EXHIBIT 10.12
SECURITIES PURCHASE AGREEMENT DATED DECEMBER 23, 1998
AMONG THE COMPANY, INTERNEXUS, S.A. AND FONDELEC ESSENTIAL
SERVICES GROWTH FUND, L.P.
______________________________
SECURITIES PURCHASE AGREEMENT
______________________________
SUBORDINATED EXCHANGEABLE PROMISSORY NOTES
OF
CONVERGENCE COMMUNICATIONS, INC.
Dated as of December 23, 1998
TABLE OF CONTENTS
Section Page
1. Definitions..............................................................................................1
2. Issuance, Purchase and Sale of Securities................................................................6
2.1 Issuance of the Securities.............................................................6
2.2 Sale and Purchase of the Securities.............................................................6
3. Closing of Sale of Securities............................................................................7
4. Covenants of the Company.................................................................................7
4.1 Deliveries by the Company to the Purchasers on the Closing Date.................................7
(a) Securities.............................................................................7
(b) Opinion of Counsel.....................................................................7
(c) Stockholders' Agreement................................................................7
(d) Registration Rights Agreement..........................................................7
(e) Officer's Certificate..................................................................7
(f) Payment of Closing Fees................................................................7
4.2 Deliveries by the Purchasers to the Company on the Closing Date.................................8
(a) Purchase Price.........................................................................8
(b) Stockholders' Agreement................................................................8
(c) Registration Rights Agreement..........................................................8
5. Representations and Warranties, Etc......................................................................8
5.1 Organization and Qualification; Authority.......................................................8
5.2 Corporate Authorization.........................................................................8
5.3 No Conflict; Requisite Consents.................................................................9
5.4 Capitalization..................................................................................9
5.5 Litigation; Defaults...........................................................................10
5.6 No Material Adverse Change.....................................................................10
5.7 Employee Programs..............................................................................10
5.8 Private Offerings..............................................................................12
5.9 Company SEC Documents..........................................................................12
5.10 Financial Statements; No Undisclosed Liabilities...............................................12
5.11 Environmental Regulation, Etc..................................................................13
5.12 Properties and Assets..........................................................................13
5.13 Insurance......................................................................................13
5.14 Employment Practices...........................................................................14
5.15 Intellectual Property..........................................................................14
5.16 Material Contracts.............................................................................14
5.17 Taxes..........................................................................................14
5.18 Licenses.......................................................................................15
5.19 Transactions with Affiliates...................................................................15
5.20 Federal Reserve Regulations....................................................................15
5.21 Investment Company Act.........................................................................15
5.22 Broker's or Finder's Commissions...............................................................15
5.23 Books and Records..............................................................................15
5.24 Disclosure.....................................................................................15
6. Representations and Warranties of the Purchasers........................................................16
7. Covenants of the Company................................................................................17
7.1 Use of Proceeds................................................................................17
7.2 Charter Documents..............................................................................17
7.3 Ordinary Course................................................................................17
7.4 Issuance of Securities.........................................................................17
7.5 Dividends; Changes in Capital Stock............................................................17
7.6 Change in Condition............................................................................18
7.7 No Action......................................................................................18
7.8 Replacement of Certificates....................................................................18
8. Rights and Obligations of the Purchasers................................................................18
8.1 Exchange Right.................................................................................18
8.2 Reservation of Securities......................................................................18
8.3 Anti-Dilution Provisions - Adjustment of Number of Shares of Capital Stock.....................19
(a) Combinations and Subdivisions of Capital Stock........................................19
(b) Distributions in Respect of Capital Stock.............................................19
(c) Recapitalization, Reclassification and Succession.....................................19
(d) Fractional Shares.....................................................................19
(e) Issuance of Additional Shares of Capital Stock........................................20
(f) Company to Prevent Dilution...........................................................20
8.4 Notice to the Holder...........................................................................20
8.5 Exchange Listing by the Company................................................................21
9. Conditions to Closing...................................................................................22
9.1 Conditions to the Company's Obligations........................................................22
9.2 Conditions to the Purchasers' Obligations......................................................22
10. Restrictions on Transfer................................................................................23
10.1 Restrictive Legends............................................................................23
10.2 Notice of the Proposed Transfer; Opinion of Counsel............................................23
11. Miscellaneous...........................................................................................24
11.1 Indemnification; Expenses, Etc.................................................................24
11.2 Survival of Representations and Warranties.....................................................25
11.3 Amendment and Waiver...........................................................................25
11.4 Notices, Etc...................................................................................25
11.5 Entire Agreement...............................................................................25
11.6 Successors and Assigns.........................................................................26
11.7 Agreement and Action of the Purchasers.........................................................26
11.8 Expenses.......................................................................................26
11.9 Descriptive Headings...........................................................................26
11.10 Governing Law..................................................................................26
11.11 Counterparts...................................................................................26
SCHEDULES
SCHEDULE 5.1 -- Qualified Jurisdictions and Subsidiaries
SCHEDULE 5.2 -- Authorization
SCHEDULE 5.3 -- Consents
SCHEDULE 5.4 -- Capitalization
SCHEDULE 5.5 -- Litigation; Defaults
SCHEDULE 5.6 -- Material Developments
SCHEDULE 5.7 -- ERISA
SCHEDULE 5.10 -- Undisclosed Liabilities
SCHEDULE 5.11 -- Environmental
SCHEDULE 5.12 -- Properties and Assets
SCHEDULE 5.13 -- Insurance
SCHEDULE 5.14 -- Employment Practices
SCHEDULE 5.15 -- Intellectual Property
SCHEDULE 5.16 -- Material Contracts
SCHEDULE 5.17 -- Taxes
SCHEDULE 5.18 -- Licenses
SCHEDULE 5.19 -- Transactions with Affiliates
EXHIBITS
EXHIBIT A -- Certificate of Designations of Series C Preferred
Stock
EXHIBIT B -- Form of Note
EXHIBIT C -- Form of Registration Rights Agreement
EXHIBIT D -- Stockholders' Agreement
EXHIBIT E -- Form of Warrant
EXHIBIT F -- Form of Opinion of Xxxxxxx Xxxxx & Xxxxxxx
EXHIBIT G -- List of DAC Aid Recipients
EXHIBIT H -- Form of Exchange Notice
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT ("Agreement"), dated as of December
__, 1998, by and among Convergence Communications, Inc., a Nevada corporation
(the "Company"), FondElec Essential Services Growth Fund, L.P., a Cayman Islands
limited partnership ("FESGF") and Internexus, S.A., an Argentinian corporation
("Internexus"). FESGF and Internexus are also each referred to herein as a
"Purchaser," and collectively, the "Purchasers."
W I T N E S S E T H:
WHEREAS, the Company is in the process of raising capital through the
sale by the Company of debt or equity securities resulting in gross proceeds of
up to $35 million (the "Financing"); and
WHEREAS, the Company desires to issue and sell to the Purchasers, and
the Purchasers desire to purchase from the Company, the Notes (as defined below)
in the aggregate amount of $10,000,000 and the Warrants (as defined below), on
the terms, and subject to the conditions, set forth herein.
NOW, THEREFORE, in consideration of these premises, the mutual
covenants and agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. Definitions. For purposes hereof unless the context otherwise
requires, the following terms shall have the meanings indicated. All accounting
terms not otherwise defined herein, shall have the respective meanings accorded
to them under GAAP (as defined below). Unless the context otherwise requires,
(i) references to a "Schedule" or an "Exhibit" are to a Schedule or an Exhibit
attached to this Agreement, (ii) references to a "section" are to a section of
this Agreement and (iii) any of the following terms may be used in the singular
or the plural, depending on the reference.
"Affiliate" means any Person (i) which directly or indirectly
through one or more intermediaries controls, or is controlled by, or is under
common control with, the Company, (ii) which beneficially owns or holds 10% or
more of any class of the outstanding Voting Stock of the Company or (iii) which
is a relative or spouse of such person, or any relative of such spouse, who has
the same home as such person. The term "control" means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through ownership of Voting Stock, by Contract
or otherwise.
"Agreement" means this Agreement, as amended, modified or
supplemented from time to time, in accordance with the terms hereof, together
with any exhibits, schedules or other attachments thereto.
"Benefit Plans" has the meaning ascribed thereto in Section
5.7 hereof.
"Business Day" means any day that is not a Saturday, a Sunday
or a day on which banking institutions in New York, New York are authorized or
obligated by Law, executive order or government decree to be closed.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations, rights in or other equivalents (however
designated and whether voting or non-voting) of such Person's capital stock,
whether outstanding on the Closing Date or issued after the Closing Date and any
and all rights, warrants or options exercisable or exchangeable for or
convertible into such capital stock.
"Certificate of Designations" means the Certificate of
Designations of the Series C Preferred Stock, substantially in the form of
Exhibit A hereto.
"Charter Documents" has the meaning ascribed thereto in
Section 5.1 hereof.
"Closing" has the meaning ascribed thereto in Section 3
hereof.
"Closing Date" has the meaning ascribed thereto in Section 3
hereof.
"Code" means the Internal Revenue Code of 1986, and the rules
and regulations promulgated thereunder, as amended from time to time.
"Commission" means the United States Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
"Common Stock" means the common stock, par value $.001 per
share, of the Company.
"Company" has the meaning ascribed thereto in the introduction
hereof.
"Company Financial Statements" has the meaning ascribed
thereto in Section 5.10 hereof.
"Company SEC Documents" has the meaning ascribed thereto in
Section 5.9 hereof.
"Contracts" has the meaning ascribed thereto in Section 5.16
hereof.
"ERISA" means the Employee Retirement Income Security Act of
1974, and the rules and regulations promulgated thereunder, as amended.
"ERISA Affiliate" means any trade or business (whether
incorporated or unincorporated) which is a member of a group described in
Section 414(b), (c), (m) or (o) of the Code, of which the Company also is a
member.
"ERISA Affiliate Title IV Plan" has the meaning ascribed
thereto in Section 5.7 hereof.
"Exchangeable Securities" has the meaning ascribed thereto in
Section 8.4(b) hereof.
"Exchange Act" means the Securities Exchange Act of 1934, and
the rules and regulations of the Commission promulgated thereunder, as amended.
"Exchange Price" has the meaning ascribed thereto in Section
8.1 hereof.
"Fair Market Value" means, with respect to the shares of
Common Stock issuable upon exchange of the Notes, the lower of (a) the Market
Price on the date of exchange of the Notes for Common Stock or (b) the average
closing sales price per share of Common Stock for the ten (10) trading days
immediately preceding the date of exchange of the Notes for Common Stock.
"Financing" has the meaning ascribed thereto in the
introduction hereof.
"GAAP" means generally accepted accounting principles and
practices set forth in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as may be approved by a significant
segment of the accounting profession that are applicable to the circumstances as
of the date of determination.
"Governmental Authority" means any governmental or
quasi-governmental authority including, without limitation, any federal, state,
territorial, county, municipal or other governmental or quasi-governmental
agency, board, branch, bureau, commission, court, arbitration panel, department,
authority, body or other instrumentality or political unit or subdivision or
official thereof, whether domestic or foreign.
"Holder" means any Person who now holds or shall hereafter
acquire and hold the Notes.
"Indemnified Party" or "Indemnified Parties" has the meaning
ascribed thereto in Section 11.1(a) hereof.
"Intellectual Property" shall mean all registered patents,
trademarks, product designations, service marks, copyrights, and applications
for any of the foregoing, used, licensed, leased or owned, by a Person which is
material to the operations of such Person.
"Law" means any statute, ordinance, code, rule, regulation or
order enacted, adopted, promulgated, applied or followed by any Governmental
Authority.
"License" or "Licenses" has the meaning ascribed thereto in
Section 5.18 hereof.
"Lien" means any security agreement, financing statement
(whether or not filed) mortgage, lien (statutory or otherwise), charge, pledge,
hypothecation, conditional sales agreement, adverse claim, title retention
agreement or other security interest, encumbrance, lien, charge, restrictive
agreement, mortgage, deed of trust, indenture, pledge, option, limitation,
exception to or other title defect in or on any interest or title of any vendor,
lessor, lender or other secured party to or of such Person under any conditional
sale, lease, consignment, or bailment given for security purposes, trust receipt
or other title retention agreement with respect to any Property or asset of such
Person, whether direct, indirect, accrued or contingent.
"Losses" has the meaning ascribed thereto in Section 11.1(a)
hereof.
"Market Price" means, with respect to the shares of Common
Stock issuable upon exchange of the Notes, (a) if the shares are listed or
admitted for trading on any national securities exchange or included in The
Nasdaq National Market or Nasdaq SmallCap Market, the last reported sales price
as reported on such exchange or market; (b) if the shares are not listed or
admitted for trading on any national securities exchange or included in The
Nasdaq National Market or Nasdaq SmallCap Market, the average of the last
reported closing bid and asked quotation for the shares as reported on NASDAQ or
a similar service if NASDAQ is not reporting such information; (c) if the shares
are not listed or admitted for trading on any national securities exchange or
included in The Nasdaq National Market or Nasdaq SmallCap Market or quoted by
NASDAQ or a similar service, the average of the last reported bid and asked
quotation for the shares as quoted by a market maker in the shares (or if there
is more than one market maker, the bid and asked quotation shall be obtained
from two market makers and the average of the lowest bid and highest asked
quotation). In the absence of any available public quotations for the Common
Stock, the Board of Directors of the Company shall determine in good faith the
fair value of the Common Stock, which determination shall be set forth in a
certificate by the Secretary of the Company.
"Material Adverse Effect" has the meaning ascribed thereto in
Section 5.1 hereof.
"NASDAQ" means the National Association of Securities Dealers
Automated Quotation System.
"Notes" means the Subordinated Exchangeable Promissory Notes
of the Company, substantially in the form of Exhibit B hereto.
"Person" means any individual, entity or group, including,
without limitation, individual, corporation, limited liability company, limited
or general partnership, joint venture, association, joint stock company, trust,
unincorporated organization, or government or any agency or political
subdivision thereof.
"Preferred Stock" means the preferred stock, par value $.001
per share, of the Company.
"Property" means any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
"Purchasers" has the meaning ascribed thereto in the
introduction hereof.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of the date hereof, by and among the Company and the
Purchasers, substantially in the form of Exhibit C hereto, as amended, modified
or supplemented from time to time in accordance with the terms thereof, together
with any exhibits, schedules or other attachments thereto.
"Regulation D" means Regulation D under the Securities Act.
"Restricted Security" has the meaning ascribed thereto in
Section 10.2 hereof.
"Rule 144" means Rule 144 as promulgated by the Commission
under the Securities Act, and any successor rule or regulation thereto.
"Rule 144A" means Rule 144A as promulgated by the Commission
under the Securities Act, and any successor rule or regulation thereto.
"Securities" means the Notes and the Warrants.
"Securities Act" means the Securities Act of 1933, and the
rules and regulations of the Commission promulgated thereunder, as amended.
"Series A Preferred Stock" means the Series A Preferred Stock,
par value $.001 per share, of the Company.
"Series B Preferred Stock" means the Series B Preferred Stock,
par value $.001 per share, of the Company.
"Series C Preferred Stock" shall mean a class of stock or
series of preferred stock to be issued by the Company in connection with the
Financing (and upon exchange of the Notes as provided in Section 8.1), which
class of stock or series of preferred stock: (i) shall have the relative voting
rights, designations, preferences, qualifications, privileges, limitations,
restrictions and other special or relative rights described in the Certificate
of Designations, and (ii) shall be senior to the Series B Preferred stock in its
rights to receive liquidating distributions.
"Stockholders' Agreement" means the Stockholders' Agreement
dated as of the date hereof by and among the Company and the Purchasers,
substantially in the form of Exhibit D hereto, as amended, modified or
supplemented from time to time in accordance with the terms thereof, together
with any exhibits, schedules or other attachments thereto.
"Significant Subsidiaries" means the following entities:
Cablevisa, S.A., Chispa Dos, Inc., InterAmerican Net De Venezuela, S.A.,
Interamerican Telecom, Inc., Multicable, S.A., WCI Cayman, Inc. and WCI de
Venezuela, C.V.
"Subsidiary" means with respect to any Person, any
corporation, association or other business entity of which securities
representing more than 50% of the combined voting power of the total Voting
Stock (or in the case of an association or other business entity which is not a
corporation, more than 50% of the equity interest) is at the time owned or
controlled, directly or indirectly, by that Person or one or more Subsidiaries
of that Person or a combination thereof. When used herein without reference to
any Person, "Subsidiary" means a Subsidiary of the Company.
"Taxes" has the meaning ascribed thereto in Section 5.17
hereof.
"Transaction Documents" means, collectively, this Agreement,
the Notes, the Registration Rights Agreement, the Stockholders' Agreement, the
Warrants and any and all agreements, exhibits, schedules, certificates,
instruments and other documents delivered pursuant hereto and thereto.
"Voting Stock" means any class or classes of Capital Stock
pursuant to which the holders thereof have the general voting power under
ordinary circumstances to vote for the election of directors, managers or
trustees of any Persons (irrespective of whether or not at the time, Capital
Stock of any class or classes will have, or might have, voting power by the
reason of the happening of any contingency).
"Warrants" means the warrants, in substantially the form of
Exhibit E attached hereto, to acquire shares of Common Stock which shall be
automatically exercisable without any action on the part of the Company on the
first day of each month commencing on February 1, 1999 in an amount equal to
3.5% of the principal amount of the Notes then outstanding divided by the then
exercise price of the Warrant and pro rated for any period less than one month.
2. Issuance, Purchase and Sale of Securities
2.1 Issuance of the Securities. The Company has authorized the
issuance and sale of the Securities in the aggregate principal amount of
$10,000,000 to be acquired by the Purchasers in accordance with the terms of
this Agreement. Each Note will be issued in substantially the form of the Note
attached hereto as Exhibit B. Each Warrant will be issued in substantially the
form of the Warrant attached hereto as Exhibit C.
2.2 Sale and Purchase of the Securities. Subject to the terms and
conditions of this Agreement, on the Closing Date (as defined), the Company will
issue, sell and deliver to each Purchaser and each Purchaser will purchase from
the Company, such principal amount of Notes and Warrants, as is specified
opposite such Purchaser's name on the signature pages hereto. At the Closing (as
defined), the principal amount of the Notes and the Warrants shall be payable by
the Purchasers to the Company in cash by wire transfer of immediately available
funds.
3. Closing of Sale of Securities. The purchase and delivery of the
Securities to be purchased by the Purchasers hereunder shall take place at the
offices of Xxxxxxx Berlin Shereff Xxxxxxxx, LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000, at a closing (the "Closing") on or before December 23, 1998 or at
such other place or on such other date as the Purchasers and the Company may
agree upon (such date on which the Closing shall have actually occurred, the
"Closing Date"). At the Closing, the Company will deliver or cause to be
delivered to each Purchaser the Securities to be purchased by such Purchaser
pursuant hereto against payment of the purchase price therefor. The Securities
to be purchased by each Purchaser hereunder shall be, with respect to such
Purchaser, in the form of a single Note (or such greater number of Notes as each
Purchaser may request no less than 48 hours prior to the Closing) and Warrant,
dated the date of the Closing and registered in the Purchaser's name or that of
its nominee (provided to the Company no less than 48 hours prior to the
Closing).
4. Deliveries at the Closing.
4.1 Deliveries by the Company to the Purchasers on the Closing
Date. At the Closing, the Company will deliver or cause to be delivered to each
Purchaser, against payment of the purchase price as provided herein:
(a) Securities. The Notes and Warrants, as provided in
Section 3 hereof.
(b) Opinion of Counsea. A favorable opinion from Xxxxxxx
Xxxxx & Xxxxxxx, counsel for the Company, substantially in the form set forth in
Exhibit F, addressed to the Purchasers, dated the Closing Date and otherwise
satisfactory in substance and form to the Purchasers, and their respective
counsel.
(c) Stockholders' Agreement. The Stockholders' Agreement,
duly executed by the Company.
(d) Registration Rights Agreement. The Registration Rights
Agreement, duly executed by the Company.
(e) Officer's Certificate. A certificate, dated the Closing
Date, of an officer of the Company, (i) certifying as true, complete and correct
its Charter Documents and resolutions relating to the transactions contemplated
by this Agreement and the other Transaction Documents, (ii) as to the absence of
proceedings or other action for dissolution, liquidation or reorganization of
the Company and (iii) as to the incumbency and specimen signatures of officers
who shall have executed instruments, agreements and other documents in
connection with the transactions contemplated hereby.
(f) Payment of Closing Fees. The fees, expenses and
disbursements of counsel for the Purchasers reflected in statements of such
counsel rendered prior to or on the Closing Date and the out-of-pocket expenses
of the Purchasers, which fees, expenses and disbursements shall not exceed
$50,000 in the aggregate.
4.2 Deliveries by the Purchasers to the Company at the Closing
Date. At the Closing, each Purchaser will deliver or cause to be delivered to
the Company the following:
(a) Purchase Price. Such Purchaser's payment of the purchase
price, as provided herein.
(b) Stockholders' Agreement. The Stockholders' Agreement,
duly executed by the Purchasers.
(c) Registration Rights Agreement. The Registration Rights
Agreement, duly executed by the Purchasers.
5. Representations and Warranties, Etc. In order to induce the
Purchasers to purchase the Securities, the Company represents and warrants to
the Purchasers that, except as set forth on the disclosure schedule hereto:
5.1 Organization and Qualification; Authority. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Nevada. Schedule 5.1 attached hereto contains a list of the
name and jurisdiction of organization of each of the Company's Subsidiaries and
the Company's ownership interest with respect thereto. Each Significant
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation. The Company and
each of its Significant Subsidiaries has full corporate power and authority and
all necessary government approvals to own and lease its properties and carry on
its business as presently conducted, is duly qualified, registered or licensed
as a foreign corporation to do business and is in good standing in each
jurisdiction in which the ownership or leasing of its properties or the
character of its present operations makes such qualification, registration or
licensing necessary, except where the failure to so qualify or be in good
standing would not have a material adverse effect on the condition (financial or
otherwise), assets, business or results of operations of the Company and its
Significant Subsidiaries, taken as a whole (a "Material Adverse Effect"). The
Company has heretofore delivered to the Purchasers' counsel complete and correct
copies of (i) the certificate of incorporation and (ii) the by-laws of the
Company and its Significant Subsidiaries, each as amended to date and as
presently in effect (collectively, the "Charter Documents").
5.2 Corporate Authorization. The execution, delivery and
performance by the Company of this Agreement and the other Transaction Documents
are within the Company's corporate power and authority. The execution and
delivery of this Agreement and the other Transaction Documents by the Company
and the performance by the Company of its obligations hereunder and thereunder,
have been duly authorized by all requisite corporate action and no other
corporate proceedings on the part of the Company other than those listed on
Schedule 5.2 are necessary to authorize this Agreement and the other Transaction
Documents. This Agreement and the other Transaction Documents have been duly
executed and delivered by duly authorized officers of the Company and, assuming
the due authorization, execution and delivery thereof by all parties thereto
other than the Company, constitutes a legal, valid and binding obligation of the
Company, enforceable against it in accordance with its terms, except as may be
limited by bankruptcy, reorganization, moratorium, fraudulent conveyance and
insolvency laws and by other laws affecting the rights of creditors generally
and except as may be limited by the availability of equitable remedies.
5.3 No Conflict; Requisite Consents. The execution, delivery and
performance by the Company of this Agreement and the other Transaction Documents
does not and will not (i) contravene or conflict with the Charter Documents,
(ii) constitute a default under or give rise to a right of termination,
cancellation or acceleration of any right or obligation of the Company or any of
the Company's Subsidiaries under any provision of any written agreement or other
instrument binding upon the Company or any of the Company's Subsidiaries or
require the consent of any third party under any Law applicable to the Company
or any License held by the Company or any of the Company Subsidiaries, or (iii)
result in the creation or imposition of any Lien on any asset of the Company or
any of the Company's Subsidiaries, except, with respect to each of the
occurrences or results referred to in clauses (ii) and (iii) of this sentence,
(a) the third party consents set forth in Schedule 5.3 and (b) such items which
would not have a Material Adverse Effect.
5.4 Capitalization
(a) As of December 23, 1998, the authorized Capital Stock of
the Company consists of 100,000,000 shares of Common Stock and 15,000,000 shares
of Preferred Stock consisting of 750,000 shares of Series B Preferred Stock, of
which 11,738,277 shares of Common Stock and 101,379 shares of Series B Preferred
Stock are issued and outstanding. Prior to August 17, 1998, the Company also had
authorized 4,250,000 shares of Series A Preferred Stock, of which 3,257,490 were
outstanding. All of the previously issued shares of Series A Preferred Stock
have been converted into shares of Common Stock, and there are no shares of
Series A Preferred Stock issued and outstanding. All issued and outstanding
shares of the Company's Capital Stock are validly issued, fully paid and
nonassessable. Except as set forth on Schedule 5.4, there are no (i) outstanding
subscriptions, options, warrants or rights (including registration rights,
conversion rights and preemptive rights), agreements, calls, convertible
securities, arrangements or commitments of any character to which the Company is
a party relating to the issued or unissued Capital Stock or other securities of
the Company or obligating the Company to grant, issue or sell any such options,
warrants or rights or (ii) shares of Common Stock reserved for issuance upon the
exercise of any warrants, options granted or to be granted under any stock
option plan or any options previously granted outside of any stock option plan.
(b) All the outstanding shares of Common Stock of the
Company's Subsidiaries are validly issued, fully paid and nonassessable and are
owned by the Company or by a Subsidiary of the Company free and clear of all
Liens, except as set forth on Schedule 5.4 and except for Liens which in the
aggregate are not material to the Company and its Subsidiaries. As of the date
of this Agreement, there are no outstanding options, warrants, preemptive or
other rights, Contracts, commitments, undertakings or arrangements by which any
of the Company's Subsidiaries is or may become obligated to issue any additional
shares of their Capital Stock or securities convertible into any such shares
except as set forth on Schedule 5.4. The Company does not directly or indirectly
own any interest in any other corporation, partnership, joint venture or other
business association or entity, which interest is material to the Company and
its Subsidiaries, taken as a whole, except as set forth on Schedule 5.4.
Schedule 5.4 contains a list of all options, warrants or other securities
convertible into shares of Common Stock granted or approved to be granted by the
Company's Board of Directors (or a committee thereof) prior to the date hereof.
5.5 Litigation; Defaults. There is no action, suit, proceeding or
investigation pending or, to the knowledge of the Company, threatened against or
affecting the Company, any of its Subsidiaries, or any properties of any of the
foregoing, before or by any Governmental Authority or any other Person, which
would (i) have a Material Adverse Effect, or (ii) impair the ability of the
Company to perform any material obligation which the Company has under any
Transaction Document except as set forth on Schedule 5.5 or Schedule 5.11.
Neither the Company nor any of its Subsidiaries is in violation of, or in
default under (and there does not exist any event or condition which, after
notice or lapse of time or both, would constitute such a default under), any
term of its Charter Documents, or of any term of any agreement, Contract,
instrument, judgment, decree, writ, determination, arbitration award, or Law
applicable to the Company or any of its Subsidiaries or to which the Company or
any of its Subsidiaries is bound, or to any Properties of the Company or any of
its Subsidiaries, except in each case to the extent that such violations or
defaults would not (a) affect the validity or enforceability of any Transaction
Document, (b) have a Material Adverse Effect or (c) impair the ability of the
Company to perform any material obligation which the Company has under any
Transaction Document except as set forth on Schedule 5.5 or Schedule 5.11.
5.6 No Material Adverse Change. Since September 30, 1998, there
has been (i) no material adverse change in the condition (financial or
otherwise), assets, business, projects or results of operations of the Company
or any of its Subsidiaries, (ii) no material obligation or liability (contingent
or otherwise) incurred by the Company or any of its Subsidiaries, other than
obligations and liabilities incurred in the ordinary course of business and no
material Lien placed on any of the Properties of the Company or any of its
Subsidiaries that remains in existence on the date hereof, other than
liabilities and Liens described on Schedule 5.12 hereto, and (iii) no
acquisition or disposition of any material assets by the Company or any of its
Subsidiaries (or any Contract or arrangement therefor), or any other material
transaction, otherwise than for fair value in the ordinary course of business,
except as set forth on Schedule 5.6 or in the Company SEC Documents.
5.7 Employee Programs
(a) Neither the Company nor its Subsidiaries provide, nor
has an obligation to provide, or make contributions to provide compensation or
benefits of any kind or description whatsoever (whether current or deferred and
whether paid in cash or in kind) to, or on behalf of, one, or more than one,
current or former employees or directors of the Company, its Subsidiaries or any
of its current or former Affiliates or any of their dependents, other than any
plans, programs or other arrangements which only provide for the payment of cash
compensation currently from the general assets of the Company or its
Subsidiaries on a payday by payday basis as base salary or hourly wages for
current services and other than policies for vacation and sick days and except
as disclosed on Schedule 5.7 (individually, a "Benefit Plan," and collectively,
the "Benefit Plans"). Each of the Benefit Plans is listed on Schedule 5.7.
(b) Except as disclosed on Schedule 5.7:
(i) No ERISA Affiliate (other than the Company or its
Subsidiaries) provides, or has an obligation to provide,
contributions, compensation or benefits of or under any plan,
program or arrangement which is subject to Title IV of ERISA
("ERISA Affiliate Title IV Plan").
(ii) The Company has furnished or made available to the
Purchasers a true, complete and current copy of each written
Benefit Plan and any amendments thereto, a summary of each other
Benefit Plan, and all Internal Revenue Service, Department of Labor
or Pension Benefit Guaranty Corporation rulings or determinations,
annual reports, summary plan descriptions, actuarial and other
financial reports and such other documentation with respect to any
Benefit Plan as was reasonably requested by the Purchasers.
(iii) No assets have been set aside in a trust or other
separate account to pay directly or indirectly any benefits under
any Benefit Plan or to the extent assets have been set aside, all
assets are shown on the books and records of such trust or separate
account at their fair market value as of the date of any report
last provided with respect to such trust.
(iv) Each Benefit Plan and each ERISA Affiliate Title
IV Plan has been established, maintained and administered in
compliance in all material respects with all applicable Laws. The
Company has no duty or obligation to indemnify or hold any other
person or entity harmless for any liability attributable to any
acts or omissions by such person or entity with respect to any
Benefit Plan or ERISA Affiliate Title IV Plan, other than
indemnification obligations to Benefit Plan fiduciaries under the
terms of the Benefit Plan documents and corporate charters, by-laws
and state corporate Law.
(v) Neither the Company nor its Subsidiaries has
incurred any material liability for any tax or penalty with respect
to any Benefit Plan, ERISA Affiliate Title IV Plan or any group
health plan (as described in Section 5000 of the Code) of an ERISA
Affiliate including, without limitation, any tax or penalty under
ERISA or under the Code.
(vi) Neither the Company nor its Subsidiaries has
terminated or withdrawn from, or sought a funding waiver with
respect to, any Benefit Plan which is subject to Title IV of ERISA.
(vii) To the knowledge of the Company, there is no
proposed or actual audit or investigation by any Governmental
Authority with respect to any Benefit Plan or ERISA Affiliate Title
IV Plan.
(viii)Neither the Company nor its Subsidiaries has any
obligation to make, or reimburse another employer, directly or
indirectly, for making, contributions to a multi employer plan as
described in Title IV of ERISA.
5.8 Private Offerings. Assuming the truth of the Purchasers'
representations and acknowledgments contained in Section 6 hereof, neither the
Company nor any Person acting on its behalf (other than the Purchasers, as to
whom the Company makes no representations) has offered or sold the Securities by
means of any general solicitation or general advertising within the meaning of
Rule 502(c) under the Securities Act. The Company has not sold the Securities to
anyone other than the Purchasers designated in this Agreement. No securities of
the same class or series as the Notes have been issued and sold by the Company
prior to the date hereof. The Securities shall bear substantially the same
legend set forth in Section 10.1 hereof for at least so long as required by the
Securities Act. Assuming the truth of the Purchasers' representations and
acknowledgments contained in Section 6 hereof and any required filings pursuant
to the Securities Act or any state securities laws, or such other post-closing
filings as may be required, the offer and sale of the Securities are and will be
exempt from the registration and prospectus delivery requirements of the
Securities Act, and have been registered or qualified (or are exempt from
registration and qualification) under the registration, permit or qualification
requirements of all applicable state securities laws.
5.9 Company SEC Documents. The Company has filed with the
Commission, and has heretofore made available to the Purchasers, true and
complete copies of, each report, schedule, registration statement and definitive
proxy statement required to be filed by it under the Exchange Act or the
Securities Act (as such documents have been amended since the time of their
filing, collectively, the "Company SEC Documents"). As of their respective
dates, the Company SEC Documents do not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
5.10 Financial Statements; No Undisclosed Liabilities. The
financial statements of the Company included or incorporated by reference in the
Company SEC Documents (the "Company Financial Statements") have been prepared in
accordance with GAAP applied on a consistent basis (except as may be indicated
therein or in the notes thereto) and fairly present in all material respects the
consolidated financial position of the Company and the consolidated Subsidiaries
of the Company as at the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
any unaudited interim financial statements, to normal year-end adjustments and
any other adjustments described therein). Since September 30, 1998, neither the
Company nor any of the Company's Subsidiaries has incurred any liabilities or
obligations of any nature, whether or not accrued, absolute, contingent or
otherwise, that would have a Material Adverse Effect, other than liabilities (i)
disclosed on Schedule 5.10, or the Company SEC Documents filed prior to the date
of this Agreement (all of which have been furnished to the Purchasers), (ii)
adequately provided for in the Company Financial Statements or disclosed in any
related notes thereto (all of which have been furnished to the Purchasers),
(iii) not required under GAAP to be reflected in the Company Financial
Statements, or disclosed in any related notes thereto, (iv) incurred in
connection with this Agreement or the other Transaction Documents, or (v)
incurred in the ordinary course of business.
5.11 Environmental Regulation, Etc. To the knowledge of the
Company, (i) the operations of the Company and its Subsidiaries comply in all
material respects with all applicable federal, state or local environmental,
health and safety statutes and regulations; (ii) none of the operations of the
Company or its Subsidiaries is the subject of any judicial or administrative
proceeding alleging the violation of any federal, state or local environmental,
health or safety statute or regulation; (iii) none of the operations of the
Company or its Subsidiaries is the subject of a federal or state investigation
evaluating whether any remedial action is needed to respond to a release of any
hazardous or toxic waste, substance or constituent, or other substance into the
environment; (iv) neither the Company nor its Subsidiaries has filed any notice
under any federal or state Law indicating past or present treatment, storage or
disposal of a hazardous waste or reporting a spill or release of a hazardous or
toxic waste, substance or constituent, or other substance into the environment;
and (v) neither the Company nor its Subsidiaries has contingent liability in
connection with any release of any hazardous or toxic waste, substance or
constituent, or other substance into the environment except as set forth on
Schedule 5.11.
5.12 Properties and Assets. The Company and its Subsidiaries have
good record and marketable fee title to all real Property and all other Property
and assets, whether tangible or intangible, owned by them and reasonably
necessary in the conduct of business of the Company or its Significant
Subsidiaries, except defects in title which would not have a Material Adverse
Effect or disclosed on Schedule 5.12. The Company and its Subsidiaries have
complied with all commitments and obligations on their part to be performed or
observed under each of the leases listed on Schedule 5.12, except for such
noncompliance which would not have a Material Adverse Effect. All buildings,
machinery and equipment of the Company and its Subsidiaries are in good repair
and working order, except for ordinary wear and tear, and except as would not
have a Material Adverse Effect.
5.13 Insurance. A list of all insurance policies covering the
assets, business, equipment and Properties under which the Company or any of its
Subsidiaries may derive any material benefit is set forth on Schedule 5.13
hereof. Except as set forth on Schedule 5.13, such policies of insurance and
bonds (or other policies and bonds providing substantially similar insurance
coverage) are and have been in full force and effect for at least the last year
and remain in full force and effect. Such policies of insurance and bonds are of
the type and in amounts customarily carried by Persons conducting business
similar to that presently conducted by the Company and its Subsidiaries. The
Company knows of no threatened termination of any such policies or bonds.
5.14 Employment Practices. Neither the Company nor its
Subsidiaries is a party to, or bound by, any collective bargaining agreement,
Contract or other agreement or understanding with a labor union organization
except as set forth on Schedule 5.14. Except as set forth on Schedule 5.14,
there (i) is no unfair labor practice or material labor arbitration proceeding
pending or, to the Company's knowledge, threatened against the Company or its
Subsidiaries, (ii) are no organizational efforts with respect to the formation
of a collective bargaining unit presently being made or, to the Company's
knowledge, threatened involving employees of the Company or its Subsidiaries,
and (iii) is no material labor controversy in existence with respect to the
Company's or the Subsidiaries' business and operations.
5.15 Intellectual Property. Schedule 5.15 annexed hereto sets
forth an accurate and complete list of all Intellectual Property owned or
licensed by the Company and its Subsidiaries. Except as set forth on Schedule
5.15, (i) the Company and its Subsidiaries own, are licensed or otherwise have
the right to use, all Intellectual Property used in the business of the Company
and its Subsidiaries, as presently conducted or as proposed by the Company or
its Subsidiaries to be conducted, (ii) to the knowledge of the Company, the use
of the Intellectual Property by the Company or its Subsidiaries does not
infringe upon or otherwise violate the rights of any third party in or to such
Intellectual Property, and no claim has been asserted with respect thereto which
violation or assertion would have a Material Adverse Effect, and (iii) no
employee of the Company or its Subsidiaries has a right to receive a royalty or
similar payment, or has any other monetary rights, in respect of any item of
Intellectual Property of the Company or its Subsidiaries.
5.16 Material Contracts. Schedule 5.16 sets forth a true, complete
and correct list of all contracts, agreements, commitments, obligations and
licenses to which the Company or its Subsidiaries is a party that are material
("Contracts"); provided, however, purchase agreements involving payments in the
aggregate of $100,000 per annum or less shall not be deemed to be material
unless such purchase agreement is by and between the Company and any Affiliate.
All of the Contracts are valid and binding and are in full force and effect;
and, except as set forth on Schedule 5.16 hereto, there are no existing material
defaults (or events which, with notice or lapse of time or both, would
constitute a material default) by the Company or its Subsidiaries, or, to the
Company's knowledge, any other party thereunder.
5.17 Taxes. The Company and its Subsidiaries have in all material
respects filed or obtained extensions of all federal, state, local and foreign
income, excise, franchise, real estate, sales and use and other tax returns
heretofore required by Law to be filed by it. All material federal, state,
county, local, foreign or other income taxes which have become due or payable by
the Company or any of its Subsidiaries (collectively, "Taxes"), have been paid
in full or are adequately provided for in accordance with GAAP on the financial
statements of the applicable Person. No Liens arising from or in connection with
Taxes have been filed and are currently in effect against the Company or any of
its Subsidiaries, except for Liens for Taxes which are not yet due or which
would not have a Material Adverse Effect. Except as set forth on Schedule 5.17,
no audits or investigations are pending or, to the knowledge of the Company,
threatened with respect to any tax returns or Taxes of the Company or any of its
Subsidiaries.
5.18 Licenses. The Company and its Subsidiaries hold all material
licenses, franchises, permits, consents, registrations, certificates and other
approvals (individually, a "License" and collectively, "Licenses") required for
the conduct of their business as now being conducted, and are operating in
substantial compliance therewith, except where the failure to hold any such
License or to operate in compliance therewith would not have a Material Adverse
Effect. Except as set forth on Schedule 5.18, the Company and its Subsidiaries
are in substantial compliance with all Laws applicable to it, except in each
case where the failure so to comply would not have a Material Adverse Effect or
a material adverse effect on the ability of the Company to perform any
obligation that it has under any Transaction Document to which it is a party.
5.19 Transactions with Affiliates. There are no material
transactions, agreements or understandings, existing or presently contemplated,
between or among the Company or any of its Subsidiaries, and any of their
officers or directors or stockholders or any of their Affiliates or associates
except as set forth on Schedule 5.19.
5.20 Federal Reserve Regulations. None of the transactions
contemplated by this Agreement (including without limitation the use of the
proceeds from the sale of the Securities) will violate or result in a violation
of Section 7 of the Exchange Act, or any regulation promulgated thereunder,
including without limitation, Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System.
5.21 Investment Company Act. Neither the Company nor any of its
Subsidiaries is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
5.22 Broker's or Finder's Commissions. The Company has not
employed any agent, broker, investment banker, finder or financial advisor or
incurred any liability for any broker's or finder's fee or any other commission
or similar fee in connection with the transaction contemplated by this Agreement
and the other Transaction Documents.
5.23 Books and Records. The books of account, minute books, stock
record books and other records of the Company and the Company's Subsidiaries,
all of which have been made available to the Purchasers, are complete and
correct in all material respects.
5.24 Disclosure. This Agreement and the other Transaction
Documents do not contain any untrue statement of a material fact or omit 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.
6. Representations and Warranties of the Purchasers
(a) Each Purchaser represents for itself to the Company that (i)
it is an accredited investor as defined in Regulation D under the Securities
Act, and (ii) by reason of its business and financial experience, and the
business and financial experience of those persons, if any, retained by it to
advise it with respect to its investment in the Securities, such Purchaser
together with such advisers have such knowledge, sophistication and experience
in business and financial matters as to be capable of evaluating the merits and
risk of the prospective investment, and that it is purchasing the Securities for
its own account or for one or more separate accounts maintained by it or for the
account of one or more institutional investors on whose behalf such Purchaser
has authority to make this representation for investment and not with a view to
the distribution thereof or with any present intention of distributing or
selling any of the Securities except in compliance with the Securities Act and
except to one or more such institutional investors, provided that the
disposition of such Purchaser's or such investor's property shall at all times
be within its control. Each Purchaser understands and agrees that the Company's
offer and sale of the Securities have not been registered under the Securities
Act and the Securities may be resold only if registered pursuant to the
provisions thereunder or if an exemption from registration is available.
(b) Each Purchaser which is an insurance company represents, to
the knowledge of such Purchaser, that no part of the funds to be used by it to
purchase the Securities to be purchased by such Purchaser constitutes assets
allocated to any separate account maintained by such Purchaser that contains the
assets of any Benefit Plan listed on Schedule 5.7 (or its related trust). Each
Purchaser which is not an insurance company or an "investment company" (as
defined in the Investment Company Act of 1940, as amended) also represents, to
the knowledge of such Purchaser, that no part of the funds to be used to
purchase the Securities to be purchased by such Purchaser constitutes assets
allocated to any trust or other entity which contains the assets of any Benefit
Plan listed on Schedule 5.7. The representations made in the preceding sentences
are made solely in reliance upon, and subject to, the accuracy of the Company's
representations contained in Section 5.7 of this Agreement and the list of
Benefit Plans shown on Schedule 5.7. As used in this section, the term "separate
account" shall have the meaning assigned to it in Section 3(17) of ERISA.
(c) Each Purchaser represents for itself to the Company that it
has full power and authority and has taken all action necessary to authorize it
to enter into and perform its obligations under this Agreement and the other
Transaction Documents. This Agreement is the legal, valid and binding obligation
of each Purchaser, and is enforceable against each Purchaser in accordance with
its terms, except as may be limited by bankruptcy, reorganization, moratorium,
fraudulent conveyance and insolvency laws and by other laws affecting the rights
of creditors generally and except as may be limited by the availability of
equitable remedies.
(d) Each Purchaser has received all the information it has
requested from the Company and has had the opportunity to ask questions of the
Company and, relying on the completeness and accuracy of such information, such
Purchaser believes such information is sufficient to make an informed decision
with respect to its purchase of the Securities.
(e) Each Purchaser acknowledges for itself that the address set
forth on such Purchaser's signature page hereto is such Purchaser's principal
place of business.
7. Covenants of the Company. The Company covenants and agrees that
from the date hereof until the earlier of (i) the consummation of the sale of
the Series C Preferred Stock to the holders of the Notes as contemplated below
or (ii) the repayment of the Notes in full, unless Holders of at least a
majority of the aggregate principal amount of the Notes then outstanding shall
otherwise consent in writing, it will do or cause the following:
7.1 Use of Proceeds. Use the net proceeds from the sale of the
Notes to provide for working capital requirements and general corporate
purposes; provided, however, that with respect to net proceeds received from the
sale of Notes to FESGF, the Company shall use at least 90% of such proceeds to
invest directly or indirectly in entities in countries which are included on the
DEC Deutsche Investitions - und Entwicklingsgesellscheft mbH's list of DAC aid
recipients on Exhibit G hereto, as amended from time to time by FESGF.
7.2 Charter Documents. The Charter Documents shall not have been
modified or amended since the date delivered by the Company, except for the
Company's Certificate of Incorporation which may be amended to increase the
number of authorized shares of Capital Stock and to perform such other acts as
are necessary to establish the terms of the Series C Preferred Stock.
7.3 Ordinary Course. The Company's business and the businesses of
its Subsidiaries shall be conducted only in the ordinary course of business and
in a manner consistent with past practice and the business plan(s) approved by
the Company's Board of Directors. The Company shall use commercially reasonable
efforts to preserve substantially intact the business organization of itself and
its Subsidiaries, to keep available the services of its present officers and
employees and to preserve its present relationships with customers, suppliers
and other persons with which it has a significant business relationship.
7.4 Issuance of Securities. The Company shall not, nor shall it
permit any of its Subsidiaries to, issue, deliver, sell, redeem, acquire,
authorize or propose to issue, deliver, sell, redeem, acquire or authorize, any
shares of its Capital Stock of any class or any securities convertible into, or
any rights, warrants or options to acquire, any such shares or convertible
securities or other ownership interest, provided that the Company shall be
permitted to (i) issue Common Stock, warrants or Series C Preferred Stock
resulting from the Financing, (ii) issue up to 500,000 shares of Common Stock at
a price of not less than $8.70 per share in connection with the Company's
contemplated purchase of Metrotelecom, S.A. and related companies and (iii)
grant options (which shall include outstanding options to officers, directors,
employees and agents) to purchase up to an aggregate of 10% of the shares of
Common Stock outstanding, as determined on a fully-diluted basis.
7.5 Dividends; Changes in Capital Stock. The Company shall not,
nor shall it propose to: (i) declare, set aside, make or pay any dividend or
other distribution, payable in cash, stock, property or otherwise, with respect
to any of its Capital Stock, except with respect to the Series B Preferred
Stock, which dividends shall not exceed the annual amount of 6.75% per share or
(ii) reclassify, combine, split, subdivide or redeem, purchase or otherwise
acquire, directly or indirectly, any of its Capital Stock.
7.6 Change in Condition. The Company shall promptly advise the
Purchasers in writing of any change in the condition (financial or otherwise),
operations or properties or businesses of the Company or any of its Subsidiaries
which would have a Material Adverse Effect.
7.7 No Action. The Company shall not, and shall not permit any of
its Subsidiaries to, take or agree or commit to take any action, (i) that is
likely to make any of its representations or warranties hereunder inaccurate; or
(ii) that is prohibited pursuant to the provisions of this Section 7.
7.8 Replacing of Certificates. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction, or
mutilation of any certificate representing any of the Securities, and in the
case of loss, theft or destruction, upon receipt of indemnity in reasonable form
and scope, the Company will issue a new certificate representing such Securities
in lieu of such lost, stolen, destroyed, or mutilated certificate.
8. Rights and Obligations of the Purchasers
8.1 Exchange of Right. In the event the Company has not issued
$10,000,000 face amount of Series C Preferred Stock to Persons other than the
Purchasers as of July 1, 1999, any Holder may, upon five Business Days notice
furnished to the Company, exchange, in whole or in part, the Notes beneficially
owned by such Holder into (i) a number of shares of Series C Preferred Stock
having a liquidation preference equal to the principal amount outstanding of the
Notes held by such Holder and, at the option of the Holder, the accrued but
unpaid interest on those Notes or (ii) a number of shares of Common Stock,
Preferred Stock or any other equity security offered for sale by the Company
after the date hereof having a liquidation preference or Fair Market Value as of
such date, as the case may be, equal to the principal amount outstanding of the
Notes held by such Holder. The Company shall pay all accrued but unpaid interest
on the Notes through the date of such exchange, except for the accrued but
unpaid interest on the Notes which has been converted into shares of Series C
Preferred Stock pursuant to subsection (i) of this Section 8.1. The notice
furnished by a Holder to the Company pursuant to this Section 8.1 shall be in
substantially the form attached hereto as Exhibit H. The "Exchange Price" means
$8.70 per share of Series C Preferred Stock subject to adjustment if the
liquidation preference of the Series C Preferred Stock is reduced or if the
Series C Preferred Stock or Common Stock is issued at less than $8.70 per share.
8.2 Reservation of Securities. The Company shall reserve and set
apart and have at all times, free from preemptive rights, the number of
authorized but unissued shares of Series C Preferred Stock or Common Stock, to
conform to the Company's obligations set forth in Section 8 and under the
Warrants.
8.3 Anti-Dilution Provisions - Adjustment of Number of Shares of
Capital Stock. The number of shares of Common Stock or Preferred Stock into
which the Notes are exchangeable shall be subject to adjustment with respect to
the shares of Common Stock or Preferred Stock of the Company as follows:
(a) Combinations and Subdivisions of Capital Stock. If at
any time the outstanding shares of Common Stock or Preferred Stock of the
Company shall be subdivided into a greater or combined into a lesser number of
shares (whether with the same or a different par value or without par value),
the number of shares of such Common Stock or Preferred Stock transferable upon
the exchange of the Notes shall be proportionately increased or decreased.
(b) Distributions in Respect of Capital Stock. If the
Company shall distribute by way of dividend or otherwise upon its shares of
Common Stock or Preferred Stock any cash, securities or property (excluding cash
dividends paid out of earnings or surplus and dividends or distributions payable
in rights, warrants or options to subscribe for or purchase such Common Stock or
Preferred Stock, or to subscribe for or purchase securities convertible into or
exchangeable for such Common Stock or Preferred Stock, with or without payment
of additional consideration, such convertible or exchangeable securities being
herein called "Exchangeable Securities," or payable in Exchangeable Securities),
then thereafter each Holder will be entitled to receive the number of shares of
the Common Stock or Preferred Stock of the Company then deliverable pursuant to
the terms hereof, and, in addition, the cash, securities or property which such
Holder would have received by way of such dividends or other distributions if,
continuously since the date of delivery hereof, such Holder had been the record
holder of the number of shares of such Common Stock or Preferred Stock, which
would have been deliverable upon the exercise of such Holder's exchange right if
such exchange had been effected immediately prior to the record date for such
distribution of cash, securities or property.
(c) Recapitalization, Reclassification and Succession. If
any recapitalization of the Company or reclassification of shares of Common
Stock or Preferred Stock of the Company or any merger or consolidation of the
Company into or with a corporation or other business entity, or the sale or
transfer of all or substantially all of either of the Company's assets or of any
successor corporation's assets to any other corporation or business entity (any
such corporation or business entity being included within the meaning of the
term "successor corporation") shall be effected, then, each Holder shall
thereafter have the right to receive upon the basis and upon the terms and
conditions specified herein and in lieu of the shares of common stock or
preferred stock of such corporation immediately theretofore issuable upon the
exercise of such Holder's exchange rights, such shares of capital stock,
securities or other property as may be issued or payable with respect to or in
exchange for a number of outstanding shares of such common stock or preferred
stock equal to the number of shares of Common Stock or Preferred Stock of the
Company immediately theretofore deliverable upon the exercise of such Holder's
exchange rights had such recapitalization, reclassification, merger,
consolidation, sale or transfer not taken place.
(d) Fractional Shares. In the event that the application of
the provisions of this Section 8 would result in the issuance of a fraction of a
share of Common Stock or Preferred Stock of the Company, or a number of full
shares plus a fraction of a share of such Common Stock or Preferred Stock, then
such fractional share shall be disregarded if less than one-half a share, or, if
more than one-half of a share, the number of shares issuable upon such exchange
shall be rounded out to the next full share.
(e) Issuance of Additional Shares of Capital Stock. If the
Company shall issue any additional shares of Common Stock, Preferred Stock or
Common Stock or Preferred Stock equivalents (other than as provided in the
foregoing subsections (a) through (d)) for no consideration or for a
consideration per share less than the Exchange Price in effect on the date of
and immediately prior to such issue, then and in such event, such Exchange Price
shall be reduced concurrently with such issue, to a price equal to the lower of
$8.70 or the price at which the Company offers such securities in a future
offering of securities; provided, however, that this provision shall not apply
to (i) the issue of up to 500,000 shares of Common Stock at a price of not less
than $8.70 per share in connection with the Company's contemplated purchase of
Metrotelecom, S.A. and related companies and (ii) the grant of options
(including outstanding options to officers, directors, employees and agents) to
purchase up to an aggregate of 10% of the shares of Common Stock outstanding, as
determined on a fully-diluted basis as authorized by the Company's Board of
Directors.
(f) Company to Prevent Dilution. If any event or condition
occurs as to which other provisions of this Section 8 are not strictly
applicable or if strictly applied would not fairly protect the exercise of
exchange rights hereunder in accordance with the essential intent and principles
of such provisions, or which might materially and adversely affect the exercise
of exchange rights of the Holders under any provisions hereof, then the Company
shall make an adjustment in the application and interpretation of such
provisions, in accordance with such essential intent and principles, so as to
protect such rights as aforesaid, and any adjustment necessary with respect to
the Exchange Price per share and the number of shares subject to the exchange
right hereunder so as to preserve without dilution the rights of the Holders;
provided, however, that in no event shall any such adjustment (other than a
reverse stock split or the like) have the effect of increasing the Exchange
Price per share as otherwise determined pursuant to this Agreement.
8.4 Notice to the Holder
(a) If the character of securities or assets deliverable
upon exchange of the Notes shall be changed as a result of the provisions
hereof, then in each such case the Company shall forthwith and within fifteen
(15) days prior to such proposed change cause a written certificate of the chief
executive officer or the chief financial officer of the Company and by its
treasurer to be sent first-class, certified mail, return receipt requested,
postage prepaid, to each Holder specifying the character of the securities or
assets and the amount thereof so deliverable and the details of the computations
thereof.
(b) In case at any time:
(i) the Company shall pay any dividend upon its
outstanding Common Stock or Preferred Stock payable in shares
of Common Stock or Preferred Stock or make any distribution
(other than cash dividends out of earned surplus) to the
holders of its shares of Common Stock or Preferred Stock; or
(ii) the Company shall offer for subscription pro rata
to the holders of its Common Stock or Preferred Stock any
additional shares of Common Stock or Preferred Stock or other
rights; or
(iii)there shall be effected any recapitalization of the
Company or reclassification of the shares of Common Stock or
Preferred Stock of the Company, or any merger or
consolidation of the Company into or with any other
corporation or business entity and as a result of which the
Company is not the surviving corporation, or the sale or
transfer of all or substantially all of the assets of the
Company to any other corporation or business entity; or
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company;
then, in any one or more of said cases, the Company shall give written notice to
each Holder of the date which is the record date for such dividend, distribution
or subscription rights, or on which such recapitalization, reclassification,
merger, consolidation, sale, transfer, dissolution, liquidation or winding up
shall take place, as the case may be. Such notice shall also specify the date as
of which the holders of record of the Company's Common Stock or Preferred Stock
shall participate in such dividend, distribution or subscription rights, or
shall be entitled to exchange its Common Stock or Preferred Stock for securities
or other property deliverable upon such recapitalization, reclassification,
merger, consolidation, sale, transfer, dissolution, liquidation or winding up,
as the case may be. Such written notice shall be given at least ten (10) days
prior to the action in question and not less than ten (10) days prior to the
record date.
8.5 Exchange Listing by the Company. If any shares of Common
Stock or Preferred Stock required to be reserved for purposes of exchange of the
Notes requires listing on any national securities exchange before such shares
may be issued upon exchange, the Company will, at its expense, as expeditiously
as possible, cause such shares to be duly listed on the appropriate national
securities exchange.
9. Conditions to Closing
9.1 Conditions to the Company's Obligations
The obligations of the Company to effect the sale and issuance of the
Securities shall be subject to the satisfaction of the conditions set forth
below, at or before the Closing (which conditions may be waived by the Company
in writing).
(a) The representations and warranties of the Purchasers set
forth in Section 6 of this Agreement shall be true and correct in all material
respects as of the date hereof and as of the date of the Closing, and the
Company shall have received a certificate signed by an officer of each of the
Purchasers dated as of the date of each Closing certifying that such
representations and warranties are true and correct.
(b) The Purchasers shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by this Agreement, and the Company shall have received a certificate
signed by an officer of each of the Purchasers dated as of the date of the
Closing certifying the performance, satisfaction and compliance therewith in all
material respects.
(c) The Purchasers shall have delivered to the Company at the
Closing the items set forth in Section 4.2.
9.2 Conditions to the Purchasers' Obligations
The obligations of the Purchasers to effect the purchase of the
Securities shall be subject to the satisfaction of the conditions set forth
below, at or before the Closing (which conditions may be waived by the
Purchasers in writing).
(a) The representations and warranties of the Company set
forth in Section 5 of this Agreement shall be true and correct in all material
respects as of the date hereof and as of the date of the Closing, and the
Purchasers shall have received a certificate signed by the Chief Executive
Officer of the Company dated as of the date of the Closing certifying that such
representations and warranties are true and correct.
(b) The Company shall have performed, satisfied and complied
in all material respects with all covenants, agreements and conditions required
by this Agreement and the Purchasers shall have received a certificate signed by
the Chief Executive Officer of the Company dated as of the date of the Closing
certifying the performance, satisfaction and compliance therewith in all
material respects.
(c) The Company shall deliver to the Purchasers at the Closing
the items set forth in Section 4.1.
(d) The Company shall not have suffered a Material Adverse
Effect.
10. Restrictions on Transfer
10.1 Restrictive Legends. Except as otherwise permitted by this
Section 10, each Note issued pursuant to this Agreement and any security issued
upon exchange thereof shall be stamped or otherwise imprinted with a legend in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
PURSUANT TO THE SECURITIES OR "BLUE SKY" LAWS OF ANY STATE. SUCH
SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT PURSUANT TO (i) A
REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS
EFFECTIVE UNDER SUCH ACT, (ii) RULE 144 OR RULE 144A UNDER SUCH
ACT, OR (iii) ANY OTHER EXEMPTION FROM REGISTRATION UNDER SUCH
ACT, PROVIDED THAT, IF REQUESTED BY THE COMPANY, AN OPINION OF
COUNSEL REASONABLY SATISFACTORY IN FORM AND SUBSTANCE IS FURNISHED
TO THE COMPANY THAT AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT IS AVAILABLE.
The Company shall maintain a copy of this Agreement and any amendments
thereto on file in its principal office, and will make such copy available
during normal business hours for inspection to any party thereto or will provide
such copy to any Purchaser upon its request.
10.2 Notice of the Proposed Transfer; Opinion of Counsel. Each
Purchaser of each Note bearing the restrictive legend set forth in Section 10.1
above ("Restricted Security") agrees that prior to any transfer or attempted
transfer of such Restricted Security to give to the Company (a) written notice
describing the manner or circumstances of such transfer or proposed transfer,
and (b) an opinion of counsel, which is knowledgeable in securities law matters,
in form and substance reasonably satisfactory to the Company, to the effect that
the proposed transfer of such Restricted Security may be effected without
registration of such Restricted Security under the Securities Act. If the holder
of the Restricted Security delivers to the Company an opinion of counsel in form
and substance reasonably satisfactory to the Company that subsequent transfers
of such Restricted Security will not require registration under the Securities
Act, the Company will after such contemplated transfer deliver new Securities
for such Restricted Security which do not bear the Securities Act legend set
forth in Section 10.1 above. The restrictions imposed by this Section 10 upon
the transferability of any particular Restricted Security shall cease and
terminate (i) when such Restricted Security has been sold pursuant to an
effective registration statement under the Securities Act, (ii) when such
Restricted Security has been transferred pursuant to Rule 144 or Rule 144A
promulgated under the Securities Act, or (iii) upon the date which is two (2)
years after the later of (A) the original issue date of the Restricted Security
and (B) the last date on which the Company or any Affiliate of the Company was
the owner of the Restricted Security (or any predecessor Restricted Security).
As used in this Section 10.2, the term "transfer" encompasses any sale, transfer
or other disposition of any Securities referred to herein.
11. Miscellaneous
11.1 Indemnification; Expenses, Etc
(a) The Company agrees to indemnify and hold harmless each
Purchaser, its Affiliates and each of its and their respective directors,
officers, partners, principals, shareholders and attorneys (individually, an
"Indemnified Party" and, collectively, the "Indemnified Parties") from and
against any and all losses, claims, damages, liabilities, costs (including
reasonable attorneys' fees) and expenses (collectively, "Losses") to which any
Indemnified Party may become subject, insofar as such Losses arise out of, in
any way relate to, or result from (i) any breach of any representation or
warranty made by the Company, or the failure of the Company to fulfill any
agreement or covenant contained in this Agreement or any other Transaction
Document, or (ii) any proceeding against the Company or any Indemnified Party
brought by any third party arising out of or in connection with this Agreement
or the other Transaction Documents; provided, however, that the Company shall
not have any obligation under this indemnity provision to indemnify any
Indemnified Party with respect to Losses until the aggregate combined total of
all such Losses incurred by any Indemnified Party exceeds $5,000, whereupon the
Indemnified Party shall be entitled to indemnity with respect to the full amount
of Losses, and the Company shall reimburse the Indemnified Party for all such
Losses as they are incurred or suffered by such Indemnified Party. The Company
shall not have any obligation under this indemnity provision for claims which
are first made after the expiration of all applicable statutes of limitations,
or for liabilities resulting from the gross negligence or willful misconduct of
any Indemnified Party.
(b) If any Indemnified Party is entitled to indemnification
hereunder, such Indemnified Party shall give notice to the Company of any claim
or of the commencement of any proceeding against the Company or any Indemnified
Party brought by any third party with respect to which such Indemnified Party
seeks indemnification pursuant hereto; provided, however, that the delay to so
notify the Company shall not relieve the Company from any obligation or
liability except to the extent the Company is prejudiced by such delay. The
Company shall have the right, exercisable by giving written notice to an
Indemnified Party within 30 days after the receipt of written notice from such
Indemnified Party of such claim or proceeding, to assume, at the expense of the
Company, the defense of any such claim or proceeding with counsel reasonably
satisfactory to such Indemnified Party. After notice from the Company to the
Indemnified Party of its election to assume the defense of such claim or
proceeding, the Company shall not be liable to the Indemnified Party for any
legal or other expenses subsequently incurred by the Indemnified Party in
connection with the defense thereof other than reasonable costs of
investigation; provided that the Indemnified Party shall have the right to
employ separate counsel to represent the Indemnified Party who may be subject to
liability arising out of any claim in respect of which indemnity may be sought
by the Indemnified Party against the Company, but the fees and expenses of such
counsel shall be for the account of such Indemnified Party unless (i) the
Company and the Indemnified Party shall have mutually agreed to the retention of
such counsel or (ii) in the opinion of counsel to such Indemnified Party,
representation of both parties by the same counsel would be inappropriate due to
actual or potential conflicts of interest between them, it being understood,
however, that the Company shall not, in connection with any one such claim or
proceeding or separate but substantially similar or related claims or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (together with appropriate local counsel) at any time for all
Indemnified Parties. The Company shall not consent to entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the giving by claimant or plaintiff to such Indemnified Party or Parties of a
release, in form and substance satisfactory to the Indemnified Party or Parties,
from all liability in respect of such claim, litigation or proceeding.
11.2 Survival of Representations and Warranties. All
representations and warranties contained in this Agreement or in the other
Transaction Documents shall survive, for a period of three (3) years from the
date hereof, the execution and delivery of this Agreement, any investigation at
any time made by any Purchaser or on such Purchaser's behalf, the purchase of
the Securities by the Purchasers under this Agreement and any disposition of or
payment on the Securities.
11.3 Amendment and Waiver. This Agreement may be amended, modified
or supplemented, and waivers or consents to departures from the provisions
hereof may be given, provided that the same are in writing and signed by the
Purchasers and/or the other holders of the Notes, holding a majority of the
aggregate principal amount of the Notes, and the Company.
11.4 Notices, Etc. Except as otherwise provided in this Agreement,
notices and other communications under this Agreement shall be in writing and
shall be delivered personally, sent by telecopier (with written confirmation of
receipt), mailed by registered or certified mail, return receipt requested, or
by a nationally recognized overnight courier, postage prepaid, addressed, (a) if
to Internexus, at such address or telecopier number as is set forth next to
Internexus' name on the signature page hereto, or as Internexus shall have
furnished to the Company in writing, with a copy to Greenberg, Peden, Siegmeyer
& Xxxxxx, P.C., 00 Xxxxxxxx Xxxxx, 00xx Xxxxx, Xxxxxxx, Xxxxx 00000, telecopier
no.: (000) 000-0000, to the attention of X.X. Xxxxxx, III, Esq., or (b) if to
FESGF, at such address or telecopier number as is set forth next to FESGF's name
on the signature page hereto, or as FESGF shall have furnished to the Company in
writing, with a copy to Xxxxxxx Berlin Shereff Xxxxxxxx, LLP, 000 Xxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000, telecopier no.: (000) 000-0000, to the attention of
Xxxxxx Xxxxx, Esq., or (c) if to the Company, at 000 Xxxx 000 Xxxxx, Xxxxx 000,
Xxxx Xxxx Xxxx, Xxxx 00000, telecopier no.: (000) 000-0000, to the attention of
Chief Executive Officer, or at such other address or telecopier number, or to
the attention of such other officer, as the Company shall have furnished to the
Purchasers in writing, with a copy to Xxxxxxx Xxxxx & Xxxxxxx, telecopier no.:
(000) 000-0000, to the attention of Xxxxx Xxxxxxxxx, Esq.
11.5 Entire Agreement. This Agreement and the other Transaction
Documents embody the entire agreement and understanding between the Purchasers
and the Company and supersede all prior agreements and understandings relating
to the subject matter hereof.
11.6 Successors and Assigns. Whenever in this Agreement any of the
parties hereto are referred to, such reference shall be deemed to include the
successors and assigns of such party; and all covenants, promises and agreements
by or on behalf of the respective parties which are contained in this Agreement
shall bind and inure to the benefit of the successors and assigns of all other
parties. The terms and provisions of this Agreement and the other Transaction
Documents shall inure to the benefit of and shall be binding upon any assignee
or transferee of any Purchaser, and in the event of such transfer or assignment,
the rights and privileges herein conferred upon any such Purchaser shall
automatically extend to and be vested in, and become an obligation of, such
transferee or assignee, all subject to the terms and conditions hereof. In
connection therewith, such transferee or assignee may disclose all documents and
information which such transferee or assignee now or hereafter may have relating
to the Notes, this Agreement, the other Transaction Documents, the Company, any
other Persons referred to herein or any of the business of any of the foregoing
entities, subject to such transferee or assignee executing a confidentiality
agreement reasonably satisfactory to the Company.
11.7 Agreement and Action of the Purchasers. Upon any occasion
requiring, permitting or referencing an act or an approval, consent, waiver,
election or other action on the part of the Purchasers, any such action shall
(i) be taken upon the affirmative vote of the Purchasers and/or the other
holders of the Notes, holding a majority or agreeing to purchase a majority
under this Agreement of the aggregate principal amount of the Notes, or (ii) be
deemed to have been taken by the Purchasers upon such action being taken by the
Purchasers and/or the other holders of the Notes, holding a majority of the
aggregate principal amount of the Notes.
11.8 Expenses. Subject to the limitation set forth in Sections
4.1(f), the Company agrees to pay all costs and expenses of the Purchasers in
connection with the preparation, execution, delivery and administration of this
Agreement or any amendments or modifications hereto and other instruments and
documents to be executed contemporaneously herewith, including reasonable
attorney's fees and out-of-pocket expenses of counsel for the Purchasers.
11.9 Descriptive Headings. The headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the meaning
hereof.
11.10 Governing Law. This Agreement shall be construed and enforced
in accordance with, and the rights of the parties shall be governed by, the
internal laws of the State of New York, without regard to any choice-of-law
principles thereof.
11.11 Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original.
If this Agreement is satisfactory, please so indicate by signing the
applicable attached signature page of this Agreement and delivering such
counterpart to the Company, whereupon this Agreement will become binding among
the parties hereto in accordance with its terms.
CONVERGENCE COMMUNICATIONS, INC.
By: /S/ Xxxx X'Xxxxxxxx
__________________________________
Name: Xxxx X'Xxxxxxxx
Title: Senior Vice President
SECURITIES PURCHASE AGREEMENT FOR
SUBORDINATED EXCHANGEABLE PROMISSORY NOTES
PURCHASER SIGNATURE PAGE
Accepted and agreed as of the Aggregate Principal Amount and
date first written above: Purchase Price of Notes to be Purchased
by Internexus, S.A.: $5,000,000
By: /S/ Xxxxxxx Xxxx
________________________
Name:
Title:
Address: Xxxxx 000, 0xx Xxxxx
Xxxxxx Xxxxx 0000, Xxxxxxxxx
Telephone: 000-000-000-0000
Telecopy: 000-000-000-0000
with a copy to:
Address: Tax I.D. Number:
Greenberg, Peden, Siegmeyer
& Xxxxxx, P.C.
00 Xxxxxxxx Xxxxx, 00xx Xxxxx (xx acquired in the name of a
Xxxxxxx, Xxxxx 00000 nominee, the taxpayer I.D.
Attention: X.X. Xxxxxx, III, Esq. number of such nominee)
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Designated Bank:
Nominee (name in which the
Notes are to be registered, _____________________________________
if different than name of Name
Purchaser):
_____________________________________
ABA #
_____________________________________
______________________________________ Street Address
(Nominee's Name)
_____________________________________
City State Zip Code
_____________________________________
Account Number Attention
SECURITIES PURCHASE AGREEMENT FOR
SUBORDINATED EXCHANGEABLE PROMISSORY NOTES
PURCHASER SIGNATURE PAGE
Accepted and agreed as of the Aggregate Principal Amount
date first written above: and Purchase Price of Notes to be
Purchased by FondElec Essential
Services Growth Fund, L.P.: $5,000,000
By: /S/ Xxxxxx Xxxxxxxx
________________________
Name: Xxxxxx Xxxxxxxx
Title: Director of FondElec ESGP Corp.,
the General Partner of FESGF
Address: 000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
Address: Tax I.D. Number: 98 0177158
Xxxxxxx Berlin Shereff Xxxxxxxx, LLP
000 Xxxxx Xxxxxx (if acquired in the name of a
Xxx Xxxx, Xxx Xxxx 00000-0000 nominee, the taxpayer I.D.
Attention: Xxxxxx Xxxxx, Esq. number of such nominee)
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Designated Bank:
Nominee (name in which the Barclays Bank plc____________________
Notes are to be registered, Name
if different than name of
Purchaser): 026 002 574__________________________
ABA #
75 Wall Street_______________________
___________________________________ Street Address
(Nominee's Name)
New York, New York___________________
City State Zip Code
215 954 099__________________________
Account Number Attention
