the person or persons to whom the Warrant shall be assigned and the
respective number of warrants to be assigned to each assignee. The Company shall
effect the assignment within ten (10) days, and shall deliver to the assignee(s)
designated by the Warrant Holder after delivery to the Company of the original
Warrant or Warrants for cancellation, a Warrant or Warrants of like tenor and
terms for the appropriate number of shares.
15. NOTICES. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be effective (a) upon hand
delivery or delivery by 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:
to the Company: Telscape International, Inc.
0000 Xxxx Xxx Xxxxxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxx, President
Facsimile No.: (000) 000-0000
to the Warrant Holder: Lucent Technologies, Inc.
000 Xxxx Xxxxxx Xxxx
Xxxxxx, Xxx Xxxxxx 00000
Attn: General Counsel
Facsimile: (000) 000-0000
Either party hereto may from time to time change its address or facsimile
number for notices under this SECTION 15 by giving at least 10 days prior
written notice of such changed address or facsimile number to the other party
hereto.
16. MISCELLANEOUS. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought. This Warrant shall
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be construed and enforced in accordance with and governed by the laws of the
State of new York, without regard to the conflicts of law principles thereof.
The headings in this Warrant are for purposes of reference only, and shall not
limit or otherwise affect any of the terms hereof. The invalidity or
unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provision.
17. SURVIVAL. The provisions of SECTIONS 6 and 7 shall survive the exercise
or expiration of this Warrant, and the Company shall confirm such survival in
writing if the Warrant Holder requests such confirmation upon exercise or
expiration of this Warrant in its entirety.
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TELSCAPE INTERNATIONAL, INC.
By:________________________________
Xxxx X. Xxxxx
President
EXHIBIT A
FORM OF WARRANT EXERCISE
I/we hereby exercise Telscape International, Inc. (the "Company")
Common Stock Purchases Warrant #_________________.
(a) Number of Shares of the Company common stock covered
in Purchase Warrant #______________ __________________
(b) Total Exercise price (____________ per share) $_________________
____________________________________ _________________________________
Signature Employment Identification Number
___________________________________________
Name (please print)
_______________________________________________________________________
Address
_______________________________________________________________________
___________________________________________
Telephone Number
_______________________________________ _______________________________
Signature Employment Identification No.
___________________________________________
Name (please print)
_______________________________________________________________________
Address
_______________________________________________________________________
___________________________________________
Telephone Number
I wish to register my shares of the Company common stock as follows:
a. ( ) Individual Ownership
b. ( ) Husband and Wife as Community Property
c. ( ) Joint Tenants w/Right to Survivorship (JTRS)
d. ( ) Tenants in Common
e. ( ) Other_________________________________
Dated:___________________________________, _____.
EXHIBIT B
FORM OF ASSIGNMENT
(To be executed by the registered Warrant Holder
desiring to transfer the Warrant)
FOR VALUED RECEIVED, the undersigned holder of the attached Warrant hereby
sells, assigns and transfers unto the persons below named all of the rights of
the undersigned under the Warrant to purchase ______________ shares of the
Common Stock of TELSCAPE INTERNATIONAL, INC. evidenced by the attached Warrant
and does hereby irrevocably constitute and appoint ______________________
attorney to transfer the said Warrant on the books of the Company, maintained
for the purpose, with full power of substitution in the premises.
Dated:
______________________________
Signature
Fill in for new Registration of Warrant:
_________________________________________
Name
_________________________________________
Address
_________________________________________
Please print name and address of assignee
(including zip code number)
NOTICE: The signature to the foregoing Assignment must correspond to the name as
written upon the face of the attached Warrant in every particular, without
alteration or enlargement or any change whatsoever.
EXHIBIT C
FORM OF SECURITY AGREEMENT
SECURITY AGREEMENT
This AGREEMENT, dated as of July 19, 1999 (the "SECURITY AGREEMENT"),
is among TELSCAPE INTERNATIONAL, INC., a Texas corporation ("HOLDINGS"),
TELSCAPE USA, INC., a Texas corporation ("TELSCAPE USA"), MSN COMMUNICATIONS,
INC., a California corporation ("MSN"), TSCP INTERNATIONAL, INC., a Texas
corporation ("TSCP"; and each of TSCP, Holdings, Telscape USA, and MSN
collectively, the "BRIDGE BORROWERS", and individually, a "BRIDGE BORROWER") and
STATE STREET BANK AND TRUST COMPANY, a Massachusetts banking corporation, as the
U.S. Collateral Agent (the "U.S. COLLATERAL AGENT") for the sole benefit of
Lucent Technologies Inc., a Delaware corporation ("LUCENT").
WITNESSETH
WHEREAS, at the request of the Borrowers, Lucent has agreed to provide
to the Bridge Borrowers a loan in an aggregate principal amount of $3,000,000
(the "BRIDGE LOAN") pursuant to the terms and conditions set forth in the Demand
Note issued by the Bridge Borrowers to Lucent (the "DEMAND NOTE"), on the date
hereof; and
WHEREAS, the Bridge Borrowers desire to induce Lucent to provide such
Bridge Loan, and therefore are willing to execute and deliver this Security
Agreement (the "SECURITY AGREEMENT");
NOW, THEREFORE, the parties hereby agree as follows:
SECTION 1.
(a) DEFINITIONS. For the purposes of this Security Agreement, unless
otherwise defined herein, capitalized terms shall have the meanings specified
below.
"ACCOUNTS" has the meaning set forth in Section 9-106 of the UCC.
"BRIDGE BORROWERS" has the meaning set forth in the preamble.
"BRIDGE LOAN" has the meaning set forth in the recitals.
"BUSINESS DAY" means a day other than a Saturday, Sunday or other day
on which the commercial banks in New York City are authorized or required
by law to close.
"COLLATERAL" has the meaning set forth in Section 2.
"DEFAULT" has the meaning set forth in the Section 7.
"DEMAND NOTE" has the meaning set forth in the recitals.
"HOLDINGS" has the meaning set forth in the preamble.
"INSTRUMENTS" has the meaning set forth in Section 2.
"LIEN" means any mortgage, pledge, hypothecation, assignment for
security, deposit arrangement, encumbrance, lien (statutory or other),
charge or other security interest or any preference, priority or other
security agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other
title retention agreement and any Financing Lease having substantially the
same economic effect as any of the foregoing).
"LUCENT" has the meaning set forth in the recitals.
"MSN" has the meaning set forth in the preamble.
"OBLIGATIONS" means the Demand Note, this Security Agreement and all
other obligations, liabilities and indebtedness of any kind owing by Bridge
Borrowers to Lucent including principal, interest, charges, fees, costs and
expenses arising out of or in connection with the performance of the Demand
Note or the preservation and enforcement of Lucent's rights under the
Demand Note and this Security Agreement.
"PERSON" means any individual, sole proprietorship, partnership,
corporation, limited liability company, limited liability partnership,
business trust, unincorporated association, joint stock corporation, trust,
joint venture or other entity or any agency or instrumentality or political
subdivision thereof.
"PROCEEDS" has the meaning set forth in Section 9-306(1) of the UCC.
"PROCESS AGENT" has the meaning set forth in Section 16(c).
"SECURED PARTIES" has the meaning set forth in Section 2.
"SECURITY AGREEMENT" has the meaning set forth in the preamble.
"TELSCAPE USA" has the meaning set forth in the preamble.
"TSCP" has the meaning set forth in the preamble.
"U.S. COLLATERAL AGENT" has the meaning set forth in the preamble.
"UCC" means the Uniform Commercial Code as from time to time in effect
in the State of New York; PROVIDED that if, by reason of any mandatory
requirement of law, any or all of the attachment, perfection, or priority
of the security interest in any Collateral is governed by the Uniform
Commercial Code as in effect in a state other than the State of New York,
the term "UCC" means the Uniform Commercial Code as in effect in such other
state for purposes of (a) the provisions hereof relating to such
attachment, perfection, or priority and (b) the definitions related to such
provisions.
(b) RULES OF CONSTRUCTION. Unless the context of this Security
Agreement clearly requires otherwise, references to the plural include the
singular, and the singular include the plural. The words "hereof," "herein,"
"hereby," "hereunder," and similar terms in this Security Agreement refer to
this Security Agreement as a whole and not to any particular provision of this
2
Security Agreement. The words "include," "includes, and "including" mean
include, includes and including "without limitation" and "without limitation by
specification." All references in this Security Agreement to "Article",
"Section", "subsection", "subparagraph", "clause" or "Exhibit", unless otherwise
indicated, shall be deemed to refer to an Article, Section, subsection,
subparagraph, clause or Exhibit, as applicable, of this Security Agreement.
SECTION 2. GRANT OF SECURITY INTEREST. Each Bridge Borrower hereby
pledges, assigns and grants to the U.S. Collateral Agent for the ratable benefit
of Lucent and the U.S. Collateral Agent (collectively, the "SECURED PARTIES") a
continuing first priority security interest in and first priority Lien on the
following described property of the Bridge Borrowers, wherever located, whether
now owned or hereafter acquired or arising, and all Proceeds and products
thereof and accessions thereto (all of the same being hereinafter called the
"COLLATERAL"), including:
(a) all Accounts;
(b) all instruments, chattel paper or letters of credit (each as
defined in the UCC) of each of the Bridge Borrowers, evidencing, representing,
arising from or existing in respect of, relating to, securing or otherwise
supporting the payment of any of the Accounts (collectively, the "INSTRUMENTS").
(c) all Proceeds and products of any and all of the foregoing
Collateral.
SECTION 3. OBLIGATIONS SECURED. The Collateral hereunder constitutes
and will constitute continuing security for prompt and complete payment and
performance when due (whether at the stated maturity, by acceleration or
otherwise) of the Obligations.
SECTION 4. APPLICATION OF PROCEEDS OF COLLATERAL. All amounts owing
with respect to the Obligations shall be secured by the Collateral without
distinction as to whether some Obligations are then due and payable and other
Obligations are not then due and payable. Upon any realization upon the
Collateral by the U.S. Collateral Agent, each Bridge Borrower agrees that the
Proceeds thereof shall be applied by the U.S. Collateral Agent:
(a) FIRST, to the U.S. Collateral Agent for payment of the costs and
expenses, if any, of such sale or disposition, including reasonable compensation
to the U.S. Collateral Agent for customary brokerage commissions and its
counsel, and all reasonable expenses, liabilities and advances made or incurred
by the U.S. Collateral Agent in connection therewith; and
(b) SECOND, to Lucent for application in the following order of
priority:
(i) First, the interest and fees due ;
(ii) Second, installments of principal due; and
(iii) Third, all other amounts due under the Demand Note or this
Security Agreement.
3
Each Bridge Borrower shall remain liable for any deficiency remaining
unpaid after the application of Proceeds in accordance with the foregoing
provisions. Each Bridge Borrower agrees that all amounts received through
realization on the Collateral shall be applied to the payment of the Obligations
in accordance with the provisions of this Section 4.
SECTION 5. REPRESENTATIONS AND COVENANTS OF BRIDGE BORROWERS.
(a) LOCATION OF CHIEF EXECUTIVE OFFICE; TAX IDENTIFICATION NUMBER.
Each Bridge Borrower represents that its federal tax identification number, its
state of incorporation and the location of its chief executive office, books and
records are as described in SCHEDULE A attached hereto. Each Bridge Borrower
shall hold and preserve such records and will permit representatives of the U.S.
Collateral Agent, at any reasonable time during normal business hours, upon
advance written notice, and as often as may reasonably be desired, to inspect
and make abstracts from such records. Each Bridge Borrower agrees that it will
not change its federal tax identification number, its state of incorporation or
the location of its chief executive office or the location where its books and
records are kept without the express written consent of the U.S. Collateral
Agent and will advise the U.S. Collateral Agent as to any change in the location
of any property comprising a part of the Collateral.
(b) OWNERSHIP OF COLLATERAL. Each Bridge Borrower represents that, as
of the date hereof, it is the owner of its Collateral free from any Lien. Each
Bridge Borrower shall continue to be the owner of its Collateral free of any
Lien and such Bridge Borrower shall defend the same against all claims and
demands of all persons at any time claiming the same or any interest therein
adverse to the Secured Parties. No effective financing statement is on file in
any recording office, except as such may have been filed in favor of the U.S.
Collateral Agent relating to this Security Agreement. Such Bridge Borrower shall
not pledge, mortgage nor create nor suffer to exist a security interest in the
Collateral in favor of any Person other than the U.S. Collateral Agent for the
sole benefit of Lucent.
(c) CREATION AND PERFECTION OF LIEN. This Security Agreement creates a
valid first priority security interest in the Collateral, securing the complete
payment and performance when due of the Obligations. All filings and other
actions necessary or desirable to perfect and protect such security interest
have been duly taken and the U.S. Collateral Agent's security interest for the
benefit of the Secured Parties in the Collateral is and shall remain prior to
all other Liens and encumbrance.
(d) NO FURTHER ACTIONS. Except for the filings referred to in
paragraph (c) above, no authorization, approval or other action by, and no
notice of filing with, any governmental authority or other Person that has not
been received, taken or made is required (i) for the grant by each Bridge
Borrower of the security interest granted hereby or for the execution, delivery
or performance of this Security Agreement by such Bridge Borrower, (ii) for the
perfection and maintenance of the security interest and Lien hereunder
(including the first priority nature of such security interest and Lien), or
(iii) for the exercise by the U.S. Collateral Agent of the rights or the
remedies in respect of the Collateral pursuant to this Security Agreement in
accordance with applicable law.
4
(e) AUTHORITY. Each Bridge Borrower represents and warrants that, as
of the date hereof, it has full power and authority to execute, deliver and
perform this Security Agreement and the Demand Note. The execution, delivery of
and performance of this Security Agreement and the Demand Note have been duly
authorized by such Bridge Borrower. This Security Agreement has been duly and
validly executed and delivered by such Bridge Borrower, and constitutes the
legal, valid and binding obligations of such Bridge Borrower, enforceable
against such Bridge Borrower in accordance with its terms, except as enforcement
may be limited by bankruptcy, insolvency, fraudulent conveyance, moratorium or
other similar laws affecting the enforcement of creditors' rights generally and
general equitable principles.
(f) FURTHER ASSURANCES BY BRIDGE BORROWERS. Each Bridge Borrower
agrees that, from time to time, at the expense of such Bridge Borrower, such
Bridge Borrower will promptly execute and deliver to the U.S. Collateral Agent
for the benefit of the Secured Parties such further instruments and documents,
and take such further action, as may be necessary or desirable, or that the U.S.
Collateral Agent may request, in order to perfect or otherwise protect and
maintain the security interest granted or purported to be granted and the Lien
created hereby or to enable the U.S. Collateral Agent to exercise and enforce
its rights and remedies hereunder with respect to any Collateral. Without
limiting the generality of the foregoing, each Bridge Borrower will: (i) if any
Collateral shall be evidenced by any Instrument, deliver and pledge to the U.S.
Collateral Agent hereunder such Instrument duly indorsed and accompanied by duly
executed instruments of transfer or assignment, all in form and substance
satisfactory to the U.S. Collateral Agent and (ii) execute and file such
financing or continuation statements, or amendments thereto, and such other
instruments or notices, as may be necessary or desirable, or as the U.S.
Collateral Agent may request, in order to perfect and preserve the assignment
and security interest granted or purported to be granted hereby. Each Bridge
Borrower hereby authorizes the U.S. Collateral Agent for the benefit of the
Secured Parties to file one or more financing or continuation statements, and
amendments thereto, relative to all or any part of the Collateral without the
signature of such Bridge Borrower where permitted by law. The U.S. Collateral
Agent agrees to provide such Bridge Borrower with a copy of any such filing. A
carbon, photographic or other reproduction of this Security Agreement or any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.
SECTION 6. POWER OF ATTORNEY. Each Bridge Borrower hereby irrevocably
appoints the U.S. Collateral Agent as its attorney-in-fact, effective at all
times subsequent to the occurrence of any breach of or default under the
Obligations, and during the continuance thereof, with full authority in the
place and stead of such Bridge Borrower and in the name of such Bridge Borrower
or otherwise, to take any action and to execute any instrument which the U.S.
Collateral Agent may deem necessary or advisable to accomplish the purpose of
this Security Agreement, including the power and right (i) to endorse such
Bridge Borrowers' name on any checks, notes, acceptances, money orders, drafts,
filings or other forms of payment or security that may come into the U.S.
Collateral Agent's possession and (ii) to do all other things which the U.S.
Collateral Agent then determines to be necessary to carry out the terms of this
Security Agreement. Each Bridge Borrower ratifies and approves all acts of such
attorney-in-fact. The power conferred on the U.S. Collateral Agent hereunder is
solely to protect the U.S. Collateral Agent's and the Secured Parties' interests
in the Collateral and shall not impose any duty upon the U.S. Collateral Agent
to exercise such power.
5
SECTION 7. ACCOUNTS. Upon any failure of any Bridge Borrower to pay to
Lucent the principal and interest due under the Demand Note upon demand by
Lucent (a "DEFAULT"):
(a) Each Bridge Borrower shall notify the U.S. Collateral Agent
promptly of: (i) any material delay in such Bridge Borrower's performance of any
of its obligations to any account debtor or the assertion of any claims,
offsets, defenses or counterclaims by any account debtor, or any disputes with
account debtors, or any settlement, adjustment or compromise thereof, (ii) all
material adverse information relating to the financial condition of any account
debtor. No credit, discount, allowance or extension or agreement for any of the
foregoing shall be granted to any account debtor without the U.S. Collateral
Agent's consent, except in the ordinary course of such Bridge Borrower's
business in accordance with practices and policies previously disclosed in
writing to the U.S. Collateral Agent. So long as no default has occurred, each
Bridge Borrower shall settle, adjust or compromise any claim, offset,
counterclaim or dispute with any account debtor. Upon the occurrence of a
default, the U.S. Collateral Agent shall, at its option, have the exclusive
right to settle, adjust or compromise any claim, offset, counterclaim or dispute
with account debtors or grant any credits, discounts or allowances.
(b) The U.S. Collateral Agent shall have the right at any time or
times, in its own name or Lucent's name, to verify the validity, amount or any
other matter relating to any Account or other Collateral, by mail, telephone,
facsimile transmission or otherwise.
(c) The U.S. Collateral Agent may, at any time or times that a default
has occurred, (i) notify any or all account debtors that the Accounts have been
assigned to the U.S. Collateral Agent and that the U.S. Collateral Agent has a
security interest therein and the U.S. Collateral Agent may direct any or all
accounts debtors to make payment of Accounts directly to the U.S. Collateral
Agent, (ii) extend the time of payment of, compromise, settle or adjust for
cash, credit, return of merchandise or otherwise, and upon any terms or
conditions, any and all Accounts or other obligations included in the Collateral
and thereby discharge or release the account debtor or any other party or
parties in any way liable for payment thereof without affecting any of the
Obligations, (iii) demand, collect or enforce payment of any Accounts or such
other obligations, but without any duty to do so, and the U.S. Collateral Agent
shall not be liable for its failure to collect or enforce the payment thereof
nor for the negligence of its agents or attorneys with respect thereto and (iv)
take whatever other action the U.S. Collateral Agent may deem necessary or
desirable for the protection of the Secured Parties' interests. At any time that
a default has occurred, at the U.S. Collateral Agent's request, all invoices and
statements sent to any account debtor shall state that the Accounts and such
other obligations have been assigned to the U.S. Collateral Agent and are
payable directly and only to the U.S. Collateral Agent and such Bridge Borrower
shall deliver to the U.S. Collateral Agent such originals of documents
evidencing the sale and delivery of goods or the performance of services giving
rise to any Accounts as the U.S. Collateral Agent may require.
(d) The U.S. Collateral Agent shall apply any collection of Proceeds
received by the U.S. Collateral Agent hereunder (insofar as such proceeds relate
to the Collateral) to the Obligations in accordance with Section 4 of this
Security Agreement.
6
SECTION 8. DEFAULT; REMEDIES. Upon the occurrence of a Default the
U.S. Collateral Agent may demand, xxx for, collect, or make any settlement or
compromise with respect to the Collateral upon the written instruction of
Lucent.
(a) Upon the occurrence of a default, the U.S. Collateral Agent shall
have all rights and remedies provided in this Security Agreement and other
applicable law, all of which rights and remedies may be exercised without notice
to or consent by the Bridge Borrowers, except as such notice or consent is
expressly provided for hereunder or required by applicable law. All rights,
remedies and powers granted to the U.S. Collateral Agent hereunder, or under
other applicable law, are cumulative, not exclusive and enforceable, in the U.S.
Collateral Agent's discretion, alternatively, successively, or concurrently on
any one or more occasions. The U.S. Collateral Agent may, at any time or times,
proceed directly against each of the Bridge Borrowers to collect the Obligations
without prior recourse to the Collateral.
(b) The U.S. Collateral Agent agrees that it will give notice to each
Bridge Borrower and Lucent of any enforcement action taken by it pursuant to
this Section 8 promptly after commencing such action.
SECTION 9. MARSHALLING. The U.S. Collateral Agent shall not be
required to marshal any present or future security for (including but not
limited to this Security Agreement and the Collateral subject to the security
interest created hereby), or guaranties of, the Obligations or any of them, or
to resort to such security or guaranties in any particular order; and all of its
rights hereunder and in respect of such security and guaranties shall be
cumulative and in addition to all other rights, however existing or arising. To
the extent that it lawfully may, each Bridge Borrower hereby agrees that it will
not invoke any law relating to the marshalling of Collateral which might cause
delay in or impede the enforcement of the U.S. Collateral Agent's rights under
this Security Agreement or under any other instrument evidencing any of the
Obligations or under which any of the Obligations is outstanding or by which any
of the Obligations is secured or guaranteed, and to the extent that it lawfully
may do so each Bridge Borrower hereby irrevocably waives the benefits of all
such laws. Except as otherwise provided by applicable law or this Agreement, the
U.S. Collateral Agent shall have no duty as to the collection or protection of
the Collateral or any income thereon, nor as to the preservation of rights
against prior parties, nor as to the preservation of any rights pertaining
thereto beyond the sole custody thereof.
SECTION 10. BRIDGE BORROWERS' OBLIGATIONS NOT AFFECTED. To the extent
permitted by law, the obligations of each Bridge Borrower under this Security
Agreement shall remain in full force and effect without regard to, and shall not
be impaired by (a) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of any Bridge Borrower, to
the extent permitted by law; (b) any exercise or nonexercise, or any waiver, by
the U.S. Collateral Agent of any right, remedy, power or privilege under or in
respect of any of the Obligations or any security therefor (including this
Security Agreement); (c) any amendment to or modification of any instrument
evidencing any of the Obligations or pursuant to which any of them were issued;
(d) any amendment to or modification of any instrument or agreement (other than
this Security Agreement) securing any of the Obligations; or (e) the taking of
additional security for or any guaranty of any of the Obligations or the release
or
7
discharge or termination of any security or guaranty for any of the Obligations;
and whether or not such Bridge Borrower shall have notice or knowledge of any of
the foregoing.
SECTION 11. NO WAIVER. No failure on the part of the U.S. Collateral
Agent to exercise, and no delay in exercising, any right, remedy or power
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise by the U.S. Collateral Agent of any right, remedy or power hereunder
preclude any other or future exercise of any other right, remedy or power. Each
and every right, remedy and power hereby granted to the U.S. Collateral Agent,
or Lucent or allowed to any of them by law or other agreement, shall be
cumulative and not exclusive of any other, and, subject to the provisions of
this Security Agreement, may be exercised by the U.S. Collateral Agent or Lucent
from time to time.
SECTION 12. INDEMNITY AND EXPENSES. (a) Each Bridge Borrower jointly
and severally agrees to indemnify the U.S. Collateral Agent from and against any
and all claims, losses and liabilities growing out of or resulting from this
Security Agreement (including, without limitation, enforcement of this Security
Agreement), except claims, losses or liabilities resulting from the U.S.
Collateral Agent's gross negligence or willful misconduct.
(b) Each Bridge Borrower will upon demand pay to the U.S. Collateral
Agent the amount of any and all reasonable expenses, including the reasonable
fees and expenses of its counsel and of any experts and agents, which the U.S.
Collateral Agent may incur in connection with (i) the preparation and
administration of this Security Agreement or the Demand Note, (ii) the custody
or preservation of, or the collection from or other realization upon, any of the
Collateral, (iii) the exercise or enforcement of any of the rights of the U.S.
Collateral Agent hereunder or (iv) the failure by any Bridge Borrower to perform
or observe any of the provisions hereof.
SECTION 13. CONSENTS, AMENDMENTS, WAIVERS. Any term of this Security
Agreement may be amended only upon the prior written agreement of the Secured
Parties and each of the Bridge Borrowers, and the performance or observance by
any Bridge Borrower of any term hereof may be waived (either generally or in a
particular instance and either retroactively or prospectively) only upon the
prior written consent of the Secured Parties.
SECTION 14. GOVERNING LAW. Except as otherwise required by the laws of
any jurisdiction in which any Collateral is located, this Security Agreement
shall be deemed to be a contract under seal and shall for all purposes be
governed by and construed in accordance with the domestic laws of the State of
New York without giving effect to any choice or conflict of law provision or
rule (whether of the State of New York or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
New York.
SECTION 15. WAIVERS OF JURY TRIAL. EACH OF THE BRIDGE BORROWERS AND
THE U.S. COLLATERAL AGENT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY
JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS SECURITY AGREEMENT AND
FOR ANY COUNTERCLAIM WITH RESPECT THERETO TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW.
8
SECTION 16. SUBMISSION TO JURISDICTION; WAIVERS. Each Bridge Borrower
hereby irrevocably and unconditionally:
(a) Submits for itself and its property in any legal action or
proceeding relating to this Security Agreement, or for recognition and
enforcement of any judgment in respect thereof, to the non-exclusive general
jurisdiction of the courts of the State of New York, the courts of the United
States of America for the Southern District of New York, and the appellate
courts from any thereof;
(b) Consents that any such action or proceeding may be brought in any
such court and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
(c) Agrees that service of process in any such action or proceeding
may be made personally or by mailing or delivering a copy of the summons and
complaint or other legal process in any legal action or proceeding to any Bridge
Borrower at its address set forth in Section 21 or to the CT Corporation System,
0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, its process agent (together with any
successor process agent, the "PROCESS AGENT"). Service of process upon the
Process Agent shall be deemed in every respect effective service upon such
Bridge Borrower and shall be legal and binding upon such Bridge Borrower for all
purposes notwithstanding any failure to mail copies of such legal process to
such Bridge Borrower or any failure on the part of such Bridge Borrower to
receive the same;
(d) Agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the right
to xxx in any other jurisdiction; and
(e) Waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to in
this Section 16(e) any special, exemplary, punitive or consequential damages.
SECTION 17. PARTIES IN INTEREST. All terms of this Security Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective successors and permitted assigns of the parties hereto, PROVIDED that
no Bridge Borrower may assign or transfer its rights hereunder without the prior
written consent of the U.S. Collateral Agent and Lucent. Any assignment or
transfer by any Bridge Borrower of its rights hereunder in violation of this
Security Agreement shall be void.
SECTION 18. COUNTERPARTS. This Security Agreement and any amendment
hereof may be executed in several counterparts and by each party on a separate
counterpart, each of which when so executed and delivered shall be an original,
but all of which together shall constitute one instrument. In proving this
Security Agreement it shall not be necessary to produce or account for more than
one such counterpart signed by the party against whom enforcement is sought.
SECTION 19. SEVERABILITY. Any provision of this Security Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions
9
hereof, and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.
The parties shall endeavor in good faith negotiations to replace the invalid,
illegal or unenforceable provision with valid provisions the economic effect of
which is as close as possible to that of the invalid, illegal or unenforceable
provision.
SECTION 20. TERMINATION. Upon the indefeasible payment in full of the
Obligations in accordance with their terms, (a) this Security Agreement shall
terminate and each Bridge Borrower shall be entitled to the return, at such
Bridge Borrowers' expense, of such Collateral in the possession or control of
the U.S. Collateral Agent as has not theretofore been disposed of pursuant to
the provisions hereof and (b) upon request of such Bridge Borrower, the U.S.
Collateral Agent will execute and file, at such Bridge Borrower's expense, UCC
termination statements and such other documents as such Bridge Borrower may
reasonably request to evidence the termination of the U.S. Collateral Agent's
security interest in the Collateral.
SECTION 21. NOTICES. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
facsimile transmission followed by other delivery) and addressed to the
addresses of the Bridge Borrowers and the U.S. Collateral Agent set forth below,
or to such other address as may be hereafter notified in writing by the
respective parties hereto, and unless otherwise expressly provided herein, shall
be deemed to have been duly given or made when delivered by messenger or by
mail, or three days after being deposited in the mail, postage prepaid, or, in
the case of telecopy notice, when received.
IF TO BRIDGE BORROWER:
Telscape International, Inc.
0000 Xxxx Xxx Xxxx., Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Xxxx X. Xxxxx
Phone: 000-000-0000
Fax 000-000-0000
Telscape USA, Inc.
0000 Xxxx Xxx Xxxx., Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Xxxx X. Xxxxx
Phone: 000-000-0000
Fax 000-000-0000
10
MSN Communications, Inc.
0000 Xxxx Xxx Xxxx., Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Xxxx X. Xxxxx
Phone: 000-000-0000
Fax 000-000-0000
TSCP International, Inc.
0000 Xxxx Xxx Xxxx., Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Xxxx X. Xxxxx
Phone: 000-000-0000
Fax 000-000-0000
IF TO LENDER:
Lucent Technologies, Inc.
000 Xxxx Xxxxxx Xxxx
Xxxxxx, Xxx Xxxxxx
Attn: Xxxxxxx Xxxxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
IF TO U.S. COLLATERAL AGENT:
State Street Bank and Trust Company
0 Xxxxxxxxxxxxx Xxxxx, 0xx Xxxxx
Xxxxxx, XX
Attn:________________________
Phone:_______________________
Fax:_________________________
SECTION 22. INTEGRATION. This Security Agreement represents the
agreement of the Bridge Borrowers with respect to the subject matter hereof, and
there is no promise, undertaking, representation or warranty by the U.S.
Collateral Agent relative to the subject matter hereof not expressly set forth
or referred to herein.
SECTION 23. ACKNOWLEDGEMENTS. The Bridge Borrowers hereby acknowledge
that:
(a) It has been advised by counsel in the negotiation, execution and
delivery of this Security Agreement;
11
(b) The U.S. Collateral Agent has no fiduciary relationship to the
Bridge Borrowers; and
(c) No joint venture exists among any of the Bridge Borrowers and the
U.S. Collateral Agent.
SECTION 24. HEADINGS. Section headings used herein are for convenience
of reference only, are not part of this Security Agreement and shall not affect
the construction of, or be taken into consideration in interpreting, this
Security Agreement.
12
IN WITNESS WHEREOF, the parties hereto have caused these presents to be
duly executed by their authorized representatives as of the date first written
above.
TELSCAPE INTERNATIONAL INC.,
as a Bridge Borrower
By:________________________
Name: XXXX X. XXXXX
Title: PRESIDENT
TELSCAPE USA, INC.,
as a Bridge Borrower
By:________________________
Name: XXXX X. XXXXX
Title: EXECUTIVE VICE PRESIDENT
MSN COMMUNICATIONS, INC.,
as a Bridge Borrower
By:________________________
Name: XXXX X. XXXXX
Title: EXECUTIVE VICE PRESIDENT
TSCP INTERNATIONAL, INC.,
as a Bridge Borrower
By:________________________
Name: XXXX X. XXXXX
Title: EXECUTIVE VICE PRESIDENT
00
XXXXX XXXXXX XXXX AND TRUST COMPANY,
as the U.S. Collateral Agent
By:________________________
Name:______________________
Title:_____________________
14
SECURITY AGREEMENT
SCHEDULE A
FEDERAL TAX IDENTIFICATION NUMBER, STATE OF INCORPORATION AND LOCATION OF
CHIEF EXECUTIVE OFFICE AND BOOKS AND RECORDS
TELSCAPE INTERNATIONAL, INC.
Federal Tax Identification Number: 00-0000000
State of Incorporation: TEXAS
Location of Chief Executive Office and Books and Records:
0000 XXXX XXX XXXXXXXXX, XXXXX 0000, XXXXXXX, XXXXX 00000
TELSCAPE USA, INC.
Federal Tax Identification Number: 00-0000000
State of Incorporation: TEXAS
Location of Chief Executive Office and Books and Records:
0000 XXXX XXX XXXXXXXXX, XXXXX 0000, XXXXXXX, XXXXX 00000
MSN COMMUNICATIONS, INC.
Federal Tax Identification Number: 00-0000000
State of Incorporation: CALIFORNIA
Location of Chief Executive Office and Books and Records:
0000 XXXX XXX XXXXXXXXX, XXXXX 0000, XXXXXXX, XXXXX 00000
TSCP INTERNATIONAL, INC.
Federal Tax Identification Number: 00-0000000
State of Incorporation: TEXAS
Location of Chief Executive Office and Books and Records:
0000 XXXX XXX XXXXXXXXX, XXXXX 0000, XXXXXXX, XXXXX 00000
