JATO COMMUNICATIONS CORP.
SERIES D PREFERRED STOCK
PURCHASE AGREEMENT
FEBRUARY 9, 2000
TABLE OF CONTENTS
PAGE NO.
SECTION 1. AGREEMENT TO SELL AND PURCHASE. . . . . . . . . . . . . . . . . . . . . .1
1.1 Authorization of Shares. . . . . . . . . . . . . . . . . . . . . . . . . .1
1.2 Sale and Purchase. . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Section 2. CLOSING, DELIVERY AND PAYMENT . . . . . . . . . . . . . . . . . . . . . .1
2.1 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
2.2 Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Section 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . .2
3.1 Organization, Good Standing and Qualification. . . . . . . . . . . . . . .2
3.2 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
3.3 Capitalization; Voting Rights. . . . . . . . . . . . . . . . . . . . . . .2
3.4 Authorization; Binding Obligations . . . . . . . . . . . . . . . . . . . .3
3.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . .4
3.6 Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
3.7 Agreements; Action . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
3.8 Obligations to Related Parties . . . . . . . . . . . . . . . . . . . . . .5
3.9 Absence of Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
3.10 Real Properties; Tangible Personal Property. . . . . . . . . . . . . . . .7
3.11 Patents and Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . .7
3.12 Compliance with Other Instruments. . . . . . . . . . . . . . . . . . . . .8
3.13 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.14 Tax Returns and Payments . . . . . . . . . . . . . . . . . . . . . . . . .8
3.15 Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.16 Proprietary Information and Inventions Agreements. . . . . . . . . . . . .9
3.17 Obligations of Management. . . . . . . . . . . . . . . . . . . . . . . . .9
3.18 Registration Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.19 Compliance with Laws; Permits. . . . . . . . . . . . . . . . . . . . . . 10
3.20 Full Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.21 Application of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . 10
3.22 Certain Limitations. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
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3.23 Environmental. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.24 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.25 Offering.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER . . . . . . . . . . . . 12
4.1 Requisite Power and Authority. . . . . . . . . . . . . . . . . . . . . . 12
4.2 Investment Representations . . . . . . . . . . . . . . . . . . . . . . . 12
4.3 Transfer Restrictions. . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5. CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.1 Conditions to Purchaser's Obligations at the Closing . . . . . . . . . . 13
5.2 Conditions to Obligations of the Company . . . . . . . . . . . . . . . . 14
Section 6. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.1 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.2 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.4 Entire Agreement; Amendment. . . . . . . . . . . . . . . . . . . . . . . 16
6.5 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.6 Delays or Omissions. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.7 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.8 Titles and Subtitles . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.10 Broker's Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.11 Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
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INDEX OF EXHIBITS
Schedule of Purchasers Exhibit A
Restated Certificate of Incorporation Exhibit B
Second Amended and Restated Investors' Rights Agreement Exhibit C
Second Amended and Restated Stockholders' Agreement Exhibit D
Form of Non-Competition Proprietary
Information and Inventions Agreement Exhibit E
Right of First Refusal and Standstill Agreement Exhibit F
Form of Legal Opinion Exhibit G
Stock Purchase Agreement Exhibit H
Form of Master Services Agreement and Wholesale
Services Agreement Exhibit I
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JATO COMMUNICATIONS CORP.
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES D PREFERRED STOCK PURCHASE AGREEMENT (the "AGREEMENT") is
entered into as of this 9th day of February, 2000, by and among JATO
COMMUNICATIONS CORP., a Delaware corporation (the "COMPANY"), and U.S.
TELESOURCE, INC., whose name and address are set forth on the Schedule of
Purchasers attached hereto as EXHIBIT A ("PURCHASER").
RECITALS
WHEREAS, the Company has authorized the sale and issuance of up to an
aggregate of five million (5,000,000) shares of its Series D Preferred Stock,
$.01 par value (the "SHARES"); and
WHEREAS, the Company desires to issue and sell the Shares to Purchaser
and Purchaser desires to purchase a portion of the Shares from the Company on
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereto agree as follows:
SECTION 1. AGREEMENT TO SELL AND PURCHASE
1.1 AUTHORIZATION OF SHARES. On or prior to the Closing (as defined in
Section 2 below), the Company shall have authorized (i) the sale and issuance
to Purchaser of the Shares and (ii) the issuance of such shares of Common
Stock to be issued upon conversion of the Shares (the "CONVERSION SHARES").
The Shares and the Conversion Shares shall have the rights, preferences,
privileges and restrictions set forth in the Restated Certificate of
Incorporation of the Company, in the form attached hereto as EXHIBIT B (the
"CERTIFICATE").
1.2 SALE AND PURCHASE. Subject to the terms and conditions hereof, at
the Closing (as hereinafter defined), the Company hereby agrees to issue and
sell to Purchaser and Purchaser agrees to purchase from the Company, the
number of Shares set forth opposite Purchaser's name on EXHIBIT A at a
purchase price of $5.60 per share.
SECTION 2. CLOSING, DELIVERY AND PAYMENT
2.1 CLOSING. The closing of the sale and purchase of the Shares under
this Agreement (the "CLOSING") shall take place on the date hereof, at the
offices of Xxxxxx Godward LLP, 0000 Xxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxx,
Xxxxxxxx 00000, or at such other time or place as the Company and Purchaser
may mutually agree (such date is hereinafter referred to as the "CLOSING
DATE").
2.2 DELIVERY. At the Closing, subject to the terms and conditions
hereof, the Company will deliver to the Purchaser one or more stock
certificates, as Purchaser may request,
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representing the number of Shares to be purchased at the Closing by
Purchaser, registered in Purchaser's name, against payment of the purchase
price therefor, by check or wire transfer made payable to the order of the
Company.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on a Schedule of Exceptions delivered by the Company
to the Purchaser at the Closing, the Company hereby represents and warrants
to Purchaser as of the date of this Agreement as follows:
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company and
each Subsidiary (as defined in Section 3.2 below) is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware or, with respect to Jato Communications Corp. of Virginia, the
Commonwealth of Virginia. Each of the Company and Subsidiary has all
requisite corporate power and authority to own and operate their respective
properties and assets. The Company has all requisite corporate power and
authority to execute and deliver this Agreement, the Second Amended and
Restated Investors' Rights Agreement, in the form attached hereto as EXHIBIT
C (the "INVESTORS' RIGHTS AGREEMENT"), and the Second Amended and Restated
Stockholders' Agreement, in the form attached hereto as EXHIBIT D (the
"STOCKHOLDERS' AGREEMENT"), issue and sell the Shares and the Conversion
Shares and to carry out the provisions of this Agreement, the Investors'
Rights Agreement, the Stockholders' Agreement and the Certificate. Each of
the Company and Subsidiary has the requisite corporate power and authority to
carry on its business as presently conducted and as presently proposed to be
conducted. Each of the Company and Subsidiary is duly qualified and is
authorized to do business and is in good standing as a foreign corporation in
all jurisdictions in which the nature of their respective activities and of
their respective properties (both owned and leased) make such qualifications
necessary, except for those jurisdictions in which failure to do so would not
have a material adverse effect on the Company or Subsidiary or their
respective businesses. The Company has made available to the Purchaser true,
correct and complete copies of the Company's Restated Certificate of
Incorporation and Amended Bylaws, each as amended to date and in full force
and effect on the date hereof. The Company has made available to the
Purchaser true, correct and complete copies of Subsidiary's Certificate of
Incorporation and Bylaws, each as amended to date and in full force and
effect on the date hereof. Since its inception, Subsidiary has had no
operations and has not incurred any material obligations.
3.2 SUBSIDIARIES. Other than Jato Operating Corp., a Delaware
corporation, Jato Operating Two Corp., a Delaware corporation, and Jato
Communications Corp. of Virginia, a Virginia corporation (collectively, the
"SUBSIDIARY"), the Company owns no equity securities of any other
corporation, limited partnership or similar entity. The Company is not a
participant in any joint venture, partnership or similar arrangement. The
Company owns shares of the Subsidiary free and clear of all encumbrances.
3.3 CAPITALIZATION; VOTING RIGHTS.
(a) The authorized capital stock of the Company, immediately prior
to the Closing, will consist of (a) eighty million (80,000,000) shares of
Common Stock, of which six million seven hundred ninety-seven thousand eight
hundred fourteen (6,797,814) shares are
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issued and outstanding, and (b) thirty million (30,000,000) shares of
Preferred Stock, of which one million seven hundred fifty-one thousand nine
hundred eighty-five (1,751,985) shares are designated Series A Preferred
Stock, of which one million seven hundred fifty-one thousand nine hundred
eighty five (1,751,985) are issued and outstanding, of which thirteen million
six hundred fifteen thousand three hundred twenty-two (13,615,322) shares are
designated Series B Preferred Stock, of which thirteen million six hundred
fifteen thousand three hundred twenty-two (13,615,322) are issued and
outstanding, of which four million nine hundred thirty-two thousand three
hundred eight (4,932,308) shares are designated Series C Preferred Stock, of
which four million nine hundred thirty-two thousand three hundred eight
(4,932,308) are issued and outstanding, and of which five million (5,000,000)
shares are designated Series D Preferred Stock, of which one million seven
hundred eighty-five thousand seven hundred fourteen (1,785,714) are issued
and outstanding. All issued and outstanding shares of the Company's Common
Stock and Preferred Stock (i) have been duly authorized and validly issued,
(ii) are fully paid and nonassessable and (iii) were issued in compliance
with all applicable state and federal laws concerning the issuance of
securities. The rights, preferences, privileges and restrictions of the
Shares are as stated in the Certificate. The Conversion Shares have been
duly and validly reserved for issuance. As of the Closing, there has been no
action taken by the Company which would have required an adjustment to the
Series D Conversion Price, as defined in the Certificate. Except as set forth
on the Schedule of Exceptions and except as may be granted pursuant to this
Agreement or the Investors' Rights Agreement, there are no outstanding
options, warrants, rights (including conversion or preemptive rights and
rights of first refusal), proxy or stockholder agreements, or agreements of
any kind for the purchase or acquisition from the Company of any of its
securities. The Shares and the Conversion Shares have been duly authorized
and, when issued in compliance with the provisions of this Agreement and the
Certificate, will be validly issued (including, without limitation, issued in
compliance with applicable state and federal securities laws), fully paid and
nonassessable, subject to no preemptive rights, and will be free of any liens
or encumbrances; PROVIDED, HOWEVER, that the Shares and the Conversion Shares
may be subject to restrictions on transfer under state and/or federal
securities laws as set forth herein or as otherwise required by such laws at
the time transfer is proposed.
(b) The authorized capital stock of (i) Jato Operating Corp.
consists of eleven hundred (1,100) shares of Common Stock, (ii) Jato
Operating Two Corp. consists of one hundred (100) shares of Common Stock, and
(iii) Jato Communications Corp. of Virginia consists of one hundred (100)
shares of Common Stock, all of which shares are issued and outstanding and
held of record by the Company.
3.4 AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on the
part of the Company, its officers, directors and stockholders necessary for
the authorization of this Agreement, the Investors' Rights Agreement and the
Stockholders' Agreement, the performance of all obligations of the Company
hereunder and thereunder at the Closing and the authorization, sale, issuance
and delivery of the Shares pursuant hereto and the Conversion Shares pursuant
to the Certificate has been taken or will be taken prior to the Closing. The
Agreement, the Investors' Rights Agreement and the Stockholders' Agreement,
when executed and delivered, will be valid and binding obligations of the
Company enforceable in accordance with their terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
of general application affecting enforcement of creditors' rights; (ii)
general principles of
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equity that restrict the availability of equitable remedies; and (iii) to the
extent that the enforceability of the indemnification provisions in Section
3.12 of the Investors' Rights Agreement may be limited by applicable laws.
The sale of the Shares and the subsequent conversion of the Shares into
Conversion Shares are not and will not be subject to any preemptive rights or
rights of first refusal that have not been properly waived or complied with.
3.5 FINANCIAL STATEMENTS. The Company has delivered to Purchaser (i)
its audited balance sheet as at December 31, 1998 and audited statement of
income and cash flows for the period from inception and ending December 31,
1998 and (ii) its unaudited balance sheet as at November 30, 1999 (the
"STATEMENT DATE") and unaudited consolidated statement of income for the
eleven-month period ending on the Statement Date (collectively, the
"FINANCIAL STATEMENTS"). The Financial Statements, together with the notes
thereto, are complete and correct in all material respects, have been
prepared in accordance with generally accepted accounting principles applied
on a consistent basis throughout the periods indicated, except as disclosed
therein, and present fairly the financial condition and position of the
Company as of December 31, 1998 and the Statement Date; PROVIDED, HOWEVER,
that the unaudited financial statements are subject to normal recurring
year-end audit adjustments (which are not expected to be material), and may
not contain all footnotes required under generally accepted accounting
principles.
3.6 LIABILITIES. The Company has no material liabilities and, to its
knowledge, knows of no material contingent liabilities not otherwise
disclosed in the Financial Statements, except current liabilities incurred in
the ordinary course of business subsequent to the Statement Date which have
not been, either in any individual case or in the aggregate, materially
adverse.
3.7 AGREEMENTS; ACTION.
(a) Except as set forth on the Schedule of Exceptions and except
for agreements explicitly contemplated hereby, there are no agreements,
understandings or proposed transactions between the Company and any of its
officers, directors, affiliates or their respective affiliates.
(b) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to
which the Company is a party or to its knowledge by which it is bound which
may involve (i) obligations (contingent or otherwise) of, or payments to, the
Company in excess of $25,000, or (ii) the license of any patent, copyright,
trade secret or other proprietary right to or from the Company (other than
licenses arising from the purchase of "off the shelf" or other standard
products), or (iii) provisions restricting or affecting the development,
manufacture or distribution of the Company's products or services, or (iv)
indemnification by the Company with respect to infringements of proprietary
rights.
(c) The Company has not (i) declared or paid any dividends, or
authorized or made any distribution upon or with respect to any class or
series of its capital stock, (ii) incurred any indebtedness for money
borrowed or any other liabilities (other than with respect to indebtedness
and other obligations incurred in the ordinary course of business or as
disclosed in the Financial Statements) individually in excess of $25,000 or,
in the case of indebtedness and/or liabilities individually less than
$25,000, in excess of $75,000 in the aggregate, (iii) made any
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loans or advances to any person, other than ordinary advances for travel
expenses, or (iv) sold, exchanged or otherwise disposed of any of its assets
or rights, other than the sale of its inventory in the ordinary course of
business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including
persons or entities the Company has reason to believe are affiliated
therewith) shall be aggregated for the purpose of meeting the individual
minimum dollar amounts of such subsections.
3.8 OBLIGATIONS TO RELATED PARTIES. There are no obligations of the
Company to officers, directors, stockholders, or employees of the Company
other than (a) for payment of salary for services rendered, (b) reimbursement
for reasonable expenses incurred on behalf of the Company and (c) for other
standard employee benefits made generally available to all employees
(including stock option agreements outstanding under any stock option plan
approved by the Board of Directors of the Company). No such officer,
director or stockholder, or any member of their immediate families is,
directly or indirectly, interested in any material contract with the Company
(other than such contracts as relate to any such person's ownership of
capital stock or other securities of the Company). The Company is not a
guarantor or indemnitor of any indebtedness of any other person, firm or
corporation.
3.9 ABSENCE OF CHANGES. Except as set forth on the Schedule of
Exceptions, since the Statement Date, there has not been:
(a) Any change in the assets, liabilities, financial condition,
earnings or operations of the Company from that reflected in the Financial
Statements, other than changes in the ordinary course of business, none of
which individually or in the aggregate has had or is expected to have a
material adverse effect on such assets, liabilities, financial condition,
earnings or operations of the Company;
(b) Any resignation or termination of any key officers of the
Company; and the Company, to the best of its knowledge, does not know of the
impending resignation or termination of employment of any such officer;
(c) Any material change in the contingent obligations of the
Company by way of guaranty, endorsement, indemnity, warranty or otherwise;
(d) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, business or
prospects or financial condition of the Company;
(e) Any waiver by the Company of a valuable right or of a material
debt owed to it;
(f) Any direct or indirect loans made by the Company to any
stockholder, employee, officer or director of the Company, other than
immaterial advances made in the ordinary course of business;
5
(g) Any material change in any compensation arrangement or
agreement with any employee, officer, director or stockholder including,
without limitation, any (i) increase in the compensation payable or to become
payable by the Company to any of the Company's employees, (ii) any bonus,
incentive compensation, service award or other like benefit, granted, made or
accrued, contingently or otherwise, to or for the credit of the Company's
employees, or (iii) any employee welfare, pension, retirement, profit-sharing
or similar payment or arrangement (whether or not subject to ERISA) made or
agreed to by the Company;
(h) Any declaration or payment of any dividend or other
distribution of the assets of the Company;
(i) Any labor organization activity;
(j) Any debt, obligation or liability incurred, assumed or
guaranteed by the Company, except those for immaterial amounts and for
current liabilities incurred in the ordinary course of business;
(k) Any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets;
(l) Any change in any material agreement to which the Company is a
party or by which it is bound which materially and adversely affects the
business, assets, liabilities, financial condition, operations or prospects
of the Company;
(m) (i) Any change in practice with respect to taxes, (ii) any
making, changing or revoking of any tax election, or (iii) any settlement or
compromise of any dispute involving a tax liability;
(n) Any change in the number of shares of capital stock of the
Company issued and outstanding;
(o) Any failure to conduct the business of the Company in the
ordinary course;
(p) Any change in the method of accounting or accounting practice
of the Company;
(q) Any change in the Company's lines of business; or
(r) Any other event or condition of any character that, either
individually or cumulatively, has materially and adversely affected the
business, assets, liabilities, financial condition, operations or prospects
of the Company. For purposes of this subsection (r), a material and adverse
effect shall only be deemed to occur if its monetary impact exceeds, or with
the passage of time, will exceed $75,000.
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3.10 REAL PROPERTIES; TANGIBLE PERSONAL PROPERTY.
(a) REAL PROPERTIES. The Schedule of Exceptions sets forth each
lease or other agreement (including easements) under which the Company leases
or has rights in any real property (the "REAL PROPERTY LEASES," and, each
individually, a "REAL PROPERTY LEASE"). The Company has a valid and
subsisting leasehold interest in all the real property which is the subject
of each Real Property Lease. The Company does not presently own, and has
never owned, any real property and does not presently operate, and has never
operated, any real property, other than as a lessee.
(b) TANGIBLE PERSONAL PROPERTY. Except as set forth on the
Schedule of Exceptions, (i) the Company has good, marketable and valid title
to all of the items of tangible personal property used in its operations and
(ii) all such tangible personal property is reflected on the Company's
unaudited Financial Statements, except as sold or disposed of subsequent to
the date thereof in the ordinary course of business consistent with past
practices. The tangible personal property of the Company is in good repair
and working order, reasonable wear and tear excepted, and constitutes all of
the tangible personal property necessary for the operation of the business as
currently conducted.
3.11 PATENTS AND TRADEMARKS. The Company is the sole owner, free of any
lien or encumbrance, of, or has a valid license, on commercially reasonable
terms, to, all U.S. and foreign patents, registered designs, copyrights,
computer software and databases, trademarks, service marks and trade names,
whether or not registered, and other trade secrets, research and development,
formulae, inventions, processes, know-how and proprietary and intellectual
property rights and information, including all grants, registrations and
applications relating thereto (collectively, the "PROPRIETARY RIGHTS")
necessary for the conduct of its business as now conducted (the "COMPANY
RIGHTS"). The Company's rights in the Company Rights are, to the Company's
knowledge, valid and enforceable. The Company has received no demand, claim,
notice or inquiry from any person in respect of the Company Rights which
challenges, threatens to challenge or inquires as to whether there is any
basis to challenge, the validity of, or the rights of the Company in, any
such Company Rights. There are no outstanding options, licenses or
agreements of any kind relating to the Company Rights, nor is the Company
bound by or a party to any options, licenses or agreements of any kind with
respect to the Proprietary Rights of any other person or entity other than
such licenses or agreements arising from the purchase of "off the shelf" or
standard products. The Company has taken, and will take, all actions which
are necessary in order to protect the Company Rights and to acquire
additional Proprietary Rights, consistent with prudent commercial practices
in the telecommunications industry. To the knowledge of the Company, the
Company is not in violation or infringement of, and has not violated or
infringed, any Proprietary Rights of any other person. To the knowledge of
the Company, no person is infringing any Company Rights. The Company is not
aware that any of its employees is obligated under any contract (including
licenses, covenants or commitments of any nature) or other agreement, or
subject to any judgment, decree or order of any court or administrative
agency, that would interfere with their duties to the Company's business by
the employees of the Company, nor will, to the Company's knowledge, the
conduct of the Company's business as proposed conflict with or result in a
breach of the terms, conditions or provisions of, or constitute a default
under, any contract, covenant or instrument under which any employee is now
obligated. The Company does not believe it is or will be necessary to
7
utilize any inventions, trade secrets or proprietary information of any of
its employees made prior to their employment by the Company, except for
inventions, trade secrets or proprietary information that have been assigned
to the Company.
3.12 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in violation
or default of any term of its Certificate or Amended Bylaws, or of any
provision of any mortgage, indenture, contract, agreement, instrument or
contract to which it is party or by which it is bound or of any judgment,
decree, order, writ or any statute, rule or regulation applicable to the
Company which would materially and adversely affect the business, assets,
liabilities, financial condition, operations or prospects of the Company.
The execution, delivery, and performance of and compliance with this
Agreement, the Investors' Rights Agreement, the Stockholders' Agreement and
the Compliance Certificate to be delivered pursuant to Section 5.1(f) hereof,
and the issuance and sale of the Shares pursuant hereto and of the Conversion
Shares pursuant to the Certificate, will not, with or without the passage of
time or giving of notice, result in any such material violation, or be in
conflict with or constitute a default under any such term, or result in the
creation of any mortgage, pledge, lien, encumbrance or charge upon any of the
properties or assets of the Company or the suspension, revocation,
impairment, forfeiture or nonrenewal of any permit, license, authorization or
approval applicable to the Company, its business or operations or any of its
assets or properties.
3.13 LITIGATION. There is no action, suit, proceeding or investigation
pending, or to the Company's knowledge, currently threatened against the
Company that questions the validity of this Agreement, the Investors' Rights
Agreement or the Stockholders' Agreement or the right of the Company to enter
into any of such agreements, or to consummate the transactions contemplated
hereby or thereby, or which might result, either individually or in the
aggregate, in any material adverse change in the assets, condition, affairs
or prospects of the Company, financially or otherwise, or any change in the
current equity ownership of the Company, nor is the Company aware that there
is any basis for the foregoing. The foregoing includes, without limitation,
actions pending or threatened (or any basis therefor known to the Company)
involving the prior employment of any of the Company's employees, their use
in connection with the Company's business of any information or techniques
allegedly proprietary to any of their former employers, or their obligations
under any agreements with prior employers. The Company is not a party or
subject to the provisions of or in violation of any order, writ, injunction,
judgment or decree or any rule or regulation of any court or government
agency or instrumentality. There is no action, suit, proceeding or
investigation by the Company currently pending or which the Company intends
to initiate.
3.14 TAX RETURNS AND PAYMENTS. The Company has timely filed all tax
returns (federal, state and local) required to be filed by it. All taxes
shown to be due and payable on such returns, any assessments imposed, and to
the Company's knowledge all other taxes due and payable by the Company on or
before the Closing have been paid or will be paid prior to the time they
become delinquent. The Company has not been advised (i) that any of its
returns, federal, state or other, have been or are being audited as of the
date hereof, or (ii) of any deficiency in assessment or proposed judgment to
its federal, state or other taxes. The Company has no knowledge of any
liability of any tax to be imposed upon its properties or assets as of the
date of this Agreement that is not adequately provided for. Neither the
Company nor the Subsidiary is a party to any agreement relating to allocating
or sharing the payment of, or liability for taxes with
8
respect to, any taxable period. Neither the Company nor Subsidiary has any
deferred income reportable for a period ending after the Closing Date that is
attributable to a transaction (e.g., an installment sale) occurring in, or
resulting from a change of accounting method for, a period ending on or prior
to the Closing Date.
3.15 EMPLOYEES. The Company is not a party to or bound by any currently
effective employment contract, deferred compensation arrangement, bonus plan,
incentive plan, profit sharing plan, retirement agreement or other employee
compensation plan or agreement. Neither the Company, nor any entity which is
required to be aggregated with the Company pursuant to Sections 414(b), (c),
(m) or (o) of the Internal Revenue Code of 1986 has any liability whether
actual or contingent, with respect to any employee benefit plan or
arrangement. To the Company's knowledge, no employee of the Company, nor any
consultant with whom the Company has contracted, is in violation of any term
of any employment contract, proprietary information agreement or any other
agreement relating to the right of any such individual to be employed by, or
to contract with, the Company because of the nature of the business to be
conducted by the Company; and to the Company's knowledge the continued
employment by the Company of its present employees, and the performance of
the Company's contracts with its independent contractors, will not result in
any such violation. The Company has not received any notice alleging that
any such violation has occurred. No employee of the Company has been granted
the right to continued employment by the Company or to any material
compensation following termination of employment with the Company. The
Company is not aware that any officer or key employee, or that any group of
key employees, intends to terminate their employment with the Company, nor
does the Company have a present intention to terminate the employment of any
officer, key employee or group of key employees. To the Company's knowledge,
the Company is in compliance with all laws and orders relating to the
employment of labor, including, without limitation, all such laws and orders
relating to wages, hours, discrimination, civil rights, safety and the
collection and payment of withholding and/or Social Security taxes and
similar taxes. There are no complaints, charges or claims against the
Company pending, or, to the Company's knowledge, threatened to be brought or
filed, with any governmental entity or arbitrator based on, arising out of,
in connection with, or otherwise relating to the employment or termination of
employment of any individual by the Company.
3.16 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS. Each current
employee, officer and consultant of the Company has executed a Proprietary
Information and Inventions Agreement that effectively waives any ownership
rights in the invention or authorship of any Company Rights and has assigned
to the Company all rights with respect thereto. No current employee, officer
or consultant of the Company has excluded works or inventions made prior to
his or her employment with the Company from his or her assignment of the
works or inventions pursuant to such employee, officer or consultant's
Non-Competition, Proprietary Information and Inventions Agreement in the form
attached hereto as EXHIBIT E.
3.17 OBLIGATIONS OF MANAGEMENT. Each officer of the Company is
currently devoting one hundred percent (100%) of his business time to the
conduct of the business of the Company. The Company is not aware of any
officer or key employee of the Company planning to work less than full time
at the Company in the future.
9
3.18 REGISTRATION RIGHTS. Except as required pursuant to the Investors'
Rights Agreement, the Company is presently not under any obligation, and has
not granted any rights, to register (as defined in Section 1 of the
Investors' Rights Agreement) any of the Company's presently outstanding
securities or any of its securities that may hereafter be issued.
3.19 COMPLIANCE WITH LAWS; PERMITS. The Company is not in violation of
any applicable statute, rule, regulation, order or restriction of any
domestic or foreign government or any instrumentality or agency thereof in
respect of the conduct of its business or the ownership of its properties
which violation would materially and adversely affect the business, assets,
liabilities, financial condition, operations or prospects of the Company. No
governmental orders, permissions, consents, approvals or authorizations are
required to be obtained and no registrations or declarations are required to
be filed in connection with the execution and delivery of this Agreement and
the issuance of the Shares or the Conversion Shares, except such as has been
duly and validly obtained or filed, or with respect to any filings that must
be made after the Closing, as will be filed in a timely manner. The Schedule
of Exceptions sets forth the states in which the Company has obtained all
franchises, permits, licenses and any similar authority necessary for the
conduct of its business as now being conducted by it, the lack of which could
materially and adversely affect the business, properties, prospects or
financial condition of the Company.
3.20 FULL DISCLOSURE. This Agreement, the Exhibits hereto, the Schedule
of Exceptions, the Investors' Rights Agreement, the Stockholders' Agreement
and all other documents delivered by the Company to Purchaser or its
attorneys or agents in connection herewith or therewith or with the
transactions contemplated hereby or thereby, do not contain any untrue
statement of a material fact nor omit to state a material fact necessary in
order to make the statements contained herein or therein not misleading.
There is no fact peculiar to the Company and known to the Company which
materially adversely affects, or reasonably could be expected to materially
adversely affect in the future, the business, property or assets, or
financial condition of the Company, which has not been set forth in this
Agreement or in the other documents described herein or furnished to the
Purchaser by or on behalf of the Company prior to the date hereof in
connection with the transactions contemplated hereby.
3.21 APPLICATION OF PROCEEDS. The proceeds of the sale of the Shares
will be used by the Company to fund the capital expenditures and working
capital needs of the Company and for other general corporate purposes. The
Company does not own any "margin security" within the meaning of Regulation T
(12 CFR Part 220) of the Board of Governors of the Federal Reserve System
(herein called a "margin security") or "margin stock" within the meaning of
Regulation U (12 CFR Part 221) of the Board of Governors of the Federal
Reserve System (herein called "margin stock"). Neither the Company nor any
agent acting on its behalf, has taken or will take any action which might
cause this Agreement to violate Regulation T, Regulation U, Regulation X or
any other regulation of the Board of Governors of the Federal Reserve System
or to violate the Securities Exchange Act of 1934, in each case as in effect
now or as the same hereafter may be in effect.
3.22 CERTAIN LIMITATIONS. Neither the nature of the Company, nor any of
its respective businesses or properties, nor any relationship between the
Company and any other person, nor any circumstance in connection with the
offer, issue, sale or delivery of the Shares
10
(other than in any such case, any matter relating to the Purchaser) is, such
as to require or give rise to any limitation on any Purchaser's ownership of
any equity securities of the Company.
3.23 ENVIRONMENTAL.
(a) To the Company's knowledge, the Company complies, and at all
times has complied, in all material respects with all applicable
Environmental Laws. For the purposes hereof, "ENVIRONMENTAL LAW" shall mean
any judgment, decree, order, law, permit, license, rule, regulation or agency
requirement relating to or addressing the environment, health or safety (to
the extent relating to exposure to any hazardous substance), including,
without limitation, the Comprehensive Environmental Response, Compensation
and Liability Act, as amended, the Resource Conservation and Recovery Act, as
amended, the Superfund Amendments and Reauthorization Act of 1986, the
Federal Clean Water Act, the Federal Clean Air Act, the Toxic Substances
Control Act and any federal, state, local or foreign statute, regulation,
ordinance, order or decree relating to health, safety (in the case of health
and safety to the extent relating to exposure in the workplace or otherwise
to any Hazardous Substance) or the environment.
(b) There is not now pending or, to the Company's knowledge,
threatened any action, claim, proceeding or investigation nor has the Company
received any notice, claim, demand letter, or request for information at any
time, alleging that the Company may be in violation of, or liable under, any
Environmental Law.
(c) To the Company's knowledge, without initiating any inquiry,
there are no hazardous substances located on the properties currently or
formerly owned or operated by the Company (including soil, groundwater or
surface features and buildings or structures thereon) other than as permitted
under applicable Environmental Laws, and none of the properties contain, or
has contained, any underground storage tank.
3.24 INSURANCE. The Company maintains and/or is covered by valid
policies of workers' compensation insurance and of insurance with respect to
its properties and business. The Company currently maintains, in full force,
insurance covering the risks of the Company, if any, of such types and in
such amounts and with such deductibles as are customary for other companies
engaged in similar lines of business and with good and responsible insurance
companies.
3.25 OFFERING. The Company, nor any person or entity acting on its
behalf, has not engaged in any form of general solicitation or advertising in
connection with the offer and sale of the Company's Series A, Series B,
Series C and Series D Preferred Stock (the "SERIES PREFERRED"). No offers to
sell the Series Preferred were made by any person or entity other than the
Company. The offer and sale of the shares of the Series Preferred were made
solely to accredited investors or qualified institutional buyers. Neither
the Company nor any affiliate has been subject to any order, judgment, or
decree of any court of competent jurisdiction enjoining either the Company or
such affiliate for failure to comply with Rule 503 of Regulation D. Assuming
the accuracy of the representations and warranties of the Purchaser contained
in Section 4.2(f) hereof, the Company has given Purchaser the opportunity to
discuss the Company's business, management and financial affairs with the
Company's management and the opportunity to review the Company's business
plan.
11
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Purchaser hereby represents and warrants to the Company as follows (such
representations and warranties do not lessen or obviate the representations
and warranties of the Company set forth in this Agreement):
4.1 REQUISITE POWER AND AUTHORITY. Purchaser has all necessary power
and authority under all applicable provisions of law to execute and deliver
this Agreement, the Investors' Rights Agreement, the Stockholders' Agreement
and to carry out their provisions. All action on Purchaser's part required
for the lawful execution and delivery of this Agreement, the Investors'
Rights Agreement and the Stockholders' Agreement has been or will be
effectively taken prior to the Closing. Upon their execution and delivery,
this Agreement, the Investors' Rights Agreement and the Stockholders'
Agreement will be valid and binding obligations of Purchaser, enforceable in
accordance with their terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
affecting enforcement of creditors' rights, (ii) general principles of equity
that restrict the availability of equitable remedies and (iii) to the extent
that the enforceability of the indemnification provisions of the Investors'
Rights Agreement may be limited by applicable laws.
4.2 INVESTMENT REPRESENTATIONS. Purchaser understands that neither the
Shares nor the Conversion Shares have been registered under the Securities
Act. Purchaser also understands that the Shares are being offered and sold
pursuant to an exemption from registration contained in the Securities Act
based in part upon Purchaser's representations contained in the Agreement.
Purchaser hereby represents and warrants as follows:
(a) PURCHASER BEARS ECONOMIC RISK. Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. Purchaser must bear the economic risk
of this investment indefinitely unless the Shares (or the Conversion Shares)
are registered pursuant to the Securities Act, or an exemption from
registration is available. Purchaser also understands that there is no
assurance that any exemption from registration under the Securities Act will
be available and that, even if available, such exemption may not allow
Purchaser to transfer all or any portion of the Shares or the Conversion
Shares under the circumstances, in the amounts or at the times Purchaser
might propose.
(b) ACQUISITION FOR OWN ACCOUNT. Purchaser is acquiring the
Shares and the Conversion Shares for Purchaser's own account for investment
only, and not with a view towards their distribution.
(c) ACCREDITED INVESTOR. Purchaser represents that it is an
"accredited investor" within the meaning of Regulation D under the Securities
Act.
(d) RULE 144. Purchaser acknowledges and agrees that the Shares,
and, if issued, the Conversion Shares must be held indefinitely unless they
are subsequently registered under the Securities Act or an exemption from
such registration is available. Purchaser has been
12
advised or is aware of the provisions of Rule 144 promulgated under the
Securities Act as in effect from time to time, which permits limited resale
of shares purchased in a private placement subject to the satisfaction of
certain conditions, including, among other things, the availability of
certain current public information about the Company, the resale occurring
following the required holding period under Rule 144 and the number of shares
being sold during any three-month period not exceeding specified limitations.
(e) RESIDENCE. The office or offices of the Purchaser in which its
investment decision was made is located at the address or addresses of the
Purchaser set forth on EXHIBIT A.
(f) ACCESS TO DATA. Purchaser has had an opportunity to discuss
the Company's business, management and financial affairs with the Company's
management and the opportunity to review the Company's business plan. The
Purchaser acknowledges that it has received all the information it has
requested from the Company and it considers necessary or appropriate for
deciding whether to acquire the Shares and the Warrant. The Purchaser
represents that it has had an opportunity to ask questions and receive
answers from the Company regarding the terms and conditions of the offering
of the Shares and the Warrant and to obtain any additional information
necessary to verify the accuracy of the information given the Purchaser.
4.3 TRANSFER RESTRICTIONS. Purchaser acknowledges and agrees that the
Shares and, if issued, the Conversion Shares are subject to restrictions on
transfer as set forth in the Investors' Rights Agreement and the
Stockholders' Agreement.
SECTION 5. CONDITIONS TO CLOSING
5.1 CONDITIONS TO PURCHASER'S OBLIGATIONS AT THE CLOSING. Purchaser's
obligations to purchase the Shares at the Closing are subject to the
satisfaction, at or prior to the Closing, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF
OBLIGATIONS. The representations and warranties made by the Company in
Section 3 hereof shall be true and correct in all respects as of the Closing
Date with the same force and effect as if they had been made as of the
Closing Date, and the Company shall have performed all obligations and
conditions herein required to be performed or observed by it on or prior to
the Closing.
(b) LEGAL INVESTMENT. On the Closing Date, the sale and issuance
of the Shares and the proposed issuance of the Conversion Shares shall be
legally permitted by all laws and regulations to which Purchaser and the
Company are subject.
(c) CONSENTS, PERMITS, AND WAIVERS. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate
for consummation of the transactions contemplated by the Agreement, the
Investors' Rights Agreement and the Stockholders' Agreement (except for such
as may be properly obtained subsequent to the Closing).
13
(d) FILING OF CERTIFICATE. The Certificate shall have been
approved by the Board of Directors of the Company and filed with the
Secretary of State of the State of Delaware and shall be in full force and
effect.
(e) RESERVATION OF CONVERSION SHARES. The Conversion Shares
issuable upon conversion of the Shares shall have been duly authorized and
reserved for issuance upon such conversion.
(f) COMPLIANCE CERTIFICATE. The Company shall have delivered to
Purchaser a Compliance Certificate, executed by the Chief Executive Officer
of the Company, dated as of the Closing Date, to the effect that the
conditions specified in subsections (a), (c), (d) and (e) of this Section 5.1
have been satisfied.
(g) SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT. A
Second Amended and Restated Investors' Rights Agreement, substantially in the
form attached hereto as EXHIBIT C, shall have been executed and delivered by
the parties thereto.
(h) SECOND AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT. A Second
Amended and Restated Stockholders' Agreement, substantially in the form
attached hereto as EXHIBIT D, shall have been executed and delivered by the
parties thereto.
(i) LEGAL OPINION. Purchaser shall have received from Xxxxxx
Godward LLP an opinion addressed to them, dated as of the Closing Date, in
substantially the form attached hereto as EXHIBIT G.
(j) STOCK PURCHASE AGREEMENT. A Stock Purchase Agreement,
substantially in the form attached hereto as EXHIBIT H, shall have been
executed and delivered by the parties thereto.
(k) RIGHT OF FIRST REFUSAL AND STANDSTILL AGREEMENT. The Right of
First Refusal and Standstill Agreement, substantially in the form attached
hereto as EXHIBIT F, shall have been executed and delivered by the parties
thereto.
(l) COMMERCIAL AGREEMENTS. A Master Services Agreement and a
Wholesale Services Agreement, substantially in the forms attached hereto as
EXHIBIT I, shall have been executed and delivered by the parties thereto.
(m) PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the Closing
hereby, all documents and instruments incident to such transactions and all
documents, instruments and proceedings related to the Purchaser's business,
technical and legal due diligence shall be reasonably satisfactory in
substance and form to Purchaser and its special counsel, and Purchaser and
its special counsel shall have received all such counterpart originals or
certified or other copies of such documents as they may reasonably request.
14
5.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's obligation
to issue and sell the Shares at the Closing is subject to the satisfaction,
on or prior to the Closing, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties made by the Purchaser in Section 4 hereof shall be true and
correct in all respects at the date of the Closing, with the same force and
effect as if they had been made on and as of said date.
(b) PERFORMANCE OF OBLIGATIONS. Purchaser shall have performed
and complied with all agreements and conditions herein required to be
performed or complied with by Purchaser on or before the Closing.
(c) CONSENTS, PERMITS, AND WAIVERS. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate
for consummation of the transactions contemplated by the Agreement, the
Investors' Rights Agreement and the Stockholders' Agreement (except for such
as may be properly obtained subsequent to the Closing).
(d) FILING OF CERTIFICATE. The Certificate shall have been
approved by the Board of Directors of the Company and filed with the
Secretary of State of the State of Delaware and shall be in full force and
effect.
(e) SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT. A
Second Amended and Restated Investors' Rights Agreement, substantially in the
form attached hereto as EXHIBIT C, shall have been executed and delivered by
Purchaser.
(f) SECOND AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT. A Second
Amended and Restated Stockholders' Agreement, substantially in the form
attached hereto as EXHIBIT D, shall have been executed and delivered by
Purchaser.
(g) RIGHT OF FIRST REFUSAL AND STANDSTILL AGREEMENT. The Right of
First Refusal and Standstill Agreement, substantially in the form attached
hereto as EXHIBIT F, shall have been executed and delivered by the parties
thereto.
(h) STOCK PURCHASE AGREEMENT. A Stock Purchase Agreement,
substantially in the form attached hereto as EXHIBIT H, shall have been
executed and delivered by the parties thereto.
(i) COMMERCIAL AGREEMENTS. A Master Services Agreement and a
Wholesale Services Agreement, substantially in the forms attached hereto as
EXHIBIT I, shall have been executed and delivered by the parties thereto.
SECTION 6. MISCELLANEOUS
6.1 GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Colorado without regard to its
conflict-of-laws rules.
15
6.2 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by Purchaser and
the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by
or on behalf of the Company pursuant hereto in connection with the
transactions contemplated hereby shall be deemed to be representations and
warranties by the Company hereunder solely as of the date of such certificate
or instrument.
6.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Shares from time to time.
6.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement, the Exhibits and
Schedules hereto, including the Investors' Rights Agreement, the
Stockholders' Agreement and the Schedule of Exceptions, and the other
documents delivered pursuant hereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and no party shall be liable or bound to any other in any manner by
any representations, warranties, covenants and agreements except as
specifically set forth herein and therein. Except as expressly provided
herein, neither this Agreement nor any term hereof may be amended, waived,
discharged or terminated other than by a written instrument signed by the
party against whom enforcement of any such amendment, waiver, discharge or
termination is sought.
6.5 SEVERABILITY. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
6.6 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement, the
Investors' Rights Agreement, the Stockholders' Agreement or the Certificate,
shall impair any such right, power or remedy, nor shall it be construed to be
a waiver of any such breach, default or noncompliance thereafter occurring.
It is further agreed that any waiver, permit, consent or approval of any kind
or character on Purchaser's part of any breach, default or noncompliance
under this Agreement, the Investors' Rights Agreement, the Stockholders'
Agreement or under the Certificate or any waiver on such party's part of any
provisions or conditions of the Agreement, the Investors' Rights Agreement,
the Stockholders' Agreement or the Certificate must be in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement, the Investors' Rights Agreement, the
Stockholders' Agreement, the Certificate, by law, or otherwise afforded to
any party, shall be cumulative and not alternative.
6.7 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to
the party to be notified; (ii) when sent by confirmed telex or facsimile if
sent during normal business hours of the recipient, if not, then on the next
business day; (iii) upon receipt after having been sent by registered or
certified mail, return receipt requested, postage prepaid; or (iv) one (1)
day after deposit with a nationally recognized overnight courier, specifying
next day delivery, with written verification of receipt. All communications
shall be sent to the Company at the address as set forth on the signature
16
page hereof and to Purchaser at the address set forth on EXHIBIT A attached
hereto or at such other address as the Company or Purchaser may designate by
ten (10) days advance written notice to the other parties hereto.
6.8 TITLES AND SUBTITLES. The titles of the sections and subsections
of the Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
6.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
6.10 BROKER'S FEES. Each party hereto represents and warrants that no
agent, broker, investment banker, person or firm acting on behalf of or under
the authority of such party hereto is or will be entitled to any broker's or
finder's fee or any other commission directly or indirectly in connection
with the transactions contemplated herein. Each party hereto further agrees
to indemnify each other party for any claims, losses or expenses incurred by
such other party as a result of the representation in this Section 6.11 being
untrue.
6.11 ATTORNEYS' FEES. In the event that any dispute among the parties
to this Agreement, the Investors' Rights Agreement or the Stockholders'
Agreement, the prevailing party in such dispute shall be entitled to recover
from the losing party all fees, costs and expenses of enforcing any right of
such prevailing party under or with respect to this Agreement, the Investors'
Rights Agreement, the Stockholders' Agreement, including without limitation,
such reasonable fees and expenses of attorneys and accountants, which shall
include, without limitation, all fees, costs and expenses of appeals.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
17
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed the SERIES D
PREFERRED STOCK PURCHASE AGREEMENT as of the date set forth in the first
paragraph hereof.
COMPANY: PURCHASER:
JATO COMMUNICATIONS CORP. U.S. TELESOURCE, INC.
By: /s/ Xxxxxx Xxxxxxxx By: /s/ Xxxx X. Xxxxxxxx
----------------------------- -----------------------------
Name: Xxxxxx Xxxxxxxx Name: Xxxx X. Xxxxxxxx
--------------------------- ---------------------------
Title: President and CEO Title: President
-------------------------- --------------------------
0000 00xx Xxxxxx, Xxxxx 0000 000 Xxxxxxxxxxx Xxxxxx
Xxxxxx, XX 00000 Xxxxxx, XX 00000
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
EXHIBIT A
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
SCHEDULE OF PURCHASERS
NAME AND ADDRESS NUMBER OF SHARES PURCHASE PRICE
U.S. Telesource, Inc.
000 Xxxxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn:_____________
Facsimile: 000-000-0000 1,785,714 $9,999,998.40
A-1
EXHIBIT B
RESTATED CERTIFICATE OF INCORPORATION
B-1
EXHIBIT C
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
C-1
EXHIBIT D
SECOND AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
D-1
EXHIBIT E
FORM OF PROPRIETARY INFORMATION
AND INVENTIONS AGREEMENT
NON-COMPETITION, PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
As an employee of JATO Communications Corp., a Delaware corporation, its
subsidiaries or its affiliates (together, the "Company"), and as a condition
of my employment by the Company and in consideration of the compensation now
and hereafter paid to me, I agree to the following (the "Agreement"):
1. MAINTAINING CONFIDENTIAL INFORMATION
(a) COMPANY INFORMATION. I agree at all times during the term of my
employment and thereafter to hold in strictest confidence, and
not to use, except for the benefit of the Company, or to disclose
to any person, firm or corporation, without the written
authorization of the Board of Directors of the Company, any trade
secrets, confidential knowledge, data or other proprietary
information of the Company. By way of illustration and not
limitation, this shall include information relating to products,
processes, know-how, methods, software, developmental work,
improvements, discoveries, plans for marketing and selling,
business plans, budgets and unpublished financial statements,
licenses, prices and costs, suppliers and customers, and
information regarding the skills and compensation of other
employees of the Company. Notwithstanding the foregoing,
confidential information shall not include any information which:
(i) at the time of disclosure, or thereafter, is generally available
to and known by the public;
(ii) was or is available to me on a non-confidential basis from a
source other than the Company; or
(iii) has been independently acquired or developed by me without
violating any of my obligations under this Agreement, as shown by my
competent written records.
(b) THIRD PARTY INFORMATION. I recognize that the Company has
received and in the future will receive confidential or
proprietary information from third parties subject to a duty on
the Company's part to maintain the confidentiality of such
information and, in some cases, to use it only for certain
limited purposes. I agree that I owe the Company and such third
parties, both during the term of my employment and thereafter, a
duty to hold all such confidential or proprietary information in
the strictest confidence and not to, except as is consistent
with the Company's agreement with the third party, disclose it
to any person, firm or corporation or use it for the benefit of
anyone other than the Company or such third party, unless
expressly authorized to act otherwise by an officer of the
Company.
2. ASSIGNMENT OF INVENTIONS AND ORIGINAL WORKS.
I agree that I will make prompt written disclosure to the Company, will
hold in trust for the sole right and benefit of the Company, and hereby
assign to the Company all my right, title and interest in and to any ideas,
inventions, original works of authorship, developments, improvements or trade
secrets which I may solely or jointly conceive or reduce to practice, or
cause to be conceived or reduced to practice, during the period of my
employment with the Company and for one (1) year after my employment. This
Agreement will not be deemed to require assignment of any invention developed
entirely on my own time without using the Company's equipment, supplies,
facilities or trade secrets and neither related to the Company's actual or
anticipated business, research or development, nor resulted from work
performed by me for the Company.
3. NO CONFLICTS OR SOLICITATION
For the period of my employment by the Company and for one (1) year
following my termination, I will not interfere with the business of the
Company by (i) soliciting, attempting to solicit, inducing, or otherwise
causing any employee of the Company to terminate his or her employment in
order to become an employee, consultant or
E-1
independent contractor to or for any other entity engaged in marketing or
selling the type of products and services offered by the Company or (ii)
directly soliciting the business of any customer or client of the Company
(other than on behalf of the Company) for the type of products and services
offered by the Company.
4. COVENANT NOT TO COMPETE.
(a) I agree that during my employment with the Company, I will not
directly or indirectly engage in (whether as an employee,
consultant, proprietor, partner, director or otherwise), or have
any ownership interest in, or participate in the financing,
operation, management or control of, any person, firm,
corporation or business that engages in a "Restricted Business"
in a "Restricted Territory" (as defined below). It is agreed
that ownership of (i) no more than ten percent (10%) of the
outstanding voting stock of a publicly traded corporation or
(ii) any stock I presently own or (iii) any options or other
rights to acquire shares of a company's capital stock I
presently own shall not constitute a violation of this
provision.
(b) As used herein, the terms:
(i) "Restricted Business" shall mean any competitive local exchange
carrier, high speed data communication services provider or any
business which otherwise engages in any other manner in any business
which is competitive with the Company.
(ii) "Restricted Territory" shall mean all regions within a fifty
mile radius of those cities in which the Company operates, or has
disclosed to you that it intends to operate, a business.
5. RETURN OF COMPANY DOCUMENTS
When I leave the employ of the Company, I will deliver to the Company (and
will not keep in my possession, recreate or deliver to anyone else) any and all
documents and other property, together with all copies thereof (in whatever
medium recorded) belonging to the Company, its successors or assigns whether
kept at the Company, home or elsewhere. I further agree that any property
situated on the Company's premises and owned by the Company, including disks and
other storage media, filing cabinets or other work areas, is subject to
inspection by Company personnel at any time with or without notice.
6. LEGAL AND EQUITABLE REMEDIES
Because my services are personal and unique and because I may have access
to and become acquainted with the proprietary information of the Company, the
Company shall have the right to enforce this Agreement and any of its provisions
by injunction, specific performance or other equitable relief, without bond and
without prejudice to any other rights and remedies that the Company may have for
a breach of this Agreement.
7. NOT AN EMPLOYMENT CONTRACT. I agree and understand that nothing in
this Agreement shall confer any right with respect to continuation of my
employment by the Company, nor shall it interfere in any way with my right or
the Company's right to terminate my employment at any time, with or without
cause.
8. GENERAL PROVISIONS.
(a) GOVERNING LAW. This Agreement will be governed by and construed
according to the laws of the State of Colorado, excluding
conflicts of laws principles. I hereby expressly consent to the
personal jurisdiction of the state and federal courts located in
Colorado for any lawsuit filed there against me by the Company
arising from or relating to this Agreement, or such other
location as the Company's principal executive office may then be
located.
(b) SEVERABILITY. If one or more of the provisions in this
Agreement are deemed unenforceable by law, then the remaining
provisions will continue in full force and effect. Moreover, if
any restriction set forth in Sections 3 or 4 hereof is found by
any court of competent jurisdiction to be unenforceable because
it extends for too long a period of time or over too great a
range of activities or in too broad a geographic area, it shall
be interpreted to extend only over the maximum period of time,
range of activities or geographic area as to which it may be
enforceable.
(c) BENEFIT; BINDING EFFECT. This Agreement will be binding upon my
heirs, executors, administrators and other legal representatives
and will be for the benefit of the Company, its successors and
its assigns.
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(d) SURVIVAL. The provisions of this Agreement shall survive the
termination of my employment and the assignment of this
Agreement by the Company to any successor in interest or other
assignee.
I UNDERSTAND THAT THIS AGREEMENT AFFECTS MY RIGHTS TO INVENTIONS I MAKE
DURING MY EMPLOYMENT, AND RESTRICTS MY RIGHT TO DISCLOSE OR USE THE COMPANY'S
PROPRIETARY INFORMATION DURING OR SUBSEQUENT TO MY EMPLOYMENT.
I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS.
Dated:
------------------- -------------------------------------------
Name
Address
------------------------------------
-------------------------------------------
-------------------------------------------
ACCEPTED AND AGREED TO:
JATO COMMUNICATIONS CORP.
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
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EXHIBIT F
RIGHT OF FIRST REFUSAL AND STANDSTILL AGREEMENT
F-1
EXHIBIT G
LEGAL OPINION
1. The Company has been duly incorporated and is a validly existing
corporation in good standing under the laws of the State of Delaware and is
qualified to do business and is in good standing under the laws of the State
of Colorado. Each of Jato Operating Corp. and Jato Operating Two Corp. has
been duly incorporated and is a validly existing corporation in good standing
under the laws of the State of Delaware and is qualified to do business and
is in good standing under the laws of the State of Colorado.
2. The Company has the requisite corporate power to own its property
and assets and to conduct its business as it is currently being conducted.
Each of the Subsidiaries has the requisite corporate power to own its
property and assets and to conduct its business as it is currently being
conducted.
3. The Restated Certificate of Incorporation has been duly adopted by
all necessary corporate action on the part of the Company, has been filed
with the Secretary of State of the State of Delaware and has become effective
under the Delaware General Corporation Law.
4. Each of the certificates evidencing the shares of Series D
Preferred Stock has been duly executed and delivered by the Company. The
Agreements have been duly and validly authorized, executed and delivered by
the Company and constitute valid and binding obligations of the Company
enforceable against the Company in accordance with their terms, except as may
be limited by applicable laws and enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, arrangement, moratorium or other
similar laws affecting creditors' rights, and subject to general equity
principals and to limitations on availability of equitable relief, including
specific performance.
5. The Company's authorized capital stock consists of (a) eighty
million (80,000,000) shares of Common Stock, of which six million seven
hundred ninety-seven thousand eight hundred fourteen (6,797,814) shares are
issued and outstanding, and (b) thirty million (30,000,000) shares of
Preferred Stock, of which one million seven hundred fifty-one thousand nine
hundred eighty-five (1,751,985) shares have been designated Series A
Preferred Stock, of which one million seven hundred fifty-one thousand nine
hundred eighty-five (1,751,985) shares are issued and outstanding, of which
thirteen million six hundred fifteen thousand three hundred twenty-two
(13,615,322) shares have been designated Series B Preferred Stock, of which
thirteen million six hundred fifteen thousand three hundred twenty-two
(13,615,322) shares are issued and outstanding, of which four million nine
hundred thirty-two thousand three hundred eight (4,932,308) shares are
designated Series C Preferred Stock, of which four million nine hundred
thirty-two thousand three hundred eight (4,932,308) are issued and
outstanding, and of which five million (5,000,000) shares are designated
Series D Preferred Stock (the "Series D Stock"), one million seven hundred
eighty-five thousand seven hundred fourteen (1,785,714) of which (excluding
the Shares to be issued at the Closing) are issued and outstanding. The
outstanding shares of Common Stock and Preferred Stock have been duly
authorized and validly issued and are fully paid and nonassessable. The
rights, preferences and privileges of the Series D Stock are as stated in the
Restated Certificate of Incorporation. The
G-1
Shares have been duly authorized, and upon issuance and delivery against
payment therefor in accordance with the terms of the Purchase Agreement, will
be validly issued, outstanding, fully paid and nonassessable and subject to
no preemptive rights under any statute, charter or agreement known to us that
have not been satisfied or waived. The shares of Common Stock issuable upon
conversion of the Shares have been duly authorized and reserved for issuance,
and upon issuance and delivery against payment therefor in accordance with
the terms of the Shares, will be validly issued, outstanding, fully paid and
nonassessable and subject to no preemptive rights under any statute, charter
or agreement known to us that have not been satisfied or waived. To our
knowledge, except as disclosed in the Purchase Agreement or the Schedule of
Exceptions, there are no options, warrants, conversion privileges, preemptive
rights or other rights presently outstanding to purchase any of the
authorized but unissued capital stock of the Company, other than the
conversion privileges of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock and rights
created in connection with the transactions contemplated by the Agreements.
6. The execution and delivery of the Agreements by the Company and the
issuance of the Shares pursuant to the Purchase Agreement do not violate any
provision of the Company's Restated Certificate of Incorporation or Amended
Bylaws, and to the best of our knowledge, do not constitute a material
default under the provisions of any material agreement to which the Company
is a party or by which it is bound, and do not violate or contravene (a) any
governmental statute, rule or regulation applicable to the Company or (b) any
order, writ, judgment, injunction, decree, determination or award which has
been entered against the Company and of which we are aware, the violation or
contravention of which would materially and adversely affect the Company, its
assets, financial condition or operations.
7. To our knowledge, there is no action, proceeding or investigation
pending or overtly threatened against the Company before any court or
administrative agency that questions the validity of the Agreements or might
result, either individually or in the aggregate, in any material adverse
change in the assets, financial condition or operations of the Company.
8. All consents, approvals, authorizations, or orders of, and filings,
registrations and qualifications with any regulatory authority or
governmental body in the United States required for the consummation by the
Company of the transactions contemplated by the Agreement, have been made or
obtained.
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EXHIBIT H
STOCK PURCHASE AGREEMENT
H-1
EXHIBIT I
FORMS OF MASTER SERVICES AGREEMENT AND WHOLESALE SERVICES AGREEMENT
I-2
