1
EXHIBIT 10.5.4
STATE COMMUNICATIONS, INC.
----------------------------------
PREFERRED STOCK PURCHASE AGREEMENT
4,214,703 SHARES
OF
SERIES C CONVERTIBLE PREFERRED STOCK
(ROUND 2)
----------------------------------
DATED: MARCH 20, 2000
2
TABLE OF CONTENTS
PAGE
ARTICLE I -- SUBSCRIPTION FOR THE PREFERRED SHARES...................................................2
1.1 Purchase and Sale......................................................................2
1.2 Closing................................................................................2
1.3 Separate Agreements....................................................................2
1.4 Use of Proceeds........................................................................3
ARTICLE II -- REPRESENTATIONS AND WARRANTIES OF THE COMPANY..........................................3
2.1 Organization and Standing..............................................................3
2.2 Corporate Power........................................................................3
2.3 Validity; Binding Obligation...........................................................4
2.4 Financial Statements...................................................................4
2.5 Consents...............................................................................4
2.6 Capitalization.........................................................................5
2.7 Validity and Rights of Preferred Shares................................................6
2.8 Registration Rights....................................................................6
2.9 Securities Laws........................................................................6
2.10 Absence of Undisclosed Liabilities....................................................6
2.11 Subsidiaries..........................................................................6
2.12 Litigation and Claims.................................................................6
2.13 Title to Properties...................................................................7
2.14 Intellectual Property Rights..........................................................7
2.15 Compliance with Other Instruments.....................................................8
2.16 Compliance with Law...................................................................8
2.17 Employees.............................................................................8
2.18 Employee Benefit Plans................................................................8
2.19 Compliance with Environmental Laws....................................................9
2.20 Insurance.............................................................................9
2.21 Material Contracts and Agreements.....................................................9
2.22 Taxes.................................................................................11
2.23 Investment Company....................................................................12
2.24 Labor Relations.......................................................................12
2.25 No Conflict of Interest...............................................................12
2.26 Small Business Matters................................................................12
2.27 Year 2000 Compliance..................................................................13
2.28 Full Disclosure.......................................................................13
ARTICLE III -- REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS......................................13
3.1 Organization...........................................................................13
3.2 Power..................................................................................13
3.3 Binding Obligation.....................................................................13
3.4 Consents...............................................................................14
3.5 Investment Purposes....................................................................14
3.6 Accredited Investor....................................................................15
3.7 Legend on Certificates.................................................................15
ARTICLE IV -- CONDITIONS TO THE PURCHASERS' OBLIGATIONS..............................................15
4.1 Delivery of Certificates...............................................................15
4.2 Representations and Warranties, Performance of Obligations.............................15
4.3 No Material Effect.....................................................................15
4.4 Litigation.............................................................................15
-i-
3
4.5 Applicable Law.........................................................................15
4.6 Articles of Amendment..................................................................15
4.8 Consents...............................................................................15
4.9 Certification of Satisfaction of Conditions............................................16
4.10 Opinion of Counsel....................................................................16
4.11 Performance of Obligations............................................................16
4.12 Taxes.................................................................................16
4.13 Fees and Disbursements of Purchasers' Counsel.........................................16
4.14 Good Standing Certificates............................................................16
4.15 No Liens..............................................................................16
4.16 SBA Documents and Information.........................................................16
ARTICLE V -- CONDITIONS TO THE COMPANY'S OBLIGATION..................................................17
5.1 Tender by Purchasers...................................................................17
5.2 Representations and Warranties; Performance of Covenants...............................17
5.3 Stockholders' Agreement; Registration Rights Agreement.................................17
5.4 Applicable Law.........................................................................17
5.5 Consents...............................................................................17
5.6 Performance of Obligations.............................................................17
ARTICLE VI -- ADDITIONAL COVENANTS OF THE COMPANY....................................................17
6.1 Securities Law Filings.................................................................17
6.2 Transactions with Substantial Holders..................................................18
6.3 Business and Financial Covenants.......................................................18
6.8 Repurchase of Preferred Shares.........................................................20
6.4 Corporate Existence, Business, Maintenance, Insurance..................................20
6.5 Payment of Taxes; ERISA................................................................21
6.6 Books and Records, Compliance..........................................................21
6.7 Directors' and Officers' Liability Insurance...........................................21
6.9 Compensation...........................................................................22
6.10 Key Person Life Insurance.............................................................22
6.11 SBA Requirements......................................................................22
ARTICLE VII -- INFORMATION...........................................................................22
7.1 Audited Annual Financial Statements....................................................22
7.2 Quarterly Unaudited Financial Statements...............................................22
7.3 Monthly Unaudited Financial Statements.................................................23
7.4 Management's Analysis..................................................................23
7.5 Budgets................................................................................23
7.6 Inspection.............................................................................23
7.7 Other Information......................................................................24
ARTICLE VIII -- EXPENSES.............................................................................25
8.2 Legal Fees and Other Expenses..........................................................25
8.3 Finder's Fee...........................................................................25
8.4 Other Expenses.........................................................................25
ARTICLE IX -- MISCELLANEOUS..........................................................................25
9.1 Survival...............................................................................25
9.2 Indemnification........................................................................25
9.3 Transfer and Termination of Rights.....................................................26
9.4 Binding Effect.........................................................................26
9.5 Amendment..............................................................................26
9.6 Governing Law..........................................................................27
9.7 Notices................................................................................27
9.8 Headings...............................................................................27
9.9 Regulatory Requirements................................................................27
9.10 Counterparts..........................................................................27
-ii-
4
LIST OF EXHIBITS AND SCHEDULES
EXHIBIT A Master Amendment Agreement
SCHEDULE I List of Purchasers
SCHEDULE 2.1(b) Jurisdictions Where Company is Qualified
SCHEDULE 2.4(a) Financial Statements
SCHEDULE 2.4(b) Changes Since Last Financial Statements
SCHEDULE 2.6(b) Stock Ledger
SCHEDULE 2.10 Liabilities
SCHEDULE 2.13 Title to Properties
SCHEDULE 2.14 Intellectual Property
SCHEDULE 2.18 Employee Benefit Plans
SCHEDULE 2.20 Insurance
SCHEDULE 2.21 Material Contracts and Agreements
SCHEDULE 2.24 Labor Relations
SCHEDULE 2.25 No Conflict of Interest
-iii-
5
PREFERRED STOCK PURCHASE AGREEMENT
4,214,703 SHARES OF
SERIES C CONVERTIBLE PREFERRED STOCK OF
STATE COMMUNICATIONS, INC.
This PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is made and
entered into on this 20th day of March, 2000 by and among STATE COMMUNICATIONS,
INC., a South Carolina corporation (the "Company"), and each of the purchasers
named in Schedule I attached hereto (collectively, the "Purchasers" and each,
individually, a "Purchaser").
W I T N E S S E T H:
WHEREAS, the Purchasers desire to purchase from the Company, and the
Company desires to issue and sell to the Purchasers, 4,214,703 shares of Series
C Convertible Preferred Stock of the Company (the "Preferred Shares") on the
terms and conditions hereinafter set forth for a purchase price of $4.25 per
share, constituting an aggregate purchase price of $17,912,487.75.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the parties agree as follows:
ARTICLE I
SUBSCRIPTION FOR THE PREFERRED SHARES
1.1 Purchase and Sale. Subject to the terms and conditions set forth
herein, each Purchaser hereby subscribes for and agrees to purchase from the
Company, and the Company hereby agrees to issue and sell to each Purchaser, on
the Closing Date (as hereinafter defined), the number of Preferred Shares set
forth opposite such Purchaser's name in column A of Schedule I, for a purchase
price of $4.25.
1.2 Closing. The closing of the purchase and sale of the Preferred
Shares (the "Closing") shall be held not later than five business days following
the satisfaction or waiver of the conditions set forth in Articles IV and V or
such other date as the parties shall mutually agree upon (the "Closing Date"),
at the offices of ▇▇▇▇▇▇ & Bird LLP, 1201 West Peachtree Street, Atlanta,
Georgia, or at such other mutually acceptable place. On the Closing Date, the
Company shall deliver to each Purchaser duly issued stock certificates
representing the number of Preferred Shares to be purchased by such Purchaser.
Each Purchaser shall pay the cash purchase price set forth opposite such
Purchaser's name in Column B of Schedule I for the Preferred Shares by wire
transfer of immediately available funds to an account designated by the Company.
1.3 Separate Agreements. The purchases by the Purchasers hereunder
shall be separate and several transactions. The obligations of each Purchaser
hereunder shall be several and not joint, and this Agreement shall for all
purposes be construed and deemed to be a separate agreement between the Company
and each Purchaser, acting severally and not jointly, with the same effect as
though a
-1-
6
separate agreement with each Purchaser to the effect herein provided were hereby
entered into between the Company and each Purchaser.
1.4 Use of Proceeds. The proceeds of the sale of the Preferred Shares
will be used by the Company for general corporate purposes as determined
appropriate by the Board of Directors of the Company.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each Purchaser as follows:
2.1 Organization and Standing.
(a) Each of the Company and the Subsidiaries (as defined in
Section 2.11) is a corporation duly organized, validly existing and in good
standing under the laws of the State of South Carolina.
(b) The Company and the Subsidiaries are currently engaged in
the business of providing local exchange and long distance telecommunication
services to residential customers and the small business market (the
"Business"). Each of the Company and the Subsidiaries is qualified to do
business as a foreign corporation in each jurisdiction in which the failure to
be so qualified would have a material adverse effect on the ability of the
Company or any Subsidiary to conduct the Business or which would impair the
Company's ability to perform its obligations in any material respect under the
Documents, as such term is defined in Section 2.2 hereof (a "Material Adverse
Effect"). Schedule 2.1(b) identifies each jurisdiction in which the Company and
each Subsidiary is currently qualified to do business as a foreign corporation.
(c) The Company has delivered to Purchasers' counsel true and
complete copies of the Articles of Incorporation and Bylaws of the Company,
including all amendments thereto, certified by the Secretary as true and in full
force and effect on the Closing Date. The Articles of Incorporation and Bylaws
of the Company will not be amended prior to the Closing Date.
(d) The Company and the Subsidiaries have all corporate power
and all governmental licenses, authorizations, consents and approvals required
to carry on the Business as now being conducted and necessary to own, operate
and lease their properties and assets.
2.2 Corporate Power. The Company has the requisite corporate power to
execute and deliver this Agreement, and the Master Amendment Agreement (relating
to the Registration Rights Agreement, dated February 1, 2000, and the Second
Amended and Restated Stockholders' Agreement, dated February 1, 2000) in
substantially the form attached hereto as Exhibit A (the "Master Amendment
Agreement") (this Agreement and the Master Amendment shall be collectively
referred to herein as the "Documents") and to perform its obligations hereunder
and thereunder.
-2-
7
2.3 Validity; Binding Obligation. This Agreement has been duly
authorized, executed and delivered by the Company and constitutes a valid and
binding agreement of the Company, enforceable against it in accordance with its
terms. The other Documents have each been duly authorized by the Company and,
when executed and delivered by the Company and the other parties named therein,
will constitute valid and binding agreements of the Company, enforceable against
the Company in accordance with their respective terms. The issuance, sale and
delivery of the Preferred Shares have been, or prior to the Closing Date will
be, duly authorized by all necessary corporate action by the Company.
2.4 Financial Statements. (a) Schedule 2.4(a) contains a true and
complete copy of:
(i) the audited balance sheet of the Company for the
year ended December 31, 1998 and the related audited
statements of operations, stockholders' equity and cash flows
of the Company for the year ended December 31, 1998; and
(ii) the unaudited consolidated balance sheet of the
Company for the ten-month period ended October 31, 1999 and
the related unaudited consolidated statements of operations,
stockholders' equity and cash flows of the Company for such
period (the financial statements referred to in clauses (i)
and (ii) of this Section 2.4(a) being collectively referred to
as the "Financial Statements").
(b) The Financial Statements have been prepared in accordance
with generally accepted accounting principles (except that such unaudited
financial statements do not contain all of the required footnotes or normal
recurring year-end adjustments) applied on a consistent basis during the
respective periods covered thereby. The Financial Statements are correct and
complete and present fairly the financial position of the Company at the date of
the balance sheets included therein and the results of operations and cash flows
of the Company for the respective periods covered by the statements of
operations and cash flows included therein. Except as set forth on Schedule 2.4
(b), since the date of the Financial Statements (i) there has been no change in
the assets, liabilities or financial condition of the Company from that
reflected in the Financial Statements, other than changes in the ordinary course
of business which in the aggregate have not been materially adverse, and (ii)
none of the business, prospects, financial condition, operations, property or
affairs of the Company has been materially and adversely affected by any
occurrence or development, individually or in the aggregate, whether or not
covered by insurance.
2.5 Consents. No consent, approval or authorization of, or
qualification, designation, declaration or filing with, or notice to any
governmental authority on the part of the Company is required in connection with
(i) the valid execution and delivery of the Documents, and (ii) the offer, sale
or issuance of the Preferred Shares (and the Common Stock issuable upon
conversion of the Preferred Shares), except (A) the filing of a Form D with the
Securities and Exchange Commission, (B) the qualification (or taking such action
as may be necessary to secure an exemption from qualification, if available) of
the offer and sale of the Preferred Shares (and the Common Stock issuable upon
conversion of the Preferred Shares) under any applicable state securities laws,
which qualification, if required, will be accomplished in a timely manner prior
to or promptly upon
-3-
8
completion of the Closing, as required by such laws and (C) such consents,
approvals and authorizations as have been obtained by the Company prior to
Closing.
2.6 Capitalization. (a) The authorized capital stock of the Company
consists of 100,000,000 shares of Common Stock, $.001 par value (the "Common
Stock"), and 50,000,000 shares of Preferred Stock, $.0l par value (the
"Preferred Stock"), 4,791,668 of which have been designated as Series A
Convertible Preferred Stock (the "Series A Preferred Stock"), 14,133,329 of
which have been designated as Series B Convertible Preferred Stock (the "Series
B Preferred Stock") and 15,776,471 of which have been designated Series C
Convertible Preferred Stock (the "Series C Preferred Stock"). Immediately after
the Closing, (i) 11,783,782 shares of Common Stock will be issued and
outstanding, (ii) 4,711,672 shares of Series A Preferred Stock will be issued
and outstanding, (iii) 13,866,663 shares of Series B Preferred Stock will be
issued and outstanding, (iv) 15,776,471 shares of Series C Preferred Stock will
be issued and outstanding, (v) 7,864,850 options, warrants or other rights to
purchase or otherwise acquire shares of Common Stock will be outstanding, and
(vi) such number of shares of Common Stock as shall be necessary to effect the
conversion of the Preferred Stock will be reserved for future issuance upon
conversion of Preferred Stock. Immediately after the Closing upon receipt of the
Purchase Price, all such issued and outstanding shares of capital stock of the
Company will be duly authorized and validly issued and outstanding, fully paid
and nonassessable.
(b) Schedule 2.6(b) contains a true and correct copy of the
Company's current stock transfer ledger reflecting the record holders of the
Company's equity securities and the number of shares held by each. Each of
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (individually, a "Founder" and
collectively, the "Founders") is the lawful owner, of record and beneficially,
of the number of shares of Common Stock set forth opposite the name of each
Founder on Schedule 2.6(b). Each Founder has good and marketable title to, and
all other incidents of record and beneficial ownership of, such shares, free and
clear of any liens, claims and encumbrances, other than the restrictions set
forth in the Stockholders' Agreement or the Liquidation Proceeds Agreements
attached to Schedule 2.6(b) (the "Liquidation Agreements").
(c) Except as set forth in paragraph (a) above or as disclosed
on Schedule 2.6(b), immediately after the Closing, there will be no outstanding
(i) securities or securities convertible into or exchangeable for shares of
capital stock of the Company, (ii) options, warrants or other rights to purchase
or otherwise acquire from the Company shares of such capital stock, or
securities convertible into or exchangeable for shares of such capital stock, or
(iii) contracts, agreements or commitments relating to the issuance by the
Company of any shares of such capital stock, any such convertible or
exchangeable securities, or any such options, warrants or other rights. Except
for the Stockholders' Agreement, the Liquidation Agreements or the Investment
Agreement by and among Seruus Telecom Fund, L.P., the Company and certain
individuals named therein, dated February 19, 1998, there are no voting trusts,
voting agreements, proxies or other agreements, instruments or understandings
with respect to the voting of the capital stock of the Company to which the
Company or, to the Company's knowledge, any of its stockholders is a party.
(d) The Company has reserved, and at all times from and after
the date hereof will keep reserved, free from preemptive rights, out of its
authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the Preferred Shares, sufficient shares of Common
Stock to provide for the conversion of all Preferred Shares.
-4-
9
2.7 Validity and Rights of Preferred Shares. The Preferred Shares, when
issued to the Purchasers pursuant to this Agreement, will be validly issued,
fully paid and nonassessable, and will have the designations, preferences,
limitations, and relative rights set forth in the Articles of Incorporation. Any
and all shares of Common Stock issued upon conversion of the Preferred Shares
(the "Conversion Shares"), when issued, will be validly issued, fully paid and
nonassessable.
2.8 Registration Rights. Except for the rights granted under (i) the
Registration Rights Agreement, dated February 1, 2000, between the Company and
certain stockholders (ii) the Registration Rights Agreement dated July 29, 1999
between the Company and certain stockholders, (iii) the Registration Rights
Agreement dated October 28, 1998 between the Company and certain stockholders,
(iv) Amended and Restated Registration Rights Agreement dated February 19, 1998
between the Company and Seruus Telecom Fund, L.P., as amended on February 1,
1999, and (v) the Registration Rights Agreement dated May 27, 1999 between the
Company and Nortel Networks Inc., no person or entity has any right to cause the
Company to effect the registration under the Securities Act of 1933, as amended
(the "Securities Act"), of any shares of its capital stock.
2.9 Securities Laws. Subject to the accuracy of the representations and
warranties of the Purchasers contained in Article III hereof, the offering, sale
and purchase of the Preferred Shares contemplated hereby are exempt from
registration under the Securities Act. The issuance of all other shares of
capital stock of the Company on or before the date hereof is being or has been
made in compliance with the Securities Act and all applicable state securities
or blue sky laws. All offering documents used and oral disclosure made in
connection with the offer or sale of any of the Company's securities prior to
the date hereof have been correct in all material respects and have not
contained any untrue statements of a material fact or omitted to state a
material fact necessary in order to make the statements contained therein not
misleading.
2.10 Absence of Undisclosed Liabilities. Except as set forth on
Schedule 2.10, as of the date hereof, neither the Company nor any Subsidiary has
a material liability or obligation of any nature (whether accrued, contingent,
absolute or otherwise) or any material loss contingency (as such term is used in
the Statement of Accounting Standards No. 5 issued by the Financial Accounting
Standards Board in March 1975), which was not adequately disclosed or provided
for in the Financial Statements.
2.11 Subsidiaries. Except as set forth in Schedule 2.11, the Company
has no Subsidiaries (as hereinafter defined). The Company does not own, or have
the right to acquire, any securities or other equity or ownership interest in
any corporation, partnership, limited liability company, association or other
entity. "Subsidiary" means a corporation, partnership, limited liability company
or any other form of legal entity of which the Company, at the time in respect
of which such term is used, owns directly, or controls with power to vote,
directly or indirectly through one or more Subsidiaries, more than fifty percent
(50%) of the voting securities.
2.12 Litigation and Claims. Except as set forth in Schedule 2.12, there
are no actions at law, suits in equity or other proceedings or investigations in
any court, tribunal or by or before any other governmental or public authority
or agency or any arbitrator or arbitration panel or any governmental or private
third-party insurance agency, pending or, to the knowledge of the Company,
threatened against or affecting the Company or that would question the validity
or enforceability of this
-5-
10
Agreement, the Documents, or any of the transactions contemplated hereby and
thereby. The Company is not in default with respect to any order, writ,
injunction, judgment or decree of any court or other governmental or public
authority or agency or arbitrator or arbitration panel.
2.13 Title to Properties. Each of the Company and the Subsidiaries has
good and marketable title to its properties and assets and has good title to all
its respective leasehold interests, in each case subject to no mortgage, pledge,
lien, encumbrance or charge, other than as set forth on Schedule 2.13 hereto.
Schedule 2.13 accurately lists with respect to the personal property owned (or
purported to be owned) by the Company or the Subsidiaries (i) each financing
statement, deed, agreement or other instrument which has been filed, recorded or
registered pursuant to any United States federal, state or local law or
regulation that names the Company or a Subsidiary as debtor or lessee or as the
grantor or the transferor of the interest created thereby, and (ii) as to each
such financing statement, deed, agreement or other instrument, the names of the
debtor, lessee, grantor or transferor and the secured party, lessor, grantee or
transferee and the name of the jurisdiction in which such financing statement,
deed, agreement or other instrument has been filed, recorded or registered.
Except as set forth on Schedule 2.13, neither the Company nor any Subsidiary has
signed any agreement or instrument authorizing any secured party thereunder to
file any such financing statement, deed, agreement or other instrument.
2.14 Intellectual Property Rights. Each of the Company and the
Subsidiaries owns or possesses the rights to use, free from any restrictions or
conflicts with the rights of others claiming through the Company or Subsidiary,
all copyrights, trademarks, service marks, trade names, patents and intellectual
property licenses, and all rights with respect to the foregoing, necessary for
the conduct of the Business as now conducted and as proposed to be conducted,
and is in compliance in all material respects with the terms and conditions, if
any, of all such copyrights, trademarks, service marks, trade names, patents and
intellectual property licenses and the terms and conditions of any agreements
relating thereto. Except as set forth on Schedule 2.14, there are no outstanding
options, licenses, or material agreements of any kind relating to the foregoing,
nor is the Company or any Subsidiary bound by or a party to any options,
licenses or agreements of any kind with respect to the patents, trademarks,
service marks, trade names, copyrights, trade secrets, licenses, information,
proprietary rights and processes of any other person or entity. Neither the
Company nor any Subsidiary has received any communications alleging that it has
violated or, by conducting its business as proposed, would violate any of the
patents, trademarks, service marks, trade names, copyrights or trade secrets or
other proprietary rights of any other person or entity. To the Company's
knowledge, none of its employees are obligated under any contract (including
licenses, covenants or commitments of any nature) or other agreement, or subject
to any judgment, decree or order of any court or administrative agency, that
would interfere with the use of their best efforts to promote the interests of
the Company or any Subsidiary or that would conflict with the Company's business
as proposed to be conducted. Neither the execution nor delivery of this
Agreement, nor the carrying on of the Company's or any Subsidiary's business by
the employees of the Company, nor the conduct of the Company's or any
Subsidiary's business as proposed, will conflict with or result in a breach of
the terms, conditions or provisions of, or constitute a default under, any
contract, covenant or instrument under which any of such employees is now
obligated. It is not currently and will not in the future be necessary for the
Company to utilize any inventions of any of its employees (or people it
currently intends to hire) made prior to their employment by the Company.
-6-
11
2.15 Compliance with Other Instruments. Neither the Company nor any
Subsidiary is in violation of or in default under any term of its organizational
documents, any term or provision of any mortgage, indenture, contract,
agreement, instrument, judgment or decree, nor is in violation of any applicable
order, statute, rule or regulation except for such violations or defaults as are
not expected to have a Material Adverse Effect, and to the Company's knowledge
there is no state of facts which, with the passage of time or giving of notice
or both, would constitute any such violation or default that would in the
aggregate have a Material Adverse Effect. The execution, delivery and
performance of and compliance with the Documents, the issuance of the Preferred
Shares (and the Conversion Shares) and the consummation of any other transaction
contemplated by the Documents have not resulted and will not result in any such
violation, or be in conflict with, or constitute a default under any of the
foregoing, or result in a violation or breach of any provision of the Company's
Articles of Incorporation or Bylaws, or result in the creation of any mortgage,
pledge, lien, encumbrance or charge upon any of the properties or assets of the
Company or any Subsidiary.
2.16 Compliance with Law. Each of the Company and the Subsidiaries is
in compliance with all statutes, laws and ordinances and all governmental rules
and regulations to which it is subject, the violation of which, either
individually or in the aggregate, would have a Material Adverse Effect. Neither
the execution, delivery or performance of this Agreement or the other Documents
nor the consummation of the transactions contemplated by the Documents will
cause the Company or any Subsidiary to be in violation of any law or ordinance,
or any order, rule or regulation, of any federal, state, municipal or other
governmental or public authority or agency.
2.17 Employees. To the knowledge of the Company, (i) no employee of the
Company is in violation of any term of any employment contract, patent
disclosure agreement or any other contract or agreement relating to the
intellectual property of the Company or the relationship of any such employee
with such entity or any other party and (ii) no key employee has or intends to
terminate his or her employment relationship with the Company. The Company
believes that its relationship with its employees is good and the relationship
among its employees is good.
2.18 Employee Benefit Plans. (a) The Company has not since inception,
nor does it currently sponsor, maintain, contribute to or participate in a
Multiemployer Plan or a "defined benefit plan" within the meaning of Section
3(35) of ERISA covering employees of the Company; (b) except as set forth on
Schedule 2.18, none of the Employee Benefit Plans is an "employee pension
benefit plan", or an "employee welfare benefit plan", within the meaning of
Section 3(3) of ERISA; (c) there are no pending or, to the best of the Company's
knowledge, threatened claims, lawsuits, or arbitrations against any Employee
Benefit Plan or any fiduciary thereof; (d) each Employee Benefit Plan is, and
has been, operated in compliance in all material respects with the applicable
provisions of federal and state law; (e) the Company has, or prior to the
Closing Date will have, paid in full all insurance premiums or otherwise met all
other funding obligations with regard to all Employee Benefit Plans for policy
years or other applicable policy funding periods ending on or before the Closing
Date; and (f) upon termination of employment of any employee, neither the
Company nor any employee will incur any liability for any severance or
termination pay, pension, profit-sharing or other post-retirement benefit,
including but not limited to life, health and welfare benefits, or other similar
payment, except as set forth on Schedule 2.18. For purposes of this
representation, "Employee Benefit Plans" shall mean bonus, pension, benefit,
welfare, profit-sharing, retirement, disability, insurance, incentive, deferred
compensation and other similar fringe or employee benefit plans, funds, programs
or arrangements,
-7-
12
and any employment contracts or executive compensation agreements, written or
oral, in each of the foregoing cases, which cover or covered, are or were
maintained for the benefit of, or relate or related to, any or all current or
former employees of the Company.
2.19 Compliance with Environmental Laws. (a) Each of the Company and
the Subsidiaries is, and will continue to be, in compliance with all applicable
federal, state and local environmental laws, regulations and ordinances
governing the Business with respect to all discharges into the ground and
surface water, emissions into the ambient air and generation, accumulation,
storage, treatment, recycling, transportation, labeling or disposal of waste
materials or process by-products except for noncompliance as is not expected to
have a Material Adverse Effect. Neither the Company nor the Subsidiary is liable
for any penalties, fines or forfeitures for failure to comply with any of the
foregoing. All material licenses, permits or registrations required for the
Business as presently conducted and proposed to be conducted, under any federal,
state, or local environmental laws, regulations or ordinances have been or will,
in a timely manner, be obtained or made.
(b) No release, emission or discharge into the environment of
hazardous substances, as defined under the Comprehensive Environmental Response,
Compensation, and Liability Act, as amended, or hazardous waste, as defined
under the Resource Conservation and Recovery Act, or air pollutants as defined
under the Clean Air Act, or pollutants, as defined under the Clean Water Act, by
the Company or any Subsidiary has occurred or is presently occurring on or from
any property owned or leased by the Company or any Subsidiary in excess of
federal, state or local permitted releases or reportable quantities, or other
concentrations, standards or limitations under the foregoing laws or any state
or local law governing the protection of health and the environment or under any
other federal, state or local laws or regulations (then or now applicable, as
the case may be).
(c) Neither the Company nor the Subsidiary has (1) owned,
operated or, to its knowledge, occupied a site or structure on or in which any
hazardous substance was or is stored, transported or disposed of in violation of
any federal, state or local environmental laws, regulations or ordinances at
such time as such site or structure was owned, occupied or operated by the
Company or any Subsidiary or at any other time, or (2) transported or arranged
for the transportation of any hazardous substance other than in full compliance
with all applicable federal, state and local environmental laws, regulations and
ordinances governing the Business or the storage, transportation or disposal of
hazardous substances. Neither the Company nor any Subsidiary has caused or been
held legally responsible for any release or threatened release of any hazardous
substance, or received notification from any federal, state or other
governmental authority of any such release or threatened release, or that the
Company or any Subsidiary may be required to pay any costs or expenses incurred
or to be incurred in connection with any efforts to mitigate the environmental
impact of any release or threatened release, of any hazardous substance from any
site or structure owned, occupied or operated by the Company or any Subsidiary.
2.20 Insurance. The Business has fire, casualty, liability, and
business interruption insurance policies with recognized insurers, in such
amounts and with such coverage as set forth on Schedule 2.20.
2.21 Material Contracts and Agreements. (a) Schedule 2.21 sets forth
all written and oral agreements or understandings of the Company or any
Subsidiary, either existing or pending, which:
-8-
13
(i) provide for the future purchase by the Company or
any Subsidiary of products or services in excess of $100,000;
(ii) involve the Company or any Subsidiary and any
director, officer, or employee of the Company or any
Subsidiary;
(iii) provide for the borrowing of money or a line of
credit by the Company or any Subsidiary or a leasing
transaction of a type required to be capitalized by the
Company or any Subsidiary in accordance with generally
accepted accounting principles;
(iv) provide for the sale, assignment, or other
disposition of any asset with a value in excess of $100,000 or
any material right of the Company or any Subsidiary;
(v) provide for the licensing or distribution of the
Company's or any Subsidiary's products and services by, or
establish an agency relationship with, any other party;
(vi) provide for the lease by the Company or any
Subsidiary of any real or personal property involving lease
payments in excess of $100,000 per year;
(vii) restrict the Company or any Subsidiary from
engaging in any business activity, restrict either Founder in
the performance of his obligations and responsibilities to the
Company or any Subsidiary, or create any other obligation or
liability of either Founder arising from any prior employment;
(viii) to the knowledge of the Company, restrict any
other officer or key employee of the Company from engaging in
any business activity, restrict any such officer or key
employee in the performance of his or her obligations and
responsibilities to the Company, or create any other
obligation or liability of any such officer or key employee
arising from his employment with the Company or any prior
employment;
(ix) provide for a guaranty, surety, indemnity, or
other financial support by the Company or any Subsidiary to
any person or entity;
(x) grant to any person or entity a right to acquire
the assets, business or operations of the Company or any
Subsidiary or grant a security interest in or lien on any
asset or right of the Company or any Subsidiary; or
-9-
14
(xi) are otherwise material to the Company or any
Subsidiary or its business or assets.
(b) Each agreement or understanding set forth on Schedule 2.21
is in full force and effect and constitutes a valid and binding obligation of
the Company or Subsidiary (except as enforceability may be affected by
bankruptcy or other similar laws relating to or affecting the rights of
creditors generally) and, to the knowledge of the Company, all other parties
thereto. Each of the Company and, where applicable, each Subsidiary and Founder
has in all respects performed the obligations required to be performed by it or
him and is not in default or alleged to be in default in any material respect
under any such agreement or understanding. There exists no event or condition
which, after notice or lapse of time, or both, would constitute such a default.
To the knowledge of the Company, there are no material defaults by any other
party to any such agreement or understanding. The Company has delivered to the
Purchasers correct and complete copies of all documents set forth on Schedule
2.21.
(c) No agreement or understanding to which the Company or
Subsidiary is a party (i) restricts the Company or Subsidiary from engaging in
the Company's business as now being conducted and as proposed to be conducted,
or (ii) grants to any person or entity, other than the Company, any right,
title, or interest in any invention or know-how conceived by the employees of
the Company and related to the business of the Company or any Subsidiary.
2.22 Taxes. All federal, state and other tax returns of the Company and
each Subsidiary required by law to be filed have been duly filed and all
federal, state and other taxes, assessments, fees and other federal governmental
charges upon the Company, the Subsidiaries or any of their respective
properties, incomes or assets that are due and payable have been paid. No
extensions of the time for the assessment of deficiencies have been granted to
the Company or any Subsidiary in connection with any federal tax, assessment,
fee or other federal governmental charge. There are no liens, claims or
encumbrances on any properties or assets of the Business imposed or arising as a
result of the delinquent payment or the non-payment of any tax, assessment, fee
or other governmental charge. Neither the Company nor any Subsidiary:
(i) has assumed and is liable for any federal, state
or other income tax liability of any other person, including
any predecessor corporation, as a result of any purchase of
assets or other business acquisition transaction; and
(ii) has indemnified any other person or otherwise
agreed to pay on behalf of any other person tax liability
growing out of or which may be asserted on the basis of any
tax treatment adopted with respect to all or any aspect of
such a business acquisition transaction.
The charges, accruals and reserves, if any, on the books of the Company in
respect of federal, state and local corporate franchise and income taxes for all
fiscal periods to date are adequate in accordance with generally accepted
accounting principles, and the Company knows of no additional unpaid assessments
for such periods or other governmental charges payable by the Company in
connection with the execution and delivery of this Agreement, the Documents or
the offer, issuance, sale or delivery of the
-10-
15
Preferred Shares by the Company, other than stock transfer taxes, recording fees
and filing fees in connection with state securities or "blue sky" filings. The
Company is not a "United States real property holding corporation" within the
meaning of Section 897(c)(2) of the Internal Revenue Code of 1986, as amended.
2.23 Investment Company. The Company is not an "investment company", or
an "affiliated person" of 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, and the Company is not an "investment adviser" or an
"affiliated person" of an "investment adviser" as such terms are defined in the
Investment Advisers Act of 1940, as amended.
2.24 Labor Relations. The Company is not engaged in any unfair labor
practices. Except as set forth on Schedule 2.24, there is:
(i) no unfair labor practice complaint pending or, to
the best of the Company's knowledge, threatened against the
Company before the National Labor Relations Board or any court
or labor board, and no grievance or arbitration proceedings
arising out of or under collective bargaining agreements is so
pending or, to the best of the Company's knowledge,
threatened,
(ii) no strike, lock-out, labor dispute, slowdown or
work stoppage pending or, to the best of the Company's
knowledge, threatened against the Company, and
(iii) no union representation or certification
question existing or pending with respect to the employees of
the Company, and, to the best knowledge of the Company, no
union organization activity taking place.
2.25 No Conflict of Interest. Except as set forth in Schedule 2.25, the
Company is not indebted, directly or indirectly, to any of its officers or
employees who is the beneficial owner of one percent or more of the outstanding
voting power or the outstanding common equity (on a fully diluted basis) of the
Company (a "Substantial Holder"), or to any affiliate of a Substantial Holder,
in any amount whatsoever. To the best knowledge of the Company, no Substantial
Holders or any of their affiliates are indebted to any firm or corporation with
which the Company is affiliated or with which the Company has a business
relationship, or any firm or corporation which competes with the Company. Except
as contemplated by the Documents, no Substantial Holder, or, to the best of the
Company's knowledge, any affiliate of a Substantial Holder, has a direct or
indirect interest in any contract with the Company or any of the Subsidiaries.
2.26 Small Business Matters. The Company, together with its
"affiliates" (as that term is defined in Title 13, Code of Federal Regulations,
ss.121.101), is a "small business concern" within the meaning of the Small
Business Investment Act of 1958 and the regulations thereunder, including Title
13, Code of Federal Regulations, ss.121.201. The information regarding the
Company and its affiliates set forth in SBA Form 480, Form 652 and Part A of
Form 1031 delivered at the Closing is accurate and complete. Copies of such
forms shall have been completed and executed by the Company and
-11-
16
delivered to those Purchasers that so request at the Closing. The Company does
not engage in any activities for which a "small business investment company" is
prohibited from providing funds by the Small Business Investment Act of 1958 and
the regulations thereunder (including Title 13, Code of Federal Regulations,
ss.107.720).
2.27 Year 2000 Compliance. The Company has (a) initiated a review and
assessment of all areas within its business and operations (including those
affected by suppliers and vendors) that could reasonably be expected to be
relevant to whether it is Year 2000 Complaint, (b) developed a plan and timeline
for ensuring that it is Year 2000 Compliant on a timely basis, and (c) to date,
implemented that plan in accordance with that timetable. Based upon the
foregoing, the Company reasonably believes that it is Year 2000 Compliant as of
the Closing Date.
2.28 Full Disclosure. This Agreement, the other Documents, and any
report, statement or other writing furnished to the Purchasers by or on behalf
of the Company in connection with the negotiation of this Agreement and the
other Documents and the sale of the Preferred Shares, taken as a whole, do not
contain any untrue statement of a material fact or omit to state a material fact
which is necessary to make the statements contained herein or therein not
misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser, severally and not jointly, hereby represents and
warrants to the Company, each with respect to itself only, as follows:
3.1 Organization. Purchaser is duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation or
organization. Such Purchaser was not organized for the specific purpose of
acquiring the Preferred Shares.
3.2 Power. Purchaser has the requisite corporate, partnership or other
power to execute and deliver the Documents and to perform its obligations
thereunder, and the execution and delivery by such Purchaser of the Documents,
the performance by such Purchaser of the transactions contemplated thereby and
the purchase of and payment for the Preferred Shares by such Purchaser, have
been duly authorized by all necessary corporate, partnership or other action on
the part of such Purchaser.
3.3 Binding Obligation. This Agreement has been duly executed and
delivered by such Purchaser, and constitutes a valid and binding agreement of
such Purchaser, enforceable against such Purchaser in accordance with its terms,
except to the extent that the enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors rights generally and general principles of equity
(regardless of whether enforceability is considered in a proceeding at law or in
equity). The other Documents, when executed and delivered by such Purchaser and
the other parties listed therein, will constitute valid and binding agreements
of such Purchaser enforceable against such Purchaser in accordance with their
terms, except to the extent that the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors rights
-12-
17
generally and general principles of equity (regardless of whether enforceability
is considered in a proceeding at law or in equity).
3.4 Consents. No consent, approval or authorization of, or designation,
declaration or filing with, any governmental authority on the part of such
Purchaser is required in connection with the valid execution and delivery of the
Documents or the purchase of and payment for the Preferred Shares, or the
consummation of any other transaction contemplated by the Documents.
3.5 Investment Purposes. (a) Such Purchaser is acquiring the securities
solely for such Purchaser's account for investment and not with a present view
to, or for resale in connection with, the distribution thereof, except for any
distribution thereof effected in compliance with the Securities Act.
(b) Such Purchaser understands that: (i) the purchase of the
Preferred Shares is a speculative investment which involves a high degree of
risk of loss of such holder's investment therein; (ii) there are substantial
restrictions on the transferability of Preferred Shares and the Conversion
Shares under the terms of the Stockholders' Agreement and the applicable
provisions of the Securities Act and the rules and regulations of the Securities
and Exchange Commission (the "SEC") promulgated thereunder and under applicable
state securities or "blue sky" laws; and (iii) at the Closing, and for an
indeterminate period following the Closing, there will be no public market for
the Preferred Shares or the Conversion Shares and, accordingly, that it may not
be possible to readily liquidate an investment in the Company, if at all.
(c) Such Purchaser has been advised and understands that: (i)
the offer and sale of the Preferred Shares and the Conversion Shares have not
been registered under the Securities Act; (ii) the Preferred Shares and the
Conversion Shares must be held indefinitely and such Purchaser must continue to
bear the economic risk of the investment in the Preferred Shares and the
Conversion Shares unless the offer or sale of the Preferred Shares or the
Conversion Shares is subsequently registered under the Securities Act or an
exemption from such registration is available; (iii) there is not currently any
public market for the Preferred Shares or the Conversion Shares; (iv) Rule 144
promulgated under the Securities Act is not presently available with respect to
the sale of any securities of the Company, including the Preferred Shares or the
Conversion Shares, and when and if the Preferred Shares or the Conversion Shares
may be disposed of without registration in reliance on Rule 144, such
disposition can be made only in accordance with the terms and conditions of such
Rule; (v) restrictive legends described in Section 3.7 shall be placed on the
certificates representing the Preferred Shares or the Conversion Shares; and
(vi) a notation shall be made in the appropriate records of the Company
indicating that the Preferred Shares or the Conversion Shares are subject to
restrictions on transfer and, if the Company should at some time in the future
engage the services of a securities transfer agent, appropriate stop-transfer
instructions will be issued to such transfer agent with respect to the Preferred
Shares or the Conversion Shares.
(d) Such Purchaser is aware that, except as expressly provided
in the Registration Rights Agreement, there exists no right to require
registration of the Preferred Shares or the Conversion Shares and such Purchaser
must bear the economic risk of the investment in the Preferred Shares and the
Conversion Shares.
-13-
18
3.6 Accredited Investor. Each Purchaser is an "accredited investor" as
defined in Rule 501(a) of Regulation D promulgated under the Securities Act of
1933, as amended.
3.7 Legend on Certificates. Each Purchaser has been advised by the
Company that the certificates representing the Preferred Shares (and Conversion
Shares) will bear an appropriate legend to the effect that the shares
represented by such Certificates have not been registered under the Securities
Act, and may not be transferred in the absence of an effective registration
statement under the Securities Act or an exemption from such registration under
said Act, and such additional legends as may be called for by the Stockholders'
Agreement.
ARTICLE IV
CONDITIONS TO THE PURCHASERS' OBLIGATIONS
The obligation of each of the Purchasers to purchase the Preferred
Shares hereunder shall be subject to the satisfaction, prior to or concurrently
with such purchase, of the following conditions:
4.1 Delivery of Certificates. Such Purchaser shall have received duly
executed stock certificates representing the Preferred Shares being purchased by
such Purchaser.
4.2 Representations and Warranties; Covenants. The representations and
warranties of the Company contained in this Agreement shall be true and correct
in all material respects on and as of the Closing Date as if made on and as of
such date. The Company shall have performed and complied in all material
respects with all agreements and covenants required by this Agreement to be
performed or complied with by it prior to or on the Closing Date.
4.3 No Material Adverse Effect. No event or events shall have occurred
and no condition or conditions shall exist, which individually or in the
aggregate would have a Material Adverse Effect, including without limitation,
any such events or conditions which occurred prior to, or existed on the date of
this Agreement, but were not explicitly disclosed herein or in a Schedule
hereto.
4.4 Litigation. There shall not be any litigation, investigation, claim
or proceeding of or before any court, arbitrator or governmental authority
pending or threatened with respect to any of the Documents or the transactions
contemplated thereby.
4.5 Applicable Law. Such Purchaser's purchase of and payment for the
Preferred Shares shall not be prohibited by any applicable law, court order or
governmental regulation and shall not subject such Purchaser to any tax,
penalty, liability or other condition under or pursuant to any applicable law,
court order or governmental regulation.
4.6 Master Amendment Agreement. Prior to or at the Closing, the Master
Amendment Agreement shall have been executed and delivered by each of the
parties thereto.
4.7 Consents. All governmental authorizations, consents, approvals or
exemptions required to issue the Preferred Shares pursuant to this Agreement
shall have been obtained, and all necessary governmental filings shall have been
made.
-14-
19
4.8 Certification of Satisfaction of Conditions. The Company shall have
delivered to the Purchasers a certificate, dated the Closing Date, and signed by
the President of the Company, certifying to the satisfaction of the conditions
set forth in Sections 4.2, 4.3, 4.4, 4.5 and 4.7.
4.9 Opinion of Counsel. The Purchasers shall have received the opinion
of Wyche, Burgess, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.A., counsel for the Company, dated the
Closing Date, in form and substance satisfactory to the Purchasers and the
Purchasers' counsel covering such matters as the Purchasers and their counsel
may reasonably request.
4.10 Performance of Obligations. All corporate and other proceedings
taken or to be taken in connection with the transactions contemplated hereby and
all documents incident thereto shall be satisfactory in form and substance to
Purchasers, and the Purchasers or their counsel shall have received all such
counterpart originals or certified or other copies of such documents as it or
they may reasonably request, which shall include, without limitation, a copy of
each of the Documents, duly executed by each party thereto.
4.11 Taxes. Any taxes, fees and other charges due and payable in
connection with the issuance and sale of the Preferred Shares shall have been
paid in full by the Company.
4.12 Fees and Disbursements of Purchasers' Counsel. Counsel for each
Purchaser shall have received payment from the Company of its fees and
disbursements in connection with the consummation of the transactions
contemplated herein.
4.13 Good Standing Certificates. The Company shall deliver a good
standing certificate dated within 10 days of the Closing Date for each
jurisdiction in which they are organized or qualified to do business.
4.14 No Liens. The Company shall have delivered to Purchasers evidence,
satisfactory to the Purchasers and Purchasers' counsel, that there are no liens,
other than those set forth on Schedule 2.13 hereto, on the assets or properties
of the Company.
4.15 SBA Documents and Information. The Company shall have executed and
delivered to each Purchaser that so requests forms and information required by
the rules and regulations of the United States Small Business Administration,
including without limitation, a Size Status Declaration on SBA Form 480 and an
Assurance of Compliance on SBA Form 652 and information necessary for the
preparation of a Portfolio Financing Report on SBA Form 1031.
4.16 Bank Financing. The Company shall have delivered to the Purchasers
a certificate, dated the Closing Date, and signed by the President of the
Company, certifying that (i) the senior credit facility between the Company,
Toronto Dominion (Texas), Inc., Newcourt Commercial Finance Corporation, dated
February 1, 2000 (the "Senior Credit Facility Agreements") remains in full force
and effect and (ii) the Company has satisfied all the conditions precedent to
the initial drawdown.
-15-
20
ARTICLE V
CONDITIONS TO THE COMPANY'S OBLIGATIONS
The obligation of the Company to issue and sell the Preferred Shares
shall be subject to the satisfaction, prior to or concurrently with such
issuance and sale, of the following conditions:
5.1 Tender by Purchasers. At the Closing, each of the Purchasers shall
have tendered the cash consideration set forth on Schedule I attached hereto.
5.2 Representations and Warranties; Performance of Covenants. The
representations and warranties of each Purchaser contained in this Agreement
shall be true and correct in all material respects on and as of the Closing Date
as if made on and as of such date, and each Purchaser shall have performed and
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it prior to or on the Closing
Date.
5.3 Master Amendment Agreement. Prior to or at the Closing, the Master
Amendment Agreement shall have been executed and delivered by each of the
parties thereto.
5.4 Applicable Law. The Purchasers' purchase of the Preferred Shares
shall not be prohibited by any applicable law, court order or governmental
regulation and there shall not be any litigation, investigation or proceeding of
or before any court, arbitrator or governmental authority pending or threatened
with respect to any of the Documents or the transactions contemplated thereby.
5.5 Consents. All governmental authorizations, consents, approvals or
exemptions required by the Company to issue and sell the Preferred Shares
pursuant to this Agreement shall have been obtained, and all necessary
governmental filings shall have been made.
5.6 Performance of Obligations. All proceedings taken or to be taken in
connection with the transactions contemplated hereby and all documents incident
thereto shall be satisfactory in form and substance to the Company and the
Company and its counsel shall have received all such counterpart originals or
certified or other copies of such documents as it may reasonably request, which
shall include, without limitation, a copy of each of the Documents, duly
executed by each party thereto.
ARTICLE VI
ADDITIONAL COVENANTS OF THE COMPANY
The Company covenants and agrees that, except as provided in Section
6.1 below, until such time as the Company has consummated a Public Offering (as
such term is defined in the Stockholders' Agreement):
6.1 Securities Law Filings. Upon consummation of a Public Offering (as
such term is defined in the Stockholders' Agreement), and for so long as the
Purchasers hold Conversion Shares, the Company will timely file the reports
required to be filed by it under the Securities Act and the Exchange Act and the
rules and regulations adopted by the SEC thereunder, to the extent required from
time to time to enable the Purchasers to sell Conversion Shares without
registration under the
-16-
21
Securities Act within the limitation of the exemptions provided by (i) Rule 144
under the Securities Act, as such rule may be amended from time to time, or (ii)
any similar rule or regulation hereafter adopted by the SEC. Upon the request of
any Purchaser, the Company will deliver a written statement as to whether it has
complied with such requirements.
6.2 Transactions with Substantial Holders. The Company shall not,
directly or indirectly, enter into any material transaction or agreement with
any stockholder owning or having a right to acquire 5% or more of the capital
stock of the Company (a "Substantial Holder") or any affiliate, director or
officer of the Company or a Substantial Holder, or a material transaction or
agreement in which a Substantial Holder or affiliate, director or officer of the
Company or a Substantial Holder has a direct or indirect interest, unless such
transaction or agreement is on terms and conditions no less favorable to the
Company or any Subsidiary than could be obtained at the time in an arm's length
transaction with a third person that is not such a Substantial Holder or
affiliate or officer of the Company or a Substantial Holder, and such
transaction or agreement has been reviewed and approved by (i) a majority of
those members of the Company's Board of Directors who have no such interest in
the transaction, and (ii) not less than a majority of the outstanding Preferred
Shares voting separately as a class. Except as provided in Section 9.3, this
Section 6.2 shall not be enforceable against the Company by any person or entity
not a party to this Agreement.
6.3 Business and Financial Covenants. The Company covenants that:
(a) At any time prior to the Closing or on and after the
Closing without the prior written consent of the holders of not less than a
majority of the outstanding Preferred Shares voting separately as a class:
(1) Merger, Consolidation, Acquisitions, Sale of
Assets.
(i) The Company shall not merge, effect a liquidation
or statutory share exchange, consolidate with, or otherwise
engage in any transaction or series of related transactions
which results in a change of control or permit any Subsidiary
to merge, effect a liquidation or statutory share exchange, or
consolidate with, any entity or otherwise effect a change of
control other than as provided in Section 6.3(b)(1).
(ii) The Company shall not sell, assign, lease or
otherwise dispose of, or permit any Subsidiary to sell,
assign, lease or otherwise dispose of, all or substantially
all of its assets (whether now owned or hereafter acquired)
other than as provided in Section 6.3(b)(2).
(iii) Except for up to 10,000,000 shares of Common
Stock of the Company which may be issued upon the exercise of
options granted under the Company's Employee Incentive Plan
pursuant to option grants having a per share exercise price of
not less than fair market value on the date of grant as
determined by the Board of Directors, the Company will not,
and will not permit any Subsidiary to, hereafter issue or sell
any shares of capital stock or any securities convertible
into, or any warrants, rights, or
-17-
22
options to purchase shares of, the capital stock of the
Company or such Subsidiary to any person or entity other than
the Company, and the Company will not pledge any of the
capital stock of any Subsidiary to any person or entity.
(2) Loans to and Investments in Others. The Company
shall not (except for the advancement of money for expenses in
the ordinary course of business) make, or permit any
Subsidiary to make, any loans or advances to any person or
entity or have outstanding any investment in any entity,
whether by way of loan or advance to, or by the acquisition of
the capital stock, assets or obligations of or any interest
in, any person or entity.
(3) Articles of Incorporation. The Company shall not
amend or repeal its articles of incorporation or bylaws, or
violate or breach any of the provisions thereof, provided,
however, the prior written consent of the holders of
two-thirds (2/3) of the outstanding Preferred Shares voting
separately as a class shall be required to amend or repeal the
Company's articles of incorporation or bylaws in a manner
which would adversely affect in a disparate manner the rights
of the holders of the Preferred Shares as compared to the
Series A Preferred Stock and Series B Preferred Stock.
(4) Debt/Lease Obligations. The Company shall not (i)
create, incur or suffer to exist or permit any Subsidiary to
create, incur or suffer to exist, any debt or any obligations
for the payment of rent for any property real or personal
under leases or agreements to lease ("Lease Obligations")
other than debt or Lease Obligations which in the aggregate do
not exceed $10,000,000 in any one calendar year, and (ii)
materially amend, modify, extend or refinance or permit any
Subsidiary to materially amend, modify, extend or refinance
any existing debt or Lease Obligation.
(5) Acquisitions. The Company shall not acquire, or
permit any Subsidiary to acquire, directly or indirectly, the
assets of or equity interests in any other business or entity,
whether by purchase, merger, consolidation or otherwise.
(6) Public Offering. The Company shall not effect an
initial public offering of any equity securities, other than a
public offering in which the Company would receive gross
offering proceeds of not less than $35,000,000 and the common
equivalent price per share to the public is not less than
$9.38, subject to equitable adjustment for any subdivision,
stock split, combination or other similar corporate
transaction affecting the capital stock of the Company.
(7) Other Actions. The Company shall not take any
other action that could reasonably be expected to have a
Material Adverse Effect on the holders of the Preferred
Shares.
(b) At any time prior to the Closing or on and after the
Closing without the prior written consent of the holders of two-thirds (2/3) of
the outstanding of the Preferred Shares voting separately as a class:
-18-
23
(1) The Company shall not merge, effect a liquidation
or statutory share exchange, consolidate with, or otherwise
engage in any transaction or series of related transactions
which results in a change of control or permit any Subsidiary
to merge, effect a liquidation or statutory share exchange, or
consolidate with, any entity or otherwise effect a change of
control; if the consideration to be received by the holders of
the Preferred Shares is or is valued at less than or equal to
$7.00 per share of Preferred Stock.
(2) The Company shall not sell, assign, lease or
otherwise dispose of, or permit any Subsidiary to sell,
assign, lease or otherwise dispose of, all or substantially
all of its assets (whether now owned or hereafter acquired) if
the consideration to be received by the Corporation, as
calculated on a per share basis and after giving affect to all
liquidation preferences, would be less than or equal to $7.00
per share of Preferred Stock.
(3) Restricted Payments; Repurchase of Common Stock.
Except as permitted by Section 6.3(b)(2) hereof, neither the
Company nor a Subsidiary shall declare or make any Restricted
Payment. "Restricted Payment" means (i) any payment or the
incurrence of any liability to make any payment in cash,
property or other assets as a dividend or other distribution
in respect of any shares of capital stock of the Company or
any Subsidiary, excluding, however, any dividends payable to
the Company by a Subsidiary, and (ii) except as otherwise
permitted by the Documents or as required by the Company's
Articles of Incorporation, any payment or the incurrence of
any liability to make any payment in cash, property or other
assets for the purposes of purchasing, retiring or redeeming
any shares of any class of capital stock of the Company or any
Subsidiary or any warrants, options or other rights to
purchase any such shares, other than employee stock
repurchases approved by the Board of Directors of the Company
upon termination of such employee's employment.
(4) Repurchase of Preferred Shares. Except as
provided in the Company's Articles of Incorporation, the
Company shall not, and shall not permit any Subsidiary or any
affiliate of the Company to, directly or indirectly, redeem or
repurchase or make any offer to redeem or repurchase any
Preferred Shares (or Conversion Shares), unless the Company,
such Subsidiary or such affiliate has offered to repurchase
Preferred Shares (or Conversion Shares) pro rata, from all
holders of outstanding Preferred Shares (or Conversion Shares)
upon the same terms.
6.4 Corporate Existence, Business, Maintenance, Insurance.
(a) The Company will at all times preserve and keep in full
force and effect its corporate existence and rights and franchises deemed
material to its business and those of its Subsidiaries, except any Subsidiary of
the Company may be merged into the Company or another Subsidiary.
-19-
24
(b) The Company shall engage solely in the business of
providing local exchange and long distance telecommunication services to
residential customers and small and medium size businesses and such other
related business activities approved by the Board. The Company (and any
Subsidiary) will not purchase or acquire any property other than property useful
in and related to such business.
(c) The Company will maintain or cause to be maintained in
good repair, working order and condition all properties used or useful in the
business of the Company and any Subsidiary and from time to time will make or
cause to be made all appropriate repairs, renewals and replacements thereof. The
Company and any Subsidiary will at all times comply in all material respects
with the provisions of all material leases to which it is a party or under which
it occupies property so as to prevent any loss or forfeiture thereof or
thereunder.
(d) The Company will maintain or cause to be maintained, with
financially sound and reputable insurers, appropriate insurance with respect to
its properties and business and the properties and business of any Subsidiary
against loss or damage.
6.5 Payment of Taxes; ERISA.
(a) The Company will pay, and will cause any Subsidiary to
pay, all taxes, assessments and other governmental charges imposed upon it or
any of its properties or assets or in respect of any of its franchises,
business, income or profits before any penalty or interest accrues thereon, and
all claims (including, without limitation, claims for labor, services, materials
and supplies) for sums which have become due and payable and which by law have
or might become a lien or charge upon any of its properties or assets, provided
that no such charge or claim need be paid if being diligently contested in good
faith by appropriate proceedings and if such reserve or other appropriate
provisions, if any, as shall be required by generally accepted accounting
principles shall have been made therefor.
(b) The Company and any Subsidiary will comply in all material
respects with the Employee Retirement Income Security Act of 1974, as amended
from time to time.
6.6 Books and Records, Compliance.
(a) The Company and any Subsidiary will keep true records and
books of account in which full, true and correct entries will be made of all
dealings or transactions in relation to its business and affairs in accordance
with generally accepted accounting principles applied on a consistent basis.
(b) The Company and any Subsidiary shall duly observe and
conform in all material respects to all valid requirements of governmental
authorities relating to the conduct of its business or to its property or
assets.
6.7 Directors' and Officers' Liability Insurance. The Company shall use
its best efforts to obtain directors' and officers' liability insurance, if such
insurance is available at a cost which the Company's Board of Directors deems to
be reasonably satisfactory.
-20-
25
6.8 Compensation. All awards of compensation, including, but not
limited to, salary, bonus and awards of stock options made to executive
officers, key managers and/or directors of the Company shall be determined by
the Company's Board of Directors in accordance with the terms of the
Stockholders' Agreement.
6.9 Key Person Life Insurance. The Company shall maintain and keep in
full force and effect key person life insurance on the life of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
in an aggregate amount of not less than $5,000,000 with the proceeds thereof
payable to the Company.
6.10 SBA Requirements. The Company will at all times after the Closing
Date comply with the nondiscrimination requirements of 13 C.F.R. Sections 112
and 113.
ARTICLE VII
INFORMATION
The Company covenants and agrees that it shall deliver the following
information and provide the following rights to each Purchaser (including
permitted transferees in accordance with Section 9.3, except as set forth in
Section 7.7), for so long as such Purchaser together with its affiliates (or
such transferees) shall hold at least 2.5% of the aggregate outstanding
Preferred Shares or Conversion Shares (considered as a single class), or until
such time as the Company shall have consummated a Qualified Public Offering (as
defined in the Articles of Incorporation):
7.1 Audited Annual Financial Statements. As soon as practicable and, in
any case, within one hundred and twenty (120) days after the end of each fiscal
year, financial statements of the Company, consisting of the balance sheet of
the Company as of the end of such fiscal year and the statements of operations,
statements of shareholders' equity and statements of cash flows of the Company
for such fiscal year, setting forth in each case, in comparative form, the
figures for the preceding fiscal year, all in reasonable detail and fairly
presented in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods reflected therein, and accompanied by
an opinion thereon of KPMG Peat Marwick LLP, or other independent certified
public accountants selected by the Company of good and recognized national
standing in the United States.
7.2 Quarterly Unaudited Financial Statements. As soon as practicable
and, in any case, within forty-five (45) days after the end of each of the first
three fiscal quarters in each fiscal year, unaudited financial statements of the
Company setting forth the balance sheet of the Company at the end of each such
fiscal quarter and the statements of operations and statements of cash flows of
the Company for each such fiscal quarter and for the year to date, and setting
forth in comparative form figures as of the corresponding date and for the
corresponding periods of the preceding fiscal year (provided that quarterly
statements of cash flows shall not be required for periods ended prior to the
Closing Date), all in reasonable detail and certified by the chief financial
officer of the Company as complete and correct, as having been prepared in
accordance with generally accepted accounting principles consistently applied
and as presenting fairly, in all material respects, the financial position of
the Company and any Subsidiary and results of operations and cash flows thereof
subject, in each case, to customary exceptions for interim unaudited financial
statements.
-21-
26
7.3 Monthly Unaudited Financial Statements. As soon as available, but
in any event within thirty (30) days after the end of each calendar month,
copies of the unaudited balance sheet of the Company as at the end of such
calendar month and the related unaudited statements of operations and cash flows
for such calendar month and the portion of the calendar year through such
calendar year, in each case setting forth in comparative form the figures for
the corresponding periods of (a) the previous calendar year (provided that
monthly financial information shall not be required for periods ended prior to
the Closing Date) and (b) the budget for the current year, prepared in
reasonable detail and in accordance with generally accepted accounting
principles applied consistently throughout the periods reflected therein and
certified by the chief financial officer of the Company as presenting fairly the
financial condition and results of operations of the Company and any Subsidiary
(subject to customary exceptions for interim unaudited financial statements).
7.4 Management's Analysis. All the financial statements delivered
pursuant to Sections 7.1 and 7.2 shall be accompanied by an informal narrative
description of material business and financial trends and developments and
significant transactions that have occurred in the appropriate period or periods
covered thereby.
7.5 Budgets. As soon as practicable, but in any event within ninety
(90) days prior to the commencement of a fiscal year, an annual operating budget
for such fiscal year, approved by the Board of Directors, including monthly
income and cash flow projections and projected balance sheets as of the end of
each quarter within such fiscal year.
7.6 Inspection. (a) The Company shall, and shall cause any Subsidiary
to, permit any such Purchaser, by its representatives, agents or attorneys:
(i) to examine all books of account, records, reports
and other papers of the Company or such Subsidiary except to
the extent that such action would, in the reasonable opinion
of counsel, constitute a waiver of the attorney/client
privilege;
(ii) to make copies and take extracts from any
thereof, except for information which is confidential or
proprietary;
(iii) to discuss the affairs, finances and accounts
of the Company or such Subsidiary with the Company's or such
Subsidiary's officers and independent certified public
accountants (and by this provision the Company hereby
authorizes said accountants to discuss with any such Purchaser
and its representatives, agents or attorneys the finances and
accounts of the Company or such Subsidiary); and
(iv) to visit and inspect, at reasonable times and on
reasonable notice during normal business hours, the properties
of the Company and such Subsidiary.
-22-
27
(b) Notwithstanding any provision herein to the contrary, the
provisions of this Section 7.6 are in addition to any rights of the Purchasers
under the South Carolina Business Corporation Act of 1988, as amended and shall
in no way limit such rights.
(c) The expenses of any Purchaser in connection with any such
inspection shall be for the account of such Purchaser. Notwithstanding the
foregoing sentence, it is understood and agreed by the Company that all
reasonable expenses incurred by the Company or such Subsidiary, any officers,
employees or agents thereof or the independent certified public accountants
therefor, shall be expenses payable by the Company and shall not be expenses of
the Purchaser making the inspection.
7.7 Other Information. The Company shall deliver the following to each
such Purchaser, provided that in the reasonable opinion of counsel to the
Company such disclosure will not constitute a waiver of the attorney/client
privilege:
(a) promptly after the submission thereof to the
Company, copies of any detailed reports (including the
auditors' comment letter to management, if any such letter is
prepared) submitted to the Company by its independent auditors
in connection with each annual or interim audit of the
accounts of the Company made by such accountants;
(b) promptly, and in any event within ten (10) days
after obtaining knowledge thereof, notice of the institution
of any suit, action or proceeding (other than a proceeding of
general application which is not directly against the Company
or one or more Subsidiary), the happening of any event or, to
the best knowledge of the Company, the assertion or threat of
any claim against the Company or any Subsidiary;
(c) promptly upon, and in any event within thirty
(30) days after obtaining knowledge thereof, notice of any
breach of, default under or failure to comply with any term
under this Agreement or any of the Documents or any material
adverse change in the Company's relationship with its major
customers, suppliers, employees or other entity with which the
Company has a business relationship;
(d) with reasonable promptness, a notice of any
default by the Company or any Subsidiary under any material
agreement to which it is a party;
(e) with reasonable promptness, copies of all written
materials furnished to directors;
(f) promptly (but in any event within ten days) after
the filing of any document or material with the SEC, a copy of
such document or material;
(g) promptly after the record date set by the Board
of Directors to determine the stockholders entitled to vote at
the Company's annual meeting of stockholders (but in any event
ten days prior to such meeting), a list of all stockholders of
the Company and their respective holdings; and
-23-
28
(h) promptly upon request therefor, such other data,
filings and information as any Purchaser may from time to time
reasonably request.
ARTICLE VIII
EXPENSES
8.1 Legal Fees and Other Expenses. The Company shall pay or reimburse
the Purchasers for all fees and charges incurred by them, including all
reasonable legal, consulting and accounting fees, in connection with the
preparation, execution, and delivery of the Documents and the consummation of
the transactions contemplated thereby whether or not the transactions
contemplated by this Agreement are consummated.
8.2 Finder's Fee. Each party represents and warrants to each other
party that it has employed no broker or finder.
8.3 Other Expenses. The Company shall pay, and shall save each
Purchaser harmless against liability for, reasonable costs and expenses relating
to any modification, amendment, alteration or enforcement of this Agreement and
the other Documents (including, without limitation, reasonable legal fees and
disbursements and any applicable taxes thereon). The obligations of the Company
under this Section 8.4 shall survive the termination of this Agreement and the
other Documents.
ARTICLE IX
MISCELLANEOUS
9.1 Survival. Except for the covenants and agreements contained in
Articles VI, VII, and VIII hereof which shall survive termination of this
Agreement in accordance with their respective terms, all agreements and
covenants made by the Company and the Founders herein or by the Company or
Founders in any certificate or other instrument delivered under or in connection
with this Agreement shall be considered to have been relied upon by the
Purchasers and shall survive the delivery to the Purchasers of the Preferred
Shares regardless of any investigation made by the Purchasers or on their
behalf.
9.2 Indemnification. (a) Indemnification by the Company. The Company
shall, to the fullest extent permitted by law, indemnify, defend and hold each
Purchaser and its affiliates and their respective directors, officers, employees
and agents harmless from and against any liability, loss or damage, together
with all reasonable costs and expenses related thereto (including reasonable
legal fees and expenses), arising out of or related to the untruth, inaccuracy
or breach of any of the representations, warranties or agreements of the Company
contained in this Agreement or any other document or instrument executed or
entered into by the Company in connection with the consummation of the
transactions contemplated herein.
(b) Indemnification by the Purchasers. Each Purchaser shall,
severally and not jointly, to the fullest extent permitted by law, indemnify,
defend and hold the Company harmless
-24-
29
from and against any liability, loss or damage, together with all reasonable
costs and expenses related thereto (including reasonable legal fees and
expenses), arising out of or related to the untruth, inaccuracy or breach of any
of the representations, warranties or agreements of such Purchaser contained in
this Agreement or any other document or instrument executed or entered into by
such Purchaser in connection with the consummation of the transactions
contemplated herein.
(c) Survival of Representations and Warranties; Duration of
Rights of Indemnification. The representations and warranties contained in this
Agreement and the right of each party to be indemnified hereunder shall survive
for a period of two years following the Closing Date; provided, however, the
right of each party to seek indemnification shall continue after such two year
period with respect to:
(i) any claim for indemnification properly noticed
within such two year period;
(ii) any claim for indemnification arising out of or
related to a breach of the representations and warranties
contained at Sections 2.6, 2.7, 2.8 or 2.22 of this Agreement,
which right of indemnification shall extend until the
expiration of all applicable statutes of limitation.
9.3 Transfer and Termination of Rights. No rights under this Agreement
may be transferred, except that:
(i) the rights of a Purchaser under this Agreement
may be transferred after the Closing in connection with a
transfer of Preferred Shares made in accordance with the
provisions of the Stockholders' Agreement (other than a
transfer pursuant to a registration statement under the
Securities Act or a transfer pursuant to Rule 144 thereunder);
and
(ii) all the rights of a Purchaser may be transferred
to an affiliate of such Purchaser;
provided, that any such transferee shall execute and deliver to the Company an
instrument satisfactory to it agreeing to be bound by the provisions hereof and
of the Stockholders' Agreement and the Registration Rights Agreement.
9.4 Binding Effect. Subject to the limitations on transfer set forth in
Section 9.3, this Agreement and all the provisions hereof shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and assigns.
9.5 Amendment. This Agreement may be amended or supplemented, and the
observance of any term hereof or thereof may be waived, with the written consent
of the Company and (i) on or prior to the Closing Date, each Purchaser, and (ii)
after the Closing Date, the holders of a two-thirds (2/3) of the Preferred
Shares and any Conversion Shares voting as a single class.
-25-
30
9.6 Governing Law. The interpretation, validity and performance of the
terms of this Agreement shall be governed by the laws of the State of South
Carolina, regardless of the law that might be applied under principles of
conflicts of law that require or permit application of the laws of any other
state or jurisdiction.
9.7 Notices. (a) All communications under this Agreement shall be in
writing and (i) sent by facsimile transmission and by certified or registered
mail, return receipt requested, courier or overnight mail, or (ii) sent by
certified or registered mail, return receipt requested, courier or overnight
mail (A) if to a Purchaser, to such Purchaser's facsimile number and address set
forth in Schedule I, or at such other address as such Purchaser may have
furnished to the Company in writing, (B) if to any transferee of a Purchaser, to
it at its facsimile number and address listed in the stock ledger books of the
Company, or at such other address as such Purchaser or transferee shall have
furnished to the Company in writing, and (C) if to the Company, to ▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ III, Esq. or at such other address or facsimile number as it shall have
furnished in writing to all Purchasers.
(b) Any written communication so addressed, sent by facsimile
transmission or certified or registered mail, return receipt requested, courier
or overnight mail, shall be deemed to have been given when sent via facsimile or
mailed or deposited with a courier. All other written communications shall be
deemed to have been given upon receipt thereof.
9.8 Headings. The section and other headings contained in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
9.9 Regulatory Requirements. In the event of any reasonable
determination by any Purchaser that, by reason of any future federal or state
rule, regulation, guideline, order, request or directive (whether or not having
the force of law and whether or not failure to comply therewith would be
unlawful) (collectively, a "Regulatory Requirement"), it is effectively
restricted or prohibited from holding any of the shares of capital stock of the
Company (including any shares of capital stock or other securities distributable
to such Purchaser in any merger, reorganization, readjustment or other
reclassification of such shares), the Company shall take such action, at the
Company's expense, as may be deemed reasonably necessary by such Purchaser to
permit such Purchaser to comply with such Regulatory Requirement. Such action to
be taken may include, without limitation, the Company's authorization of one or
more new classes of capital stock and the modification of amendment of the
articles of incorporation or any other documents or instruments executed in
connection with the shares held by such Purchaser. Such Purchaser shall give
written notice to the Company of any such determination and the action or
actions necessary to comply with such Regulatory Requirement, and the Company
shall take all steps necessary to comply with such determination as
expeditiously as possible. This Section 9.9 shall not be deemed to limit in any
respect the representations of the Purchasers in Sections 3.2 and 3.4 hereof
9.10 Counterparts. This Agreement may be executed and delivered in two
or more counterparts, each of which shall be deemed to be an original and all of
which together shall be deemed to be one and the same agreement.
[SIGNATURES BEGIN ON NEXT PAGE]
-26-
31
IN WITNESS WHEREOF, the parties have executed this Preferred Stock
Purchase Agreement as of the date first above written.
STATE COMMUNICATIONS, INC.
By:
----------------------------------------
Title:
-------------------------------------
▇▇▇▇▇ GLOBAL INVESTMENTS, LTD.
By: ▇▇▇▇▇ Capital Management, Inc.,
Trading Advisor
By:
----------------------------------------
Title:
-------------------------------------
REMINGTON INVESTMENTS STRATEGIES, L.P.
By: ▇▇▇▇▇ Capital Advisors, L.L.C., General
Partner
By:
----------------------------------------
Title:
-------------------------------------
CIBC WMC INC.
By:
----------------------------------------
Title:
-------------------------------------
NORTEL NETWORKS INC.
By:
----------------------------------------
Title:
-------------------------------------
WACHOVIA CAPITAL INVESTMENTS, INC.
By:
----------------------------------------
Title:
-------------------------------------
[SIGNATURES CONTINUED ON NEXT PAGE]
-27-
32
IN WITNESS WHEREOF, the parties have executed this Preferred Stock
Purchase Agreement as of the date first above written.
----------------------------------- -------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------- -------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
----------------------------------- -------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇
----------------------------------- -------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Management Trust The ▇▇▇▇▇▇▇▇ 1998 Children's Trust
By: By:
------------------------------- ----------------------------------
Name: Name:
----------------------------- -------------------------------
Title: Title:
---------------------------- -------------------------------
[SIGNATURES CONTINUED ON NEXT PAGE]
-28-
33
IN WITNESS WHEREOF, the parties have executed this Preferred Stock
Purchase Agreement as of the date first above written.
------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇
------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III
[SIGNATURES CONTINUED ON NEXT PAGE]
-29-
34
IN WITNESS WHEREOF, the parties have executed this Preferred Stock
Purchase Agreement as of the date first above written.
------------------------------------------
▇▇▇▇▇ ▇▇▇▇
------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇ Trustee for ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------------
G. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ SSB ▇▇▇ ROLLOVER
By:
----------------------------------------
Title:
-------------------------------------
-30-
35
IN WITNESS WHEREOF, the parties have executed this Preferred Stock
Purchase Agreement as of the date first above written.
▇▇▇▇▇ TECHNOLOGY VENTURE FUND II, L.P.
By:
----------------------------------------
By:
----------------------------------------
Title:
-------------------------------------
-31-
36
SCHEDULE I
PURCHASERS
(B)
(A) Total Purchase Price to be
Purchasers No. of Shares Paid at Closing
---------- ------------- ---------------
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ 51,765 $ 220,001.25
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 28,236 $ 120,003.00
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Management Trust 11,765 $ 50,001.25
The ▇▇▇▇▇▇▇▇ 1998 Children's Trust 11,765 $ 50,001.225
▇▇▇▇▇▇▇ ▇. ▇▇▇▇ 5,882 $ 24,998.50
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ 5,882 $ 24,998.50
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 1,176 $ 4,998.00
▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ 1,176 $ 4,998.00
▇▇▇▇▇ Technology Venture Fund II L.P. 282,352 $ 1,199,996.00
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
CIBC WMC Inc. 1,764,706 $ 7,500,000.50
c/o CIBC Capital Partners
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Nortel Networks Inc. 1,176,471 $ 5,000,001.75
GMS 991 15 A40
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Director, Customer Finance North America
(▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Wachovia Capital Investments, Inc. 470,588 $ 1,999,999.00
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 23,529 $ 99,998.25
-1-
37
SCHEDULE I
PURCHASERS
(B)
(A) Total Purchase Price to be
Purchasers No. of Shares Paid at Closing
---------- ------------- ---------------
▇▇▇▇▇▇▇ ▇▇▇▇ 10,000 $ 42,500.00
▇▇▇▇▇▇▇ ▇▇▇▇▇ 20,000 $ 85,000.00
▇▇▇▇▇▇ ▇▇▇▇▇ 52,941 $ 224,999.25
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III 5,000 $ 21,250.00
▇▇▇▇▇ ▇▇▇▇ 23,529 $ 99,998.25
▇▇▇▇ ▇. ▇▇▇▇ Trustee for ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 5,000 $ 21,250.00
▇▇▇▇▇ ▇▇▇▇▇▇ 35,000 $ 148,750.00
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇?
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 5,000 $ 21,250.00
G. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 212,940 $ 904,995.00
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ SSB ▇▇▇ Rollover 10,000 $ 42,500.00
Total 4,214,703 $17,912,487.75
-2-