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EXHIBIT A
SECURITIES PURCHASE AGREEMENT
dated as of May 7, 1999 (the
"Agreement") by and among FIBERNET
TELECOM GROUP, INC., a Nevada
corporation (the "Company"), and the
purchasers listed on Annex I hereto,
and any successors or assigns thereto
(the "Purchasers").
PREAMBLE
The Company wishes to sell and issue to the Purchasers the Notes,
the Warrants and the Preferred Stock (each as defined below), and the Purchasers
desire to purchase and accept such Notes, the Warrants and Preferred Stock, all
upon and subject to the terms and conditions hereof. The proceeds of the sale
and issuance of such Notes, the Warrants and Preferred Stock shall be utilized
in the manner specified on Schedule 6.8. The Notes, the Warrant and the
Preferred Stock to be purchased under this Agreement are collectively referred
to as "Securities."
NOW THEREFORE, the parties to this Agreement hereby agree as
follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. Capitalized terms used in this Agreement and not otherwise
defined herein shall have the meanings assigned to thereto in the Notes and
Preferred Stock. As used in this Agreement, the following terms shall have the
following respective meanings:
"Act" shall mean the Securities Act of 1933, together with any
applicable regulations, as the same may be amended from time to time.
"Agreement" shall have the meaning given to such term in the
caption.
"Affiliate" shall mean, with respect to any Person, (i) a director
or officer of such Person, (ii) a spouse, parent, sibling or descendant of such
Person (or a spouse, parent, sibling or descendant of any director or executive
officer of such Person), and (iii) any other Person that, directly or indirectly
through one or more intermediaries, Controls, or is Controlled by, or is under
common Control with, such Person.
"all or substantially all" means, for the purposes thereof, (i) all
or substantially all of the assets of the Company, (ii) 50% or more of the
Company's interest in any Subsidiary and/or (iii) all or substantially all of
the assets of any Subsidiary.
"Applicable Law" shall mean, with respect to any Person, property,
transaction or event, all present and future applicable laws, statutes,
regulations, treaties, judgments and decrees and all applicable official
directives, rules, consents, approvals, authorizations, orders, guidelines and
policies of any Governmental Authority or Persons having authority over or
applicable to such Person or any of its assets or properties.
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"Bankruptcy Code" shall mean the United States Bankruptcy Code, 11
U.S.C.ss.11 et seq., as amended from time to time.
"Buildings and Fixtures" means all plant, buildings, structures,
erections, improvements, appurtenances and fixtures (including fixed machinery
and fixed equipment) situate on any of the Real Property.
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which banks are authorized or required to be closed in New York, New
York.
"Capital Lease Obligations" shall mean, with respect to any Person
on any date, the obligations of such Person to pay rent or other amounts under
any lease of (or other arrangement conveying the right to use) real or personal
property, or a combination thereof, which obligations are required to be
classified and accounted for as capital leases on a balance sheet of such Person
as of such date computed in accordance with GAAP.
"Certificate of Designation" shall mean the Certificate of
Designation of the Preferred Stock of the Company.
"Closing" shall mean the issuance and purchase of the Securities
on the Closing Date hereunder.
"Closing Date" shall mean May 7, 1999, or such other date as the
Purchasers and the Company shall agree.
"Code" shall mean the Internal Revenue Service Code of 1986, as
amended, and the rules and regulations thereunder, as from time to time in
effect, or any successor thereto.
"Collateral" shall mean all of the "Collateral" as respectively
defined in the Collateral Agreements.
"Collateral Agent" shall mean the Majority in Interest, in its
capacity as collateral agent together with its successors and assigns in such
capacity, for the Purchasers.
"Collateral Agent Agreement" shall mean the Collateral Agent
Agreement dated as of the date hereof by and among the Collateral Agent and the
Purchasers.
"Collateral Agreements" shall mean the Pledge Agreement, the
Parent Pledge Agreement, the General Security Agreement and the Guaranty.
"Common Stock" means the common stock, par value $.001 per share,
of the Company.
"Company" shall have the meaning given to such term in the
caption.
"Concordia" means Concordia Telecom Management, L.L.C., a Delaware
limited liability company.
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"Contaminant" includes, but is not limited to, any pollutants,
dangerous substances, liquid waste, industrial waste, hauled liquid waste, toxic
substances, hazardous wastes, hazardous materials, hazardous substances or
contaminants, including any of the foregoing as defined in any Environmental Law
and other terms of similar import.
"Control" shall mean, with respect to any Person, the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
"Employee Plan" means any "employee benefit plan" (as defined in
Section 3(3) of ERISA) as well as any other plan, program or arrangement
involving direct and indirect compensation, under which the Company or any ERISA
Affiliate of the Company has any present or future obligations or liability on
behalf of its employees or former employees, contractual employees or their
dependents or beneficiaries.
"Encumbrances" means all security interests, Liens, pledges,
charges, easements and restrictions.
"Environmental Activity" means any past, present or future activity,
event or circumstance in respect to a Contaminant, including, without
limitation, its storage, use, holding, collection, purchase, accumulation,
assessment, generation, manufacture, construction, processing, treatment,
stabilization, disposition, handling or transportation, or its Release, escape,
leaching, dispersal or migration into the natural environment, including the
movement through or in the air, soil, surface water or groundwater.
"Environmental Laws" at any date shall mean all provisions of
Applicable Law or any Judgments relating to the environment, occupational health
or safety, or any Environmental Activity, whether or not having the force of
law, including all administrative orders, directed duties, licenses,
authorizations and permits of, and agreements with, any Governmental Authority.
"Equal Access" shall mean FiberNet Equal Access, L.L.C., a New York
limited liability company.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and the regulations promulgated thereunder.
"ERISA Affiliate" means any Person (including any trade or business,
whether incorporated or not) which together with any Loan Party would be deemed
to be a member of the same "controlled group" within the meaning of Section
414(b) of the Code, under "common control" within the meaning of Section 414(c)
of the Code or a member of the same "affiliated service group" within the
meaning of Section 414(m) of the Code.
"Event of Default" shall mean any of the events set forth in Article
VII of this Agreement.
"Exchange Act" shall mean the Securities Exchange of 1934, together
with any applicable regulations, as the same may be amended from time to time.
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"Fair Market Value" shall mean the good faith determination of the
Board of Directors of the Company of the value of the shares of Common Stock as
provided in the Notes minus ten percent (10%) illiquidity discount.
"FiberNet Note" shall mean the note dated as of March 23, 1999 from
FiberNet Telecom to Trident Technology in the principal aggregate amount of up
to $800,000.
"FiberNet Telecom" shall mean FiberNet Telecom, Inc., a Delaware
corporation.
"Filing Expiration" shall mean the earlier of (i) the date upon
which any comment period provided for in the Exchange Act during which the SEC
may comment on any Exchange Act Filings (as defined in Section 6.17(a) of this
Agreement) has expired without receipt of comments from the SEC and (ii) the
date of the resolution of any comments received by the Company from the SEC.
"Financial Officer" of any Person shall mean its chief financial
officer or principal accounting officer.
"Fiscal Year" shall mean, with respect to any Loan Party, the
one-year period ending on December 31 of any year.
"General Security Agreement" shall mean the General Security
Agreement dated as of the date hereof by the Loan Parties in favor of the
Purchasers.
"Governmental Authority" shall mean Congress, any legislature,
assembly, council or other legislative body and any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, or any court or any judicial or quasi-judicial body or
authority, in each case whether of or involving the United States of America or
any political subdivision thereof.
"Guaranty" shall mean the Guaranty Agreement dated as of the date
hereof among the Purchasers, FiberNet Telecom, Local Fiber and Equal Access.
"Historical Financial Statements" shall mean the audited financial
statements of each of the Loan Parties for the fiscal year ended December 31,
1997 and the audited financial statements of each of the Loan Parties for the
fiscal year ended December 31, 1998, in each case, delivered to the Purchasers
and included in Annex II hereto.
"Indebtedness" of any Person, without duplication, (i) all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (ii) all obligations of such Person evidenced by (or which
customarily would be evidenced by) bonds, debentures, notes or similar
instruments, (iii) all reimbursement obligations of such Person with respect to
letters of credit and similar instruments, (iv) all obligations of such Person
under conditional sale or other title retention agreements relating to property
or assets purchased by such Person, (v) all obligations of such Person issued or
assumed as the deferred purchase price of property or services, other than
accounts payable incurred and paid on terms customary in the business of such
Person (it being understood that the "deferred purchase price" in connection
with any purchase of property or assets shall include only that portion of the
purchase price
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which shall be deferred beyond the date on which the purchase is actually
consummated), (vi) all obligations of others secured by (or for which the holder
of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien on property owned or acquired by such Person, whether or
not the obligations secured thereby have been assumed, (vii) all obligations of
such Person under forward sales, futures, options and other similar hedging
arrangements (including interest rate hedging or protection agreements), (viii)
all obligations of such Person to purchase or otherwise pay for merchandise,
materials, supplies, services or other property under an arrangement which
provides that payment for such merchandise, materials, supplies, services or
other property shall be made regardless of whether delivery of such merchandise,
materials, supplies, services or other property is ever made or tendered, (ix)
any Guaranties by such Person of obligations of others and (x) all Capital Lease
Obligations of such Person.
"Intellectual Property Rights" means all industrial and intellectual
property rights, including, without limitation, patents, patent applications,
patent rights, trademarks, trademark applications, trade names, service marks,
service xxxx applications, copyrights, copyright applications, know-how, trade
secrets, proprietary processes and formulae, confidential information,
franchises, licenses, inventions, instructions, marketing materials, trade
dress, logos and designs and all documentation and media constituting,
describing or relating to the foregoing, including, without limitation, manuals,
memoranda and records.
"Investor Directors" shall mean the Directors to be designated by
the Purchasers to the Board of Directors of the Company as of the date hereof.
"Joint Venture" shall mean any partnership or collaboration between
or among Persons effected pursuant to the execution of agreements providing for
such partnership or collaboration.
"Judgments" shall mean all judgments, injunctions, orders and
decrees of all courts and arbitrators in proceedings or actions in which the
Person in question is a party or by which any of its assets or properties is
bound.
"Liability" means any liability or obligation, whether known or
unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated and whether due or to become due, regardless of when
asserted.
"Lien" shall mean, with respect to any asset, (i) any mortgage, deed
of trust, lien, pledge, encumbrance, charge or security interest of any kind
whatsoever in or on such asset (including the filing of or agreement to give any
financing statement under the Uniform Commercial Code of any jurisdiction), (ii)
the interest of a vendor or a lessor under any conditional sale agreement,
capital lease or title retention agreement relating to such asset and (iii) in
the case of securities, any purchase option, call, appreciation right or similar
right of a third party with respect to such securities.
"Liquidation" shall have the meaning ascribed to such term in the
Certificate of Designation.
"Loan Documents" shall mean this Agreement, the Notes, the Warrants
and the Collateral Agreements.
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"Loan Parties" shall mean the Company, Local Fiber, Equal Access
and FiberNet Telecom (each, a "Loan Party").
"Local Fiber" shall mean Local Fiber, L.L.C., a New York limited
liability company.
"LPS" shall mean LPS Consultants, Inc.
"LTJ" shall mean LTJ Group, Inc.
"Majority in Interest" shall mean Signal so long as (i) Xxxxxx
Xxxxxxx, Xx. ("Xxxxxxx") or Xxxxxxx Xxxxxxx ("Xxxxxxx") are employed by Signal
or its Affiliates and have primary responsibility for decisions in connection
with Signal's investment in the Company and (ii) the aggregate amount of the
Note to be issued to Signal hereunder (or, if such Note is converted, the
aggregate number of shares of Common Stock owned or held by Signal) (the "Signal
Investment Amount") is greater than the aggregate amount of the Note to be
issued to Trident hereunder (or, if such Note is converted, the aggregate number
of shares of Common Stock owned or held by Trident) (the "Trident Investment
Amount"); provided, that if (x) the Trident Investment Amount is greater than
the Signal Investment Amount or (y) both Xxxxxxx and Xxxxxxx xxxxx to be
involved in the capacity described in clause (i) above and (z) Xxxxxx Xxxxx
("Kuzon") is employed by Trident or its Affiliates and has primary
responsibility for decisions in connection with Trident's investment in the
Company, then "Majority in Interest" shall mean Trident (all of such conditions
described immediately above referred to as the "Majority Requirements"); and
further provided, that when the Majority Requirements no longer apply, "Majority
in Interest" shall mean the Person or Persons controlling no less than fifty
percent (50%) of the Note Purchase Price (as defined in Section 2.1(a)) or
issued and outstanding shares of Preferred Stock (as defined in Section 2.1(b)).
"Managing Purchasers" shall mean the Purchasers listed under the
heading "Managing Purchasers" on Annex I hereto.
"Material Adverse Effect" shall mean (i) a material adverse effect
on the business, assets, liabilities, operations, results of operations,
condition (financial or otherwise), ability to carry on its business or a
significant part thereof or prospects of Equal Access and Local Fiber
individually, and the Company and FiberNet Telecom taken as a whole, (ii) any
impairment of the ability of Equal Access and Local Fiber individually, and the
Company and FiberNet Telecom taken as a whole to perform any of its material
obligations under any Transaction Document to which such Loan Party is a party
or (iii) any impairment of any security interest or Lien of the Purchasers or
Collateral Agent in the Collateral. If a dispute shall arise as to whether there
has been a Material Adverse Effect, such dispute shall be conclusively resolved
by the Majority in Interest in their good faith reasonable discretion.
"Obligations" shall mean the respective obligations of each Loan
Party under any Loan Document to which such Loan Party is party.
"Organizational Document" shall mean, with respect to any Person,
each instrument or other document that (i) defines the existence of such Person,
including its articles or certificate of incorporation or organization, as filed
or recorded with an applicable
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Governmental Authority, or (ii) governs the internal affairs of such Person,
including its by-laws, in each case as amended, supplemented or restated.
"Other Purchasers" shall mean the Purchasers listed under the
heading "Other Purchasers" on Annex I hereto.
"Parent Pledge Agreement" shall mean the Pledge Agreement dated as
of the date hereof between the Company and the Collateral Agent.
"Permitted Encumbrances" means (i) Encumbrances for Taxes not yet
due and payable or being contested in good faith by appropriate proceedings and
for which there are adequate reserves on the books, (ii) workers or unemployment
compensation liens arising in the ordinary course of business; and (iii)
mechanic's, materialman's, supplier's, vendor's or similar liens arising in the
ordinary course of business securing amounts that are not delinquent.
"Permitted Liens" shall mean (i) liens arising by operation of law
in the ordinary course of business that, individually and in the aggregate, do
not in any material respect interfere with the use of any of the assets subject
thereto, (ii) minor imperfections of title which do not materially detract from
the value of the property affected or materially impair the operations of the
Company or any Loan Party and (iii) liens for taxes not yet due and payable.
"Person" shall be construed broadly and shall include any natural
person, company, partnership, joint venture, corporation, business trust,
unincorporated organization or Governmental Authority.
"Pledge Agreement" shall mean the Pledge Agreement dated as of the
date hereof between FiberNet Telecom and the Collateral Agent.
"Redemption Agreement" means the Stock Redemption Agreement dated as
of the date hereof among the Company, LPS, LTJ and SMFS.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement dated as of the date hereof by and among the Purchasers and the
Company.
"Release" includes discharge, spray, inject, inoculate, abandon,
deposit, spill, leak, seep, pour, emit, empty, throw, dump, place and exhaust,
(and words of similar import) and when used as a noun, has a similar meaning.
"Responsible Officer" of any Person shall mean the Chief Executive
Officer or a Financial Officer of such Person.
"SEC" means the Securities and Exchange Commission.
"Series B Preferred Stock" shall mean the Series B Voting Preferred
Stock, $.001 par value per share, of the Company.
"Signal" means Signal Capital Partners, L.P., a Delaware limited
partnership.
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"SMFS" shall mean SMFS, Inc.
"Stockholders Agreement" shall mean the Stockholders Agreement dated
as of the date hereof by and among the Company, the Purchasers, SMFS, Inc., LPS
Consultants, Inc. and LTJ Group, Inc.
"Subsidiaries" shall mean FiberNet Telecom, Equal Access and Local
Fiber and/or any successors thereto.
"Taxes" means, with respect to any Person, (i) all income taxes
(including any tax on or based upon net income, gross income, income as
specially defined, earnings, profits or selected items of income, earnings or
profits) and all gross receipts, sales, use, ad valorem, capital and transfer,
transfer, franchise, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property or windfall profits taxes,
alternative or add-on minimum taxes, customs duties and other taxes, fees,
assessments or charges of any kind whatsoever, together with all interest and
penalties, additions to tax, surtaxes and other additional amounts imposed by
any taxing authority (domestic or foreign) on such entity (if any) and (ii) any
liability for the payment of any amount of the type described in the immediately
preceding clause (i) as a result of being a "transferee" (within the meaning of
Section 6901 of the Code or any other Applicable Law) of another entity or a
member of an affiliated or combined group.
"Transaction Documents" shall mean this Agreement, the
Registration Rights Agreement, the Stockholders Agreement, the Redemption
Agreement, the Collateral Agreements, the Notes, the Warrants and the
Guaranty.
"Trident" means Trident Telecom Partners LLC, a Delaware limited
liability company .
"Trident Technology" means Trident Technology Partners LLC, a
Wyoming limited liability corporation.
1.2 Terms Generally.
The definitions in Section 1.1 shall apply equally to the singular and
plural forms of the terms defined. Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms. The words
"include", "includes" and "including" shall be deemed to be followed by the
phrase "without limitation".
1.3 Use of Defined Terms.
Terms defined in this Agreement and used in any Exhibit, Schedule,
Certificate, Annex or any Transaction Document or other document delivered in
connection with this Agreement, shall have the meanings assigned herein unless
otherwise defined or the context otherwise requires.
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1.4 Cross-References.
Unless otherwise specified, references in this Agreement or any
Transaction Document to any Article or Section are references to such Article or
Section of this Agreement or such Transaction Document, as the case may be, and
references in any Article, Section or definition to any clause are references to
such clause of such Section, Article or definition.
1.5 Accounting Terms; GAAP.
Except as otherwise expressly provided herein, all terms of an accounting
or financial nature shall be construed in accordance with GAAP, consistently
applied, and all financial statements or accounting determinations required
herein to be prepared or made in accordance with GAAP shall be prepared or made
in accordance with GAAP applied on a consistent basis.
ARTICLE II
ISSUANCE OF THE NOTE AND PREFERRED STOCK
2.1 Issuance of Note and Preferred Stock.
Subject to the terms and conditions contained herein, at the Closing, the
Company has authorized the issuance of:
(a) Senior Secured Convertible Notes due May 7, 2004 of the Company
dated the Closing Date in the principal aggregate amount of $13,900,000 (the
"Note Purchase Price") to be issued as follows;
(i) the 8% Senior Secured Convertible Note due May 7, 2004 of
the Company dated the Closing Date in the form attached hereto as Exhibit
A-1 (the "8% Note");
(ii) the 6% Senior Secured Convertible Note due May 7, 2004 of
the Company dated the Closing Date in the form attached hereto as Exhibit
A-2 (the 6% Note"); and
(iii) the 4% Senior Secured Convertible Note due May 7, 2004
of the Company dated the Closing Date in the form attached hereto as
Exhibit A-3 (the "4% Note" and collectively with the 8% Note and the 6%
Note, the "Notes" and each a "Note").
(b) 133,333, shares of Series C Preferred Stock, $.001 par value
(the "Preferred Stock"), of the Company for a purchase price of $1.50 per share
(the "Purchase Price Per Share") or $200,000 in the aggregate (the "Preferred
Stock Purchase Price"); and
(c) 6,204,000 warrants to purchase shares of Common Stock at $.67
per share ("Class A Warrants") and 1,600,000 warrants to purchase shares of
Common Stock at $1.50 per share ("Class B Warrants", and together with the Class
A Warrants, the "Warrants"), dated the Closing Date in the form of Exhibit B-1
and Exhibit B-2 attached hereto.
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2.2 Agreement to Sell Securities.
At the Closing, the Company shall sell (i) to each Other Purchaser, and
each Other Purchaser shall purchase from the Company, an 8% Note in the
principal amount set forth on Annex I and the number of shares of Preferred
Stock listed next to such Other Purchaser in Annex I, (ii) to Concordia and
Trident, and Concordia and Trident shall each purchase from the Company, a 4%
Note in the principal amounts set forth on Annex I, and the number of shares of
Preferred Stock listed next to Concordia and Trident in Annex I, (iii) to
Signal, and Signal shall purchase from the Company, a 6% Note in the principal
amount set forth on Annex I and the number of shares of Preferred Stock listed
next to Signal in Annex I and (iv) (A) to each Managing Purchaser, and each
Managing Purchaser shall purchase from the Company, Class B Warrants in such
numbers as set forth on Annex II hereto, and (B) to each Purchaser, and each
Purchaser shall purchase from the Company, the number of Class A Warrants, all
as listed next to such Purchaser in Annex I, each for the consideration price
listed in Annex I; provided, that the parties hereto agree that Xxxxx Xxxx
Partners, L.P. shall fund its portion of the Note Purchase Price as set forth on
Annex I, hereto within 10 days hereof.
2.3 Delivery of Securities.
(a) At the Closing, the Company shall deliver (i) to each Purchaser
a Note (each payable to the order of such Purchaser), the stock certificate for
the Preferred Stock to be purchased by such Purchaser (with such certificate
registered in the name of such Purchaser), each duly executed by the Company and
(ii) (A) the number of Class A Warrants to be issued to each Purchaser and (B)
the number of Class B Warrants as set forth on Annex II to be issued to the
Managing Purchasers, as duly executed by the Company;
(b) Delivery shall be made against receipt by the Company of the
Note Purchase Price and the Preferred Stock Purchase Price by wire transfer of
immediately available funds.
2.4 The Closing.
The Closing hereunder, subject to the satisfaction or waiver of the
conditions set forth in Article IV, will take place at the offices of X'Xxxxxxxx
Graev & Karabell, LLP, 00 Xxxxxxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000,
simultaneously with the execution and delivery of this Agreement.
2.5 Subsequent Closing.
Within 14 days of the date hereof the Company shall sell to a Person or
Persons to be determined by the Majority in Interest an 8% Note in the principal
amount of up to $1,500,000 and a pro rata number of shares of Preferred Stock
and Warrants for the consideration price listed in Annex I pursuant to the terms
and conditions contained herein at a closing, to be held 14 days from the date
hereof; provided, that any sale hereunder shall be subject to any filings
required by Applicable Law.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMPANY
Each Loan Party, as applicable, represents and warrants to each
Purchaser as of the date hereof as set forth below.
3.1 Organization, Etc.
Each of the Company and FiberNet Telecom is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is incorporated. Each of Equal Access and Local Fiber is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of New York. Each Loan Party has all requisite power and
authority and has all governmental licenses, approvals, consents and
authorizations necessary to own or lease its property and assets and to carry on
its business as currently conducted and is qualified to do business in each
jurisdiction in which the nature of the business conducted or the property owned
or leased by it requires such qualification. Schedule 3.1 sets forth (a) a
correct and complete list of each jurisdiction in which each Loan Party is
qualified to do business and (b) the jurisdiction where each Loan Party is
incorporated.
3.2 Corporate Power and Authority; No required Consents or Approvals.
(a) Each Loan Party has the power to execute, deliver and perform
its obligations under each Transaction Document to which it is a party, to grant
Liens pursuant to the Collateral Agreements to which it is a party and, in the
case of the Company, to issue and sell the Securities hereunder and to deliver
the Securities to the Purchasers.
(b) The execution, delivery and performance by each Loan Party of
each Transaction Document to which it is a party, including the execution and
delivery of the Notes and Warrant by the Company and the issuance of Preferred
Stock by the Company, have been duly authorized by all required corporate,
partnership and/or stockholder action, as applicable, of such Loan Party and
will not (i) violate any provision of Applicable Law, any Judgment or any
Organizational Document of any Loan Party, (ii) conflict with, result in a
breach of or constitute (alone or with notice or lapse of time or both) a
default (or give rise to any right of termination, modification, cancellation or
acceleration) under, any Contract (as defined below) to which any Loan Party is
party or (iii) result in the creation or imposition of any Lien (other than a
Permitted Lien) upon any property of any Loan Party.
(c) The Company has delivered to the Purchasers correct and complete
copies of the respective Organizational Documents of each Loan Party. All
minutes of meetings and all written consents of the directors and stockholders
or members of each of Loan Party were delivered to counsel for the Purchasers.
(d) Except as set forth on Schedule 3.2(d), and except for the
filing of financing statements, no filing with or consent or approval of, or
other action by, any Governmental Authority or other Person is or will be
required by any Applicable Law or agreement in connection with the execution,
delivery and performance by each Loan Party of any Transaction Document to which
it is a party, any borrowings hereunder or the grant by the applicable Loan
Party to the Purchasers of any Lien pursuant to the Collateral Agreements.
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3.3 Enforceability.
Each Transaction Document to which each Loan Party is a party has been
duly executed and delivered by such Loan Party, and constitutes the legal, valid
and binding obligation of such Loan Party, enforceable in accordance with its
terms.
3.4 Financial Information.
(a) Schedule 3.4(a) sets forth the following financial statements
(the "Financial Statements"): (i) the pro forma consolidated balance sheets of
the Company and its Subsidiaries as of the date hereof, giving effect to the
transactions contemplated by this Agreement (the "Opening Balance Sheet"), (ii)
the unaudited balance sheet of the Company and its Subsidiaries as of March 31,
1999, and the related unaudited statements of operations and cash flows for the
periods then ended and (iii) the Historical Financial Statements.
(b) Except as set forth on Schedule 3.4(b), the Financial
Statements, including the notes thereto, (i) present fairly the consolidated
financial position and results of operations of the respective entities at the
dates and for the periods indicated, (ii) are in accordance with the books and
records of such entities, and (iii) have been prepared in accordance with GAAP.
(c) Except as set forth on Schedule 3.4(c), at the date of the
Opening Balance Sheet, neither the Company nor any Subsidiary had any liability
of any nature or any loss contingency (as such term is used in the Statement of
Financial Accounting Standards No. 5 issued by the Financial Accounting
Standards Board in March 1975) that was not adequately disclosed or provided for
on the Opening Balance Sheet, including the notes thereto.
(d) The net accounts receivable reflected in the Opening Balance
Sheet arose from bona fide transactions in the ordinary course of business with
unaffiliated third parties, and the goods and services involved have been sold,
delivered and performed to the account obligors, and no further goods are
required to be provided and no further services are required to be rendered in
order to complete the sales and fully render the services and to entitle the
Company to collect such accounts receivable in full. Such net accounts
receivable (i) have not been assigned or pledged to any other person or entity
and (ii) are not subject to any right of set-off in respect of any obligations
of the Company or otherwise. Adequate provision has been made for collection,
losses, contractual discounts and other adjustments from third-party payors.
3.5 Absence of Changes.
Except as set forth on Schedule 3.5, since December 31, 1998, there has
not been:
(a) any adverse change in the condition (financial or otherwise),
assets, liabilities, operations, earnings or prospects of any Loan Party;
(b) any damage, destruction or loss (whether or not covered by
insurance) affecting any asset of any Loan Party in excess of $25,000;
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(c) any liability or loss contingency incurred by any Loan Party
that would have to be disclosed on financial statements (including the notes
thereto) in accordance with GAAP, other than liabilities incurred in the
ordinary course of business consistent with past practice;
(d) any commitment to borrow money or provide financial support to
any person or entity entered into by any Loan Party;
(e) any payment or discharge of any liability by any Loan Party
outside the ordinary course of business consistent with past practice;
(f) any sale, assignment, license, or other disposition of any
material asset or right of any Loan Party outside the ordinary course of
business consistent with past practice;
(g) any declaration or payment of any dividend or other distribution
with respect to any shares of capital stock of any Loan Party;
(h) any labor trouble, problem or grievance affecting the business
of any Loan Party;
(i) any write-down of the value of any inventory of any Loan Party,
or any write-off as uncollectible of any accounts or notes receivable of any
Loan Party, in each case outside the ordinary course of business consistent with
past practice;
(j) any general uniform increase in the direct or indirect
compensation of employees of any Loan Party (including, without limitation, any
increase pursuant to any bonus, pension, profit-sharing, deferred compensation,
or other plan or commitment);
(k) any capital expenditure or commitment therefor by any Loan Party
for additions to property, plant or equipment in excess of $25,000;
(l) any change in the accounting or tax methods, practices, or
assumptions followed by any Loan Party; or
(m) any other transaction or event relating to any Loan Party not in
the ordinary course of business consistent with past practice.
3.6 Litigation.
There are no actions (including derivative actions), suits or proceedings
at law or in equity instituted or, to the Company's knowledge, threatened with
respect to the transactions contemplated by the Transaction Documents. Except as
set forth on Schedule 3.6, there are no other actions (including derivative
actions), suits or proceedings at law or in equity or by or before any
Governmental Authority instituted or, to the knowledge of the Company after due
inquiry, threatened against or affecting any Loan Party or any of their
respective businesses, properties or rights, and no Loan Party is a party to any
arbitration, or currently anticipates becoming a party to any arbitration. None
of such actions, suits or proceedings disclosed on Schedule 3.6 has resulted or
could reasonably be expected to result in a Material Adverse Effect. No Loan
Party is subject to, or if subject to in default with respect to, any order,
injunction or
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decree of any Governmental Authority which has resulted or could reasonably be
expected to result in a Material Adverse Effect.
3.7 Compliance With Laws.
Except as set forth on Schedule 3.7, no Loan Party is in violation of, or
in default with respect to, any Applicable Law (including, without limitation,
the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, and all Environmental
Laws) or Judgment.
3.8 Employee Plans.
Schedule 3.8 contains a list of all Employee Plans sponsored, maintained
or contributed to by each Loan Party and their Affiliates and ERISA Affiliates.
Except as disclosed on Schedule 3.8, no Loan Party, or any of their Affiliates
or ERISA Affiliates, has in the six-year period ending on the Closing Date
sponsored, made contributions to, or had any liability to any Employee Plan;
each Employee Plan sponsored by or maintained by each Loan Party or any ERISA
Affiliate is maintained and administered in material compliance with all
provisions of ERISA, the Code and all other Applicable Law; each Employee Plan
sponsored by each Loan Party has been operated and administered in compliance
with all Applicable Law; no Loan Party nor any ERISA Affiliate has breached the
fiduciary rules of ERISA, the Code or any other corresponding rules under any
other Applicable Law; all required employer and employee contributions and
premiums under all Employee Plans have been made by each Loan Party or ERISA
Affiliates in a timely manner; there are no existing past funding obligations of
any kind owed by any Loan Party or ERISA Affiliate with respect to any Employee
Plan; no Loan Party or ERISA Affiliate has agreed to provide any post-retirement
health or welfare benefits to any employees, former employees or retired
employees of any Loan Party, or any ERISA Affiliate.
3.9 Taxes.
Except as set forth on Schedule 3.9: (i) Each Loan Party has filed or
caused to be filed all tax returns, reports or statements ("Tax Returns")
required to have been filed by it or them on or before the date hereof and such
Tax Returns are true, correct and complete in all material respects, (ii) each
Loan Party has paid all Taxes shown to be due on the Tax Returns referred to in
clause (i) and any other Taxes for which it could be required to pay under the
filings in clause (i), (iii) no Loan Party has waived in writing any statute of
limitations in respect of Taxes which waiver is currently in effect, (iv) no
issues that have been raised in writing by the relevant taxing authority in
connection with the examination of the Tax Returns referred to in clause (i) are
currently pending, (v) all deficiencies asserted or assessments made as a result
of any examination of the Tax Returns referred to in clause (i) by a taxing
authority have been paid in full, (vi) no Loan Party has incurred any liability
to make any payments that either alone or in conjunction with any other payments
could constitute a "parachute payment" within the meaning of Section 280G of the
Code, (vii) no Loan Party is presently required to make any adjustments or
changes either on, before, or after the Closing Date, to its accounting methods,
(ix) no Loan Party has ever been a member of an affiliated, consolidated or
unitary group for Tax purposes other than a group in which it currently is a
member; and (x) no Loan Party has ever been a party to a Tax sharing, indemnity
or similar agreement.
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Except as set forth on Schedule 3.9, each Loan Party has properly and
timely filed or caused to be filed all federal and local tax returns, reports or
statements that are required to be filed by it and has paid or caused to be paid
all taxes shown to be due and payable on such returns or on any assessments
(including taxes with respect to real property) received by it, other than any
taxes or assessments the validity of which it is contesting in good faith by
appropriate proceedings and with respect to which adequate accounting reserves
have been set aside to the extent required by GAAP. The charges, accruals and
reserves of each Loan Party in respect of taxes and other governmental charges
are adequate.
3.10 Real Property - Owned or Leased.
(a) Schedule 3.10(a) contains a list and brief description of all of
the owned real property of the Company and each of its Subsidiaries (the "Owned
Property") and all real property in which the Company or any of its Subsidiaries
has a leasehold interest held under leases (the "Leased Property") including the
name of the lessor and any requirement of consent of the lessor to consummate
the transactions contemplated hereby. The Owned Property and the Leased Property
(together, the "Real Property") constitute all real properties used or occupied
by the Company and its Subsidiaries.
(b) With respect to the Real Property, except as set forth in
Schedule 3.10(b):
(i) no portion thereof is subject to any pending condemnation
proceeding by any public or quasi-public authority or Governmental
Authority and there is no threatened condemnation or proceedings with
respect thereto;
(ii) the physical condition of the Real Property is sufficient
to permit the continued conduct of the business of the Company or its
Subsidiaries as presently conducted and as presently proposed to be
conducted subject to the provision of usual and customary maintenance and
repair performed in the ordinary course with respect to similar properties
of like age and construction;
(iii) with respect to the Leased Property, the Company or one
its Subsidiaries is the owner and holder of all the leasehold estates
purported to be granted by such related lease and each such lease is in
full force and effect and constitutes a valid and binding obligation of
the Company or such Subsidiary;
(iv) no notice of any increase in the assessed valuation of
the Real Property and no notice of any contemplated special assessment has
been received by the Company or any of its Subsidiaries and there is no
threatened special assessment pertaining to any of the Real Property;
(v) there are no Contracts, written or oral, to which the
Company or any of its Subsidiaries is a party, granting to any party or
parties the right of use or occupancy of any portion of the parcels of the
Real Property;
(vi) there are no parties (other than the Company or any of
its Subsidiaries) in possession of the Owned Property;
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(vii) with respect to the Leased Property, there have been no
discussions or correspondence with the landlord or lessor concerning
renewal terms for those leases scheduled to expire within six months of
the date hereof;
(viii) all of the Buildings and Fixtures on the Owned Property
were constructed in accordance with all Applicable Laws and the Company or
its Subsidiaries has adequate rights of ingress and egress into the Owned
Property for the operation of the business of the Company or its
Subsidiaries;
(ix) none of the Owned Property or the Buildings and Fixtures
thereon, nor their use, operation or maintenance for the purpose of
carrying on the business of the Company or its Subsidiaries, violates any
restrictive covenant or any provision of any Law or encroaches on any
property owned by any other Person; and
(x) there are no outstanding work orders from or required by
any municipality, police department, fire department, sanitation, health
or safety authorities or from any other Person and there are no matters
under discussion with or by the Company or any of its Subsidiaries
relating to work orders.
(c) Leased Real Property. Except as set forth on Schedule 3.10(c),
neither the Company nor any of its Subsidiaries is a party to, or under any
agreement to become a party to, any lease with respect to real property other
than the Leased Property, true, correct and complete copies of which have been
provided to the Purchasers. With respect to each lease (i) the lease (or a
notice in respect of the lease) has been properly registered in the appropriate
land registry office, (ii) all rents and additional rents have been paid, (iii)
no waiver, indulgence or postponement of the lessee's obligations has been
granted by the lessor, (iv) there exists no event of default or event,
occurrence, condition or act (including the transactions contemplated hereby)
which, with the giving of notice, the lapse of time or the happening of any
other event or condition, could become a default under the lease, and (v) all of
the covenants to be performed by any party under the leases have been fully
performed. Each of the Leased Properties is adequate and suitable for the
purposes for which it is presently being used and as presently proposed to be
used and the Company or its Subsidiaries have adequate rights of ingress and
egress into each of the Leased Properties.
3.11 Intellectual Property.
(a) To the Company's Knowledge (as defined herein), the Company and
each of its Subsidiaries have the unimpaired right to use, sell, license and
dispose of, and have the right to bring actions for the infringement of, all
Intellectual Property Rights necessary or required for the conduct of the
business of the Company or its Subsidiaries as currently conducted and as
currently proposed to be conducted and such rights to use, sell, license,
dispose of and bring actions are sufficient for such conduct of the business of
the Company or its Subsidiaries.
(b) To the Company's Knowledge, except as set forth in Schedule 3.11
there are no royalties, honoraria, fees or other payments payable by the Company
or any of its Subsidiaries to any Person by reason of the ownership, use,
license, sale or disposition of the Intellectual Property Rights.
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(c) To the Company's Knowledge, except as set forth in Schedule
3.11(c), no activity, service or procedure currently conducted or currently
proposed to be conducted by the Company or any of its Subsidiaries violates or
will violate any Contract of such Person with any third party or infringes any
Intellectual Property Right of any other party.
(d) To the Company's Knowledge, except as set forth in Schedule
3.11, neither the Company nor any of its Subsidiaries has received from any
third party in the past five years any notice, charge, claim or other assertion
that the Company or such Subsidiary is infringing any Intellectual Property
Right of any third party or committed any acts of unfair competition, and no
such claim is impliedly threatened.
(e) To the Company's Knowledge, except as set forth in Schedule
3.11, neither the Company nor any of its Subsidiaries has sent to any third
party in the past five years or otherwise communicated to another Person any
notice, charge, claim or other assertion of infringement by or misappropriation
of any Intellectual Property Right of the Company or such Subsidiary by such
other Person or any acts of unfair competition by such other Person, nor is any
such infringement, misappropriation or unfair competition occurring or
threatened.
(f) Schedule 3.11 contains a true and complete list of all
applications, filings and other formal actions made or taken pursuant to
Applicable Laws by the Company or any of its Subsidiaries to perfect or protect
its or the Subsidiary's interest in the Intellectual Property Rights.
(g) To the Company's Knowledge, except as set forth on Schedule
3.11, no Person other than the Company or any of its Subsidiaries has been
granted any interest in a right to use all or any portion of the Intellectual
Property Rights necessary or required for the conduct of the business of the
Company or its Subsidiaries.
(h) The Purchasers have been provided with a true and complete copy
of all Contracts that comprise or are related to the Intellectual Property
Rights used in or required for the conduct of the business of the Company or its
Subsidiaries.
(i) For purposes of this Section 3.11, "Knowledge" shall mean the
good faith due diligence, investigation and imputed knowledge of the Company.
3.12 Contracts.
Schedule 3.12 sets forth a complete list as of the Closing Date hereof of
each material agreement, contract, guaranty, indenture or instrument to which a
Loan Party is a party or by which any of their respective properties are or may
be bound (collectively, "Contracts"), correct and complete copies of which have
been provided to the Purchasers. Each Contract is the binding obligation of the
respective Loan Parties thereto and, to the knowledge of the Company, the
binding obligation of each other parties thereto, in each case, enforceable in
accordance with its terms. No Loan Party is in default in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any Contract to which it is a party. No Loan Party is a party to
any agreement, instrument or corporate restriction that has resulted or could
reasonably be expected to result in a Material Adverse Effect.
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3.13 No Material Misstatements.
All information, including financial information, provided, or to be
provided from time to time, to the Purchasers in connection with this Agreement
and the other Transaction Documents is true and correct and none of the
documentation furnished to the Purchasers by the Company or any of its
Subsidiaries, including the Historical Financial Statements nor any other
statement furnished by or on behalf of the Company or any of its Subsidiaries or
any other Loan Party to the Purchasers in connection with the negotiation or
confirmation of the transactions as contemplated hereby or by the other
Transaction Documents, contains or will contain any untrue statement of a
material fact or omits or will omit as of such time, a material fact necessary
to make the statements contained therein, in light of the circumstances in which
they were made, not misleading, and all such statements, taken as a whole,
together with this Agreement, do not and will not contain any untrue statement
of a material fact or omit a material fact necessary to make the statements
contained herein or therein not misleading and all expressions of expectation,
intention, belief and opinion contained therein were, and will be, honestly made
on reasonable grounds after due and careful inquiry by the Company (and any
other person who furnished such material). There is not, and will not be, any
fact which the Company or any other Loan Party has not disclosed to the
Purchasers in writing which has had a Material Adverse Effect, or is reasonably
likely to have a Material Adverse Effect.
3.14 Outstanding Debt.
Schedule 3.14 lists all Indebtedness of each Loan Party immediately after
giving effect to the use of proceeds in accordance with Schedule 6.8. There does
not exist any breach, default or event of default (however defined) under any
Contract relating to or evidencing any Indebtedness of the Loan Parties (or any
event which, with only the giving of notice or the passage of time or both,
would result in such a breach or default).
3.15 Investment Company Act and Public Utility Holding Company Act.
No Loan Party is an "investment company" or an "affiliate" of an
"investment company" as defined in, or subject to regulation under, the
Investment Company Act of 1940, as amended. No Loan Party is a "holding company"
as defined in, or subject to regulation under, the Public Utility Holding
Company Act of 1935, as amended.
3.16 Solvency.
Each Loan Party is not, and immediately following the issuance of the
Notes and giving effect to the Loan Parties' obligation to repay same, will not
be, "insolvent" nor an "insolvent person" within the meaning of the Bankruptcy
Code, the Uniform Fraudulent Transfer Act as in effect on the date hereof in the
State of New York or any other applicable fraudulent conveyance or preference
laws, as applicable. The fair value of the aggregate assets of each Loan Party
exceeds, and immediately following the issue of the Notes and giving effect to
such Loan Party's obligation to repay same, will exceed its total liabilities
(including subordinated, unmatured, unliquidated, disputed and contingent
liabilities). Neither the assets of any Loan Party are nor immediately following
the sale of the Note hereunder will they be, unreasonably small in relation to
any business or transaction in which such corporation is or is about to be
engaged. No Loan
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Party intends to, nor believes that it will, nor should it reasonably believe it
will, incur debts beyond its ability to pay such debts as they mature (taking
into account the timing and amounts of cash to be received by each Loan Party
and the amounts to be payable on or in respect of its obligations).
3.17 Capital Stock; Equity Capital.
Except as set forth on Schedule 3.17, there are no restrictions upon the
voting rights associated with, or the transfer of, any of the capital stock of
the Company, except as provided by (a) United States or state securities laws or
(b) the terms and provisions of the Transaction Documents.
3.18 Capitalization.
The authorized share capital (or limited liability company membership
interests) of each Loan Party is as set forth on Schedule 3.18. Except as set
forth on Schedule 3.18, all issued and outstanding shares of capital stock of
each of the Loan Parties are duly authorized and validly issued, fully paid,
nonassessable, free and clear of all Liens other than those in favor of
Purchasers, and such shares were issued in compliance with all applicable state,
provincial and federal laws concerning the issuance of securities. The capital
stock of each of the Loan Parties is owned by the stockholders or members in the
amounts set forth on Schedule 3.18. No shares of the capital stock of any Loan
Party other than those described above, are issued and outstanding. Except as
set forth on Schedule 3.18, there are no preemptive or other outstanding rights,
options, warrants, conversion rights or similar agreements or understandings for
the purchase or acquisition from any Loan Party of any shares of capital stock
or other securities of any such entity.
3.19 Employee Disputes.
Except as set forth on Schedule 3.19, there are no disputes pending or, to
the best knowledge of the Company after diligent inquiry, threatened, between
any Loan Party and any of their respective employees, other than individual
employee grievances arising in the ordinary course of business which could not
reasonably be expected to result in a Material Adverse Effect.
3.20 Telecommunications Permits.
Except as set forth on Schedule 3.20, the Company and its Subsidiaries
possess all permits, licenses, approvals or rulings (collectively, "Permits")
from the applicable Governmental Authority related to the conduct of the
business of the Company and its Subsidiaries, and all such Permits are valid and
will not expire and no action by the Company or its Subsidiaries is required to
renew or maintain the validity of such Permits within six months of the date
hereof.
3.21 Securities Laws.
The offering, sale and purchase of the Securities contemplated hereby are
exempt from registration under the Securities Act. The issuance of all other
shares of capital stock of the
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Company on or before the date hereto has been made in compliance with the
Securities Act and all applicable state securities or blue sky laws.
3.22 Accounts and Notes Receivable.
Except as set forth in Schedule 3.22, all the accounts receivable and
notes receivable owing to the Company or any of its Subsidiaries as of the date
hereof constitute, and as of the Closing Date will constitute, legal, valid and
enforceable, claims arising from bona fide transactions in the ordinary course
of business, subject to bankruptcy, insolvency, moratorium, reorganization and
other similar laws affecting creditors' rights generally, there are no asserted
claims, refusals to pay or other rights of set-off against any thereof and none
of such accounts or notes receivable is in jeopardy of non-payment. Neither the
Company nor any of its Subsidiaries has accelerated the collection of accounts
receivable, other than in the ordinary course of business consistent with past
custom and practice. Schedule 3.22 sets forth a complete and accurate aging of
all accounts receivable as of date hereof from both the due date and the invoice
date.
3.23 Accounts and Notes Payable.
Except as set forth in Schedule 3.23, all accounts payable and notes
payable by the Company or any of its Subsidiaries to third parties as of the
date hereof arose, and as of the Closing will have arisen, in the ordinary
course of business, and there is no such account payable or note payable
delinquent in its payment other than accounts and notes payable being disputed
in good faith. Neither the Company nor any of its Subsidiaries has delayed or
postponed the payment of accounts payable and other obligations and Liabilities,
other than in the ordinary course of business, consistent with past custom and
practice.
3.24 Suppliers and Vendors.
Except in the ordinary course of business, no supplier to or vendor of the
Company or any of its Subsidiaries has (i) canceled or otherwise terminated, or,
threatened to cancel or otherwise terminate, its relationship with the Company
or any of its Subsidiaries, (ii) decreased, limited or otherwise adversely
modified, or threatened to decrease, limit or otherwise adversely modify, the
services, supplies or materials it provides to the Company or any of its
subsidiaries, or (iii) failed to honor any warranty obligations, and the
transactions proposed to be consummated pursuant to this Agreement and the other
Transaction Documents shall not materially adversely affect the relationship of
the Company or any of its Subsidiaries with any supplier, vendor, franchisee or
licensee.
3.25 Customer Relations, Profitability.
Neither the Company nor any of its Subsidiaries has notice that any
customer, agent, representative or supplier of the Company or any of its
Subsidiaries intends to discontinue, diminish or change its relationship with
the Company or any of its Subsidiaries. Each such relationship is in material
conformity with standard industry terms and conditions. Each such relationship
wherein the Company or such Subsidiary is obligated to perform under contract
services with respect to the business of the Company or its Subsidiaries is
priced at a profit level reasonably consistent with the Company's or such
Subsidiary's practices.
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3.26 Year 2000.
(a) All hardware and software products used by the Company and its
Subsidiaries in the administration and business operations of the Company and
its Subsidiaries will be able to accurately process date data (including, but
not limited to, calculating, comparing and sequencing) from, into and between
the twentieth century (through year 1999), the year 2000 and the twenty-first
century, including leap year calculations, when used in accordance with the
product documentation accompanying such hardware and software products.
(b) All software products offered by the Company or any of its
Subsidiaries will be able to accurately process date data (including, but not
limited to, calculating, comparing and sequencing) from, into and between the
twentieth century (through your 1999), the year 2000 and the twenty-first
century, including leap year calculations, when used in accordance with the
product documentation accompanying such software products.
3.27 SEC Filings.
Schedule 3.27 lists all filings made by the Company pursuant to the rules
and regulations of the Act and the Exchange Act. Except as set forth on Schedule
3.27, the Company has filed all filings required by the Act and Exchange Act
("Filings" and each, a "Filing") with the SEC. No Filing contains an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
3.28 Equipment.
Except as set forth on Schedule 3.28, all computer, switching and voice,
data and video communication devices and equipment, information management
systems and all related peripheral devices or equipment (collectively,
"Equipment"), is state of the art Equipment functioning and in working order
consistent with the intended use of such Equipment.
3.29 Related Transactions.
Except as set forth on Schedule 3.29, and except for compensation to
regular employees of the Company and its Subsidiaries, no current or former
director or officer of the Company or its Subsidiaries or holder of any capital
stock of the Company or its Subsidiaries has been (i) a party to any material
transaction with the Company or its Subsidiaries, or (ii) the direct or indirect
owner of an interest (other than non-affiliated holdings in publicly held
companies) in any business organization that is or was a competitor, supplier or
customer of the Company or its Subsidiaries.
3.30 Fairness Opinion.
The Company engaged Xxxxxx Xxxxxx Xxxxxxxx & Co., Inc. ("Xxxxxx Xxxxxx")
for the purposes of rendering an opinion to the Board of Directors of the
Company to be dated as of the date hereof that the consideration to be received
by the Company in connection with the transactions contemplated by the
Transaction Documents is fair from a financial point of view to the Company.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
4.1 Purchasers Representations and Warranties.
Each Purchaser, severally and only with respect to itself, represents and
warrants to the Company as follows:
(a) Such Purchaser is acquiring the Securities to be purchased by it
or him and, should such Purchaser acquire other securities of the Company
issuable upon conversion, redemption, or exercise of any Securities, it or he
will acquire such other securities, for its or his own account, for investment
and not with a view to the distribution thereof, nor with any present intention
of distributing the same (except any distributions to be made by Trident or
Trident Technology to its members).
(b) Such Purchaser understands that the Securities have not been,
and any other securities of the Company issuable upon conversion, redemption, or
exercise of any Securities, will not be, registered under the Act, by reason of
their issuance in a transaction exempt from the registration requirements of the
Act, and that they must be held indefinitely unless a subsequent disposition
thereof is registered under the Act or is exempt from registration.
(c) Such Purchaser is an "accredited investor," as defined in Rule
501 (the provisions of which are known to such Purchaser) promulgated under the
Act and has been advised by individuals with such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment in the Company, has the ability to bear the economic
risks of its investment for an indefinite period of time, has been furnished
with and has had access to such information as reasonably requested and has had
the opportunity to ask, and has received answers for, questions of the Company.
4.2 Authority.
Such Purchaser has all requisite power and authority to enter into the
Transaction Documents to which it is a party, to perform its or his obligations
thereunder, and to consummate the transactions contemplated thereby. Such
Purchaser has not been organized, reorganized or recapitalized specifically for
the purpose of investing in the Company.
4.3 Enforceability.
Such Purchaser has taken all requisite corporate, partnership or other
action necessary to authorize its or his execution and delivery of the
Transaction Documents to which it or he is a party, its or his performance of
its or his obligations thereunder, and its or his consummation of the
transactions contemplated thereby. Each Transaction Document has been executed
and delivered by an officer or duly authorized representative of each Purchaser
in accordance with such authorization. This Agreement constitutes and, upon
their execution and delivery, the other Transaction Documents to which it is a
party will constitute, valid and binding obligations of such Purchaser,
enforceable in accordance with their terms, subject to applicable bankruptcy,
reorganization, insolvency, and similar laws affecting creditors' rights
generally and to general principles of equity.
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4.4 Brokers and Finders.
No person or entity acting on behalf or under the authority of such
Purchaser is or will be entitled to any broker's, finder's, or similar fee or
commission in connection with the transactions contemplated hereby which would
become an obligation of the Company.
ARTICLE V
CONDITIONS TO PURCHASE
5.1 Conditions to Obligations of Purchasers on the Closing Date.
The obligation of the Purchasers to purchase the Securities hereunder is
subject to the satisfaction of the following conditions:
(a) Notes. Each Purchaser shall have received a duly executed Note
from the Company in accordance with the provisions of Section 2.3.
(b) Preferred Stock. Each Purchaser shall have received a
certificate for its respective shares of Preferred Stock from the Company in
accordance with the provisions of Section 2.3.
(c) Warrant. Each Purchaser shall have received a duly executed
Class A Warrant and/or Class B Warrant, as applicable, from the Company in
accordance with the provisions of Section 2.3.
(d) Stockholders Agreement. The Company shall have duly executed and
delivered the Stockholders Agreement substantially in the form of Exhibit C
attached hereto, and the Purchasers shall have received a duly executed
counterpart thereof.
(e) Registration Rights Agreement. The Company shall have duly
executed and delivered the Registration Rights Agreement substantially in the
form of Exhibit D attached hereto, and the Purchasers shall have received a duly
executed counterpart thereof.
(f) Collateral Agreements. The applicable Loan Party shall have duly
executed and delivered the Collateral Agreements and any other agreements,
documents or instruments required in connection therewith and the Purchasers
shall have received a duly executed counterpart thereof. The Collateral
Agreements shall be in full force and effect and no default or Event of Default
shall have occurred and be continuing thereunder. Each Purchaser shall have
received evidence satisfactory to it or him of the perfection and priority of
all security interests and Liens contemplated by the Collateral Agreements or
arrangements satisfactory to the Purchasers shall have been made for such
perfection.
(g) Charter Amendment. The Company shall have filed and the
Secretary of State of Nevada shall have accepted a Certificate of Designation
setting forth the preferences, privileges, rights and powers of the Preferred
Stock substantially in the form of Exhibit E attached hereto.
(h) Corporate Documents. The Purchasers shall have received:
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(i) a copy of the certificate of incorporation or articles of
organization, as applicable, of each Loan Party, including all amendments
thereto, certified as of a recent date by an appropriate public official
of its jurisdiction of incorporation and a certificate as to the good
standing or existence of such party in such jurisdiction;
(ii) a certificate of a Responsible Officer of the Company and
each other Loan Party dated the Closing Date and certifying (A) a correct
and complete copy of each Organizational Document of such party as in
effect on the Closing Date and at all times since a date prior to the date
of the resolutions described in the following clause (B), (if applicable),
(B) a correct and complete copy of resolutions duly adopted by the board
of directors (or general and/or limited partners) of such party,
authorizing the execution, delivery and performance of the Transaction
Documents, the sale of the Securities hereunder, the granting of Liens
pursuant to the Collateral Agreements and the other transactions
contemplated hereby and thereby, as applicable, (C) that the certificate
of incorporation (or articles of organization) of such party has not been
amended since the date of the last amendment thereto shown on the
certificate of good standing or existence furnished pursuant to clause (i)
above, and (D) as to the incumbency and specimen signature of each officer
of such party who shall execute any Transaction Document or any other
document delivered in connection herewith;
(iii) a certificate of a Responsible Officer of each Loan
Party as to the incumbency and specimen signature of the Responsible
Officer executing the certificate pursuant to clause (ii) above;
(iv) a certificate from the Secretary of State of each state
in the United States of America in which each Loan Party is required to be
qualified to do business as a foreign corporation, certifying as to such
qualification and such party's good standing in such state or province;
and
(v) such other documents as the Purchasers or X'Xxxxxxxx Graev
& Karabell, LLP, counsel to the Purchasers, may reasonably request.
(i) Financing Statements, Etc. Each of the Purchasers shall have
received evidence satisfactory to it that each document (including, without
limitation, each Uniform Commercial Code financing statement) required by law or
reasonably requested by the Purchasers to be filed, registered or recorded in
order to create in favor of the Purchasers perfected Liens on the Collateral,
shall be executed and delivered to the Purchasers to be filed, registered or
recorded in each jurisdiction in which the filing, registration or recording
thereof is so required or requested.
(j) Lien Search. The Purchasers shall have been satisfied with the
results of a search of the Uniform Commercial Code filings and other
registrations of Liens made with respect to each Loan Party in such
jurisdictions as the Purchasers shall reasonably require, including the
jurisdictions in which Uniform Commercial Code filings and registrations shall
be made pursuant to clause (i) hereof, which shall not have disclosed any prior
Lien or security interest in the Collateral, other than any Liens being released
contemporaneously with the Closing or Liens permitted hereunder.
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(k) Other Searches. The Purchasers shall have been satisfied with
the results of litigation and judgement searches with respect to each Loan Party
for the jurisdictions of the principal place of business of such Persons.
(l) No Defaults. Each Loan Party shall be in compliance with the
terms and provisions set forth in the Transaction Documents to which it is a
party. Neither the Company nor any Loan Party shall be in material default under
any Contract and no Event of Default or Default under this Agreement shall have
occurred and be continuing or shall occur upon consummation of this Agreement.
(m) Insurance. The Company shall have obtained insurance in
compliance with Section 6.12 and the Purchasers shall have received evidence
satisfactory to them of such issuance.
(n) Requisite Approvals. Each Loan Party shall have obtained all
required governmental, and other consents, licenses, permits and approvals
relating to the transactions contemplated by this Agreement and the other
Transaction Documents, which consents, licenses, permits and approvals shall be
acceptable to Purchasers and their counsel.
(o) Representations and Warranties. The representations and
warranties of each Loan Party contained herein and in any other Transaction
Document and in any certificate or other instrument delivered pursuant to any of
the foregoing shall be correct as though made on and as of the Closing Date.
(p) Officer's Certificate. The Purchasers shall have received
certificates signed by a Responsible Officer of each Loan Party confirming
compliance with the conditions precedent set forth herein on and as of the
Closing Date.
(q) Fees and Expenses. All fees, expenses and other consideration
owing by the Company to the Purchasers under the terms of this Agreement, the
other Transaction Documents or any other document executed in connection
herewith shall have been paid or delivered in full.
(r) Legal Opinions. The Purchasers shall have received a legal
opinion from (i) Paul, Hastings, Xxxxxxxx & Xxxxxx LLP, counsel to the Company,
covering the matters set forth on Exhibit F attached hereto, and as the
Purchasers shall reasonably request, (ii) a regulatory opinion from Xxxxxxx
Berlin Shereff Xxxxxxxx, LLP, special telecommunications counsel to the Company,
covering such matters as the Purchasers shall reasonably request and (iii)
Xxxxxx Xxxxxx, Nevada counsel to the Company, covering such matters as the
Purchasers shall reasonably request.
(s) Contracts. The Purchasers shall have received true and complete
copies of, and be satisfied with the terms of, each Contract.
(t) Payment of Proceeds. The Purchasers shall have received a
letter, in form and substance satisfactory to them, directing the payment of the
proceeds of the sale of the Securities.
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(u) Agent for Service of Process. The Purchasers shall have received
and been satisfied with a letter appointing FiberNet Equal Access, L.L.C. as the
agent for service of process of each Loan Party.
(v) Legal Matters. All matters relating to this Agreement and the
other Transaction Documents and the transactions contemplated hereby and thereby
shall be satisfactory to the Purchasers and X'Xxxxxxxx Graev & Karabell, LLP,
counsel to the Purchasers.
(w) Proxy. Each of SMFS, LPS and LTJ shall have executed and
delivered the an irrevocable voting proxy for any shares of any Loan Party owned
by each SMFS, LPS and LTJ substantially in the form of Exhibit G attached
hereto, and the Purchasers shall have received a duly executed counterpart
thereof.
(x) Resignations. Each of Xxxxx Xxxxxxxxxx, Xx., Xxxxxxxx X. Xxxxx
and Xxxxx Xxxxxxx shall have resigned from any executive positions held by him
in any Loan Party, which resignations shall be effective on the Closing Date.
(y) FiberNet Note. The FiberNet Note shall have been paid in full
simultaneously with the Closing, and no obligations thereunder shall be
outstanding.
(z) Other Agreements. All agreements or contracts providing for the
registration under the Act of any securities of the Company or its Subsidiaries
or stockholder agreement, voting agreement or irrevocable proxies relating to
any securities of the Company or its Subsidiaries shall be terminated as of the
Closing Date.
(aa) Closing Fee. The Company shall pay a fee equal to four percent
(4%) of the Note Purchase Price and the Preferred Stock Purchase Price ("Closing
Fee") to be divided in equal sums to the Managing Purchasers by wire transfer to
the respective bank accounts designated by the Managing Purchasers of
immediately available funds payable out of proceeds of the transactions
contemplated hereby. In lieu of $100,000 of the Closing Fee, the Company shall
issue to Concordia, Trident and Signal or Signal's Affiliates warrants to
purchase 100,000 shares of Common Stock at a $1.50 per share price to be divided
equally among Concordia, Trident and Signal or Signal's Affiliates.
(bb) Redemption of Series B Preferred Stock. All issued and
outstanding shares of Series B Preferred Stock shall be redeemed by the Company.
(cc) Other Matters. The Purchasers shall have received such other
consents, documents and financial information as they may require.
ARTICLE VI
COVENANTS
From the Closing Date until the indefeasible payment of the Notes by the
Company or so long as the Preferred Stock shall be issued and outstanding, the
Company covenants as follows in this Article VI.
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6.1 Payment of Principal, Premium and Interest.
The Company shall duly and punctually pay the principal of (and premium,
if any) and interest on the Notes in accordance with the terms of the Notes and
this Agreement.
6.2 Corporate Existence.
The Company shall and shall cause each of its Subsidiaries to do or cause
to be done all things necessary to preserve, renew and keep in full force and
effect their corporate (or partnership or limited liability company) existence
and any necessary state or other qualifications.
6.3 Obligations and Taxes.
The Company shall and shall cause each of its Subsidiaries to pay or
discharge, or cause to be paid or discharged, before the same shall become
delinquent (a) all Taxes imposed upon them or upon their income or profits or in
respect of their business or property unless such Taxes are being paid in
accordance with the terms of an agreement with the applicable Taxing authority
or are being contested in good faith and adequate reserves have been established
on the books of the Company therefor, (b) all lawful claims for labor, materials
and supplies, (c) all required payments under any Indebtedness and (d) all other
obligations; provided, however, that it shall not be required to pay or
discharge or to cause to be paid or discharged any such amount so long as the
validity or amount thereof shall be contested in good faith in an appropriate
manner and appropriate reserves and accruals have been made with respect
thereto.
6.4 Performance Under Agreements.
The Company shall and shall cause each of its Subsidiaries, as applicable,
to perform their obligations under this Agreement, each Transaction Document,
and each other Contract to which they are a party; provided, however, that
neither the Company nor any of its Subsidiaries shall be required to so perform
their obligations under any Contract (other than this Agreement and any other
Transaction Document) to the extent it is reasonably contesting such obligations
in good faith and in an appropriate manner and, if required by GAAP, they have
made appropriate reserves and accruals with respect thereto.
6.5 Access to Properties and Inspections.
The Company shall and shall cause and each of its Subsidiaries to maintain
financial records in accordance with accounting practices and controls
sufficient to allow the Company to prepare the financial statements,
certificates and reports required by Section 6.11 and to provide such
information with respect to the Collateral as the Managing Purchasers may
reasonably request; and, upon written notice, at all reasonable times and as
often as the Managing Purchasers may reasonably request, permit any authorized
representative or agent of the Managing Purchasers to visit and inspect their
properties and records (including all records relating to Collateral), and to
make extracts from such records and permit any authorized representative or
agent of the Managing Purchasers to discuss its affairs, finances and condition
with such officers, key employees and independent chartered accountants acting
as auditors as the Managing Purchasers shall deem appropriate. Delivery of a
copy of this Agreement to
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the respective independent chartered accountants acting as auditors shall
constitute instructions to such accountants to discuss the financial condition
of the Loan Parties with the Managing Purchasers and their representatives, and
to permit the Managing Purchasers and their representatives to inspect, copy and
make extracts from all financial statements, analyses, work papers and other
documents and information (including electronically stored documents and
information) prepared by such accountants with respect to the Loan Parties.
6.6 Defense of Claims.
The Company shall and shall cause each of its Subsidiaries to diligently
defend themselves and their properties from and against any lawsuits or claims.
6.7 Notices of Litigation, Claims, Etc.
The Company shall (or, if applicable, shall cause its Subsidiaries to),
promptly upon obtaining notice of the occurrence thereof (but in no event more
than 10 days after obtaining notice of the occurrence thereof), provide the
Managing Purchasers with written notice of any of the following events:
(a) the issuance by any Governmental Authority of any injunction,
order or decision involving any Loan Party or any of their respective
properties;
(b) the filing or commencement of any action, suit or proceeding
against or affecting any Loan Party or the properties of any of the same,
whether at law or in equity or by or before any court or any United States,
state, municipal, foreign or other Governmental Authority;
(c) the imposition of any Lien which is not a Permitted Lien;
(d) any claim, demand or action impairing title to any of the
properties or assets of any Loan Party;
(e) any other adverse action by or notice from a Governmental
Authority with respect to any Loan Party or any of their respective properties;
(f) any Event of Default under the Notes;
(g) any default by any Loan Party under any Contract evidencing
Indebtedness if such default is likely to have a Material Adverse Effect; and
(h) any development in the business or affairs of any Loan Party
which is likely to have a Material Adverse Effect.
Each notice shall specify, as applicable, (i) the nature and extent thereof,
(ii) any rights of any other parties thereto with respect to termination,
acceleration or similar provisions and (iii) any corrective action taken or
proposed to be taken with respect thereto.
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6.8 Proceeds.
The Company shall use the proceeds of the sale of the Securities as
provided in Schedule 6.8.
6.9 Compliance.
The Company and each of its Subsidiaries shall comply in all material
respects with all Applicable Law and Judgments, including Environmental Laws
and, subject to Section 6.10, maintain all required clearances, consents,
permits and approvals of Governmental Authorities.
6.10 Business and Properties.
The Company and each of its Subsidiaries shall:
(a) at all times do or cause to be done all things necessary to (i)
preserve, renew and keep in full force and effect the material rights, licenses,
permits, franchises and concessions necessary to, or used or useful in the
conduct of, its business; and (ii) keep its assets and properties used or useful
in the conduct of its business in good repair, working order and condition,
ordinary wear and tear excepted, and from time to time make, or cause to be
made, all necessary and proper repairs, renewals and replacements, betterments
and improvements thereto, all as in the reasonable judgment of the Company may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; and
(b) as promptly as possible after obtaining knowledge of the
occurrence thereof, furnish written notice to the Purchasers of the institution
of any proceeding for the condemnation or other taking of any property of the
Company or any of its Subsidiaries.
6.11 Financial Statements and Reports.
The Company shall furnish to the Managing Purchasers:
(a) as soon as available but in any event within ninety (90) days
after the end of each Fiscal Year (commencing with the Fiscal Year ending
December 31, 1999 consolidated and consolidating balance sheets, income
statements and cash flow statements of the Company and its Subsidiaries, showing
its financial condition as at the end of such Fiscal Year and the results of its
operations for such Fiscal Year, all the foregoing financial statements (other
than the consolidating schedules) to be audited by independent accountants of
nationally-recognized standing in the United States reasonably acceptable to the
Purchasers and prepared in accordance with GAAP;
(b) as soon as available but in any event within 30 days after the
commencement of each Fiscal Year, current and projected annual budgets,
operating plans and financial projections for the Company and its Subsidiaries
on a consolidated and consolidating basis (presented on a monthly basis) for
such fiscal year;
(c) as soon as available but in any event within 30 days after the
end of each month, commencing with May, 1999, the unaudited consolidated and
consolidating balance
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sheets, income statements and cash flow statements (along with comparisons to
budget), showing the financial condition as at the end of such month, and the
results of operations for such month and for the then elapsed portion of the
Fiscal Year, for the Company and its Subsidiaries in each case prepared in
accordance with GAAP, subject to normal year-end adjustments (none of which
alone or in the aggregate would result in a Material Adverse Effect) and the
absence of notes thereto;
(d) as soon as received, copies of any notice of potential liability
or charge or complaint received by any Loan Party from any Governmental
Authority;
(e) concurrently with the statements provided pursuant to clauses
(a) and (c), certificate of a Financial Officer containing a narrative
discussion by a Financial Officer of the financial condition and results of
operation of the Company for the periods covered by such statements;
(f) promptly upon their becoming available, copies of any
statements, reports and other communications, if any, which the Company shall
have provided to its stockholders;
(g) promptly upon receipt thereof, copies of all financial and
management reports submitted to the Company by its independent auditors in
connection with each annual audit of the books of the Company and its
Subsidiaries; and
(h) promptly, from time to time, such other information (in writing
if so requested) regarding the assets and properties (including the Collateral)
and operations, business affairs and financial condition of any Loan Party as
the Purchasers may reasonably request.
Each certificate of the Financial Officer of the Company (and, in the case of
year-end financial statements and reports, the independent auditors of the
Company) delivered under this Section 6.11 shall certify that the statement or
report to which such certificate relates fairly presents in all material
respects the financial position and results of operations of the Company and its
Subsidiaries at the dates thereof and for the periods then ended and has been
prepared in accordance with GAAP, in the case of unaudited financial statements,
subject to normal year-end audit adjustments (none of which alone or in the
aggregate would result in a Material Adverse Effect) and the absence of notes
thereto. The audit report with respect to the financial statements referred to
in clause (a) shall not contain a "going concern" or like qualification or
exception or any qualification arising out of the scope of the audit.
6.12 Insurance.
The Company and each of its Subsidiaries shall maintain insurance
(including business interruption insurance) on the business and properties of
the Company and its Subsidiaries to such extent and against such risks,
including fire and other risks insured against by extended coverage, and
workers' compensation insurance and public liability insurance against claims
for personal injury or death or property damage occurring upon, in, about or in
connection with, the use of any properties owned, occupied or controlled by the
Company or any Subsidiary of the Company, in each case as is customary with
companies similarly situated and in the same or similar businesses, and shall
provide evidence to the Managing Purchasers of such insurance upon its request.
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6.13 Employee Plans.
The Company and each other Loan Party shall (and shall cause their ERISA
Affiliates) to (a) comply in all material respects with the provisions of all
Applicable Law which is applicable to any Employee Plan (including ERISA and the
Code, if such party is subject to such laws); (b) operate and administer each
Employee Plan in accordance with all Applicable law; (c) not terminate or
withdraw from any Employee Plan if such withdrawal could result in a material
liability to accrue against any Loan Party (or any ERISA Affiliates); (d) not
fail to make full payment when due of all amounts which, under the provisions of
any Employee Plan, any Loan Party (or any ERISA Affiliate) is required to pay as
a contribution or premium payment thereto; (e) furnish to each Lender, as soon
as possible, and in any event with ten (10) days after any Responsible Officer
of a Loan Party knows or has reason to know of any of the following events,
written notice of the same: (i) the withdrawal from or termination of any
Employee Plan by any Loan Party or any ERISA Affiliate), if such termination or
withdrawal could result in any material liability to any Loan Party (or ERISA
Affiliate); (ii) that any Employee Plan is not in compliance with any Applicable
Law; or (iii) that any required employer or employee contributions or premiums
have not been made on a timely basis to any Employee Plan sponsored by or
contributed to by any Loan Party (or ERISA Affiliate).
6.14 Local Fiber Approval.
The Company and Local Fiber shall take any and all necessary steps to (i)
obtain the approval of the New York State Public Utilities Commission required
under Section 101 of the New York Public Service Laws ("Approval") regarding
Local Fiber and (ii) to keep the Guaranty in full force and effect in accordance
with the terms and provisions thereof immediately following the Closing.
6.15 Further Assurances.
The Company and each of its Subsidiaries shall duly execute and deliver,
or cause to be duly executed and delivered, at its own cost and expense, such
further instruments and documents and take or cause to be taken all such action,
in each case as may be necessary or proper in the reasonable judgment of the
Managing Purchasers, to carry out the provisions and purposes of this Agreement
and the other Transaction Documents and to better assure and confirm unto the
Managing Purchasers, its rights and remedies under this Agreement and the other
Transaction Documents.
6.16 Transfer of Securities.
(a) The Securities shall only be transferable in accordance with the
Stockholders Agreement.
(b) Each certificate representing Securities shall (unless otherwise
permitted by the provisions of paragraph (c) and (d) below) be stamped or
otherwise imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED
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UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY
STATE. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM. IN ADDITION, THE TRANSFER OF THESE SECURITIES IS SUBJECT
TO THE CONDITIONS SPECIFIED IN THE STOCKHOLDERS AGREEMENT DATED AS
OF MAY 7, 1999 BY AND AMONG FIBERNET TELECOM GROUP, INC. AND THE
STOCKHOLDERS LISTED THEREIN. NO TRANSFER OF THESE SECURITIES SHALL
BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED."
6.17 Additional Covenants.
(a) The Company and the Stockholders shall take any and all
necessary actions to make all filings required by the regulations contained in
Rule 14f-1 of the Exchange Act (the "Exchange Act Filings") immediately after
the Closing.
(b) The Company and the Stockholders shall take any and all
necessary actions to increase the size of the Board to seven (7) directors, of
which Xxxxxxx Xxxxxxx, Xxxx Xxxxxx, Xxxxxx Xxxxxxxxxx and [to be named] shall be
replacements effective on the Filing Expiration Date (such event, the "Board
Change").
6.18 Post-Closing Covenants.
Subject to approval by the Board of Directors of the Company, within 90
days after Closing, (i) the Company shall move its jurisdiction of incorporation
from Nevada to Delaware and (ii) FiberNet Telecom shall be merged with and in to
the Company.
6.19 Negative Covenants.
For so long as the Notes remain outstanding or the Preferred Stock is
issued and outstanding, except as expressly contemplated by this Agreement or
any other Transaction Document, the Company shall not and shall cause each of
its Subsidiaries without the affirmative written consent of the Majority in
Interest to:
(a) sell, lease, transfer or assign any of its assets, tangible or
intangible, other than as relating to the conduct of the business of the Company
or its Subsidiaries in the ordinary course, consistent with past custom and
practice;
(b) sell or transfer all or substantially all equity interests of
the Company and/or any Subsidiary;
(c) enter into any Contract (or series of related Contracts) that
requires expenditures; and/or the incurrence of obligations not provided for in
the Operating Budget (as defined herein);
(d) permit its capital expenditures and commitments therefor to
exceed or be less than the amounts budgeted in the current capital expenditure
budget (the "Operating Budget"), a
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true, correct and complete copy of which has been delivered to the Investor on
or prior to the date hereof;
(e) delay or postpone the payment of accounts payable and other
obligations and Liabilities or accelerate the collection of accounts receivable,
other than in the ordinary course of business consistent with past custom and
practice;
(f) enter into any employment Contract or collective bargaining
agreement, written or oral, or modify the terms of any such existing Contract or
agreement outside the ordinary course of business;
(g) grant any increase in the base compensation of any of its
executive officers or employees above the amounts provided for in the budget
prepared by the Company in excess of 5%;
(h) adopt, amend, modify or terminate any Employee Plan, bonus,
incentive, severance or other plan, Contract or commitment for the benefit of
any of its officers or employees;
(i) enter into any transaction with any of its officers, employees
or Affiliates (or any directors, officers or employees of such Affiliate), other
than ordinary course employment arrangements entered into in accordance with
past custom or practice;
(j) in any manner take or cause to be taken any action which is
designed, intended or might reasonably be anticipated to have the effect of
discouraging customers, employees, suppliers, lessors, and other associates of
the Company or any of its Subsidiaries from maintaining the same business
relationships with the Company or any of its Subsidiaries after the date of this
Agreement as were maintained prior to the date of this Agreement;
(k) issue or sell any equity interests or issue or sell any
securities convertible into, exercisable or exchangeable for or options or
warrants to purchase or rights to subscribe for, any equity interests;
(l) declare or pay a distribution on any equity interests, change
the number of authorized shares of its equity interests or reclassify, combine,
split, subdivide or redeem or otherwise repurchase any of its equity interests,
or issue, deliver, pledge or encumber any additional equity interests or other
securities equivalent to, or exchangeable for, equity interests or enter into
any Contract to do any of the foregoing;
(m) incur any Indebtedness above $250,000 or issue any securities
evidencing any Indebtedness;
(n) create or suffer to exist any Encumbrance above $250,000 on any
of its assets or properties other than Permitted Encumbrances;
(o) change its accounting principles or policies;
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(p) engage in any business or activity other than those conducted or
proposed to be conducted by the Company and the Subsidiaries as of the date
hereof;
(q) amend any of its Charter Documents in such a way that would have
a Material Adverse Effect on the rights of Trident in relation to Signal
hereunder without the prior written consent of Trident;
(r) take or omit to take any action which would result in the
representations and warranties contained in this Agreement and the other
Transaction Documents being untrue on the Closing Date;
(s) change the primary business or activity of FiberNet Telecom as a
holding company of limited liability company interests of Equal Access and Local
Fiber;
(t) create any subsidiary or Joint Venture; and/or
(u) agree or otherwise commit to take any of the actions set forth
above.
6.20 Other Negative Covenants.
(a) Prior to the Board Change, the Board of Directors of the Company
shall not without the consent of at least one of the Investor Directors
authorize any executive actions, agreements, contracts, arrangements,
obligations or similar arrangements, or take any action that is deemed or could
be deemed by the Majority in Interest to adversely affect the rights, privileges
and/or interests of the Purchasers under this Agreement, the Transaction
Documents and/or any other certificates, agreements or documents related
thereto.
ARTICLE VII
EVENTS OF DEFAULT
(a) The following events shall constitute an "Event of Default"
under the Notes issued pursuant to this Agreement:
(i) default shall be made in any payment of principal of this
or any Note issued pursuant to this Agreement when the same shall become
due and payable;
(ii) default shall be made in any payment of interest on the
Notes when the same shall become due and payable, and such interest shall
remain unpaid for 3 days after such due date;
(iii) default shall be made in any payment in principal or
interest on any other Indebtedness of the Company and its Subsidiaries
that had not been cured in accordance with the terms of such Indebtedness
and/or any Indebtedness of any Loan Party in excess of $200,000 shall be
declared due and payable prior to its stated maturity by reason of an
event of default with respect thereto;
(iv) any redemption of the Preferred Stock by the Company and
its Subsidiaries;
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(v) any representation, covenant or warranty made by any Loan
Party under or in connection with any Transaction Document, or any
certificate or other instrument furnished in connection with any
Transaction Document or the transactions contemplated thereby, shall prove
to have been false or misleading when made in any material respect, and
such default (if curable) shall remain uncured and unwaived for a period
of 5 days;
(vi) default shall be made in the due observance or
performance of any covenant or agreement (other than as contemplated by
clause (i) or (ii) above) to be observed or performed by any Loan Party
under the Notes or any Transaction Document, and such default (if curable)
shall remain uncured and unwaived for a period of 10 days;
(vii) default shall be made in any payment to be made upon the
exercise of the Purchaser's right under Section 3 of the Certificate of
Designation of the Preferred Stock of the Company with respect to the
Purchaser's shares of Common Stock in the Company, regardless of whether
or not the Company has sufficient funds legally available for purchase of
such shares or is contractually permitted to make such payment;
(viii) the Company or any Loan Party shall (A) voluntarily
commence any proceeding or file any petition seeking relief under Title 11
of the United States Code or any other Federal or state bankruptcy,
insolvency or similar law, (B) consent to the institution of any such
proceeding or the filing of any such petition, (C) apply for or consent to
the appointment of a receiver, trustee, custodian, sequestrator or similar
official for the Company or such Loan Party or for all or a substantial
part of its properties, (D) file an answer admitting the material
allegations of a petition filed against it in any such proceeding, (E)
make a general assignment for the benefit of creditors, or (F) admit in
writing its inability to pay its debts as they become due;
(ix) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent jurisdiction
seeking (A) relief in respect of the Company or any Loan Party, or of all
or a substantial part of the properties thereof, under Title 11 of the
United States Code or any other Federal or state bankruptcy, insolvency or
similar law, (B) the appointment of a receiver, trustee, custodian,
sequestrator or similar official for the Company or any Loan Party or for
a substantial part of the properties thereof, or (C) the winding up or
liquidation of the Company or any Loan Party; and an order or decree
approving or ordering any of the foregoing shall be issued by a court
having jurisdiction and continue unstayed and in effect for 60 days;
(x) final judgment for the payment of money in excess of
$200,000 shall be rendered against the Company or any Loan Party and the
same shall remain undischarged or unbonded for a period of 60 consecutive
days during which execution shall not be effectively stayed; or
(xi) any officer of the Company or any Loan Party shall have
been convicted of any felony or of any other crime relevant to his office
or employment.
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(b) In case of any Event of Default and at any time thereafter
during the continuance of such Event of Default, the Majority in Interest may,
by written notice to the Company, declare its Note or Notes to be due and
payable in full both as to principal and interest; provided, however, that no
notice need be given to the Company if acceleration is based upon the Events of
Default described in clause (viii) or (ix) of paragraph (a) above, in either of
which cases the Notes shall automatically become due and payable without any
action on the part of any Holder. Upon a declaration by the Majority in Interest
that its Note or Notes is or are due and payable as provided in this clause (b)
and written notice by the Majority in Interest to the remaining Holders of the
same, the Notes held by the remaining Holders shall be deemed to be due and
payable in full both as to principal and interest.
(c) In case an Event of Default shall have occurred and be
continuing, the Majority in Interest may proceed to protect and enforce their
rights either by suit in equity or by action at law, whether for the specific
performance of any covenant or agreement contained in this Agreement or the
Notes or in aid of the exercise of any power granted in this Agreement or the
Notes, or proceed to enforce the payment of this Note or to enforce any other
legal or equitable right of the Holders. No remedy conferred hereunder is
intended to be exclusive of any other remedy and each such remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or
currently or hereafter existing at law or in equity or by statute or otherwise.
ARTICLE VIII
MISCELLANEOUS
8.1 Communication.
Subject to the express provisions of this Agreement, all communications
provided for or permitted hereunder shall be in writing, personally delivered to
an officer or other responsible employee of the addressee or sent by registered
mail, charges prepaid, or by telecopy with confirmed receipt (with hard copy to
follow), telegram or other means of recorded telecommunication, charges prepaid,
to the applicable address set forth below or to such other address as either
party hereto may from time to time designate to the other in such manner,
provided that no communication shall be sent by mail pending any threatened or
during any actual postal strike or other disruption of postal service in the
United States. Any communication so personally delivered shall be deemed to have
been validly and effectively given on the date of such delivery. Any
communication so sent by registered mail shall be deemed to have been validly
and effectively given on the tenth Business Day next following the day on which
it is sent. Any communication so sent by telecopy, telegram or other means of
recorded telecommunication shall be deemed to have been validly and effectively
given on the Business Day next following the day on which it is sent.
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Communications sent to any Loan Party shall be addressed to:
FiberNet Telecom Group, Inc.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: President
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Communications sent to the Purchasers shall be addressed to each
Purchaser's address listed on Annex I:
With a copy to:
X'XXXXXXXX GRAEV & KARABELL, LLP
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
8.2 Survival of Representations, Warranties and Covenants.
All agreements, representations, warranties and covenants made by or on
behalf of the Company in the Transaction Documents, including due diligence
costs, and otherwise with respect thereto or any transactions contemplated
thereby are material, shall be considered to have been relied upon by the
Purchasers and shall survive the execution and delivery of the Transaction
Documents or any investigation made at any time by or on behalf of the
Purchasers and any disposition or payment of the Notes until repayment in full
of all Indebtedness of the Company to the Purchasers (including the Note and the
other amounts due under this Agreement) or so long as any shares of Preferred
Stock shall be issued and outstanding. All statements contained in any
certificate or other instrument delivered by or on behalf of the Company
pursuant to the Transaction Documents or in connection with the transactions
contemplated hereby shall be deemed representations and warranties made by the
Company pursuant hereto. The obligations of the Company pursuant to Sections 8.5
and 8.6 shall survive the payment in full and the cancellation of the Notes and
the termination of this Agreement for the period of three years from the
termination of this Agreement.
8.3 Successors and Assigns.
This Agreement shall inure to the benefit of and be binding on the parties
hereto, their respective successors and any assignees or transferees of some or
all of the parties' rights or obligations hereunder; provided that, except as
provided in the following sentence, neither this Agreement, nor the benefit
hereof, may be assigned by the Company without the prior written consent of the
Purchasers.
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8.4 Expenses of the Purchasers.
The Company agrees to pay all out-of-pocket expenses reasonably incurred
by the Purchasers associated with the preparation, execution and delivery of
this Agreement and the other Transaction Documents, including due diligence
costs, and reasonably incurred by the Purchasers in connection with the purchase
of the Notes, Warrants and Preferred Stock hereunder and the transactions
comprising the financing and issuance of the FiberNet Note by FiberNet Telecom
to Trident Technology (such transactions collectively, the "Bridge Financing"),
all filings with any Governmental Authority, compliance with any Applicable Law,
or otherwise in connection with this Agreement, any other Transaction Document
or the Notes, Warrants or Preferred Stock issued hereunder, including, but not
limited to, the fees and disbursements of X'Xxxxxxxx Graev & Karabell, LLP,
counsel for the Purchasers and Xxxxxxxxxx Xxxxxxxxx Xxxxxx & Xxxxxx LLP, counsel
to Trident Technology in connection with the Bridge Financing. All amounts due
under this Section 8.4 shall be payable on demand of the Purchasers therefor by
wire transfer of immediately available funds to any designated bank account. All
statements, reports, certificates, opinions, appraisals and other documents or
information required to be furnished to the Purchasers by the Company under this
Agreement shall be supplied by the Company without cost to the Purchasers.
8.5 Indemnification.
(a) In addition to all rights and remedies available to the
Purchasers at law or in equity, the Company shall indemnify the Purchasers, each
subsequent holder of the Note and the Preferred Stock and their respective
affiliates, stockholders, officers, directors, employees, agents,
representatives, counsel, successors and permitted assigns (collectively, the
"Indemnified Persons") and save and hold each of them harmless against and pay
on behalf of or reimburse such party as and when incurred for any loss
(including, without limitation, diminutions in value and consequential damages),
liability, demand, claim, action, cause of action, cost, damage, deficiency, tax
(including any taxes imposed with respect to such indemnity payments), penalty,
fine or expense, whether or not arising out of any claims by or on behalf of any
other Loan Party or any third party, including interest, penalties, reasonable
attorneys' fees and expenses and all amounts paid in investigation, defense or
settlement of any of the foregoing (collectively, "Losses") which any such party
may suffer, sustain or become subject to, as a result of, in connection with,
relating or incidental to or by virtue of:
(i) any misrepresentation or breach of warranty on the part of
the Company under Article III of this Agreement or under any Transaction
Document;
(ii) without duplication of subsection (a)(i) above, any
misrepresentation in or omission from any of the representations,
warranties, statements, schedules and exhibits hereto, certificates or
other instruments or documents furnished to the Purchasers by the Company
and/or any other Loan Party made in or pursuant to this Agreement or under
any other Transaction Document;
(iii) any nonfulfillment or breach of any covenant or
agreement on the part of the Company or any other Loan Party under this
Agreement or under any other Transaction Document;
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(iv) any action, demand, proceeding, investigation or claim by
any third party (including, without limitation, Governmental Authorities)
against or affecting any Indemnified Person which, if successful, would
give rise to or evidence the existence of or relate to a breach of any of
the representations, warranties or covenants of the any other Loan Party;
(v) any claim (whenever made) relating in any way to a Loan
Party and any claim (whenever made) arising out of, relating to, resulting
from or caused by any transaction, status, event, condition, occurrence or
situation relating to, arising out of or in connection with (A) the status
or conduct of any Loan Party, (B) the execution, performance and delivery
of the Transaction Documents and the documents and agreements contemplated
thereby or (C) any actions taken by or omitted to be taken by any of the
Indemnified Persons in connection with this Agreement or any other
Transaction Document or the documents and agreements contemplated hereby
and thereby.
(b) Notwithstanding the foregoing, and subject to the following
sentence, upon judicial determination, which is final and no longer appealable,
that the act or omission giving rise to the indemnification hereinabove provided
resulted out of or was based upon the Indemnified Person's gross negligence,
fraud or willful misconduct was by the Indemnified Person, the Company shall not
be responsible for any Losses sought to be indemnified in connection therewith
by such Indemnified Person, and the Company shall be entitled to recover from
the Indemnified Person all amounts previously paid in full or partial
satisfaction of such indemnity with interest thereon at the rate of 15.0% per
annum calculated on the basis of a year of 365 days, together with all costs and
expenses of the Company reasonably incurred in effecting such recovery, if any.
(c) All indemnification rights hereunder shall survive the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby, regardless of any investigation, inquiry or examination
made for or on behalf of, or any knowledge of the Purchasers and/or any of the
Indemnified Persons or the acceptance by the Purchasers of any certificate or
opinion. In addition, for purposes of determining whether there has been a
breach, and the amount of any Losses that are the subject matter of a claim for
indemnification hereunder, each representation and warranty contained in this
Agreement shall be read without regard and without giving effect to any
materiality or knowledge standard or qualification contained in such
representation or warranty.
(d) If for any reason the indemnity provided for in this Section 8.5
is unavailable to any Indemnified Person or is insufficient to hold each such
Indemnified Person harmless from all such Losses arising with respect to the
transactions contemplated by this Agreement, then the Company shall contribute
to the amount paid or payable in respect of such Loss in such proportion as is
appropriate to reflect not only the relative benefits received by any Loan Party
on the one hand and such Indemnified Person on the other but also the relative
fault of any Loan Party and the Indemnified Person as well as any relevant
equitable considerations. In addition, Company agrees to reimburse any
Indemnified Person upon demand for all reasonable expenses (including legal
counsel fees) incurred by such Indemnified Person or any such other Person in
connection with investigating, preparing or defending any such action or claim.
The indemnity,
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contribution and expenses reimbursement obligations that the Company has under
this Section 8.5 shall be in addition to any liability that the Company may
otherwise have. The Company further agrees that the indemnification and
reimbursement commitments set forth in this Agreement shall apply whether or not
the Indemnified Person is a formal party to any such lawsuits, claims or other
proceedings.
8.6 Environmental Liability.
In addition to any indemnification of the Purchasers provided for in this
Section 8.5, the Company shall indemnify and hold harmless the Indemnified
Persons against and from any and all Losses of any nature whatsoever suffered or
incurred by any Indemnified Person whether upon realization of any security for
the Obligations, or as a lender to the Company, or as successor to or assignee
of any right or interest of the Company, or as a result of any order,
investigation or action by any Governmental Authority relating to the Company or
its business or assets, or as mortgagee in possession, or as
successor-in-interest to the Company by foreclosure deed or deed in lieu of
foreclosure, under or on account of any Environmental Law, including the
assertion of any lien thereunder, with respect to:
(a) the Release or threat of Release of a Contaminant, or the
presence of any Contaminant at, on or near any property owned, leased or
controlled by any Loan Party;
(b) the Release of a Contaminant owned by, or under the charge,
management or control of any Loan Party or any predecessor or assignor of any
Loan Party, at a place other than property owned, leased or controlled by any
Loan Party;
(c) any costs of removal or remedial action incurred by any
Governmental Authority or any costs incurred by any other Person or damages from
injury to, destruction, or loss of natural resources in relation to any property
owned, leased or controlled by any Loan Party or any contiguous real property or
elsewhere, including reasonable costs of assessing such injury, destruction or
loss incurred pursuant to any Environmental Laws;
(d) liability for personal injury or property damage arising under
any statutory or common law tort theory, including, without limitation, damages
assessed for the maintenance of a public or private nuisance or for the carrying
on of a dangerous activity at, on or near any property owned, leased or
controlled by any Loan Party or elsewhere; and/or
(e) any other environmental matter within the jurisdiction of any
Governmental Authority.
(f) The Company's obligation under this Section 8.6(f) shall arise
upon the discovery of the presence of any Contaminant, whether or not any
Governmental Authority has taken or threatened any action in connection with the
presence of any Contaminant.
(g) Any indemnification of the Purchasers or any other Indemnified
Person by the Company pursuant to this Section 8.6 shall be effected by wire
transfer of immediately available funds from the Company to an account
designated by the Purchasers or any other Indemnified Person within fifteen (15)
days after the determination thereof.
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8.7 GOVERNING LAW.
(a) ALL QUESTIONS CONCERNING THE CONSTRUCTION, INTERPRETATION AND
VALIDITY OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE DOMESTIC LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY CHOICE
OR CONFLICT OF LAW PROVISION OR RULE (WHETHER IN THE STATE OF NEW YORK OR ANY
OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
(b) THE PARTIES TO THIS AGREEMENT AGREE THAT JURISDICTION AND VENUE
IN ANY ACTION BROUGHT BY ANY PARTY HERETO PURSUANT TO THIS AGREEMENT SHALL
PROPERLY (BUT NOT EXCLUSIVELY) LIE IN ANY FEDERAL OR STATE COURT LOCATED IN THE
STATE OF NEW YORK. BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE PARTIES
HERETO IRREVOCABLY SUBMIT TO THE JURISDICTION OF SUCH COURTS FOR THEMSELVES AND
IN RESPECT OF THEIR PROPERTY WITH RESPECT TO SUCH ACTION. THE PARTIES HERETO
IRREVOCABLY AGREE THAT VENUE WOULD BE PROPER IN SUCH COURT, AND HEREBY WAIVE ANY
OBJECTION THAT SUCH COURT IS AN IMPROPER OR INCONVENIENT FORUM FOR THE
RESOLUTION OF SUCH ACTION.
(c) THE COMPANY HEREBY DESIGNATES AND APPOINTS FIBERNET EQUAL
ACCESS, L.L.C. AND SUCH OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY THE
COMPANY WITH THE WRITTEN CONSENT OF THE PURCHASERS WHICH IRREVOCABLY AGREE IN
WRITING TO SO SERVE AS ITS AGENT TO RECEIVE ON ITS BEHALF SERVICE OF ALL PROCESS
IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY
ACKNOWLEDGED BY THE COMPANY TO BE EFFECTIVE AND BINDING SERVICE IN EVERY
RESPECT. A COPY OF ANY SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL
TO THE COMPANY AT ITS ADDRESS PROVIDED IN SECTION 8.1 EXCEPT THAT UNLESS
OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT
AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY THE COMPANY
REFUSES TO ACCEPT SERVICE, THE COMPANY HEREBY AGREES THAT SERVICE UPON IT BY
MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT
TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT
OF THE PURCHASERS TO BRING PROCEEDINGS AGAINST THE COMPANY IN THE COURTS OF ANY
OTHER JURISDICTION.
(d) DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL
TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND
EXPERT PERSON. THEREFORE, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN
ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR
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REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS RELATED HERETO.
8.8 Rights and Waivers.
(a) The rights and remedies of the Purchasers under the Transaction
Documents and in connection therewith: (i) are cumulative, (ii) may be exercised
as often and in such order as the Purchasers consider appropriate, (iii) are in
addition to the rights and remedies of the Purchasers under the general law, and
(iv) shall not be capable of being waived or varied except by virtue of an
express waiver or variation in writing signed by an officer of the Purchasers;
and in particular any failure to exercise or any delay in exercising any of such
rights and remedies shall, to the extent permitted by law, not operate as a
waiver or variation of that or any other such right or remedy; any defective or
partial exercise of any of such rights shall, to the extent permitted by law,
not preclude any other or future exercise of that or any other such right or
remedy; and no act or course of conduct or negotiation on the part of the
Purchasers or on its behalf shall, to the extent permitted by law, in any way
preclude the Purchasers from exercising any such right or remedy or constitute a
suspension or variation of any such right or remedy.
(b) No Transaction Document nor any provision thereof, may be
waived, amended or modified except pursuant to an agreement or agreements in
writing entered into by the parties thereto.
8.9 Amendments
No amendments to, or modification of, this Agreement shall be made without
the written consent of the Company and the Majority in Interest.
8.10 No Fiduciary Relationship.
No provision in this Agreement or in any of the other Transaction
Documents and no course of dealing between the parties shall be deemed to create
any fiduciary duty by the Purchasers to any other Loan Party.
8.11 No duty.
All attorneys, accountants, appraisers, and other professional Persons and
consultants retained by the Purchasers shall have the right to act exclusively
in the interest of the Purchasers and shall have no duty of disclosure, duty of
loyalty, duty of care, or other duty or obligation of any type or nature
whatsoever to the Company or any of the Company's shareholders or any other
Person.
8.12 Construction.
The Company and the Purchasers acknowledge that each of them has had the
benefit of legal counsel of its own choice and has been afforded an opportunity
to review this Agreement and the other Transaction Documents with its legal
counsel and that this Agreement and the other Transaction Documents shall be
construed as if jointly drafted by the Purchasers and the Company.
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8.13 Severability.
Whenever possible, each provision of this Agreement will be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or any other jurisdiction, and such invalid, void or otherwise unenforceable
provisions shall be null and void. It is the intent of the parties, however,
that any invalid, void or otherwise unenforceable provisions be automatically
replaced by other provisions which are as similar as possible in terms to such
invalid, void or otherwise unenforceable provisions but are valid and
enforceable to the fullest extent permitted by law.
8.14 Counterparts.
This Agreement may be executed in two or more counterparts, each of which
when executed and delivered shall deemed to be an original, but all of which
when taken together shall constitute but one and the same instrument; either
party may execute this Agreement by signing any counterpart of it.
8.15 Headings.
Article and Section headings and the Table of Contents used herein are for
convenience of reference only and are not to affect the construction of, or to
be taken into consideration in interpreting, this Agreement.
8.16 Entire Agreement.
This Agreement, together with the other Transaction Documents, constitutes
the entire agreement between the parties relating to the subject matter hereof
and, except as stated herein or in the instruments and documents to be executed
and delivered pursuant hereto, contains all the representations and warranties
of the respective parties relating to the subject matter hereof.
8.17 Time of Essence.
Time shall be of the essence of this Agreement and the other Transaction
Documents, provided that the time for doing or completing any matter provided
for herein may be extended or abridged by an agreement in writing signed by the
parties or by their respective counsel who are hereby expressly appointed in
this regard.
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IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their authorized officers, all as of
the day and year first above written.
FIBERNET TELECOM GROUP, INC.
By:
-----------------------------------------
Name:
Title:
SIGNAL CAPITAL PARTNERS, L.P.
By: Signal Capital Advisors, L.P.
Its: General Partner
By: Signal Capital Advisors, Inc.
Its: General Partner
By:
-----------------------------------------
Name:
Title:
TRIDENT TELECOM PARTNERS LLC
By: Trident Telecom Management LLC
Its: Managing Member
By: Xxxxxxx Management, Inc.
Its: Managing Member
By:
-----------------------------------------
Name:
Title:
45
CONCORDIA TELECOM MANAGMENT, L.L.C.
By:
-----------------------------------------
Name: Xxxxxxx X. Xxxx
Title: Sole Member
BURDEN DIRECT INVESTMENT FUND III
By: Xxxxxxx A.M. Burden & Co., L.P.
Its: Managing General Partner
By: Burden Brothers, Inc.,
Its: Sole General Partner
By:
-----------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: President and CEO
PEQUOT SCOUT FUND, LP
By:
-----------------------------------------
Name:
Title:
XXXXX XXXX PARTNERS, L.P.
By: Xxxxx Xxxx Associates, L.P.
Its: General Partner
By: Xxxxx Xxxx, Inc.
Its: General Partner
By:
-----------------------------------------
Name: Xxxxxxx X. Xxxxxxx, Xx.
Title: Chairman, Xxxxx Xxxx, Inc.
46
LANCER OFFSHORE, INC.
By:
-----------------------------------------
Name:
Title:
ALEXANDER ENTERPRISE HOLDINGS CORP.
By:
-----------------------------------------
Name:
Title:
KING STREET CAPITAL LTD.
By:
-----------------------------------------
Name:
Title:
KING STREET CAPITAL LP
By:
-----------------------------------------
Name:
Title:
TAURUS TELECOMMUNICATION, INC.
By:
-----------------------------------------
Name:
Title:
47
Annex I
PURCHASERS
------------------------------------------- ------------------- ------------------- --------------- ---------------------
Principal Number of Shares Number Aggregate
Managing Purchasers Amount of Series C of Purchase
Name and Address of Note Preferred Stock Warrants Price
------------------------------------------- ------------------- ------------------- --------------- ---------------------
Signal Capital Partners, L.P
00 X. 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx Xxxxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000 $4,534,750.00 43,499.00 2,024,000 $4,600,000.00
------------------------------------------- ------------------- ------------------- --------------- ---------------------
Trident Telecom Partners LLC
000 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx Xxxxxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000 $4,189,715.00 40,189.00 2,068.00 $4,250,000.00
------------------------------------------- ------------------- ------------------- --------------- ---------------------
Concordia Telecom Management, L.L.C.
c/o FiberNet Telecom Group, Inc.
000 Xxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000 $492,908.00 4,728.00 220,000 $500,000.00
------------------------------------------- ------------------- ------------------- --------------- ---------------------
Other Purchasers
Name and Address
------------------------------------------- ------------------- ------------------- --------------- ---------------------
Burden Direct Investment Fund III
00 X. 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx Xxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000 $985,816.00 9,456.00 440,000 $1,000,000.00
------------------------------------------- ------------------- ------------------- --------------- ---------------------
Alexander Enterprise Holdings Corp.
c/o Alpha Investment Management, Inc.
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx X'Xxxxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000 $887,234.00 8,511.00 396,000 $900,000.00
------------------------------------------- ------------------- ------------------- --------------- ---------------------
48
------------------------------------------- ------------------- ------------------- --------------- ---------------------
King Street Capital Ltd.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxx Xxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000 $236,596.00 2,269.00 84,480.00 $240,000.00
------------------------------------------- ------------------- ------------------- --------------- ---------------------
King Street Capital LP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxx Xxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000 $256,312.00 2,459.00 91,520 $260,000.00
------------------------------------------- ------------------- ------------------- --------------- ---------------------
Pequot Scout Fund, LP
000 Xxxxx Xxxx Xxxx
Xxxxxxxx, XX 00000
Attn: Xxxx Xxxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000 $985,816.00 9,456.00 352,000 $1,000,000.00
------------------------------------------- ------------------- ------------------- --------------- ---------------------
Xxxxx Xxxx Partners, L.P.
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxx Xx.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000 $739,362.00 7,092.00 264,000 $750,000.00
------------------------------------------- ------------------- ------------------- --------------- ---------------------
Taurus Telecommunication, Inc.
0000 Xxxxx Xxx
Xxxxxxxxxxx, , X.X. 00000
Attn: Xxxxxxx Xxxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000 $98,582.00 946.00 44,000 $100,000.00
------------------------------------------- ------------------- ------------------- --------------- ---------------------
Lancer Offshore, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx Xxxxx
Telephone: (000) 000-0000
Telecopier: (000-000-0000 $492,908.00 4,728.00 220,000 $500,000.00
------------------------------------------- ------------------- ------------------- --------------- ---------------------
49
Annex II
MANAGING PURCHASERS Number of Class B Warrants
------------------- --------------------------
Concordia Telecom Management, L.L.C. 891,667
Trident Telecom Management LLC 416,666
Signal Capital Partners, L.P. 291,667
50
Annex III
[To be provided by Company.]
