▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
DECEMBER 31, 2001
TABLE OF CONTENTS
PAGE
1. Purchase and Sale of Preferred Stock and Warrant......................1
1.1 Sale and Issuance of Senior Preferred Stock.....................1
1.2 Sale and Issuance of Warrants...................................2
1.3 Closing; Delivery...............................................2
2. Representations, Warranties and Covenants of the Company..............3
2.1 Organization, Good Standing and Qualification...................3
2.2 Capitalization..................................................3
2.3 Subsidiaries....................................................4
2.4 Authorization...................................................4
2.5 Governmental Authorization......................................5
2.6 Valid Issuance of Securities....................................5
2.7 Consents........................................................5
2.8 Litigation......................................................6
2.9 Intellectual Property Rights....................................6
2.10 Compliance with Other Instruments...............................6
2.11 FCC Compliance..................................................6
2.12 State Commission Compliance.....................................7
2.13 Absence of Liabilities..........................................7
2.14 No Conflict of Interest.........................................7
2.15 Rights of Registration and Voting Rights........................7
2.16 Private Placement...............................................8
2.17 Title to Property and Assets....................................8
2.18 Tax Returns and Audits..........................................8
2.19 Labor Agreements and Actions....................................8
2.20 Permits.........................................................8
2.21 Real Property Holding Corporation...............................9
2.22 Financial Statements............................................9
2.23 Changes.........................................................9
2.24 Environmental and Safety Laws..................................10
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2.25 FCPA...........................................................10
2.26 Reports........................................................11
2.27 Accuracy of Other Information..................................11
2.28 Compliance with Laws Generally.................................11
2.29 ERISA Compliance...............................................11
2.30 Employee Matters...............................................11
2.31 Disclosure.....................................................12
3. Representations and Warranties of the Purchaser......................12
3.1 Accredited Investor; Authorization.............................12
3.2 No Conflict With Other Agreements..............................12
3.3 Investment Knowledge...........................................12
3.4 Distribution...................................................12
4. Conditions of Purchaser's Obligations at Closing.....................13
4.1 Representations and Warranties.................................13
4.2 Performance....................................................13
4.3 Compliance Certificate.........................................13
4.4 Qualifications.................................................13
4.5 Supporting Documents...........................................13
4.6 Amended Credit Agreement.......................................13
4.7 Warrants.......................................................13
4.8 Board of Directors.............................................14
4.9 Investor Rights Agreement......................................14
4.10 Certificate of Designation.....................................14
4.11 NASD Approval..................................................14
4.12 No Litigation..................................................14
5. Conditions of the Company's Obligations at Closing...................14
5.1 Representations and Warranties.................................14
5.2 Performance....................................................14
5.3 Investor Rights Agreement......................................14
5.4 Amended Credit Agreement.......................................14
5.5 No Litigation..................................................15
6. Warrants and Warrant Shares..........................................15
6.1 Warrant Certificates...........................................15
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6.2. Exercise of Warrants...........................................16
6.3. Transfers of Warrants and Warrant Shares.......................17
6.4 Rights Upon Equity Dispositions, Equity Redemptions and
Non-Surviving Transactions.....................................17
6.5. Repurchase Offers..............................................18
6.6. Cumulative Rights..............................................19
6.7. Exercise of Rights Conditioned Upon Closing of
Transaction Involved...........................................20
6.8. Payment of Taxes and Expenses..................................20
6.9. Reservation and Issuance of Warrant Shares.....................20
6.10. Corrective Adjustments.........................................20
6.11. Listing of Shares..............................................20
6.12. Lists of Holders...............................................21
6.13. Statement of Warrant Interest..................................21
6.14. Right of Inspection............................................21
6.15. Attendance and Participation Rights............................21
6.16. Anti-Dilution Provisions.......................................21
7. Affirmative Covenants of the Company.................................24
7.1 Corporate Existence............................................24
7.2 Books of Account and Reserves..................................24
7.3 Furnishing of Financial Statements and Information.............24
7.4 Reserve for Warrant Shares.....................................25
7.5 SEC Reporting..................................................26
7.6 Authorizations.................................................26
7.7 Use of Proceeds................................................26
7.8 Notice of Transactions or Liquidation..........................26
7.9 Representation on Board of Directors...........................26
7.10 Voting Rights..................................................26
7.11 Warrant Exercise...............................................28
7.12 Fairness Opinion...............................................28
7.13 Legal Opinion..................................................28
7.14 Disclosure Schedule............................................28
8. Definitions..........................................................28
9. Miscellaneous........................................................32
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9.1 Survival of Representations and Warranties.....................32
9.2 Warrant Exchange...............................................32
9.3 Compliance with FCC and State Commission Requirements..........32
9.4 Compliance with Purchaser's Regulatory Requirements............32
9.5 Transfer; Successors and Assigns...............................33
9.6 Titles and Subtitles...........................................33
9.7 Notices........................................................33
9.8 Finder's Fee...................................................34
9.9 Expenses.......................................................34
9.10 Amendments and Waivers.........................................34
9.11 Severability...................................................34
9.12 Delays or Omissions............................................34
9.13 Entire Agreement...............................................35
9.14 GOVERNING LAW..................................................35
9.15 Forum Selection; Consent to Jurisdiction.......................35
9.16 Waiver of Jury Trial...........................................35
9.17 Counterparts...................................................36
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EXHIBITS AND SCHEDULES
----------------------
Exhibit A - Form of Certificate of Designation of Rights and Preferences
of Senior Preferred Stock
Exhibit B - Form of Investor Rights Agreement
Exhibit C - Form of Legal Opinions
Exhibit D - Form of Warrant Certificate
▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
PREFERRED STOCK AND
-------------------
WARRANT PURCHASE AGREEMENT
--------------------------
THIS PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT (this
"Agreement"), dated as of December 31, 2001, by and among
▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC., a Delaware corporation (the "Company"), and MCG
CAPITAL CORPORATION, a Delaware corporation, as assignee of MCG FINANCE
CORPORATION (including any successor, assignee, transferee, pledgee or
participant thereof, the "Purchaser").
WITNESSETH:
----------
WHEREAS, the Company and the Purchaser entered into a Credit Facility
Agreement dated as of March 16, 2000, as amended prior to the date hereof
(the "Credit Agreement"), pursuant to which the Purchaser agreed to provide
the Borrowers (as defined therein) with credit facilities aggregating up to
$17.0 million; and
WHEREAS, concurrently herewith, and subject to the terms and
conditions therein, the Company and the Purchaser are amending the Credit
Agreement pursuant to that certain Amendment Number Two to Credit Facility
Agreement dated as of the date hereof (and as amended from time to time
hereafter, the "Amended Credit Agreement"); and
WHEREAS, in order to induce Purchaser to enter into the Amended Credit
Agreement, in consideration of the entry into the Amended Credit Agreement
by the Purchaser and the other transactions contemplated hereby and
thereby, and subject to the terms and conditions set forth herein, the
Company desires to issue and sell to the Purchaser, and the Purchaser
desires to purchase from the Company, (i) 50,000 shares of the Company's
Senior Preferred Stock, par value $0.01 per share (the "Preferred Stock"),
for an aggregate purchase price of $5,000,000 (the "Purchase Price"), (ii)
and Warrants (as defined below) to purchase 10,124,384 shares of common
stock, par value $0.01 per share, of the Company (the "Common Stock");
WHEREAS, the Senior Preferred Stock and the Warrants are subject to
redemption, exchange or cancellation, as applicable, on the terms set forth
herein and in the Certificate of Designation.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1 PURCHASE AND SALE OF PREFERRED STOCK AND WARRANT.
1.1 Sale and Issuance of Senior Preferred Stock.
-------------------------------------------
(a) The Company has, or before the Closing (as defined
below) will have, authorized the issuance and sale to the Purchaser of up
to 50,000 shares of Preferred Stock. The Company shall adopt and file with
the Secretary of State of the State of Delaware on or
before the Closing the Certificate of Designation of Rights and Preferences
of Senior Preferred Stock in the form attached hereto as Exhibit A (the
"Certificate of Designation").
(b) Subject to the terms and conditions of this Agreement,
the Purchaser agrees to purchase at the Closing, and the Company agrees to
sell and issue to the Purchaser at the Closing, (i) 50,000 shares of
Preferred Stock.
1.2 Sale and Issuance of Warrants.
-----------------------------
(a) The Company has, or before the Closing (as defined
below) will have, authorized the grant to the Purchaser of warrants (each a
"Warrant" and, collectively, the "Warrants") to purchase up to an aggregate
10,124,384 shares of Common Stock (as such number may be adjusted from time
to time as provided herein) in consideration of the entry into the Amended
Credit Agreement by the Purchaser and the other transactions contemplated
hereby and thereby. Upon issuance of the Warrants to the Purchaser, all
other warrants held by the Purchaser, as listed on Section 1.2 of the
Disclosure Schedule (the "Old Warrants"), shall be cancelled and exchanged
for the Warrants. Each Warrant is exercisable immediately.
(b) Each Warrant entitles the registered holder of such
Warrant to purchase (during the Exercise Period) one fully paid,
nonassessable Warrant Share at a price of $0.01 per share (as such amount
may be adjusted from time to time as provided herein, the "Exercise
Price").
(c) Without limiting the foregoing, the Preferred Stock and
the Warrants (and the grant thereof hereunder) are additional compensation
for the cost, expense and risk incurred by the Purchaser associated with
the Amended Credit Agreement, but neither the grant nor the exercise of any
Warrants or the issuance of the Preferred Stock in any way affects or
relieves the Company or Borrowers (or any affiliate thereof) of any of its
or their obligations to fully and timely perform and to fully and timely
repay the entire indebtedness due under the Amended Credit Agreement and
related Loan Documents (as defined in the Amended Credit Agreement).
1.3 Closing; Delivery. Subject to the terms and conditions of
this Agreement, the purchase and sale of the Preferred Stock and Warrants
shall take place at the offices of Dow, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, PLLC, ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇., ▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇.▇., at 10 a.m., on December
31, 2001, or at such other time and place as the Company and the Purchaser
mutually agree upon, orally or in writing (which time and place are
designated as the "Closing"). At the Closing, the Company shall deliver to
the Purchaser (i) a certificate registered in the name of the Purchaser
representing the number of shares of Preferred Stock being purchased
thereby, and (ii) a Warrant Certificate registered in the name of the
Purchaser representing the Warrants. The Purchaser shall deliver payment of
the Purchase Price through the partial cancellation of outstanding debt,
including accrued and unpaid interest thereon, with an aggregate value of
$5,000,000. The Company and the Purchaser shall take such additional
actions and execute and deliver such additional agreements and other
instruments and documents as reasonably necessary or appropriate to effect
the transactions contemplated by this Agreement in accordance with its
terms.
2
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. The
Company hereby represents, warrants and covenants to the Purchaser that the
statements contained in this Section 2 are true, correct and complete. As
used herein, the "Disclosure Schedule" refers to that certain disclosure
schedule delivered by the Company to the Purchaser prior to the execution
of this Agreement. When used in connection with the Company or any of its
subsidiaries, the term "Material Adverse Effect" means any change, event or
effect that is materially adverse to the business, assets, liabilities,
financial condition, operations or results of operations of the Company and
its subsidiaries, taken as a whole.
2.1 Organization, Good Standing and Qualification. The Company is
a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware and has all requisite corporate power and
authority to carry on its business as now conducted. The Company is duly
qualified to transact business and is in good standing in each jurisdiction
in which the failure so to qualify would have a Material Adverse Effect.
2.2 Capitalization. The authorized capital stock of the Company
immediately prior to the Closing will consist of:
(a) 1,000,000 shares of preferred stock, par value $0.01 per
share (the "Preferred Stock"), of which 200,000 shares have been designated
as Class A Preferred Stock, First Series, none of which are issued or
outstanding, and 50,000 of which have been designated as Senior Preferred
Stock, none of which are issued or outstanding. The rights, privileges and
preferences of the Senior Preferred Stock are set forth on Exhibit A
hereto.
(b) 39,000,000 shares of common stock, par value $0.01 per
share (the "Common Stock"), of which 10,826,538 shares were issued and
outstanding on December 31, 2001. All of the outstanding shares of Common
Stock have been duly authorized, are fully paid and nonassessable and have
been issued in compliance with all applicable federal and state securities
laws. The Company has reserved 10,124,384 shares of Common Stock for
issuance upon exercise of the Warrants.
(c) The Company has reserved 1,750,000 shares of Common
Stock for issuance to officers, directors, employees and consultants of the
Company pursuant to the stock option plans set forth in Section 2.2(c) of
the Disclosure Schedule, which have been duly adopted by the Company's
Board of Directors and approved by the Company's stockholders (except that
stockholder approval of the Company's 2002 Plan is pending) (collectively,
the "Stock Plans"). Of such reserved shares of Common Stock, as of December
31, 2001, options to purchase 0 shares had been exercised, options to
purchase 1,012,709 were outstanding and 737,291 shares of Common Stock were
available for issuance to officers, directors, employees and consultants
pursuant to the Stock Plans, as set forth in Section 2.2(c) of the
Disclosure Schedule.
(d) The Warrant Shares (if issued upon exercise of the
Warrants as of the date hereof) would constitute 45% of the shares of
Capital Stock of the Company on a Fully-Diluted Basis.
3
(e) Except as set forth in Section 2.2(e) of the Disclosure
Schedule or as provided in this Agreement with respect to the Preferred
Stock, (i) no subscription, warrant, option, convertible or exchangeable
security or other right (contingent or otherwise) to purchase or acquire
any shares of capital stock of the Company or any of its subsidiaries is
authorized or outstanding, (ii) neither the Company nor any of its
subsidiaries has any obligation (contingent or otherwise) to issue any
subscription, warrant, option, convertible or exchangeable security or
other such right or to issue or distribute to holders of any shares of its
capital stock any evidences of indebtedness or assets of the Company or any
of its subsidiaries, and (iii) neither the Company nor any of its
subsidiaries has any obligation (contingent or otherwise) to purchase,
redeem or otherwise acquire any shares of its capital stock or any interest
therein or to pay any dividend or make any other distribution in respect
thereof.
(f) The Company has previously delivered to the Purchaser a
true and correct copy of the Company's Certificate of Incorporation and
Bylaws, each as amended and restated to date (including a true and correct
copy of each certificate of designation filed with respect to Preferred
Stock and any other class of capital stock).
(g) Except as provided in this Agreement or as set forth in
Section 2.2(g) of the Disclosure Schedule, there are no agreements, written
or oral, between the Company and any holder of its capital stock, or, to
the Company's knowledge, among any holders of its capital stock, relating
to the acquisition (including, without limitation, rights of first refusal
or preemptive rights), disposition, registration under the Securities Act
of 1933, as amended (the "Securities Act"), or voting of the capital stock
of the Company.
2.3 Subsidiaries. Except as set forth in the Company SEC Reports
(as defined in Section 2.25), the Company does not currently have any
subsidiaries, as defined in Item 601(21) of Regulation S-K, promulgated by
the Securities and Exchange Commission ("Subsidiaries"), or own or control,
directly or indirectly, any interest in any other corporation, partnership,
limited liability company, trust, association, or other business entity.
Each of the Company's Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has all requisite corporate power and authority to carry
on its business as now conducted. Each of the Company's Subsidiaries is
duly qualified to transact business and is in good standing in each
jurisdiction in which the failure so to qualify would have a Material
Adverse Effect.
2.4 Authorization. All corporate action on the part of the
Company, its officers, directors and stockholders necessary for the
authorization, execution and delivery of this Agreement, the Preferred
Stock Certificates, the Warrants, the Warrant Shares, the Warrant
Certificates, the Certificate of Designation, and the Investor Rights
Agreement in the form attached hereto as Exhibit B (the "Investor Rights
Agreement" and with this Agreement, the Preferred Stock Certificates, the
Warrant, the Warrant Certificates and the Certificate of Designation,
collectively, the "Investment Instruments"), the performance of all
obligations of the Company hereunder and thereunder and the authorization,
issuance and delivery of the Preferred Stock, the Warrants, and the Warrant
Certificates and the Warrant Shares issuable upon exercise of the Warrants
has been taken or will be taken prior to the Closing, and the Investment
Instruments, when executed and delivered by the Company, shall constitute
valid and legally binding obligations of the Company, enforceable against
the Company in accordance
4
with their respective terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance,
and other laws of general application affecting enforcement of creditors'
rights generally, and as limited by laws relating to the availability of
specific performance, injunctive relief, or other equitable remedies, or
(ii) to the extent the indemnification provisions contained in the Investor
Rights Agreement may be limited by applicable federal or state securities
laws.
2.5 Governmental Authorization. The execution, delivery and
performance by the Company of this Agreement and the consummation of the
transactions contemplated hereby require no action by or in respect of, or
filing with, the Federal Communications Commission (the "FCC") or with the
New Jersey Board of Public Utilities (the "NJBPU"), the Connecticut
Department of Public Utility Control (the "CDPUC"), or the New York State
Public Service Commission (the "NYPSC", and collectively with the NJBPU,
the CDPUC and any other state public utility commission, public service
commission or other similar governmental agency, authority, commission or
body having jurisdiction over the Company's business, the "State
Commissions") or other State Commission, other than notices to, or consents
or waivers from, the State Commissions solely in connection with the
issuance of the Preferred Stock and the Warrants and the issuance of the
Warrant Shares upon exercise of the Warrant by the Company (the "State
Consents").
2.6 Valid Issuance of Securities. The Preferred Stock, the
Warrants and the Warrant Certificates that are being issued to the
Purchasers hereunder, when issued, sold and delivered in accordance with
the terms hereof for the consideration expressed herein, will be duly and
validly issued, fully paid and nonassessable, free from all transfer or
similar taxes, liens and charges and free of restrictions on transfer other
than restrictions on transfer under this Agreement and applicable federal
and state securities laws, and, subject to the truth and accuracy of the
Purchasers' representations set forth in Section 3, will be issued in
compliance with all applicable federal and state securities laws and,
except as may be set forth in this Agreement or in the Investor Rights
Agreement, will be free from all preemptive rights, rights of first refusal
or similar rights of other equity holders of the Company. The Preferred
Stock, when issued, sold and delivered in accordance with the terms hereof
and for the consideration expressed herein, will be entitled to all the
rights and benefits set forth in the Certificate of Designation. The
Warrant Shares (when and if issued upon exercise of the Warrants in
accordance with the terms hereof) will be duly and validly issued, fully
paid and nonassessable, and will be free from all transfer or similar taxes
(other than income taxes that may be imposed upon the holder thereof),
liens, and charges and free of restrictions on transfer other than
restrictions on transfer under this Agreement and applicable federal and
state securities laws, and, subject to the truth and accuracy of the
Purchasers' representations set forth in Section 3, will be issued in
compliance with all applicable federal and state securities laws, and,
except as may be set forth in this Agreement or in the Investor Rights
Agreement, will be free from all preemptive rights, rights of first refusal
or similar rights of other equity-holders of the Company.
2.7 Consents. Except as set forth in Section 2.7 of the
Disclosure Schedule, no consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
federal, foreign, state or local governmental authority, stock exchange, or
securities market or any other person or entity on the part of the Company
or any of its subsidiaries is required in connection with the consummation
of the transactions contemplated
5
by the Investment Instruments, except for filings pursuant to applicable
state securities laws and Regulation D of the Securities Act.
2.8 Litigation. There is no action, suit, proceeding or
investigation pending or, to the Company's knowledge, threatened against
the Company or any of its subsidiaries which is material or which would
reasonably be expected to prevent or materially delay the transactions
contemplated hereby, nor, to the Company's knowledge, is there any
reasonable basis for the foregoing. Neither the Company nor any of its
subsidiaries is a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality which has had, or would reasonably be expected to result
in, a Material Adverse Effect, or prevent or materially delay the
transactions contemplated hereby.
2.9 Intellectual Property Rights. The Company and its
subsidiaries own, license or otherwise possess legally enforceable rights
to use all patents, pending patent applications, trademarks, service marks,
trade names, copyrights, trade secrets, licenses, information, software
source code and object code and proprietary rights and processes
(collectively, the "Intellectual Property Rights") necessary for the
Company's and its subsidiaries' business as now conducted. Neither the
Company nor any of its subsidiaries has received any communications
alleging that the Company or any of its subsidiaries has violated any of
the patents, trademarks, service marks, trade names, copyrights, trade
secrets or other proprietary rights or processes of any other person or
entity which would reasonably be expected to result in a Material Adverse
Effect. To the Company's knowledge, neither the Company nor any of its
subsidiaries is infringing upon, or in conflict with, the right or claimed
right of any third party with respect to any of the Intellectual Property
Rights. Neither the Company nor any of its subsidiaries has licensed any of
the Intellectual Property Rights to any other person or entity, nor does
any other person or entity have an option or any other right to acquire any
of the Intellectual Property Rights. To its knowledge, both the Company and
its subsidiaries have avoided every condition, and have not performed any
act, the occurrence of which would result in the Company's or any
subsidiary's loss of any Intellectual Property Right, the loss of which
would reasonably be expected to have a Material Adverse Effect.
2.10 Compliance with Other Instruments. Neither the Company nor
any of its subsidiaries is in violation or default of any provisions of
their respective charters, bylaws or other organizational documents or in
material violation or default of any instrument, judgment, order, writ,
decree or contract to which it is a party or by which it is bound or in
violation or default of any provision of any federal or state statute, rule
or regulation applicable to the Company or any of its subsidiaries. The
execution, delivery and performance of the Investment Instruments and the
consummation of the transactions contemplated hereby or thereby will not,
with or without the passage of time and/or the giving of notice, result in
any such violation or be in conflict with or constitute either a default
under any such provision, instrument, judgment, order, writ, decree or
contract or an event which results in the creation of any material lien,
charge or encumbrance upon any assets of the Company or its subsidiaries;
provided, however, that in the case of any contract (other than contracts
pursuant to which the Company has incurred indebtedness or other
liabilities in an amount in excess of $50,000), the foregoing
representation shall not be deemed to have been breached so long as any
such resulting violation of, conflict with or default under such contract
would not reasonably be expected to have a Material Adverse Effect.
6
2.11 FCC Compliance. Section 2.11 of the Disclosure Schedule
lists the licenses, permits and other authorizations issued by the FCC for
the operation of the Company's business (the "FCC Licenses"). There is no
license, permit or other authorization issued by the FCC and required for
the operation of the Company's business as currently conducted except for
the FCC Licenses. The FCC Licenses are in effect for the term set forth on
Section 2.11 of the Disclosure Schedule and are held by the Company. Except
as may be set forth in Section 2.11 of the Disclosure Schedule, there is no
complaint, petition for revocation, investigation or other proceeding
pending before the FCC with respect to any of the FCC Licenses or with
respect to the Company. No petitions to deny, objections or other
challenges have been filed with the FCC against any pending application of
the Company. The Company is in compliance with all applicable FCC tariffing
requirements, reporting requirements, universal service and
telecommunications relay service funding obligations and other
telecommunications regulations.
2.12 State Commission Compliance. Section 2.12 of the Disclosure
Schedule hereto lists the licenses, permits and other authorizations issued
by the State Commissions for the operation of the Company's business (the
"State Authorizations"). There is no license, permit or other authorization
issued by the State Commissions and required for the operation of the
Company's business except for the State Authorizations. The State
Authorizations are in effect and are held by the Company. Except as may be
set forth in Section 2.12 of the Disclosure Schedule, there is no
complaint, petition for revocation, investigation or other proceeding
pending before the State Commissions with respect to any of the State
Authorizations or with respect to the Company. No petitions to deny,
objections or other challenges have been filed with the State Commissions
against any pending application of the Company. The Company is in
compliance with all applicable tariffing requirements, reporting
requirements, universal service and telecommunications relay service
funding obligations and other telecommunications regulations of the State
Commissions.
2.13 Absence of Liabilities. Except as set forth in Section 2.13
of the Disclosure Schedule or as disclosed in the Financial Statements (as
defined below), since December 31, 2000 neither the Company nor any of its
subsidiaries has (i) declared or paid any dividends, or authorized or made
any distribution upon or with respect to any class or series of its capital
stock, (ii) incurred any indebtedness for money borrowed or incurred any
other liabilities individually in excess of $25,000 or in excess of $50,000
in the aggregate, (iii) made any loans or advances to any person or entity,
other than ordinary advances for travel expenses, or (iv) sold, exchanged
or otherwise disposed of any of its assets or rights, other than in the
ordinary course of business, consistent with past practice.
2.14 No Conflict of Interest. Except as disclosed in the Company
SEC Reports, the Company is not a party to any transaction which would be
required to be disclosed pursuant to Item 404 of Regulation S-K.
2.15 Rights of Registration and Voting Rights. Except as set
forth in Section 2.15 of the Disclosure Schedule and as contemplated in the
Investor Rights Agreement, neither the Company nor any of its subsidiaries
has granted or agreed to grant any registration rights, including piggyback
rights, to any person or entity. To the Company's knowledge, no
stockholders of the Company have entered into any agreements with respect
to the voting of capital stock of the Company.
7
2.16 Private Placement. Subject in part to the truth and accuracy
of the Purchasers' representations set forth in this Agreement, the offer,
sale and issuance of the Preferred Stock and the Warrants, and the issuance
of the Warrant Shares upon exercise of the Warrants, each as contemplated
by this Agreement, is exempt from the registration requirements of the
Securities Act and any otherwise applicable state securities laws or "blue
sky" laws, and neither the Company nor any authorized agent acting on its
behalf will take any action hereafter that would cause the loss of such
exemption.
2.17 Title to Property and Assets. Each of the Company and its
subsidiaries owns or leases its properties and assets free and clear of all
mortgages, liens, loans and encumbrances, except such encumbrances and
liens which are disclosed in the financial statements included in the
Company SEC Reports or which arise in the ordinary course of business and
do not materially impair the Company's ownership or use of such properties
or assets. With respect to the properties and assets it leases, each of the
Company and its subsidiaries is in compliance with such leases, except for
such instances of non-compliance which, individually or in the aggregate,
would not reasonably be expected to result in a Material Adverse Effect
and, to its knowledge, holds a valid leasehold interest free of any
material liens, claims or encumbrances.
2.18 Tax Returns and Audits. Except as set forth on Section 2.18
of the Disclosure Schedule, each of the Company and its subsidiaries has
timely filed all required tax returns and reports (federal, state and
local) or has properly and timely filed for extensions of the time for the
filing thereof. Neither the Company nor its subsidiaries has knowledge of
any deficiency, penalty or additional assessment due or appropriate in
connection with any such taxes. All taxes (federal, state and local)
imposed upon the Company, its subsidiaries or any of their respective
properties, operations or income have been paid and discharged prior to the
date when any interest or penalty would accrue for the nonpayment thereof,
except for those taxes being contested in good faith by appropriate
proceedings diligently prosecuted and with adequate reserves reflected on
the financial statements in accordance with U.S. generally accepted
accounting principles ("GAAP"). The Company does not know of any additional
assessments or adjustments pending or threatened against the Company or any
of its subsidiaries for any period which would reasonably be expected to
result in a Material Adverse Effect, nor of any reasonable basis for any
such assessment or adjustment.
2.19 Labor Agreements and Actions. The Company is not bound by or
subject to (and none of its assets or properties is bound by or subject to)
any written or oral, express or implied, contract, commitment or
arrangement with any labor union, and since January 1, 1999 no labor union
has requested or, to the knowledge of the Company, has sought to represent
any of the employees, representatives or agents of the Company or any of
its subsidiaries. There is no strike or other labor dispute involving the
Company and any of its subsidiaries pending, or to the knowledge of the
Company threatened, nor is the Company aware of any labor organization
activity involving its employees. The Company has complied in all material
respects with all applicable federal and state equal employment opportunity
laws and with all other laws related to employment.
2.20 Permits. The Company and each of its subsidiaries possesses
all franchises, permits, licenses and any similar authority necessary or
required for the conduct of its
8
business as now being conducted by it and/or the operation of its
properties (the "Authorizations"). Each Authorization is valid, binding and
enforceable on, against and by the Company or its subsidiaries. Each
Authorization is subsisting without any defaults thereunder or enforceable
adverse limitations thereon, and no Authorization is subject to any
proceedings or claims opposing the issuance, continuance, renewal,
development or use thereof or contesting the validity or seeking the
revocation thereof. Section 2.20 of the Disclosure Schedule accurately and
completely lists each Authorization of the Company and its subsidiaries
(other than each license and other Authorization issued by the FCC or any
State Commission, and further including all pending applications and
renewals therefor), together with relevant identifying information
describing such Authorizations.
2.21 Real Property Holding Corporation. Neither the Company nor
any of its subsidiaries is a United States real property holding
corporation within the meaning of Internal Revenue Code Section 897(c)(2)
and Section 1.897-2(c) of the Treasury Regulations promulgated thereunder.
2.22 Financial Statements. The Company has made available to the
Purchasers its audited consolidated financial statements (including balance
sheet and income statement) as of, and for the year ended December 31, 2000
(which were filed with the SEC on April 2, 2001 in the Company's 10-K) and
its unaudited consolidated financial statements (including balance sheet
and income statement) as of, and for the three-month period ended September
30, 2001 (which were filed with the SEC on November 14, 2001 in the
Company's 10-Q) (collectively, the "Financial Statements"). The Financial
Statements are complete and correct in all material respects and fairly
present the consolidated financial condition and operating results of the
Company and its subsidiaries as of the dates thereof. Except as set forth
in the Financial Statements, the Company has no material liabilities,
contingent or otherwise, other than (i) liabilities paid or incurred in the
ordinary course of business subsequent to the dates thereof and (ii)
obligations under contracts and commitments incurred in the ordinary course
of business, which, in both cases, individually or in the aggregate, are
not material to the financial condition or operating results of the Company
and its subsidiaries, taken as a whole.
2.23 Changes. Except as set forth in Section 2.23 of the
Disclosure Schedule and the Company SEC Reports, since September 30, 2001,
there has not been:
(a) any change in the assets, liabilities, financial
condition or operating results of the Company and its subsidiaries from
that reflected in the Financial Statements, except changes in the ordinary
course of business that have not resulted in a Material Adverse Effect;
(b) any waiver or compromise by the Company or its
subsidiaries of a valuable right or of a material debt owed to it;
(c) any satisfaction or discharge of any material lien,
claim or encumbrance or payment of any obligation by the Company or its
subsidiaries, except in the ordinary course of business;
9
(d) any material change to a material contract or agreement
(as defined in Item 601(b)(10) of Regulation S-K) by which the Company, any
of its subsidiaries or any of their respective assets is bound or subject;
(e) any material change in any compensation arrangement or
agreement with any employee, officer, director or stockholder of the
Company or any of its subsidiaries;
(f) any sale, assignment or transfer of any material
patents, trademarks, copyrights, trade secrets or other intangible assets
of the Company or any of its subsidiaries, other than in the ordinary
course of business;
(g) any resignation or termination of employment of any
executive officer or key employee of the Company or any of its
subsidiaries; and the Company does not know of any impending resignation or
termination of employment of any such executive officer or key employee;
(h) receipt of notice that there has been a loss of, or
order cancellation by, any major customer of the Company or any of its
subsidiaries, which loss or cancellation would result in a Material Adverse
Effect;
(i) any mortgage, pledge, transfer of a security interest
in, or lien, created by the Company or any of its subsidiaries, with
respect to any material portion of its properties or assets, except liens
which are not, individually or in the aggregate, material to the Company
and its subsidiaries, taken as a whole;
(j) any loans or guarantees made by the Company or any of
its subsidiaries to or for the benefit of its employees, officers or
directors, or any members of their immediate families, other than travel
advances and other advances made in the ordinary course of its business;
(k) any declaration, setting aside or payment or other
distribution in respect to any of the Company's capital stock, or any
direct or indirect redemption, purchase, or other acquisition of any of
such stock by the Company; or
(l) any arrangement or commitment by the Company or any of
its subsidiaries to do anything described in this Section 2.23.
2.24 Environmental and Safety Laws. Neither the Company nor any
of its subsidiaries is in violation in any material respect of any
applicable statute, law or regulation relating to the environment or
occupational health and safety and, to the Company's knowledge, no material
expenditures by the Company or any of its subsidiaries are required in
order to comply with any such existing statute, law or regulation.
2.25 FCPA. The Company and its subsidiaries have complied in all
material respects with the United States Foreign Corrupt Practices Act of
1977, as amended (the "FCPA"), in obtaining any consents, licenses,
approvals, authorizations, rights, and privileges in connection with the
conduct of their business and, have otherwise conducted their business in
10
compliance with all material respects with the FCPA. Their internal
management and accounting practices and controls are adequate to ensure
compliance in all material respects with the FCPA.
2.26 Reports. Since January 1, 1999, the Company has filed all
reports (including proxy statements) and registration statements required
to be filed with the SEC (collectively, the "Company SEC Reports"). The
Company has previously furnished or made available to the Purchasers true
and complete copies of all of the Company SEC Reports filed prior to the
date hereof. None of the Company SEC Reports, as of their respective dates,
contained any untrue statement of material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading. Each of the balance sheets (including the related
notes) included in the Company SEC Reports presents fairly, in all material
respects, the consolidated financial position of the Company and its
subsidiaries as of the respective dates thereof, and the other related
statements (including, without limitation, the statement of operations,
statement of cash flows and any related notes) included in the Company SEC
Reports present fairly, in all material respects, the results of operations
and the changes in financial position of the Company and its subsidiaries
for the respective periods or as of the respective dates set forth therein,
all in conformity with GAAP consistently applied during the periods
involved, except as otherwise noted therein and subject, in the case of
unaudited interim financial statements, to the absence of footnotes and
normal year-end adjustments. All of the Company SEC Reports, as of their
respective dates, complied as to form in all material respects with the
requirements of the Securities Exchange Act of 1934, as amended, the
Securities Act and the applicable rules and regulations thereunder.
2.27 Accuracy of Other Information. All written information
contained in any application, schedule, report, certificate or any other
document furnished to the Purchaser by the Company or any other person or
entity (on behalf of the Company) in connection with this Agreement is in
all material respects true, accurate and complete, and no such person or
entity (including the Company) has omitted to state therein (or failed to
include in any such document) any material fact or any fact necessary to
make such information not misleading. All written projections furnished to
the Purchaser by the Company or any other person or entity on behalf of the
Company have been prepared on a reasonable basis and in good faith, making
use of such information as was available at the date such projection was
made.
2.28 Compliance with Laws Generally. The Company and its
subsidiaries are in compliance in all material respects with all material
laws, rules, regulations, administrative orders and judicial decrees
(federal, state, local and otherwise) applicable to them, and their
operations and properties.
2.29 ERISA Compliance. The Company and its subsidiaries are in
compliance in all material respects with all applicable provisions of the
Employee Retirement Income Security Act ("ERISA").
2.30 Employee Matters. Neither the Company nor any of its
subsidiaries is a party to or bound by, or has any liability under, any
material employment contract or any deferred compensation agreement, bonus
plan, incentive plan, profit sharing plan, retirement
11
agreement or other employee compensation or benefit agreement, plan or
arrangement, of any kind including without limitation any multiemployer
plan, except as disclosure in the Company SEC Reports.
2.31 Disclosure. No representation or warranty of the Company
contained in this Agreement and the Disclosure Schedule and other exhibits
attached hereto, or in any certificate furnished or to be furnished by the
Company to the Purchasers at the Closing (when read together), contains any
untrue statement of a material fact or omits to state a material fact
necessary to make the statements contained herein or therein not misleading
in light of the circumstances under which they were made.
3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
hereby represents and warrants to the Company that:
3.1 Accredited Investor; Authorization. The Purchaser is an
"accredited investor" within the meaning of Rule 501 promulgated under the
Securities Act and has the corporate power and authority to enter into and
perform this Agreement and to purchase the Preferred Stock (and the Common
Stock issuable upon conversion thereof) and Warrants (and the Warrant
Shares upon conversion thereof). This Agreement has been duly authorized,
executed and delivered by the Purchaser and constitutes the legal, valid
and binding obligation of the Purchaser, enforceable in accordance with its
terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, and other laws of
general application affecting enforcement of creditors' rights generally,
and as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies.
3.2 No Conflict With Other Agreements. The execution, delivery
and performance of the Investment Instruments and the consummation of the
transactions contemplated hereby and thereby will not, with or without the
passage of time and/or the giving of notice, result in a violation or
default of any provisions of the Purchaser's certificate of incorporation,
bylaws or other charter documents or of any instrument, judgment, order,
writ, decree or contract to which it is a party or by which it is bound or,
to its knowledge, of any provision of federal or state statute, rule or
regulation.
3.3 Investment Knowledge. The Purchaser has sufficient knowledge
and experience in financial and business matters so as to be capable of
evaluating the risks and merits of its investment in the Company and is
capable of bearing the economic risks of such investment. The Purchaser
acknowledges that the Preferred Stock, the Warrant and the Warrant Shares
have not been registered under the Securities Act and, except as provided
in the Investor Rights Agreement, the Company is under no obligation to
file a registration statement with the SEC with respect to the Preferred
Stock or the shares of Common Stock issuable upon conversion of the
Preferred Stock or the Warrant Shares.
3.4 Distribution. The Preferred Stock, the Warrants and the
Common Stock issuable upon exercise thereof are being acquired for the
Purchaser's own account for the purpose of investment and not with a view
to or for resale in connection with any distribution thereof.
12
4. CONDITIONS OF PURCHASER'S OBLIGATIONS AT CLOSING. The obligations
of the Purchaser to the Company under this Agreement are subject to the
fulfillment, on or before the Closing, of each of the following conditions,
unless otherwise waived in writing by the Purchaser:
4.1 Representations and Warranties. The representations and
warranties of the Company contained in Section 2 shall be true and correct
in all material respects on and as of the date of the Closing with the same
effect as though such representations and warranties had been made on and
as of the date of the Closing, except for those representations and
warranties made as of a specific date, which shall be true and correct in
all material respects as of such date.
4.2 Performance. The Company shall have performed and complied in
all material respects with all covenants, agreements, obligations and
conditions contained in this Agreement that are required to be performed or
complied with by the Company on or before the Closing.
4.3 Compliance Certificate. A duly authorized executive officer
of the Company shall have delivered to the Purchaser at the Closing a
certificate certifying as to the matters specified in Sections 4.1 and 4.2.
4.4 Qualifications. All authorizations, approvals or permits of
any governmental authority or regulatory body of the United States or of
any state that are set forth in Section 4.4 of the Disclosure Schedule
shall have been obtained and be effective as of the Closing, except as may
be otherwise set forth in Section 4.4 of the Disclosure Schedule.
4.5 Supporting Documents. The Purchaser shall have received the
following:
(a) A copy of resolutions of the Board of Directors of the
Company authorizing and approving the Investment Instruments and copies of
resolutions of the Board of Directors of the Company authorizing and
approving the adoption of the Certificate of Designation, the issuance of
the Preferred Stock, the issuance of the Warrants and the other matters
contemplated by this Agreement, all such resolutions to be certified by the
Secretary of the Company;
(b) A certificate of good standing of the Company issued by
the Secretary of State of the State of Delaware, dated not more than five
(5) days before the date of Closing; and
(c) Such additional documentation as legal counsel for the
Purchasers may reasonably request.
4.6 Amended Credit Agreement. The Company shall have entered into
and delivered the Amended Credit Agreement, and all documents required to
be delivered by the Company pursuant thereto, including an opinion of
counsel for the Company, in a form consistent with past practice and
reasonably acceptable to the Purchaser or its lending affiliate.
4.7 Warrants. The Company shall have issued the Warrant
Certificate to the Purchaser, substantially in the form attached hereto as
Exhibit D.
13
4.8 Board of Directors. As of the Closing, the Company's Board of
Directors shall consist of six (6) members, of which one member shall be
reserved for election by the holders of the Preferred Stock in accordance
with the terms and provisions of the Certificate of Designation, and which
shall be vacant as of Closing.
4.9 Investor Rights Agreement. The Company, the Purchaser and the
other parties thereto shall have executed and delivered the Investors Right
Agreement.
4.10 Certificate of Designation. The Company shall have filed the
Certificate of Designation with the Secretary of State of the State of
Delaware on or prior to the date of the Closing, which shall continue to be
in full force and effect as of the date of the Closing, and shall have
provided the Purchaser with evidence, reasonably satisfactory to the
Purchaser, thereof.
4.11 NASD Approval. The Company shall have delivered to the
Purchaser evidence, in form and substance reasonably satisfactory to the
Purchaser and its counsel, to establish that the issuance and sale of the
Preferred Stock, the Warrant and the issuance of the Warrant Shares upon
exercise of the Warrants does not require consent of the Company's
stockholders under the applicable rules of the National Association of
Securities Dealers for stocks listed on the OTC Bulletin Board.
4.12 No Litigation. On the Closing Date, there shall be no
effective injunction or other pending or threatened proceeding, legal
restraint or prohibition which would prevent the consummation of the
transactions contemplated hereby.
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations
of the Company to the Purchaser under this Agreement are subject to the
fulfillment, on or before the Closing, of each of the following conditions,
unless otherwise waived by the Company in writing.
5.1 Representations and Warranties. The representations and
warranties of the Purchaser contained in Section 3 shall be true and
correct in all material respects on and as of the date of the Closing with
the same effect as though such representations and warranties had been made
on and as of the date of the Closing, except for those representations and
warranties made as of a specific date, which shall be true and correct in
all material respects as of such date.
5.2 Performance. The Purchaser shall have performed and complied
in all material respects with all covenants, agreements, obligations and
conditions contained in this Agreement that are required to be performed or
complied with by the Purchaser on or before the Closing.
5.3 Investor Rights Agreement. The Purchaser shall have executed
and delivered the Investor Rights Agreement.
5.4 Amended Credit Agreement. The Purchaser shall have entered
into the Amended Credit Agreement.
14
5.5 No Litigation. On the Closing Date, there shall be no
effective injunction or other pending or threatened proceeding, legal
restraint or prohibition which would prevent the consummation of the
transactions contemplated hereby.
6. WARRANTS AND WARRANT SHARES
6.1 Warrant Certificates.
--------------------
(a) Form of Certificate; Registration Among Company's
Records. The Warrants shall be evidenced by one or more Warrant
Certificates, each of which will be substantially in the form of Exhibit D
with the applicable legend specified on Exhibit D (but such certificates
shall incorporate such changes therein as may be required from time to time
to reflect any adjustments made pursuant to this Agreement, and the legend
thereon shall be modified or removed from time to time to reflect the
applicable requirements of the Securities Act). Each Warrant Certificate
shall be uniquely numbered, shall identify the record Holder thereof, and
shall be registered on the books and records of the Company in
substantially the same manner as other equity interests of the Company.
(b) Exchange and Transfer of Certificates. A Warrant
Certificate (and the Warrants evidenced thereby) may be exchanged or
(subject to compliance with the applicable requirements hereof) may be
transferred from time to time at the option of the Holder thereof. Upon
surrender of any such Warrant Certificate to the Company, the Company shall
issue and deliver to (or in accordance with the written instructions of)
such Holder one or more new Warrant Certificates evidencing in the
aggregate the same number of Warrants.
(c) Missing and Mutilated Certificates. If any Warrant
Certificate is lost, stolen, mutilated or destroyed, the Company (upon
request of the registered Holder thereof) shall issue and deliver to (or in
accordance with the written instructions of) such Holder one or more
replacement Warrant Certificates evidencing in the aggregate the same
number of Warrants. The Company's obligation under this subsection 6.1(c)
is conditioned upon its receipt of reasonably satisfactory evidence of such
loss, theft, mutilation or destruction (including, without limitation, an
affidavit of the Holder). A Holder shall not be required to post a bond or
provide any other surety, indemnity or protection to the Company in
connection with the issuance of any such replacement Warrant Certificate.
(d) Authorization of Certificate Signer. Any Warrant
Certificate may be signed on behalf of the Company (and delivered to the
Holder entitled thereto) by any person who, on the actual date of execution
of such Warrant Certificate, is a proper officer of the Company to sign
such Warrant Certificate even though (1) on the date of execution of this
Agreement such person was not such an officer, and/or (2) on the date of
delivery of such Warrant Certificate such person has ceased to serve as
such officer of the Company.
15
6.2. Exercise of Warrants.
--------------------
(a) Exercise Period. The Warrants are exercisable at any
time and from time to time on or after the date hereof and prior to 11:59
p.m. (Eastern Time) on December 31, 2006 (as such period may be extended
from time to time by mutual agreement of the Holders and the Company, the
"Exercise Period"), at which time any unexercised Warrants shall expire.
(b) Method of Exercise; Cashless Exercise or "Net
Settlement". A Holder of any Warrant Certificate may exercise any such
Warrants from time to time during the Exercise Period to purchase Warrant
Shares upon (1) the surrender of such Warrant Certificate evidencing such
Warrants, and (2) the payment of the applicable Exercise Price in cash, by
certified or cashier's check payable to the order of the Company or by wire
transfer to the Company (or, at the Purchaser's election, through the
cancellation of any obligations owed by the Company to the Purchaser). As
an alternative to paying such Exercise Price (or any portion thereof) in
cash, a Holder may instead elect to effect a cashless exercise or a "net
settlement" pursuant to which such Holder will receive in exchange for such
tendered Warrants an amount of Warrant Shares determined by multiplying (a)
the number of Warrant Shares to which such Holder would otherwise be
entitled as a result of such exercise by (b) a fraction (i) the numerator
of which is the difference between the then Current Market Price per
Warrant Share and the Exercise Price then in effect and (ii) the
denominator of which is the then Current Market Price per Warrant Share (a
"Cashless Exercise"). Such surrender and payment must occur at an office of
the Company or at such other address as the Company may specify in writing
to the then registered Holder of such Warrant Certificate.
(c) Issuance of Warrant Shares Upon Exercise. Upon surrender
of any Warrant Certificate and payment of the applicable Exercise Price (as
described in Section 6.2(b)), the Company shall issue, sell and deliver to
or upon the instructions of the Holder of such Warrant Certificate and/or
its designee one or more certificates evidencing in the aggregate the
number of Warrant Shares represented by such Warrant Certificate that are
then being purchased (each of which Warrant Shares shall be validly issued,
fully paid and nonassessable). Any persons so designated to be named
therein shall be deemed to have become a Holder of record of such Warrant
Shares as of the date of exercise of such Warrants. If less than all of the
Warrants evidenced by a Warrant Certificate are exercised at any time prior
to the expiration of the Exercise Period, then the Company shall issue to
such Holder (or its designee) one or more new Warrant Certificates
evidencing the remaining number of Warrants evidenced by such Warrant
Certificate that are not then exercised by Holder.
(d) Rights of a Holder of Warrant Shares Upon Exercise. Upon
any exercise of Warrants by a Holder entitled thereto in accordance with
and as provided under this Agreement, the Holder of such issued Warrant
Shares shall be entitled to all of the rights and benefits of a holder of
Common Stock under the Organic Documents of the Company as well as the
rights and benefits of a Holder of Warrant Shares under this Agreement
(notwithstanding any provision of such Organic Documents to the contrary).
To the extent that the rights and benefits of a holder of Capital Stock
under the Organic Documents are inconsistent with or less favorable than
the rights and benefits of a Holder of Warrant Shares under this Agreement
and the Investor Rights Agreement, then the terms and provisions of this
Agreement shall control and govern with respect to the rights and benefits
of such Holder.
16
6.3. Transfers of Warrants and Warrant Shares.
----------------------------------------
(a) General Transferability. Except as otherwise expressly
provided herein, upon compliance with any applicable requirements under the
Securities Act and the laws, regulations and orders of and/or administered
by each State Commission, including, without limitation, any State PUC (to
the extent failure to so comply would reasonably be expected to have or
cause a Material Adverse Effect) or the FCC, then the Warrants, the
corresponding Warrant Certificates and the Warrant Shares may be
transferred by a Holder from time to time in whole or in part upon
complying with the applicable restrictions under this Section (but without
the necessity of otherwise obtaining any consent of the Company). The
Company shall cooperate with the Holders and use its best efforts to comply
with any such applicable requirements in order to permit a Holder to effect
a transfer pursuant to this Section 6.3(a).
(b) Treatment of Holder Prior to Notice of Transfer. Prior
to receiving notice of any such transfer (either from such Holder or from
such transferee), the Company shall be otherwise entitled to treat such
known Holder as the Holder of record hereunder for purposes of giving and
receiving notices and for purposes of exercising rights hereunder.
(c) Rights of a Subsequent Holder. Unless otherwise limited
or restricted pursuant to the document of transfer, then a subsequent
Holder of Warrants, Warrant Certificates or Warrant Shares hereunder shall
be entitled to all of the rights and benefits of the transferring Holder
under this Agreement and under the Organic Documents.
6.4 Rights Upon Equity Dispositions, Equity Redemptions and
Non-Surviving Transactions.
(a) Offer to Purchase. In connection with any Equity
Disposition, any Equity Redemption or any Non-Surviving Transaction, the
Company or the acquiror in any such transaction shall also offer to
purchase on the terms set forth below all of the Warrant Shares and all of
the Warrants. If an Equity Disposition or an Equity Redemption is of less
than all of the Capital Stock then outstanding, then the number of Warrants
and Warrant Shares subject to purchase under this Section shall be reduced
proportionately (to the nearest whole number) to the product of (a) the
percentage of Capital Stock then outstanding subject to such transaction,
multiplied by (b) the total number of then outstanding Warrant and Warrant
Shares, and such reduced number will be allocated pro rata among all
Holders desiring to tender Warrant Shares or Warrants in connection with
such transaction, based upon the aggregate number of Warrants and Warrant
Shares held by each such Holder.
(b) Notice of Proposed Transaction. The Company shall give
written notice to each Holder of Warrants and each Holder of Warrant Shares
(at each such Holder's last known address as it appears on the Company's
books and records) promptly after an agreement in principle is reached with
respect to any Equity Disposition, any Equity Redemption or any
Non-Surviving Transaction (but, in any event, at least 30 calendar days
prior to the closing of any such transaction).
(c) Purchase Price. If a Holder accepts the offer under this
Section 6.4, then (as a condition to consummation of such Equity
Disposition, Equity Redemption or
17
Non-Surviving Transaction) either the Company or such acquiror shall
purchase (either before or concurrently with the consummation of such
transaction) all Warrants and Warrant Shares tendered by a Holder thereof
at an aggregate price equal to the product of (1) the aggregate
consideration received by all sellers and transferors in connection with
such transaction or series of related transactions (including the
consideration to be received by the holders of Warrants and Warrant Shares
pursuant to this provision) and (2) a fraction the numerator of which is
the number of Warrants and Warrant Shares held by such Holder and tendered
for purchase in connection with such transaction or series of related
transactions and the denominator of which is the sum of the number of
shares of Common Stock outstanding immediately prior to such transaction or
series of related transactions plus the number of Warrants then outstanding
(which product shall be net of the applicable aggregate Exercise Price then
in effect with respect to Warrants tendered but not with respect to Warrant
Shares tendered).
(d) Payment of Purchase Price. The Company (either before or
concurrently with the consummation of such transactions) shall distribute
to the respective Holders of Warrants and Warrant Shares (or to such other
Person as any such Holder may direct the Company in writing) the applicable
purchase price for each tendered Warrant Share and Warrant. Such payment,
except as otherwise provided in this subsection 6.4(d), shall be in
immediately available funds (i.e., in cash, by certified or cashier's
check, or by wire transfer) or by any other means acceptable to such
Holder. In addition, the Company shall also deliver to each such Holder (as
and to the extent applicable) a return or re-issuance of Warrants and
Warrant Shares not purchased in connection with any such transaction. To
the extent that any consideration for such transaction is payable by such
acquiror in cash, in publicly traded and readily marketable securities
(with reasonable liquidity and no restrictions on transfer) or evidence of
indebtedness from an obligor who (in the commercially reasonable opinion of
Holders) is highly creditworthy, then the purchase price payable to Holders
may be in the same form of consideration; otherwise, the purchase price (or
the remaining balance thereof) payable to Holders shall be in cash.
Notwithstanding the foregoing, in connection with any such Equity
Disposition, Equity Redemption or Non-Surviving Transaction, each Holder
may elect (at its option) to receive the purchase price payable under this
Section pro rata in kind in the same form of consideration as is to be
received by the Company or any such selling equityholder.
6.5. Repurchase Offers.
-----------------
(a) Offer to Repurchase. Within 30 calendar days following
the occurrence of any Repurchase Condition, the Company shall make a
written offer (each, a "Repurchase Offer") to repurchase at the Repurchase
Price (as defined below) any or all of the Warrant Shares and Warrants
owned by each Holder at the election of each such Holder. Each such
Repurchase Offer (among other things) shall indicate the date of occurrence
of the relevant Repurchase Condition and shall provide a calculation of the
Current Market Price per Warrant Share (together with a copy of
documentation supporting such calculation). Each such Repurchase Offer
shall be delivered by the Company to each such Holder entitled thereto by
first-class mail to the last known address of such Holder on the books and
records of the Company.
(b) "Repurchase Condition". A "Repurchase Condition" will be
deemed to occur (1) at any time on or after December 31, 2006 upon a
written request from
18
Holders of at least 50% of the outstanding Warrants and Warrant Shares, or
(2) upon any full repayment of the indebtedness under the Loan Documents,
or (3) upon the occurrence of any Event of Default under and as defined in
the Amended Credit Agreement, or (4) upon the execution of any definitive
agreement by the Company or holders of Capital Stock to engage in an Equity
Disposition or a Non-Surviving Transaction (or any amendment thereto), or
(5) upon any attempt by any Holder to exercise the Warrants in accordance
with the terms hereof at a time when the Company is legally, regulatorily
or otherwise not authorized or permitted to issue the corresponding Warrant
Shares in compliance with applicable law, including without the consent,
approval or authorization of any governmental or regulatory authority,
provided, however, that the Company shall be permitted a reasonable period
of time (not to exceed 30 calendar days) to prepare any state blue sky
filings, information statements, Nasdaq listing applications, NASD listing
applications for stocks listed on the OTC Bulletin Board or other necessary
securities documents to procure the necessary private placement exemptions
from registration and Nasdaq approvals (or other securities related
approvals) in connection with any such exercise without a "Repurchase
Condition" being deemed to have occurred.
(c) "Repurchase Price". The "Repurchase Price" for each
Warrant and Warrant Share in connection with any such Repurchase Offer will
be the Current Market Price per Warrant Share, less, with respect to
Warrants (but not Warrant Shares), the applicable Exercise Price then in
effect for the Warrants to be so repurchased.
(d) Acceptance of Repurchase Offer. At any time within 30
calendar days after a Holder receives a Repurchase Offer (together with a
final written valuation report), each such Holder may accept such
Repurchase Offer by agreeing to tender for repurchase by the Company all or
any portion of such Holder's Warrant Shares and Warrants.
(e) Payment of Purchase Price. Within 30 calendar days of
receiving any such agreement to tender Warrant Shares or Warrants, the
Company and each Borrower (jointly and severally) shall distribute to each
such Holder (or to such other Person as such Holder may direct the Company
in writing) the applicable Repurchase Price for each such tendered Warrant
Share and Warrant in cash, by certified or cashier's check, by wire
transfer or by any other means acceptable to such Holder (concurrently with
which distribution, such Holder shall deliver to the Company the Warrant
Certificates and/or Warrant Shares). In addition, the Company shall also
deliver to each such Holder (as and to the extent applicable) a return or
re-issuance of Warrants and Warrant Shares not tendered for repurchase.
Notwithstanding the foregoing, with respect to the Repurchase Condition
pursuant to subsection 6.5(b)(2) or (b)(6) above, unless all the Holders
otherwise consent, the Company and each Borrower (jointly and severally)
shall establish a cash escrow of the Repurchase Price with a "well
capitalized" depository institution concurrently with any such full
repayment of the indebtedness under the Loan Documents (but such cash
escrow shall be returned to the Company if the Holders elect not to accept
such Repurchase Offer within the time period set forth in Section 6.5(d)).
6.6. Cumulative Rights. The rights of Holders upon the occurrence
of events set forth in this Article 6 are cumulative. If more than one such
event occurs simultaneously (or the time period for exercising any such
rights overlaps), then each Holder can elect which rights (if any) to
exercise and any prior inclusion or surrender of Warrants or Warrant Shares
with
19
respect to a transaction that has not yet closed may be rescinded by such
Holder during such overlapping period in order to exercise rights arising
under any concurrently occurring event.
6.7. Exercise of Rights Conditioned Upon Closing of Transaction
Involved. The rights of Holders to have Warrants or Warrant Shares included
and purchased in any Equity Disposition or Non-Surviving Transaction
pursuant to this Article 6 are conditioned upon the consummation of the
proposed transaction. Neither the Company nor any equityholder involved in
any such proposed transaction shall have any obligation to Holders to
consummate any such proposed transaction once an agreement in principle or
decision to proceed with respect thereto is reached, except as expressly
provided in this Article 6.
6.8. Payment of Taxes and Expenses. The Company will pay all
expenses (including reasonable costs and expenses of Holders and one legal
counsel thereto, but excluding underwriter's and/or broker's discounts and
commissions), taxes (other than income taxes) and other reasonable fees and
charges attributable to the issuance, registration, qualification,
notification, approval, listing, transfer pursuant to Section 6.3, and/or
repurchase of the Warrants, the Warrant Certificates and the Warrant
Shares.
6.9. Reservation and Issuance of Warrant Shares. The Company at
all times shall reserve (and keep free from preemptive rights or similar
rights of equityholders of the Company) among its authorized but unissued
shares of Capital Stock the full number of Warrant Shares deliverable from
time to time upon exercise of all of the Warrants. The Company covenants
that all Warrant Shares (when and if issued upon exercise of the Warrants
in accordance with the terms hereof including payment of the Exercise Price
in accordance with the provisions hereof) will be duly authorized, validly
issued, fully paid and nonassessable (and will be free from all taxes,
liens, charges and security interests with respect to the issuance
thereof). Before taking any action that could cause an adjustment pursuant
to Section 6.16, the Company will take any corporate action that (in the
opinion of its counsel) may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable Warrant
Shares at the applicable Exercise Price as so adjusted.
6.10. Corrective Adjustments. The Company hereby acknowledges
that the Purchaser has relied upon, among other things, the representation
and warranty set forth in Section 2.2 regarding the outstanding Capital
Stock of the Company and the rights to acquire Capital Stock of the Company
as of the date of this Agreement. If it is later determined that any
representation and warranty set forth in this Agreement including, without
limitation, Section 2.2 hereof, is untrue or inaccurate such that the
outstanding Capital Stock or rights to acquire Capital Stock are greater
that the amount disclosed therein, then the Company shall notify each
Holder in writing within 10 Business Days of discovering such inaccuracy
and shall promptly prepare, execute and deliver to the Holders such
additional documents and certificates as are necessary to equitably adjust
the Exercise Price and/or Warrants and Warrant Shares deliverable upon
exercise of all Warrants for the benefit of Holders. Such adjustment shall
include the issuance of additional Warrants and/or the reduction in
Exercise Price of the Warrants, as approved in writing by Holders of a
majority of the Warrants.
6.11. Listing of Shares. If the Company lists any shares of
Common Stock on any national securities exchange, inter-dealer quotation
system or other market, then the
20
Company (at its expense) will use its best efforts to cause the Warrant
Shares to be approved for listing, subject to notice of issuance, and will
provide prompt notice to each such exchange, system or other market of the
issuance thereof from time to time.
6.12. Lists of Holders. The Company (from time to time upon the
request of any Holder) will provide each Holder upon request with a list of
the registered Holders and their respective addresses.
6.13. Statement of Warrant Interest. The Company (from time to
time upon the request of any Holder) will provide each Holder with a
statement of such Holder's interest in the Company containing the following
information (as applicable): (a) the number of Warrants then owned of
record by such Holder, and (b) the number of Warrant Shares purchasable
upon the exercise of each Warrant then owned of record by such Holder, and
(c) the Exercise Price of each Warrant then owned of record by such Holder,
and (d) the number of Warrant Shares then owned of record by such Holder,
and (e) a chart describing (in reasonable detail) the then current
capitalization of the Company.
6.14. Right of Inspection. The Company shall permit and cause
each of its subsidiaries to permit each Holder, and such persons as it may
reasonably designate, to visit and inspect any of the properties of the
Company and its subsidiaries, examine their books and discuss the affairs,
finances and accounts of the Company and its subsidiaries with their
officers, employees and accountants (and the Company hereby authorizes said
accountants to discuss with such Holder and such designees such affairs,
finances and accounts provided that the Company shall be entitled to have a
representative of the Company be present), all at such reasonable times as
shall be requested by the Holder.
6.15. Attendance and Participation Rights. So long as the
Warrants and Warrant Shares of Holders (together will all other Capital
Stock owned by any Holder) collectively represent 1% or more of the Common
Stock (on a Fully Diluted Basis), then a representative of Holders shall be
entitled (if at any time hereafter Holders so elect) to attend each of the
meetings of the Company's Board of Directors (including, each committee
thereof). Notwithstanding the foregoing, at the request of the Company,
representatives of Holders may be required temporarily to leave any such
meeting of the Board of Directors if such action is necessary to preserve
the Company's attorney-client privilege with respect to such meetings or
the information disseminated therein.
6.16. Anti-Dilution Provisions
------------------------
(a) Adjustments to Warrant Shares Purchasable and Exercise
Price.
(i) Equity Dividends, Restructurings and
Reclassifications. If the Company at any time (1) declares or pays a
dividend on its outstanding Capital Stock in shares of Common Stock or
other securities of the Company, or (2) subdivides its outstanding shares
of Common Stock, or (3) combines its outstanding shares of Common Stock
into a smaller number of shares, or (4) issues by reclassification of the
Common Stock other securities of the Company (including any such
reclassification in connection with a merger, consolidation or other
business combination in which the Company is the surviving entity), then
the number and kind of Warrant
21
Shares purchasable upon exercise of each Warrant and the applicable
Exercise Price therefor shall be adjusted so that each Holder of a Warrant
upon exercise of such Warrant shall be entitled to receive (for the same
aggregate Exercise Price) the aggregate number and kind of Warrant Shares
or other securities of the Company that such Holder would have owned or
would have been entitled to receive after the occurrence of any such event
had such Warrant been exercised immediately prior to the occurrence of such
event (or, if earlier, any record date with respect thereto). Any
adjustment required by this subsection 6.16(a)(i) shall become effective on
the date of such event retroactive to the record date with respect thereto
(if any), and (b) shall be made successively whenever any such event
occurs.
(ii) Issuances of Capital Stock. If the Company issues
or sells any shares of Capital Stock (or rights, options, warrants or
convertible or exchangeable securities containing a right to subscribe for
or purchase shares of Common Stock), other than shares of Capital Stock
issued pursuant to the exercise of options granted prior to December 31,
2001 under the Company's Stock Plans, then the number of Warrant Shares
thereafter purchasable upon the exercise of each Warrant shall be
automatically increased to account for the economic effects of such
transaction (and the applicable Exercise Price for such Warrants shall be
correspondingly decreased but in no event shall such exercise price be
below par value) such that the aggregate number of Warrant Shares then
outstanding and represented by unexercised Warrants at all times shall
equal forty-five percent (45%) of the Company's shares of Common Stock on a
Fully Diluted Basis. If the Company and the Holders are unable to agree on
the amount or form of any such adjustment, then the Company will retain an
Independent Appraiser acceptable to Holders (which acceptance may not be
unreasonably withheld) that will determine the amount and form of such
adjustment. Any adjustment required by this subsection 6.16(a)(ii) (1)
shall become effective on the date of issuance retroactive to the record
date for determining equityholders entitled to receive such issuance, and
(2) shall be made successively whenever any such event occurs.
(iii) Dividend and Distribution Dilution. If any
dividend, distribution or payment (whether as cash or other assets of the
Company) is made after the date hereof with respect to any Capital Stock or
other equity securities of the Company, other than dividends appropriately
covered under subsection 6.16(a)(i) above, then the Company (concurrently
with the payment thereof) shall make a corresponding proportionate
distribution or payment to each Holder of Warrants and/or Warrant Shares
equal to such Holder's percentage ownership of the Company's outstanding
Capital Stock (but, for such purposes, treating all Warrants as though they
had then been exercised). Notwithstanding the foregoing, the Company shall
not be obligated to make any such distribution or payment to a Holder (and
no Holder shall be entitled to receive such distribution or payment) to the
extent that such Holder otherwise receives actual payment of the
corresponding dividend or distribution as a holder of Warrant Shares in
such class of equity security.
(iv) Catchall Anti-Dilution Protection. If the Company
otherwise issues any securities or instruments or engages in any
transaction an effect of which is to dilute the economic value or voting
rights of any Holder's Warrants or Warrant Shares (including the issuance
of any securities or instruments with enhanced voting rights, preemptive
rights, dividend preferences or liquidation preferences) in a manner
contrary to the intent of this Section 6.16, which the parties hereby
acknowledge and agree is that the aggregate number of Warrant
22
Shares issuable upon exercise of the Warrants at all times shall represent
45% of the Company's Common Stock on a Fully Diluted Basis, then the
Company will implement an equitable adjustment to such Holder's interest in
the Company (in a manner reasonably acceptable to such Holder) in order to
account for the effects of such transaction. Any adjustment required by
this subsection 6.16(a)(iv) shall be made successively whenever any such
event occurs. If the Company and Holders are unable to agree on the amount
or form of any such equitable adjustment, then the Company will retain an
Independent Appraiser acceptable to Holders (which acceptance may not be
unreasonably withheld) that will determine the amount and form of such
equitable adjustment.
(v) Rights Applicable to Shares Other than Common
Stock. If at any time (as a result of an adjustment made pursuant to this
Section 6.16) a Holder becomes entitled to receive any shares of Capital
Stock of the Company other than shares of Common Stock, then thereafter the
number of such other shares so receivable upon exercise of any Warrant
shall be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with respect to the
Warrant Shares contained in this Section 6.16, and the provisions of
Article 6 with respect to the Warrant Shares shall apply on like terms to
such other shares.
(vi) Holders Entitled to Equivalent Rights. Except for
the underwriters' warrants and the advisors' warrants existing as of the
date hereof and the Investor Rights Agreement, if the Company has otherwise
granted or hereafter grants to any Person any other or additional
anti-dilution protection or preemptive rights with respect to any
securities of the Company (or similar protections or rights with any more
favorable or less restrictive terms), then the Company will promptly notify
each Holder of Warrants and each Holder of Warrant Shares, and such
protections and rights (or the more favorable or less restrictive terms
thereof) will be deemed automatically to be incorporated into this
Agreement (without the necessity of any other action by the parties hereto)
as additional protections and rights that each Holder is entitled to
exercise.
(vii) Expiration of Rights Previously Subject to
Adjustment. Upon the expiration of any rights, options or warrants that
resulted in adjustments pursuant to this Section 6.16 that were not
exercised, then the Exercise Price and the number of Warrant Shares
purchasable shall be readjusted and thereafter shall be such as it would
have been had it been originally adjusted (or had the original adjustment
not been required, as applicable) as if (A) the only shares of Common Stock
purchasable upon exercise of such rights, options or warrants were the
shares of Common Stock (if any) actually issued or sold upon the exercise
of such rights, options or warrants and (B) such shares of Common Stock so
issued or sold (if any) were issuable for the consideration actually
received by the Company for the issuance, sale or grant of all such rights,
options or warrants whether or not exercised; provided that no such
readjustment may have the effect of increasing the Exercise Price or
decreasing the number of Warrant Shares purchasable upon the exercise of a
Warrant by an amount in excess of the amount of the adjustment initially
made in respect to the issuance, sale or grant of such rights, options or
warrants.
(b) Notice of Adjustment. Upon any adjustment required under
this Section 6.16, the Company (at its expense) shall mail (within 10
Business Days after such
23
adjustment) by first-class mail, postage prepaid, to each Holder of
Warrants and each Holder of Warrant Shares a notice of such adjustment.
Such notice shall include the following (each in reasonable detail): (i)
the number of Warrant Shares purchasable upon the exercise of each Warrant
and the Exercise Price of such Warrant after such adjustment, and (ii) a
brief statement of the facts requiring such adjustment, and (iii) the
computation by which such adjustment was made.
(c) Preservation of Purchase Rights upon Certain
Transactions. In connection with any merger, consolidation, reorganization
or combination of the Company with or into another Person (whether or not
the Company is the surviving entity), or any sale, transfer or lease to
another Person of all or substantially all the property of the Company,
then the Company (or such successor or purchasing Person) shall execute an
agreement in favor of each Holder of Warrants giving such Holder the right
thereafter upon payment of the applicable Exercise Price in effect
immediately prior to such action to receive upon exercise of each Warrant
the kind and amount of securities, cash and property that such Holder would
have owned or would have been entitled to receive after the happening of
such merger, consolidation, combination, sale, transfer or lease had such
Warrant been exercised immediately prior to such action (or the applicable
record date, if earlier). Such agreement shall provide for adjustments that
shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Article 6. The provisions of this Section shall
similarly apply to successive mergers, consolidations, combinations, sales,
transfers or leases.
7. AFFIRMATIVE COVENANTS OF THE COMPANY. The Company covenants and
agrees as follows:
7.1 Corporate Existence. Within seven (7) days from the date
hereof, the Company will take all necessary action to be in good standing
in the State of Delaware (including paying any delinquent franchise taxes)
and in any other jurisdiction in which failure to so qualify would have a
Material Adverse Effect. Thereafter, the Company and each of its
subsidiaries will maintain its corporate existence in good standing and
comply with all applicable laws and regulations of the United States or of
any state or political subdivision thereof and of any foreign jurisdiction,
and of any government authority of any of the foregoing, where the failure
to so comply would have a Material Adverse Effect.
7.2 Books of Account and Reserves. The Company will keep books of
record and account in which full, true and correct entries are made of all
of its material dealings, business and affairs, in accordance with GAAP,
consistently applied. The Company will employ certified public accountants
of established national reputation selected by the Board of Directors of
the Company who are "independent" within the meaning of the accounting
regulations of the SEC (the "Accountants"). The Company will have annual
audits made by such Accountants in the course of which such Accountants
shall make such examinations, in accordance with generally accepted
auditing standards, as will enable them to give such reports or opinions
with respect to the financial statements of the Company as will satisfy the
requirements of the SEC in effect at such time with respect to reports or
opinions of accountants.
7.3 Furnishing of Financial Statements and Information. The
Company shall deliver to the Purchaser:
24
(a) annually, as soon as available, but in any event by the
end of each fiscal year, an operating plan and budget for the following
year, and quarterly updates of the Company's performance in comparison with
such plan and budget, which quarterly updates shall be provided as soon as
available, but in any event within forty-five (45) days of the close of
each quarter;
(b) as soon as available, but in any event within 45 days
after the end of each quarter of each fiscal year of the Company, an
unaudited balance sheet of the Company, together with the related
statements of operations, retained earnings and cash flow for such quarter,
prepared in accordance with GAAP, consistently applied (provided, however,
that such statements need not comply with the footnote disclosure
requirements of GAAP);
(c) as soon as available, but in any event within 90 days
after the end of each fiscal year, a balance sheet of the Company, as of
the end of such fiscal year, together with the related statements of
operations, retained earnings and cash flow statements for such fiscal
year, all in reasonable detail and prepared in accordance with GAAP,
consistently applied, and duly certified by the Accountants, who shall have
given the Company an opinion, unqualified as to the scope of the audit,
regarding such statements;
(d) with reasonable promptness after the Company learns of
the commencement or written threats of the commencement of any material
lawsuit, legal or equitable, or of any material administrative, arbitration
or other proceeding against the Company or its business, assets or
properties, written notice and a summary of the nature and extent of such
suit or proceeding;
(e) promptly upon transmission thereof, copies of all
reports, proxy statements, registration statements and notifications filed
by it with the SEC pursuant to any act administered by the SEC or furnished
to stockholders of the Company or to Nasdaq or any national securities
exchange;
(f) with reasonable promptness, notice of any material
default under any material agreement of the Company or its subsidiaries;
and
(g) with reasonable promptness, such other financial data
relating to the business, affairs and financial condition of the Company
and its subsidiaries as is available to the Company and as from time to
time the Purchasers may reasonably request.
7.4 Reserve for Warrant Shares.
--------------------------
(a) The Company shall at all times reserve and keep
available out of its authorized but unissued shares of Common Stock, for
the purpose of effecting the exercise of the Warrants and otherwise
complying with the terms of this Agreement, such number of its authorized
shares of Common Stock as shall be sufficient to effect the exercise of the
Warrants from time to time outstanding or otherwise to comply with the
terms of this Agreement. If at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the
exercise of the Warrants or otherwise to comply with the terms of this
Agreement, the Company will forthwith take such corporate action as may be
necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such
25
purposes. The Company will obtain any authorization, consent, approval or
other action by or make any filing with any court or administrative body,
stock exchange or market that may be required under applicable state
securities laws or the rules of any stock exchange or market in order to
obtain the issuance of shares of Common Stock upon exercise of the
Warrants.
7.5 SEC Reporting. The Company shall properly report the
consummation of the transactions contemplated hereby with the SEC.
7.6 Authorizations. The Company will use its best efforts to
promptly obtain and maintain all FCC Licenses, State Authorizations and
State Consents and all other approvals, consents, authorizations and other
confirmations required to be obtained from any third party that are
necessary, proper or advisable to consummate the transactions contemplated
by this Agreement (including, without limitation, the authorization,
issuance and sale of the Preferred Stock, the Warrants and the Warrant
Shares in accordance with the terms hereof and the Company's Organic
Documents), and shall file all necessary applications or other
documentation in order to obtain any required State Consents within ten
(10) Business Days of the date hereof.
7.7 Use of Proceeds. The Company shall use the proceeds from the
sale of the Preferred Stock to repay and retire the credit facility under
the Credit Agreement, including deferred and unpaid interest thereon
through December 31, 2001, and for general corporate purposes relating to
the business and operations of the Company.
7.8 Notice of Transactions or Liquidation. The Company shall give
at least twenty (20) days' prior written notice to the Purchaser of any
merger or consolidation in which the Company's outstanding securities are
converted into securities, cash or other property, any sale of all or
substantially all of its assets or any liquidation, dissolution or winding
up of the Company.
7.9 Representation on Board of Directors. The Company shall
maintain its Board of Directors in accordance with the terms of its
Restated Certificate of Incorporation and the Certificate of Designation.
The Company shall maintain a provision in its Bylaws or charter providing
for the indemnification of its directors to the fullest extent permitted by
the laws of Delaware.
7.10 Voting Rights. The Company shall not, without the
affirmative consent or approval of the Holders of at least fifty percent
("50%") of the Warrants and Warrant Shares, voting together as a single
class of securities:
(a) in any manner authorize, issue or sell any shares of (A)
Preferred Stock other than as contemplated by this Agreement or (B) Senior
Securities (as defined in the Certificate of Designation) or (C) Capital
Stock that ranks pari passu with the Preferred Stock with respect to
dividends or the distribution of the Company's assets upon a Liquidation;
(b) reclassify, cancel or in any manner alter or change the
terms, designations, powers, preferences or relative, optional or other
special rights, or the qualifications, limitations or restrictions, of the
Preferred Stock;
26
(c) amend, repeal, modify or otherwise change any provision
of the Certificate of Designation (whether by merger, consolidation or
otherwise);
(d) amend, repeal or modify any provision of the Company's
Certificate of Incorporation or By-laws in a manner that would adversely
affect the powers, preferences, privileges or rights of the Preferred Stock
or holders of the Preferred Stock;
(e) take any action that would result in an increase in the
principal amount of the Company's aggregate outstanding indebtedness of
Five Million Dollars ($5,000,000) or more, in one or more transactions;
(f) redeem, acquire, purchase or repurchase, or agree or
undertake to do any of the foregoing with respect to, any Capital Stock of
the Company, other than Senior Securities (as defined in the Certificate of
Designation) and the Preferred Stock;
(g) declare, set aside or pay any dividends or otherwise
make any distributions in respect of any Capital Stock of the Company,
other than the Preferred Stock and Senior Securities (as defined in the
Certificate of Designation);
(h) make any material change in the nature of the Company's
business as it existed on December 31, 2001;
(i) increase the number of directors constituting the Board
of Directors to more than six (6) directors;
(j) enter into any contract, arrangement or transaction with
an affiliate of the Company, other than a direct or indirect wholly-owned
subsidiary of the Company; or
(k) effect any sale, lease or other disposition of assets
(including assets or capital stock of the Company's subsidiaries) with a
fair market value in excess of $1,000,000;
7.11 Warrant Exercise. Upon notice from the Holder of any Warrant
of the intent to exercise any or all of the Warrants, the Company shall use
its best efforts to promptly take, or cause to be taken, all actions and to
do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to obtain any required approval of the FCC
and the State Commissions for the lawful exercise of such Warrants as soon
as practicable, including preparing and filing as promptly as practicable
all documentation to effect all necessary filings, notices, petitions,
statements, registrations, submissions of information, applications and
other documents. Prior to the exercise of such Warrants, the Company shall
cause the Holder to receive from the Company's counsel an opinion, in such
form as the Holder shall reasonably require, that all approvals of the FCC
and the State Commissions necessary for the lawful exercise of such
Warrants have been obtained.
7.12 Fairness Opinion. The Company shall use commercially
reasonable efforts to obtain, on or prior to January 31, 2002, a fairness
opinion from an investment banking firm reasonably acceptable to the Board
of Directors of the Company to the effect that the transactions
contemplated by the Amended Credit Agreement and this Agreement are fair to
the Company from a financial point of view (the "Fairness Opinion").
27
7.13 Legal Opinion. The Company shall use commercially reasonable
efforts to obtain, on or prior to January 31, 2002, an opinion from counsel
to the Company reasonably acceptable to the Purchaser, in form and
substance reasonably satisfactory to the Purchaser, which such opinion
shall include, without limitation, opinions regarding: (a) due
authorization for the execution, delivery and performance of the
Transaction Documents by the Company (and its subsidiaries); (b) the
Transaction Documents not conflicting with or contravening any of the
Company's (or any of its subsidiaries') Organic Documents, any law,
regulation, or any contractual restriction applicable to the Company (or
any of its subsidiaries); (c) the enforceability of the Transaction
Documents against the Company (or its subsidiaries); (d) the good standing
of the Company (and its subsidiaries) in its state of incorporation and any
other jurisdiction where the nature of its business requires such
qualification ; and (e) the effectiveness of all required licenses, permits
and authorization from the FCC, any State Commission or any other
regulatory agency held by the Company (or its subsidiaries) (the "Legal
Opinion").
7.14 Disclosure Schedule. The Company shall deliver to the
Purchaser the Disclosure Schedule to this Agreement on or prior to January
6, 2001, and shall deliver a compliance certificate certifying as of the
date of the delivery of the Disclosure Schedule as to the matters specified
in Sections 4.1 and 4.2 of this Agreement.
8. DEFINITIONS.
8.1 As used herein, the following terms have the following
respective meanings:
(a) "Appraised Valuation" means, as of any relevant date,
the fair market value of a Warrant Share, a share of Common Stock or other
security or equity interest (as applicable) as determined by an Independent
Appraiser. Such Independent Appraiser will be selected by Holders of a
majority of the Warrants and Warrant Shares then outstanding and approved
by the Company (which approval may not be unreasonably withheld, delayed or
conditioned). Such Independent Appraiser shall use one or more valuation
methods that the Independent Appraiser (in its best professional judgment)
determines to be most appropriate under the circumstances; provided, that
such valuation methods shall not give effect to (1) any discount for any
lack of liquidity of the Warrants, Warrant Shares and/or such other
security, or (2) the minority status of any holder of Warrants, Warrant
Shares or other security, or (3) the fact that the Company may have no
class of equity securities registered under the Securities Act. Such
Independent Appraiser, as promptly as is reasonably possible, will prepare
and deliver to the Company and to each Holder of a Warrant or Warrant Share
a written valuation report indicating (a) the methods of valuation
considered or used, and (b) the value of a Warrant Share or other security,
and (c) the nature and scope of the examination or investigation upon which
the determination of value was made. Unless the valuation report is revised
by the Independent Appraiser within 5 Business Days after delivery thereof
or unless the Company and Holders otherwise mutually agree, then the
valuation report shall be deemed final at the end of such 5-Business-Day
period. The Company shall pay the fees and expenses associated with the
Independent Appraiser.
(b) "Business Day" means any day except a Saturday, Sunday
or other day on which commercial banks in Arlington, Virginia are
authorized by law to close.
28
(c) "Capital Stock" means the Common Stock, and all other
classes of common stock (whether voting or non-voting) and all other forms
of capital stock or securities of the Company (preferred or otherwise).
(d) "Current Market Price" means, with respect to any share
of Common Stock or any other security of the Company at the date herein
specified, the following:
(i) if the Company does not then have such securities
registered under the Exchange Act, then the Current Market Price per share
of such security will be the greater of the applicable Exercise Price per
Warrant Share then in effect or the Appraised Valuation per share of such
security, or alternatively
(ii) if the Company does then have such securities
registered under the Exchange Act, then the Current Market Price per share
of such security will be the greater of the Appraised Valuation per share
of such security or the average of the daily market prices of such security
for 20 consecutive Business Days during the period commencing 30 Business
Days before such date (or, if the Company has had a class of such
securities registered under the Exchange Act for less than 30 consecutive
Business Days before such date, then the average of the daily market prices
for all of the Business Days before such date for which daily market prices
are available). The market price for each such Business Day shall be as
follows: (A) for a security listed or admitted to trading on any securities
exchange, then the closing price (regular way) on such day (or if no sale
takes place on such day, then the average of the closing bid and asked
prices on such day), and (B) for a security not then listed or admitted to
trading on any securities exchange, then the last reported sale price on
such day (or if no sale takes place on such day, then the average of the
closing bid and asked prices on such day, as reported by a reputable
quotation source designated by the Company), and (C) for a security not
then listed or admitted to trading on any securities exchange and as to
which no such reported sale price or bid and asked prices are available,
then the average of the reported high bid and low asked prices on such day,
as reported by a reputable quotation service, or a newspaper of general
circulation in Manhattan Borough (New York, NY) customarily published on
each business day, designated by the Company (or if there is no bid and
asked prices on such day, then the average of the high bid and low asked
prices, as so reported, on the most recent day (not more than 30 calendar
days prior to the date in question) for which prices have been so
reported), and (D) if there are no bid and asked prices reported during the
30 calendar days prior to the date in question, then the Current Market
Price per share of the security shall be determined as if the Company did
not have a class of such securities registered under the Exchange Act.
(e) "Equity Disposition" means the sale, issuance, transfer
or other Equity Disposition of Capital Stock (or securities convertible
into, or exchangeable for, Capital Stock or rights to acquire Capital Stock
or such securities) to one or more Persons through any transaction or
series of related transactions (other than as a result of a Public Offering
or other than as a result of a series of acquisitions of unrelated internet
service providers or telecommunications companies) if, after such sale,
issuance, transfer or Equity Disposition, (a) more than 50% of the Capital
Stock or voting power of the Company is sold, issued or transferred or (b)
any "person" other than any stockholder who as of the date hereof
(including, without limitation, after taking into account the consummation
of the transactions contemplated by this Agreement) is a beneficial owner
of more than 30% of the total voting power of the
29
outstanding capital stock of the Company on a Fully-Diluted Basis or an
Affiliate of such a stockholder (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), is or becomes the beneficial owner (as defined
in Rules 13d-3 and 13d-5 of the Exchange Act; provided that such person
shall be deemed to have "beneficial ownership" of all shares that such
person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of
more than 30% of the total voting power of the outstanding capital stock of
the Company on a Fully-Diluted Basis. For purposes of this definition, any
transfer of Capital Stock (or securities convertible into, or exchangeable
for, Capital Stock or rights to acquire Capital Stock or such securities)
by a shareholder to any member of his or her immediately family or to any
trust created by such shareholder for estate planning purposes shall not
constitute an "Equity Disposition".
(f) "Equity Redemption" means any purchase, repurchase,
acquisition, redemption or retirement of any issued and outstanding shares
of Capital Stock (or any rights, options or convertible securities
therefor) from any holder by the Company or any Affiliate thereof, except
for repurchases to fund employee stock purchase/401(k) or similar plans
which plans in the aggregate do not exceed 5% of the outstanding Capital
Stock.
(g) "Exchange Date" means (X) January 6, 2002 if , on or
before such date, the Purchaser has not received the Disclosure Schedule to
this Agreement, (Y) January 31, 2002 if on or before such date (i) the
Board of Directors of the Company has not received the Fairness Opinion,
and (ii) the Purchaser has not received the Legal Opinion, or (Z) June 30,
2002 if, on or before such date, the Company has not obtained all required
State Consents, as set forth in Section 9.2 of the Disclosure Schedule.
(h) "Fully Diluted Basis" means, when referring to the
computation of a percentage of one or more classes of Capital Stock held by
a Person, the percentage that the number of shares of such class or classes
of Capital Stock that would be held by such Person after giving effect to
the full exercise of any options or warrants, the full conversion of any
convertible securities and the full exchange of any exchangeable securities
held by such Person, whether or not such warrants, options or convertible
or exchangeable securities are then exercisable, convertible or
exchangeable, as the case may be, bears to the aggregate number of shares
of such class or classes of Capital Stock that would be outstanding after
giving effect to the full exercise of all warrants or options, the full
conversion of any convertible securities and the full exchange of any
exchangeable securities held by all Persons, whether or not such warrants,
options or convertible or exchangeable securities are then exercisable.
(i) "Holder" means, individually and collectively, each
owner and/or holder of any interest in any Warrant (and corresponding
Warrant Certificate) and/or any Warrant Share, and (with respect to each)
any successor, assignee, transferee, trustee, estate, heir, executor,
administrator, or personal representative thereof. For avoidance of doubt,
as of the effective date of this Agreement, the term "Holder" shall include
both MCG Finance Corporation and MCG Credit Corporation on a pro rata basis
in accordance with their respective interests under the Amended Credit
Agreement. At any time when there is more than one Holder as defined
hereunder, the Holders as a group shall designate one such Holder to act as
administrative agent for the Holders as a group, and as of the effective
date of this Agreement, MCG Finance Corporation shall act as such
administrative agent.
30
(j) "Independent Appraiser" means a Person who (a) is with a
nationally recognized investment banking or appraisal firm, and (b) is
qualified in the valuation of businesses, transactions and securities of
the general type being analyzed, and (c) does not have a material direct or
material indirect financial interest in the Company or any Holder, other
than such Person's receipt of a fee in connection with the subject
valuation.
(k) "Liquidation" means any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Company.
(l) "Non-Surviving Transaction" means either (a) any merger,
consolidation or other business combination by the Company with one or more
Persons in which the other Person effectively is the survivor or (b) any
sale, transfer, lease or license of all or any material portion of the
assets (or the economic benefits thereof) of the Company to one or more
other Persons through any transaction or series of related transactions or
(c) a Liquidation.
(m) "Organic Document" means, relative to any entity, its
certificate and articles of incorporation, organization or formation, its
by-laws or operating agreements, and all equityholder agreements, voting
agreements and similar arrangements applicable to any of its authorized
shares of capital stock, its partnership interests or its equity interests,
and any other arrangements relating to the control or management of any
such entity (whether existing as a corporation, a partnership, an LLC or
otherwise), and, with respect to the Company includes, without limitation,
the Certificate of Designation.
(n) "Person" means an individual, an association, a
partnership, a corporation, a trust or an unincorporated organization or
any other entity or organization.
(o) "Securities Act" means the Securities Act of 1933, as
amended, or any similar Federal statute, as implemented by the Commission
or any court of competent jurisdiction.
(p) "State PUC" means the public utility commission or other
regulatory agency of any state in which the Company does business that is
vested with jurisdiction over the Company and over State Communications
Acts or the provision of communication services within such state.
(q) "Warrant" means the irrevocable and unconditional right
(subject to the terms hereof) to acquire a fully paid and nonassessable
Warrant Share at a purchase price per share equal to an applicable Exercise
Price (and any other right or warrant issued upon any exchange or transfer
of any such Warrant or any adjustment relating thereto).
(r) "Warrant Certificate" means a certificate (substantially
in the form of Exhibit D) evidencing one or more Warrants.
(s) "Warrant Share" means a share of Common Stock or other
Capital Stock or property issuable upon exercise of a Warrant in accordance
with the terms hereof (until such share is registered by the Company and
sold by the Holder thereof to a third party in a public transaction).
31
9. MISCELLANEOUS.
9.1 Survival of Representations and Warranties. Unless otherwise
set forth in this Agreement, the warranties and representations of the
Company and the Purchaser contained in or made pursuant to this Agreement
shall survive the execution and delivery of this Agreement and the Closing
until the first (1st) anniversary of the date hereof.
9.2 Warrant Exchange. On any Exchange Date, (i) the Warrants
issued to the Purchaser at the Closing will be cancelled and, in exchange,
the Company will re-issue the Old Warrants previously held by the Purchaser
on the same terms and conditions as such Old Warrants were previously
issued.
9.3 Compliance with FCC and State Commission Requirements. The
Company and the Purchaser each hereby acknowledge its intent that the
Investment Instruments comply with all of the laws, regulations and orders
of and/or administered by the FCC or any State Commission relating to the
Purchaser's ownership, exercise and/or other realization of rights in
connection herewith. If at any time the terms and conditions of any such
ownership, exercise or other ability to realize upon rights violates, is in
conflict with or requires any consent under any such legal requirements,
then the Company and the Purchaser (or any subsequent holder) will
cooperate and negotiate in good faith to amend the underlying documents (or
the relevant rights therein) and/or to file and prosecute (or to cause
others to file and prosecute) applications for any such consent in order to
enable the Company and the Purchaser (or such subsequent holder) to be in
compliance in all material respects with such legal requirements.
9.4 Compliance with Purchaser's Regulatory Requirements. The
Company and the Purchaser each hereby acknowledge its intent that the
Investment Instruments each comply with all of the statutory and regulatory
requirements applicable to the Purchaser (or any subsequent holder)
relating to its ownership, exercise and/or other realization of rights in
connection herewith. If at any time the terms and conditions of any such
ownership, exercise or other ability to realize upon rights violates or is
in conflict with any such regulatory requirements applicable to the
Purchaser (or such subsequent holder), then the Company and the Purchaser
(or such subsequent holder) will cooperate and negotiate in good faith to
amend the underlying documents (or the relevant rights therein) in order to
enable the Purchaser (or such subsequent holder) to be in compliance in all
material respects with such statutory and regulatory requirements.
9.5 Transfer; Successors and Assigns. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the
respective successors and assigns of the parties. Nothing in this
Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and assigns any
rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement. This Agreement
may not be assigned by the Company without the prior written consent of the
Purchaser.
9.6 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
32
9.7 Notices. Any notice required or permitted by this Agreement
shall be in writing and shall be deemed given upon delivery, when delivered
personally or by overnight courier or sent by telegram or fax, or
forty-eight (48) hours after being deposited in the U.S. mail, as certified
or registered mail, with postage prepaid, addressed to the party as
follows:
(a) if to the Company, to:
▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, President
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ & ▇▇▇▇▇▇▇, Ltd.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or (b) if to the Purchaser:
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Investment Administration & Legal Affairs Division
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Dow, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, PLLC
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
9.8 Finder's Fee. Each party represents that it neither is nor
will be obligated for any finder's fee or commission in connection with
this transaction. The Purchaser agrees to indemnify and to hold harmless
the Company from any liability for any commission or compensation in the
nature of a finder's fee (and the costs and expenses of defending against
such liability or asserted liability) for which the Purchaser or any of its
officers, employees, or representatives is responsible. The Company agrees
to indemnify and hold harmless the Purchaser from any liability for any
commission or compensation in the nature of a finder's fee
33
(and the costs and expenses of defending against such liability or asserted
liability) for which the Company or any of its officers, employees or
representatives is responsible.
9.9 Expenses. The Company shall pay all reasonable fees and
disbursements of the Purchaser (including the legal fees and expenses of
both internal and outside counsel to the Purchaser) with respect to this
Agreement, the Investment Instruments, the documents referred to herein and
the transactions contemplated hereby and thereby, for ongoing compliance
and any amendments, modifications or changes thereto, and for enforcement
of its rights thereunder. The foregoing payments shall be made at Closing
or thereafter upon demand therefor in accordance with instructions provided
by the Purchaser.
9.10 Amendments and Waivers. Any term of this Agreement may be
amended with the written consent of the Company and the holders of at least
a majority of the shares of Preferred Stock then outstanding. Any amendment
or waiver effected in accordance with this Section 9.10 shall be binding
upon the Purchaser and each transferee of the Preferred Stock (or the
Common Stock issuable upon conversion thereof), each future holder of all
such securities and the Company.
9.11 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, the parties agree to
renegotiate such provision in good faith. In the event that the parties
cannot reach a mutually agreeable and enforceable replacement for such
provision, then (a) such provision shall be excluded from this Agreement,
(b) the balance of the Agreement shall be interpreted as if such provision
were so excluded and (c) the balance of the Agreement shall be enforceable
in accordance with its terms.
9.12 Delays or Omissions. No delay or omission to exercise any
right, power or remedy accruing to any holder of any of the Preferred Stock
, Warrant or any Warrant Shares, upon any breach or default of the Company
under this Agreement, shall impair any such right, power or remedy of such
holder nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind
or character on the part of any holder of any breach or default under this
Agreement, or any waiver on the part of any holder of any provisions or
conditions of this Agreement, must be in writing and shall be effective
only to the extent specifically set forth in such writing. All remedies,
either under this Agreement or by law or otherwise afforded to any holder,
shall be cumulative and not alternative.
9.13 Entire Agreement. This Agreement, the Disclosure Schedule
and the documents referred to herein constitute the entire agreement
between the parties hereto pertaining to the subject matter hereof, and any
and all other written or oral agreements existing between the parties
hereto are expressly canceled.
9.14 GOVERNING LAW. THE LAWS OF THE COMMONWEALTH OF VIRGINIA
SHALL GOVERN THE INTERPRETATION, VALIDITY AND PERFORMANCE OF THE TERMS OF
THIS AGREEMENT REGARDLESS OF THE LAW THAT MIGHT BE APPLIED UNDER PRINCIPLES
OF CONFLICTS OF LAW, OR, TO THE EXTENT THAT
34
THE PARTICULAR ISSUE IN CONTROVERSY INVOLVES THE COMPANY'S LEGAL POWER OR
AUTHORIZATION IN CONNECTION HEREWITH, MATTERS OF INTERNAL GOVERNANCE OR
MATTERS OF CORPORATE LAW, THEN RESOLUTION OF SUCH ISSUE SHALL BE GOVERNED
BY THE CORPORATE LAWS OF THE STATE OF DELAWARE.
9.15 Forum Selection; Consent to Jurisdiction. Any litigation in
connection with or in any way related to this Agreement, or any course of
conduct, course of dealing, statements (whether verbal or written), actions
or inactions of the Purchaser or the Company will be brought and maintained
exclusively in the courts of the Commonwealth of Virginia or in the United
States District Court for the Eastern District of Virginia; provided,
however, that, at the Purchaser's option only, any suit seeking enforcement
against the Company may also be brought (at the Purchaser's option) in the
courts of any other jurisdiction where any property of the Company may be
found or where any Purchaser may otherwise obtain personal jurisdiction
over the Company. The Company hereby expressly and irrevocably submits to
the jurisdiction of the courts of the Commonwealth of Virginia and of the
United States District Court for the Eastern District of Virginia for the
purpose of any such litigation as set forth above and irrevocably agrees to
be bound by any final and non-appealable judgment rendered thereby in
connection with such litigation. The Company further irrevocably consents
to the service of process by registered or certified mail, postage prepaid,
or by personal service within or outside the Commonwealth of Virginia. The
Company hereby expressly and irrevocably waives, to the fullest extent
permitted by law, any objection which it may have or hereafter may have to
the laying of venue of any such litigation brought in any such court
referred to above and any claim that any such litigation has been brought
in an inconvenient forum. To the extent that the Company has or hereafter
may acquire any immunity from jurisdiction of any court or from any legal
process (whether through service or notice, attachment prior to judgment,
attachment in aid of execution or otherwise) with respect to itself or its
property, then the Company hereby irrevocably waives such immunity in
respect of its obligations under this Agreement.
9.16 Waiver of Jury Trial. The Purchaser and the Company each
hereby knowingly, voluntarily and intentionally waives any rights it may
have to a trial by jury in respect of any litigation (whether as claim,
counter-claim, affirmative defense or otherwise) in connection with or in
any way related to this Agreement, or any course of conduct, course of
dealing, statements (whether verbal or written), actions or inactions of
the Purchaser or the Company.
9.17 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
[Signature Page Follows]
35
The parties have executed this Agreement as of the date first
written above.
COMPANY:
▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: CEO
PURCHASER:
MCG CAPITAL CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President and Chief
Operating Officer
36
