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EXHIBIT 10.2
EXECUTION COPY
SECURITIES PURCHASE AGREEMENT
BETWEEN
XXXXXXX COMMUNICATIONS, INC.
AND
MERITAGE PRIVATE EQUITY FUND, L.P.,
MERITAGE PRIVATE EQUITY PARALLEL FUND, L.P.
AND
MERITAGE ENTREPRENEURS FUND, L.P.
DATED AS OF DECEMBER , 1999
SERIES A-1 CONVERTIBLE PREFERRED STOCK
AT $4.00 PER SHARE
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TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS...............................................................................1
ARTICLE II. DOCUMENT CLOSING DATE....................................................................7
Section 2.1. Sale and Purchase of Series A-1 Preferred Stock................................7
Section 2.2. Purchase Price.................................................................7
Section 2.3. Document Closing...............................................................7
Section 2.4. Intentionally Omitted..........................................................7
Section 2.5. Use of Proceeds................................................................7
ARTICLE III. INTENTIONALLY OMITTED....................................................................7
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................8
Section 4.1. Organization and Good Standing................................................8
Section 4.2. Authorization.................................................................8
Section 4.3. Enforceability................................................................8
Section 4.4. Consents......................................................................8
Section 4.5. Capitalization................................................................8
Section 4.6. Subsidiaries..................................................................9
Section 4.7. Financial Statements; Undisclosed Liabilities.................................9
Section 4.8. Absence of Certain Developments..............................................10
Section 4.9. Indebtedness and Liens.......................................................10
Section 4.10. Indebtedness to and from Officers, Directors and Others......................10
Section 4.11. Licenses, Etc................................................................10
Section 4.12. Solvency.....................................................................11
Section 4.13. Title to Assets; Leases......................................................11
Section 4.14. Litigation...................................................................11
Section 4.15. Tax Returns..................................................................11
Section 4.16. Defaults.....................................................................11
Section 4.17. Burdensome Obligations.......................................................12
Section 4.18. Employee Benefit Plans.......................................................12
Section 4.19. Representations and Warranties under Related Agreements......................12
Section 4.20. Employment Contracts, Labor Relations........................................12
Section 4.21. Location of Office...........................................................13
Section 4.22. Necessary Property...........................................................13
Section 4.23. Transaction Costs............................................................13
Section 4.24. Governmental Regulations.....................................................13
Section 4.25. Intentionally Omitted........................................................13
Section 4.26. Disclosure...................................................................13
Section 4.27. Governmental Licenses........................................................13
Section 4.28. Compliance with Laws.........................................................13
Section 4.29. Acquisition Agreements.......................................................14
Section 4.30. Material Contracts and Obligations...........................................14
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Section 4.31. Environmental and Safety Laws................................................15
Section 4.32. Investments in Real Property Holding Interests...............................15
Section 4.33. Unrelated Business Taxable Income............................................15
ARTICLE V. PURCHASER'S INVESTMENT REPRESENTATIONS AND WARRANTIES....................................16
ARTICLE VI. CONDITIONS TO PURCHASE..................................................................18
Section 6.1. Purchaser's Conditions........................................................18
Section 6.1.1. Related Agreements................................................18
Section 6.1.2. Charter Documents; Good Standing Certificate......................18
Section 6.1.3. Proof of Corporate Action.........................................18
Section 6.1.4. Incumbency Certificate............................................19
Section 6.1.5. Legal Opinion.....................................................19
Section 6.1.6. Representations and Warranties; Officers' Certificates............19
Section 6.1.7. Legality; Governmental and Other Authorizations...................19
Section 6.1.8. Due Diligence.....................................................19
Section 6.1.9. Payment of Certain Fees and Disbursements.........................19
Section 6.1.10. Chief Executive Officer..........................................19
Section 6.1.11. General..........................................................19
Section 6.2. The Company's Conditions......................................................20
Section 6.2.1. Related Agreements................................................20
Section 6.2.2. Legality: Governmental and Other Authorizations..................20
Section 6.2.3. Chief Executive Officer...........................................20
Section 6.2.4. General...........................................................20
ARTICLE VII. COVENANTS APPLICABLE TO THE COMPANY WHILE ANY OF THE SERIES A-1 PREFERRED STOCK ARE
OUTSTANDING.................................................................................20
Section 7.1. Records and Accounts.........................................................20
Section 7.2. Corporate Existence; Subsidiaries; Maintenance of Properties.................21
Section 7.3. Insurance....................................................................21
Section 7.4. Taxes and Claims.............................................................21
Section 7.5. Inspection of Properties and Books...........................................21
Section 7.6. Compliance with Laws, Contracts, Licenses and Permits........................22
Section 7.7. Employee Benefit Plans.......................................................22
Section 7.8. Further Assurances...........................................................23
Section 7.9. Notices......................................................................23
Section 7.10. Restrictions on Indebtedness.................................................23
Section 7.11. Restrictions on Liens........................................................24
Section 7.12. Distributions................................................................25
Section 7.13. Merger, Consolidation, Sale of Assets or Other Dispositions..................25
Section 7.14. Merger, Consolidation or Other Acquisitions..................................25
Section 7.15. Transactions with Affiliates.................................................25
Section 7.16. Investments..................................................................25
Section 7.17. Joint Ventures...............................................................26
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Section 7.18. Payments on Permitted Indebtedness...........................................26
Section 7.19. Response Actions.............................................................26
Section 7.20. Dilution Protection..........................................................26
Section 7.21. Annual Statements............................................................27
Section 7.22. Monthly Statements...........................................................27
Section 7.23. Other Financial Information..................................................27
Section 7.24. Officer's Certificates.......................................................28
Section 7.25. Notice of Litigation, Defaults, Etc..........................................28
Section 7.26. Charter and By-law Amendments................................................28
Section 7.27. Proprietary Information and Inventions Agreement.............................28
ARTICLE VIII. DEFAULTS..............................................................................28
Section 8.1. Events of Default............................................................28
Section 8.2. Remedies.....................................................................30
Section 8.3. Waivers......................................................................30
ARTICLE IX. SUBSEQUENT HOLDERS OF SERIES A-1 PREFERRED STOCK........................................30
ARTICLE X. REGISTRATION AND TRANSFER OF SERIES A-1 PREFERRED STOCK..................................31
Section 10.1. Transfer and Exchange of Series A-1 Preferred Stock..........................31
Section 10.2. Replacement of Series A-1 Preferred Stock....................................31
ARTICLE XI. EXPENSES; INDEMNITY.....................................................................31
Section 11.1. Expenses.....................................................................31
Section 11.2. Indemnification..............................................................32
Section 11.3. Brokers' Fees................................................................32
Section 11.4. Survival of Obligations......................................................32
ARTICLE XII. NOTICES..............................................................................32
ARTICLE XIII. SURVIVAL AND TERMINATION OF COVENANTS, AGREEMENTS, REPRESENTATIONS AND WARRANTIES....33
ARTICLE XIV. AMENDMENTS AND WAIVERS...............................................................33
ARTICLE XV. RIGHT TO PUBLICIZE...................................................................34
ARTICLE XVI. WAIVER OF JURY TRIAL.................................................................34
ARTICLE XVII. INCORPORATORS, SHAREHOLDERS, OFFICERS, DIRECTORS, EMPLOYEES AND PARTNERS FREE FROM
PERSONAL LIABILITY...................................................................34
ARTICLE XVIII. SCHEDULES............................................................................35
ARTICLE XIX. ENTIRE AGREEMENT; COUNTERPARTS; SECTION HEADINGS.....................................35
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ARTICLE XX. GOVERNING LAW......................................................................................35
ARTICLE XXI. SEVERABILITY.......................................................................................35
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LIST OF EXHIBITS
EXHIBIT A Registration Rights Agreement
EXHIBIT B Amended and Restated Certificate of Incorporation
EXHIBIT C Certificate of Designations of Series A-1 Convertible Preferred Stock
EXHIBIT D Stockholders' Agreement
EXHIBIT E Form of Opinion of Special Counsel to Company
EXHIBIT F List of Founders' Warrants
EXHIBIT G 1998 Stock Incentive Plan
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SECURITIES PURCHASE AGREEMENT
XXXXXXX COMMUNICATIONS, INC.
00000 XXXXXXXX XXXXX XXXX, XXXXX 000
XXXXXXXXXXXX, XXXXXXXX 00000
As of December , 1999
Meritage Private Equity Fund, L.P.
Meritage Private Equity Parallel Fund, L.P.
Meritage Entrepreneurs Fund, L.P.
0000 Xxxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Ladies and Gentlemen:
The undersigned, Xxxxxxx Communications, Inc., a Delaware corporation (the
"Company"), hereby agrees with you as follows:
ARTICLE I. DEFINITIONS
For all purposes of this Agreement the following terms shall have
the meanings set forth in this Article I:
ACQUISITION. The term "Acquisition" shall mean an acquisition by the
Company of all or substantially all of the assets or equity interest of another
Person.
AFFILIATE. The term "Affiliate" shall mean any Person directly or
indirectly controlling, controlled by or under direct or indirect common control
with the Company (or other specified Person) and shall include (a) any Person
who is a director or beneficial owner of at least 10% of the then outstanding
capital stock of the Company (or other specified Person) and Family Members of
any such Person, (b) any Person in which the Company (or other specified Person)
or an Affiliate (as defined in clause (a) above) of the Company (or other
specified Person) shall, directly or indirectly, either beneficially own at
least 10% of its then outstanding equity securities or constitute at least a 10%
equity participant, and (c) in the case of a specified Person who is an
individual, Family Members of such Person; provided, however, that Purchaser
shall not be deemed an Affiliate of the Company for purposes of this Agreement.
BALANCE SHEET DATE. The term "Balance Sheet Date" shall have the
meaning specified in Section 4.7(a)(i) of this Agreement.
BOARD OF DIRECTORS. The term "Board of Directors" shall mean the
Board of Directors of the Company.
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CHARTER. The term "Charter" shall include the articles or certificate
of incorporation, statute, constitution, joint venture or partnership agreement
or articles or other organizational document of any Person other than an
individual, each as from time to time amended or modified.
CLOSING. The term "Closing" shall have the meaning specified in
Section 2.3 of this Agreement.
CLOSING DATE. The term "Closing Date" shall have the meaning
specified in Section 2.3 of this Agreement.
CODE. The term "Code" shall mean the Internal Revenue Code of 1986,
any successor statute of similar import, and the rules and regulations
thereunder, collectively and as from time to time amended and in effect.
COMMON STOCK. The term "Common Stock" shall have the meaning
specified in Section 4.5(a) of the Agreement.
COMPANY. The term "Company" shall have the meaning specified in the
introduction to this Agreement.
CONSOLIDATED OR CONSOLIDATED. The term "Consolidated" or
"consolidated" shall mean, with reference to any term defined herein, that term
as applied to the accounts of the Company and all of its Subsidiaries, if any,
consolidated in accordance with generally accepted accounting principles.
CONVERSION STOCK. The term "Conversion Stock" shall mean the shares
of Common Stock issuable upon conversion of the Series A Preferred Stock or the
Series A-1 Preferred Stock.
DEFAULT. The term "Default" shall mean an event or condition which
with the passage of time or giving of notice, or both, would become an Event of
Default.
DISTRIBUTION. The term "Distribution" shall mean (a) the declaration
or payment of any dividend of cash or property on or in respect of any shares of
any class of capital stock of the Company; (b) the purchase, redemption or other
retirement of any shares of any class of capital stock of the Company, directly
or indirectly or otherwise; or (c) any other distribution on or in respect of
any shares of any class of capital stock of the Company.
EMPLOYEE BENEFIT PLAN. The term "Employee Benefit Plan" shall mean
any employee benefit plan within the meaning of ss.3(3) of ERISA maintained or
contributed to by the Company or any ERISA Affiliate, other than a Multiemployer
Plan.
ENVIRONMENTAL LAW. The term "Environmental Law" means any law,
regulation or ordinance relating to air or water quality, waste management,
hazardous or toxic substances or the protection of health or the environment.
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ERISA. The term "ERISA" shall mean the federal Employee Retirement
Income Security Act of 1974, any successor statute of similar import, and the
rules and regulations thereunder, collectively and as from time to time amended
and in effect.
ERISA AFFILIATE. The term "ERISA Affiliate" shall mean any Person
which is treated as a single employer with the Company under ss.414 of the Code.
ERISA REPORTABLE EVENT. The term "ERISA Reportable Event" shall mean
a reportable event with respect to a Guaranteed Pension Plan within the meaning
of ss.4043 of ERISA and the regulations promulgated thereunder.
EVENTS OF DEFAULT. The term "Events of Default" shall have the
meaning specified in Section 8.1 of this Agreement.
EXCHANGE ACT. The term "Exchange Act" shall mean the Securities
Exchange Act of 1934, or any successor federal statute, and the rules and
regulations of the Securities and Exchange Commission thereunder, as may be
amended from time to time.
FAMILY MEMBERS. The term "Family Members" shall mean, as applied to
any individual, any spouse, child, grandchild, parent, brother or sister thereof
or any spouse of any of the foregoing, and each trust created for the benefit of
one or more of such Persons and each custodian of property of one or more such
Persons.
FCC. The term "FCC" shall mean the Federal Communications Commission.
FINANCING AGREEMENTS. The term "Financing Agreements" shall mean this
Agreement, the Series A Purchase Agreement, the Series A Preferred Stock, the
Series A-1 Preferred Stock, the Founders' Warrants, the Stockholders' Agreement,
the Registration Rights Agreement and any and every other present or future
instrument or agreement from time to time entered into between the Company and
Purchaser or any other holder of the Series A-1 Preferred Stock which relates to
this Agreement, all as from time to time amended or modified, and all
statements, reports or certificates delivered by or on behalf of the Company to
you or any other holder of the Series A-1 Preferred Stock in connection herewith
or therewith.
FOUNDERS' WARRANTS. The term "Founders' Warrants" shall mean the
warrants to purchase an aggregate of 880,000 shares of Common Stock at $3.00 per
share, which warrants were issued to certain members of the Company's senior
management team and expire on the dates set forth on Exhibit F.
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES OR GAAP. The terms
"generally accepted accounting principles" or "GAAP" shall mean accounting
principles which are (a) consistent with the principles promulgated or adopted
by the Financial Accounting Standards Board and its predecessors, in effect from
time to time and (b) applied on a basis consistent with prior periods.
GUARANTEED PENSION PLAN. The term "Guaranteed Pension Plan" shall
mean any employee pension benefit plan within the meaning of ss. 3(2) of ERISA
maintained or contributed
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to by the Company or any ERISA Affiliate the benefits of which are guaranteed on
termination in full or in part by the PBGC pursuant to Title IV of ERISA, other
than a Multiemployer Plan.
HAZARDOUS MATERIALS. The term "Hazardous Materials" shall mean,
collectively, (a) any petroleum or petroleum products, flammable explosives,
radioactive materials, friable asbestos, urea formaldehyde foam insulation, and
transformers or other equipment that contain dielectric fluid containing
polychlorinated biphenyls (PCBs), (b) any chemicals or other materials or
substances as included in the definition of "hazardous substance", "hazardous
waste", "hazardous materials", "extremely hazardous wastes", "restricted
hazardous wastes", toxic substances", "toxic pollutants", "contaminants",
"pollutants" or words of similar import under any Environmental Law; and (c) any
other chemical or other material or substance, exposure to which is now
prohibited, limited or regulated under any Environmental Law.
INDEBTEDNESS. The term "Indebtedness" shall mean all obligations,
contingent and otherwise, which in accordance with generally accepted accounting
principles should be classified on the obligor's balance sheet as liabilities,
or to which reference should be made by footnotes thereto, including without
limitation, in any event and whether or not so classified: (i) all debt and
similar monetary obligations, whether direct or indirect; (ii) all liabilities
secured by any Lien existing on Property, whether or not the liability secured
thereby shall have been assumed; (iii) all guaranties, endorsements and other
contingent obligations whether direct or indirect in respect of Indebtedness or
performance of others, including any obligation to supply funds to or in any
manner to invest in, directly or indirectly, the debtor, to purchase
Indebtedness, or to assure the owner of Indebtedness against loss, through an
agreement to purchase goods, supplies, or services for the purpose of enabling
the debtor to make payment of the Indebtedness held by such owner or otherwise,
and (iv) obligations to reimburse issuers of any letters of credit.
INSTITUTIONAL DIRECTORS. The term "Institutional Directors" shall
mean those directors of the Company who are not also executive officers of the
Company.
INVESTMENTS. The term "Investments" shall mean (a) any investment in
shares of capital stock, evidence of Indebtedness or other securities issued by
any other Person, (b) any loan, advance, or extension of credit to, or
contribution to the capital of, any other Person, (c) any purchase of the
securities or business or integral part of the business of any other Person, or
commitment to make such purchase, and (d) any other investment in any other
Person; provided, however, that the term "Investment" shall not include (i)
trade and customer accounts receivable for services rendered in the ordinary
course of business and payable in accordance with customary trade terms, and all
letters of credit or other instruments securing the same, (ii) advances to
employees for travel expenses, drawing accounts and similar expenditures but
only to the extent that (A) each such advance is in an amount less than $2,000,
(B) the aggregate amount of such advances outstanding to any individual employee
at any particular time does not exceed $5,000, and (C) all such advances
outstanding at any particular time do not exceed $25,000, and (iii) stock or
other securities acquired in connection with the satisfaction or enforcement of
Indebtedness or claims due or owing to the Company or any of its Subsidiaries or
as security for any such Indebtedness or claim.
IRS. The term "IRS" shall have the meaning specified in Section 4.18
hereof.
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LIEN. The term "Lien" shall mean (a) any encumbrance, mortgage,
pledge, lien, charge or other security interest of any kind upon any Property,
or upon the income or profits therefrom; (b) any acquisition of or agreement to
have an option to acquire any Property or assets upon conditional sale or other
title retention agreement, device or arrangement (including a capitalized
lease); or (c) any sale, assignment, pledge or other transfer for security by
the Company or any of its Subsidiaries of any accounts, general intangibles or
chattel paper, with or without recourse.
MAJORITY HOLDERS. The term "Majority Holders" shall mean the holders
of at least 66-2/3% of the Preferred Stock.
MULTIEMPLOYER PLAN. The term "Multiemployer Plan" shall mean any
multiemployer plan within the meaning of ss. 3(37) of ERISA maintained or
contributed to by the Company or any ERISA Affiliate.
OPTION PLAN. The term "Option Plan" shall mean the Company's 1998
Stock Incentive Plan, substantially in the form of Exhibit G hereto, pursuant to
which as of the date hereof an aggregate of 3,550,000 shares of Common Stock has
been allocated and reserved for the grant of Awards thereunder, including
550,000 shares allocated and reserved for the stock purchase program thereunder.
PBGC. PBGC shall mean the Pension Benefit Guaranty Corporation
created by ss.4002 of ERISA and any successor entity or entities having
similar responsibilities.
PERMITTED INDEBTEDNESS. The term "Permitted Indebtedness" shall have
the meaning specified in Section 7.10 of this Agreement.
PERMITTED LIENS. The term "Permitted Liens" shall have the meaning
specified in Section 7.11 of this Agreement.
PERSON. The term "Person" shall mean an individual, partnership,
corporation, association, trust, joint venture, unincorporated organization, and
any government, governmental department or agency or political subdivision
thereof.
PREFERRED STOCK. The term "Preferred Stock" shall have the meaning
specified in Section 4.5(a) of this Agreement.
PROPERTY. The term "Property" shall mean the assets and properties
owned and/or operated by the Company and its Subsidiaries.
PUBLIC SALE. The term "Public Sale" shall mean any sale of securities
to the public pursuant to a public offering registered under the Securities Act
or to the public through a broker or market-maker pursuant to the provisions of
Rule 144 (or any successor rule) adopted under the Securities Act or any other
public offering not required to be registered under the Securities Act.
PURCHASE PRICE. The term "Purchase Price" shall have the meaning
specified in Section 2.2 of this Agreement.
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PURCHASER. The term "Purchaser" shall mean, collectively, Meritage
Private Equity Fund, L.P., Meritage Private Equity Parallel Fund, L.P.
and Meritage Entrepreneurs Fund, L.P.
REGISTRATION RIGHTS AGREEMENT. The term "Registration Rights
Agreement" shall mean the Registration Rights Agreement dated as of November 18,
1998 among the Company and the stockholders of the Company in the form of
Exhibit A hereto.
RELATED AGREEMENTS. The term "Related Agreements" shall mean the
Financing Agreements (other than this Agreement), the Amended and Restated
Certificate of Incorporation of the Company in the form attached as Exhibit B
hereto and the Certificate of Designations of the Series A-1 Preferred Stock in
the form attached as Exhibit C hereto.
SECURITIES ACT. The term "Securities Act" shall mean the Securities
Act of 1933, as amended, or any successor federal statute, and the rules and
regulations of the Securities and Exchange Commission thereunder, all as the
same shall be in effect at the time.
SERIES A HOLDERS. The term "Series A Holders" shall mean the holders
of the Company's Series A Preferred Stock.
SERIES A PREFERRED STOCK. The term "Series A Preferred Stock" shall
have the meaning specified in Section 4.5(a) of this Agreement.
SERIES A-1 PREFERRED STOCK. The term "Series A-1 Preferred Stock"
shall have the meaning specified in Section 4.5(a) of this Agreement.
SERIES A PURCHASE AGREEMENT. The term "Series A Purchase Agreement"
shall mean the Securities Purchase Agreement dated as of November 18, 1998, as
amended as of December 14, 1998, among the Company and the Series A Holders.
STOCKHOLDERS' AGREEMENT. The term "Stockholders' Agreement" shall
mean the Stockholders' Agreement dated as of November 18, 1998, as amended as of
December 14, 1998 and July 20, 1999, among the Company and all of its
stockholders in the form of Exhibit D hereto.
SUBSIDIARY. The term "Subsidiary" shall mean any Person in which the
Company shall at the time own directly or indirectly through another Subsidiary
at least a majority of its outstanding capital stock (or other shares of
beneficial interest) entitled to vote generally.
SUPERMAJORITY BOARD VOTE. The term "Supermajority Board Vote" shall
mean the affirmative vote of at least 66 2/3% of the members of the Board of
Directors present at a meeting at which a quorum is present, which vote shall
include the affirmative vote of at least four Institutional Directors, if there
are five Institutional Directors present at the meeting at which such vote
occurs, or three Institutional Directors, if there are four or three
Institutional Directors present at the meeting at which such vote occurs.
UNITED STATES BANKRUPTCY CODE. The term "United States Bankruptcy
Code" shall mean Title 11 of the United States Code as in effect from time to
time.
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USRPHC. The term "USRPHC" shall have the meaning specified in Section
4.32 of this Agreement.
ARTICLE II. SALE AND PURCHASE OF SERIES A-1 PREFERRED STOCK; DOCUMENT CLOSING
DATE
SECTION 2.1. SALE AND PURCHASE OF SERIES A-1 PREFERRED STOCK. Subject
to all of the terms and conditions hereof and in reliance on the representations
and warranties set forth or referred to herein, the Company agrees to issue and
sell to Purchaser, and Purchaser commits to purchase, 3,125,000 shares of the
Company's Series A-1 Preferred Stock.
SECTION 2.2. PURCHASE PRICE. The per share purchase price for the
Series A-1 Preferred Stock to be purchased pursuant to this Agreement is $4.00,
for an aggregate purchase price of $12,500,000 (the "Purchase Price").
SECTION 2.3. CLOSING. The closing of the purchase and sale of the
Series A-1 Preferred Stock to be purchased by Purchaser hereunder (the
"Closing") will take place at the offices of the Company, 00000 Xxxxxxxx Xxxxx
Xxxx, Xxxxx 000, Xxxxxxxxxxxx, Xxxxxxxx 00000, at 11:00 a.m. C.S.T. on December
13, 1999, or at such other time, date and place as the parties hereto may agree
upon (the "Closing Date"). At the Closing, the Company will deliver to Purchaser
certificates evidencing the shares of Series A-1 Preferred Stock to be purchased
on the Closing Date against payment of the Purchase Price for all such shares in
immediately available funds by wire transfer to the account of the Company at
Bank of America, St. Louis, Missouri, ABA Routing No. 000000000, Account No.
5045218535, Attention: Xxxxx Xxxxxxxxxxx (314-466-0420). The Series A-1
Preferred Stock to be purchased on the Closing Date will be issued to Purchaser
on the Closing Date and registered in Purchaser's name in the Company's records.
All such shares shall initially be issued in the name of Meritage Private Equity
Fund, L.P., with the understanding that, following the final closing of such
partnership, such shares shall be allocated among Meritage Private Equity Fund,
L.P., Meritage Private Equity Parallel Fund, L.P. and Meritage Entrepreneurs
Fund, L.P.
SECTION 2.4. INTENTIONALLY OMITTED.
SECTION 2.5. USE OF PROCEEDS. The proceeds from the sale of the
Series A-1 Preferred Stock purchased hereunder will be used to pay for expenses
related to the Closing, for working capital purposes and to acquire or build
telecommunications networks in such markets as shall be determined by the Board
of Directors. The Company covenants and agrees to provide Purchaser with such
information as it may reasonably request to verify the use of the proceeds from
the sale of the Series A-1 Preferred Stock.
ARTICLE III. INTENTIONALLY OMITTED
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ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce Purchaser to enter into this Agreement and to
purchase the Series A-1 Preferred Stock, the Company hereby represents and
warrants as of the date hereof that:
SECTION 4.1. ORGANIZATION AND GOOD STANDING. The Company is validly
existing and in good standing under the laws of the State of Delaware and in
each jurisdiction in which it is required to be qualified as a foreign
corporation. The Company is not required to be qualified as a foreign
corporation in any jurisdiction other than those listed on Schedule 4.1. The
Company has the power to own its properties and to carry on its business as now
conducted and as proposed to be conducted.
SECTION 4.2. AUTHORIZATION. The execution, delivery and performance
by the Company of this Agreement and each Related Agreement, the issuance and
sale by the Company of the Series A-1 Preferred Stock hereunder and the issuance
of the Conversion Stock upon conversion of the Series A-1 Preferred Stock, (a)
are within its corporate power and authority, (b) have been duly authorized by
all necessary corporate, shareholder and other proceedings, and (c) do not
conflict with or result in any breach of any provision of, or result in the
creation of any Lien upon any of the Property pursuant to, the Certificate of
Incorporation or by-laws of the Company or any law, regulation, order, judgment,
writ, injunction, license, permit, agreement or instrument, the non-compliance
with which would materially adversely affect the business, operations or
financial condition of the Company.
SECTION 4.3. ENFORCEABILITY. This Agreement and each of the Related
Agreements, the issuance and sale by the Company of the Series A-1 Preferred
Stock hereunder and the issuance of the Conversion Stock upon conversion of the
Series A-1 Preferred Stock, constitute legally binding obligations of the
Company enforceable against it in accordance with the respective terms and
provisions hereof and thereof, except to the extent (a) such enforceability is
limited by bankruptcy, insolvency, reorganization, moratorium or other laws
relating to or affecting generally the enforcement of creditors' rights, (b)
that the availability of the remedy of specific performance or injunctive or
other equitable relief is subject to the discretion of the court before which
any proceeding therefor may be brought and (c) the enforceability of the
indemnity and contribution provisions contained in the Registration Rights
Agreement may be limited under federal securities laws.
SECTION 4.4. CONSENTS. Except as set forth in Schedule 4.4 hereto,
the execution, delivery and performance by the Company of this Agreement and
each Related Agreement, the purchase and sale of the Series A-1 Preferred Stock
hereunder and the issuance of the Conversion Stock upon conversion of the Series
A-1 Preferred Stock, do not require the approval or consent of, or any filing
with, any governmental authority or agency or any other Person.
SECTION 4.5. CAPITALIZATION. (a) Capital Stock. The authorized
capital stock of the Company consists solely of 60,000,000 shares of common
stock, $.01 par value per share (the "Common Stock"), and 50,000,000 shares of
Preferred Stock, $.01 par value per share (the "Preferred Stock"), of which
30,200,000 shares are designated as Series A Convertible Preferred Stock (the
"Series A Preferred Stock") and 3,125,000 shares are designated as Series A-1
Convertible Preferred Stock (the "Series A-1 Preferred Stock"). Of such
authorized shares,
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5,464,200 shares of Common Stock and 26,850,000 shares of Series A Preferred
Stock were issued and outstanding as of October 31, 1999. Schedule 4.5 sets
forth a table indicating the pro forma capitalization of the Company after
giving effect to the issuance of the Series A-1 Preferred Stock and the
consummation of all other transactions contemplated by this Agreement. All of
such issued shares of Common Stock have been duly authorized, are validly issued
and outstanding, are fully paid and non-assessable and were issued in compliance
with applicable state and federal securities laws. All Series A Preferred Stock
have been duly authorized, are validly issued and outstanding, are fully paid
and non-assessable and were issued in compliance with applicable state and
federal securities laws. All Series A-1 Preferred Stock have been duly
authorized, and, upon payment therefor pursuant to the terms of this Agreement,
will be validly issued and outstanding, fully paid and non-assessable.
(b) Options, Etc. Except for shares of Common Stock issuable (i) upon
conversion of the Series A Preferred Stock, (ii) pursuant to the Option Plan,
(iii) pursuant to the Founders' Warrants and (iv) pursuant to the employment
agreement contemplated by Section 6.1.10 hereof, there are no outstanding rights
(either preemptive or other) or options to subscribe for or purchase from the
Company, or any warrants or other agreements providing for or requiring the
issuance by the Company of, any capital stock or any securities convertible into
or exchangeable for, or exercisable into, its capital stock.
(c) Reservation. The Conversion Stock has been duly and validly
reserved for issuance.
SECTION 4.6. SUBSIDIARIES. Schedule 4.6 correctly sets forth the name
of each Subsidiary of the Company, the jurisdiction of its incorporation and the
Persons owning the outstanding capital stock of each such Subsidiary. Each such
Subsidiary is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, has all requisite corporate power
and authority and all material licenses, permits and authorizations necessary to
own its properties and carry on its businesses as now being conducted and is
qualified to do business in every jurisdiction in which its ownership of its
property or the conduct of its business requires such qualification. All of the
outstanding shares of capital stock of each such Subsidiary are validly issued,
fully paid and non-assessable. Except for such Subsidiaries, the Company does
not own any legal and/or beneficial interest in any corporation, partnership,
business trust, joint venture or other trade or business enterprise.
SECTION 4.7. FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES. (a)
Purchaser has heretofore been furnished with complete and correct copies of each
of the following:
(i) the unaudited balance sheet of the Company as of October
31, 1999 ("Balance Sheet Date"); and
(ii) the pro forma balance sheet of the Company and its
Subsidiaries as of the Balance Sheet Date, taking into account the
issuance of all of the Series A-1 Preferred Stock as contemplated
hereby.
(b) The Company's unaudited balance sheet as of the Balance Sheet
Date was prepared in accordance with generally accepted accounting principles
and fairly presents the financial condition of the Company as at the Balance
Sheet Date. Neither the Company nor any
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of its Subsidiaries has any liabilities or obligations of any nature, whether
absolute, accrued, contingent or otherwise, which are not described in such
unaudited balance sheet except for liabilities that may have arisen in the
ordinary and usual course of business since the Balance Sheet Date and that
individually or in the aggregate do not have and could not reasonably be
expected to have a material adverse effect on the Company and its Subsidiaries,
taken as a whole, and other liabilities and obligations expressly disclosed in
the Schedules to this Agreement.
(c) The pro forma balance sheet of the Company referred to in Section
4.7(a)(ii) has been prepared by management of the Company on a reasonable basis
taking into consideration the effect of the transactions contemplated hereby as
of the Closing Date and none of the Company and its management is aware of any
fact which casts doubt on the accuracy or completeness thereof. After giving
effect to the transactions contemplated by the Related Agreements, neither the
Company nor any of its Subsidiaries will have any material liabilities,
contingent or otherwise, which are not referred to in such balance sheet or in
the notes thereto other than liabilities not required to be disclosed in
accordance with generally accepted accounting principles and liabilities arising
under the Related Agreements.
SECTION 4.8. ABSENCE OF CERTAIN DEVELOPMENTS. There has been no
material adverse change in the business, properties, financial condition or
prospects of the Company and its Subsidiaries, taken as a whole, since the
Balance Sheet Date.
SECTION 4.9. INDEBTEDNESS AND LIENS. Neither the Company nor any of
its Subsidiaries has any Indebtedness or Liens upon any of its Property other
than Permitted Indebtedness and Permitted Liens.
SECTION 4.10. INDEBTEDNESS TO AND FROM OFFICERS, DIRECTORS AND
OTHERS. Except as set forth on Schedule 4.10 hereto, neither the Company nor any
of its Subsidiaries is indebted to any director, officer, employee or consultant
of the Company or any of its Subsidiaries or to any other Affiliate of the
Company, except for amounts due as normal salaries, fees or reimbursement of
ordinary business expenses. Except as set forth on Schedule 4.10, no director,
officer, employee or consultant of the Company or any of its Subsidiaries and no
other Affiliate of the Company is now, or on the Closing Date will be, indebted
to the Company or any Subsidiary of the Company except for ordinary business
expense advances.
SECTION 4.11. LICENSES, ETC. Schedule 4.11 sets forth a listing of
all franchises, patents, patent applications, patent licenses, patent rights,
trademarks, trademark rights, trade names, trade name rights, copyrights,
licenses, permits, authorizations, certificates of convenience and necessity,
operating rights and other rights as are necessary for the conduct of the
Company's business as currently conducted. All of the foregoing are in full
force and effect, and the Company is in compliance with the foregoing without
any known conflict with the valid rights of others which could affect or impair
in a material manner the business, assets, financial condition or prospects of
the Company. The Company does not believe it is or will be necessary to utilize
any inventions, trade secrets or proprietary information of any of its employees
made prior to their employment by the Company, except for such inventions, trade
secrets or proprietary information that have been assigned to the Company. To
the Company's knowledge, the conduct of the Company's business has not infringed
or misappropriated and does not infringe or misappropriate any proprietary
rights of other persons or entities, nor to the Company's knowledge, would any
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future conduct as presently contemplated infringe any proprietary rights of
other persons or entities.
SECTION 4.12. SOLVENCY. Prior to and taking into account the
consummation of the financing transactions contemplated by this Agreement and
the Related Agreements, the Company is solvent, and has tangible and intangible
assets having a fair value in excess of the amount required to pay its probable
liabilities on its existing debts as they become absolute and matured, and its
capital is not unreasonably small for the conduct of its business as presently
contemplated and the ability to pay its debts from time to time incurred in
connection therewith as such debts mature.
SECTION 4.13. TITLE TO ASSETS; LEASES. The Company owns and leases no
real property except for its leases of office facilities described on Schedule
4.13. Except as disclosed on Schedule 4.13, the Company enjoys peaceful and
undisturbed possession, and is in compliance with the terms, of such leases and
of all leases of personal property, except where failure to enjoy such
possession or such noncompliance would not have a material adverse effect upon
the business, assets, prospects or financial condition of the Company and all
such leases are valid and in full force and effect.
SECTION 4.14. LITIGATION. There is no litigation, action, suit or
proceeding, at law or in equity, or any proceeding before any court, board or
other governmental or administrative agency or any arbitrator pending or, to the
knowledge of the Company, after due inquiry, threatened, involving the Company
and its Subsidiaries. No judgment, decree or order of any court, board or other
governmental or administrative agency or arbitrator has been issued against or
binds the Company or its assets which has or may have any material adverse
effect on the business, assets, financial condition or prospects of the Company
and its Subsidiaries, taken as a whole.
SECTION 4.15. TAX RETURNS. The Company has filed all tax returns and
reports which are required to be filed by it with any foreign, federal, state or
local governmental authority or agency and has paid, or made adequate provision
for the payment of, all assessments received and all taxes which have or may
become due under applicable foreign, federal, state or local governmental law or
regulations with respect to the periods in respect of which such returns and
reports were filed. The Company knows of no additional assessments since the
date of such returns and reports for which adequate reserves appearing on the
balance sheet referred to in Section 4.7(a)(ii) have not been established. The
Company has made adequate provisions for all current taxes.
SECTION 4.16. DEFAULTS. Except as set forth in Schedule 4.16 hereto,
neither the Company nor any of its Subsidiaries is in default under any
provisions of its Certificate of Incorporation or by-laws or under any
provisions of any franchise, contract, agreement, lease or other instrument to
which it is a party or by which it or its property is bound, or in violation of
any law, judgment, decree or governmental order, rule or regulation, which
default or violation could affect adversely in any material manner the business,
assets, prospects or financial condition of the Company and its Subsidiaries,
taken as a whole. Neither the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby, nor compliance with its
terms and conditions and with the terms and provisions of the Financing
Agreements, will conflict or result in breach of, or constitute a default under,
any of the material terms, obligations,
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covenants, conditions or provisions of any restriction or of any material
indenture, mortgage, deed of trust, pledge, bank loan or credit agreement,
charter, by-law or any other material agreement or instrument to which the
Company or any of its Subsidiaries is a party or by which the Company or any of
its Subsidiaries or any of their respective properties may be bound or affected,
or any judgment, order, writ, injunction, decree or demand of any court,
arbitrator, governmental agency or result in the creation or imposition of any
lien, charge or encumbrance of any nature whatsoever upon any property or asset
of the Company or any of its Subsidiaries.
SECTION 4.17. BURDENSOME OBLIGATIONS. Neither the Company nor any of
its Subsidiaries is party to or bound by any agreement, deed, lease or other
instrument which is so unusual or burdensome as to affect or impair materially
and adversely the business, assets, prospects or financial condition of the
Company and its Subsidiaries, taken as a whole, in the foreseeable future.
SECTION 4.18. EMPLOYEE BENEFIT PLANS. Neither the Company nor any of
its Subsidiaries maintains any Employee Benefit Plan, except as set forth on
Schedule 4.18, and neither the Company nor any of its Subsidiaries has ever
maintained or contributed to any Employee Benefit Plan with respect to which the
Company is or was required to file Internal Revenue Service ("IRS") Form 5500,
and neither the Company nor any of its Subsidiaries contributes to or has ever
contributed to any "multiemployer plan," as such term is defined in Section 3 of
ERISA.
SECTION 4.19. REPRESENTATIONS AND WARRANTIES UNDER RELATED
AGREEMENTS. All representations and warranties made by the Company in any of the
Related Agreements or in the certificates delivered in connection therewith are
true and correct in all material respects as of the date hereof with the same
force and effect as though made on and as of the date hereof, and such
representations and warranties are hereby confirmed to you and made
representations and warranties of the Company hereunder as fully as if set forth
herein. To the best of the Company's knowledge, all representations and
warranties made in the Related Agreements by or on behalf of any party thereto
other than the Company and Purchaser are true and correct in all material
respects.
SECTION 4.20. EMPLOYMENT CONTRACTS, LABOR RELATIONS. Except as set
forth on Schedule 4.20, neither the Company nor any of its Subsidiaries is a
party to any written employment agreement, arrangement or understanding with any
of its officers or employees and there are no collective bargaining agreements
covering any of the employees of the Company or any of its Subsidiaries. Neither
the Company, nor to the Company's knowledge, any of its employees, is subject to
any noncompete, nondisclosure, confidentiality, employment, consulting or
similar agreements relating to, affecting or in conflict with the present or
proposed business activities of the Company (other than agreements between the
Company and its present and former employees). No consent of any union (or any
similar group or organization) is required in connection with the consummation
of the transactions contemplated hereby or by the Related Agreements. Except as
disclosed in Schedule 4.20, there are no pending, threatened or anticipated (a)
employment discrimination charges or complaints against or involving the Company
or any of its Subsidiaries before any federal, state, or local board,
department, commission or agency, (b) unfair labor practice charges or
complaints, disputes or grievances affecting the Company or any of its
Subsidiaries, (c) union representation petitions respecting the employees of the
Company or any of its Subsidiaries, (d) efforts being made to organize any of
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the employees of the Company or any of its Subsidiaries or (e) strikes, slow
downs, work stoppages, or lockouts or threats thereof affecting the Company or
any of its Subsidiaries.
SECTION 4.21. LOCATION OF OFFICE. The Company's executive offices and
the location where its books and records are kept is at the address set forth
above.
SECTION 4.22. NECESSARY PROPERTY. Except as may be set forth in
Schedule 4.22 hereto, the properties and assets owned, leased by or licensed to
the Company and its Subsidiaries constitute all of the real and personal
properties, tangible and intangible, which are necessary, used or useful in the
conduct of the businesses of the Company and its Subsidiaries in the manner and
to the extent presently conducted. Except as may be set forth in Schedule 4.22,
no other material real or personal properties are required for the conduct of
the businesses of the Company and its Subsidiaries as presently conducted.
SECTION 4.23. TRANSACTION COSTS. Except as set forth on Schedule
4.23, there are no Transaction Costs (as defined below) that will be payable by
the Company with respect to the offer, issue and sale of the Series A-1
Preferred Stock. The term "Transaction Costs" shall mean all of the costs, fees,
and expenses incurred by the Company in connection with the offer, issue and
sale of the Series A-1 Preferred Stock, including without limitation, broker's,
finder's or placement fees or commissions, attorneys' fees and fees of other
professionals.
SECTION 4.24. GOVERNMENTAL REGULATIONS. The Company is not a "holding
company", or a "subsidiary company" of a "holding company", or an "affiliate" of
a "holding company", as such terms are defined in the Public Utility Holding
Company Act of 1935; nor is the Company a "registered investment company", or an
"affiliated person" or a "principal underwriter" of a "registered investment
company", as such terms are defined in the Investment Company Act of 1940, as
amended.
SECTION 4.25. INTENTIONALLY OMITTED.
SECTION 4.26. DISCLOSURE. No representation, warranty or statement
made in this Agreement, any Related Agreement, or any agreement, certificate,
statement or document furnished by or on behalf of the Company in connection
herewith or therewith contains any untrue statement of material fact or omits to
state a material fact necessary in order to make the statements contained herein
or therein, in light of the circumstances in which they were made, not
misleading.
SECTION 4.27. GOVERNMENTAL LICENSES. Schedule 4.27 describes and
refers to the types of licenses, consents, permits, approvals and authorizations
of public or governmental bodies including, without limitation, the FCC, and the
states, counties and municipalities in which the Company's businesses will be
located, which will be required in connection with and be material to the
installation, conduct and operation of the Company's business (collectively
referred to as the "Authorizations").
SECTION 4.28. COMPLIANCE WITH LAWS. The Company and each of its
Subsidiaries are in compliance in all material respects with and have so
complied with, and are not in any material respect in default under or in
violation of, and the operation of the businesses of the Company and its
Subsidiaries do not contravene in any material respect, any statute, law
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(including environmental or employment laws), ordinance, decree, order, rule or
regulation of any governmental body applicable to the Company or any of its
Subsidiaries or any of their respective businesses, including, without
limitation, the rules and regulations of the FCC.
SECTION 4.29. ACQUISITION AGREEMENTS. Except for the transactions
contemplated by this Agreement, the Related Agreements and the employment
agreement contemplated by Section 6.1.10 hereof, and except as set forth in
Schedule 4.29, neither the Company nor any of its Subsidiaries is a party to,
bound by or the subject of, any agreement or understanding relating to the
purchase or investment by any Person in the assets or stock of the Company or
any of its Subsidiaries, and neither the Company nor any of its Subsidiaries is
a party to, bound by or the subject of, any agreement or understanding relating
to the purchase of or investment by the Company or any of its Subsidiaries in
the assets or stock of any Person.
SECTION 4.30. MATERIAL CONTRACTS AND OBLIGATIONS. Attached hereto as
Schedule 4.31 is a true, complete and accurate list, categorized by subject
matter, of all of the following outstanding contracts, agreements, plans, leases
and commitments entered into by the Company or any of its Subsidiaries which are
in writing or, to the best of the Company's knowledge, have been orally agreed
to by the Company or any of its Subsidiaries:
(i) all purchase orders or contracts for the purchase of
materials, products or supplies which are for a term of more than 6 months, or
involve aggregate payments by the Company or any of its Subsidiaries of more
than $10,000, or which were entered into other than in the ordinary course of
business of the Company and its Subsidiaries;
(ii) all written employment, consulting or service contracts
with any stockholder, director, officer, consultant, advisor or employee of the
Company, any person related by blood or marriage to any such Person or any other
Affiliate of the Company, and any such oral contracts which are not terminable
at will by the Company or any of its Subsidiaries;
(iii) all plans, contracts or arrangements providing for
stock options or stock purchases, bonuses, pensions, deferred or incentive
compensation, retirement or severance payments, profit-sharing, insurance or
other benefit plans or programs for any stockholder, director, officer,
consultant, advisor or employee of the Company or any of its Subsidiaries;
(iv) all contracts for construction or for the purchase of
real estate, improvements, fixtures, equipment, machinery and other items which
under GAAP constitute capital expenditures;
(v) all contracts relating to the rental or use of
equipment, vehicles, other personal property or fixtures;
(vi) all contracts relating in any way to direct or indirect
Indebtedness for borrowed money or evidenced by a bond, debenture, note or other
evidence of Indebtedness (whether secured or unsecured) of or to the Company or
any of its Subsidiaries, and all Liens with respect to any Property used or
owned by the Company or any of its Subsidiaries;
(vii) all contracts substantially restricting the Company or
any of its Subsidiaries from engaging in any line of business or competing with
any Person or in any
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geographical area, or from using or disclosing any information in its possession
(other than routine supplier and customer confidentiality agreements);
(viii) all license agreements, either as licensor
or licensee;
(ix) all joint venture contracts and agreements
involving a sharing of profits;
(x) all contracts, commitments or shared
services arrangement with any Affiliate and all contracts or commitments not
made in the ordinary course of its business; and
(xi) all other contracts, except those which are
(A) cancellable on 30 days' or less notice without any penalty or other
financial obligation or (B) if not so cancellable, involve annual aggregate
payments by or to the Company or any of its Subsidiaries of $5,000 or less.
Except as set forth on Schedule 4.30, all contracts,
agreements, plans, leases and commitments required to be disclosed to Purchaser
pursuant to this Section 4.30 are valid, binding and in full force and effect as
to the Company and its Subsidiaries, and none of the Company or any of its
Subsidiaries or, to the best of the Company's knowledge, any other party
thereto, is in material breach or material violation of, or material default
under, nor is there any reasonable basis for a claim of material breach or
violation by the Company or any of its Subsidiaries of, or default by the
Company or any of its Subsidiaries under, the terms of any such contract,
agreement, plan, lease or commitment, and no event has occurred which
constitutes or, with the lapse of time or the giving of notice or both, would
constitute such a material breach, violation or default by the Company or any of
its Subsidiaries thereunder.
SECTION 4.31. ENVIRONMENTAL AND SAFETY LAWS. To the Company's
knowledge, neither the Company nor any of its Subsidiaries is in violation of
any applicable Environmental Law or any applicable statute, law or regulation
relating to occupational health and safety and to the Company's knowledge, no
material expenditures are or will be required in order to comply with any such
existing statute, law or regulation.
SECTION 4.32. INVESTMENTS IN REAL PROPERTY HOLDING INTERESTS.
The Company's capital stock does not constitute a United States real property
interest as that term is defined in Section 897(c)(1)(A)(ii) of the Code. The
preceding representation is based on a determination by the Company that the
Company is not and, since its inception, has not been a United States real
property holding corporation (as that term is defined in Section 897(c)(2) of
the Code) (a "USRPHC"). From time to time, upon request of any Purchaser, the
Company shall make a determination as to its status as a USRPHC. If at any time
in the future the Company should become a USRPHC, the Company shall, as promptly
as possible, notify each Purchaser of such change in status.
SECTION 4.33. UNRELATED BUSINESS TAXABLE INCOME. Any gross
income derived by Purchaser from the Series A-1 Preferred Stock and the
Conversion Stock issuable upon conversion of the Series A-1 Preferred Stock, as
holders thereof, shall be in the form of dividends, if any, and capital gains
and losses from the disposition of property, but only such dividends and capital
gains and losses that are not included under Section 512(b)(4) of the Code in
calculating
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unrelated business taxable income. This Section 4.33 shall not be deemed to
apply to (i) any compensation (in cash, stock or other form), received by any
designee of a Purchaser in his or her capacity as a director of the Company,
that is transferred to such Purchaser, (ii) any income included under Section
512(b)(4) of the Code as a result of acquisition indebtedness incurred by any
Purchaser in connection with the purchase of an interest in the Company, (iii)
any income derived by any Purchaser from the Company with respect to which such
Purchaser has expressly waived in writing the application of the provisions of
this Section 4.33, or (iv) any income derived by any Purchaser pursuant to the
reimbursement of expenses provisions hereof.
ARTICLE V. PURCHASER'S INVESTMENT REPRESENTATIONS AND WARRANTIES
Purchaser hereby represents and warrants to the Company and to
the directors, officers and control persons (within the meaning of the
Securities Act) of the Company as follows:
(i) Purchaser recognizes that the Company has
little financial and operating history and that an investment in the Company is
highly speculative and involves significant risks, including, without
limitation, those disclosed on Schedule 5.1 hereto.
(ii) Purchaser has been afforded the opportunity
to ask questions and to receive answers concerning the terms and conditions of
the purchase of Series A-1 Preferred Stock and to obtain any additional
information which the Company possesses or can acquire without unreasonable
effort or expense that is necessary to verify the accuracy of the information
set forth in this Agreement. The Company has responded to all inquiries that
Purchaser has made of it concerning the Company, its business, financial
condition and prospects or any other matter relating to the operations of the
Company and the offering and sale of the Series A-1 Preferred Stock. No oral or
written statement or inducement which is contrary to the information set forth
in this Agreement has been made by or on behalf of the Company to such
Purchaser.
(iii) Purchaser is an "accredited investor" (as
defined in Rule 501 of Regulation D promulgated under the Securities Act) and
has such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of an investment in the Series A-1
Preferred Stock.
(iv) Purchaser (a) has adequate means of
providing for its current needs and possible contingencies, (b) has no need for
liquidity in its investment, (c) is able to bear the economic risks of such
investment in the Series A-1 Preferred Stock, and (d) at the present time, can
afford a complete loss of such investment.
(v) Purchaser is purchasing the Series A-1
Preferred Stock for its own account, for investment purposes, and not for
distribution, assignment or resale to others; provided, however, that nothing
contained herein shall prevent Purchaser and subsequent holders of Series A-1
Preferred Stock from transferring such securities in compliance with the
provisions of Article XI hereof. No other Person has any direct or indirect
beneficial interest in such Series A-1 Preferred Stock, except as disclosed by
Purchaser to the Company and except investors in Purchaser.
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(vi) Purchaser understands that (a) there is and
will be no market for the Series A-1 Preferred Stock, (b) the sale of the Series
A-1 Preferred Stock has not been and will not be registered under the Securities
Act or any state securities laws in reliance on the exemption for nonpublic
offerings provided by Section 4(2) of the Securities Act and Regulation D
promulgated thereunder and analogous state securities law provisions, and must
be held indefinitely unless they are subsequently registered under the
Securities Act and applicable state securities laws or an exemption from such
registration is available, (c) except as expressly provided in the Registration
Rights Agreement, the Company is under no obligation to register the Series A-1
Preferred Stock on Purchaser's behalf or to assist it in complying with any
exemption from registration, and (d) none of the Series A-1 Preferred Stock may
be sold pursuant to Rule 144 promulgated by the Securities and Exchange
Commission pursuant to the Securities Act unless all of the conditions of that
Rule are met.
(vii) Purchaser understands that no Federal or
state agency has passed upon the Series A-1 Preferred Stock or made any finding
or determination as to the fairness of the investment or any recommendation or
endorsement of the Series A-1 Preferred Stock. Purchaser will not transfer the
Series A-1 Preferred Stock without registering or qualifying the same under
applicable securities laws unless such transfer is exempt under such laws.
(viii) Purchaser has not been furnished any
offering literature other than this Agreement, the written materials described
in Schedule 5.2 hereto and other materials which the Company may have provided
at the request of Purchaser, and Purchaser has relied only on the information
contained in this Agreement, the written materials described in Schedule 5.2
hereto and the other information furnished or made available to Purchaser by the
Company, as described in subparagraph (ii) above.
(ix) Purchaser has its principal place of
business at the address set forth above.
(x) Purchaser certifies, under penalties of
perjury, (a) that its federal taxpayer identification number shown on the
signature page hereof and (b) that Purchaser is not subject to backup
withholding either because Purchaser has not been notified that Purchaser is
subject to backup withholding as a result of a failure to report all interest or
dividends, or the Internal Revenue Service has notified Purchaser that Purchaser
is no longer subject to backup withholding.
The representations and warranties of Purchaser herein shall
not limit or modify the representations and warranties of the Company set forth
in this Agreement.
Purchaser agrees to indemnify and hold harmless the Company,
its officers, directors, and control persons (within the meaning of the
Securities Act) from and against any and all damage, loss, liability, cost and
expense (including reasonable attorneys' fees) which any of them may incur by
reason of any breach of the representations and warranties made by Purchaser
herein or in any other document provided by Purchaser to the Company. All
representations, warranties and covenants in this Agreement, and the
indemnification contained in this Article V, shall survive any closing
hereunder.
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The certificates evidencing shares of the Series A-1 Preferred
Stock shall be imprinted with a legend in substantially the following form:
"THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES ACT, AND SUCH SHARES CANNOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO
THE REGISTRATION PROVISIONS OF SUCH ACTS OR AN EXEMPTION THEREFROM.
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER CONTAINED IN A CERTAIN SECURITIES
PURCHASE AGREEMENT BY AND AMONG THE COMPANY AND THE PURCHASER OF SUCH SHARES, A
COPY OF WHICH IS AVAILABLE AT THE PRINCIPAL OFFICES OF THE COMPANY."
ARTICLE VI. CONDITIONS TO PURCHASE
SECTION 6.1. PURCHASER'S CONDITIONS. Purchaser's obligation to
purchase the Series A-1 Preferred Stock to be purchased on the Closing Date by
Purchaser pursuant to this Agreement is subject to compliance by the Company
with its agreements herein contained, and to the satisfaction, on or prior to
the Closing Date, of the following conditions unless waived:
SECTION 6.1.1. RELATED AGREEMENTS. Each of the Related
Agreements shall have been executed and delivered in the forms provided for
herein (including without limitation the Company's execution and delivery of
Instruments of Accession whereby Purchaser shall become party to the
Stockholders' Agreement and the Registration Rights Agreement, in each case in
the form attached to such Instruments), and each of the Related Agreements shall
be in full force and effect and no term or condition thereof shall have been
amended, modified or waived except with the prior written consent of Purchaser.
All covenants, agreements and conditions contained in the Related Agreements
which are to be performed or complied with by the Company on or prior to the
Closing Date shall have been performed or complied with in all material respects
(or waived with the prior written consent of Purchaser).
SECTION 6.1.2. CHARTER DOCUMENTS; GOOD STANDING CERTIFICATE.
Purchaser shall have received from the Company (a) a copy, certified by the
Secretary of State of Delaware, of the Amended and Restated Certificate of
Incorporation of the Company and the Certificate of Designations of the Series
A-1 Preferred Stock, (b) a copy, certified by a duly authorized officer of the
Company to be true and complete as of the Closing Date, of the by-laws of the
Company; and (c) certificates, dated not more than ten (10) days prior to the
Closing Date, of the Secretaries of State of Delaware and Missouri, as to the
Company's corporate good standing in such states.
SECTION 6.1.3. PROOF OF CORPORATE ACTION. Purchaser shall have
received from the Company copies, certified by a duly authorized officer thereof
to be true and complete as of the Closing Date, of the records of all corporate
action taken by the Company to authorize the execution, delivery and performance
of this Agreement and each of the Related Agreements.
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SECTION 6.1.4. INCUMBENCY CERTIFICATE. Purchaser shall have
received from the Company an incumbency certificate, dated the Closing Date,
signed by a duly authorized officer thereof and giving the name and bearing a
specimen signature of each individual who shall be authorized to sign, in the
name and on behalf of the Company, this Agreement and each of the Related
Agreements, and to give notices and to take other action on behalf of the
Company hereunder.
SECTION 6.1.5. LEGAL OPINION. Purchaser shall have received
from Xxxxx Xxxx LLP, special counsel to the Company, a favorable opinion
substantially in the form of Exhibit E hereto, and covering such other matters
with respect to the transactions contemplated by this Agreement as Purchaser may
reasonably request.
SECTION 6.1.6. REPRESENTATIONS AND WARRANTIES; OFFICERS'
CERTIFICATES. The representations and warranties of the Company contained or
incorporated by reference herein shall be true and correct in all material
respects on and as of the Closing Date with the same force and effect as though
made on and as of the Closing Date, except for those representations and
warranties which relate specifically to a particular date, provided that such
representations and warranties were true and correct in all respects as of such
date; no event or condition shall have occurred or would result from the
issuance of any of the Series A-1 Preferred Stock which would be a Default or an
Event of Default, and the Company shall have performed and complied with, in all
material respects, all conditions and agreements required to be performed or
complied with by it prior to the Closing; and Purchaser shall have received on
the Closing Date a certificate to these effects signed by an authorized officer
of the Company.
SECTION 6.1.7. LEGALITY; GOVERNMENTAL AND OTHER
AUTHORIZATIONS. The purchase of the Series A-1 Preferred Stock by Purchaser
shall not be prohibited by any law or governmental order or regulation. All
necessary consents, approvals, licenses, permits, orders and authorizations of,
or registrations, declarations and filings with, any governmental or
administrative agency or of or with any other Person, with respect to any of the
transactions contemplated by this Agreement or any of the Related Agreements,
shall have been duly obtained or made and shall be in full force and effect.
SECTION 6.1.8. DUE DILIGENCE. Purchaser shall have completed
its legal, financial, tax, environmental, accounting and business due diligence
review of the Company with the results thereof satisfactory to Purchaser in its
sole discretion.
SECTION 6.1.9. PAYMENT OF CERTAIN FEES AND DISBURSEMENTS.
Purchaser shall have been reimbursed by the Company pursuant to Section 11.1 of
this Agreement for all reasonable out-of-pocket costs and expenses (including,
but not limited to, the reasonable legal fees of one counsel to Purchaser)
incurred by it through the Closing Date in connection with the transactions
contemplated by this Agreement.
SECTION 6.1.10. CHIEF EXECUTIVE OFFICER. Xxxxx X. Xxxxxxx
shall have entered into a three-year employment agreement with the Company
whereby Xx. Xxxxxxx agrees to serve as the Company's chief executive officer and
as a member of the Board of Directors.
SECTION 6.1.11. GENERAL. All instruments and legal,
governmental, administrative and corporate proceedings in connection with the
transactions contemplated by this Agreement
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and the Related Agreements shall be reasonably satisfactory in form and
substance to Purchaser, and Purchaser shall have received copies of all
documents which Purchaser may have reasonably requested in connection therewith,
including, without limitation, records of corporate proceedings, the opinion of
counsel contemplated by Section 6.1.5 and any consents, licenses, approvals,
permits and orders required to be secured by the Company in connection with the
transactions contemplated hereby.
SECTION 6.2. THE COMPANY'S CONDITIONS. The Company's
obligation to issue and sell the Series A-1 Preferred Stock to be purchased on
the Closing Date pursuant to this Agreement are subject to compliance by
Purchaser with its agreements herein contained, and to the satisfaction, on or
prior to the Closing Date, of the following conditions:
SECTION 6.2.1. RELATED AGREEMENTS. Instruments of Accession to
the Stockholders' Agreement and the Registration Rights Agreement shall each
have been executed and delivered by Purchaser in the forms attached to such
agreements, and each of the other Related Agreements shall be in full force and
effect and no term or condition thereof shall have been amended, modified or
waived except with the prior written consent of the Company. All covenants,
agreements and conditions contained in the Related Agreements which are to be
performed or complied with by Purchaser on or prior to the Closing Date shall
have been performed or complied with in all material aspects (or waived with the
prior written consent of the Company).
SECTION 6.2.2. LEGALITY: GOVERNMENTAL AND OTHER
AUTHORIZATIONS. The sale of the Series A-1 Preferred Stock by the Company shall
not be prohibited by any law or governmental order or regulation. All necessary
consents, approvals, licenses, permits, orders and authorizations of, or
registrations, declarations and filings with, any governmental or administrative
agency or of or with any other Person, with respect to any of the transactions
contemplated by this Agreement or any of the Related Agreements, shall have been
duly obtained or made and shall be in full force and effect.
SECTION 6.2.3. CHIEF EXECUTIVE OFFICER. Xxxxx X. Xxxxxxx
shall have entered into the employment agreement contemplated in Section 6.1.10
hereof.
SECTION 6.2.4. GENERAL. All instruments and legal,
governmental and administrative and corporate proceedings in connection with the
transactions contemplated by this Agreement and the Related Agreements shall be
reasonably satisfactory in form and substance to the Company, and the Company
shall have received copies of any consents, licenses, approvals, permits and
orders secured by Purchaser in connection with the transactions contemplated
hereby.
ARTICLE VII. COVENANTS APPLICABLE TO THE COMPANY WHILE ANY OF THE SERIES A-1
PREFERRED STOCK ARE OUTSTANDING
The Company covenants that, so long as any of the Series A-1
Preferred Stock is outstanding, the Company will comply and will cause each of
its Subsidiaries to comply with the following provisions unless otherwise
consented to in writing by the Majority Holders:
SECTION 7.1. RECORDS AND ACCOUNTS. Each of the Company and its
Subsidiaries will keep true and accurate records and books of account in which
full, true and correct entries
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will be made in accordance with generally accepted accounting principles and
maintain adequate accounts and reserves for all taxes (including income taxes),
all depreciation, depletion, obsolescence and amortization of its Properties,
all contingencies, and all other reserves, all in accordance with GAAP.
SECTION 7.2. CORPORATE EXISTENCE; SUBSIDIARIES; MAINTENANCE OF
PROPERTIES. The Company and its Subsidiaries will not engage in any business
other than providing telecommunications services and those businesses reasonably
ancillary thereto. Unless authorized by the Board of Directors each of the
Company and its Subsidiaries will (a) preserve and keep in full force and effect
its corporate existence, rights and franchises, and (b) maintain all of its
Properties used or useful in the conduct of its business in good condition,
repair and working order (normal wear and tear excepted) and cause to be made
all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the 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; provided, however, that nothing in this Section 7.2
shall prevent the Company or any of its Subsidiaries from discontinuing the
operation and maintenance of any of such Properties if such discontinuance is,
in the judgment of the Company, desirable in the conduct of such Person's
business and does not in the aggregate materially adversely affect the business
of the Company and its Subsidiaries taken as a whole.
SECTION 7.3. INSURANCE. Each of the Company and its
Subsidiaries will maintain with financially sound and reputable insurance
companies, funds or underwriters insurance of the kinds, covering the risks and
in the relative proportionate amounts which, in the judgment of the Board of
Directors, are usually carried by reasonable and prudent companies conducting
businesses similar to that of the Company and its Subsidiaries.
SECTION 7.4. TAXES AND CLAIMS. Each of the Company and its
Subsidiaries will pay and discharge, or cause to be paid and discharged, before
the same shall become overdue, all taxes, assessments and other governmental
charges imposed upon the Company and its Subsidiaries and their Properties,
sales and activities, or any part thereof, or upon the income or profits
therefrom, as well as all claims for labor, materials, or supplies, which if
unpaid might by law become a Lien upon any of their Properties; provided,
however, that any such tax, assessment, charge, levy or claim need not be paid
if the validity or amount thereof shall currently be contested in good faith by
appropriate proceedings and if the Company or any of its Subsidiaries shall have
set aside on its books adequate reserves with respect thereto; and provided,
further, that the Company and its Subsidiaries will pay or cause to be paid all
such taxes, assessments, charges, levies or claims forthwith upon the
commencement of foreclosure on any Lien which may have attached as security
therefor.
SECTION 7.5. INSPECTION OF PROPERTIES AND BOOKS. Upon the
request of any holder of Series A-1 Preferred Stock, the Company will furnish
such information regarding the business, affairs, prospects and financial
condition of the Company and its Subsidiaries as such holder may reasonably
request. Each of the Company and its Subsidiaries shall permit any holder of
Series A-1 Preferred Stock or any of its designated representatives, at their
respective cost, to visit and inspect any of the properties of the Company and
its Subsidiaries, to examine the books of account of the Company and its
Subsidiaries (and to make copies thereof and extracts therefrom), and to discuss
the affairs, finances and accounts of each of the Company and its Subsidiaries
with, and to be advised as to the same by, officers of such Persons, all at such
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reasonable times and intervals as such holder of Series A-1 Preferred Stock may
reasonably request. At least three days prior to any interview of an officer of
such Person, the chief executive officer of the Company shall be notified of
such interview and shall be invited to attend such interview. Prior to making
any such inspection or conducting any such interviews, such holder of Series A-1
Preferred Stock and its representatives who are making the inspection or
conducting the interviews shall execute confidentiality and non-disclosure
agreements reasonably acceptable to the Company and its counsel and such holder
and its counsel. Purchaser shall be entitled to have one representative attend
meetings of the Board of Directors as a non-voting observer. In connection
therewith, the Company shall provide such representative with a copy of all
notices, minutes, consents and other materials, financial or otherwise, which
the Company provides to members of its Board of Directors concurrently with the
delivery of such information to the members of its Board of Directors.
Participation by observers in any meeting of the Board of Directors shall be at
the reasonable discretion of the Chairman of the Board. Any observer may be
excluded from all or any portion of any meeting in which the Board of Directors
is (i) considering matters with respect to which such observer or any Affiliate
of such observer has a conflict of interest, (ii) when deemed reasonably
advisable by the Chairman of the Board and/or counsel for the Company to
preserve an attorney-client privilege or the confidentiality of any other
significant matter and (iii) when the Board of Directors by majority vote
otherwise resolves to conduct its proceedings in executive session. The Company
shall reimburse the out-of-pocket expenses incurred by one of Purchaser's
representatives in attending meetings of the Board of Directors.
SECTION 7.6. COMPLIANCE WITH LAWS, CONTRACTS, LICENSES AND
PERMITS. The Company and each of its Subsidiaries will comply with (a) all
applicable laws and regulations, (b) the provisions of its Charter and by-laws,
(c) all agreements and instruments by which it or any of its Properties may be
bound (including, without limitation, the Related Agreements) (d) all applicable
decrees, orders, and judgments and (e) all required approvals, permits and
licenses. If at any time while any Series A-1 Preferred Stock is outstanding,
any authorization, consent, approval, permit or license from any officer, agency
or instrumentality of any government shall become necessary or required in order
that any of the Company or its Subsidiaries may lawfully fulfill any of its
obligations hereunder, each of the Company and its Subsidiaries will immediately
take or cause to be taken all reasonable steps within its power to obtain such
authorization, consent, approval, permit or license and furnish Purchaser with
evidence thereof.
SECTION 7.7. EMPLOYEE BENEFIT PLANS. Neither of the Company
nor any ERISA Affiliate will:
(a) engage in any "prohibited transaction" within the meaning
of ss.406 of ERISA or ss.4975 of the Code;
(b) permit any Guaranteed Pension Plan to incur an
"accumulated funding deficiency", as such term is defined in ss.302 of ERISA,
whether or not such deficiency is or may be waived;
(c) fail to contribute to any Guaranteed Pension Plan to an
extent which, or terminate any Guaranteed Pension Plan in a manner which, could
result in the imposition of a lien or encumbrance on the assets of the Company
or any of its Subsidiaries pursuant to ss.302(f) or ss.4068 of ERISA; or
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(d) permit or take any action which would result in the
aggregate benefit liabilities (with the meaning of ss.4001 of ERISA) of all
Guaranteed Pension Plans exceeding the value of the aggregate assets of such
Plans, disregarding for this purpose the benefit liabilities and assets of any
such Plan with assets in excess of benefit liabilities.
The Company will (i) promptly upon filing the same with the
Department of Labor or Internal Revenue Service, furnish to each holder of
Series A-1 Preferred Stock a copy of the most recent actuarial statement
required to be submitted under ss.103(d) of ERISA and Annual Report, Form 5500,
with all required attachments, in respect of each Guaranteed Pension Plan and
(ii) promptly upon receipt or dispatch, furnish to each holder of Series A-1
Preferred Stock a copy of any notice, report or demand sent or received in
respect of a Guaranteed Pension Plan under ss.ss.302, 4041, 4042, 4043, 4063,
4065, 4066 and 4068 of ERISA, or in respect of a Multiemployer Plan, under
ss.ss.4041A, 4202, 4219, 4242 or 4245 of ERISA.
SECTION 7.8. FURTHER ASSURANCES. The parties will cooperate
with each other and execute such further instruments and documents as any party
shall reasonably request to carry out the transactions contemplated by this
Agreement.
SECTION 7.9. NOTICES. The Company will promptly notify each
holder of Series A-1 Preferred Stock in writing of the occurrence of any Default
or Event of Default or if any Person shall give any notice or take any other
action in respect of a claimed default (whether or not constituting a Default or
an Event of Default) under any of the Related Agreements or any other Default
with respect to a material agreement to which the Company or any of its
Subsidiaries is a party. The Company also covenants and agrees to promptly
provide each holder of Series A-1 Preferred Stock with written notice: (a) upon
the Company or any of its Subsidiaries' obtaining knowledge of any violation of
any Environmental Law regarding the Property or the operations of the Company or
any of its Subsidiaries; (b) upon the Company or any of its Subsidiaries'
obtaining knowledge of any potential or known release, or threat of release, of
any Hazardous Materials at, from, or into the Property which it reports in
writing or is reportable by it in writing to any governmental authority; (c)
upon the Company or any of its Subsidiaries' receipt of any notice of violation
of any Environmental Laws or of any release or threatened release of Hazardous
Materials at, from or into the Property, including a notice or claim of
liability or potential responsibility from any third party (including without
limitation any federal, state or local governmental officials) and including
notice of any formal inquiry, proceeding, demand, investigation or other action
with regard to (i) the Company, any of its Subsidiaries or any other Person's
operation of the Property or (ii) contamination on, from or into the Property;
(d) upon the Company or any of its Subsidiaries' receipt of notice of any
investigation or remediation of offsite locations at which the Company, any of
its Subsidiaries or any of their predecessors are alleged to have directly or
indirectly disposed of Hazardous Materials; or (e) upon the Company or any of
its Subsidiaries' obtaining knowledge that any expense or loss has been incurred
by such governmental authority in connection with the assessment, containment,
removal or remediation of any Hazardous Materials with respect to which the
Company or any of its Subsidiaries may be liable or for which a Lien may be
imposed on the property.
SECTION 7.10. RESTRICTIONS ON INDEBTEDNESS. Neither the
Company nor any of its Subsidiaries will create, incur, assume, guarantee or be
or remain liable, contingently or otherwise, with respect to any Indebtedness
other than the following ("Permitted Indebtedness"):
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(i) Indebtedness as set forth in Schedule 7.10
hereto;
(ii) obligations, contingent and otherwise, which
in accordance with GAAP are classified on the obligor's balance sheet as
liabilities or referred to in the footnotes thereto, which are incurred in the
ordinary course of business and not incurred through (A) the borrowing of money,
or (B) the obtaining of credit except for credit on an open account basis
customarily extended in connection with normal purchases of goods and services;
and
(iii) any other Indebtedness of the Company and
its Subsidiaries which shall be approved by a Supermajority Board Vote.
SECTION 7.11. RESTRICTIONS ON LIENS. Neither the Company nor
any of its Subsidiaries will create or incur or suffer to be created or incurred
or to exist any Lien of any kind upon any of its Properties or assets of any
character whether now owned or hereafter acquired, or upon the income or profits
therefrom; or transfer any of such Property or assets or the income or profits
therefrom for the purpose of subjecting the same to the payment of Indebtedness
or performance of any other obligation in priority to payment of its general
creditors; or acquire, or agree or have an option to acquire, any property or
assets upon conditional sale or other title retention or purchase money security
agreement, device or arrangement; or suffer to exist for a period of more than
thirty days after the same shall have been incurred any Indebtedness or claim or
demand against it which if unpaid might by law or upon bankruptcy or insolvency,
or otherwise, be given any priority whatsoever over its general creditors (other
than those claims which the Company is contesting in good faith by appropriate
proceedings and as to which the Company shall have set aside on its books
adequate reserves with respect thereto); or sell, assign, pledge or otherwise
transfer any accounts, contract rights, general intangibles or chattel paper,
with or without recourse; provided, however, that the Company and its
Subsidiaries may create or incur or suffer to be created or incurred or to exist
any of the following ("Permitted Liens"):
(a) Liens to secure taxes, assessments and other government
charges or claims for labor, material or supplies in respect of obligations not
overdue or due but being contested to the extent permitted by Section 7.4;
(b) Deposits or pledges made in connection with, or to secure
payment of, workmen's compensation, unemployment insurance, old age pensions or
other social security obligations;
(c) Liens in respect of final judgments or awards against the
Company or any of its Subsidiaries in an aggregate amount of not greater than
$100,000 (in excess of available insurance recoveries);
(d) Liens of carriers, warehousemen, mechanics and
materialmen, and other like Liens;
(e) Encumbrances consisting of easements, rights of way,
zoning restrictions, restrictions on the use of real property and irregularities
in the title thereto, landlord's or lessor's Liens under leases to which the
Company or any of its Subsidiaries is a party, and other minor Liens or
encumbrances none of which interferes materially with the use of the property
affected in
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the ordinary conduct of the business of the Company and its Subsidiaries and
which defects do not individually or in the aggregate have a material adverse
effect on the business, assets, financial condition or prospects of the Company
or any of its Subsidiaries;
(f) Any Liens on the assets and Property of the Company from
time to time securing Permitted Indebtedness;
(g) Any Liens existing on the date of this Agreement; and
(h) Any other Liens which shall be approved by the Board of
Directors by a Supermajority Board Vote.
SECTION 7.12. DISTRIBUTIONS. Unless approved by a
Supermajority Board Vote, the Company shall not make any Distribution.
SECTION 7.13. MERGER, CONSOLIDATION, SALE OF ASSETS OR OTHER
DISPOSITIONS. Without the approval of the Board of Directors by a Supermajority
Board Vote, neither the Company nor any of its Subsidiaries will become a party
to any merger or consolidation in which the Company and/or its Stockholders do
not hold a majority of the voting equity in, and do not control, the surviving
entity of such merger or consolidation, or sell, lease, sublease or otherwise
transfer or dispose of (including, but not limited to, any sale and leaseback
transactions) any substantial portion of its Property to any Person whether
directly or indirectly or in a single transaction or a series of related
transactions, other than sales of inventory and used equipment in the ordinary
course of business consistent with past practices; provided, that, the Company
or any wholly-owned Subsidiary may engage in any of the above transactions with
the Company or any other wholly-owned Subsidiary without such approval, so long
as in the case of any merger or consolidation to which it is a party the Company
is the surviving entity.
SECTION 7.14. MERGER, CONSOLIDATION OR OTHER ACQUISITIONS.
Neither the Company nor any Subsidiary shall directly or indirectly, by
operation of law or otherwise, become a party to a merger or consolidation in
which the Company and/or its Stockholders continue to hold in the aggregate a
majority of the voting equity in, or continue to control, the surviving entity
of such merger or consolidation, acquire all or substantially all of the assets
(other than purchases of inventory made in the ordinary course of the Company's
business) or capital stock of, or otherwise combine with, any Person, unless
such acquisition is approved by the Board of Directors by a Supermajority Board
Vote, provided that the Company or any wholly-owned Subsidiary may engage in any
of the above transactions with the Company or any other wholly-owned Subsidiary
without such approval, so long as in the case of any merger or consolidation to
which it is a party the Company is the surviving entity.
SECTION 7.15. TRANSACTIONS WITH AFFILIATES. Unless approved by
the Board of Directors by a Supermajority Board Vote, neither the Company nor
any of its Subsidiaries will engage in any transaction with any Affiliate except
for transactions contemplated by the Related Agreements and except for
transactions by the Company with any Subsidiary or by any Subsidiary with any
other Subsidiary.
SECTION 7.16. INVESTMENTS. Unless approved by the Board of
Directors by a Supermajority Board Vote, the Company will not, and will not
permit any of its Subsidiaries to,
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have outstanding or acquire or commit itself to acquire or hold any Investment
except Investments in: (a) marketable direct obligations issued or guaranteed by
the United States of America which mature within one year from the date of
acquisition thereof or which are subject to a repurchase agreement, exercisable
within 90 days from the date of acquisition of such agreement, with any
commercial bank or trust company incorporated under the laws of the United
States of America or any State thereof or the District of Columbia, (b)
commercial paper maturing within one year from the date of acquisition thereof
and having, at the date of acquisition thereof, the highest rating obtainable
from Xxxxx'x Investors Service, Inc. or Standard & Poor's Corporation, (c)
bankers' acceptances eligible for rediscount under Federal Reserve Board
requirements accepted by any commercial bank or trust company referred to in
clause (a) hereof and (d) certificates of deposit maturing within one year from
the date of acquisition thereof issued by any commercial bank or trust company
referred to in clause (a) hereof and having capital and surplus of at least
$100,000,000.
SECTION 7.17. JOINT VENTURES. Neither the Company nor any
Subsidiary will cause or consent to any joint venture engaging in any activity
which would result in a breach of any representation, warranty, covenant or
agreement set forth in this Agreement or which would result in the joint venture
being in breach of any representation, warranty, covenant or agreement set forth
in this Agreement if the joint venture were a Subsidiary.
SECTION 7.18. PAYMENTS ON PERMITTED INDEBTEDNESS. Neither the
Company nor any of its Subsidiaries shall make (i) any payments of the
Indebtedness represented by the Permitted Indebtedness except as specifically
required by the terms of the Permitted Indebtedness or (ii) any prepayments of
such Permitted Indebtedness. In addition, the Company shall not amend, alter or
agree to any such amendment or alteration to the terms and conditions of any of
the documents representing the Permitted Indebtedness.
SECTION 7.19. RESPONSE ACTIONS. The Company covenants and
agrees that if any release or disposal of Hazardous Materials shall occur or
shall have occurred on the Property, the Company will cause the prompt
containment and removal of such Hazardous Materials and remediation of the
Property as necessary to comply in all material respects with all Environmental
Laws or to preserve in all material respects the value of the Property.
SECTION 7.20. DILUTION PROTECTION. Except for the shares of
Common Stock to be issued upon conversion of the Series A Preferred Stock and
the Series A-1 Preferred Stock, upon exercise of the Founders' Warrants and any
options issued under the Option Plan, and pursuant to the employment agreement
contemplated by Section 6.1.10 hereof, and any capital stock of the Company
issued pursuant to Acquisitions approved by the Board of Directors as provided
in Section 7.14 hereof, without a Supermajority Board Vote, neither the Company
nor any of its Subsidiaries will (a) issue, sell, give away, transfer, pledge,
mortgage, assign or otherwise dispose of, grant any rights (either preemptive or
other) or options to subscribe for or purchase, enter into any agreements, or
issue any warrants, providing for the issuance of any capital stock of the
Company or any stock or securities convertible into or exchangeable for any
capital stock of the Company or (b) designate any series of Preferred Stock of a
class which has been authorized in the Company's Certificate of Incorporation;
provided that the foregoing approval shall not be required for the issuance or
transfer to the Company or any of its wholly-owned Subsidiaries of securities of
any wholly-owned Subsidiary of the Company. Without the affirmative vote of
66-2/3% of the outstanding Common Stock and Preferred Stock, voting as a
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class, the Company will not authorize any additional class of capital stock or
increase the number of shares of authorized capital stock from that set forth in
Section 4.5 hereof or Schedule 4.5 hereto. The Company shall maintain such
number of authorized and unissued shares of (w) Common Stock to be issued upon
conversion of the Series A-1 Preferred Stock, (x) Common Stock to be issued upon
conversion of the Series A Preferred Stock, (y) Common Stock to be issued upon
exercise of the Founders' Warrants, and (z) Common Stock to be issued upon
exercise of any options granted under the Option Plan.
SECTION 7.21. ANNUAL STATEMENTS. As soon as available and in
any event within 90 days after the close of each fiscal year of the Company
commencing with the fiscal year ending December 31, 1999, the Company will
deliver to each holder of Series A-1 Preferred Stock (a) an audited consolidated
balance sheet and statement of income and retained earnings and of cash flows of
the Company and its Subsidiaries audited to the extent so required by any "big
five" independent public accounting firm, as selected by the Company, and (b)
consolidated internal unaudited balance sheets and statements of income and
retained earnings and of cash flows of each Subsidiary of the Company, in each
case showing the financial condition of the Company and/or each Subsidiary of
the Company as of the close of such fiscal year and the results of the Company's
and/or such Subsidiary's operations during such fiscal year, all on a
consolidated basis, and setting forth in comparative form the comparable
statements for the previous fiscal year, if any. Each of the audited financial
statements delivered hereunder shall be certified by such accounting firm to
have been prepared in accordance with generally accepted accounting principles
consistently applied, accompanied by the written statement of such firm to the
effect that such firm does not know of the existence of any Default or Event of
Default, or if such firm shall have obtained knowledge of any such Default or
Event of Default or other event, setting forth the nature thereof.
SECTION 7.22. MONTHLY STATEMENTS. Within 30 days after the end
of each month commencing with the month ending November 30, 1999, the Company
will deliver to each holder of Series A-1 Preferred Stock (a) a consolidated
internal, unaudited balance sheet and statement of income and retained earnings
and of cash flows of the Company as of the end of each such month, and (b)
consolidated internal unaudited balance sheets and statements of income and
retained earnings and of cash flows of each Subsidiary of the Company, in each
case including a comparison of such financial statements to the annual operating
budget and projected monthly balance sheets and statements of income delivered
pursuant to Section 7.23 hereof and certified by the chief financial officer of
the Company to be true and correct and to have been prepared in accordance with
GAAP consistently applied (other than such footnotes which may be required by
GAAP), subject to normal year-end adjustments described in reasonable detail.
SECTION 7.23. OTHER FINANCIAL INFORMATION. The Company will
deliver to each holder of Series A-1 Preferred Stock, within 30 days prior to
the commencement of each fiscal year, (i) an annual operating budget and
projected monthly balance sheets and statements of income, (ii) as soon as
practical after preparation thereof, complete and correct copies of all
quarterly or annual budgetary analyses or forecasts of the Company and its
Subsidiaries (if any) prepared by management for the use of the Board of
Directors and (iii) updated five-year projections of the Company and its
Subsidiaries (if any) prepared by management for the use of the Board of
Directors. Promptly after the receipt thereof, the Company will provide to each
holder of Series A-1 Preferred Stock copies of any reports as to adequacies in
accounting controls submitted by independent accountants with respect to the
Company and its Subsidiaries.
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SECTION 7.24. OFFICER'S CERTIFICATES. Together with delivery
of consolidated financial statements of the Company pursuant to Section 7.22
above, the Company shall deliver to each holder of Series A-1 Preferred Stock a
certificate of the President, chief financial officer or Treasurer of the
Company, to the effect that such financial statements are true and correct and
were prepared in accordance with GAAP and that such officer has caused the
provisions of this Agreement and the Series A-1 Preferred Stock to be reviewed
and has no knowledge of any Default or Event of Default, or if such officer has
such knowledge, specifying such Default or Event of Default and the nature
thereof, and what action the Company has taken, is taking or proposes to take
with respect thereto.
SECTION 7.25. NOTICE OF LITIGATION, DEFAULTS, ETC. The Company
will promptly give notice to each holder of Series A-1 Preferred Stock of any
litigation or any administrative proceeding to which the Company or any of its
Subsidiaries may hereafter become a party which, after giving effect to
applicable insurance, may result in any adverse change in the business, assets,
prospects or financial condition of the Company and its Subsidiaries taken as a
whole. Forthwith upon any officer of the Company obtaining knowledge of any
Default or Event of Default hereunder or any default or event of default under
any Related Agreement or any agreement relating to any Indebtedness of the
Company or any of its Subsidiaries for borrowed money, the Company will furnish
a notice specifying the nature and period of existence thereof and what action
the Company or any of its Subsidiaries has taken, is taking or proposes to take
with respect thereto.
SECTION 7.26. CHARTER AND BY-LAW AMENDMENTS. Except as
otherwise specified in this Agreement, without the consent of the Majority
Holders, the Charter and By-laws of each of the Company and its Subsidiaries
shall not be amended or modified, whether by merger, dissolution or otherwise,
if such amendment or modification has, or would, directly or indirectly,
adversely affect the rights of holders of the Series A-1 Preferred Stock or the
rights or remedies of such holders hereunder or under any of the Related
Agreements.
SECTION 7.27. PROPRIETARY INFORMATION AND INVENTIONS
AGREEMENT. The Company and its Subsidiaries shall each have and enforce a policy
requiring each employee with access to proprietary information of the Company or
any Subsidiary to enter into a proprietary information and confidentiality and
assignment agreement substantially in the form approved by the Board of
Directors.
ARTICLE VIII. DEFAULTS
SECTION 8.1. EVENTS OF DEFAULT. The Majority Holders will be
entitled to exercise the remedies provided in Section 8.2 hereof in accordance
with the terms thereof if any one or more of the following events ("Events of
Default") shall occur:
(a) the Company or any of its Subsidiaries shall fail in any
material respect to perform or observe any of the covenants, agreements or
provisions to be performed or observed by it under this Agreement or any of the
Related Agreements (except to the extent such failure is attributable to actions
of any holder of Preferred Stock) (other than covenants, agreements or
provisions for which a default in the performance or observance thereof is
specifically dealt with
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elsewhere in this Agreement or any Related Agreement) and the continuance of
such failure for a period of thirty days after written notice thereof has been
given to the Company by the Majority Holders; or
(b) any material representation or warranty made by the
Company or any of its Subsidiaries to any Purchaser in or in connection with
this Agreement or any Related Agreement or any amendment thereto shall prove to
have been materially false on the date as of which it was made; or
(c) default under any Indebtedness of the Company or any of
its Subsidiaries in an amount outstanding which exceeds $1,000,000 in the
aggregate, and such default shall continue, without having been duly cured,
waived or consented to, beyond the period of grace, if any, therein specified
and so as to permit the acceleration thereof, if any acceleration is provided
for therein; or
(d) a final judgment which in the aggregate with other
outstanding final judgments against the Company or any of its Subsidiaries
exceeds $100,000 (in excess of available insurance recoveries) shall be rendered
against such Person and, within 60 days after entry thereof, such judgment shall
not have been satisfied and discharged or stayed pending appeal or bonded, or
within 60 days after expiration of such stay such judgment shall not have been
discharged; or
(e) the Company or any of its Subsidiaries shall:
(i) commence a voluntary case under Title 11 of the
United States Bankruptcy Code as from time to time in effect, or authorize, by
appropriate proceedings of its board of directors or other governing body, the
commencement of such a voluntary case;
(ii) have filed against it a petition commencing an
involuntary case under said Title 11 and such petition shall not have been
dismissed or stayed within 60 days;
(iii) seek relief as a debtor under any applicable law,
other than said Title 11, of any jurisdiction relating to the liquidation or
reorganization of debtors or to the modification or alteration of the rights of
creditors, or consent to or acquiesce in such relief;
(iv) have entered against it an order by a court of
competent jurisdiction (x) finding it to be bankrupt or insolvent, (y) ordering
or approving its liquidation, reorganization or any modification or alteration
of the rights of its creditors, or (z) assuming custody of, or appointing a
receiver or other custodian for, all or a substantial part of its property;
which order shall not be vacated, denied, set aside, or stayed within 60 days
from the date of entry; or
(v) make an assignment of all or a substantial part of
its Property for the benefit of, or enter into a composition with, its
creditors, or appoint or consent to the appointment of a receiver or other
custodian for all or a substantial part of its Property; or
(f) with respect to any Guaranteed Pension Plan, an ERISA
Reportable Event shall have occurred as a result of which a trustee shall have
been appointed by an appropriate United States District Court to administer such
Guaranteed Pension Plan or the PBGC shall have
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instituted proceedings to terminate such Guaranteed Pension Plan, and the
Majority Holders shall have determined in their reasonable discretion that such
event reasonably could be expected to result in liability of the Company or any
of its Subsidiaries to the PBGC or such Guaranteed Pension Plan in an aggregate
amount exceeding $100,000.
SECTION 8.2. REMEDIES. Upon the occurrence of any of the
Events of Default under Section 8.1 hereof, in each and every such case, the
Majority Holders may proceed to protect and enforce the rights of all such
holders by suit in equity, action at law and/or other appropriate proceeding
either for specific performance of any covenant, provision or condition
contained or incorporated by reference in this Agreement or in aid of the
exercise of any power granted in this Agreement, and in addition, at the option
of the Majority Holders, the Majority Holders shall have the right to hire an
investment banker to (i) commence an underwritten public offering of all of the
Conversion Stock, (ii) assist in obtaining a private buyer for all of the
Conversion Stock, (iii) assist in obtaining a buyer for all the outstanding
stock of the Company or all or substantially all of the assets of the Company or
(iv) assist in effecting any other similar transaction or series of transactions
resulting in the disposition of all the stock or all or substantially all of the
assets and business of the Company, in each case at a price solely acceptable to
the Majority Holders. The Majority Holders shall have the right to (A) to
determine the type of transaction to be effected, (B) to give direction to the
investment banker, (C) to negotiate and control the sale process and all
documentation and (D) to approve the terms and price of any such transaction. In
furtherance of the foregoing (and except for an Event of Default under Section
8.1(f) hereof which shall be automatic), the remedies set forth in this Section
8.2 may only be exercised by the action of the Majority Holders, and not by the
action of any single holder of Preferred Stock.
SECTION 8.3. WAIVERS. Each of the Company and its Subsidiaries
hereby waives, to the extent not prohibited by applicable law, (a) all
presentments, demands for performance and notices of nonperformance (except to
the extent specifically required by the provisions hereof or any Related
Agreement), and (b) any requirement of diligence or promptness on the part of
any holder of Series A-1 Preferred Stock in the enforcement of its rights under
the provisions of this Agreement or any Related Agreement.
ARTICLE IX. SUBSEQUENT HOLDERS OF SERIES A-1 PREFERRED STOCK
The provisions of this Agreement, the Stockholders' Agreement
and the Registration Rights Agreement that are for the benefit of Purchaser as
the holder of any Series A-1 Preferred Stock are, except as otherwise
specifically provided in such agreement, also for the benefit of, and
enforceable by and binding upon, all subsequent holders of the Series A-1
Preferred Stock who may acquire such Series A-1 Preferred Stock, and the
provisions of this Agreement, the Stockholders' Agreement and the Registration
Rights Agreement that subject Purchaser to obligations as the holders of any
Series A-1 Preferred Stock also subject all subsequent holders of Series A-1
Preferred Stock thereto.
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ARTICLE X. REGISTRATION AND TRANSFER OF SERIES A-1 PREFERRED STOCK
SECTION 10.1. TRANSFER AND EXCHANGE OF SERIES A-1 PREFERRED
STOCK. The Company shall keep at its principal office a register in which shall
be entered the names and addresses of the holders of the Series A-1 Preferred
Stock and the particulars (including without limitation the class thereof) of
the respective Series A-1 Preferred Stock held by them and of all transfers of
Series A-1 Preferred Stock. Upon surrender at such office of any certificate
representing shares of Series A-1 Preferred Stock for registration of exchange
or transfer, in accordance with the terms hereof and of the Financing
Agreements, the Company shall issue, at its expense, one or more new
certificates, in such denomination or denominations as may be requested, for
such shares of Series A-1 Preferred Stock and registered as such holder may
request. Any certificate representing shares of Series A-1 Preferred Stock
surrendered for registration of transfer shall be duly endorsed, or accompanied
by a written instrument of transfer duly executed by the holder of such
certificate or his attorney duly authorized in writing. The Company shall not be
responsible for payment of any transfer taxes due upon any such exchange or
transfer.
SECTION 10.2. REPLACEMENT OF SERIES A-1 PREFERRED STOCK. Upon
receipt of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of any Series A-1 Preferred Stock and, in the case of
any such loss, theft or destruction, upon receipt of indemnity reasonably
satisfactory to the Company, or, in the case of such mutilation, upon the
surrender of such Series A-1 Preferred Stock for cancellation to the Company at
its principal office, the Company will execute and deliver, in lieu thereof, a
new Series A-1 Preferred Stock of like tenor. Any Series A-1 Preferred Stock in
lieu of which any such new Series A-1 Preferred Stock has been so executed and
delivered by the Company shall not be deemed to be outstanding for any purpose
of this Agreement.
ARTICLE XI. EXPENSES; INDEMNITY
SECTION 11.1. EXPENSES. Whether or not the transactions
contemplated by this Agreement shall be consummated, the Company shall pay on
demand (accompanied by reasonable supporting details and documentation) all
reasonable out-of-pocket fees, costs and expenses incurred by Purchaser in
connection with such transactions hereunder, under any Related Agreements and in
connection with any amendments or waivers (whether or not the same become
effective) hereof or thereof and, following the occurrence of an Event of
Default all reasonable out-of-pocket expenses incurred by the holders of Series
A-1 Preferred Stock in connection with the enforcement of any rights hereunder
or with respect to any Series A-1 Preferred Stock. Such fees, costs and expenses
shall include without limitation (i) the cost and expenses of preparing and
duplicating this Agreement, each Related Agreement and the Series A-1 Preferred
Stock; (ii) the cost of delivering to Purchaser's principal office, insured to
Purchaser's satisfaction, the Series A-1 Preferred Stock sold to Purchaser
hereunder and any Common Stock delivered to Purchaser upon any conversion
thereof; (iii) the reasonable fees and out-of-pocket expenses and disbursements
of one counsel to Purchaser and the Series A Holders, Xxxxxx Godward LLP, in
connection with the preparation, administration, interpretation or enforcement
of this Agreement and the Related Agreements and other instruments mentioned
herein, the Closing, any amendments, modifications, approvals, consents or
waivers hereto, thereto or hereunder
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requested by the Company; (iv) all taxes (other than taxes determined with
respect to income and taxes relating to any transfer of the Series A-1 Preferred
Stock other than to the Company), including any recording fees and filing fees
and documentary stamp and similar taxes at any time payable in respect of this
Agreement, or the issuance of any of the Series A-1 Preferred Stock; and (v) all
reasonable out-of-pocket expenses associated with any rights of board
attendance, and travel and lodging expenses related thereto, incurred by the
board designees of the holders of the Series A-1 Preferred Stock.
SECTION 11.2. INDEMNIFICATION. To the fullest extent permitted
by applicable law, the Company shall indemnify, exonerate and hold Purchaser and
its (if applicable) general and limited partners and their respective
stockholders, officers, directors, employees and agents free and harmless from
and against any and all actions, causes of action, suits, losses, liabilities,
damages and expenses, including, without limitation, reasonable attorneys' fees
and disbursements, incurred by any of the indemnitees as a result of or relating
to (i) any transaction to which the Company is a party which is financed or to
be financed in whole or in part directly or indirectly with proceeds from the
sale of any of the Series A-1 Preferred Stock, (ii) without duplication of the
reimbursed expenses paid under Section 11.1, the execution, delivery,
performance or enforcement of this Agreement (including, without limitation, the
breach by the Company of any of its representations or warranties contained in
Article IV of this Agreement and any failure by the Company or any of its
Subsidiaries to comply with any of its covenants hereunder), the Related
Agreements or any instrument contemplated hereby or thereby, (iii) any violation
of, or liability under, any Environmental Laws with respect to conditions at the
Property or the operations conducted thereon, or (iv) the investigation or
remediation of offsite locations at which the Company, any of its Subsidiaries
or their predecessors are alleged to have directly or indirectly disposed of
Hazardous Materials.
SECTION 11.3. BROKERS' FEES. The parties shall indemnify each
other against and agree that each will hold the others harmless from any claim,
demand or liability for any other broker's, finder's or placement fees or
lender's incentive fees alleged to have been incurred by it in connection with
the transactions contemplated by this Agreement or the Related Agreements.
SECTION 11.4. SURVIVAL OF OBLIGATIONS. The obligations of the
parties under this Article XI shall survive payment or transfer of the Series
A-1 Preferred Stock and the termination of this Agreement.
ARTICLE XII. NOTICES
Any notice or other communication in connection with this
Agreement, any Related Agreement or the Series A-1 Preferred Stock shall be
deemed to be received if in writing (or in the form of a telex or telecopy)
addressed as provided below (a) when actually delivered, in person, (b) when
telexed or telecopied to said address, confirmed by registered or certified
mail, (c) when received if delivered by overnight courier, or (d) in the case of
delivery by mail, three business days shall have elapsed after the same shall
have been deposited in the United States mails, postage prepaid and registered
or certified:
(i) If to the Company, at its principal executive
offices, to the attention of the Chief Executive Officer or at
such other
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address as the Company shall have specified by notice
actually received by the, addressor,
with copies to:
Xxxxxx Investments, L.P.
00000 Xxxxxxxxxxxx Xxxxx Xxxx, Xxxxx 000
Xxxxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx
and to: Xxxxx Xxxx LLP
One Metropolitan Square
000 Xxxxx Xxxxxxxx, Xxxxx 0000
Xx. Xxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxx, Esq.
(ii) If to Purchaser, then to 0000 Xxxxxxx, Xxxxx
000, Xxxxxx, Xxxxxxxx 00000, Attention: Xxxx X. Xxxxxxx, or at
such other address as Purchaser shall have specified by notice
actually received by the addressor; and
(iii) If to any other holder of record of any Series
A-1 Preferred Stock, to it at its address set forth in the
applicable register referred to in Article X hereof.
ARTICLE XIII. SURVIVAL AND TERMINATION OF COVENANTS, AGREEMENTS,
REPRESENTATIONS AND WARRANTIES
All covenants, agreements, representations and warranties made
herein or in any Related Agreement shall be deemed to have been relied on by the
recipient, notwithstanding any investigation made by the recipient or on the
recipient's behalf, and shall survive the execution and delivery of this
Agreement and the issuance of the Series A-1 Preferred Stock. Except for the
representations and warranties contained herein and as otherwise expressly
provided herein or in any such Related Agreement, such covenants, agreements,
representations and warranties, shall terminate and be of no further force or
effect upon the automatic conversion of the Series A-1 Preferred Stock pursuant
to the Amended and Restated Certificate of Incorporation of the Company.
ARTICLE XIV. AMENDMENTS AND WAIVERS
Except as otherwise expressly provided herein, any term of
this Agreement may be amended and the observance of any term of this Agreement
may be waived (either generally or in a particular instance and either
retroactively or prospectively) only with the written consent of the Company and
the Majority Holders, respectively. Any amendment or waiver effected in
accordance with this Article XIV shall be binding upon the Company and each
holder of any Series A-1 Preferred Stock. No course of dealing between the
Company or any of its Subsidiaries
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on the one hand, and the holder of any Series A-1 Preferred Stock, on the other
hand, shall operate as a waiver of any rights under this Agreement. No delay or
omission in exercising any right under this Agreement shall operate as a waiver
of such right or any other right. A waiver on any one occasion shall not be
construed as a bar to or waiver of any right or remedy on any other occasion.
The Company will not effect any amendment or waiver of any provision of the
Series A Purchase Agreement unless an equivalent amendment or waiver of the
corresponding provision of this Agreement is simultaneously effected, and vice
versa.
ARTICLE XV. RIGHT TO PUBLICIZE
Each of the parties hereby acknowledges that each party, at
its own expense, will have the right to publicly disclose the investments in the
Company contemplated hereby, provided, however, that no party may use in a
public disclosure the name of any other party without the prior approval by such
other party.
ARTICLE XVI. WAIVER OF JURY TRIAL
EACH PARTY HEREBY EXPRESSLY WAIVES ANY RIGHT IT MAY HAVE TO A
JURY TRIAL IN ANY SUIT, ACTION OR PROCEEDING EXISTING UNDER OR RELATING TO THIS
AGREEMENT, THE SERIES A-1 PREFERRED STOCK OR ANY OF THE RELATED AGREEMENTS.
ARTICLE XVII. INCORPORATORS, SHAREHOLDERS, OFFICERS, DIRECTORS, EMPLOYEES AND
PARTNERS FREE FROM PERSONAL LIABILITY
No recourse under or upon any obligation, covenant or
agreement of this Agreement or of any Related Agreement will be had against any
incorporator, shareholder (except for obligations specific to any shareholder
under this Agreement or any Related Agreement), officer, director, employee, or
partner as such, past, present, or future, of the Company or any holder of
Series A-1 Preferred Stock or any predecessor or successor entity, either
directly or through the Company or any holder of Series A-1 Preferred Stock,
whether by virtue of any constitution, statute, or rule of law, or by the
enforcement of any assessment or penalty or otherwise, it being expressly
understood that this Agreement and the other Related Agreements are solely
corporate obligations, and no such personal liability whatsoever will attach to,
or is or will be incurred by, the incorporators, shareholders (except for
obligations specific to any shareholder under this Agreement or any Related
Agreement), officers, directors or employees, as such, of the Company or any
holder of Series A-1 Preferred Stock or of any predecessor or successor entity,
or any of them, under or by reason of the obligations, covenants, or agreements
contained in this Agreement and the Related Agreements; provided that nothing in
this Article XVII shall eliminate or limit the liability of any incorporator,
shareholder, officer, director, employee or partner (i) for breach of fiduciary
duty, if any, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the General Corporation Law of the State of Delaware or (iv) for any transaction
for which the individual derived an improper personal benefit.
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ARTICLE XVIII. SCHEDULES
Any matter or item disclosed in any part of a particular
Schedule hereto shall be deemed to be disclosed in all parts of the Schedules
hereto where such matter is required to be disclosed.
ARTICLE XIX. ENTIRE AGREEMENT; COUNTERPARTS; SECTION HEADINGS
This Agreement and the Related Agreements set forth the entire
understanding of the parties hereto with respect to the subject matter hereof
and thereof and supersede any prior written or oral understandings with respect
thereto. This Agreement may be executed simultaneously in one or more
counterparts thereof, each of which shall be deemed as original but all of which
together shall constitute one and the same instrument. The headings in this
Agreement are for convenience of reference only and shall not alter or otherwise
affect the meaning hereof.
ARTICLE XX. GOVERNING LAW
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF MISSOURI AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF MISSOURI, WITHOUT GIVING EFFECT
TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE THAT WOULD CAUSE THE
APPLICATION OF THE SUBSTANTIVE LAWS OF ANY OTHER STATE, EXCEPT THAT ALL MATTERS
RELATIVE TO THE INTERNAL AFFAIRS OF THE COMPANY SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE GENERAL CORPORATION LAW OF THE STATE OF
DELAWARE.
ARTICLE XXI. SEVERABILITY
If any term or provision of this Agreement or the Series A-1
Preferred Stock, as the case may be, or the application thereof to any Person or
circumstance, shall, to any extent, be invalid or unenforceable, the remainder
of this Agreement or the Series A-1 Preferred Stock, as the case may be, or its
application to other Persons or circumstances, shall not be affected thereby and
each term and provision hereof shall be enforced to the fullest extent permitted
by law.
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If the foregoing corresponds with your understanding of our
agreement, kindly sign this letter and the accompanying copies thereof in the
appropriate space below and return one counterpart of the same to the Company,
at the address first listed above.
Very truly yours,
XXXXXXX COMMUNICATIONS, INC.
By:
--------------------------------------
Xxxxxx X. Xxxx, President
Accepted and agreed to:
MERITAGE PRIVATE EQUITY FUND, L.P.
(Federal Taxpayer Identification No._______________)
MERITAGE PRIVATE EQUITY PARALLEL FUND, L.P.
(Federal Taxpayer Identification No._______________)
MERITAGE ENTREPRENEURS FUND, L.P.
(Federal Taxpayer Identification No._______________)
By Meritage Investment Partners, LLC
General Partner
By:
--------------------------------------------------------------------
Name:
------------------------------------------------------------------
Title:
-----------------------------------------------------------------
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List of Schedules
4.1 States of Qualification
4.4 Third Party Consents
4.5 Capitalization
4.6 Subsidiaries
4.7(a)(i) and (ii) Financial Statements
4.10 Indebtedness to and from Affiliates
4.11 Licenses, etc.
4.13 Leases
4.16 Defaults
4.18 Employee Benefit Plans
4.20 Employment Contracts, Labor Relations
4.22 Necessary Property
4.23 Transaction Costs
4.27 Authorizations
4.29 Acquisition Agreements
4.30 Material Contracts and Obligations
5.1 Risk Factors
5.2 Written Materials
7.10 Additional Indebtedness
