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EXHIBIT 10.3
SERIES B CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
by and between
HIGH SPEED ACCESS CORP.
and
VULCAN VENTURES, INCORPORATED
November 25, 1998
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SERIES B CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
THIS SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE
AGREEMENT ("Agreement") is made and entered into as of the 25th day of November,
1998, by and between HIGH SPEED ACCESS CORP., a Delaware corporation
("Company"), and VULCAN VENTURES, INCORPORATED., a Washington corporation
("Investor");
WITNESSETH:
WHEREAS, Company desires to sell and issue, and Investor
desires to purchase and acquire, 8,000,000 shares of Company's authorized but
unissued Series B Convertible Preferred Stock ("Series B Preferred Stock"), upon
the terms and subject to the conditions contained herein;
NOW, THEREFORE, in consideration of the mutual covenants,
representations and warranties herein contained, and intending to be legally
bound, Company and Investor agree as follows:
1. Sale and Issuance of Series B Convertible Preferred Stock.
1.1 Company shall adopt and file with the Secretary of State
of the State of Delaware on or before the Closing (as defined below) a
Certificate of Amendment to the Certificate of Incorporation of Company in the
form attached hereto as Exhibit A (the "Certificate of Amendment"). The Series B
Preferred Stock will have the rights, preferences, privileges and restrictions
set forth in the Certificate of Amendment.
1.2 Subject to the terms and conditions of this Agreement, at
the Closing, Investor agrees to purchase from Company, and Company agrees to
sell, issue and deliver to Investor, 8,000,000 shares of Series B Preferred
Stock at a price of Two Dollars Fifty Cents ($2.50) per share, for an aggregate
purchase price of Twenty Million Dollars ($20,000,000).
2. Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at 10:00 a.m. on November 25, 1998,
at the offices of Xxxxx, Xxxxxxx & Xxxxx, 0000 Xxxxxxxx Xxxxx, Xxxxxxxxxx,
Xxxxxxxx, or at such other time, date, or place as shall be mutually agreed upon
by the parties hereto in writing (the "Closing Date").
3. Closing Items.
3.1 At the Closing, Company shall deliver, or cause to be
delivered, the following items:
[a] the Certificate of Incorporation of Company, as
amended, including the Certificate of Amendment (the "Amended
Certificate"), in the form attached hereto as Exhibit B, certified by
the Delaware Secretary of State;
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[b] the Bylaws of Company in the form attached hereto
as Exhibit C ("Bylaws"), certified as to their due adoption and
continued validity by the Secretary of Company;
[c] resolutions of the Board of Directors of Company
authorizing the execution, delivery and consummation of this Agreement,
the Registration Rights Agreement, the Shareholders Agreement, the
Voting Agreement and the Series C Purchase Agreement, the Warrants
(each as defined below), and the issuance of the shares of Series B
Preferred Stock, certified as to their due adoption and continued
validity by the Secretary of Company;
[d] resolutions of the shareholders of Company
authorizing the Amended Certificate certified as to their due adoption
and continued validity by the Secretary of Company;
[e] the Amended and Restated Registration Rights
Agreement in the form attached hereto as Exhibit D duly executed by
Company and all other parties thereto, other than Investor (the
"Registration Rights Agreement");
[f] the Amended and Restated Shareholders Agreement
in the form attached hereto as Exhibit E duly executed by Company and
all other parties thereto, other than Investor (the "Shareholders
Agreement");
[g] the Voting Agreement in the form attached hereto
as Exhibit F duly executed by Company and all other parties thereto,
other than Investor (the "Voting Agreement");
[h] an opinion of Xxxxx, Tarrant & Xxxxx, counsel to
Company, substantially in the form attached hereto as Exhibit G;
[i] the Series C Convertible Preferred Stock Purchase
Agreement duly executed by Company and Investor in the form attached
hereto as Exhibit H (the "Series C Purchase Agreement");
[j] stock certificates representing the 8,000,000
shares of Series B Preferred Stock purchased by Investor pursuant to
Section 1.2 above; and
[k] the Warrants in the form attached hereto as
Exhibit I (the "Warrants") duly executed by Company.
3.2 At the Closing, Investor shall execute and deliver, or
cause to be delivered, to Company, (i) this Agreement, the Registration Rights
Agreement, the Shareholders Agreement, the Voting Agreement, the Series C
Purchase Agreement and the Warrants and (ii) immediately
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available funds in the amount of Twenty Million Dollars ($20,000,000)
representing the purchase price for the shares of Series B Preferred Stock
purchased by Investor pursuant to Section 1.2 above.
4. Further Assurances. Each party shall execute such additional
documents and take such other actions as the other party may reasonably request
to consummate the transactions contemplated hereby, and otherwise as may be
necessary to effectively carry out the terms and provisions of this Agreement.
5. Representations and Warranties of Company. Company represents and
warrants to Investor as follows:
5.1 Corporate Standing. Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware. Company has all requisite power and authority to: (i) own, lease and
operate its properties and to carry on its business as now being conducted and
as presently proposed to be conducted; and (ii) execute, deliver and perform
this Agreement, the Series C Purchase Agreement, the Registration Rights
Agreement, the Shareholders Agreement, the Voting Agreement, the Warrants and
any other agreement to which Company is a party, the execution and delivery of
which is contemplated hereby or thereby (the "Ancillary Agreements"). Each
entity (each a "Company Subsidiary"; collectively referred to as the "Company
Subsidiaries") listed in Section 5.1 and Section 5.7 of the letter dated the
date hereof and delivered by Company to Investor and attached hereto as Exhibit
J (the "Disclosure Letter"), is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation.
Each Company Subsidiary has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted and
as presently proposed to be conducted. Company and each Company Subsidiary is
duly qualified and is authorized to transact business and is in good standing as
a foreign corporation in each jurisdiction in which the failure to so qualify
would have a material adverse effect on its business, properties, prospects or
financial condition.
5.2 Authorization; Binding Agreement. The execution and
delivery of this Agreement and the Ancillary Agreements and the consummation of
the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of Company. Each of this Agreement,
each Ancillary Agreement and the Systems Agreements (as defined in Section 5.23
hereof) has been duly executed and delivered by Company and constitutes the
legal, valid and binding obligation of Company enforceable against it in
accordance with its terms except as such enforceability may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors rights generally or (ii) general
principals of equity (regardless of whether an enforceability is considered in a
proceeding at law or in equity).
5.3 Capitalization. As of the Closing Date, the authorized
capital stock of Company consists of (i) 50,000,000 Common Shares, $.01 par
value per share ("Common Shares"), of which at the date hereof 4,000,000 shares
are validly issued and outstanding, fully paid and
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nonassessable and owned, beneficially and of record, as set forth in Section 5.3
of the Disclosure Letter, (ii) 5,000,000 shares of Series A Convertible
Preferred Shares, $.01 par value per share ("Series A Preferred Stock"), of
which at the date hereof 5,000,000 shares are validly issued and outstanding and
fully paid and nonassessable and owned, beneficially and of record, as set forth
in Section 5.3 of the Disclosure Letter, (iii) 10,000,000 shares of Series B
Convertible Preferred Shares, $.01 par value per share ("Series B Preferred
Stock"), of which at the date hereof 2,000,000 shares are validly issued and
outstanding and fully paid and nonassessable and owned, beneficially and of
record, as set forth in Section 5.3 of the Disclosure Letter, and an additional
8,000,000 shares of which are being sold pursuant to this Agreement, and (iv)
5,000,000 shares of Series C Convertible Preferred Shares, $.01 par value per
share ("Series C Preferred Stock" and, together with the Series A Preferred
Stock and the Series B Preferred Stock, the "Preferred Stock"), none of which is
outstanding at the date hereof and up to 5,000,000 shares of which may be sold
pursuant to the Series C Purchase Agreement. 5,000,000 Common Shares have been
duly and validly reserved for issuance upon conversion of the Series A Preferred
Stock, 10,000,000 Common Shares have been duly and validly reserved for issuance
upon conversion of the Series B Preferred Stock, 5,000,000 Common Shares have
been duly and validly reserved for issuance upon conversion of the Series C
Preferred Stock, 900,000 Common Shares have been duly and validly reserved for
issuance under Company's 1998 Stock Option Plan, as referenced in Section 5.3 of
the Disclosure Letter, and 5,000,000 Common Shares have been duly and validly
reserved for issuance pursuant to the Warrants. The authorized, issued and
outstanding shares of capital stock of each Company Subsidiary are as set forth
in Section 5.3 of the Disclosure Letter. All of such issued and outstanding
shares of capital stock of each Company Subsidiary are validly issued and
outstanding, fully paid and nonassessable and owned, beneficially and of record,
by Company, free and clear of all liens, claims, and encumbrances. Except as set
forth in Section 5.3 of the Disclosure Letter, the Ancillary Agreements and the
Amended Certificate, there are outstanding no subscriptions, options, warrants,
calls, commitments or rights (including conversion or preemptive rights and
rights of first refusal), proxy or stockholder agreements or agreements of any
character relating to shares of Company's or any Company Subsidiary's capital
stock or any instruments that can be converted into or exchanged for shares of
Company's or any Company Subsidiary's capital stock. None of the shares of
Company's or any Company Subsidiary's capital stock have been issued in
violation of any preemptive right. All issuances, sales, redemptions, transfers
or purchases of the capital stock of Company and each Company Subsidiary and any
involvement in any transfer of any such stock by Company or any Company
Subsidiary have been in compliance with all applicable agreements and all
applicable laws, including federal and state securities laws, and all taxes
thereon, if any, have been paid. Except as set forth in Section 5.3 of the
Disclosure Letter and for obligations of Company to redeem Series B Preferred
Stock, as contemplated by Section 9.1 of this Agreement, there are no
contractual obligations of Company to repurchase, redeem or otherwise acquire
any shares of capital stock of Company or any Company Subsidiary. No bonds,
debentures, notes or other indebtedness having the right to vote (or convertible
into or exercisable for securities having the right to vote) on any matters on
which shareholders of Company may vote are issued or outstanding. Except for the
Voting Agreement, neither Company nor any Company Subsidiary is a party or
subject to any agreement or understanding, and, to Company's best knowledge,
there is no agreement or understanding between any persons that affects
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or relates to the voting or giving of written consents with respect to any
security or the voting by any director of Company or any Company Subsidiary.
5.4 Validly Issued Shares; Securities Exemption. The shares of
Series B Preferred Stock to be issued, sold and delivered in accordance with the
terms of this Agreement for the consideration set out herein will, upon issuance
in accordance with the terms hereof, be duly and validly issued, fully paid and
nonassessable, free of restrictions on transfer other than restrictions on
transfer under this Agreement, the Shareholders Agreement and under applicable
federal and state securities laws (other than those created by Investor). The
issuance of the Series B Preferred Stock to Investor pursuant to this Agreement
will comply with all applicable laws, including federal and state securities
laws, and will not violate the preemptive rights of any person. Without limiting
the immediately preceding sentence, Company has not made a general solicitation
of the public in connection with the offering and sale of the shares of Series B
Preferred Stock to be issued hereunder. Moreover, the offering and sale of the
Series B Preferred Stock to be issued hereunder will not be integrated with any
previous securities offerings made by Company. The Common Shares issuable upon
conversion of the Series B Preferred Stock being purchased under this Agreement,
and upon issuance and exercise of the Warrants, will be, upon issuance and
delivery in accordance with the terms of the Amended Certificate, duly and
validly issued, fully paid and nonas sessable and free of restrictions on
transfer other than restrictions on transfer under this Agreement, the Warrants,
the Shareholders Agreement and under applicable federal and state securities
laws (other than those created by Investor). The issuance of the Common Shares
upon conversion of the Series B Preferred Stock, and upon issuance and exercise
of the Warrants, will comply with all applicable laws, including federal and
state securities laws (assuming the accuracy of the representations set forth in
Sections 6.2 through 6.5 of this Agreement as of the date of issuance of such
Common Shares), and will not violate the preemptive rights of any person.
5.5 No Conflict. The execution and delivery of this Agreement
and any Ancillary Agreement do not, and the consummation of the transactions
contemplated hereby and thereby will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of,
any obligation or the loss of a material benefit under, or the creation of a
lien, pledge, security interest, charge or other encumbrance on assets (any such
conflict, violation, default, right of termination, cancellation or
acceleration, loss or creation, a "Violation") pursuant to, any provision of the
Amended Certificate or the Bylaws, or of the certificate of incorporation or
bylaws of any Company Subsidiary or result in any Violation of any material
lease, agreement, obligation, instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Company, any Company Subsidiary or Company's or any Company
Subsidiary's properties or assets.
5.6 Contracts and Other Commitments; Compliance.
Section 5.6 of the Disclosure Letter sets forth each network service agreement
and each other material contract, agreement, lease, loan, commitment and
proposed transaction to which Company or any Company Subsidiary is a party or is
bound or which Company or any Company subsidiary is seeking to be bound that is
material to Company or any Company Subsidiary (the "Contracts"). Neither Company
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nor any Company Subsidiary is bound by any judgment, order, writ or decree. No
event or condition has occurred or exists, or, to the knowledge of Company, is
alleged by any of the other parties thereto to have occurred or existed, which
constitutes, or with lapse of time or giving of notice or both might constitute,
a default or breach under any Contract, which default is reasonably likely to
result in a material adverse change in the financial condition, results of
operation or business of Company. Company is not in violation or default of any
provision of the Amended Certificate or the Bylaws, no Company Subsidiary is in
violation or default of any provision of its certificate of incorporation or
bylaws and neither Company nor any Company Subsidiary is in violation or default
in any respect of any provision of any Contract.
5.7 Subsidiaries. Except as set forth in Section 5.7 of the
Disclosure Letter, none of Company or any Company Subsidiary owns or controls,
directly or indirectly, any interest in any other corporation, partnership,
limited liability company, association or other business entity. Neither Company
nor any Company Subsidiary is a participant in any joint venture, partnership or
similar arrangement.
5.8 Consents. No consent, approval, qualification, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, or other third party is required by or
with respect to Company in connection with the execution and delivery of this
Agreement, or the consummation by Company of the transactions contemplated
hereby, which has not already been obtained, except for notices of sale required
to be filed with the Securities and Exchange Commission under Regulation D of
the Securities Act of 1933, as amended (the "Securities Act"), or such filings
as may be required under applicable state securities laws which will be timely
filed within the applicable periods therefor.
5.9 Financial Statements. Company's unaudited consolidated
balance sheet as of October 31, 1998, and the related unaudited statement of
income for the period April 3, 1998 through October 31, 1998 (the "Financial
Statements"), are set forth in Section 5.9 of the Disclosure Letter. The
Financial Statements were prepared in accordance with Generally Accepted
Accounting Principles ("GAAP") (except for the omission of footnotes and other
required schedules and information and year end accruals which are, in the
aggregate, immaterial in amount); the balance sheet included in such Financial
Statements fairly presents the financial condition of Company and its
Subsidiaries as of October 31, 1998 and the statements of income included in
such Financial Statements fairly present the results of operations of Company
and the Company Subsidiaries for the period then ended. None of Company or any
of the Company Subsidiaries has any liabilities or obligations of any nature,
whether absolute, accrued, contingent or otherwise, which are not fully
reflected or reserved against in the Financial Statements, except for
liabilities that may have arisen in the ordinary course of business and that are
not required by GAAP to be included in the Financial Statements.
5.10 Indebtedness for Borrowed Money; No Undisclosed
Liabilities. Except as set forth in the Financial Statements, neither Company
nor any Company Subsidiary has any direct or
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indirect indebtedness for borrowed money, indebtedness by way of lease-purchase
arrangements, guarantees, chattel mortgages or other security arrangements with
any bank, financial institution or other third party. Except as and to the
extent reflected and adequately reserved against in the Financial Statements or
incurred in the ordinary course of business since the date of the Financial
Statements, as of the Closing Date, neither Company nor any Company Subsidiary
will have any liability or obligation whatsoever, whether accrued, absolute,
contingent or otherwise of a nature required by generally accepted accounting
principles to be included in the Financial Statements.
5.11 Absence of Changes. Except as set forth in Section 5.11
of the Disclosure Letter, since October 31, 1998, there has not been:
[a] any change in the assets, liabilities, financial
condition or operating results of Company or the Company Subsidiaries
from that reflected in the Financial Statements, except changes in the
ordinary course of business or otherwise that have not, in the
aggregate, materially and adversely affected the business, properties,
prospects or financial condition of Company or any Company Subsidiary
(as such business is presently conducted and as it is proposed to be
conducted);
[b] any material damage, destruction or loss, whether
or not covered by insurance, affecting the business, properties,
prospects, or financial condition of Company or any Company Subsidiary
(as such business is presently conducted and as it is presently
proposed to be conducted);
[c] any waiver or compromise by Company or any
Company Subsidiary of a valuable right or of a material debt owed to
it;
[d] any satisfaction or discharge of any lien, claim,
or encumbrance or payment of any obligation by Company or any Company
Subsidiary, except in the ordinary course of business and that is not
material to the business, properties, or financial condition of Company
or any Company Subsidiary (as such business is presently conducted and
as it is presently proposed to be conducted);
[e] any material change to a material contract or
arrangement by which Company or any Company Subsidiary or any of their
respective assets is bound or subject;
[f] any material change in any compensation
arrangement or agreement with any employee or officer;
[g] any sale, assignment or transfer of any
intangible assets;
[h] any resignation or termination of employment of
any key officer of Company or any Company Subsidiary (and Company does
not know of any impending resignation or termination of employment of
any such officer);
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[i] any mortgage, pledge, transfer of a security
interest in, or lien, created by Company or any Company Subsidiary,
with respect to any of its material properties or assets, except
capital leases and liens for taxes not yet due or payable;
[j] any declaration, setting aside or payment of any
dividend or other distribution of Company's assets in respect of any of
Company's or any Company Subsid iary's capital stock (excluding,
however, the accrual of dividends on the Preferred Stock), or any
direct or indirect redemption, purchase, or other acquisition of any of
such stock by Company or any Company Subsidiary;
[k] to the best of Company's knowledge, any other
event or condition of any character that might materially and adversely
affect the business, properties, prospects or financial condition of
Company or any Company Subsidiary (as such business is presently
conducted and as it is presently proposed to be conducted); or
[l] any agreement or commitment by Company or any
Company Subsidiary to do any of the things described in this Section
5.11.
5.12 Title to Property and Assets; Leases.
[a] Neither Company nor any Company Subsidiary owns
any real property in fee simple. Section 5.12 of the Disclosure Letter
sets forth a complete and accurate list and description of all the real
property that Company or any Company Subsidiary leases having lease
payments, in the case of any single lease, in the aggregate of $15,000
or more per year. Neither Company nor any Company Subsidiary is bound
or committed to make any capital improvement or expenditure exceeding
$5,000 with respect to any individual parcel of leased real property.
[b] Except as set forth in Section 5.12 of the
Disclosure Letter, Company and each Company Subsidiary has good, valid
and marketable title to all the personal and mixed, tangible and
intangible properties and assets which it purports to own, free and
clear of all liens, restrictions, claims, charges, security interests,
easements or other encumbrances of any nature whatsoever, except for
liens for current taxes not yet due and payable and landlords' liens
that are immaterial, individually or in the aggregate, in scope and
amount. With respect to the property and assets that it leases, Company
and each Company Subsidiary is in compliance with such leases and, to
Company's best knowledge, holds a valid leasehold interest, free and
clear of any liens, claims and encumbrances. All properties and assets
of Company and each Company Subsidiary are in the possession or control
of Company and such Company Subsidiary, respectively, and no other
person is entitled to possession of any such properties and assets.
5.13 Legal Proceedings. Except as set forth in Section 5.13 of
the Disclosure Letter, there are no claims of any kind or any actions, suits,
proceedings, arbitrations or investigations
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pending or, to Company's best knowledge, threatened against or affecting Company
or any Company Subsidiary against any asset, interest or right of Company or any
Company Subsidiary or which threatens the validity of the transactions
contemplated by this Agreement.
5.14 Environmental Matters. Neither Company nor any Company
Subsidiary is in violation in any material respect of any applicable statute,
law or regulation relating to the environment or occupational health and safety
(the "Environmental Laws") that would individually, or, together with all other
such violations in the aggregate, result in a material and adverse effect on the
business and properties or financial condition of Company or any Company
Subsidiary and Company has no knowledge of any material expenditures necessary
to comply with the Environmen tal Laws.
5.15 Licenses and Permits; Compliance with Laws. Company and
each Company Subsidiary holds all franchises, permits, licenses, variances,
exemptions, orders and approvals of all governmental entities which are material
to the operation of Company's and such Company Subsidiary's business and is in
compliance in all material respects with the terms thereof. Company and each
Company Subsidiary has complied in all material respects with, and is not in any
default under (and has not been charged with or received notice with respect to,
nor is threatened with or under investigation with respect to, any charge
concerning any violation of any provision of) any federal, state or local law,
regulation, ordinance, rule or order (whether executive, judicial, legislative
or administrative) or any order, writ, injunction or decree of any court, agency
or instrumentality, except for such defaults that, in the aggregate, would be
immaterial to the business and properties or financial condition of Company or
such Company Subsidiary, and no action, suit, proceeding, hearing, charge,
claim, demand, or notice has been filed or commenced against Company or any
Company Subsidiary alleging any failures to comply, except for such defaults
which individually, or, together with all other such defaults, would not have a
material adverse effect on the business and properties or financial condition of
Company or any Company Subsidiary.
5.16 Employee Benefit Plans. Company has delivered or made
available to Investor true, complete and correct copies of each employee benefit
plan, including any profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, phantom stock, retirement,
vacation, severance, disability, death benefit, hospitalization, medical or
other plan, arrangement or understanding (whether or not legally binding)
providing benefits to any current or former employee, officer or director of
Company or any Company Subsidiary (collectively "Benefit Plans"), and any
employment, consulting, severance, termination or indemnification agreement,
arrangement or understanding between Company or any Company Subsidiary and any
officer, director or employee of Company or such Company Subsidiary, or in the
case of any unwritten Benefit Plans, descriptions thereof. Each Benefit Plan has
been administered in all material respects in accordance with its terms and all
applicable laws.
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5.17 Labor Relations.
[a] Company and each Company Subsidiary is in
compliance in all material respects with all applicable laws respecting
employment and employment practices, terms and conditions of employment
and wages and hours and occupational safety and health;
[b] There is no unfair labor practice charge or
complaint or any other matter against or involving Company or any
Company Subsidiary pending or, to Company's best knowledge, threatened
before the National Labor Relations Board, any other agency or any
court of law;
[c] There is no labor strike, dispute, slowdown or
stoppage actually pending or, to Company's best knowledge, threatened
against Company or any Company Subsidiary;
[d] Neither Company nor any Company Subsidiary is a
party to or bound by any collective bargaining agreement or any similar
labor union arrangement; and
[e] There are no charges, investigations,
administrative proceedings or formal complaints of discrimination
(including discrimination based upon sex, age, marital status, race,
color, religion, national origin, sexual preference, disability,
handicap or veteran status) pending or, to Company's best knowledge,
threatened, before the Equal Employment Opportunity Commission or any
federal, state or local agency or court against Company or any Company
Subsidiary. There are no pending governmental audits of the equal
employment opportunity practices of Company or any Company Subsidiary
and, to Company's best knowledge, no basis for any such claim exists.
5.18 Insurance. Company and each Company Subsidiary maintains
insurance policies, including property, casualty, liability and other insurance
with respect to its assets and business in amounts customary for similarly
situated companies and sufficient in amount to allow it to replace any of its
properties that might be damaged or destroyed. Neither Company nor any Company
Subsidiary is liable for any material retroactive premium adjustments with
respect to any of its insurance policies or bonds. All such policies and bonds
are legal, valid and enforceable and in full force and effect and neither
Company nor any Company Subsidiary is in breach or default (including with
respect to the payment of premiums or the giving of notices) and no event has
occurred which, with notice or the lapse of time, would constitute such a breach
or default, or permit termination, modification or acceleration under the policy
or received any notice of premium increases or cancellations with respect to any
of such policies and bonds. Company believes the amount and type of Company's
and each Company Subsidiary's insurance coverage is adequate for Company's and
each Company Subsidiary's business and is consistent with good business
practice.
5.19 Tax Matters. Company and each Company Subsidiary has
timely filed or caused to be filed all federal, state, foreign and local income,
franchise, gross receipts, payroll, sales,
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use, withholding, occupancy, excise, real and personal property, employment and
other tax returns, tax information returns and reports ("Tax Returns") required
to be filed and all such Tax Returns were correct and complete in all material
respects. Company and each Company Subsidiary has paid, or made adequate
provisions for the payment of, all taxes, duties or assessments of any nature
whatsoever, interest payments, penalties and additions (whether or not reflected
in the returns as filed) due and payable (and/or properly accruable for all
periods ending on or before the date of this Agreement) to any city, county,
state, foreign country, the United States or any other taxing authority. There
are no security interests on any of the assets of Company or any Company
Subsidiary that arise in connection with any failure (or alleged failure) to pay
any tax. Company and each Company Subsidiary has withheld and paid all taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor, stockholder or other third
party.
5.20 Related Party Transactions. Except as set forth in
Section 5.20 of the Disclosure Letter, no employee, officer or holder of
Company's capital stock or member of his or her immediate family is indebted to
Company or any Company Subsidiary, nor is Company or any Company Subsidiary
indebted (or committed to make loans or extend or guarantee credit) to any of
them, other than (i) for payment of salary for services rendered, (ii)
reimbursement for reasonable expenses, or advances with respect to expenses to
be, incurred on behalf of Company or any Company Subsidiary, and (iii) for other
standard employee benefits made generally available to all employees (including
stock option agreements outstanding under any stock option plan approved by the
Board of Directors of Company). To the best of Company's knowledge, none of such
persons has any direct or indirect ownership interest in any firm or corporation
with which Company or any Company Subsidiary has a business relationship, or any
firm or corporation that competes with Company or any Company Subsidiary, except
that employees, stockholders, and officers of Company and members of their
immediate families may own stock in publicly traded companies that may compete
with Company or a Company Subsidiary.
5.21 Brokers' and Finders' Fees. Company has not employed any
broker, finder or financial advisor or incurred any liability for fees or
commissions payable to any broker, finder or financial advisor in connection
with the negotiations relating to or the transactions contemplated by this
Agreement.
5.22 Registration Rights. Except as set forth in Section 5.22
of the Disclosure Letter, neither Company nor any Company Subsidiary is
presently under any obligation and has not granted any rights to register under
the Securities Act any of its outstanding securities or any of its securities
that may be subsequently issued.
5.23 Intellectual Property. Section 5.23 of the Disclosure
Letter sets forth a complete and correct list of all intellectual property,
including, without limitation, trademarks, service marks, patents, copyrights
and applications, used in the conduct of the business of Company
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and each Company Subsidiary other than commercially available software programs.
Company and the Company Subsidiaries either own or have properly licensed all
rights necessary or required to provide and perform the services it now provides
and performs, including, without limitation, all rights relating to any
equipment, software or content that Company or any Company Subsidiary will use
or provide in connection with the services to be performed by Company or any
Company Subsidiary under the Network Services Agreements, dated as of the date
hereof among Company, Charter Communications, Inc. ("Charter") and Marcus Cable,
Inc. ("Marcus"), the Systems Access and Investment Agreement dated as of the
date hereof by and among Company, Investor, Charter and Marcus and Programming
Content Agreement dated as of the date hereof by and between Investor and
Company (the "Systems Agreements"). Company's and each Company Subsidiary's
provision or operation of such services will not violate or infringe any
intellectual property laws or violate or infringe any rights of third parties.
There is no complaint, action or proceeding before any court pending or, to
Company's best knowledge, threatened against Company or any Company Subsidiary
asserting that Company's or any Company Subsidiary's use of any intellectual
property infringes the rights of any third party or otherwise contesting
Company's and each Company Subsidiary's rights with respect to any intellectual
property, and there is no basis for such assertion or contest. To Company's best
knowledge, no third party is infringing on Company's or any Company Subsidiary's
rights with respect to its intellectual property.
5.24 Material Facts. Company has provided Investor with all
the information prepared by or for Company or otherwise in Company's possession
that is responsive to inquiries made by Investor in deciding whether to purchase
the Series B Preferred Stock. This Agreement and the documents or written
statements furnished by Company to Investor in connection with the transactions
contemplated hereby, do not contain any untrue statement of a material fact or
omit to state any material fact necessary to make the statements contained
herein or therein, in light of the circumstances in which they are made, not
misleading.
6. Representations and Warranties of Investor. Investor hereby
represents and warrants to Company as follows:
6.1 Authorization; Binding Agreement. This Agreement, the
Ancillary Agreements and the Systems Agreements to which Investor is a party,
have been duly authorized, executed and delivered by Investor and constitute the
legal, valid and binding obligations of Investor enforceable against Investor in
accordance with their respective terms except as such enforceability may be
limited by (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors rights generally
or (ii) general principals of equity (regardless of whether an enforceability is
considered in a proceeding at law or in equity).
6.2 Investment Representations. Investor is acquiring the
Series B Preferred Stock and the Common Shares issuable upon conversion thereof
(collectively the "Securities") solely for its own account as principal, for
investment purposes only and not with a view to resale or distribution thereof
in whole or in part, and Investor has no present intention of selling, granting
any participation in, or otherwise distributing the Securities. No other person
has a direct or indirect
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beneficial interest in the Securities to be acquired by Investor hereunder and
Investor does not have any contract, undertaking, agreement or arrangement with
any person to sell, transfer or grant participation to any third person, with
respect to any of the Securities.
6.3 Accredited Investor; Ownership; Residence. Investor is
domiciled in the State of Washington and is an "accredited investor" as such
term is defined under Regulation D of the Securities Act. Xxxx X. Xxxxx owns
beneficially and of record more than fifty percent (50%) of the outstanding
voting securities of Investor.
6.4 Receipt of Information; Restricted Securities. Subject to
the Registration Rights Agreement, Investor acknowledges that the Securities are
not being and will not be registered under the Securities Act or the securities
laws of any other jurisdiction in reliance on exemptions thereunder. The
Securities have not been and will not be approved or disapproved by the
Securities and Exchange Commission or any other governmental authority or agency
of any jurisdiction. Investor represents that it has had an opportunity to ask
questions and receive answers from Company regarding the terms and conditions of
the offering of the Series B Preferred Stock and the business, properties,
prospects, and financial condition of Company and to obtain additional
information (to the extent Company possessed such information or could acquire
it without unreasonable effort or expense) necessary to verify the accuracy of
any information furnished to such Investor or to which such Investor had access.
Investor's representations under this Section 6, however, shall not limit or
modify the representations and warranties of Company in Section 5 of this
Agreement or the right of Investor to rely thereon.
6.5 Investment Experience. Investor is experienced in
evaluating and investing in private placement transactions of securities of
companies in a similar stage or development, and acknowledges that it is able to
fend for itself, can bear the economic risk of its investment, and has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of the investment in the Series B Preferred
Stock.
7. Survival of Representations and Warranties. All representations and
warranties contained in this Agreement by either party to this Agreement and any
certificate or other instrument delivered by or on behalf of either party
pursuant to this Agreement shall be continuous and shall survive the Closing and
the issuance of all shares of Company's capital stock as contemplated hereunder.
Each party shall have the right to rely on each other party's representations
and warranties made herein, notwithstanding any investigation conducted by such
party.
8. Indemnification; Limitation of Liability.
8.1 Indemnification by Company. Company shall indemnify and
reimburse Investor for any and all claims, losses, liabilities, damages
(including, without limitation, fines, penalties, and criminal or civil
judgments and settlements), costs (including, without limitation, court costs)
and expenses (including, without limitation, reasonable attorneys' and
accountants' fees)
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suffered or incurred by Investor and any successors or assigns thereto, as a
result of, or with respect to:
[a] any breach or inaccuracy of any representation or
warranty of Company set forth in Section 5 hereof or in any exhibit,
schedule or annex to this Agreement;
[b] any breach of or noncompliance by Company with
any covenant or agreement of Company contained in this Agreement or any
Ancillary Agreement; and
[c] any and all actions, suits, proceedings, claims,
demands, assessments and judgments incident to any of the foregoing.
8.2 Limitation on Investor's Liability. The liability of
Investor to Company with respect to any claims arising from the performance or
breach of this Agreement by Investor shall be limited to $20,000,000.
9. Covenants of Company. Company hereby covenants and agrees as
follows:
9.1 Redemption Rights. Subject to the terms and provisions of
the Amended Certificate, including, without limitation, the rights of the
Preferred Stock upon liquidation and dissolution, at any time and from time to
time from and after November 25, 2003 but prior to a Qualified Public Offering
(as defined in Section 10 of this Agreement), Investor shall have the right and
option to sell to Company, and Company shall buy, Investor's shares of Series B
Preferred Stock and any Common Shares into which such Series B Preferred Stock
shall have been converted (the "Put") at a price per share (the "Put Purchase
Price") equal to the greater of (a) $2.50 per share, plus accrued but unpaid
dividends, whether or not declared, through the date of the Put Closing (as
defined below), or (b) the fair market value per share as of the date Investor's
written notice of exercise of the Put is given to Company (without application
of any discount for lack of marketabili ty or minority position) as determined
by a qualified, independent appraiser experienced in the valuation of shares of
companies similar to Company (the "Qualified Appraiser") acceptable to both
Company and Investor. If Investor and Company are unable to agree upon a
Qualified Appraiser, each of them shall separately designate a Qualified
Appraiser. Such Qualified Appraisers shall jointly designate a definitive
Qualified Appraiser, and such definitive Qualified Appraiser's determination of
such fair market value of Investor's shares of Company stock shall be conclusive
and binding upon the parties. The fees and expenses of the definitive Qualified
Appraiser shall be borne equally by Company and Investor. The closing (the "Put
Closing") shall take place at a time and place mutually agreed upon by Investor
and Company on or before the 120th day after written notice of exercise of the
Put is given to Company by Investor, or if Investor and Company shall not agree
on the time and place, the Put Closing shall take place at the principal office
of Company in Louisville, Kentucky at 10:00 a.m. on the 120th day after written
notice of exercise is given, unless such day is a Saturday, Sunday or holiday,
in which case it shall occur on the next business day. The Put Purchase Price
shall be paid in cash at the Put Closing. Notwithstanding the provisions of the
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first sentence of this Section 9.1, in the event that any person or entity
exercises a put right with respect to any equity securities of Company on a date
earlier than November 25, 2003, the right of Investor to exercise the Put shall
automatically be accelerated to such earlier date.
9.2 Reservation of Shares. On and after the Closing Date,
Company will reserve and keep reserved at all times sufficient Common Shares for
issuance upon conversion of the Series B Preferred Stock. Immediately prior to
the occurrence of any event that would cause the number of Common Shares or type
of securities into which the Series B Preferred Stock would be convertible to be
adjusted, Company shall take any and all actions necessary to permit such
conversion. Upon conversion of any shares of Series B Preferred Stock, Company
will promptly issue and deliver the Common Shares required to be delivered.
9.3 Financial Reporting. For periods commencing on or after
the Closing Date, Company shall deliver or cause to be delivered to Investor, on
a monthly basis, monthly and year-to-date balance sheets and income and cash
flow statements (each as compared to budget and the comparable prior year
period), and a monthly written summary of operations. Such monthly reports shall
be provided on or before thirty (30) days following the end of each month. Not
later than thirty (30) days prior to the end of each fiscal year, Company shall
provide a business plan and projections for the next fiscal year. Annual audits
of the Company's financial statements for periods commencing on or after January
1, 1998 shall be performed by PriceWaterhouseCoopers LLP, or another independent
accounting firm approved by the audit committee of Company's Board of Directors,
and copies thereof shall be delivered to Investor on or before the 120th day
following the end of Company's fiscal year.
9.4 Use of Proceeds. The proceeds from the sale of the Series
B Preferred Stock pursuant to this Agreement shall be used by Company for
working capital or for any other purpose approved by the Board of Directors of
Company, subject to the requirements of Section 9.5 hereof.
9.5 Prohibited Matters.
[a] From and after the date hereof, Company shall
not, without the consent of the holders of a majority of each
class or series of the then outstanding Preferred Stock voting
as a separate class or series (with each share having one
vote):
[i] Effect a liquidation or dissolution or
winding up of business or a substantial change in the nature
of Company's business;
[ii] Amend the Amended Certificate or the
Bylaws, except for an amendment to the Amended Certificate to
increase the number of authorized Common Shares in connection
with a (x) Qualified Public Offering, or (y) employee or
director stock option plans approved by the Board of Directors
of Company (such increase not to exceed in the aggregate
3,000,000 shares) or (z) an issuance upon conversion of the
Preferred Stock;
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[iii] Redeem or pay any dividend or
distribution on the Common Shares or any capital stock of
Company ranking junior to the Series B Preferred Stock and, if
ranking pari passu, without redeeming and or paying an equal
dividend on the Series B Preferred Stock;
[iv] Issue any class or series of equity
securities or additional shares of existing classes or series,
or equivalents thereof or rights convertible thereinto or
exchangeable therefor except (w) pursuant to employee or
director stock option plans approved by the Board of Directors
of Company, any such issuances in this subsection (w) not to
exceed in the aggregate 3,000,000 shares, (x) upon conver sion
of the Preferred Stock, (y) in a Qualified Public Offering, or
(z) pursuant to the exercise of Warrants;
[v] Repay or make any shareholder loans
except as set forth in Section 9.5 of the Disclosure Letter;
[vi] Except for (x) transactions in the
ordinary course of business between Company and its officers,
directors and employees relating to compensation (such amount
to be commercially reasonable and generally consistent with
the Business Plan), (y) transactions pursuant to the Systems
Agreements and any amendments, extensions, revisions or other
agreements made pursuant thereto, or (z) as set forth in
Section 5.20 of the Disclosure Letter, engage in any
transactions with "affiliates", which for the purposes of this
Section 9.5[vi] only shall mean (A) any director or officer of
Company or holder of Company's capital stock, (B) any person
or entity, directly or indirectly, controlling, controlled by
or under common control with any such person or entity, and
(C) in the case of a natural person, members of his or her
immediate family or a trust for their benefit;
[vii] Effect any transaction, including,
without limitation, the issuance of any shares of stock or
rights to acquire shares of stock, which would result in a
change in ownership of more than fifty percent (50%) of
Company's outstanding Common Shares on an as-if fully
converted basis, except for a Qualified Public Offering, or
effect any merger or sale of Company or substantially all its
assets; or
[viii] Acquire any assets not in the
ordinary course or capital stock, partnership, membership or
any other equity interest, or any interest convertible
thereinto or exchangeable therefor, in any entity for a
purchase price in excess of $2.5 million, or engage in more
than one of any of such transactions for an aggregate purchase
price in excess of $7.5 million; or
[ix] Take any other action that,
individually or together with any other action, would
materially and adversely affect the holders of the Preferred
Stock,
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it being acknowledged by Company and Investor that a Qualified
Public Offering shall not materially and adversely affect the
holders of the Preferred Stock.
[b] Notwithstanding the provisions of Section 9.5[a]
above:
[i] In the event there has been one or more
transfers by Broadband (defined as Broadband Solutions, LLC
("Broadband I") and Broadband Solutions II, LLC ("Broadband
II") considered together) of more than, in the aggregate, 30%
of the total number of shares of Preferred Stock owned by
Broadband immediately succeeding the Closing, together with
any Series C Preferred Stock purchased subsequent to the
Closing, to one or more non-Affiliates of Broadband I or
Broadband II, then Company shall not thereafter require the
consent of the holders of the majority of shares of any class
or series of Preferred Stock controlled by Broadband to effect
any of the "prohibited matters" referred to in Section 9.5[a].
For purposes of this paragraph, any transfer by Broadband I or
Broadband II to River Cities Capital Fund ("River Cities")
shall not constitute a transfer to a non-Affiliate of
Broadband I or Broadband II if River Cities grants an
irrevocable proxy to Broadband to vote on all matters, but any
subsequent transfer by River Cities (other than to its
partners and so long as they grant a proxy to Broadband) shall
constitute a transfer to a non-Affiliate, unless such
subsequent transferee is an Affiliate of Broadband.
[ii] In the event that there has been one or
more transfers by Investor of more than, in the aggregate, 30%
of the total number of shares of Preferred Stock owned by
Investor immediately succeeding the Closing, together with any
Series C Preferred Stock purchased subsequent to the Closing,
to one or more non-Affiliates of Investor, then Company shall
not thereafter require the consent of holders of the majority
of shares of any class or series of Preferred Stock controlled
by Investor to effect any of the "prohibited matters" referred
to in Section 9.5[a].
[c] For the purposes of this Section 9, unless
otherwise provided in this Section 9.5, an Affiliate shall
mean [i] with respect to Broadband, any entities or persons
controlling, controlled by or under common control with
Broadband I or Broadband II or any or all of its members, each
existing as of the date hereof, directly or indirectly, either
individually or as a group, or any member of Broadband I or
Broadband II, each existing as of the date hereof, or such
person's lineal descen dants, ancestors or spouses of any of
them, or a trust or family limited partnership or any estate
or tax planning vehicle established for its or their benefit,
and [ii] with respect to Investor, any entities or persons
controlled, directly, by Xxxx X. Xxxxx, or any entities or
persons in which Xxxx X. Xxxxx, either individually or through
an entity which he controls, holds an equity investment of not
less than One Hundred Million Dollars ($100,000,000) in value.
10. Qualified Public Offering. For purposes of this Agreement, a
Qualified Public Offering shall mean an underwritten public offering of Common
Shares, initiated by a resolution of
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Company's Board of Directors, at a per share price of at least $7.50 (as
proportionately and appropriately adjusted to reflect any subdivision, reverse
split or recapitalization of Common Shares after the date hereof) and aggregate
gross proceeds of not less than $50 million to Company, which has been made
pursuant to a registration statement filed with the Securities and Exchange
Commission under the Securities Act.
11. Public Statements. Except as required by law, neither Company nor
Investor shall, without the prior written approval of the other party hereto,
make any press release or other public announcement concerning the transactions
contemplated by this Agreement. Investor and Company may disclose information
with respect to the transaction contemplated hereby to their respective
employees, agents, consultants and third parties only to the extent such persons
have a need to know such information or as may be required by law, rule,
regulation, decree or court order.
12. Notices. All notices, requests, consents, and other communications
under this Agreement shall be in writing and shall be mailed by first class,
registered, or certified mail, postage prepaid, or sent via overnight courier
service, or delivered personally and sent by facsimile:
If to Investor, to: Vulcan Ventures, Incorporated
Attention: Xxxxxxx X. Xxxxx
000 000xx Xxxxxx X.X.
Xxxxxxxx, Xxxxxxxxxx 00000
Telecopy No.: (000) 000-0000
If to Company, to: High Speed Access Corp.
Attention: W. Xxxx Xxxxx, III
Suite 210
0000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Telecopy No.: (000) 000-0000
With a copy to: Xxxx X. Xxxxxxx, Esq.
High Speed Access Corp.
Suite 210
1000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Telecopy No.: (000) 000-0000
or to such other address of which the addressee shall have notified the sender
in writing. Notices mailed in accordance with this section shall be deemed given
when mailed, and notices sent by overnight courier service shall be deemed given
when placed in the hands of a representative of such service.
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13. Parties in Interest; Assignment. Except as otherwise provided
herein, all covenants and agreements contained in this Agreement by or on behalf
of either party to this Agreement shall bind and inure to the benefit of their
respective heirs, executors, successors, and assigns, whether so expressed or
not. Nothing in this Agreement, express or implied, is intended to confer upon
any party other than the parties hereto and their respective successors and
assigns any rights, remedies, obligations or liabilities under or by reason of
this Agreement. This Agreement is not assignable (whether by merger, operation
of law, or otherwise) and any purported assignment shall be null and void;
provided, however, that Investor may assign its rights, but not its obligations,
hereunder to an Affiliate of Investor, as defined in Section 9.5[c](ii).
14. Construction; Governing Law. The section headings contained in this
Agreement are inserted as a matter of convenience and shall not affect in any
way the construction of the terms of this Agreement. This Agreement shall be
governed by and interpreted in accordance with the laws of the State of Delaware
without regard to the principles of conflicts of laws thereof.
15. Entire Agreement; Amendment and Waiver. This Agreement, including
the Disclosure Letter and Exhibits hereto, constitutes and contains the entire
agreement between the parties hereto with respect to the transactions
contemplated hereby and supersedes any prior writing by the parties. Any term of
this Agreement may be amended and the observance of any term of this Agreement
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of Company and
Investor (or its Permitted Assigns). Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of any
securities purchased under this Agreement at the time outstanding (including
securities into which such securities have been converted), each future holder
of all such securities, and Company.
16. Severability. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of the
remaining provisions.
17. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same Agreement.
18. Expenses Company agrees, upon consummation of the transactions
contemplated by this Agreement, to pay all reasonable legal and out-of-pocket
expenses of Irell & Xxxxxxx LLP and Paul, Hastings, Xxxxxxxx & Xxxxxx LLP in
connection with this Agreement, the Ancillary Agreements and the transactions
contemplated hereunder and thereunder.
19. Time of Essence. Time is of the essence to the performance of the
obligations set forth in this Agreement.
20. Attorneys' Fees. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement or any Ancillary Agreement, the
substantially prevailing party shall be
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entitled to reasonable attorneys' fees, costs, and disbursements in addition to
any other relief to which such party may be entitled.
21. Best Knowledge. For purposes of this Agreement, the phrase "to
Company's best knowledge" or words of similar import shall mean the actual
knowledge of the executive officers of Company after making reasonable inquiry
with respect to the relevant subject.
IN WITNESS WHEREOF, Company and Investor have caused this
Agreement to be executed as of the day and year first written above.
"COMPANY"
HIGH SPEED ACCESS CORP.
By: /s/ Xxxxxx X. Xxxxxxxx
________________________________
Title: Vice Chairman
_____________________________
"INVESTOR"
VULCAN VENTURES, INCORPORATED
By: /s/ Xxxxxxx X. Xxxxx
________________________________
Title: Vice President
____________________________
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