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EXHIBIT 10.35
PREFERRED NETWORKS, INC.
CLASS B SENIOR REDEEMABLE PREFERRED STOCK PURCHASE AGREEMENT
MARCH 17, 1998
This CLASS B SENIOR REDEEMABLE PREFERRED STOCK PURCHASE AGREEMENT
dated as of March 17, 1998 (together with the Exhibits and Schedules attached
hereto, the "AGREEMENT") is entered into by and among Preferred Networks, Inc.,
a Georgia corporation, with its current principal place of business at ▇▇▇
▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (the "COMPANY"), and the persons and entities
named in the Schedule of Investors designated as Exhibit A hereto (collectively
referred to as the "INVESTORS" and individually referred to as an "INVESTOR").
1. PURCHASE, SALE AND TERMS OF PURCHASED SHARES.
1.1. The Purchased Shares and Warrants. The Company has duly
authorized the issuance and sale to the Investors for an aggregate purchase
price of $8,000,004 of (a) an aggregate of 5,333,336 shares (the "PURCHASED
SHARES") of its authorized Class B Senior Redeemable Preferred Stock (the
"CLASS B PREFERRED STOCK") and (b) the issuance of common stock purchase
warrants (the "WARRANTS") to be in substantially the form of Exhibit B attached
hereto for the purchase of an aggregate of 5,400,000 shares of the Company's
common stock, no par value (the "COMMON STOCK"). The designations, rights and
preferences and other terms and conditions relating to the Class B Preferred
Stock are as set forth in Exhibit C attached hereto. The Purchased Shares and
the Warrants are collectively referred to herein as the "SECURITIES".
1.2 Purchase and Sale of the Purchased Shares and the Warrants.
The Company agrees to issue and sell to the Investors, and, subject to and in
reliance upon the representations, warranties, terms and conditions of this
Agreement, the Investors, severally but not jointly, agree to purchase that
number of Purchased Shares and Warrants for the purchase price (the "PURCHASE
PRICE") set forth opposite their respective names in Exhibit A hereto under the
respective headings "PURCHASED SHARES" "WARRANTS" and "AGGREGATE PURCHASE PRICE
FOR SECURITIES." The Purchase Price shall be paid in immediately available
funds.
1.3 Closing. The consummation of the purchase and sale (the
"CLOSING") shall occur concurrently herewith (the "CLOSING DATE"). At the
Closing, the Company shall deliver to each Investor a certificate for that
number of Purchased Shares and a Warrant exercisable into that number of shares
of Common Stock set forth opposite such Investor's name in Exhibit A hereto,
against delivery to the Company of the Purchase Price.
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1.4 Use of Proceeds. The Company agrees to use the proceeds from
the sale of the Purchased Shares and the Warrants for construction of the
Company's paging system networks and for general working capital purposes for
the Company and its Subsidiaries.
1.5 Covenants of the Company Prior to Closing. The Company shall
do all things necessary to fulfill the conditions to purchase set forth in
Sections 2 and 3 of this Agreement, including, without limitation, holding such
meetings of shareholders as are required to obtain the required shareholder
approvals and taking all actions necessary to comply with the applicable
federal and state securities laws in connection with obtaining such approvals.
2. CONDITIONS OF PURCHASE.
The obligations of each Investor under Article 1 of this Agreement are
subject to the compliance by the Company with its agreements herein contained
and to the fulfillment on or before the Closing of the following conditions:
2.1 Opinion of Counsel. The Investors shall have received from
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel for the Company, its favorable opinion,
dated the Closing Date, in form and substance reasonably acceptable to the
Investors and the Investors' counsel.
2.2 Authorization; Consents. The Board of Directors of the
Company and an independent committee of the Board of Directors shall have duly
adopted resolutions in form satisfactory to the Investors and shall have
received all necessary approvals of shareholders of the Company authorizing the
Company to consummate the transactions contemplated hereby in accordance with
the terms hereof, and the Investors shall have received a duly executed
certificate of the Secretary or an Assistant Secretary of the Company dated the
Closing Date setting forth a copy of such resolutions and such other matters as
may be requested by the Investors. The Company shall have obtained any and all
other consents, permits and waivers and made all filings necessary or
appropriate for consummation of the transactions contemplated by this
Agreement.
2.3 Articles of Incorporation; Certificate of Amendment. The
Company shall have duly filed with the Secretary of State of Georgia a
Certificate of Amendment in the form as set forth in Exhibit C attached hereto
amending the Company's Articles of Incorporation, which amendment shall have
become effective for all purposes on or before and shall remain effective
through the Closing Date.
2.4 Board of Directors. Effective as of the Closing, an
individual to be selected by the Investors shall have been elected to the
Company's Board of Directors as the representative of the Investors.
2.5 Expenses. The Company shall have paid the expenses set forth
in Section 18 hereof.
2.6 Secretary's Certificates; Good Standing Certificates. Each of
the Company and the Subsidiaries shall have delivered to the Investors true and
correct copies of its Articles of
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Incorporation, Bylaws and other charter documents, all as amended through the
Closing Date and each certified by its respective corporate Secretary or
Assistant Secretary.
2.7 SBIC Matters. The Company shall have duly completed and
executed for the Investors that are small business investment companies (each
individually, an "SBIC HOLDER"), Small Business Administration Forms 480 and
652 together with a written statement from the Company regarding its intended
use of proceeds from the financing.
2.8 Amendment to Registration Rights Agreement. The Registration
Rights Agreement dated as of June 21, 1995 (as heretofore amended) among the
Company, the Investors and the other parties thereto shall have been amended as
provided in the Second Amendment to Registration Rights Agreement in the form
attached hereto as Exhibit D (such Registration Rights Agreement, as heretofore
amended and as amended by such Second Amendment is hereinafter referred to as
the "REGISTRATION RIGHTS AGREEMENT").
2.9 All Proceedings Satisfactory. All corporate and other
proceedings taken prior to or at the Closing in connection with the
transactions contemplated by this Agreement, and all documents and evidences
incident thereto, shall be reasonably satisfactory in form and substance to the
Investors, and the Investors shall receive such copies thereof and other
materials (certified, if requested) as they may reasonably request in
connection therewith.
3. CONDITIONS OF SALE.
The Company's obligation to issue and sell the Purchased Shares and
the Warrants hereunder shall be subject to compliance by the Investors in all
material respects with their agreements herein contained and to the fulfillment
on or before and at the Closing of the following conditions:
3.1. Representations and Warranties. If the Closing occurs other
than on the date hereof, the representations and warranties of the Investors
contained in Section 6 of this Agreement shall be true and correct in all
material respects with the same force and effect as though such representations
and warranties had been made on and as of the Closing Date, and the Company
shall receive a certificate to such effect executed by a duly authorized
representative of each of the Investors.
3.2. Authorization; Consents. The Board of Directors of the
Company (including the independent board committee) shall have duly adopted
resolutions in form satisfactory to the Investors and shall have received all
necessary approvals of shareholders of the Company authorizing the Company to
consummate the transactions contemplated hereby in accordance with the terms
hereof, and the Investors shall have received a duly executed certificate of
the Secretary or an Assistant Secretary of the Company dated the Closing Date
setting forth a copy of such resolutions and such other matters as may be
requested by the Investors. The Company shall have obtained any and all other
consents, permits and waivers and made all filings necessary or appropriate for
consummation of the transactions contemplated by this Agreement.
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4. REPRESENTATIONS AND WARRANTIES.
As a material inducement to the Investors to enter into this Agreement
and to purchase the Purchased Shares and Warrants as contemplated hereby the
Company represents and warrants to the Investors as follows:
4.1. Organization, Corporate Power and Authority, etc. Each of the
Company and the Subsidiaries (as defined below) is a corporation or limited
liability company duly organized, validly existing and in good standing under
the laws of its state of incorporation and has full corporate power and
authority to own and hold its properties and to carry on its business as
presently conducted. Each of the Company and the Subsidiaries is duly licensed
or qualified and in good standing as a foreign corporation or limited liability
company authorized to do business in all jurisdictions in which the character
of property owned or leased, or the nature of the activities conducted by it,
makes such licensing or qualification necessary, except where the failure to so
qualify would not have a Material Adverse Effect. The attached Schedule 4.1
contains a list of all entities of which the Company owns or controls, directly
or indirectly through one or more other Persons, a majority of the voting stock
or limited liability company interests (each a "SUBSIDIARY" and collectively,
"SUBSIDIARIES"). Except for such Subsidiaries, neither the Company nor any
Subsidiary owns of record or beneficially any shares of capital stock or
securities convertible into capital stock of, or any other proprietary interest
in, any Person.
4.2 Validity and Enforceability. The Company has all necessary
corporate power and authority, and has taken all corporate action required to
execute, deliver and perform this Agreement, to issue, sell and deliver the
Purchased Shares and the Warrants and to issue the Common Stock issuable upon
exercise of the Warrants. This Agreement and all other documents and
instruments executed by the Company pursuant hereto, when delivered, are and
will be duly authorized, valid and binding obligations of the Company
enforceable against the Company in accordance with their respective terms,
subject to laws of general application relating to bankruptcy, insolvency and
the relief of debtors and equitable principles limiting rights to specific
performance. The sale of the Preferred Shares and the Warrants by the Company
in accordance herewith is not subject to preemptive or other preferential
rights or similar statutory or contract rights that have not heretofore been
waived and does not give rise to any "anti-dilution" provisions either arising
pursuant to any agreement or instrument to which the Company is a party or
which are otherwise binding on the Company. Without limitation of the
foregoing, the Company and the Investors who hold Class A Warrants (as such
term is defined in Exhibit B) hereby represent and warrant that the "Exercise
Price" for purposes of the Class A Warrants is as of the date hereof $1.50 per
share and shall not be adjusted by reason of the issuance of the Securities as
contemplated hereby. Upon the issuance, sale and delivery of the Securities in
accordance with the terms hereof, the Securities will be validly issued, fully
paid and non-assessable and will be free and clear of all liens, security
interests, charges, restrictions, claims and Encumbrances of any nature
whatsoever (each a "LIEN"), subject to applicable restrictions on transfer
under Federal and state securities laws and any Liens created by the Investors.
4.3 Capitalization; Status of Capital Stock. (a) The Company has
a total authorized capitalization consisting of 30,000,000 shares of Preferred
Stock (of which 13,500,000 shares are
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designated as Class A Redeemable Preferred Stock and 5,500,000 shares are
designated as Class B Senior Redeemable Preferred Stock), and 100,000,000
shares of Common Stock. All issued and outstanding shares of capital stock of
the Company and each Subsidiary have been duly authorized and validly issued,
are fully paid and non-assessable, and were issued in compliance with all
applicable state and Federal securities laws.
(b) The Preferred Shares and the Warrants which are being issued
hereunder have been duly and validly authorized and, when issued and delivered
in accordance with the terms hereof for the consideration provided herein, will
be validly issued, fully paid and nonassessable and will not be subject to any
Lien. On or prior to Closing, the Company will have authorized and reserved,
and covenants to continue to reserve, a sufficient number of shares of Common
Stock for issuance upon the exercise of the Warrants. The shares of Common
Stock that will be issued upon exercise of the Warrants will be validly issued,
fully paid and nonassessable and will not be subject to any Lien, subject to
applicable restrictions on transfer under Federal and state securities laws and
any Liens created by the Investors. No further approval or authorization of the
shareholders or the directors of the Company or any successor or other Person
is or will be required for the issuance of the Common Stock upon exercise of
the Warrants.
(c) Except as set forth on Schedule 4.3: (a) neither the Company
nor any Subsidiary has any subscription, warrant, option, convertible security
or other options or rights (contingent or otherwise) to purchase shares of
capital stock, or securities convertible into shares of capital stock,
authorized, issued or outstanding, nor is the Company or any Subsidiary
obligated in any manner to issue shares of its capital stock or securities
convertible into or evidencing any right to acquire shares of its capital
stock, or to distribute to holders of any of its capital stock any evidence of
indebtedness or assets; (b) no Person has any preemptive right, right of first
refusal or similar right to acquire additional shares of capital stock of the
Company or any Subsidiary in connection with the sale and purchase of the
Securities pursuant to this Agreement or otherwise; (c) there are no
restrictions on the transfer of the shares of capital stock of the Company,
other than (i) those imposed by relevant state and Federal securities laws,
(ii) as set forth in Section 6.5 hereto; and (iii) certain restrictions on
transfers of shares issued in connection with certain acquisitions made by the
Company, (d) no Person has any right to cause the Company to effect the
registration under the Securities Act of any shares of capital stock or any
other securities (including debt securities) of the Company other than as set
forth in the Registration Rights Agreement and the registration rights
agreements executed by the Company in connection with the acquisitions of Big
Apple Paging Corp. and Mercury Paging & Communications, Inc.; (e) neither the
Company nor any Subsidiary has any obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any of its equity securities or any
interests therein, or to pay any dividend or make any other distribution in
respect thereto; and (f) there are no voting trusts, shareholders' agreements,
or proxies relating to any securities of the Company or any Subsidiary. A
complete and correct schedule of the number of shares of issued and outstanding
capital stock and of any subscription, warrant, option, convertible security or
other options or rights (contingent or otherwise) to purchase shares of capital
stock, or securities convertible into shares of capital stock of the Company
and each Subsidiary immediately prior to the Closing is set forth in Schedule
4.3.
4.4 Governmental and Other Consents, etc. No authorization,
consent, approval, license, exemption of or filing or registration with any
court or governmental department,
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commission, board, bureau, agency or instrumentality, domestic or foreign, or
any third party, the absence of which would have a Material Adverse Effect is
or will be necessary for, or in connection with, the offer, issuance, sale,
execution or delivery by the Company, or for the performance by it of its
obligations, under this Agreement except such, if any, as may be required under
any applicable state securities laws that have been complied with on or prior
to the Closing Date.
4.5 Compliance with Securities Laws. (a) Subject to the accuracy
of the representations of the Investors set forth in Section 6 below, the
Company has complied and will comply with all applicable United States Federal
and state securities laws in connection with the offer, issuance and sale of
the Securities in compliance with Section 1.5 of this Agreement. The Company
has not, either directly or through any agent, offered any securities to, or
otherwise approached, negotiated or communicated in respect of any securities
with, any Person so as thereby to require that the offer or sale of the
Securities be registered pursuant to the provisions of Section 5 of the
Securities Act. Subject to the accuracy of the representations of the Investors
set forth in Section 6 below, the offer, sale and issuance of the Purchased
Shares and the Warrants (and of the Common Stock issuable upon the exercise of
the Warrants) in conformity with the terms of this Agreement are exempt from
the registration requirements of Section 5 of the Securities Act and all
applicable state securities laws.
(b) The Company's Annual Reports on Form 10-K for the fiscal year
ended December 31, 1996, and all other reports, registration statements, proxy
statements or information statements filed or to be filed by it or any of its
Subsidiaries subsequent to March 1, 1996 under the Securities Act or the
Exchange Act, in the form filed with the Commission (collectively, "SEC
DOCUMENTS"), as of the date filed, (1) complied as to form with the applicable
requirements under the Securities Act or the Exchange Act, as the case may be,
and (2) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and each of the balance sheets contained in or
incorporated by reference into any of the Company's SEC Documents (including
the related notes and schedules thereto) fairly presents the financial position
of the Company and its Subsidiaries as of its date, and each of the statements
of income and changes in shareholders' equity and cash flows or equivalent
statements in the Company's SEC Documents (including any related notes and
schedules thereto) fairly presents the results of operations, changes in
shareholders' equity and changes in cash flows, as the case may be, of the
Company and its Subsidiaries for the periods to which they relate, in each
case, in compliance with applicable accounting requirements and with the
published rules of the SEC with respect thereto and in accordance with
generally accepted accounting principles consistently applied during the
periods involved, except, in each case, as may be noted therein, subject to
normal year-end audit adjustments (which are not expected to be material) in
the case of unaudited statements.
(c) Since December 31, 1997, the Company and its Subsidiaries
have not incurred any material liability other than in the ordinary course of
business consistent with past practice.
(d) Since December 31, 1997, (1) the Company and its Subsidiaries
have conducted their respective businesses in the ordinary and usual course
consistent with past practice (excluding the incurrence of expenses related to
this Agreement and the transactions
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contemplated hereby) and (2) no event has occurred or fact or circumstance
arisen that, individually or taken together with all other facts, circumstances
and events has had or is reasonably likely to have a Material Adverse Effect.
4.6 Financial Statements. The Company's audited financial
statements as of December 31, 1996 (the "AUDITED FINANCIAL STATEMENTS") and
unaudited financial statements as of September 30, 1997 (such unaudited
financial statements, together with the Audited Financial Statements being
referred to collectively as the "FINANCIAL STATEMENTS") have been previously
provided to the Investors. The Financial Statements present fairly the
financial position of the Company as at the dates thereof and for the periods
covered thereby and have been prepared in accordance with generally accepted
accounting principles consistently applied (except in the case of unaudited
financial statements for footnotes otherwise required by generally accepted
accounting principles and normal year adjustments that are not material in
amount). Neither the Company nor any Subsidiary has any liability, contingent
or otherwise, not disclosed in the Financial Statements or in the notes
thereto, that could together with all such other liabilities, have a Material
Adverse Effect. Since December 31, 1996, (i) there has been no material adverse
change in the business, assets or condition, financial or otherwise, or
operations of the Company or any Subsidiary; (ii) neither the business,
condition, financial or otherwise, or operations of the Company or any
Subsidiary nor any of its properties or assets has been materially adversely
affected by any event or occurrence of any type, whether or not insured
against; (iii) except as set forth on Schedule 4.6 hereto or in the Company's
filings under the Exchange Act, and except as entered into in the ordinary
course of business, neither the Company nor any Subsidiary has incurred any
liabilities or obligations in excess of $50,000; and (iv) neither the Company
nor any Subsidiary has entered into any transaction that would have a Material
Adverse Effect.
4.7. Taxes. Each of the Company and the Subsidiaries has
accurately prepared and timely filed all Federal, state and other tax returns
that are required to be filed by it and has paid or made provision for the
payment of all taxes that have become due pursuant to such returns and all
other taxes, assessments and governmental charges that have become due and
payable, including, without limitation, all taxes that the Company or any
Subsidiary is obligated to withhold from amounts owing to employees, creditors
and third parties. There are no tax Liens upon any asset of the Company or any
Subsidiary except statutory liens arising by operation of law for taxes not yet
due. Except as set forth on Schedule 4.7, neither the Company nor any of its
shareholders has ever filed (a) an election pursuant to Section 1362 of the
Internal Revenue Code of 1986, as amended (the "CODE"), that the Company be
taxed as an S corporation or (b) a consent pursuant to Section 341(f) of the
Code, relating to collapsible corporations.
4.8. Litigation. Except as set forth on Schedule 4.8, there is no
action, suit, proceeding or investigation pending or, to the Company's
knowledge, threatened against or affecting the Company or any Subsidiary that
might result, either in any case or in the aggregate, in any material adverse
change in the business, assets or condition, financial or otherwise, or
operations of the Company or any Subsidiary, or that might call into question
the validity of, or hinder the enforceability or performance of, this Agreement
or the Securities, or any action taken or to be taken pursuant hereto or
thereto; nor, to the Company's knowledge, has there occurred any event nor does
there exist any condition making likely the institution of any such litigation,
proceeding or investigation. Neither the Company nor any Subsidiary is in
default with respect to any order,
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writ, injunction, decree, ruling or decision of any court, commission, board or
other government agency by which the Company or any Subsidiary is bound that
might result, either in any case or in the aggregate, in any material adverse
change in the Company's business, assets or condition, financial or otherwise,
or operations.
4.9. ERISA. Except as described on Schedule 4.9, neither the
Company nor any Subsidiary maintains or operates any Employee Benefit Plan or
has any such Employee Benefit Plan been maintained or operated during the past
three years. Neither the Company nor any Subsidiary maintains or contributes to
any Guaranteed Pension Plan or Multiemployer Plan. With respect to each
Employee Benefit Plan listed on Schedule 4.9, to the extent applicable, the
following is true:
(a) Each such Employee Benefit Plan has been maintained and
operated in all material respects in compliance with its terms and with all
applicable provisions of ERISA, the Code and all applicable regulations,
rulings and other authority issued thereunder;
(b) All contributions required by law to have been made under
each such Employee Benefit Plan (without regard to any waivers granted under
Section 412 of the Code) to any fund or trust established thereunder or in
connection therewith have been made by the due date thereof;
(c) Each such Employee Benefit Plan intended to qualify under
Section 401(a) of the Code is the subject of a favorable unrevoked
determination letter issued by the Internal Revenue Service as to its qualified
status under the Code, which determination letter may still be relied upon as
to such tax qualified status, and no circumstances have occurred that would
adversely affect qualified status of any such Employee Benefit Plan;
(d) No Employee Benefit Plan is subject to Title IV of ERISA;
(e) None of such Employee Benefit Plans that are "employee
welfare benefit plans" as defined in Section 3(1) of ERISA provides for
continuing benefits or coverage for any participant or beneficiary of a
participant after such participant's termination of employment, except as
required by applicable law, including section 4980B of the Code or Section 601
of ERISA; and
(f) Neither the Company nor any trade or business (whether or not
incorporated) under common control with the Company within the meaning of
Section 4001 of ERISA has, or at any time has had, any obligation to contribute
to any "multiemployer plan" as defined in Section 3(37) of ERISA.
4.10. No Violations. The execution, delivery and performance by the
Company of this Agreement and any documents or instruments delivered, executed
and performed in connection therewith, the consummation of the transactions
contemplated hereby (including the issuance, sale and delivery of the Purchased
Shares and the Warrants and upon exercise of the Warrants, the issuance and
delivery of the Common Stock issuable in connection therewith), and compliance
with the provisions hereof, will not violate any provision of law, the Articles
of Incorporation or Bylaws, as amended, of the Company or violate any order of
any court or other
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agency of government or indenture, agreement or other instrument to which the
Company or any Subsidiary is bound, or conflict with, result in the breach of
or constitute (with due notice or lapse of time or both) a default under, any
such indenture, agreement or other instrument, or result in the creation or
imposition of any Lien upon any of the properties or assets of the Company or
any Subsidiary.
4.11. Other Agreements. Neither the Company nor any Subsidiary is a
party to or bound by any agreement, contract or commitment or subject to any
charter, bylaw or other corporate restriction that materially adversely affects
its business, assets or condition, financial or otherwise, or operations.
Neither the Company nor any Subsidiary is in default under any provision of its
Articles of Incorporation, Bylaws or other charter documents, each as amended
and in effect on the date hereof.
4.12. Other Agreements of Officers, etc. No officer or Key Employee
of the Company is a party to or bound by any agreement, contract or commitment,
or subject to any restriction that materially and adversely affects, or that in
the future has a reasonable possibility of materially and adversely affecting,
the business, assets or condition, financial or otherwise, or operations of the
Company or the right of any such Person to participate in the affairs of the
Company. To the Company's knowledge, no Key Employee has any present intention
of terminating his employment with the Company, and the Company does not have
any present intention of terminating any such employment. This Section 4.12
shall not be deemed to constitute an employment contract nor to grant any right
in favor of any Person other than the Investors.
4.13. Transactions with Affiliates. Except as set forth on Schedule
4.13 or in the Company's Annual Report on Form 10-K for the year ended December
31, 1996, there are no loans, advances, leases or other continuing transactions
between the Company and any shareholder owning more than 1% of the capital
stock of the Company or any director or officer of the Company or any
Subsidiary, or any member of such officer's, director's or shareholder's
immediate family, or any Person controlled by any such officer, director or
shareholder or member of such officer's, director's or shareholder's immediate
family.
4.14. Compliance with Law. Except with regard to environmental
matters, securities matters, and FCC matters covered in other Sections of this
Agreement, each of the Company and the Subsidiaries is currently in compliance
in all respects with all Federal and state laws, rules, regulations and orders
applicable to its business, operations, properties, assets, products and
services, and has obtained and possesses all necessary certificates of need,
permits, licenses and other authorizations required to conduct its business as
presently conducted except where a failure so to comply to or to obtain and
possess the same would not have a Material Adverse Effect. There is no Federal
or state governmental inquiry, investigation, lawsuit or proceeding pending or,
to the Company's knowledge, threatened against or affecting the Company or any
Key Employee, the effect of which may lead to or result in the suspension or
revocation of any governmental license or approval held by the Company, and, to
the Company's knowledge, there is no basis for any of the foregoing.
4.15. Material Contracts. Except as set forth on Schedule 4.15, the
Company, each Subsidiary and, to the Company's and each Subsidiary's knowledge,
each other party thereto,
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have in all material respects performed all the obligations required to be
performed by them to date, have not received any notice of default, and are not
in default, under any lease, agreement or contract now in effect to which the
Company or any Subsidiary is a party or by which the Company, any Subsidiary or
their respective property may be bound, which defaults would have singularly or
in the aggregate a Material Adverse Effect. Neither the Company nor any
Subsidiary has any present expectation or intention of not fully performing all
of its obligations under each such lease, contract or other agreement to which
it is a party or by which it is bound, and neither any Company nor any
Subsidiary has any knowledge of any breach or anticipated breach by the other
party to any contract or commitment to which the Company or any Subsidiary is a
party.
4.16. Title to Assets. (a) Each of the Company and the Subsidiaries
has good and marketable title to, and is the owner of, or holds a valid
leasehold interest in or license rights to, all properties and assets necessary
to conduct its business as presently conducted. There are no Liens on or
outstanding against any of the Company's or any Subsidiary's properties and
assets except as set forth on Schedule 4.16, and except for statutory Liens,
such as mechanic's, materialman's, warehouseman's, carrier's or other like
Liens, incurred in good faith in the ordinary course of business, provided that
the underlying obligations relating to such Liens are paid in the ordinary
course of business, or are being contested diligently and in good faith by
appropriate proceedings and as to which the Company has set aside adequate
reserves on its books. All material leases pursuant to which the Company or any
Subsidiary leases personal property are in good standing and are valid and
effective in accordance with their respective terms and there exists no default
or other occurrence or condition that could result in a default or termination
thereof, except for default or other occurrence that would not have a Material
Adverse Effect.
(b) The properties and assets owned, leased by or licensed to the
Company and each Subsidiary, if applicable, and reflected in the Financial
Statements constitute all of the real and personal properties, tangible and
intangible, that are necessary, used or useful in the conduct of its business
in the manner and to the extent presently conducted or as presently
contemplated to be conducted. No other material real or personal properties are
required for the conduct of the business of the Company or any Subsidiary as
presently conducted. All such tangible properties and assets are in good
working order and repair, ordinary wear and tear excepted.
4.17. Real Property. Neither the Company nor any Subsidiary owns
any real property. The Company and each Subsidiary has the right to quiet
enjoyment of all real property in which it holds a leasehold interest for the
full term thereof, including all renewal terms, of the lease or similar
agreement relating thereto.
4.18. Environmental Compliance; No Liability. (a) The Company and
each Subsidiary has operated its business and each parcel of real property
owned or leased by it (the "REAL PROPERTY") in compliance in all material
respects with all applicable Environmental Laws. No notice of any violation,
citation, summons or order has been received, no complaint has been filed, no
penalty has been assessed and, to the knowledge of the Company and each
Subsidiary, no investigation or review is pending or has been threatened by any
governmental entity or other person that could require the Company or any
Subsidiary to expend money, or abide by conditions contained in consent
decrees, settlement agreements or orders, in each case with
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11
regard to (i) any violation or alleged violation of any Environmental Law, or
(ii) any failure or alleged failure to comply with any Environmental Permit, or
(iii) any use, possession, generation, treatment, storage, recycling,
transportation, disposal or release of a Regulated Material.
(b) Compliance with Permits. There are no environmental permits,
certificates, licenses, approvals, registrations, and authorizations required
for the operation of its business and the Real Property (the "ENVIRONMENTAL
PERMITS").
(c) Treatment; CERCLIS. Neither the Company nor any Subsidiary
has treated, stored, recycled or disposed of any Regulated Material on any real
property, and, to the Company's knowledge, no other Person has treated, stored,
recycled or disposed of any Regulated Material on any part of the Real Property
except in material compliance with applicable Environmental Laws. There has
been no unremedied release of, and there is not present any Regulated Material
at, on or under any Real Property except such Regulated Material as is used or
stored at, on, or under any Real Property in material compliance with
Environmental Laws. None of the Real Property is listed or, to the knowledge of
the Company, proposed for listing on the National Priorities List pursuant to
Superfund, CERCLIS or any state or local list of sites requiring investigation
or cleanup.
(d) Notices; Existing Claims; Certain Regulated Materials;
Storage Tanks. Neither the Company nor any Subsidiary has received any request
for information, notice of claim, demand or other notification that it is or
may be potentially responsible with respect to any investigation, abatement or
cleanup of any threatened or actual release of any Regulated Material. Neither
the Company nor any Subsidiary is required to place any notice or restriction
relating to the presence of any Regulated Material at any Real Property or in
any deed to any Real Property. There has been no past, and there is no pending
or contemplated, claim by the Company or any Subsidiary under any Environmental
Law based on actions of others that may have impacted on the Real Property, and
the Company has not entered into any agreement with any Person regarding any
claim pursuant to any Environmental Law. All underground storage tanks located
on the Real Property are disclosed on Schedule 4.18, and all such tanks and
associated piping are in sound condition and are not leaking and have not
leaked. All underground storage tanks are in material compliance with all
Environmental Laws and if no longer in use or being operated have been closed
or removed materially in accordance with all Environmental Laws.
(e) PCBs; Asbestos, etc. To the knowledge of the Company, no
polychlorinated biphenyls ("PCBs"), asbestos containing material ("ACM's"),
radon, or urea formaldehyde are present at any property now owned or leased by
the Company or any Subsidiary.
(f) Environmental Liens. There are no environmental Liens on any
of the assets of the Company or any Subsidiary or Real Property and no action
by a governmental entity has been taken or is in the process, or to the
knowledge of the Company, pending or threatened that could subject any of such
assets or Real Property to any such Liens.
4.19. Foreign Investment in Real Property Tax Act. The Company is
not now and has never been a "United States real property holding corporation"
for purposes of Section 897(c)(2) of the Code and the Treasury Regulations
thereunder.
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12
4.20. FCC Matters. (a) The FCC has issued to the Company, and the
Company holds all material licenses (the "FCC LICENSES") necessary to conduct
its business as such business is currently conducted and proposed to be
conducted, and such FCC Licenses are valid and in full force and effect. For
the two-year period prior to the date hereof, the Company has filed all
statements, reports and information required by the FCC and duly performed in
all respects all of its obligations under such FCC Licenses and the
Communications Act.
(b) The Company is in compliance in all material respects with
the Communications Act governing the ownership and operation of the paging
systems owned, permitted, licensed, being constructed and/or operated pursuant
to the FCC Licenses. There is not now pending or, to the Company's or any
Subsidiary's knowledge, threatened any litigation, proceeding or investigation
before the FCC that might result in a termination of any of the FCC Licenses.
The Company has constructed all of its material facilities operating under the
FCC Licenses within the construction period provided under the Communications
Act.
(c) No event has occurred (including any notice issued by the
FCC), and no agreement has been entered into by the Company (including this
Agreement), that now or after notice or lapse of time or both, might reasonably
be expected to permit cancellation, revocation or termination of the FCC
Licenses, or would result in any FCC action that could reasonably be expected
to have a Material Adverse Effect, and there is not, to the Company's
knowledge, pending or threatened any action or matter that would suggest that
the FCC Licenses will not be renewed in the ordinary course.
(d) There is not pending any application, petition, objection or
other pleading filed with the FCC or any federal entity with jurisdiction to
review administrative orders of the FCC, that questions the validity of or
contests any of the FCC Licenses.
(e) No consents, approvals or actions by the FCC are required to
permit the consummation of the transactions contemplated hereby, and such
consummation will not result in a violation of the Communications Act and will
not cause any forfeiture or impairment of the FCC Licenses.
4.21. Disclosure. Neither this Agreement nor any certificate, list,
exhibit, letter or other written statement furnished by the Company to the
Investors or their special counsel in connection herewith (including, without
limitation, in response to any request for information made by any Investor or
its agent to the Company) contains any untrue statement of a material fact or
omits to state any material fact necessary in order to make the statements
contained herein or therein not misleading in light of the circumstances under
which they are or were made. There exists no fact or circumstance that
materially and adversely affects the business, assets or condition, financial
or otherwise, or operations of the Company, that has not been specifically set
forth in financial statements of the Company heretofore delivered to the
Investors or set forth in this Agreement or the Exhibits and Schedules hereto
or a certificate furnished to the Investors by the Company at the Closing.
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13
4.22. Margin Stock. Neither the Company nor any Subsidiary owns or
has any present intention of acquiring any "margin stock" within the meaning of
Regulation U (12 CFR Part 221), of the Board of Governors of the Federal
Reserve System.
4.23 Investment Company. The Company is not an "investment
company", or a company "controlled" by an "investment company", as such terms
are defined in the Investment Company Act of 1940, as amended.
4.24 Boycott. Neither the Company nor any Subsidiary has at any
time has participated in, and is not currently participating in, an anti-Israel
boycott within the scope of Chapter 7 of Part 2 of Division 4 of Title 2 of the
California Government Code.
4.25 Registration Rights. (a) Except for (i) the Registration
Rights Agreement, (ii) the Registration Rights Agreement dated as of September
13, 1996 between the Company and Big Apple Paging Corporation (the "BIG APPLE
AGREEMENT") and (iii) the Registration Rights Agreement dated as of January 31,
1997 among the Company and stockholders of Mercury Paging and Communications,
Inc. (the "MERCURY AGREEMENT"), the Company is not party to any agreement or
otherwise obligated to register under the Securities Act or include in any
underwritten offering of its securities any shares of its capital stock,
whether now outstanding or subject to issuance upon the exercise of any warrant
or option for shares of the Company's capital stock.
(b) The initial public offering of the Company's Common Stock on
March 1, 1996 constituted a "Qualified Public Offering" for all purposes of the
Registration Rights Agreement and the Stockholders Agreement dated as of June
21, 1995 among the Company and certain of its shareholders at such time, as
heretofore amended (the "STOCKHOLDERS AGREEMENT").
(c) The rights of the "Secondary Holders" (as defined in the
Registration Rights Agreement) to "Demand Registrations" (as defined in the
Registration Rights Agreement) have terminated in accordance with Section 1(g)
of the Registration Rights Agreement (as amended by the Amendment thereto dated
as of June 3, 1997); provided, however, that the following Secondary Holders
continue to have as of the date hereof rights to "Secondary Demand
Registrations" (as defined in the Registration Rights Agreement) in accordance
with the terms of the Registration Rights Agreement: Advanced Technology
Development Fund II, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
▇▇▇▇▇ Communications, Inc. and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
(d) The Company covenants not to effect any registration of its
securities requested under either the Big Apple Agreement or the Mercury
Agreement if, in the opinion of the Company's counsel, such registration is not
required for the immediate transfer of all of the shares subject to such
agreements, as the case may be, pursuant to Rule 144 or other available
exemption from registration under the Securities Act.
4.26 Investments in United States Real Property Interest. The
Company's capital stock does not constitute a United States real property
interest as that term is defined in Section 897(c)(1)(A)(ii) of the Internal
Revenue Code of 1986, as amended (the "CODE"). The preceding representation is
based on a determination by the Company that the Company is not
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14
and has not been a United States real property holding corporation (as that
term is defined in Section 897(c)(2) of the Code) during the five (5) year
period preceding the date of this Agreement. The Company shall use its best
efforts to ensure that it does not at any time in the future become a United
States real property holding corporation ("USRPHC") and from time to time, upon
request of any Investor that is acquiring more than $100,000 of Securities
hereunder, shall make a determination as to its status as a USRPHC. If at any
time in the future the Company should become a United States real property
holding corporation, the Company shall, as promptly as possible, notify each
Investor of such change in status.
5. COVENANTS OF THE COMPANY.
Until the such time as no Purchased Shares are outstanding, the
Company will comply with the following covenants:
5.1 Board of Directors Meetings. (a) The Company shall use its
best efforts to fix the number of directors of the Company at not more than
nine (9) and to cause one (1) nominee of the Investors to be recommended to the
shareholders for election as a director at all meetings of shareholders, or
consents in lieu thereof, for such purpose. The Company will reimburse all
direct out-of-pocket expenses reasonably incurred by such director of the
Company in attending meetings of the Board of Directors and all other
out-of-pocket expenses reasonably incurred by such director in connection with
such director's serving on the Board of Directors and fulfilling such
director's responsibilities as a director of the Company. The Company shall
ensure that meetings of its full Board of Directors are held at least four
times each year and at intervals of not more than four (4) months. The
Company's Articles of Incorporation and Bylaws shall provide for
indemnification and exculpation of directors from personal liability, to the
fullest extent permitted under applicable state law. The Company shall at all
times maintain, at the Company's expense, directors and officers liability
insurance for its directors and officers.
(b) Board Visitation and Materials. The Company shall deliver to
each Investor investing at least $1,500,000 pursuant to this Agreement (each a
"PRINCIPAL HOLDER") a copy of all materials distributed at or prior to all
meetings of the Board of Directors of the Company or any committee thereof,
(which shall include the minutes of the previous meeting) and shall thereafter
promptly deliver to each Principal Holder any revised minutes as are adopted at
such or any subsequent meeting. The Company shall (a) permit a representative
of each Principal Holder to attend all meetings of the Company's Board of
Directors, and of the Company's shareholders, (b) provide to such designees not
less than 5 calendar days' prior actual notice of all meetings (or as required
by the bylaws, if the meeting is an emergency meeting and the matters to be
discussed or voted on would not in any way adversely affect the Investor or its
interest or rights) of the Company's Board of Directors and of the Company's
shareholders and an agenda for the meetings and other materials related
thereto, (c) permit each such designee to attend such meetings as a non-voting
observer, (d) provide to each such designee a copy of all materials distributed
at such meetings and (e) reimburse all direct out-of-pocket expenses reasonably
incurred by such designee in attending such meetings.
5.2 Consultations and Advice. The Company shall allow each
Investor purchasing more than $100,000 of Securities hereunder to consult with
and advise management of the Company on significant business issues, including
management's proposed annual operating
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15
plans, and cause its management to meet with each such Investor regularly
during each year at the Company's facilities at mutually agreeable times for
such consultation and advice and to review progress in achieving said plans.
5.3. Right of First Offer on Company Sales. Each Investor shall
have a right of first offer with respect to future sales in a private placement
by the Company of its capital stock or securities convertible into or
exercisable or exchangeable for shares of such capital stock. Each time the
Company proposes to offer any such securities in a private offering, the
Company shall first offer such securities to the Investors and the holders of
Class A Redeemable Preferred Stock, who shall each be entitled to purchase its
pro rata share (on a fully-diluted basis as measured by their respective
holdings of Common Stock and Common Stock issuable upon the exercise of
Warrants and Class A Warrants) of such securities, before it offers to sell
such securities to other Persons. This Section 5.3 shall not apply to stock
issued in connection with acquisitions.
5.4. Maintenance of Existence; Compliance with Law. The Company
shall and shall cause each Subsidiary to keep in full force and effect its
corporate existence, except where the failure to do so will not have a Material
Adverse Effect, and will comply in all material respects with all applicable
laws and regulations in the conduct of its business except those being
contested in good faith by appropriate procedures and will file with the
Commission in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act.
5.5 Rule 144 Requirements. The Company shall comply with the
requirements of Rule 144(c) under the Securities Act with respect to current
public information about the Company and will furnish to any holder of
Securities upon request such reports and documents of the Company as such
holder may reasonable request to avail itself of any similar rule or regulation
of the Commission allowing it to sell any such securities without registration.
5.6 Insurance. The Company shall keep the insurable properties
owned by it and by the Subsidiaries insured by financially sound and reputable
insurers against the perils of liability, casualty, fire and extended coverage
in amounts of coverage at least equal to those customarily maintained by
companies in the same or a similar business of similar size. The Company shall
also maintain with such insurers workers' compensation insurance and insurance
against hazards and risks and liability to persons and property to the extent
and in the manner customary for corporations engaged in the same or a similar
business of similar size.
5.7 Key Man Insurance. The Company shall maintain and continue to
pay the premiums on a key-man term life insurance policy on the life of (i)
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ in the amount of not less than $9,500,000, (ii) ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇ in the amount of not less than $4,500,000 and (iii) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ in
the amount of not less than $2,000,000, in each case naming the Company as the
beneficiary. The life insurance proceeds received by the Company shall be used
for valid business purposes of the Company as approved by the Board of
Directors of the Company.
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16
5.8. Maintenance of Properties. The Company shall and shall cause
each Subsidiary to maintain all properties used in the conduct of its business
in good repair, working order and condition as necessary to permit such
business to be properly and advantageously conducted.
5.9. Affiliated Transactions. All transactions by and between the
Company or any Subsidiary and any officer, Key Employee, director or
shareholder of the Company or any Subsidiary or Persons controlled by or
affiliated with such officer, Key Employee, director or shareholder, shall be
conducted on an arms-length basis, shall be on terms and conditions no less
favorable to the Company or Subsidiary than could be obtained from non-related
Persons and shall be approved in advance by a majority of disinterested
Directors after full disclosure of the terms thereof.
5.10. Management Compensation. Compensation paid by the Company or
any Subsidiary to its management shall be reasonably comparable to compensation
paid to management in companies of similar size, of similar maturity, of
similar profitability and in similar industries.
5.11 Inspection. The Company shall permit and shall cause each
Subsidiary to permit authorized representatives of the Principal Holders to
visit and inspect any of the properties of the Company and its Subsidiaries,
including its books of account, and to make copies thereof at the expense of
the Principal Holders and to discuss its affairs, finances and accounts with
its officers, administrative employees and independent accountants, all at such
reasonable times with reasonable notice as may be reasonably requested but in
no event more than one time in any calendar month and all in a manner that does
not interfere with the business operations of the Company and its Subsidiaries;
provided that all such information provided to the Investors by the Company
will be maintained as confidential by the Investors and not be disclosed to
third parties and provided, further that, subject to the foregoing, each
Investor may provide summaries of such information to affiliates of such
Investor in connection with reports provided by the Investor to its affiliates
in its fiduciary capacity. The Company shall permit and shall cause each
Subsidiary to permit examiners of the Small Business Administration to visit
and inspect the books and records of the Company and its Subsidiaries for the
purpose of verifying the certifications made by the Company to the Small
Business Administration.
5.12 Restrictive Provisions. Until such time as no Purchased
Shares are outstanding, without the written consent of holders of not less than
two-thirds (66.67%) of the then outstanding Purchased Shares, the Company shall
not:
(a) take any action that amends, alters or repeals the
preferences, special rights or other powers of the Class B Preferred Stock, so
as to affect adversely the Class B Preferred Stock (including, without limiting
the generality of the foregoing, the authorization, creation or issuance of any
shares of capital stock or other securities with preference or priority equal
or superior to the Class B Preferred Stock or on a parity with the Class B
Preferred Stock in any regard, including, without limitation, redemption rights
and the right to receive either dividends or amounts distributable upon
liquidation, dissolution or winding up of the company) or that increases the
authorized number of shares of Class B Preferred Stock;
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17
(b) cause the issuance of any authorized but unissued shares of
Class B Preferred Stock;
(c) redeem, purchase or otherwise acquire for consideration any
shares of its capital stock (or rights, options or warrants to purchase such
shares), other than the Securities in accordance with their terms;
(d) approve any material change in the line of business of the
Company or any Subsidiary;
(e) enter into any merger, consolidation or amalgamation, or any
recapitalization, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution) or convey, sell, lease, assign, transfer or
otherwise dispose of all or substantially all of its business, assets or
property;
(f) amend its Articles of Incorporation or Bylaws, if such
amendment would (i) change any material rights, preferences, privileges or
limitations provided to the holders of Class B Preferred Stock therein, (ii)
change the size of the Board of Directors or the procedures for meetings of the
Board of Directors and shareholders, including without limitation, notice and
quorum requirements; or (iii) increase the dividend rate applicable to the
Company's Class A Redeemable Preferred Stock, permit Class A Redeemable
Preferred Stock to be converted into Common Stock or any other equity or debt
security or instrument of the Company or otherwise change the rights, powers or
preferences of the Class A Redeemable Preferred Stock in a manner that
adversely affects the holders of Class B Preferred Stock;
(g) enter into any acquisition or series of related acquisitions
involving an aggregate transaction value equal to or greater than $5,000,000;
or
(h) increase its indebtedness for borrowed money in one or more
transactions, whether or not related, in an aggregate amount of $5,000,000 in
excess of the amount of the Company's existing indebtedness and availability
under existing credit facilities immediately preceding the Closing.
6. REPRESENTATIONS WARRANTIES AND
COVENANT OF THE INVESTORS.
In order to induce the Company to enter into this Agreement, each
Investor, severally and not jointly, represents and warrants as follows:
6.1 Accredited Investor. The Investor is an "accredited investor"
as that term is defined in Regulation D under the Securities Act.
6.2 Address, Etc. The address, state of organization and state
of headquarters of the Investor are as set forth on Schedule A attached hereto.
6.3 Understanding of Nature of Securities. The Investor
understands that:
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(i) The Securities and the Common Stock issued upon the
exercise of the Warrants (the "Shares")have not been registered under the
Securities Act or any state securities laws (the "STATE ACTS") and are being
issued and sold in reliance upon certain of the exemptions contained in the Act
and the State Acts, and the representations and warranties of the Investors
contained herein are essential to the claim of exemption by the Company under
the Act and the State Acts;
(ii) The Securities and the Shares are "restricted
securities" as that term is defined in Rule 144 promulgated under the
Securities Act;
(iii) The Securities and the Shares cannot be sold or
transferred without registration under the Act and any applicable State Acts or
exemption therefrom;
(iv) The Securities and the Shares and any certificates
issued in replacement therefor shall bear the following legend, in addition to
any other legend required by law or otherwise;
"The securities represented by this certificate have not been
registered under the Securities Act of 1933 (the "Act") or any state securities
acts and may not be sold, transferred or otherwise disposed of unless a
registration statement under the Act and any applicable state securities acts
with respect to such securities is effective or unless the Company is in
receipt of an opinion of counsel satisfactory to it to the effect that such
securities may be sold without registration under the Act and such acts."
(v) Only the Company can register the Securities and the
Shares under the Securities Act and any of the State Acts;
(vi) Except as set forth in this Agreement and in the
Registration Rights Agreement, the Company has not made any representations to
the Investor that the Company will register the Securities or the Shares under
the Securities Act or any of the State Acts, or with respect to compliance with
any exemption therefrom;
(vii) There are stringent conditions for Investor's
obtaining an exemption for the resale of the Securities or the Shares under the
Securities Act and any State Acts; and
(viii) The Company may from time to time make stop transfer
notations in its transfer records to ensure compliance with the Securities Act
and any State Acts.
6.4 Investment Intent. The Investor is acquiring the Securities
and the Shares for the Investor's own account and not on behalf of any person.
The Investor is acquiring the Securities and the Shares for investment and not
with a view to or for sale in connection with any distribution of the
Securities or the Shares or with the intent to divide the Investor's
participation with others or resell or otherwise participate in a distribution
of the Securities or the Shares, directly or indirectly. Neither the Investor
nor anyone acting on the Investor's behalf has or will pay any commission or
other remuneration to any person in connection with the purchase of the
Securities or the Shares.
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6.5 Transfer Restriction. The Investor agrees not to effect any
public sale or distribution (including sales pursuant to Rule 144 under the
Securities Act) of any Common Stock during the seven days prior to, and during
the 90-day period beginning on the effective date of, any underwritten Demand
Registration or any underwritten Piggyback Registration (as such terms are
defined in the Registration Rights Agreement) unless the underwriters managing
such registered public offering otherwise agree; provided, however, that the
Investor may sell shares of Common Stock in any such registered public offering
as part of such offering in accordance with the Registration Rights Agreement.
7. MATTERS RELATING TO THE WARRANTS.
7.1 Mandatory Exercise of Warrants. All but not less than all of
the Warrants must be exercised by the holders thereof at the request of the
Company at the then applicable exercise price if and only if (i) the average
closing bid price for shares of Common Stock during the ninety (90) calendar
days prior to the date of such exercise, as well as for each of the ten (10)
calendar days prior to such date, exceeds ten dollars ($10) per share, as
appropriately adjusted for stock dividends, splits, recapitalizations and any
similar occurrence; (ii) the Company has taken all actions necessary to cause
all shares of Common Stock issued upon such exercise to be registered
immediately upon issue, whether through registration on a Form S-3 or
otherwise, so as to be freely tradable immediately upon their issuance and
(iii) the Company simultaneously redeems all outstanding Class B Preferred
Stock.
8. BROKERS' FEE.
The Company represents and warrants that no liabilities for brokerage
commissions, finders' fees and the like have been incurred by the Company in
connection with the financing described in this Agreement. The Company hereby
agrees to indemnify and hold the Investors harmless against and in respect of
any claim for brokerage commissions, finders' fees or the like relating to this
Agreement or the transactions contemplated hereby arising out of arrangements
made by the Company.
9. REMEDIES.
(a) The Company agrees to indemnify each holder of any Security
(including such holder's respective directors, officers, partners, employees
and agents) and each person who controls such holder within the meaning of
Section 15 of the Securities Act (collectively the "INDEMNITEES" and
individually an "INDEMNITEE") to the full extent permitted by law against all
claims, losses, damages, expenses and liabilities, including any amount paid in
settlement of any action, suit, claim or proceeding and all legal and other
expenses reasonably incurred in investigating or defending against the same
(other than losses arising solely from a diminution in the value of the
Preferred Stock, the Warrants or the Common Stock held by the Indemnitees)
("LOSSES"), arising out of any breach of any representation, warranty, covenant
or agreement made by the Company herein.
(b) In addition, the Company agrees to indemnify each Indemnitee
from and against any and all Losses or actions in respect thereof (including in
such Indemnitee's capacity, if any, as a director, controlling person or
representative of the Company) as a result of or arising out of,
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or relating to, (i) the execution, delivery, performance, or enforcement of
this Agreement or any other instrument, document or agreement executed by any
Indemnitee pursuant to this Agreement; (ii) the solicitation of shareholder
approval (including liabilities under the Exchange Act) pursuant to Section 1.5
of this Agreement or periodic reporting by the Company of transactions
contemplated by this Agreement under the Exchange Act; or (iii) any transaction
financed or to be financed in whole in part, directly or indirectly, with the
proceeds of the issuance of the Securities, except in each such case for Losses
arising out of any Indemnitee's gross negligence, willful misconduct or bad
faith.
(c) If the indemnification provided for in Section 9(b) above for
any reason is held by a court of competent jurisdiction to be unavailable to an
Indemnitee in respect of any Losses, then the Company, in lieu of indemnifying
such Indemnitee thereunder, shall contribute to the amount paid or payable by
such Indemnitee as a result of such losses, claims, damages, expenses or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company and the Investors, or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company and the
Investors in connection with the action or inaction which resulted in such
Losses, as well as any other relevant equitable consideration.
(d) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to this Section 9, such person (the
"INDEMNIFIED PARTY") shall promptly notify the person against whom such
indemnity may be sought (the "INDEMNIFYING PARTY") in writing promptly after
such indemnified party has actual knowledge of any claim as to which indemnity
may be sought; provided, however, that the failure of any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Section 9. In case any such proceeding shall be brought
against any Indemnified Party and it shall notify the Indemnifying Party of the
commencement thereof, the Indemnifying Party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
Indemnifying Party similarly notified, to assume the defense thereof, with
counsel reasonably satisfactory to such Indemnified Party and shall pay as
incurred the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any Indemnified Party shall have the right to retain
its own counsel at its own expense. Notwithstanding the foregoing, the
Indemnifying Party shall pay as incurred the fees and expenses of the counsel
retained by the Indemnified Party in the event (i) the Indemnifying Party and
the Indemnified Party shall have mutually agreed to the retention of such
counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the Indemnifying Party and the Indemnified
Party and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them as
expressed by opinion of counsel. The Indemnifying Party shall not be liable for
any settlement of any proceeding effected without its written consent but if
settled with such consent or if there be a final judgment for the plaintiff,
the Indemnifying Party agrees to indemnify the Indemnified Party from and
against any loss or liability by reason of such settlement or judgment.
(e) In the event indemnification arises hereunder as a result of
a third party claim against the Indemnified Party, no indemnification shall be
made pursuant to this Section 9 until
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such time as the Indemnifying Party shall have been finally adjudicated
(including the exhaustion of all appeals that are undertaken with respect to
any adjudication) or otherwise bound to be liable hereunder to such third
party; provided, however, that all legal and other expenses reasonably incurred
in investigating or defending such claim shall be paid by the Indemnifying
Party at the time incurred by the Indemnified Party.
(f) The indemnification and contribution provided for in this
Section 9 will remain in full force and effect regardless of any investigation
made by or on behalf of the Indemnitee or any officer, director, employee,
agent or controlling person of the Indemnitee.
(g) Each party hereto acknowledges that the other parties hereto
shall not have an adequate remedy in the event that this Agreement is breached
and that the non-breaching parties may suffer irreparable damage and injury in
such event, and that, in addition to any other available rights and remedies,
the non-breaching parties shall be entitled to an injunction restricting the
breaching party or parties, as the case may be, from committing or continuing
any violation of this Agreement. The indemnification provided for herein is in
addition to and not in lieu of any other rights and remedies that the Investors
may have in law or equity.
10. AMENDMENTS AND WAIVERS.
For the purposes of this Agreement and all agreements, documents and
instruments executed pursuant hereto or thereto, except as otherwise
specifically set forth herein or therein, no course of dealing between the
Company and the Investors and no delay on the part of any party hereto in
exercising any rights hereunder or thereunder shall operate as a waiver of the
rights hereof and thereof. No covenant or other provision hereof or thereof may
be waived or amended otherwise than by a written instrument signed by the party
so waiving or amending such covenant or other provision; provided, however,
that except as otherwise provided herein or therein, amendments to this
Agreement shall require and shall be effective upon the receipt of the written
consent of (a) the Company and (b) Investors holding Warrants that upon the
exercise thereof represent not less than 75% of the Common Stock issuable upon
the exercise of all of the Warrants. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of any
Securities at the time outstanding, each future holder of all such Securities,
and the Company. Notwithstanding any of the above, the conditions to Closing
set forth in Section 2 of this Agreement may only be waived by each Investor
itself.
11. SURVIVAL OF COVENANTS; ASSIGNABILITY OF RIGHTS.
(a) All covenants, agreements, representations and warranties of
the Company made herein and in the certificates, lists, exhibits, schedules or
other written information delivered or furnished in connection therewith and
herewith shall be deemed material and to have been relied upon by the
Investors, and shall survive the delivery of the Securities and shall bind the
Company's successors and assigns, whether so expressed or not, and all such
covenants, agreements, representations and warranties shall inure to the
benefit of each Investor's successors and assigns and to transferees of the
Securities, whether so expressed or not.
(b) The representations and warranties of the Investors made in
Section 6 herein shall be deemed material and to have been relied upon by the
Company and shall survive the delivery
- 21 -
22
of the Securities and shall bind each Investor's successors and assigns,
whether so expressed or not and all such covenants, agreements, representations
and warranties shall inure to the benefit of the Company's successors and
assigns whether so expressed or not.
(c) The Investors may transfer the Securities only in compliance
with Federal and state securities laws.
12. GOVERNING LAW.
(a) This Agreement shall be deemed to be a contract made under,
and shall be construed in accordance with, the laws of the State of Georgia,
without giving effect to any choice of law provision or rule (whether of the
State of Georgia or any other jurisdiction) that would cause the application of
the domestic substantive laws of any jurisdiction other than the State of
Georgia.
(b) The Company and each of the Investors that holds Class A
Warrants hereby agrees that the Class A Warrants, together with the Class A
Redeemable Preferred Stock Purchase Agreement dated as of May 21, 1997 (the
"CLASS A PURCHASE AGREEMENT") pursuant to which the Class A Warrants were
issued, shall, notwithstanding anything to the contrary set forth in the Class
A Warrants or such Purchase Agreement, from and after the date hereof be deemed
to be a contract made under, and shall be construed in accordance with, the
laws of the State of Georgia, without giving effect to any choice of law
provision or rule (whether of the State of Georgia or any other jurisdiction)
that would cause the application of the domestic substantive laws of any
jurisdiction other than the State of Georgia.
13. SECTION HEADINGS.
The descriptive headings in this Agreement have been inserted for
convenience only and shall not be deemed to limit or otherwise affect the
construction of any provision hereof.
14. COUNTERPARTS.
This Agreement may be executed simultaneously in any number of
counterparts, each of which when so executed and delivered shall be taken to be
an original; but such counterparts shall together constitute but one and the
same document.
15. NOTICES AND DEMANDS.
Any notice or demand which, by any provision of this Agreement or any
agreement, document or instrument executed pursuant hereto or thereto, except
as otherwise provided therein, is required or provided to be given shall be
deemed to have been sufficiently given or served for all purposes three days
after being sent by first class mail, postage and charges prepaid, hand
delivery, or FedEx or similar courier service to the following addresses: if to
the Company, at its mailing address set out above, or at any other address
designated by the Company to the Investors in writing; if to any Investor at
its mailing address set forth in Schedule A, or at any other address (or
facsimile number) designated by such Investor to the
- 22-
23
Company. Any notice given by facsimile pursuant to this Section 15 shall be
followed by written notice delivered by FedEx or similar courier service.
16. SEVERABILITY.
Whenever possible, each provision of this Agreement shall be
interpreted in such a manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be deemed prohibited or invalid
under such applicable law, such provision shall be ineffective to the extent of
such prohibition or invalidity, and such prohibition or invalidity shall not
invalidate the remainder of such provision or the other provisions of this
Agreement.
17. DEFINITIONS OF TERMS.
As used in this Agreement, the following terms have the following
meanings or the meanings ascribed to them elsewhere in this Agreement:
DEFINITION SECTION
---------- -------
Agreement.............................................. Preamble
Purchase Shares........................................ 1.1
Class B Preferred Stock................................ 1.1
Common Stock........................................... 1.1
Purchase Price......................................... 1.2
Closing Date........................................... 1.3
Registration Rights Agreement.......................... 2.8
SEC Documents.......................................... 4.5
Audited Financial Statements........................... 4.6
Financial Statements................................... 4.6
Real Property.......................................... 4.17
FCC Licenses........................................... 4.20
Big Apple Agreement.................................... 4.25
Mercury Agreement...................................... 4.25
Stockholders Agreement................................. 4.25
Code................................................... 4.26
Principal Holder....................................... 5.1
Indemnified Party...................................... 9
Indemnifying Party..................................... 9
Class A Purchase Agreement............................. 12
Commission. The term "COMMISSION" means the Securities and Exchange
Commission, or any other federal agency at the time administering the
Securities Act.
Communications Act. The term "COMMUNICATIONS ACT" means the
Communications Act of 1934, as amended, or any similar law then in force, and
the rules, regulations and policies thereunder.
- 23 -
24
Employee Benefit Plan. The term "EMPLOYEE BENEFIT PLAN" means any
employee benefit plan within the meaning of ss.3(3) of ERISA maintained or
contributed to by the Company or any ERISA Affiliate, other than a
Multiemployer Plan.
Encumbrance. The term "ENCUMBRANCE" means any mortgage, deed of trust,
pledge, security interest, encumbrance, option, right of first refusal,
agreement of sale, adverse claim, encroachment, right-of-way, burden or charge
of any kind or nature whatsoever or any item similar or related to the
foregoing.
Environmental Law. The term "ENVIRONMENTAL LAW" means the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended, the Resources Conservation and Recovery Act of 1976, as amended,
and any applicable laws (whether or not statutory), statutes, regulations,
rules, ordinances, codes, licenses, permits, orders, approvals, plans,
authorizations, concessions, and similar items of all governmental authorities
and all applicable judicial, administrative and regulatory decrees, judgments
and orders, any of which relate to the protection of human health or the
environment from the effects of Regulated Material, including, but not limited
to, those pertaining to reporting, licensing, permitting, investigating and
remediating emissions, discharges, releases or threatened releases of Regulated
Material into the air, surface water, groundwater or land, or relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Regulated Material.
ERISA. The term "ERISA" means the Employee Retirement Income Security
Act of 1974, any successor statute of similar import, and the rules and
regulations thereunder, collectively, and from time to time amended and in
effect.
ERISA Affiliate. The term "ERISA AFFILIATE" means any Person that is
treated as a single employer with the Company under ss.414 of the Code.
Exchange Act. The term "EXCHANGE ACT" means the Securities Exchange
Act of 1934, as amended.
FCC. The term "FCC" means the Federal Communications Commission, or
any other federal agency at the time administering the Communications Act.
Guaranteed Pension Plan. The term "GUARANTEED PENSION PLAN" means any
employee pension benefit plan within the meaning of ss.3(2) of ERISA maintained
or contributed to by the Company or any ERISA Affiliate the benefits of which
are guaranteed on termination in full or in part by the Pension Benefit
Guaranty Corporation (or any Person succeeding to the functions thereof).
Key Employees. The term "KEY EMPLOYEES" means the Chairman, the
President, any Vice President and the Treasurer of the Company, or any person
who is not an officer of the Company but is in charge of one or more of the
following functions: sales, business development or operations.
- 24 -
25
Knowledge. The terms "KNOWLEDGE" or similar terms (whether or not
capitalized herein) when applied to the Company, means the knowledge of its Key
Employees, officers or directors of the Company or any Subsidiary after
reasonable inquiry.
Material Adverse Effect. The term "MATERIAL ADVERSE EFFECT" means any
event, occurrence or condition, if the result thereof, either singly or in the
aggregate would have a material and adverse effect upon the business,
operations, properties, assets, prospects, profitability or condition
(financial or otherwise) of the Company and its Subsidiaries taken as a whole.
Multiemployer Plan. The term "MULTIEMPLOYER PLAN" means a
multiemployer plan within the meaning of ss.3(37) of ERISA.
Person. The term "PERSON" means any corporation, association,
partnership, joint venture, organization, business or individual.
Regulated Material. The term "REGULATED MATERIAL" means substances
that are defined or listed in, or otherwise classified pursuant to, any
applicable Environmental Laws as "hazardous substances," "hazardous materials"
"hazardous wastes" or "toxic substances," or any other formulation intended to
define, list or classify substances by reason of deleterious properties such as
ignitability, corrosivity, reactivity, radioactivity, carcinogenicity,
reproductive toxicity or "EP toxicity," and petroleum and drilling fluids,
produced waters and other wastes associated with the exploration, development,
or production of crude oil, natural gas or geothermal energy.
Rule 144. The term "RULE 144" means Rule 144 promulgated under the
Securities Act.
Securities Act. The term "SECURITIES ACT" means the Securities Act of
1933, as amended.
18. EXPENSES.
The Company shall pay all costs and expenses that it incurs with
respect to the negotiation, execution, delivery and performance of this
Agreement. The Company shall reimburse the Investors for (i) their reasonable
travel and out-of-pocket expenses incurred in connection with the transactions
contemplated hereby, including, without limitation, all reasonable audit,
consulting and other professional expenses incurred as part of the Investors'
due diligence with respect to the Company and the transactions contemplated
hereby, (ii) the reasonable legal fees, expenses and disbursements of special
counsel for the Investors (including both ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ and Paul, Hastings,
Janosfsky & ▇▇▇▇▇▇ LLP) incurred in connection with the negotiation, execution,
delivery and performance of this Agreement and the other agreements and
documents contemplated hereby and in connection with any proposed amendments,
waivers or consents to or to be provided in connection with this Agreement and
any such other agreements and documents or the transactions contemplated hereby
or thereby, and the negotiation, preparation and delivery thereof.
- 25 -
26
19. ENTIRE AGREEMENT.
This Agreement and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement between the parties
with respect to the subjects hereof and thereof, including without limitation
all term sheets heretofore circulated and discussed among the Company and the
Investors.
- 26 -
27
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.
Preferred Networks, Inc.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------------
Name: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------------
ALTA COMMUNICATIONS VI, L.P.
By: Alta Communications VI Management
Partners, L.P., its General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, General Partner
ALTA COMM S BY S, LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Member
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Member
CENTENNIAL FUND IV, L.P.
By: Centennial Fund V, L.P.,
its General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
SAUGATUCK CAPITAL COMPANY LIMITED PARTNERSHIP III
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
FLEET VENTURE RESOURCES, INC.
By: /s/ ▇▇▇▇▇▇ ▇. VanDegna
--------------------------------------------
▇▇▇▇▇▇ ▇. VanDegna
Chairman and CEO
- 27 -
28
PNC CAPITAL CORP.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇, EVP
--------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
FLEET EQUITY PARTNERS, VI, L.P.
By: Fleet Growth Resources, Inc.,
its Corporate General Partner
By: /s/ ▇▇▇▇▇▇ ▇. VanDegna
--------------------------------------------
▇▇▇▇▇▇ ▇. VanDegna
Chairman and CEO
PRIMUS CAPITAL FUND III LIMITED PARTNERSHIP
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
T/W ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ GST EXEMPT
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------------
Trustee
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------------
Trustee
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Custodian for
▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Under the Uniform
Transfers to Minors Act, Pennsylvania
WEBBMONT HOLDINGS L.P.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President, Woodcrest Associates Ltd.
General Partner
- 28 -
29
SPOTTED DOG FARM, L.P.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: General Partner
RTM, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: SVP
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
- 29 -
30
SCHEDULES
4.1 -- Subsidiaries
4.3 -- Capitalization
4.6 -- Financial Statements
4.7 -- Taxes
4.8 -- Litigation
4.9 -- ERISA
4.15 -- Material Contracts
4.16 -- Title to Assets
4.18 -- Environmental
EXHIBITS
Exhibit A -- Schedule of Investors
Exhibit B -- Form of Warrant
Exhibit C -- Certificate of Amendment
Exhibit D -- Second Amendment to Registration Rights Agreement
- 30 -
31
Exhibit A
Aggregate Purchase
Investor Price for Securities Purchased Shares Warrants
-------- -------------------- ---------------- ---------
1. Alta Communications VI, L.P. $5,377,590.00 3,585,060 3,629,873
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
2. Alta Comm S By S, LLC $ 122,410.50 81,607 82,627
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
3. Centennial Fund IV, L.P. $ 169,000.50 112,667 114,075
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
4. PNC Capital Corp. $ 232,273.50 154,849 156,785
One PNC Plaza
▇▇▇ ▇▇▇ ▇▇▇. & ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
5. Saugatuck Capital Company $ 579,307.50 386,205 391,032
Limited Partnership III
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
6. Primus Capital Fund III $ 290,112.00 193,408 195,826
Limited Partnership
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
- 31 -
32
Aggregate Purchase
Investor Price for securities Purchased Shares Warrants
-------- -------------------- ---------------- --------
7. Fleet Equity Partners VI, L.P. $ 173,791.50 115,861 117,310
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
8. Fleet Venture Resources, Inc. $ 405,516.00 270,344 273,722
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
9. T/W ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ GST $ 60,000.00 40,000 40,500
Exempt
PNC Bank
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇▇
10. ▇▇▇▇ ▇. ▇▇▇▇▇▇ $ 25,000.50 16,667 16,875
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
11. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, $ 15,000.00 10,000 10,125
Custodian for ▇▇▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ Under the Uniform
Transfers to Minors Act,
Pennsylania
▇▇▇▇ ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
12. Webbmount Holdings L.P. $ 150,000.00 100,000 101,250
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
- 32 -
33
Aggregate Purchase
Investor Price for Securities Purchased Shares Warrants
-------- -------------------- ---------------- --------
13. Spotted Dog Farm, L.P. $ 100,000.50 66,667 67,500
▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
14. RTM, Inc. $ 100,000.50 66,667 67,500
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
15. ▇▇▇▇ ▇. and ▇▇▇▇▇▇ ▇. $ 100,000.50 66,667 67,500
▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
16. ▇▇▇▇ ▇. and ▇▇▇▇▇▇ ▇▇▇▇▇▇ $ 100,000.50 66,667 67,500
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------- ----------- ---------
TOTALS: $ 8,000,004.00 5,333,336 5,400,000
- 33 -
34
Exhibit B
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR ANY
APPLICABLE STATE SECURITIES ACTS. THESE SECURITIES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM.
PREFERRED NETWORKS, INC.
COMMON STOCK PURCHASE WARRANT
Date of Issuance: March [ ], 1998 Certificate No. W - B[ ]
FOR VALUE RECEIVED, Preferred Networks, Inc., a Georgia
corporation (the "Company"), hereby grants [ ] or its registered assigns (the
"Registered Holder") the right to purchase from the Company during the Exercise
Period (as defined below) up to a number of shares of the Company's Warrant
Stock equal to [ ] shares of Warrant Stock at a price per share of $1.50 (as
adjusted from time to time hereunder, the "Exercise Price"). This Warrant is
one of several warrants (collectively, the "Warrants") issued by the Company to
certain investors pursuant to the Class B Senior Redeemable Preferred Stock
Purchase Agreement dated as of March [ ], 1998 (the "Purchase Agreement").
Certain capitalized terms used herein are defined in Section 6 hereof. The
amount and kind of securities obtainable pursuant to the rights granted
hereunder and the Exercise Price for such securities are subject to adjustment
pursuant to the provisions contained in this Warrant.
This Warrant is subject to the following provisions:
1. EXERCISE OF WARRANT.
1.1. Exercise Period. The Registered Holder may exercise, in whole
or in part (but not as to a fractional share of Warrant Stock), the purchase
rights represented by this Warrant at any time and from time to time after the
Date of issuance of this Warrant to and including the fifth anniversary of the
Date of Issuance of this Warrant (the "Exercise Period"). The Company shall
give the Registered Holder written notice of the expiration of the rights
hereunder at least 30 days but not more than 90 days prior to the end of the
Exercise Period.
1.2. EXERCISE PROCEDURE.
(i) This Warrant shall be deemed to have been exercised when
the Company has received all of the following items (the "Exercise Time"):
(a) a completed Exercise Agreement, as described in paragraph
1.3 below, executed by the Person exercising all or part of the
purchase rights represented by this Warrant (the "Purchaser");
(b) this Warrant;
35
(c) if this Warrant is not registered in the name of the
Purchaser, an Assignment or Assignments in the form set forth in
Exhibit II hereto evidencing the assignment of this Warrant to the
Purchaser, in which case the Registered Holder shall have complied
with the provisions set forth in Section 9 hereof; and
(d) either (1) a check payable to the Company in an amount
equal to the product of the Exercise Price multiplied by the number of
shares of Warrant Stock being purchased upon such exercise.(the
"Aggregate Exercise Price"), (2) the surrender to the Company of debt
or equity securities of the Company having a Market Price equal to the
Aggregate Exercise Price of the Warrant Stock being purchased upon
such exercise (provided that for purposes of this subparagraph, the
Market Price of any note or other debt security or any preferred
stock, unless it is publicly traded, shall be deemed to be equal to
the aggregate outstanding principal amount or liquidation value
thereof plus all accrued and unpaid interest thereon or accrued or
declared and unpaid dividends thereon) or (3) a written notice to the
Company that the Purchaser is exercising the Warrant (or a portion
thereof) by authorizing the Company to withhold from issuance a number
of shares of Warrant Stock issuable upon such exercise of the Warrant
which, when multiplied by the Market Price of the Warrant Stock, is
equal to the Aggregate Exercise Price (and such withheld shares shall
no longer be issuable under this Warrant).
(ii) Certificates for shares of Warrant Stock purchased upon
exercise of this Warrant shall be delivered by the Company to the Purchaser
within five business days after the date of the Exercise Time. Unless this
Warrant has expired or all of the purchase rights represented hereby have been
exercised, the Company shall prepare a new Warrant, substantially identical
hereto, representing the rights formerly represented by this Warrant which have
not expired or been exercised and shall within such five-day period, deliver
such new Warrant to the Person designated for delivery in the Exercise
Agreement.
(iii) The Warrant Stock issuable upon the exercise of this
Warrant shall be deemed to have been issued to the Purchaser and outstanding,
and the Purchaser shall be deemed for all purposes to have become the record
holder of such Warrant Stock, at the Exercise Time.
(iv) The issuance of certificates for shares of Warrant
Stock upon exercise of this Warrant shall be made without charge to the
Registered Holder or the Purchaser for any issuance tax in respect thereof or
other cost incurred by the Company in connection with such exercise and the
related issuance of shares of Warrant Stock. Each share of Warrant Stock
issuable upon exercise of this Warrant shall, upon payment of the Exercise
Price therefor, be fully paid and nonassessable and free from all liens and
charges with respect to the issuance thereof.
(v) The Company shall not close its books against the
transfer of this Warrant or of any share of Warrant Stock issued or issuable
upon the exercise of this Warrant in any manner which interferes with the
timely exercise of this Warrant. The Company shall from time to time take all
such action as may be necessary to assure that the par value per share of the
unissued Warrant Stock acquirable upon exercise of this Warrant is at all times
equal to or less than the Exercise Price then in effect.
(vi) The Company shall assist and cooperate with any
Registered Holder or Purchaser required to make any governmental filings or
obtain any governmental approvals prior
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36
to or in connection with any exercise of this warrant (including, without
limitation, making any filings required to be made by the Company).
(vii) Notwithstanding any other provision hereof, if an
exercise of any portion of this Warrant is to be made in connection with a
registered public offering of the Company's capital stock or the sale of the
Company, the exercise of any portion of this Warrant may, at the election of
the holder hereof, be conditioned upon the consummation of the public offering
or sale of the Company, in which case such exercise shall not be deemed to be
effective until the consummation of such transaction.
(viii) The Company shall at all times reserve and keep
available out of its authorized but unissued shares of Warrant Stock, solely
for the purpose of issuance upon the exercise of the Warrants, such number of
shares of Warrant Stock issuable upon the exercise of all outstanding Warrants.
All shares of Warrant Stock which are so issuable shall, when issued, be duly
and validly issued, fully paid and nonassessable and free from all taxes, liens
and charges. The Company shall take all such actions as may be necessary to
assure that all such shares of Warrant Stock may be so issued without violation
of any applicable law or governmental regulation or any requirements of any
domestic securities exchange upon which shares of Warrant Stock may be listed
(except for official notice of issuance, which shall be immediately delivered
by the Company upon each such issuance). The Company shall not take any action
that would cause the number of authorized but unissued shares of Warrant Stock
to be less than the number of such shares required to be reserved hereunder for
issuance upon exercise of all of the outstanding Warrants.
(ix) Any certificate for shares of Warrant Stock issued upon
the exercise of this Warrant shall contain a legend in substantially the form
of the legend set forth on the first page of this Warrant except if such
exercise is effected in connection with a registered public offering of the
Company's capital stock and the Warrant Stock issuable upon the exercise of
this Warrant are included in such registered offering.
1.3. EXERCISE AGREEMENT. Upon any exercise of this Warrant, the
Exercise Agreement shall be substantially in the form set forth in Exhibit I
hereto, except that if the shares of Warrant Stock are not to be issued in the
name of the Person in whose name this Warrant is registered, the Exercise
Agreement shall also state the name of the Person to whom the certificates for
the shares of Warrant Stock are to be issued, and if the number of shares of
Warrant Stock to be issued does not include all the shares of Warrant Stock
purchasable hereunder, it shall also state the name of the Person to whom a new
Warrant for the unexercised portion of the rights hereunder is to be delivered.
Such Exercise Agreement shall be dated the actual date of execution thereof
1.4. FRACTIONAL SHARES. If a fractional share of Warrant Stock
would, but for the provisions of paragraph 1.1, be issuable upon exercise of
the rights represented by this Warrant, in lieu of issuing such fractional
share, the Company shall, within five business days after the date of the
Exercise Time, deliver to the Purchaser's order the Company's check payable to
the Purchaser in an amount equal to the difference between the Market Price of
such fractional share as of the date of the Exercise Time and the Exercise
Price of such fractional share.
2. ADJUSTMENT OF EXERCISE PRICE. In order to prevent dilution of the
rights granted under this Warrant, the Exercise Price shall be subject to
adjustment from time to time as provided in this Section 2.
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2.1. ADJUSTMENT OF EXERCISE PRICE UPON ISSUANCE OF COMMON STOCK.
(i) If and whenever after the date of this Warrant, the Company issues or sells
in a private placement (including in connection with any acquisition of any
interest in, or any entry into a joint venture with, any business or company),
or in accordance with paragraph 2.2 is deemed to have issued or sold, any share
of Common Stock for a consideration per share less than the Exercise Price in
effect immediately prior to such time, then immediately upon such issue or sale
or deemed issue or sale, the Exercise Price shall be reduced to the lowest
price paid by the purchaser per share at which such share of Common Stock has
been issued or sold or is deemed to have been issued or sold. Notwithstanding
the foregoing, if the Company inadvertently issues or sells, or is deemed to
have issued or sold, any share of Common Stock for a consideration per share
less than the Exercise Price in effect immediately prior to such time, the
Exercise Price shall not be reduced if the Company is able to rescind or
appropriately modify the transaction within a reasonable time after it became
aware of the reduction in the Exercise Price that would otherwise occur.
(ii) Notwithstanding the foregoing and Section 2.2,
there shall be no adjustment to the Exercise Price or the number of shares of
Warrant Stock obtainable upon exercise of this Warrant with respect to (i)
issuance of Common Stock by the Company to co-channel licensees in lieu of cash
owed, not to exceed 350,000 shares of Common Stock in the aggregate, (ii)
issuance of up to 675,994 shares of Common Stock pursuant to options granted by
the Company prior to 1996 to purchase common stock at various prices between
$.97 and $1.50, or (iii) stock issued by the Company to the seller of stock or
assets in an arms length transaction consummated in accordance with the terms
of Section 5. 12 of the Purchase Agreement. Notwithstanding anything to the
contrary set forth herein, in no event shall the Exercise Price at any time be
an amount that is higher than the "Exercise Price" provided for in the Common
Stock Purchase Warrants issued by the Company pursuant to the Class A
Redeemable Preferred Stock Purchase Agreement dated as of May 21, 1997 among
the Company, Fleet Equity Partners, VI, L.P., Centennial Fund IV, L.P. and
certain other persons (such warrants are referred to as the "Class A
Warrants"); and if the "Exercise Price" of the Class A Warrants is adjusted in
accordance with the terms thereof by reason of the issuance of the Warrants,
then the Exercise Price of the Warrants shall initially be the price to which
the "Exercise Price" of the Class A Warrants is so adjusted.
2.2. EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes of
determining the adjusted Exercise Price under paragraph 2.1, the following
shall be applicable:
(i) Issuance of Rights or Options. If the Company in any
manner grants or sells any Options and the lowest price per share for which any
one share of Common Stock is issuable upon the exercise of any such Option, or
upon conversion or exchange of any Convertible Security issuable upon exercise
of such Option, is less than the Exercise Price in effect immediately prior to
the time of the granting or sale of such Option, then such share of Common
Stock shall be deemed to be outstanding and to have been issued and sold by the
Company at such time for such lower price per share. For purposes of this
paragraph, the "lowest price per share for which any one share of Common Stock
is issuable" shall be equal to the sum of the lowest amount of consideration
(if any) paid or payable by the option holder with respect to any one share of
Common Stock upon the granting or sale of the Option, upon exercise of the
Option and upon conversion or exchange of the Convertible Security. No further
adjustment of the Exercise Price shall be made upon the actual issue of such
Common Stock or of such Convertible Security upon the exercise of such Options
or upon the actual issue of such Common Stock upon conversion or exchange of
such Convertible Security.
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(ii) Issuance of Convertible Securities. If the Company in
any manner issues or sells any Convertible Security and the lowest price per
share for which any one share of Common Stock is issuable upon conversion or
exchange thereof is less than the Exercise Price in effect immediately prior to
the time of such issue or sale, then such share or shares of Common Stock shall
be deemed to be outstanding and to have been issued and sold by the Company at
such time for such lower price per share. For the purposes of this paragraph,
the "lowest price per share for which any one share of Common Stock is
issuable" shall be equal to the sum of the lowest amount of consideration (if
any) paid or payable by the holder of the Convertible Security with respect to
any one share of Common Stock upon the issuance or sale of the Convertible
Security and upon the conversion or exchange of such Convertible Security. No
further adjustment of the Exercise Price shall be made upon the actual issue of
such Common Stock upon conversion or exchange of any Convertible Security, and
if any such issue or sale of such Convertible Security is made upon exercise of
any Options for which adjustments of the Exercise Price had been or are to be
made pursuant to other provisions of this Section 2, no further adjustment of
the Exercise Price shall be made by reason of such issue or sale.
(iii) Change in Option Price or Conversion Rate. If the
purchase price provided for in any Options, the additional consideration, if
any, payable upon the issue, conversion or exchange of any Convertible
Securities, or the rate at which any Convertible Securities are convertible
into or exchangeable for Common Stock changes at any time, the Exercise Price
in effect at the time of such change shall be adjusted immediately to the
Exercise Price that would have been in effect at such time had such Options or
Convertible Securities provided for such changed purchase price, additional
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold. For purposes of this paragraph 2.2, if the
terms of any Option or Convertible Security that was outstanding as of the Date
of Issuance of this Warrant are changed in the manner described in the
immediately preceding sentence, then such Option or Convertible Security and
the Common Stock deemed issuable upon exercise, conversion or exchange thereof
shall be deemed to have been issued as of the date of such change; provided
that no such change shall at any time cause the Exercise Price to be increased
to an amount in excess of the Exercise Price in effect immediately upon the
issuance of this Warrant.
(iv) Treatment of Expired Options and Unexercised
Convertible Securities. Upon the expiration of any Option or the termination of
any right to convert or exchange any Convertible Securities without the
exercise of such Option or right, the Exercise Price then in effect shall be
adjusted immediately to the Exercise Price that would have been in effect at
the time of such expiration or termination had such Option or Convertible
Securities, to the extent outstanding immediately prior to such expiration or
termination, never been issued; provided that if such expiration or termination
would result in an increase in the Exercise Price then in effect, such increase
shall not be effective until 30 days after written notice thereof has been
given to all holders of the Warrants. For purposes of this paragraph 2.2, the
expiration or termination of any Option or Convertible Security that was
outstanding as of the Date of Issuance of this Warrant shall not cause the
Exercise Price hereunder to be adjusted unless, and only to the extent that, a
change in the terms of such Option or Convertible Security caused it to be
deemed to have been issued after the Date of Issuance of this Warrant.
(v) Calculation of Consideration Received. If any Common
Stock, Options or Convertible Securities are issued or sold or deemed to have
been issued or sold for cash, the consideration received therefor shall be
deemed to be the amount paid by the holder to the Company for such security
(including discounts, commissions and related expenses paid to
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independent third parties). In case any Common Stock, Options or Convertible
Securities are issued or sold for a consideration other than cash (including in
connection with acquisitions), the amount of the consideration other than cash
paid by the holder shall be the fair value of such consideration, except where
such consideration consists of securities, in which case the amount of
consideration received by the Company shall be the Market Price thereof as of
the date of receipt. In case any Common Stock, Options or Convertible
Securities are issued to the owners of the non-surviving entity in connection
with any merger in which the Company is the surviving corporation, the amount
of consideration therefor shall be deemed to be the fair value of such portion
of the net assets and business of the non-surviving entity as is attributable
to such Common Stock, Options or Convertible Securities, as the case may be.
The fair value of any consideration other than cash or securities shall be
determined jointly by the Company and the Registered Holders of Warrants
representing a majority of the shares of Warrant Stock obtainable upon exercise
of such Warrants. If such parties are unable to reach agreement within a
reasonable period of time, such fair value shall be determined by an appraiser
jointly selected by the Company and the Registered Holders of Warrants
representing a majority of the shares of Warrant Stock obtainable upon exercise
of such Warrants. The determination of such appraiser shall be final and
binding on the Company and the Registered Holders of the Warrants, and the fees
and expenses of such appraiser shall be paid by the Company.
(vi) Integrated Transactions. In case any Option is issued
in connection with the issue or sale of other securities of the Company,
together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, the Options
shall be deemed to have been issued for a consideration of $.01.
(vii) Treasury Shares. The number of shares of Common Stock
outstanding at any given time does not include shares owned or held by or for
the account of the Company or any Subsidiary, and the disposition of any shares
so owned or held shall be considered an issue or sale of Common Stock.
(viii) Record Date. If the Company takes a record of the
holders of Common Stock for the purpose of entitling them (A) to receive a
dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or (B) to subscribe for or purchase Common Stock,
Options or Convertible Securities, then such record date shall be deemed to be
the date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of such
other distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
2.3. SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company at
any time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding shares of Common Stock into a
greater number of shares, the Exercise Price in effect immediately prior to
such subdivision shall be proportionately reduced and the number of shares of
Warrant Stock obtainable upon exercise of this Warrant shall be proportionately
increased. If the Company at any time combines (by reverse stock split or
otherwise) one or more classes of its outstanding shares of Common Stock into a
smaller number of shares, the Exercise Price in effect immediately prior to
such combination shall be proportionately increased and the number of shares of
Warrant Stock obtainable upon exercise of this Warrant shall be proportionately
decreased.
2.4. REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR
SALE. Prior to the consummation of any Organic Change, the Company shall make
appropriate provision (in form
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and substance satisfactory to the Registered Holders of the Warrants
representing a majority of the Warrant Stock obtainable upon exercise of all
Warrants then outstanding) to ensure that each of the Registered Holders of the
Warrants shall thereafter have the right to acquire and receive, in lieu of or
addition to (as the case may be) the shares of Warrant Stock immediately
theretofore acquirable and receivable upon the exercise of such holder's
Warrant, such shares of stock, securities or assets as may be issued or payable
with respect to or in exchange for the number of shares of Warrant Stock
immediately theretofore acquirable and receivable upon exercise of such
holder's Warrant had such Organic Change not taken place. In any such case, the
Company shall make appropriate provision (in form and substance satisfactory to
the Registered Holders of the Warrants representing a majority of the Warrant
Stock obtainable upon exercise of all Warrants then outstanding) with respect
to such holders' rights and interests to ensure that the provisions of this
Section 2 and Sections 5 and 6 hereof shall thereafter be applicable to the
Warrants (including, in the case of any such consolidation, merger or sale in
which the successor entity or purchasing entity is other than the Company, an
immediate adjustment of the Exercise Price to the value for the Common Stock
reflected by the terms of such consolidation, merger or sale, and a
corresponding immediate adjustment in the number of shares of Warrant Stock
acquirable and receivable upon exercise of the Warrants, if the value so
reflected is less than the Exercise Price in effect immediately prior to such
consolidation, merger or sale). The Company shall not effect any such
consolidation, merger or sale, unless prior to the consummation thereof, the
successor entity (if other than the Company) resulting from consolidation or
merger or the entity purchasing such assets assumes by written instrument (in
form and substance satisfactory to the Registered Holders of Warrants
representing a majority of the Warrant Stock obtainable upon exercise of all of
the Warrants then outstanding), the obligation to deliver to each such holder
such shares of stock, securities or assets as, in accordance with the foregoing
provisions, such holder may be entitled to acquire.
2.5. CERTAIN EVENTS. If any event occurs of the type contemplated
by the provisions of this Section 2 but not expressly provided for by such
provisions (including, without limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with equity features), then the
Company's board of directors shall make an appropriate adjustment in the
Exercise Price and the number of shares of Warrant Stock obtainable upon
exercise of this Warrant so as to protect the rights of the holders of the
Warrants; provided that no such adjustment shall increase the Exercise Price or
decrease the number of shares of Warrant Stock obtainable as otherwise
determined pursuant to this Section 2.
2.6. NOTICES.
(i) Immediately upon any adjustment of the Exercise Price,
the Company shall give written notice thereof to the Registered Holder, setting
forth in reasonable detail and certifying the calculation of such adjustment.
(ii) The Company shall give written notice to the Registered
Holder at least 20 days prior to the date on which the Company closes its books
or takes a record (A) with respect to any dividend or distribution upon the
Common Stock, (B) with respect to any pro rata subscription offer to holders of
Common Stock or (C) for determining rights to vote with respect to any Organic
Change, dissolution or liquidation.
(iii) The Company shall also give written notice to the
Registered Holders at least 20 days prior to the date on which any Organic
Change, dissolution or liquidation shall take place.
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3. MANDATORY EXERCISE OF WARRANT. Upon the occurrence of certain events,
the holder hereof may be required to exercise its right to purchase all but not
less than all of the shares of Common Stock obtainable upon exercise of this
Warrant in accordance with the provisions of Section 7.1 of the Purchase
Agreement.
4. DIVIDENDS. If the Company declares or pays a Dividend, then the
Company shall set aside such Dividend for payment upon exercise of this Warrant
to the Registered Holder of this Warrant the Dividend that would have been paid
to such Registered Holder on the Warrant Stock had this Warrant been fully
exercised immediately prior to the date on which a record is taken for such
Dividend, or, if no record is taken, the date as of which the record holders of
Common Stock entitled to such dividends are to be determined.
5. PURCHASE RIGHTS. If at any time the Company grants, issues or sells
any Purchase Rights, then the Registered Holder of this Warrant shall be
entitled to acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which such Holder could have acquired if such Holder
had held the number of shares of Warrant Stock acquirable upon complete
exercise of this Warrant immediately before the date on which a record is taken
for the grant, issuance or sale of such Purchase Rights, or, if no such record
is taken, the date as of which the record holders of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights.
6. DEFINITIONS. The following terms have meanings set forth below:
"Common Stock" means the Company's Common Stock, no par value
per share, and except for purposes of the shares obtainable upon exercise of
this Warrant, any capital stock of any class of the Company hereafter
authorized that is not limited to a fixed sum or percentage of par or stated
value in respect to the rights of the holders thereof to participate in
dividends or in the distribution of assets upon any liquidation, dissolution or
winding up of the Company.
"Convertible Securities" means any stock or securities
(directly or indirectly) convertible into or exchangeable for Common Stock.
"Dividend" means any dividend or other distribution upon the
Common Stock except for a stock dividend payable in shares of Common Stock.
"Market Price" means, as to any security, the average of the
closing prices of such security's sales on all domestic securities exchanges on
which such security may at the time be listed, or, if there have been no sales
on any such exchange on any day, the average of the highest bid and lowest
asked prices on all such exchanges at the end of such day, or, if on any day
such security is not so listed, the average of the representative bid and asked
prices quoted in the NASDAQ System as of 4:00 P.M., New York time, on such day,
or, if on any day such security is not quoted in the NASDAQ System, the average
of the highest bid and lowest asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or any similar successor organization, in each such case averaged
over a period of 21 days consisting of the day as of which "Market Price" is
being determined and the 20 consecutive business days prior to such day;
provided that if such security is listed on any domestic securities exchange
the term "business days" as used in this sentence means business days on which
such exchange is open for trading. If at any time such security is not listed
on any domestic securities exchange or quoted in the NASDAQ System or the
domestic over-the-
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42
counter market, the "Market Price" shall be the fair value thereof determined
jointly by the Company and the Registered Holders of Warrants representing a
majority of the Warrant Stock purchasable upon exercise of all the Warrants
then outstanding; provided that if such parties are unable to reach agreement
within a reasonable period of time, such fair value shall be determined by an
appraiser jointly selected by the Company and the Registered Holders of
Warrants representing a majority of the Warrant Stock purchasable upon exercise
of all the Warrants then outstanding. The determination of such appraiser shall
be final and binding on the Company and the Registered Holders of the Warrants,
an. d the fees and expenses of such appraiser shall be paid by the Company.
"Options" means any rights or options to subscribe for or
purchase Common Stock or Convertible Securities.
"Organic Change" means any recapitalization, reorganization,
reclassification, consolidation, merger, sale of all or substantially all of
the Company's assets or other transaction, in each case, which is effected in
such a way that the holders of Common Stock are entitled to receive (either
directly or upon subsequent liquidation) stock, securities or assets with
respect to or in exchange for Common Stock.
"Person" means an individual, a partnership, a joint venture,
a corporation, a limited liability company, a trust, an unincorporated
organization and a government or any department or agency thereof.
"Purchase Rights" means any Options, Convertible Securities
or rights to purchase stock, warrants, securities or other property pro rata to
the record holders of any class of Common Stock.
"Warrant Stock" means shares of the Company's Common Stock;
provided that if there is a change such that the securities issuable upon
exercise of the Warrant are issued by an entity other than the Company or there
is a change in the type or class of securities so issuable, then the term
"Warrant Stock" shall mean one share of the security issuable upon exercise of
the Warrant if such security is issuable in shares, or shall mean the smallest
unit in which such security is issuable if such security is not issuable in
shares.
Other capitalized terms used in this Warrant but not defined
herein shall have the meanings set forth in the Purchase Agreement.
7. NO VOTING RIGHTS; LIMITATIONS OF LIABILITY. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a stockholder
of the Company. No provision hereof, in the absence of affirmative action by
the Registered Holder to purchase Common Stock, and no enumeration herein of
the rights or privileges of the Registered Holder shall give rise to any
liability of such holder for the Exercise Price of Common Stock acquirable by
exercise hereof or as a stockholder of the Company.
8. WARRANT TRANSFERABLE. Subject to the transfer conditions referred to
in the legend endorsed hereon, this Warrant and all rights hereunder are
transferable, in whole or in part, without charge to the Registered Holder,
upon surrender of this Warrant with a properly executed Assignment (in the form
of Exhibit II hereto) at the principal office of the Company.
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9. WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This Warrant is
exchangeable, upon the surrender hereof by the Registered Holder at the
principal office of the Company, for new Warrants of like tenor representing in
the aggregate the rights hereunder, and each of such new Warrants shall
represent such portion of such rights as is designated by the Registered Holder
at the time of such surrender. The date the Company initially issues this
Warrant shall be deemed to be the "Date of Issuance" hereof regardless of the
number of times new certificates representing the unexpired and unexercised
rights formerly represented by this Warrant shall be issued. All Warrants
representing portions of the rights hereunder are referred to herein as the
"Warrants."
10. REPLACEMENT. Upon receipt of evidence reasonably satisfactory to the
Company (an affidavit of the Registered Holder shall be satisfactory) of the
ownership and the loss, theft, destruction or mutilation of any certificate
evidencing this Warrant, and in the case of any such loss, theft or
destruction, upon receipt of indemnity reasonably satisfactory to the Company
(provided that if the holder is a financial institution or other institutional
investor with capital and surplus in excess of three times the value of the
Common Stock that can be purchased upon exercise of this Warrant, such holder's
agreement shall be satisfactory), or, in the case of any such mutilation upon
surrender of such certificate, the Company shall (at its expense) execute and
deliver in lieu of such certificate a new certificate of like kind representing
the same rights represented by such lost, stolen, destroyed or mutilated
certificate and dated the date of such lost, stolen, destroyed or mutilated
certificate.
11. NOTICES. Except as otherwise expressly provided herein, all notices
referred to in this Warrant shall be in writing and shall be delivered
personally, sent by reputable overnight courier service (charges prepaid) or
sent by registered or certified mail, return receipt requested, postage prepaid
and shall be deemed to have been given when so delivered, sent or deposited in
the U.S. Mail (i) to the Company, at its principal executive offices and (ii)
to the Registered Holder of this Warrant, at such holder's address as it
appears in the records of the Company (unless otherwise indicated by any such
holder).
12. AMENDMENT AND WAIVER. Except as otherwise provided herein, the
provisions of the Warrants may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed
by it, only if the Company has obtained the written consent of the Registered
Holders of Warrants representing at least 66-2/3% of the shares of Warrant
Stock obtainable upon exercise of the Warrants; provided that no such action
may change the Exercise Price of the Warrants or the number of shares or class
of stock obtainable upon exercise of each Warrant without the written consent
of the Registered Holders of Warrants representing at least 85% of the shares
of Warrant Stock obtainable upon exercise of the Warrants.
13. DESCRIPTIVE HEADINGS; GOVERNING LAW. The descriptive headings of the
several Sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. All issues and questions
concerning the construction, validity, enforcement and interpretation of this
Warrant shall be governed by, and construed in accordance with, the laws of the
State of Georgia, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Georgia or any other jurisdiction)
that would cause the application of the domestic substantive laws of any
jurisdiction other than the State of Georgia.
- 10 -
44
IN WITNESS Whereof, the Company has caused this Warrant to be signed and
attested by its duly authorized officers under its corporate seal and to be
dated the Date of Issuance hereof
PREFERRED NETWORKS, INC.
By
-----------------------------
Its
----------------------------
[Corporate Seal]
Attest:
-----------------------------------
Title:
-----------------------------
- 11 -
45
EXHIBIT I
EXERCISE AGREEMENT
To: Dated:
The undersigned, pursuant to the provisions set forth in the
attached Warrant (Certificate No. W-B[ ]), hereby agrees to subscribe for the
purchase of___________ shares of the Common Stock covered by such Warrant and
makes payment herewith in full therefor at the price per share provided by such
Warrant.
Payment shall be made by (check one of the following):
_____ 1. Delivery of $________ transmitted hereby by check.
_____ 2. Delivery of stock certificate no(s). ____________
and surrender of____ shares of the Company's _________ stock evidenced thereby
having a Market Price on the date hereof of $_______ (computed in accordance
with the definition of Market Price set forth in Section 7 of the Warrant)(i.e.
a "cashless" exercise).
_____ 3. Delivery of the Company's _______ Note in the
aggregate principal amount of $_______ and surrender of $_______ in principal
amount thereof, plus accrued and unpaid interest in the amount of $________
having a Market Price on the date hereof of $___________ (computed in
accordance with the definition of Market Price set forth in Section
7 of the Warrant)(i.e. a "cashless" exercise).
_____ 4. Surrender of_________ shares of Warrant Stock,
exerciseable under Warrant No. having a Market Price on the date hereof of
$_________ (computed in accordance with the definition of Market Price set
forth in Section 6 of the Warrant)(i.e., a net issuance exercise).
Signature
-------------------------
Address
---------------------------
- 12 -
46
EXHIBIT II
ASSIGNMENT
FOR VALUE RECEIVED, _____________________________ hereby
sells, assigns and transfers all of the rights of the undersigned under the
attached Warrant (Certificate No. W-B[ ]) with respect to the number of shares
of the Common Stock covered thereby set forth below, unto:
Names of Assignee Address No. of Shares
Signature
----------------------
----------------------
Witness
------------------------
- 13 -
47
Exhibit C
ARTICLES OF AMENDMENT
OF
PREFERRED NETWORKS, INC.
I.
The name of the corporation, which was organized under the Georgia
Business Corporation Code, is "Preferred Networks, Inc."
II.
The amendment adopted is to amend Article III of the Articles of
Incorporation of the Corporation to create a new series of Preferred Stock of
the Corporation, designated as Class B Senior Redeemable Preferred Stock, by
adding the following to the existing Article III:
The Board of Directors of the Corporation hereby authorizes
the issuance of up to 5,500,000 shares of Preferred Stock, designated
Class B Senior Redeemable Preferred Stock (the "Class B Preferred
Stock"), which shall have the following rights, preferences, powers,
privileges, restrictions, qualifications, and limitations:
1. DIVIDENDS. The holders of the Class B Preferred
Stock shall be entitled to receive, out of funds legally available
therefor, dividends at a rate per annum of fifteen percent (15%) on
the liquidation value of $1.50 per share (as calculated in accordance
with the provisions of this Section 1, the "Accruing Dividends").
Accruing Dividends shall accrue from day to day, beginning on the date
of issuance of the Class B Preferred Stock and continue through the
date the Liquidation Preference Payments (as defined below) on the
Class B Preferred Stock are paid in full in cash. Accruing Dividends
shall accrue whether or not declared, and whether or not there are
profits, surplus or other funds of the Corporation legally available
for the payment of dividends, shall be cumulative, and shall be
compounded annually. The Corporation shall not be obligated to declare
or pay Accruing Dividends except as set forth in Sections 2 and 4
herein.
2. LIQUIDATION, DISSOLUTION OR WINDING UP; CERTAIN
MERGERS, CONSOLIDATIONS AND ASSET SALES. In the event of any voluntary
or involuntary liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation available for distribution
to shareholders shall be paid out, prior to and in preference over any
payment in respect of the shares of Common Stock or shares of the
Corporation's Class A Redeemable Preferred Stock (the "Class A
Preferred Stock") then outstanding, as follows: each holder of Class B
Preferred Stock shall be entitled to be paid in full in cash the sum
of (i) one dollar and fifty cents ($1.50) per share of Class B
Preferred Stock held by such holder plus (ii) all Accruing Dividends
unpaid thereon (whether or not declared) and any other dividends, if
any, declared but unpaid thereon, calculated to the date payment
thereof is made (such sum payable with respect to each
48
share of Class B Preferred Stock being sometimes referred to as the
"Liquidation Preference Payments"). If upon such liquidation,
dissolution or winding up of the Corporation, whether voluntary or
involuntary, the assets to be distributed among the holders of the
Class B Preferred Stock shall be insufficient to permit payment in
full to the holders of Class B Preferred Stock of the Liquidation
Preference Payments, then the entire assets of the Corporation to be
so distributed shall be distributed ratably among the holders of Class
B Preferred Stock. Upon any such liquidation, dissolution or winding
up of the Corporation, immediately after the holders of Class B
Preferred Stock shall have been paid in full the Liquidation
Preference Payments, the remaining net assets of the Corporation
available for distribution shall be distributed first, ratably among
the holders of Class A Preferred Stock until the holders of Class A
Preferred Stock shall have received an amount equal to the
"Liquidation Preference Payments" on account of the Class A Preferred
Stock as provided in Section 2 of the Class A Terms (as defined in
Section 4.2 below), plus interest, if any, pursuant to Section 4.5 of
the Class A Terms, and second, ratably among the holders of Common
Stock. Written notice of such liquidation, dissolution or winding up,
stating a payment date, the amount of the Liquidation Preference
Payments and the place where the Liquidation Preference Payments shall
be payable, shall be delivered in person, mailed by certified or
registered mail, return receipt requested, or sent by telecopier or
telex, not less than 20 days prior to the payment date stated therein,
to the holders of record of Class B Preferred Stock, such notice to be
addressed to each such holder at its address as shown by the records
of the Corporation. The consolidation or merger of the Corporation
into or with any other entity or entities that results in the exchange
of outstanding shares of the Corporation for securities or other
consideration issued or paid or caused to be issued or paid by any
such entity or affiliate thereof (other than a merger the sole purpose
of which is to reincorporate the Corporation in a different
jurisdiction) and the sale, lease, abandonment, transfer or other
disposition by the Corporation of all or substantially all its assets
shall, unless otherwise provided in a notice signed by the holders of
not less than seventy-five percent (75%) of the then issued and
outstanding Class B Preferred Stock delivered to the Corporation on or
prior to the date of any such transaction, be deemed to be a
liquidation, dissolution or winding up of the Corporation within the
meaning of the provisions of this Section 2.
3. VOTING. 3.1 Voting. Each holder of outstanding
shares of Class B Preferred Stock shall be entitled to one vote with
respect to any and all matters presented to the shareholders of the
Corporation for their action or consideration and shall be entitled to
notice of any shareholder meetings in accordance with the
Corporation's bylaws. Except as provided by law, by the provisions of
Subsections 3.2 and 3.3 below or by the provisions establishing any
other series of Preferred Stock, holders of Class B Preferred Stock
and of any other outstanding series of Preferred Stock shall vote
together with the holders of Common Stock as a single class.
-2-
49
3.2 Directors. The holders of the Class B Preferred
Stock, voting as a separate class, shall be entitled to elect one (1)
director of the Corporation.
3.3 Restrictive Provisions. Except as expressly provided
herein or as required by law, so long as any shares of Class B
Preferred Stock remain outstanding, the Corporation shall not without
the vote of or written consent by the holders of at least two-thirds
of the then outstanding shares of Class B Preferred Stock voting as a
class:
(a) take any action that (i) directly or
indirectly amends, alters or repeals the preferences, special rights
or other powers of the Class B Preferred Stock, so as to affect
adversely the Class B Preferred Stock, including, without limiting the
generality of the foregoing, the authorization, creation or issuance
of any shares of capital stock or other securities (other than Common
Stock) with preference or priority equal or superior to the Class B
Preferred Stock or on a parity with the Class B Preferred Stock in any
regard, including, without limitation, redemption rights and the right
to receive either dividends or amounts distributable upon liquidation,
dissolution or winding up of the Corporation, or (ii) increases the
authorized number of shares of Class B Preferred Stock or (iii) causes
the issuance of any authorized but unissued shares of Class B
Preferred Stock;
(b) redeem, purchase or otherwise acquire for
consideration any shares of its capital stock (or rights, options or
warrants to purchase such shares), other than, in accordance with the
priority set forth herein with respect to the redemption of Class A
Preferred Stock and Class B Preferred Stock, (i) the Securities as
defined in the Class A Redeemable Preferred Stock Purchase Agreement
dated as of May 21, 1997 entered into between the Corporation and the
Investors set forth therein and (ii) the Class B Preferred Stock as
provided for herein;
(c) approve any material change in the line of
business of the Corporation or any Subsidiary;
(d) enter into any merger, consolidation or
amalgamation, or any recapitalization, or liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution) or convey,
sell, lease, assign, transfer or otherwise dispose of all or
substantially all of its business, assets or property;
(e) amend its Articles of Incorporation or
Bylaws, if such amendment would directly or indirectly change any
material rights, preferences, privileges or limitations provided to
the holders of Class B Preferred Stock therein, or change the size of
the Board of Directors or the procedures for meetings of the Board of
Directors and shareholders, including without limitation, notice and
quorum requirements;
-3-
50
(f) increase the dividend rate applicable to
the Class A Preferred Stock, permit Class A Preferred Stock to be
converted into Common Stock or any other equity or debt security or
instrument of the Corporation or otherwise change, directly or
indirectly, the rights, powers or preferences of the Class A Preferred
Stock in a manner that adversely affects the holders of Class B
Preferred Stock;
(g) enter into any acquisition or series of
related acquisitions involving an aggregate transaction value equal to
or greater than $5,000,000; or
(h) increase its indebtedness for borrowed
money in one or more transactions, whether or not related, in an
aggregate amount of $5,000,000 in excess of the amount of the
Corporation's existing indebtedness and availability under existing
credit facilities immediately preceding the date of initial issuance
of the Class B Preferred Stock.
4. REDEMPTION. 4.1 Voluntary Redemption. The
Corporation, at its option, may at any time redeem all but not less
than all of the Class B Preferred Stock for an amount per share equal
to the Liquidation Preference Payments on the Class B Preferred Stock
as of the date such amount is paid in full in cash.
4.2 Mandatory Redemption. On the earlier of (i) March
17, 2003 or (ii) the date as of which the Corporation proposes to
effect the redemption of the Class A Preferred Stock at the election
of the Corporation pursuant to notice given by the Corporation to the
holders of Class A Preferred Stock pursuant to Section 4.1 of the
Articles of Amendment filed June 16, 1997 creating the Class A
Preferred Stock (the "Class A Terms") or (iii) the date as of which
the Corporation is required to effect redemption of any Class A
Preferred Stock pursuant to notice given by any holder of Class A
Preferred Stock to the Corporation pursuant to Section 4.2 of the
Class A Terms (in any such case, the "Redemption Date") each holder of
Class B Preferred Stock shall be entitled to require the Corporation
to redeem all outstanding shares of Class B Preferred Stock held by
such holder, prior to the Corporation redeeming any shares of Class A
Preferred Stock or any other class or series of its outstanding
capital stock, making any other payment or distribution on account of
the Class A Preferred Stock (including, without limitation pursuant to
Section 4.5 of the Class A Terms) or any other class or series of its
outstanding capital stock, or setting aside any funds for such
purposes, at a price per share calculated as follows (in either case,
the "Redemption Price"):
(a) If the Redemption Date is on or prior to
March 17, 2001, the Redemption Price per share shall be equal to the
sum of (i) the Liquidation Preference Payments on the Class B
Preferred Stock as of the date such amount is paid in full in cash,
plus (ii) all additional Accruing Dividends that would have accrued on
the Class B
-4-
51
Preferred Stock from the date of such redemption through March 17,
2001 had such redemption not occurred.
(b) If the Redemption Date is after March 17,
2001, the Redemption Price per share shall be equal to the Liquidation
Preference Payments on the Class B Preferred Stock as of the date such
amount is paid in full in cash.
4.3 Redemption Mechanics. At least 60 days prior to the
Redemption Date (in the case of Section 4.2(i) or (ii) above), or, in
the case of Section 4.2(iii) above, no more than three days following
the Corporation's receipt of notice of redemption from a holder of
Class A Preferred Stock, written notice of the Redemption Date,
including a copy of any notice of redemption delivered by a holder of
Class A Preferred Stock in the case of Section 4.2(iii) (in any such
case, the "Redemption Notice") shall be delivered by the Corporation
to each holder of Class B Preferred Stock by delivery in person of the
Redemption Date. At any time on or prior to five days before the
Redemption Date (and, in the case of Section 4.2(iii) above, not less
than 10 days after delivery of the Redemption Notice, even if such
date is after the Redemption Date), written notice shall be given to
the Corporation by each holder of Class B Preferred Stock who desires
to require the Corporation to redeem shares of Class B Preferred
Stock, notifying the Corporation of such redemption and specifying the
number of shares of Class B Preferred Stock to be redeemed from such
holder. From and after the close of business on a Redemption Date,
unless there shall have been a default in the payment of the
Redemption Price, all rights of holders of Class B Preferred Stock
electing to require the Corporation to redeem the Class B Preferred
Stock held by each of them (except the right to receive the Redemption
Price) shall cease with respect to the shares to be redeemed on such
Redemption Date, and such shares shall not thereafter be transferred
on the books of the Corporation or be deemed to be outstanding for any
purpose whatsoever. If the funds of the Corporation legally available
for redemption of the Class B Preferred Stock on the Redemption Date
are insufficient to redeem the total number of Class B Preferred Stock
electing to be redeemed on such Redemption Date, the holders of such
shares shall share ratably in any funds legally available for
redemption of such shares according to the respective amounts that
would be payable to them if the full number of shares to be redeemed
on such Redemption Date were actually redeemed. The Class B Preferred
Stock required to be redeemed but not so redeemed shall remain
outstanding and entitled to all rights and preferences provided
herein. At any time thereafter when additional funds of the
Corporation are legally available for the redemption of such Class B
Preferred Stock, such funds will be used, at the end of the next
succeeding fiscal quarter, to redeem the balance of such shares, or
such portion thereof for which funds are then legally available, on
the basis set forth above.
4.4 Redeemed or Otherwise Acquired Shares to be Retired.
Any shares of Class B Preferred Stock redeemed pursuant to this
Section 4 or otherwise acquired by the
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52
Corporation in any manner whatsoever shall be canceled and shall not
under any circumstances be reissued; and the Corporation may from time
to time take such appropriate corporate action as may be necessary to
reduce accordingly the number of shares of authorized Class B
Preferred Stock.
4.5 Failure to Redeem. If the Corporation fails, for any
reason or for no reason, to redeem on the Redemption Date any of the
then outstanding Class B Preferred Stock elected by the holders
thereof to be redeemed in accordance with the terms and conditions of
this Section 4, eighty percent (80%) of the Accruing Dividends that
accrue from and after such Redemption Date (the "Cash Dividends")
shall be payable in cash and shall be due and payable on the first day
of each month after the Redemption Date. Cash Dividends paid by the
Corporation shall satisfy Accruing Dividends in an equal amount, and
such Accruing Dividends shall not be duplicated in determining the
Redemption Price or for any other purpose. If, as of each yearly
anniversary of the Redemption Date, the Corporation shall have failed
to pay in full the Cash Dividends for the immediately preceding
12-month period, the Redemption Price shall be recomputed on the basis
that Accruing Dividends for such 12-month period had accrued at an
annually compounding rate per annum of twenty percent (20%). If any
redemption elected by the holders of Class B Preferred Stock has not
been made in full on or before the first anniversary of the Redemption
Date, then, in addition to the rights of the holders of Class B
Preferred Stock set forth herein and arising at law or in equity, upon
the written request of the holders of two-thirds of the then
outstanding Class B Preferred Stock the Corporation shall take all
actions necessary to submit a proposal to sell capital stock or assets
of the Corporation sufficient to enable the Corporation to pay the
Redemption Price in full for stockholder approval including, without
limitation, the engagement of an investment banking firm reasonably
acceptable to the holders of two-thirds of the then outstanding Class
B Preferred Stock.
4.6 Failure to Surrender. Should any holder of Class B
Preferred Stock redeemed pursuant to this Section 4 fail to surrender
the certificate or certificates representing the shares to be
redeemed, the Corporation may transfer the money distributable upon
the redemption to a trustee for such holder in accordance with and
with the effect set forth in Section 14-2-641(b) of the Georgia
Business Corporation Code, or any successor provision.
4.7 Ranking. The Corporation shall not pay any dividend on,
redeem or make any other payment or distribution on account of (or set
aside any funds for such purpose) capital stock of any class or
series, including, without limitation, any shares of Class A Preferred
Stock (including, without limitation, making any payment pursuant to
Section 4.5 of the Class A Terms) while any shares of Class B
Preferred Stock shall remain outstanding.
-6-
53
III.
The date of the adoption of the amendment was March 16, 1998.
IV.
The amendment was duly adopted by the Board of Directors of the
Corporation in accordance with the provisions of O.C.G.A. Section 14-2-602.
* * * * *
-7-
54
DULY EXECUTED and delivered by the undersigned on March 17, 1998.
PREFERRED NETWORKS, INC.
By:
------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President
* * * * *
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Exhibit D
SECOND AMENDMENT TO
REGISTRATION RIGHTS AGREEMENT
This Second Amendment to Registration Rights Agreement (this
"Amendment") is dated as of March 17, 1998 by and among Preferred Networks,
Inc., a Georgia corporation (the "Company") and each of the Persons listed as a
Stockholder on the signature pages to this Amendment (referred to herein
collectively as the "Stockholders").
The Company and the Stockholders have entered into a Registration
Rights Agreement dated as of June 21, 1995, as amended (the "Registration
Rights Agreement"). Subsequent to entering into the Registration Rights
Agreement, the Company and the Stockholders consented to certain actions by the
Company and waived compliance with certain provisions of the Registration
Rights Agreement pursuant to that certain Consent and Waiver Agreement dated as
of September 12, 1996 and that certain Second Waiver and Consent Agreement,
dated as of November 12, 1996, and amended the Registration Rights Agreement
pursuant to that certain Amendment to Registration Rights Agreement dated as of
June 16, 1997 (the "First Amendment").
The Company and certain investors, including certain of the persons
defined as Primary Holders in the Registration Rights Agreement, are parties to
a Class B Senior Redeemable Preferred Stock Purchase Agreement dated as of
March 17, 1998 (the "1998 Purchase Agreement").
It is a condition to closing under the 1998 Purchase Agreement that
the Registration Rights Agreement be amended as set forth herein.
NOW, THEREFORE, in consideration of the premises, the mutual covenants
and agreements of the parties herein and in the Registration Rights Agreement,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereby agree as follows:
1. Defined Terms. Capitalized terms not defined in this
Amendment are used as defined in the Registration Rights Agreement, including
the First Amendment.
2. Definition of "Primary Holders". The definition of "Primary
Holders" set forth in the first paragraph of the preamble to the Registration
Rights Agreement is hereby expanded to include all persons purchasing stock and
warrants pursuant to the 1998 Purchase Agreement.
56
3. Section 1(a)(i). Section 1(a)(i) of the Registration Rights
Agreement is hereby amended by adding the following at the end thereof:
Holders of at least 33.33% of the Class B Warrant Securities shall
also be entitled to request Primary Demand Registrations, provided the
estimated aggregate offering value for all securities included in such
a registration initiated by the Class B Holders is at least
$5,000,000.
4. Section 7(f). Section 7(f) of the Registration Rights
Agreement is hereby amended to read in full as follows:
"Warrants" means the contingent stock purchase warrants
issued to the Primary Holders pursuant to the Purchase Agreement, the stock
purchase warrants issued to the Primary Holders pursuant to Sections 1.3 and
1.4 of the 1997 Purchase Agreement, and the stock purchase warrants issued to
the Class B Holders pursuant to the 1998 Purchase Agreement.
5. Section 7. Section 7 is amended by adding the following new
defined terms:
"Class B Holder" means a holder of Class B Warrant Securities.
"Class B Warrant Securities" means the stock purchase
warrants issued pursuant to the 1998 Purchase Agreement and Common Stock issued
upon the exercise of such warrants.
6. No Other Effect. Except as specifically set forth in this
Amendment, the Registration Rights Agreement shall remain in full force and
effect.
7. Counterparts. This Amendment may be executed in two or more
counterparts, each of which shall be an original and each of which shall
constitute one and the same amendment. Any party may deliver an executed copy
of this Amendment by facsimile transmission to the other parties and such
delivery shall have the same force and effect as delivery of a manually signed
copy of this Amendment.
[signatures on following pages]
2
57
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first written above.
THE COMPANY: PREFERRED NETWORKS, INC.
March ____, 1998 By:
---------------------------------------
Its:
--------------------------------------
THE STOCKHOLDERS:
FLEET EQUITY PARTNERS VI, L.P.
By: Fleet Growth Resources II, Inc.
Its: General Partner
March ____, 1998 By:
-----------------------------
Its:
-----------------------------
Address: ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
FLEET VENTURE RESOURCES, INC.
March ____, 1998 By:
---------------------------------------
Its:
--------------------------------------
Address: ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
3
58
▇▇▇▇▇▇▇▇ PARTNERS II, L.P.
By: Silverado II, L.P.
Its: General Partner
By: Silverado II Corp.
Its: General Partner
March ____, 1998 By:
----------------------
Its:
----------------------
Address: ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ALTA COMMUNICATIONS, VI, L.P.
By: Alta Communications VI Management
Partners, L.P.
Its: General Partner
March ____, 1998 By:
--------------------------------
Its:
--------------------------------
Address: ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ALTA COMM S BY S, LLC
March ____, 1998 By:
-----------------------------------------
Its:
-----------------------------------------
Address: ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
4
59
CENTENNIAL FUND IV, L.P.
By: Centennial Holdings IV, L.P.
Its: General Partner
March ____, 1998 By:
----------------------------
Its:
----------------------------
Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SAUGATUCK CAPITAL COMPANY
LIMITED PARTNERSHIP III
By: Greyrock Partners
Its: General Partner
March ____, 1998 By:
----------------------------
Its:
----------------------------
Address: ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
5
60
PRIMUS CAPITAL FUND III
LIMITED PARTNERSHIP
By: Primus Venture Partners III
Limited Partnership
Its: General Partner
By: Primus Venture Partners, Inc.
Its: General Partner
March ____, 1998 By:
------------------------
Its:
------------------------
Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
PNC CAPITAL CORP.
March ____, 1998 By:
----------------------------------------
Its:
----------------------------------------
Address: One PNC Plaza, 19th Floor
▇▇▇ ▇▇▇ ▇▇▇ & ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇
March ____, 1998 By:
----------------------------------------
Address: ▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
6
61
▇▇▇▇▇ ▇. ▇▇▇▇▇
March ____, 1998 By:
-------------------------------------
Address: ▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ INVESTMENT COMPANY
March ____, 1998 By:
-------------------------------------
Address: Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇ POSNER
March ____, 1998 By:
-------------------------------------
Address: ▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
March ____, 1998 By:
-------------------------------------
Address: ▇▇▇▇ ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
March ____, 1998 By:
-------------------------------------
Address: ▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
7
62
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
March ____, 1998 By:
------------------------------------
Address: ▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇
March ____, 1998 By:
------------------------------------
Address: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ , ▇▇ ▇▇▇▇▇
ADVANCED TECHNOLOGY
DEVELOPMENT FUND II
March ____, 1998 By:
------------------------------------
Its:
------------------------------------
Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
March ____, 1998 ----------------------------------------
Address: ▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
8
63
▇▇▇▇▇▇ FINANCIAL CORP.
March ____, 1998 By:
------------------------------------
Its:
------------------------------------
Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
DIGITAL COMMUNICATIONS
March ____, 1998 By:
------------------------------------
Its:
------------------------------------
Address: ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ TRUST
March ____, 1998 By:
------------------------------------
Its:
------------------------------------
Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
TRUST B. UNDER AGREEMENT DATED
12/31/76 WITH I. ▇▇▇▇▇▇ ▇▇▇▇▇▇
March ____, 1998 By:
------------------------------------
Its:
------------------------------------
Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
9
64
▇▇▇▇▇▇ ▇. ▇▇▇
March ____, 1998
-------------------------------------
Address: 2700 International Tower
Peachtree Center
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
March ____, 1998
-------------------------------------
Address: 2700 International Tower
Peachtree Center
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
HUNTER ▇. ▇▇▇▇▇▇
March ____, 1998
-------------------------------------
Address: 2700 International Tower
Peachtree Center
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
March ____, 1998
-------------------------------------
Address: 2700 International Tower
Peachtree Center
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
10
65
▇▇▇ ▇. ▇▇▇▇▇
March ____, 1998
-------------------------------------
Address: 2700 International Tower
Peachtree Center
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
March ____, 1998
-------------------------------------
Address: 2700 International Tower
Peachtree Center
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III
March ____, 1998
-------------------------------------
Address: ▇▇▇ ▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
March ____, 1998
-------------------------------------
Address: ▇▇▇ ▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
March ____, 1998
-------------------------------------
Address: ▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇. ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
11
66
▇▇▇▇▇ ▇. ▇▇▇▇▇
March ____, 1998
--------------------------------------
Address: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
March ____, 1998
--------------------------------------
Address: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
RTM, INC.
March ____, 1998 By:
----------------------------------
Its:
----------------------------------
Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
March ____, 1998
--------------------------------------
Address: ▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
March ____, 1998
--------------------------------------
Address: ▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
12
67
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
March ____, 1998
-------------------------------------
Address: ▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
March ____, 1998
-------------------------------------
Address: ▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
March ____, 1998
-------------------------------------
Address: ▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇ COMMUNICATIONS, INC.
March ____, 1998 By:
---------------------------------
Its:
---------------------------------
Address: ▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
13
68
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
March ____, 1998
--------------------------------------
Address: ▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
March ____, 1998
--------------------------------------
Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, #▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
March ____, 1998
--------------------------------------
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
AZURE LIMITED PARTNERSHIP I
March ____, 1998 By:
----------------------------------
Its:
----------------------------------
Address: ▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
3-2-1 INVESTMENT COMPANY
March ____, 1998 By:
----------------------------------
Its:
----------------------------------
Address: ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, #▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
14
69
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
March ____, 1998
---------------------------------------
Address: ▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
TRANSIT COMMUNICATIONS,
U.S.A., L.P.
March ____, 1998 By:
-----------------------------------
Its:
-----------------------------------
Address: ▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
* * *
15