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EXHIBIT 10.3
KASTAR SATELLITE COMMUNICATIONS CORP.
SERIES A AND B PREFERRED
STOCK PURCHASE AGREEMENT
MAY 26, 1999
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TABLE OF CONTENTS
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1. Purchase and Sale of Stock............................................................1
1.1 Sale and Issuance of Series A and B Preferred Stock..........................1
1.2 First and Second Closings....................................................1
2. Representations and Warranties of the Company.........................................2
2.1 Organization, Good Standing and Qualification................................2
2.2 Capitalization and Voting Rights.............................................2
2.3 Subsidiaries.................................................................3
2.4 Authorization................................................................4
2.5 Valid Issuance of Preferred and Common Stock.................................4
2.6 Governmental Consents........................................................5
2.7 Offering.....................................................................5
2.8 Litigation...................................................................5
2.9 Proprietary Information Agreements...........................................6
2.10 Patents and Trademarks.......................................................6
2.11 Compliance with Other Instruments............................................6
2.12 Agreements; Action...........................................................7
2.13 Related-Party Transactions...................................................8
2.14 Financial Statements.........................................................8
2.15 Changes......................................................................9
2.16 Tax Returns..................................................................9
2.17 Permits.....................................................................10
2.18 Environmental and Safety Laws...............................................10
2.19 Disclosure..................................................................10
2.20 Modification of FCC Authorization...........................................10
2.21 Business Plan...............................................................11
2.22 Registration Rights.........................................................11
2.23 Corporate Documents; Minute Books...........................................11
2.24 Title to Property and Assets................................................11
2.25 Insurance...................................................................12
2.26 Employee Benefit Plans......................................................12
2.27 Labor Agreements and Actions................................................12
2.28 Net Operating Loss Carryforward.............................................12
2.29 Qualified Small Business Stock..............................................12
2.30 Year 2000 Compliance........................................................13
2.31 Eligibility to Hold Preferred Stock.........................................13
3. Representations and Warranties of the Investors......................................13
3.1 Authorization...............................................................13
3.2 Purchase Entirely for Own Account...........................................14
3.3 Disclosure of Information...................................................14
3.4 Investment Experience.......................................................14
3.5 Accredited Investor.........................................................14
i.
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TABLE OF CONTENTS (Continued)
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3.6 Restricted Securities.......................................................14
3.7 Further Limitations on Disposition..........................................15
3.8 Legends.....................................................................15
3.9 Tax Advisors................................................................16
3.10 Eligibility to Hold Preferred Stock.........................................16
4. California Commissioner of Corporations..............................................16
4.1 Corporate Securities Law....................................................16
5. Conditions of Investor's Obligations at Closings.....................................16
5.1 First Closing Conditions....................................................16
5.2 Second Closing Conditions...................................................19
6. Conditions of the Company's Obligations at Closings..................................20
6.1 Representations and Warranties..............................................20
6.2 Payment of Purchase Price...................................................20
6.3 Qualifications..............................................................20
6.4 Investor Rights Agreement...................................................20
6.5 Voting Agreement............................................................20
6.6 Right of First Offer Agreement..............................................21
6.7 Televerde Voting Trust Agreement............................................21
6.8 ▇▇▇▇▇▇▇ Voting Trust. ▇▇▇▇▇▇▇ shall have executed and delivered the
▇▇▇▇▇▇▇ Voting Trust in substantially the form attached as Exhibit N........21
7. Indemnification......................................................................21
8. Miscellaneous........................................................................21
8.1 Survival....................................................................21
8.2 Successors and Assigns......................................................22
8.3 Governing Law...............................................................22
8.4 Titles and Subtitles........................................................22
8.5 Notices.....................................................................22
8.6 Finder's Fee................................................................22
8.7 Expenses....................................................................22
8.8 Amendments and Waivers......................................................23
8.9 Effect of Amendment or Waiver...............................................23
8.10 Severability................................................................23
8.11 Aggregation of Stock........................................................23
8.12 Entire Agreement............................................................23
8.13 Counterparts................................................................24
8.14 Attorneys' Fees.............................................................24
SCHEDULE A Schedule of Investors
SCHEDULE B Schedule of Exceptions
EXHIBIT A Certificate of Incorporation
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TABLE OF CONTENTS (Continued)
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EXHIBIT B Investor Rights Agreement
EXHIBIT C List of Stockholders
EXHIBIT D Opinion of Counsel for the Company for First Closing
(▇▇▇▇▇▇▇▇▇▇, Hyatt & ▇▇▇▇▇▇, P.C.)
EXHIBIT E Opinion of Counsel for the Company for First Closing
(▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇, P.C.)
EXHIBIT F Opinion of Counsel for the Company for First Closing
(▇▇▇▇▇▇, Wiltshire & Grannis LLP)
EXHIBIT G Voting Agreement
EXHIBIT H Right of First Offer Agreement
EXHIBIT I Televerde Voting Trust Agreement
EXHIBIT J Stock Purchase Agreement (Televerde Sale)
EXHIBIT K Form of Indemnification Agreement
EXHIBIT L Opinion of Counsel for the Company for Second Closing
(▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.)
EXHIBIT M Opinion of Counsel for the Company for Second Closing
(▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇, P.C.)
EXHIBIT N ▇▇▇▇▇▇▇ Voting Trust
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SERIES A AND B PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES A AND B PREFERRED STOCK PURCHASE AGREEMENT is made
on the 26th day of May, 1999, by and among KaSTAR Satellite Communications
Corp., a Delaware corporation (the "Company"), and the investors listed on
Schedule A hereto (each, an "Investor" and collectively, the "Investors").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock.
1.1 Sale and Issuance of Series A and B Preferred Stock.
(a) Subject to the terms and conditions of this Agreement,
each Investor listed under the heading "First Closing" on Schedule A hereto
agrees, severally, to purchase at the First Closing and the Company agrees to
sell and issue to each Investor at the First Closing, that number of shares of
the Company's Series A Preferred Stock set forth opposite each Investor's name
on Schedule A hereto for the purchase price set forth thereon.
(b) Subject to the terms and conditions of this Agreement,
each Investor listed under the heading "Second Closing" on Schedule A hereto
agrees, severally, to purchase at the Second Closing and the Company agrees to
sell and issue to each Investor at the Second Closing, that number of shares of
the Company's Series B Preferred Stock set forth opposite each Investor's name
on Schedule A hereto for the purchase price set forth thereon.
(c) In connection with the transactions contemplated hereby,
KPCB Holdings, Inc. ("▇▇▇▇▇▇▇") is purchasing 8,328,750 shares of the Company's
Series A Preferred Stock from Televerde Communications L.P. ("Televerde")
pursuant to that certain Stock Purchase Agreement (the "Televerde Purchase
Agreement") dated as of the date hereof among Televerde, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇
and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇. In order to induce ▇▇▇▇▇▇▇ to consummate the transactions
contemplated by this Agreement and the Televerde Purchase Agreement, the Company
has agreed that the representations in Section 2 below are being made to ▇▇▇▇▇▇▇
both in connection with the transactions contemplated by this Agreement and the
Televerde Purchase Agreement.
1.2 First and Second Closings.
(a) The purchase and sale of the Series A Preferred Stock to
the Investors listed under the heading "First Closing" shall take place at the
offices of ▇▇▇▇▇▇▇, Phleger & ▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇ "▇" ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, at 10:00 A.M., on May 26, 1999, or at such other time
and place as the Company and Investors acquiring in the aggregate more than half
the shares of Series A Preferred Stock sold pursuant hereto mutually agree upon
orally or in writing (which time and place are designated as the " First
Closing").
(b) The purchase and sale of the Series B Preferred Stock to
the Investors listed under the heading "Second Closing" shall take place at the
offices of
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▇▇▇▇▇▇▇, Phleger & ▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇ "▇" ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, at 10:00 A.M. on a date no later than ten (10) days following
the date on which (i) the Company receives the Federal Communications
Commission's (the "FCC") approval of the transfer of control of the Company from
Televerde to the Company's stockholders generally (in form and substance
reasonably acceptable to the Investors and special counsel for the Investors)
(the "FCC Approval") and (ii) the conditions set forth in Section 5.2 are
satisfied, or at such other time and place as the Company and Investors
acquiring the shares of Series B Preferred Stock sold pursuant hereto mutually
agree upon orally or in writing (which time and place are designated as the
"Second Closing"). The Company shall use reasonable efforts to obtain the FCC
Approval promptly after the First Closing.
(c) At each Closing, the Company shall deliver to each
Investor a certificate representing the Series A Preferred Stock or Series B
Preferred Stock, as the case may be, that such Investor is purchasing against
payment of the purchase price therefor by check or wire transfer.
2. Representations and Warranties of the Company. The Company
hereby represents and warrants to each Investor (in connection with both the
transactions contemplated hereby and by the Televerde Purchase Agreement) that,
except as set forth on a Schedule of Exceptions (the "Schedule of Exceptions")
furnished to each Investor and special counsel for the Investors prior to
execution hereof and attached hereto as Schedule B, which exceptions shall be
deemed to be representations and warranties as if made hereunder:
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. The Company is duly qualified to transact
business and is in good standing in each jurisdiction in which the failure to so
qualify would have a material adverse effect on its business or properties. The
Company has provided special counsel to the Investors a certified copy of the
Company's Certificate of Incorporation (the "Certificate"), including all
amendments thereto, as in effect on the date hereof.
2.2 Capitalization and Voting Rights. The authorized capital
of the Company, after giving effect to the First Closing, consists of:
(a) Preferred Stock. 81,116,645 shares of Preferred Stock, par
value $.001 (the "Preferred Stock"), of which (i) 79,277,580 shares have been
designated Series A Preferred Stock (the "Series A Preferred Stock"), of which
72,043,500 shares are issued and outstanding, 8,328,750 shares of which will be
sold pursuant to the Televerde Purchase Agreement and up to 6,921,250 shares of
which will be sold pursuant to this Agreement at the First Closing and (ii)
1,839,065 shares have been designated Series B Preferred Stock (the "Series B
Preferred Stock"), up to 835,625 shares of which will be sold pursuant to this
Agreement at the Second Closing. The rights, privileges and preferences of the
Preferred Stock will be as stated in the Company's Certificate.
(b) Common Stock. 95,431,348 shares of common stock, par value
$.001 ("Common Stock"), of which no shares are issued and outstanding.
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(c) The outstanding shares of Series A Preferred Stock are
owned by the stockholders and in the numbers specified in Exhibit C hereto
immediately prior to the First Closing.
(d) The outstanding shares of Series A Preferred Stock are all
duly and validly authorized and issued, fully paid and nonassessable, and were
issued in compliance with all applicable state and federal laws concerning the
issuance of securities.
(e) Except for (i) the conversion privileges of the Series A
Preferred Stock, (ii) the right of certain Investors to acquire shares of Series
B Preferred Stock hereunder and the conversion privileges of the Series B
Preferred Stock, (iii) the rights provided in Section 4 of that certain Investor
Rights Agreement dated as of the date hereof among the Company and the Investors
listed on Exhibit A thereto (the "Investor Rights Agreement") and (iv) currently
outstanding options to purchase 7,234,079 shares of Series A Preferred Stock
granted to employees pursuant to the Company's Stock Option Plan (the "Option
Plan"), there are not outstanding any options, warrants, rights (including
conversion or preemptive rights) or agreements for the purchase or acquisition
from the Company of any shares of its capital stock. In addition to the
aforementioned options, the Company has reserved an additional 14,314,703 shares
of its Common Stock for purchase upon exercise of options to be granted in the
future under the Option Plan. The Company is not a party or subject to any
agreement or understanding, and, to the Company's knowledge, there is no
agreement or understanding between any persons and/or entities, which affects or
relates to the voting or giving of written consents with respect to any security
or by a director of the Company.
2.3 Subsidiaries. (a) The Schedule of Exceptions sets forth
(i) the name of each corporation, partnership, limited liability company or
other entity in which the company has, directly or indirectly, an equity
interest representing 50% or more of the capital stock thereof or other equity
interests therein (individually, a "Subsidiary" and, collectively, the
"Subsidiaries"); (ii) the number and type of outstanding equity securities of
each Subsidiary and a list of the holders thereof; (iii) the jurisdiction of
organization of each Subsidiary; (iv) the names of the officers and directors,
or managers and members, of each Subsidiary; and (v) the jurisdictions in which
each Subsidiary is qualified or holds licenses to do business as a foreign
corporation.
(b) Each Subsidiary is duly organized, validly existing and in
good standing under the laws of its state of organization. Each Subsidiary is
duly qualified to transact business and is in good standing in each jurisdiction
in which the failure to so qualify would have a material adverse effect on its
business or properties. The Company has provided special counsel to the
Investors with a certified copy of the charter documents of each subsidiary,
including all amendments thereto, as in effect on the date hereof.
(c) The Company owns 100% of the outstanding equity interests
of each of KaSTAR 109.2 Acquisition, LLC, a Colorado limited liability company
and KaSTAR 73 Acquisition, LLC, a Colorado limited liability company.
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
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Agreement, the Investor Rights Agreement, that certain Voting Agreement dated as
of the date hereof among the Company, Televerde, DirectCom Networks, Inc.
("DirectCom") and ▇▇▇▇▇▇▇ (the "Voting Agreement"), that certain Voting Trust
Agreement dated as of the date hereof among the Company, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and
Televerde (the "Televerde Voting Trust Agreement") and that certain Right of
First Offer and Co-Sale Agreement dated as of the date hereof among the Company,
▇▇▇▇▇▇▇, Televerde and DirectCom (the "Right of First Offer Agreement"), the
performance of all obligations of the Company hereunder and thereunder, and the
authorization (or reservation for issuance), sale and issuance of the Series A
Preferred Stock and Series B Preferred Stock being sold hereunder and the Common
Stock issuable upon conversion of the Series A Preferred Stock and Series B
Preferred Stock has been taken or will be taken prior to the First Closing. This
Agreement, the Investor Rights Agreement, the Voting Agreement, the Televerde
Voting Trust Agreement and the Right of First Offer Agreement constitute valid
and legally binding obligations of the Company, enforceable in accordance with
their respective terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors' rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies, and (iii) to the extent the indemnification provisions
contained in the Investor Rights Agreement may be limited by applicable federal
or state securities laws.
2.5 Valid Issuance of Preferred and Common Stock. The Series A
Preferred Stock and Series B Preferred Stock that is being purchased by the
Investors hereunder, when issued, sold and delivered in accordance with the
terms of this Agreement for the consideration expressed herein, will be duly and
validly issued, fully paid and nonassessable and will be free of restrictions on
transfer, other than restrictions on transfer under this Agreement and the
Investor Rights Agreement and under applicable state and federal securities
laws. The Series A Preferred Stock that is being purchased by ▇▇▇▇▇▇▇ under the
Televerde Purchase Agreement, when issued, sold and delivered in accordance with
the terms thereof for the consideration expressed therein will be duly and
validly issued, fully paid and nonassessable and, to the knowledge of the
Company, will be free of restrictions on transfer, other than restrictions on
transfer under the Televerde Purchase Agreement and the Investor Rights
Agreement and under applicable state and federal securities laws. The Common
Stock issuable upon conversion of the Series A Preferred Stock and the Series B
Preferred Stock purchased under this Agreement has been duly and validly
reserved for issuance and, upon issuance in accordance with the terms of the
Certificate, will be duly and validly issued, fully paid and nonassessable and
will be free of restrictions on transfer, other than restrictions on transfer
under this Agreement and the Investor Rights Agreement and under applicable
state and federal securities laws. The Common Stock issuable upon conversion of
the Series A Preferred Stock purchased under the Televerde Agreement has been
duly and validly reserved for issuance and, upon issuance in accordance with the
terms of the Certificate, will be duly and validly issued, fully paid and
nonassessable and, to the knowledge of the Company, will be free of restrictions
on transfer, other than restrictions on transfer under the Televerde Purchase
Agreement and the Investor Rights Agreement and under applicable state and
federal securities laws.
2.6 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any foreign, federal, state or local governmental authority on the
part of the Company or any Subsidiary is required in connection with the
consummation of the transactions contemplated by this Agreement, except
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for: (i) the filing of a Notice of Transaction pursuant to Section 25102(f) of
the California Corporate Securities Law of 1968, as amended, and the rules
thereunder (the "Law"), which filing will be effected within the time prescribed
by law, (ii) such other filings required pursuant to applicable federal and
state securities laws and blue sky laws, which filings will be effected within
the required statutory period and (iii) the FCC Approval prior to the Second
Closing as contemplated by Section 1.2(b).
2.7 Offering. Subject in part to the truth and accuracy of
each Investor's representations set forth in Section 3 of this Agreement, the
offer, sale and issuance of the Series A Preferred Stock and Series B Preferred
Stock as contemplated by this Agreement are exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Act"), and the
qualification or registration requirements of the Law or other applicable blue
sky laws. Neither the Company nor any authorized agent acting on its behalf will
take any action hereafter that would cause the loss of such exemptions.
2.8 Litigation. There is no action, suit, proceeding or
investigation pending, or to the Company's knowledge, currently threatened
against the Company or any Subsidiary that questions the validity of this
Agreement or the right of the Company to enter into such agreement or to
consummate the transactions contemplated hereby, or that might result, either
individually or in the aggregate, in any material adverse changes in the
business, assets or condition of the Company or any Subsidiary, financially or
otherwise, or any change in the current equity ownership of the Company or any
Subsidiary (other than governmental proceedings affecting the satellite industry
in general). Except for the Company's FCC authorizations and other orders of the
FCC, all of which are generally publicly available (and all of the material
provisions of which are publicly available), neither the Company nor any
Subsidiary is a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no FCC rule, regulation or order currently in effect
that, to the Company's knowledge, would result in or require a material adverse
change in the business or operations of the Company. There is no action, suit,
proceeding or investigation initiated by the Company or any Subsidiary currently
pending or that the Company or any Subsidiary intends to initiate.
2.9 Proprietary Information Agreements. Each employee, officer
and consultant of the Company (other than outside counsel and accountants to the
Company) or any Subsidiary has executed a Proprietary Information and Inventions
Agreement, copies of which have been provided to special counsel to the
Investors. Neither the Company nor any Subsidiary, after reasonable
investigation, is aware that any of its employees, officers or consultants are
in violation thereof, and the Company will use its reasonable efforts to prevent
any such violation.
2.10 Patents and Trademarks. To its knowledge, the Company and
each Subsidiary possesses all patents, patent rights, trademarks, trademark
rights, service marks, service ▇▇▇▇ rights, trade names, trade name rights and
copyrights (collectively, the "Intellectual Property") necessary for its
business without any conflict with or infringement of the valid rights of others
and the lack of which could materially and adversely affect the operations or
condition, financial or otherwise, of the Company or any Subsidiary, and neither
the Company nor any Subsidiary has received any notice of infringement upon or
conflict with the asserted rights of
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others. The Company and each Subsidiary has a valuable body of trade secrets,
including know-how, concepts, computer programs and other technical data (the
"Proprietary Information") for the development, manufacture and sale of its
products. To its knowledge, the Company and each Subsidiary has the right to use
the Proprietary Information free and clear of any rights, liens, encumbrances or
claims of others, except that the possibility exists that other persons may have
independently developed trade secrets or technical information similar or
identical to those of the Company or any Subsidiary. Neither the Company nor any
Subsidiary is aware of any such independent development nor of any
misappropriation of its Proprietary Information. Neither the Company nor any
Subsidiary is aware that any of its employees is obligated under any contract
(including licenses, covenants or commitments of any nature) or other agreement,
or subject to any judgment, decree or order of any court or administrative
agency, that would interfere with the use of his or her best efforts to promote
the interests of the Company or any Subsidiary or that would conflict with the
Company's or any Subsidiary's business. The Company does not believe it is or
will be necessary to utilize any inventions of any of its or any of its
Subsidiary's employees (or people it currently intends to hire) made prior to
their employment by the Company or any Subsidiary.
2.11 Compliance with Other Instruments. Neither the Company
nor any Subsidiary is in violation in any material respect of any provision of
its Certificate or Bylaws, or Articles of Organization or Operating Agreement,
as the case may be, nor, to its knowledge, in any material respect of any
instrument, judgment, order, writ, decree, authorization, license or contract,
statute, rule or regulation to which the Company or any Subsidiary is subject
and a violation of which would have a material adverse effect on the condition,
financial or otherwise, or operations of the Company or any Subsidiary. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby, except as provided in Section 1.2(b) in
connection with the FCC Approval, will not result in any such violation, or be
in conflict with or constitute, with or without the passage of time and giving
of notice, either a default under any such provision or an event that results in
the creation of any lien, charge or encumbrance upon any assets of the Company
or any Subsidiary or the suspension, revocation, impairment, forfeiture or
nonrenewal of any material permit, license, authorization or approval applicable
to the Company or any Subsidiary, or its business or operations or any of its
assets or properties.
2.12 Agreements; Action.
(a) Except for agreements explicitly contemplated hereby,
there are no agreements, understandings or proposed transactions between the
Company or any Subsidiary and any of its officers, directors, affiliates or any
affiliate thereof.
(b) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which
the Company or any Subsidiary is a party or by which it is bound that may
involve (i) obligations (contingent or otherwise) of, or payments to the Company
or any Subsidiary, in excess of $10,000, other than obligations of, or payments
to, the Company or any Subsidiary arising from purchase or sale agreements
entered into in the ordinary course of business, (ii) the license of any patent,
copyright, trade secret or other proprietary right to or from the Company or any
Subsidiary, (iii) provisions restricting or affecting the development,
manufacture or distribution of the Company's or any Subsidiary's
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products or services, or (iv) indemnification by the Company or any Subsidiary
with respect to infringements of proprietary rights, other than indemnification
obligations arising from purchase or sale agreements entered into in the
ordinary course of business).
(c) Neither the Company nor any Subsidiary 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 or other equity interests, (ii)
incurred any indebtedness for money borrowed or any other liabilities
individually in excess of $10,000 or, in the case of indebtedness and/or
liabilities individually less than $10,000, in excess of $50,000 in the
aggregate, (iii) made any loans or advances to any person, other than ordinary
advances for travel expenses, or (iv) sold, exchanged or otherwise disposed of
any of its assets or rights, other than the sale of its inventory in the
ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
(e) Neither the Company nor any Subsidiary has engaged in the
past three (3) months in any discussion (i) with any representative of any
corporation or corporations regarding the consolidation or merger of the Company
or any Subsidiary with or into any such corporation or corporations, (ii) with
any corporation, partnership, association or other business entity or any
individual regarding the sale, conveyance or disposition of all or substantially
all of the assets of the Company or any Subsidiary or a transaction or series of
related transactions in which more than fifty percent (50%) of the voting power
of the Company or any Subsidiary is disposed of, or (iii) regarding any other
form of acquisition, liquidation, dissolution or winding up of the Company or
any Subsidiary.
(f) All of the contracts, agreements and instruments set forth
on the Schedule of Exceptions pursuant to this Section 2.12 are valid, binding
and enforceable in accordance with their respective terms. The Company has
performed all material obligations required to be performed by it and is not in
default under or in breach of nor in receipt of any claim of default or breach
under any contract, agreement or instrument and the Company does not have any
present expectation or intention of not fully performing all such obligations.
No event has occurred which with the passage of time or the giving of notice or
both would result in a default, breach or event of noncompliance by the Company
under any contract, agreement or instrument. The Company has no knowledge of any
breach or anticipated breach by the other parties to any contract, agreement,
instrument or commitment.
(g) The special counsel to the Investors has been supplied
with a true and correct copy of each of the written instruments, plans,
contracts and agreements and an accurate description of each of the oral
arrangements, contracts and agreements that are referred to on the Schedule of
Exceptions pursuant to this Section 2.12, together with all amendments, waivers
or other changes thereto.
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2.13 Related-Party Transactions. No employee, officer or
director of the Company or any Subsidiary or member of his or her immediate
family is indebted to the Company or any Subsidiary, nor is the Company or any
Subsidiary indebted (or committed to make loans or extend or guarantee credit)
to any of them. To the best of the Company's knowledge, none of such persons has
any direct or indirect ownership interest in any firm or corporation with which
the Company or any Subsidiary is affiliated or with which the Company or any
Subsidiary has a business relationship, or any firm or corporation that competes
with the Company or any Subsidiary, except that employees, officers or directors
of the Company or any Subsidiary and members of their immediate families may own
stock in publicly traded companies that may compete with the Company. No member
of the immediate family of any officer or director of the Company or any
Subsidiary is directly or indirectly interested in any material contract with
the Company or any Subsidiary.
2.14 Financial Statements. The Company has delivered to each
Investor its unaudited financial statements (balance sheet and statement of
operations, statement of stockholders' equity and statement of cash flows,
including notes thereto) at December 31, 1998 and for the fiscal year then
ended, and its unaudited financial statements (balance sheet and statement of
operations) as, at and for the three (3) month period ended March 31, 1999 (the
"Financial Statements"). The Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated and with each other, except that
unaudited Financial Statements may not contain all footnotes required by
generally accepted accounting principles. The Financial Statements fairly
present the financial condition and operating results of the Company and any
Subsidiaries as of the dates, and for the periods, indicated therein, subject in
the case of unaudited Financial Statements to normal year-end audit adjustments.
Except as set forth in the Financial Statements, neither the Company nor any
Subsidiary has any material liabilities, contingent or otherwise, other than (i)
liabilities incurred in the ordinary course of business subsequent to December
31, 1998 and (ii) obligations under contracts and commitments incurred in the
ordinary course of business and not required under generally accepted accounting
principles to be reflected in the Financial Statements, which, in both cases,
individually or in the aggregate, are not material to the financial condition or
operating results of the Company or any Subsidiary. Except as disclosed in the
Financial Statements, neither the Company nor any Subsidiary is a guarantor or
indemnitor of any indebtedness of any other person, firm or corporation. The
Company maintains and will continue to maintain a standard system of accounting
established and administered in accordance with generally accepted accounting
principles.
2.15 Changes. Since December 31, 1998 there has not been:
(a) any change in the assets, liabilities, financial condition
or operating results of the Company or any Subsidiary from that reflected in the
Financial Statements, except changes in the ordinary course of business that
have not been, in the aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties, financial
condition, operating results or business of the Company or any Subsidiary;
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(c) any waiver by the Company or any Subsidiary of a valuable
right or of a material debt owed to it;
(d) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company or any Subsidiary,
except in the ordinary course of business and that is not material to the
assets, properties, financial condition, operating results or business of the
Company or any Subsidiary;
(e) any material change or amendment to a material contract or
arrangement by which the Company or any Subsidiary or any of its assets or
properties is bound or subject;
(f) any material change in any compensation arrangement or
agreement with any employee; or
(g) any agreement or commitment by the Company or any
Subsidiary to do any of the things described in this Section 2.15.
2.16 Tax Returns. The Company and each Subsidiary have timely
filed all tax returns (federal, state and local) required to be filed by it and
all Taxes (as defined below), assessments or other governmental charges imposed
upon the Company or any Subsidiary, or upon any of the assets, income or
franchises of the Company or any Subsidiary, have been timely paid or, if not
yet payable, are adequately accrued on the Company's books and records. Neither
the Company nor any Subsidiary has been advised that any of its returns have
been or are being audited. "Tax" or "Taxes" means any federal, state, local or
foreign income, gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, property, windfall, profits, environmental, customs,
capital stock, franchise, employees' income withholding, foreign or domestic
withholding, social security, unemployment, disability, real property, personal
property, sales, use, transfer, value added, alternative or add-on minimum or
other similar tax, governmental fee, governmental assessment or governmental
charge of any kind whatsoever, including any interest, penalties or addition to
Tax or additional amounts with respect to the foregoing.
2.17 Permits. The Company and each Subsidiary has all
franchises, permits, licenses, certifications, authorizations and any similar
authority (including, without limitation, all authorizations from the FCC)
necessary for the conduct of its business, the lack of which could materially
and adversely affect the business, properties or financial condition of the
Company or any Subsidiary (other than additional authorizations described in the
order granting the Company's FCC authorizations and that are the subject of
pending rule-making proceedings affecting the satellite industry in general).
Neither the Company nor any Subsidiary is in default in any material respect
under any of such franchises, permits, licenses, certifications, authorizations
or other similar authority. The Company and each Subsidiary has timely filed all
reports, tariffs and other documents required to be filed with the FCC as a
condition of the Company's authorization to construct, launch and operate
geostationary Ka-band satellites, and the FCC has not established for the
Company or any Subsidiary an implementation milestone schedule concerning the
construction, launch or operation of the Company's proposed satellites or other
condition or requirement of such authorization. There is no FCC rule or
contractual provision by which the Company is bound, compliance with which is
required as of the date
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hereof, that materially jeopardizes the Company's planned launch for the
Company's proposed satellites.
2.18 Environmental and Safety Laws. To its knowledge, neither
the Company nor any Subsidiary is in violation of any applicable statute, law or
regulation relating to the environment or occupational health and safety, and to
its knowledge, no material expenditures are or will be required in order to
comply with any such existing statute, law or regulation.
2.19 Disclosure. The Company has fully provided each Investor
with all the information that such Investor has requested for deciding whether
to purchase the Series A Preferred Stock and Series B Preferred Stock and all
information that the Company believes is reasonably necessary to enable such
Investor to make such decision. Neither this Agreement (including all the
exhibits and schedules hereto) nor any other statements or certificates made or
delivered in connection herewith, taken as a whole, contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements herein or therein not misleading in light of the circumstances
under which they were made.
2.20 Modification of FCC Authorization. No modification or
amendment of, or other change in, the Company's FCC authorization is necessary
for the Company to provide the communications services set forth in the Business
Plan (defined in Section 2.21). The absence of any modification or amendment of,
or other change in, the Company's FCC authorization will not result in or
require a material adverse change in the business or operations of the Company.
2.21 Business Plan. The Business Plan dated April 1999,
previously delivered to each Investor (the "Business Plan") has been prepared in
good faith by the Company and, taken as a whole, does not, to the Company's
knowledge, contain any untrue statement of a material fact nor does it omit to
state a material fact necessary to make the statements made therein not
misleading, except that with respect to projections contained in the Business
Plan, the Company represents only that such projections were prepared in good
faith and that the Company reasonably believes there is a reasonable basis for
such projections.
2.22 Registration Rights. Except as provided in the Investor
Rights Agreement, the Company has not granted or agreed to grant any
registration rights, including piggyback rights, to any person or entity.
2.23 Corporate Documents; Minute Books. Except for amendments
necessary to satisfy representations and warranties or conditions contained
herein (the forms of which amendments have been approved by the Investors), the
Certificate and Bylaws of the Company, and the Articles of Organization and
Operating Agreement of each Subsidiary, are in the form previously provided to
special counsel for the Investors. The minute books of the Company provided to
special counsel to the Investors contain a complete summary of all meetings of
directors and stockholders since the time of incorporation and reflect all
transactions referred to in such minutes accurately in all material respects,
and the records of each Subsidiary provided to special counsel for the Investors
contain a complete summary of all meetings of any managers and members since the
time of organization and reflect all transactions referred to in such records
accurately in all material respects.
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2.24 Title to Property and Assets. The property and assets of
the Company and each Subsidiary are owned by the Company or the Subsidiary, as
the case may be, free and clear of all mortgages, liens, loans and encumbrances,
except (i) as reflected in the Financial Statements, (ii) for statutory liens
for the payment of current taxes that are not yet delinquent, (iii) for liens,
encumbrances and security interests that arise in the ordinary course of
business and minor defects in title, none of which, individually or in the
aggregate, materially impair the Company's or any Subsidiary's ownership or use
of such property or assets and (iv) that the authorizations granted by the FCC
to the Company to construct, launch and operate Ka-band geostationary satellites
at 109.2 ▇.▇. and 73 ▇.▇. do not confer upon the Company any property rights in
such orbital locations or spectrum frequencies but do grant the Company
authority to use such orbital locations to the full extent granted by the
authorizations. With respect to the property and assets it leases, the Company
and each Subsidiary is in material compliance with such leases and, to its
knowledge, holds a valid leasehold interest free of any liens, claims or
encumbrances, subject to clauses (i)-(iii).
2.25 Insurance. The Company has fire and casualty insurance
policies with such coverages in amounts (subject to reasonable deductibles)
customary for companies similarly situated.
2.26 Employee Benefit Plans. Neither the Company nor any
Subsidiary has any Employee Benefit Plan as defined in the Employee Retirement
Income Security Act of 1974.
2.27 Labor Agreements and Actions. Neither the Company nor any
Subsidiary is 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 no labor union has requested
or, to the Company's knowledge, has sought to represent any of the employees,
representatives or agents of the Company or any Subsidiary. There is no strike
or other labor dispute involving the Company or any Subsidiary pending, or to
the Company's knowledge, threatened, that could have a material adverse effect
on the assets, properties, financial condition, operating results or business of
the Company or any Subsidiary, nor is the Company aware of any labor
organization activity involving its employees. The Company is not aware that any
officer or key employee, or that any group of key employees, intends to
terminate their employment with the Company or any Subsidiary, nor does the
Company or any Subsidiary have a present intention to terminate the employment
of any of the foregoing. The employment of each officer and employee of the
Company or any Subsidiary is terminable at the will of the Company or the
Subsidiary, as the case may be. Neither the Company nor any Subsidiary is a
party to or bound by any currently effective employment contract, deferred
compensation agreement, bonus plan, incentive plan, profit sharing plan,
retirement agreement or other employee compensation agreement. To its knowledge,
the Company and each Subsidiary has complied in all material respects with all
applicable state and federal equal employment opportunity and other laws related
to employment.
2.28 Net Operating Loss Carryforward. The information
contained in the Schedule of Exceptions or otherwise provided to counsel for the
Investors regarding the application of Section 382 of the Code to the Company's
federal net operating loss carryforward is true and correct to the Company's
knowledge.
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2.29 Qualified Small Business Stock. As of the Closing, the
Series A Preferred Stock will meet each of the requirements for qualification as
"qualified small business stock" within the meaning of Section 1202 of the Code.
2.30 Year 2000 Compliance. To its knowledge, all of the
Company's and any Subsidiary's internal computer systems are Year 2000
Compliant, except that neither the Company nor any Subsidiary makes such
representation with respect to off-the-shelf software that is used in the
Company's or any Subsidiary's internal computer systems the failure or
malfunctioning of which would not have a material adverse effect on the Company
or any Subsidiary. To its knowledge, neither the Company nor any Subsidiary is
relying on the products or services of any third party whose systems are not
Year 2000 Compliant where the failure to so comply would reasonably be expected
to have a material adverse effect on the Company or any Subsidiary. Except as
set forth in the Schedule of Exceptions, neither the Company nor any Subsidiary
has made any other representations or warranties that any product or service
sold, licensed, rendered or otherwise provided by the Company or any Subsidiary
is Year 2000 Compliant. For purposes of this Agreement, "Year 2000 Compliant"
shall mean that such products and data and information systems and any such
data, information or other files or software it uses, individually and in
combination, completely and accurately record, store, process, calculate and
present data involving dates before, on or after January 1, 2000; specifically:
(i) no value for a current date will cause any interruption in operation; (ii)
date-based functionality will behave consistently when dealing with dates
before, on or after January 1, 2000; (iii) no abnormal endings or incorrect
results will be produced when working with dates before, on or after January 1,
2000; (iv) in all interfaces and data storage, the century will be specified
explicitly and will be unambiguously derived; and (v) year 2000 will be
recognized as a leap year.
2.31 Eligibility to Hold Preferred Stock. The Company is not
aware of any fact which, upon consummation of the transactions contemplated
hereby, would: (a) make any of its current stockholders ineligible or
unqualified to hold shares of the Company's Series A Preferred Stock under any
material statute, law, rule, regulation, instrument, order, judgment, writ,
decree or contract, including but not limited to the Communications Act of 1934,
as amended, and the rules and regulations of the FCC (other than the FCC
Approval required in connection with the Second Closing, as contemplated by
Section 1.2(b)); or (b) render the Company ineligible or unqualified to hold the
authorizations granted to it by the FCC or, in the Company's reasonable
judgment, jeopardize the Company's ability to hold such authorizations as a
result of foreign ownership, criminal convictions or other ground for
forfeiture, cancellation or revocation under the rules and regulations of the
FCC or the imposition of a monetary forfeiture.
3. Representations and Warranties of the Investors. Each
Investor hereby represents, warrants and covenants that:
3.1 Authorization. Such Investor has full power and authority
to enter into this Agreement, the Investor Rights Agreement, the Voting
Agreement and the Right of First Offer Agreement and each such agreement
constitutes its valid and legally binding obligation, enforceable in accordance
with its terms.
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3.2 Purchase Entirely for Own Account. This Agreement is made
with such Investor in reliance upon such Investor's representation to the
Company, which by such Investor's execution of this Agreement such Investor
hereby confirms, that the Series A Preferred Stock and Series B Preferred Stock
to be received by such Investor and the Common Stock issuable upon conversion
thereof (collectively, the "Securities") will be acquired for investment for
such Investor's own account, not as a nominee or agent, and not with a view to
the resale or distribution of any part thereof, and that such Investor has no
present intention of selling, granting any participation in or otherwise
distributing the same. By executing this Agreement, such Investor further
represents that such Investor does not have any contract, undertaking, agreement
or arrangement with any person to sell, transfer or grant participations to such
person or to any third person, with respect to any of the Securities.
3.3 Disclosure of Information. Such Investor believes it has
received all the information it considers necessary or appropriate for deciding
whether to purchase the Series A Preferred Stock and Series B Preferred Stock.
Such Investor further represents that it has had an opportunity to ask questions
and receive answers from the Company regarding the terms and conditions of the
offering of the Series A Preferred Stock and Series B Preferred Stock and the
business, properties, prospects and financial condition of the Company. Except
to the extent that an Investor has actual knowledge that any representations or
warranties of the Company are untrue, the foregoing does not limit or modify the
representations and warranties of the Company in Section 2 of this Agreement or
the right of such Investor to rely thereon.
3.4 Investment Experience. Such Investor is an investor in
securities of companies in the development stage and acknowledges that it is
able to fend for itself, can bear the economic risk of its investment, and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Series A
Preferred Stock and Series B Preferred Stock. If other than an individual, such
Investor also represents it has not been organized for the purpose of acquiring
the Series A Preferred Stock and Series B Preferred Stock.
3.5 Accredited Investor. Such Investor is an "accredited
investor" within the meaning of Securities and Exchange Commission ("SEC") Rule
501 of Regulation D, as presently in effect.
3.6 Restricted Securities. Such Investor understands that the
Securities it is purchasing are characterized as "restricted securities" under
the federal securities laws inasmuch as they are being acquired from the Company
in a transaction not involving a public offering and that under such laws and
applicable regulations such Securities may be resold without registration under
the Act only in certain limited circumstances. In the absence of an effective
registration statement covering the Series A Preferred Stock and Series B
Preferred Stock (or the Common Stock issued on conversion thereof) or an
available exemption from registration under the Act, the Series A Preferred
Stock and Series B Preferred Stock (and any Common Stock issued on conversion
thereof) must be held indefinitely. In this connection, such Investor represents
that it is familiar with SEC Rule 144, as presently in effect, and understands
the resale limitations imposed thereby and by the Act, including without
limitation, the fact that the Investors may not be able to sell the Series A
Preferred Stock and Series B Preferred Stock (or the Common Stock issued on
conversion thereof) pursuant to Rule 144 unless current
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information about the Company is available to the public. Such information is
not now available and the Company has no present plans to make such information
available.
3.7 Further Limitations on Disposition. Without in any way
limiting the representations set forth above, such Investor further agrees not
to make any disposition of all or any portion of the Securities unless and until
the transferee has agreed in writing for the benefit of the Company to be bound
by this Section 3 and the Investor Rights Agreement, and:
(a) There is then in effect a registration statement under the
Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(b) (i) Such Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
requested by the Company, such Investor shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company that such disposition
will not require registration of such shares under the Act.
(c) Notwithstanding the provisions of subsections (a) and (b)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by an Investor that is a partnership to a partner of such
partnership or a retired partner of such partnership who retires after the date
hereof, or to the estate of any such partner or retired partner or the transfer
by gift, will or intestate succession of any partner to his or her spouse or to
the siblings, lineal descendants or ancestors of such partner or his or her
spouse, if the transferee agrees in writing to be subject to the terms hereof to
the same extent as if he or she were an original Investor hereunder.
3.8 Legends. It is understood that the certificates evidencing
the Securities may bear the following legend:
"These securities have not been registered under the
Securities Act of 1933, as amended. They may not be sold, offered for sale,
pledged or hypothecated in the absence of a registration statement in effect
with respect to the securities under such Act or an opinion of counsel
satisfactory to the Company that such registration is not required or unless
sold pursuant to Rule 144 of such Act."
3.9 Tax Advisors. Such Investor has reviewed with such
Investor's own tax advisors the federal, state and local tax consequences of
this investment, where applicable, and the transactions contemplated by this
Agreement. Each such Investor is relying solely on such advisors and not on any
statements or representations of the Company or any of its agents and
understands that each such Investor (and not the Company) shall be responsible
for such Investor's own tax liability that may arise as a result of this
investment or the transactions contemplated by this Agreement.
3.10 Eligibility to Hold Preferred Stock. Each Investor is not
aware of any fact which, upon consummation of the transactions contemplated
hereby, would: (a) make such Investor ineligible or unqualified to hold the
Series A Preferred Stock and/or Series B Preferred Stock under any material
statute, law, rule, regulation, instrument, order, judgment, writ, decree
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or contract, including but not limited to the Communications Act of 1934, as
amended, and the rules and regulations of the FCC (other than the FCC Approval
required in connection with the Second Closing, as contemplated by Section
1.2(b)); or (b) render the Company ineligible or unqualified to hold the
authorizations granted to it by the FCC or, in the Investors' reasonable
judgment, jeopardize the Company's ability to hold such authorizations as a
result of foreign ownership, criminal convictions or other ground for
forfeiture, cancellation, revocation under the rules and regulations of the FCC
or the imposition of a monetary forfeiture, provided that no Investor is
required by this Section to make any representations as to the citizenship,
character or proportionate stock ownership of any other Investor.
4. California Commissioner of Corporations.
4.1 Corporate Securities Law. THE SALE OF THE SECURITIES THAT
ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER
OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES
OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
5. Conditions of Investor's Obligations at Closings.
5.1 First Closing Conditions.
The obligations of each Investor under subsection 1.1(a) of
this Agreement are subject to the fulfillment on or before the First Closing of
each of the following conditions, the waiver of which shall not be effective
against any Investor who does not consent in writing thereto:
(a) Representations and Warranties. The representations and
warranties of the Company contained in Section 2 shall be true in all material
respects on and as of the First Closing with the same effect as though such
representations and warranties had been made on and as of the date of such
Closing.
(b) Performance. The Company shall have performed and complied
with all agreements, obligations and conditions contained in this Agreement that
are required to be performed or complied with by it on or before the First
Closing.
(c) Compliance Certificate. The President of the Company shall
deliver to each Investor at the First Closing a certificate stating that the
conditions specified in Sections 5.1(a) and 5.1(b) have been fulfilled.
(d) Qualifications. All authorizations, approvals or permits,
if any, of any governmental authority or regulatory body of the United States or
of any state that are required in
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connection with the lawful issuance and sale of the Securities pursuant to this
Agreement shall be duly obtained and effective as of the First Closing.
(e) Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at the First
Closing, and all documents incident thereto shall be reasonably satisfactory in
form and substance to Investors' special counsel, and they shall have received
all such counterpart original and certified or other copies of such documents as
they may reasonably request.
(f) Proprietary Information. Each employee of and consultant
(excluding outside counsel and auditors) to the Company shall have entered into
a Proprietary Information and Inventions Agreement in the form previously
provided to special counsel for the Investors.
(g) Bylaws. The Bylaws of the Company shall provide that the
Board of Directors of the Company shall consist of five (5) persons, which
number shall not be changed by an Amendment to the Certificate or the Bylaws
without the consent of sixty-three percent (63%) of the Series A Preferred Stock
and Series B Preferred Stock, voting together as a single class.
(h) Board of Directors. The Company shall have taken all
necessary corporate action such that immediately following the Closing, the
directors of the Company shall be ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ (collectively, the "Directors").
(i) Opinion of Company Counsel. Each Investor shall have
received from ▇▇▇▇▇▇▇▇▇▇ Hyatt & ▇▇▇▇▇▇, P.C., counsel for the Company, an
opinion, dated as of the First Closing, in the form attached as Exhibit D, from
▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇, P.C., counsel for the Company, an opinion dated as of
the First Closing, in the form attached as Exhibit E and from ▇▇▇▇▇▇, Wiltshire
& Grannis LLP, counsel for the Company, an opinion dated as of the First
Closing, in the form attached as Exhibit F.
(j) Investor Rights Agreement. The Company, DirectCom,
Televerde and TRW, Inc. shall have executed and delivered the Investor Rights
Agreement in substantially the form attached as Exhibit B.
(k) Voting Agreement. The Company, Televerde and DirectCom
shall have executed and delivered the Voting Agreement in substantially the form
attached as Exhibit G.
(l) Right of First Offer Agreement. The Company, Televerde and
DirectCom shall have executed and delivered the Right of First Offer Agreement
in substantially the form attached as Exhibit H.
(m) Televerde Voting Trust Agreement. The Company and
Televerde shall have executed and delivered the Televerde Voting Trust Agreement
in substantially the form attached as Exhibit I.
(n) Pay-Off of DirectCom Loans. The Investors shall have
received, in form and substance satisfactory to the Investors and special
counsel for the Investors, evidence of
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payment in full of all outstanding indebtedness owed to DirectCom by the
Company, Televerde and any affiliates of Televerde (other than ▇▇▇▇▇ ▇▇▇▇▇▇▇ and
@Contact, LLC) and the release of all security interests arising under that
certain Security Agreement dated August 21, 1998 among the Company, DirectCom,
Televerde and certain other parties (other than security interests with respect
to ▇▇▇▇▇ ▇▇▇▇▇▇▇ and @Contact, LLC pursuant to that certain First Amendment to
Security Agreement dated as of the date hereof).
(o) Televerde Stock Purchase. Televerde, ▇▇▇▇▇ ▇▇▇▇▇▇▇ and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ shall have executed and delivered that certain Stock Purchase
Agreement among Televerde, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and the investors
listed on Schedule A thereto, in substantially the form attached as Exhibit J.
(p) Indemnification Agreements. The Company and each of the
Directors shall have executed and delivered Indemnification Agreements, in
substantially the form attached as Exhibit K.
(q) Ladybug Buy-Out. The Company shall have purchased all of
the issued and outstanding capital stock of Ladybug Mountain PCS Corp., a
Colorado corporation ("Ladybug").
5.2 Second Closing Conditions. The obligations of each
Investor under subsection 1.1(b) of this Agreement are subject to the
fulfillment on or before the Second Closing of each of the following conditions,
the waiver of which shall not be effective against any Investor who does not
consent in writing thereto:
(a) Representations and Warranties. The representations and
warranties of the Company contained in Sections 2.1, 2.4, 2.5, 2.6, 2.7, 2.11,
2.17 and 2.20 shall be true in all material respects on and as of the Second
Closing with the same effect as though such representations and warranties had
been made on and as of the date of such Closing.
(b) Performance. The Company shall have performed and complied
with all agreements, obligations and conditions in all material respects
contained in this Agreement that are required to be performed or complied with
by it on or before the Second Closing.
(c) Compliance Certificate. The President of the Company shall
deliver to each Investor at the Second Closing a certificate stating that the
conditions specified in Sections 5.2(a) and 5.2(b) have been fulfilled.
(d) Qualifications. All authorizations, approvals or permits,
if any, of any governmental authority or regulatory body of the United States or
of any state that are required in connection with the lawful issuance and sale
of the Securities pursuant to this Agreement shall be duly obtained and
effective as of the Second Closing.
(e) Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at the Second
Closing, and all documents incident thereto shall be reasonably satisfactory in
form and substance to Investors' special counsel, and they shall have received
all such counterpart original and certified or other copies of such documents as
they may reasonably request.
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(f) Opinion of Company Counsel. Each Investor shall have
received from ▇▇▇▇▇▇▇▇▇▇, Hyatt & ▇▇▇▇▇▇, P.C., counsel for the Company, an
opinion, dated as of the Second Closing, in the form attached as Exhibit L, and
from ▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇, P.C., counsel for the Company, an opinion dated
as of the Second Closing, in the form attached as Exhibit M.
(g) FCC Approval. Each Investor shall have received evidence
of the Company's receipt of the FCC Approval (in form and substance reasonably
acceptable to the Investors and special counsel for the Investors).
(h) ▇▇▇▇▇▇▇ Voting Trust. The Company and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
shall have executed and delivered that certain Voting Trust Agreement in
substantially the form attached as Exhibit N (the "▇▇▇▇▇▇▇ Voting Trust").
6. Conditions of the Company's Obligations at Closings. The
obligations of the Company to each Investor under this Agreement are subject to
the fulfillment on or before each of the First Closing and the Second Closing,
as the case may be, of each of the following conditions by that Investor:
6.1 Representations and Warranties. The representations and
warranties of the Investor contained in Section 3 shall be true in all material
respects on and as of each of the First Closing and the Second Closing, as the
case may be, with the same effect as though such representations and warranties
had been made on and as of such Closing.
6.2 Payment of Purchase Price. The Investors shall have
delivered the aggregate purchase price specified in Schedule A hereto with
respect to the applicable Closing.
6.3 Qualifications. All authorizations, approvals or permits,
if any, of any governmental authority or regulatory body of the United States or
of any state that are required in connection with the lawful issuance and sale
of the Securities pursuant to this Agreement shall be duly obtained and
effective as of each of the First Closing and the Second Closing, as the case
may be.
6.4 Investor Rights Agreement. Each Investor shall have
executed and delivered the Investor Rights Agreement in substantially the form
attached as Exhibit B.
6.5 Voting Agreement. ▇▇▇▇▇▇▇ shall have executed and
delivered the Voting Agreement in substantially the form attached as Exhibit G.
6.6 Right of First Offer Agreement. ▇▇▇▇▇▇▇ shall have
executed and delivered the Right of First Offer Agreement in substantially the
form attached as Exhibit H.
6.7 Televerde Voting Trust Agreement. ▇▇▇▇▇▇▇ shall have
executed and delivered the Televerde Voting Trust Agreement in substantially the
form attached as Exhibit I.
6.8 ▇▇▇▇▇▇▇ Voting Trust. ▇▇▇▇▇▇▇ shall have executed and
delivered the ▇▇▇▇▇▇▇ Voting Trust in substantially the form attached as
Exhibit N.
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7. Indemnification. The Company shall indemnify, defend and
hold harmless ▇▇▇▇▇▇▇ and its affiliates, and each of their officers, directors,
partners, employees, agents, successors and assigns from and against any and all
costs, losses, liabilities (whether known or unknown, whether asserted, or
unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due), damages,
lawsuits, deficiencies, claims and expenses, including without limitation,
interest, penalties, costs, attorneys' fees and all amounts paid in
investigation, defense or settlement of any of the foregoing (collectively, the
"Damages"), incurred in connection with, arising out of, resulting from or
incident to any claim or action asserted by Ladybug Mountain PCS Corp.
("Ladybug"), or by any present or former shareholder or creditor of Ladybug,
against the Company and/or ▇▇▇▇▇▇▇. In addition, if the Company shall make any
payment or advance any consideration to a third party that is in any way
attributable to any liabilities, debts, losses or obligations of Ladybug, then
the Company shall simultaneously pay to ▇▇▇▇▇▇▇ an amount equal to the product
of the value of the payment or consideration advanced to the third party
multiplied by a fraction, the numerator of which is the number of Company shares
owned by ▇▇▇▇▇▇▇ and its affiliates on such date (including all shares of Common
Stock issued or issuable upon the exercise of any outstanding warrants or
options or other securities convertible into Common Stock), and the denominator
of which is the issued and outstanding shares of the Company's capital stock on
such date (including all shares of Common Stock issued or issuable upon the
exercise of any outstanding warrants or options or other securities convertible
into Common Stock).
8. Miscellaneous.
8.1 Survival. The warranties, representations and covenants of
the Company and Investors contained in or made pursuant to this Agreement shall
survive the execution and delivery of this Agreement and each of the First
Closing and the Second Closing and shall in no way be affected by any
investigation of the subject matter thereof made by or on behalf of the
Investors or the Company.
8.2 Successors and Assigns. Except as expressly set forth
herein, no party hereto shall assign any of its rights or obligations hereunder
without the prior written consent of each other party hereto, which consent
shall not be unreasonably withheld, conditioned or delayed. Subject to the
foregoing, 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
(including transferees of any Securities). 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.
8.3 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Colorado as applied to agreements among
Colorado residents entered into and to be performed entirely within Colorado.
8.4 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.
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8.5 Notices. All notices required or permitted hereunder shall
be in writing and shall be deemed effectively given: (i) upon personal delivery
to the party to be notified, (ii) when sent by confirmed telex or facsimile if
sent during normal business hours of the recipient, if not, then on the next
business day; (iii) five days after having been sent by registered or certified
mail, return receipt requested, postage prepaid; or (iv) one day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt. All communications shall be sent to the
address as set forth on the signature page hereof or at such other address as
such party may designate by ten days advance written notice to the other parties
hereto.
8.6 Finder's Fee. Each party represents that it neither is nor
will be obligated for any finders' fee or commission in connection with this
transaction. Each Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability or
asserted liability) for which such Investor or any of its officers, partners,
employees or representatives is responsible. The Company agrees to indemnify and
hold harmless each Investor from any liability for any commission or
compensation in the nature of a finders' fee (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.
8.7 Expenses. Irrespective of whether either the First Closing
or the Second Closing is effected, the Company shall pay all costs and expenses
that it incurs with respect to the negotiation, execution, delivery and
performance of this Agreement. If the First Closing is effected, the Company
shall, at the First Closing, reimburse the reasonable fees and out of pocket
expenses of special counsel for all Investors, which in the aggregate shall not
exceed $32,500. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the Investor Rights Agreement, the Voting
Agreement, the Televerde Voting Trust Agreement, the Right of First Offer
Agreement or the Certificate, the prevailing party shall be entitled to
reasonable attorney's fees, costs and necessary disbursements in addition to any
other relief to which such party may be entitled.
8.8 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
at least two-thirds of the Common Stock not previously sold to the public that
is issued or issuable upon conversion of the Series A Preferred Stock and the
Series B Preferred Stock sold to the Investors pursuant to this Agreement. Any
amendment or waiver effected in accordance with this paragraph shall be binding
upon each holder of any securities purchased under this Agreement at the time
outstanding (including securities into which such securities are convertible),
each future holder of all such securities and the Company.
8.9 Effect of Amendment or Waiver. Each Investor acknowledges
that by the operation of Section 8.8 hereof the holders of two-thirds of the
Common Stock not previously sold to the public that is issued or issuable upon
conversion of the Series A Preferred Stock and Series B Preferred Stock sold to
the Investors pursuant to this Agreement will have the power to diminish or
eliminate all rights of such Investor under this Agreement.
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8.10 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
8.11 Aggregation of Stock. All shares of the Series A
Preferred Stock, Series B Preferred Stock or Common Stock, issued upon
conversion thereof held or acquired by affiliated entities or persons shall be
aggregated together for the purpose of determining the availability of any
rights under this Agreement.
8.12 Entire Agreement. This Agreement and the documents
referred to herein constitute the entire agreement among the parties and no
party shall be liable or bound to any other party in any manner by any
warranties, representations or covenants except as specifically set forth herein
or therein.
8.13 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.14 Attorneys' Fees. In the event that any dispute among the
parties to this Agreement should result in litigation, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement, including without limitation, such reasonable fees
and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
KASTAR SATELLITE COMMUNICATIONS CORP.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
Its: Vice President
--------------------------------
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
INVESTORS:
KPCB Holdings, Inc., as nominee
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------------
Its: Senior Vice President
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------
Its: Partner
--------------------------------
Address: ▇▇▇ ▇▇▇▇ "▇" ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
[SIGNATURE PAGE TO SERIES A AND B PREFERRED STOCK PURCHASE AGREEMENT]
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UMB Bank, Trustee of the ▇▇▇▇▇▇▇,
Phleger & ▇▇▇▇▇▇▇▇ LLP Retirement
Savings Plan FBO ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
--------------------------------
Its: Assistant Vice President
--------------------------------
Address: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Address: ▇▇▇ ▇▇▇▇ "▇" ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
[SIGNATURE PAGE TO SERIES A AND B PREFERRED STOCK PURCHASE AGREEMENT]
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SCHEDULE A
Schedule of Investors
NUMBER OF SHARES AGGREGATE PURCHASE PRICE
---------------- ------------------------
FIRST CLOSING
KPCB Holdings, Inc. 6,671,250 $6,671,250*
Series A Shares
▇▇▇▇▇▇▇, Phleger & ▇▇▇▇▇▇▇▇ LLP 75,000 $75,000
Series A Shares
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ 100,000 $100,000
Series A Shares
UMB Bank, Trustee of the ▇▇▇▇▇▇▇, 75,000 $75,000
Phleger & ▇▇▇▇▇▇▇▇ LLP Retirement Series A Shares
Savings Plan FBO ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
SECOND CLOSING
KPCB Holdings, Inc. 835,625 $1,749,798.75
Series B Shares
*$1,671,250 of the purchase price to be paid by KPCB Holdings, Inc. to the
Company will be paid directly to Televerde Communications L.P. ("Televerde") in
satisfaction of amounts owed to Televerde by the Company in connection with the
purchase of the outstanding shares of Ladybug Mountain PCS Corp.