SPECTRANET INTERNATIONAL
COMMON STOCK PURCHASE AGREEMENT
DECEMBER 30, 1997
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TABLE OF CONTENTS
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SECTION 1. AUTHORIZATION AND SALE AND ISSUANCE OF SHARES AND WARRANTS . . . .2
A. AUTHORIZATION.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
B. SALE OF THE SERIES A SHARES AND ISSUANCE OF WARRANTS. . . . . . . . . . . .2
C. SALE OF SERIES B SHARES AND ISSUANCE OF WARRANTS PURSUANT TO OPTION.. . . .2
SECTION 2. CLOSING DATE; DELIVERIES . . . . . . . . . . . . . . . . . . . . .3
A. INITIAL CLOSING.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
B. OPTIONAL CLOSINGS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
C. DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. . . . . . . . . . .3
A. ORGANIZATION AND STANDING; ARTICLES OF INCORPORATION AND BYLAWS.. . . . . .3
B. CORPORATE POWER.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
C. SUBSIDIARIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
D. CAPITALIZATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
E. AUTHORIZATION.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
F. FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . .6
G. LIABILITIES.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
H. MATERIAL CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
I. INTERESTED PARTY TRANSACTIONS.. . . . . . . . . . . . . . . . . . . . . . .6
J. CHANGES.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
K. TAX MATTERS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
L. TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. . . . . . . . . . . . . . . . .8
M. COMPLIANCE WITH OTHER INSTRUMENTS.. . . . . . . . . . . . . . . . . . . . .9
N. LITIGATION, ETC.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
O. EMPLOYEES.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
P. PATENTS, TRADEMARKS, AND TRADE SECRETS. . . . . . . . . . . . . . . . . . 10
Q. REGISTRATION RIGHTS.. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
R. GOVERNMENTAL CONSENT, ETC.. . . . . . . . . . . . . . . . . . . . . . . . 11
S. OFFERING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
T. BROKERS OR FINDERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
U. PERMITS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
V. ENVIRONMENTAL AND SAFETY LAWS.. . . . . . . . . . . . . . . . . . . . . . 11
W. MINUTE BOOKS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
X. PROJECT STATUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Y. FULL DISCLOSURE.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS . . . . . . . . 12
A. REQUISITE POWER AND AUTHORITY.. . . . . . . . . . . . . . . . . . . . . . 12
B. ACCREDITED INVESTOR; EXPERIENCE.. . . . . . . . . . . . . . . . . . . . . 12
C. INVESTMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
D. RULE 144. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
E. NO PUBLIC MARKET. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
F. ACCESS TO DATA.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
G. RESIDENCE.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 5. CONDUCT AND AGREEMENTS PENDING CLOSING . . . . . . . . . . . . . 13
A. CONDUCT OF BUSINESS.. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
B. ACCESS, INFORMATION, DOCUMENTS. . . . . . . . . . . . . . . . . . . . . . 14
C. COOPERATION.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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D. NO SOLICITATION.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
E. SHAREHOLDER APPROVALS AND OTHER CONSENTS. . . . . . . . . . . . . . . . . 14
F. PUBLIC ANNOUNCEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
G. FINANCIAL ADVISOR AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . 15
H. BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
I. EMPLOYEE SEVERANCE PROGRAM. . . . . . . . . . . . . . . . . . . . . . . . 15
J. AMENDMENTS TO EMPLOYEE STOCK OPTIONS. . . . . . . . . . . . . . . . . . . 15
SECTION 6. CONDITIONS TO CLOSING OF PURCHASERS. . . . . . . . . . . . . . . 15
A. REPRESENTATIONS AND WARRANTIES CORRECT. . . . . . . . . . . . . . . . . . 15
B. COVENANTS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
C. BLUE SKY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
D. OPINIONS OF COMPANY'S COUNSELS. . . . . . . . . . . . . . . . . . . . . . 15
E. SHAREHOLDER APPROVALS; OTHER CONSENTS.. . . . . . . . . . . . . . . . . . 15
F. FILING OF RESTATED ARTICLES; ADOPTION OF RESTATED BYLAWS. . . . . . . . . 16
G. RESERVATION OF SERIES B COMMON STOCK.. . . . . . . . . . . . . . . . . . 16
H. COMPLIANCE CERTIFICATE. . . . . . . . . . . . . . . . . . . . . . . . . . 16
I. INVESTOR RIGHTS AGREEMENT.. . . . . . . . . . . . . . . . . . . . . . . . 16
▇. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ FILING. . . . . . . . . . . . . . . . . . . . . . . . . 16
K. CONTEMPORANEOUS INVESTMENT BY SPECTRA 3 AND ENRON.. . . . . . . . . . . . 16
L. CORPORATE DOCUMENTS.. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
M. BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
N. MANAGEMENT SERVICES AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . 16
O. BUSINESS OPPORTUNITY AGREEMENT. . . . . . . . . . . . . . . . . . . . . . 17
P. FINANCIAL ADVISOR AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . 17
▇. ▇▇▇▇▇ WARRANT AMENDMENT.. . . . . . . . . . . . . . . . . . . . . . . . . 17
R. PAYMENT OF TRANSACTION FEES AND EXPENSES. . . . . . . . . . . . . . . . . 17
S. PROCEEDINGS AND DOCUMENTS.. . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 7. CONDITIONS TO CLOSING OF COMPANY . . . . . . . . . . . . . . . . 17
A. REPRESENTATIONS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
B. BLUE SKY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
C. LEGAL MATTERS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
D. PERFORMANCE OF OBLIGATIONS. . . . . . . . . . . . . . . . . . . . . . . . 17
E. FILING OF RESTATED ARTICLES.. . . . . . . . . . . . . . . . . . . . . . . 17
F. INVESTOR RIGHTS AGREEMENT.. . . . . . . . . . . . . . . . . . . . . . . . 18
G. SHAREHOLDER APPROVALS; OTHER CONSENTS.. . . . . . . . . . . . . . . . . . 18
▇. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ FILING. . . . . . . . . . . . . . . . . . . . . . . . . 18
I. CONTEMPORANEOUS INVESTMENT BY SPECTRA 3 AND ENRON.. . . . . . . . . . . . 18
▇. ▇▇▇▇▇ WARRANT AMENDMENT.. . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 8. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . 18
A. INDEMNIFICATION.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
B. INDEMNIFICATION PROCEDURES. . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 9. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . 19
A. GOVERNING LAW.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
B. SURVIVAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
C. SUCCESSORS AND ASSIGNS. . . . . . . . . . . . . . . . . . . . . . . . . . 19
D. ENTIRE AGREEMENT; AMENDMENT.. . . . . . . . . . . . . . . . . . . . . . . 19
E. NOTICES, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
F. DELAYS OR OMISSIONS.. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
G. EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
H. SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
I. TITLES AND SUBTITLES. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
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J. FINDERS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
K. COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
L. TERMINATION.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
M. ADDITIONAL FEES.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
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EXHIBITS
Exhibit A Schedule of Purchasers
Exhibit B Amended and Restated Articles of Incorporation
Exhibit C Form of Warrant
Exhibit D Schedule of Exceptions
Exhibit E Amended and Restated Bylaws
Exhibit F Amended and Restated Investor Rights Agreement
Exhibit G Securityholders Agreement
Exhibit H Business Opportunity Agreement
Exhibit I-1 Management Consulting Services Agreement - Corporate Managers L.L.C.
Exhibit I-2 Management Consulting Services Agreement - Enron
Exhibit J ▇▇▇▇▇ Warrant Amendment
Exhibit K Definition of Accredited Investor
Exhibit L Employee Severance Program
Exhibit M-1 Form of Opinion of Company Counsel
Exhibit M-2 Form of Opinion of Company Regulatory Counsel
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SPECTRANET INTERNATIONAL
COMMON STOCK PURCHASE AGREEMENT
This Common Stock Purchase Agreement (the "Agreement") is made as of
December 30, 1997 among SpectraNet International, a California corporation (the
"Company"), Colorado Spectra 3, L.L.C., a Colorado limited liability company
("Spectra 3"), Enron Capital & Trade Resources Corp., a Delaware corporation
("Enron"), and the holders of the Company's outstanding convertible notes listed
on the Schedule of Purchasers attached hereto as Exhibit A (the "Noteholders").
Spectra 3, Enron and each Noteholder is referred to herein as a "Purchaser" and
collectively as the "Purchasers." Spectra 3, Colorado Spectra 1, L.L.C.
("Spectra 1") and Colorado Spectra 2, L.L.C. ("Spectra 2") are referred to
herein as the "▇▇▇▇▇ Entities."
RECITALS
WHEREAS, in connection with the transactions contemplated by this
Agreement, the Company is seeking approval from its existing shareholders for
the conversion of all shares of its existing preferred stock, no par value per
share (the "Preferred Stock"), into shares of the Company's common stock, no par
value per share (the "Common Stock"), and approval of an Amended and Restated
Articles of Incorporation in the form attached hereto as Exhibit B (the
"Restated Articles"), to be filed following such conversion, which among other
things would classify the Common Stock into two series -- "Series A Common
Stock" and "Series B Common Stock" -- with all then outstanding shares of Common
Stock to be classified as Series B Common Stock;
WHEREAS, the Company has authorized the sale and issuance to the
Purchasers following the foregoing shareholder approvals of an aggregate of Ten
Million One Hundred Thirty Five Thousand One Hundred Sixty Four (10,135,164)
shares of its Series A Common Stock (the "Series A Shares") and warrants to
purchase Ten Million One Hundred Thirty Five Thousand One Hundred Sixty Four
(10,135,164) shares of its Series B Common Stock (subject to adjustment), such
warrants to be in substantially the form attached hereto as Exhibit C (the
"Warrants");
WHEREAS, the Company has authorized the sale and issuance to Enron of Five
Million (5,000,000) Series A Shares and Warrants to purchase Five Million
(5,000,000) Shares of its Series B Common Stock (subject to adjustment);
WHEREAS, the Company has authorized the sale and issuance to Spectra 3 of
Five Million (5,000,000) Series A Shares and Warrants to purchase Five Million
(5,000,000) Shares of its Series B Common Stock (subject to adjustment);
WHEREAS, pursuant to certain convertible note and warrant purchase
agreements the Noteholders made loans to the Company in the amounts set forth on
Exhibit A and were issued convertible notes (the "Notes") which in accordance
with their terms automatically convert into Series A Shares and Warrants upon
the closing of the sale and issuance to Enron and Spectra 3;
WHEREAS, the Noteholders have agreed to convert all of the unpaid
principal amount of the Notes into Series A Shares and Warrants and to become
parties to this Agreement on the same terms and conditions as Spectra 3 and
Enron;
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WHEREAS, the Purchasers desire to purchase the Series A Shares and the
Warrants on the terms and conditions set forth herein;
WHEREAS, the Company desires to issue and sell the Series A Shares and the
Warrants to the Purchasers on the terms and conditions set forth herein; and
WHEREAS, the Company has authorized the sale and issuance to Enron and
Spectra 3 of an aggregate of up to Six Million Six Hundred Sixty Six Thousand
Six Hundred Sixty Six (6,666,666) shares of its Series B Common Stock (the
"Series B Shares") and Warrants to purchase an aggregate of up to Six Million
Six Hundred Sixty Six Thousand Six Hundred Sixty Six (6,666,666) shares of its
Series B Common Stock, upon the exercise by Enron and/or Spectra 3 of an option
granted herein;
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the parties hereto agree as follows:
SECTION 1.
AUTHORIZATION AND SALE AND ISSUANCE OF
SHARES AND WARRANTS
a. AUTHORIZATION. The Company has (i) authorized the sale and
issuance of the Series A Shares and Warrants upon the Initial Closing (as
hereinafter defined) and (ii) authorized the sale and issuance, upon the
exercise of the option granted herein, of the Series B Shares and Warrants at
one or more Optional Closings (as hereinafter defined). The Series A Shares and
the Series B Shares will have the rights and privileges set forth in the
Restated Articles. The Series A Shares and Series B Shares, if any, are
sometimes referred to herein as the "Shares."
b. SALE OF THE SERIES A SHARES AND ISSUANCE OF WARRANTS. Subject to
the terms and conditions hereof, at the Initial Closing (as hereinafter defined)
the Company (i) will severally issue and sell to each of the Purchasers and the
Purchasers will severally buy from the Company the total number of Series A
Shares specified opposite each Purchaser's name on Exhibit A, at a purchase
price of $3.00 per share, and (ii) will severally issue to each Purchaser, for
no additional consideration, warrants to purchase that number of shares of
Series B Common Stock as set forth on Exhibit A beside such Purchaser's name.
The Company's agreements with each of the Purchasers are separate agreements,
and the sales of the Series A Shares and the issuance of the Warrants to each of
the Purchasers are separate sales.
c. SALE OF SERIES B SHARES AND ISSUANCE OF WARRANTS PURSUANT TO OPTION.
Subject to the terms and conditions hereof, Spectra 3 and enron shall severally
have the option, exercisable in their sole discretion, to purchase the Series B
Shares and Warrants at one or more Optional Closings (as hereinafter defined).
As between Spectra 3 and Enron, unless they otherwise agree, each will have the
right to purchase up to Three Million Three Hundred Thirty Three Thousand Three
Hundred Thirty Three (3,333,333) Series B Shares; provided, however, that to the
extent Spectra 3 or Enron elects not to exercise such option (or elects to
exercise such option with respect to fewer than all of the Series B Shares that
it is entitled to purchase thereunder), the other such party shall have the
right to purchase all or any portion of the number of Series B Shares allocated
to but not purchased by such party. The option granted hereby shall be
exercisable at any time following the Initial Closing and prior to the date that
is 45 days after the Initial Closing by delivering written notice of such
exercise to the Company, provided that such option may be exercised until the
date that is 60 days after the initial Closing by a party that has elected to
exercise its option with respect to the full number of Series B
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Shares allocated to such party with respect to any Series B Shares allocated to
but not purchased by the other party. To the extent such option is exercised by
Spectra 3 and/or Enron pursuant to the foregoing provisions, the Company (i)
will severally issue and sell to each party exercising such option and each
party exercising such option will severally buy from the Company the total
number of Series B Shares to which such option exercise relates, at a purchase
price of $3.00 per share, and (ii) will severally issue to each party exercising
such option, for no additional consideration, Warrants to purchase a number of
shares of Series B Common stock equivalent to the number of Series B Shares so
purchased.
SECTION 2.
CLOSING DATE; DELIVERIES
a. INITIAL CLOSING. The closing of the purchase and sale of the
Series A Shares and the issuance of the Warrants hereunder (the "Initial
Closing") shall be held at the offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, ▇▇▇ ▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ at 10:00 a.m., local time, on the second business
day following the satisfaction or waiver of the conditions to the Closing set
forth in Sections 6 and 7 hereof or at such other time and place upon which the
Company, Spectra 3 and Enron shall agree.
b. OPTIONAL CLOSINGS. The closing(s) of the purchase and sale of the
Series B Shares and the issuance of the related Wsrrants hereunder (each such
closing is referred to herein as an "Optional Closing" and all such closings as
the "Optional Closings") shall take place at such time, date and place as are
mutually agreed upon by the party or parties exercising the option contemplated
by Section 1.c. above and the Company. The Initial Closing and such Optional
Closing(s), if any, are sometimes referred to herein as the "Closings" and the
dates of such Closings are sometimes referred to herein as the "Closing Dates"
or "Closing Date," as applicable.
c. DELIVERIES. At the applicable Closing, subject to the terms and
conditions hereof, the Company will deliver to each purchaser certificates,
registered in each Purchaser's name, representing the shares and the warrants to
be purchased by such purchaser at such Closing, against payment of the Purchase
price for such Shares, in the case of Spectra 3 and enron, by wire transfer to
the account of the Company of immediately available funds per the Company's
instructions, and in the case of each noteholder, by surrender and conversion of
the unpaid principal amount of notes held by such Noteholder. The Company shall
issue a check payable to each Noteholder in the amount of any unpaid interest
accrued on the Notes held by such Noteholder as of the date of the Initial
Closing. The Company and the Purchasers will deliver receipts with respect to
the delivery of the purchase price and the certificates at the Closing.
SECTION 3.
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
Except as set forth on the Schedule of Exceptions attached hereto as
Exhibit D with respect to the specific representation or warranty referenced
therein, the Company hereby represents and warrants to the Purchasers as
follows:
a. ORGANIZATION AND STANDING; ARTICLES OF INCORPORATION AND BYLAWS.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of California. The Company has the
requisite corporate power and authority to own and operate its properties and
assets, and to carry on its business as presently conducted and as presently
proposed to be
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conducted. The Company is qualified to do business as a foreign corporation and
is in good standing in Texas and each other jurisdiction in which the conduct of
its business or its ownership or leasing of property requires such qualification
(except where the failure to be so qualified, individually or in the aggregate,
would not have a material adverse effect on the Company, its business or its
properties). The Company has furnished Spectra 3 and Enron, and their
respective counsel, with copies of its Amended and Restated Articles of
Incorporation, as in effect as of the date hereof (the "Existing Charter"), the
Restated Articles which have been approved by the Company's shareholders and
will be filed with the Secretary of State of California and become effective
prior to the Closing , its Bylaws as in effect as of the date hereof (the
"Existing Bylaws") and the Amended and Restated Bylaws attached hereto as
Exhibit E (the "Restated Bylaws") which have been approved by the Company's
shareholders and will become effective prior to the Closing. Said copies are
true, correct and complete and contain all amendments through the Closing Date.
b. CORPORATE POWER. The Company has all requisite legal and corporate
power and authority (i) to execute and deliver this Agreement, the Warrants, the
Amended and Restated Investor Rights Agreement in the form attached hereto as
Exhibit F (the "Investor Rights Agreement"), the Securityholders Agreement in
the form attached as Exhibit G (the "Securityholders Agreement"), the Business
Opportunity Agreement in the form attached as Exhibit H (the "Business
Opportunity Agreement"), the Management Consulting Services Agreements in the
forms attached as Exhibits I-1 and I-2 (the "Management Services Agreements"),
and the Amendment to Warrant Purchase/Right to Maintain Agreement (including the
form of warrant attached thereto) in the form of Exhibit J (the "▇▇▇▇▇ Warrant
Amendment," and together with the Investor Rights Agreement, Securityholders
Agreement, Business Opportunity Agreement and Management Services Agreements,
the "Other Transaction Documents"), (ii) to sell and issue the Series A Shares
and Warrants at the Initial Closing and Series B Shares and Warrants at the
Optional Closing(s) and (iii) to carry out and perform its obligations under the
terms of this Agreement, the Warrants, the Other Transaction Documents and the
Restated Articles and Restated Bylaws.
c. SUBSIDIARIES. Each of the Subsidiaries listed in the Schedule of
Exceptions (the "Subsidiaries") (i) is a corporation duly organized, validly
existing and in good standing under the laws of the State of California and (ii)
has the requisite corporate power and authority to own and operate its
properties and assets, and to carry on its business as presently conducted and
as presently proposed to be conducted. Except for the Subsidiaries, the Company
has no subsidiaries and does not otherwise own or control, directly or
indirectly, any equity interest in any corporation, association, partnership or
business entity, nor has the Company made any commitment or subscribed for the
purchase of any such equity interest. All of the capital stock of each of the
Subsidiaries is owned by the Company, free and clear of any liens or
encumbrances except as described in the Schedule of Exceptions. There are no
options, warrants or other rights outstanding to purchase or acquire, or any
securities convertible into, nor has any Subsidiary agreed to issue or reissue,
any of the authorized and unissued capital stock of any Subsidiary.
d. CAPITALIZATION. The authorized capital stock of the Company, as of
the date of this Agreement under the Existing Charter, consists of (i) Fifteen
Million (15,000,000) shares of Common Stock, of which Three Million Five Hundred
Twenty Nine Thousand (3,529,000) shares are issued and outstanding at the date
hereof; and (ii) Five Million One Hundred Sixty Thousand Three Hundred Thirty
Five (5,160,335) shares of Preferred Stock, of which (A) One Hundred Thirty Four
Thousand Two Hundred (134,200) shares are designated Series A Preferred Stock,
One Hundred Eighteen Thousand Six Hundred Sixty Seven (118,667) of which are
issued and outstanding, (B) Two Million Four Hundred Twenty Six Thousand One
Hundred Thirty Five (2,426,135) shares are designated Series B Preferred Stock,
Two Million Sixteen Thousand Six Hundred Thirty Eight (2,016,638) of which are
issued and outstanding, and (C) Two Million Six Hundred Thousand (2,600,000)
shares are
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designated Series C Preferred Stock, all of which are issued and outstanding.
The authorized capital stock of the Company, immediately following the Initial
Closing under the Restated Articles, will consist of (i) One Hundred Million
(100,000,000) shares of Common Stock, of which (A) Ten Million One Hundred
Thirty-Five Thousand One Hundred Sixty Four (10,135,164) shares have been
designated as Series A Common Stock, all of which will be issued and
outstanding, and (B) Eighty Nine Million Eight Hundred Sixty Four Thousand Eight
Hundred Thirty Six (89,864,836) shares have been designated as Series B Common
Stock, Nine Million One Hundred Seventy Eight Thousand Six Hundred Twenty Five
(9,178,625) shares of which will be issued and outstanding, and (ii) Ten Million
(10,000,000) shares of Preferred Stock, none of which will be issued or
outstanding. The Schedule of Exceptions includes a schedule of the Company's
equity capitalization both before and after the issuance of the Series A Shares
and Warrants to the Purchasers hereunder, including all anti-dilution
adjustments resulting therefrom, and the other transactions contemplated hereby.
All issued and outstanding shares of the Company's Common Stock and Preferred
Stock have been duly authorized and validly issued, are fully paid and
nonassessable, and were issued in compliance with all applicable federal and
state securities laws. The Company has reserved (i) Ten Million One Hundred
Thirty Five Thousand One Hundred Sixty Four (10,135,164) shares of Series B
Common Stock for issuance upon conversion of the Series A Shares pursuant to the
Restated Articles, (ii) Ten Million One Hundred Thirty Five Thousand One Hundred
Sixty Four (10,135,164) shares of Series B Common Stock for issuance upon
exercise of the Warrants to be issued to the Purchasers at the Initial Closing,
(iii) Six Million Six Hundred Sixty Six Thousand Six Hundred Sixty Six
(6,666,666) shares of Series B Common Stock for issuance upon the exercise of
the option contemplated by Section 1.c. above, (iv) Six Million Six Hundred
Sixty Six Thousand Six Hundred Sixty Six (6,666,666) shares of Series B Common
Stock for issuance upon exercise of Warrants which may be issued pursuant to the
option contemplated by Section 1.c. above and (v) 6,398,253 shares of Series B
Common Stock for issuance upon exercise of other outstanding options and
warrants or pursuant to options which may be granted under the Company's stock
option plans. The Series A Shares shall have the rights and privileges set
forth in the Restated Articles. Except as described in the Schedule of
Exceptions, there are no options, warrants or other rights outstanding to
purchase or acquire, or any securities convertible into, nor has the Company
agreed to issue or reissue, other than pursuant to this Agreement, any of the
Company's authorized and unissued capital stock. Except as provided in the
Restated Articles or the Securityholders Agreement, there are no agreements or
understandings that affect or relate to the voting or giving of written consent
in lieu of meeting with respect to any of the Company's outstanding securities.
Except as provided in the Investor Rights Agreement or as described in the
Schedule of Exceptions, there are no preemptive rights with respect to the
issuance or sale of the Company's capital stock. Except as described in the
Schedule of Exceptions, there are no restrictions on the transfer of the
Company's capital stock other than those arising from federal and state
securities laws, this Agreement or the Other Transaction Documents.
e. AUTHORIZATION. All corporate action on the part of the Company,
its directors and shareholders necessary for the authorization, execution,
delivery and performance of this Agreement, the Warrants and the Other
Transaction Documents, the authorization, sale, issuance and delivery of the
Series A Shares and Warrants and Series B Shares and Warrants (and the Series B
Common Stock issuable upon conversion of the Series A Shares and upon exercise
of the Warrants), and the performance of all of the Company's obligations
hereunder and thereunder has been taken, including, without limitation, the
approval by the requisite vote of the Company's shareholders of each of the
proposals submitted for shareholder approval in the Information Statement dated
December 17, 1997 and the approval of the amendment and restatement of the
Investor Rights Agreement by the requisite consent of the parties thereto. This
Agreement constitutes and the Other Transaction Documents, when executed and
delivered by the Company, shall constitute valid and binding obligations of the
Company, enforceable in accordance with their respective terms, except as
limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application affecting enforcement of
5
creditors' rights, (ii) general principles of equity that restrict the
availability of equitable remedies, and (iii) to the extent that the
enforceability of the indemnification provisions of Section 2.9 of the
Investor Rights Agreement may be limited by applicable laws. The Series A
Shares, the Series B Shares, the shares of Series B Common Stock issuable
upon the conversion of the Series A Shares and the shares of Series B Common
Stock issuable upon exercise of the Warrants, when issued in compliance with
the provisions of this Agreement, the Restated Articles (with respect to the
Series B Common Stock issuable upon conversion of the Series A Shares), and
the Warrants (with respect to the Series B Common Stock issuable upon
exercise of the Warrants), will be validly issued, will be fully paid and
nonassessable, will have the rights and privileges described in the Restated
Articles and will be free of any liens or encumbrances, other than any liens
or encumbrances created by or imposed upon the holders through no action of
the Company. The Warrants, when issued in compliance with the provisions of
this Agreement, will have the rights and privileges described in the
Warrants, and will be free of any liens or encumbrances, other than liens or
encumbrances created by or imposed upon the holders through no action of the
Company. The sale of the Series A Shares and Series B Shares, the issuance
of the Warrants, and the issuance of shares of Series B Common Stock upon
conversion of the Series A Shares and upon exercise of the Warrants are not
and will not be subject to any preemptive rights or rights of first refusal
that have not been properly waived or complied with.
f. FINANCIAL STATEMENTS. The Company has delivered to each Purchaser
the Company's unaudited consolidated balance sheet as at September 30, 1997 (the
"Statement Date") and unaudited consolidated statements of income and cash flows
for the twelve-month period ending on the Statement Date (collectively, the
"Financial Statements"). The Financial Statements are complete and correct in
all material respects, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated, except as disclosed therein, and present fairly the financial
condition and position of the Company and its Subsidiaries as of the Statement
Date and operating results of the Company and its Subsidiaries for the periods
indicated; provided, however, that the Financial Statements are subject to
normal recurring year-end audit adjustments (which are not expected to be
material), and do not contain the footnotes required under generally accepted
accounting principles.
g. LIABILITIES. Except as disclosed in the Schedule of Exceptions,
neither the Company nor any of its Subsidiaries has any material liability or
obligation, absolute or contingent, that is not reflected in the Financial
Statements, other than obligations and liabilities incurred after the Statement
Date in the ordinary course of business which taken individually or in the
aggregate would not have a material adverse effect on the assets, liabilities,
condition (financial or otherwise), operating results, business or prospects of
the Company and its Subsidiaries, taken as a whole.
h. MATERIAL CONTRACTS. All contracts, agreements, leases or other
commitments, written or oral, absolute or contingent, to which the Company or
any of its Subsidiaries is a party are listed in the Schedule of Exceptions
other than (i) contracts for the purchase of supplies or services entered into
in the ordinary and usual course of business, involving the expenditure of no
more than $25,000 and extending for no more than one year beyond the date
hereof; (ii) sales contracts entered into in the ordinary course of business
involving no more than $25,000; and (iii) contracts terminable by the Company or
such Subsidiary on no more than thirty (30) days' written notice without cost or
liability to the Company.
i. INTERESTED PARTY TRANSACTIONS. Except as described in the Schedule
of Exceptions, no employee, shareholder, officer or director of the Company is
indebted (or committed to make loans or extend or guarantee credit) to the
Company or any of its Subsidiaries nor is the Company or any of its Subsidiaries
indebted (or committed to make loans or extend or guarantee credit) to any of
6
them. Except as described in the Schedule of Exceptions, neither the Company
nor any of its Subsidiaries is a guarantor or indemnitor of any indebtedness of
any other person, firm or corporation. Except as contemplated or otherwise
disclosed by this Agreement or in the Schedule of Exceptions, no shareholder,
officer, director or employee of the Company or any of its Subsidiaries, nor any
"affiliate" or "associate" of such persons (as such terms are defined in the
rules and regulations promulgated under the Securities Act), is now a party to
any transaction with the Company or any of its Subsidiaries, including, without
limitation, any contract, agreement or other arrangement providing for the
employment of, furnishing of services by, rental of real or personal property
from, or otherwise requiring payments to, any such person or entity.
j. CHANGES. Since the Statement Date, there has not been:
(1) Any change in the assets, liabilities, condition
(financial or otherwise), operating results, business or prospects of the
Company or any of its Subsidiaries from that reflected in the Financial
Statements, EXCEPT changes in the ordinary course of business that have not
been, individually or in the aggregate, materially adverse to the assets,
liabilities, condition (financial or otherwise), operating results, business or
prospects of the Company and its Subsidiaries, taken as a whole;
(2) Any material change in the contingent obligations of
the Company or any of its Subsidiaries by way of guaranty, endorsement,
indemnity, warranty or otherwise;
(3) Any damage, destruction or loss, whether or not covered
by insurance, materially and adversely affecting the assets, liabilities,
condition (financial or otherwise), operating results, business or prospects of
the Company and its Subsidiaries, taken as a whole;
(4) Any waiver by the Company or any of its Subsidiaries of
a valuable right or of a material debt owed to it;
(5) Any direct or indirect loans made by the Company or any
of its Subsidiaries to any shareholder, employee, officer or director of the
Company or any of its Subsidiaries, other than advances made in the ordinary
course of business;
(6) Any material change in any compensation arrangement or
agreement with any employee, officer, director or shareholder of the Company or
any of its Subsidiaries;
(7) Any declaration or payment of any dividend or other
distribution of the assets of the Company;
(8) Any labor organization activity;
(9) Any debt, obligation or liability incurred, assumed or
guaranteed by the Company or any of its Subsidiaries, other than current
liabilities incurred in the ordinary course of business and reflected in the
Schedule of Exceptions;
(10) Any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets;
(11) Any change in any agreement to which the Company or any of
its Subsidiaries is a party or by which it is bound which materially and
adversely affects the assets, liabilities, condition
7
(financial or otherwise), operating results, business or prospects of the
Company and its Subsidiaries, taken as a whole;
(12) Any other event or condition of any character that, either
individually or cumulatively, has materially and adversely affected the assets,
liabilities, condition (financial or otherwise), operating results, business or
prospects of the Company and its Subsidiaries, taken as a whole;
(13) Any resignation or termination of employment or, to the
Company's best knowledge, any impending resignation or termination of employment
of any officer or key employee of the Company or any of its Subsidiaries;
(14) Receipt of any notice that there has been a loss of, or
material order cancellation by, any major customer of the Company or any of its
Subsidiaries;
(15) Any mortgage, pledge, transfer of a security interest in, or
lien, created by the Company or any of its Subsidiaries with respect to any of
its material properties or assets, except liens for taxes not yet due or
payable;
(16) Any direct or indirect redemption, purchase or other
acquisition by the Company of any shares of its capital stock; or
(17) Any agreement or commitment by the Company or any of its
Subsidiaries to do any of the things described in this Section 3.j.
k. TAX MATTERS. The Company and each of its Subsidiaries has filed
all necessary federal and state property, income and franchise tax returns and
has paid all taxes shown as due thereon or otherwise owed by it to any taxing
authority except those contested in good faith and for which appropriate amounts
have been reserved in accordance with generally accepted accounting principles;
and there is no tax deficiency which has been, or to the best knowledge of the
Company might be, asserted against the Company or any of its Subsidiaries which
would materially affect the assets, liabilities, condition (financial or
otherwise), operating results, business or prospects of the Company and its
Subsidiaries, taken as a whole. The provision for taxes of the Company and its
Subsidiaries as shown in the Financial Statements is adequate for taxes due or
accrued as of the Statement Date thereof. The Company has not made any
elections pursuant to the Internal Revenue Code of 1986, as amended (the
"Code"), other than elections that relate solely to methods of accounting,
depreciation or amortization, that would have a material effect on the assets,
liabilities, condition (financial or otherwise), operating results, business or
prospects of the Company and its Subsidiaries, taken as a whole. Since the
Statement Date, the Company and its Subsidiaries has made adequate provisions on
its books of account for all taxes, assessments and governmental charges with
respect to its business, properties and operations for such period. The Company
and its Subsidiaries have withheld or collected from each payment made to each
of its employees, the amount of all taxes (including, but not limited to,
federal income taxes, Federal Insurance Contribution Act taxes and Federal
Unemployment Tax Act taxes) required to be withheld or collected therefrom, and
has paid the same to the proper tax receiving officers or authorized
depositories. The Company is not a real property holding company within the
meaning of Section 897 of the Code. To the best of the Company's knowledge, the
Company is a "qualified small business" within the meaning of Section 1202(d) of
the Code.
l. TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. Set forth in the
Schedule of Exceptions is a list which includes all material assets and
properties of the Company and its Subsidiaries
8
as of September 30, 1997. The Company and each of its Subsidiaries have good
title to all of their respective properties and assets, both real and personal,
tangible and intangible, reflected on the balance sheets included in the
Financial Statements or acquired after the date thereof (except inventory or
other personal property disposed of in the ordinary course of business
subsequent to the date thereof), and such properties and assets are not subject
to any mortgage, pledge, lien, security interest, encumbrance or charge other
than (i) liens for current taxes not yet due and payable, (ii) liens and
encumbrances that do not materially detract from the value of the property
subject thereto or materially impair the operations of the Company or any of its
Subsidiaries, and (iii) liens securing obligations reflected in the Financial
Statements. With respect to properties or assets it leases or holds pursuant to
a license, the Company and each of its Subsidiaries are in compliance with such
leases and licenses (except for such defaults or breaches that would not have a
material adverse affect on the Company and its Subsidiaries, taken as a whole)
and holds valid leasehold interests or licenses free of any liens, claims or
encumbrances except for those described in subsections (i) through (iii) hereof.
All properties and assets owned, leased or licensed by the Company or any of its
Subsidiaries are in good operating condition and repair and are reasonably fit
and usable for the purposes for which they are used.
m. COMPLIANCE WITH OTHER INSTRUMENTS. Neither the Company nor any of
its Subsidiaries is in violation or default of (i) any term of its articles of
incorporation or bylaws, (ii) any term or provision of any mortgage, indenture,
contract, agreement, instrument, or contract to which it is a party or by which
it is bound or (iii) any order, judgment, decree, statute, rule or regulation
applicable to the Company or any of its Subsidiaries, except for such violations
or defaults that, either individually or in the aggregate, would not materially
adversely affect the assets, liabilities, condition (financial or otherwise),
operating results, business or prospects of the Company and its Subsidiaries,
taken as a whole. The execution, delivery and performance of and compliance
with this Agreement and the Other Transaction Documents, the issuance of the
Shares and Warrants pursuant hereto, and the issuance of the Series B Common
Stock upon conversion of the Series A Shares and upon exercise of the Warrants
(i) will not with or without the passage of time or giving of notice, result in
any violation of, or conflict with, or constitute a default under, (A) the
articles of incorporation or bylaws of the Company or any of its Subsidiaries or
(B) any material term or provision of any mortgage, indebtedness, indenture,
contract, agreement, instrument, judgment or decree to which the Company is a
party or by which it is bound, or (ii) result in the creation of any mortgage,
pledge, lien, encumbrance or charge upon any of the properties or assets of the
Company, except in the case of (i)(B) and (ii) above, for such violations,
conflicts, defaults, liens, encumbrances and charges that would not, either
individually or in the aggregate, materially and adversely affect the assets,
liabilities, condition (financial or otherwise), operating results, business or
prospects of the Company and its Subsidiaries, taken as a whole.
n. LITIGATION, ETC. There are no actions, suits, proceedings or
investigations pending or, to the Company's best knowledge, currently threatened
against the Company or any of its Subsidiaries (i) that question the validity of
this Agreement, the Warrants or any Other Transaction Agreement, or the right of
the Company to enter into any such agreement, or to consummate the transactions
contemplated hereby or thereby, or (ii) which might result, individually or in
the aggregate, in any material adverse change in the assets, liabilities,
condition (financial or otherwise), operating results, business or prospects of
the Company and its Subsidiaries, taken as a whole, or any change in the current
equity ownership of the Company or any of its Subsidiaries, nor is the Company
aware that there is any basis for the foregoing. The foregoing includes,
without limitation, actions pending or threatened (or any basis therefor known
to the Company) involving the prior employment of any of the employees of the
Company or any of its Subsidiaries, their use in connection with the business of
the Company or any of its Subsidiaries of any information or techniques
allegedly proprietary to any of their former employers, or their obligations
under any agreements with prior employers. Neither the Company nor any of its
Subsidiaries is a party or subject to the provisions of any order, writ,
injunction, judgment or decree of
9
any court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company or any of its Subsidiaries currently
pending or which the Company or any of its Subsidiaries intends to initiate.
o. EMPLOYEES. Neither the Company nor any of its Subsidiaries has any
collective bargaining agreements with any of its employees. There is no labor
union organizing activity pending or, to the Company's best knowledge,
threatened with respect to the Company or any of its Subsidiaries. No employee
has any agreement or contract, written or oral, regarding his employment. To
the Company's knowledge, no employee of the Company, nor any consultant with
whom the Company or any of its Subsidiaries has contracted, is in violation of
any term of any employment contract, proprietary information agreement or any
other contract or agreement relating to the relationship of such employee with
the Company or any other party because of the nature of the business presently
conducted or presently proposed to be conducted by the Company or any of its
Subsidiaries; and to the Company's knowledge, the continued employment by the
Company and its Subsidiaries of their present employees, and the performance of
the contracts of the Company and its Subsidiaries with its independent
contractors, will not result in any such violation. The Company has not
received any notice alleging that any such violation has occurred. No employee
of the Company or any of its Subsidiaries has been granted the right to
continued employment by the Company or any of its Subsidiaries or to any
material compensation following termination of employment with the Company or
such Subsidiary. The Company is not aware that any officer or key employee, or
that any group of key employees, intends to terminate their employment with the
Company or any of its Subsidiaries, nor does the Company or any of its
Subsidiaries have a present intention to terminate the employment of any
officer, key employee or group of key employees. Each employee and contractor
of the Company or any of its Subsidiaries who has access to confidential or
proprietary information has executed an Employee Confidentiality and Invention
Agreement. Neither the Company nor any of its Subsidiaries has any Employee
Benefit Plan as defined in the Employee Retirement Income Security Act of 1974.
The Company and its Subsidiaries have complied in all material respects with all
applicable state and federal equal employment opportunity and other laws related
to employment.
p. PATENTS, TRADEMARKS, AND TRADE SECRETS. To the Company's best
knowledge, it and its Subsidiaries own or has sufficient legal rights to all
patents, patent rights, licenses, trade secrets, trademarks, service marks,
trademark rights, trade names or trade name rights, copyrights, inventions and
intellectual property rights necessary for their business as now operated and as
proposed to be operated without any known conflict with or infringement of the
rights of others. There are no outstanding options, licenses or agreements of
any kind relating to the foregoing, nor is the Company or any of its
Subsidiaries 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 and other proprietary rights
and processes of any other person or entity other than such licenses or
agreements arising from the purchase of "off the shelf" or standard products.
The Company has not received any communications alleging that the Company or any
of its Subsidiaries has violated or, by conducting its business as presently
conducted or 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. The Company is not aware that any of the employees
of the Company and its Subsidiaries is obligated under any contract (including
licenses, covenants or commitments of any nature) or other agreement, or subject
to any judgment, decree or order of any court or administrative agency, that
would interfere with their duties to the Company 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 business by the
employees of the Company and its Subsidiaries, nor the conduct of the Company's
business as proposed, will, to the Company's best knowledge, conflict with or
result in a breach of the terms, conditions or provisions of, or constitute a
10
default under, any contract, covenant or instrument under which any employee is
now obligated. The Company does not believe it is or will be necessary to
utilize any inventions, trade secrets or proprietary information of any of its
employees made prior to their employment, except for inventions, trade secrets
or proprietary information that have been assigned to the Company. The Schedule
of Exceptions lists all patents and registered trademarks of the Company and its
Subsidiaries. The Company has paid all maintenance fees and made all required
filings with respect to such patents and registered trademarks.
q. REGISTRATION RIGHTS. Except as provided for by the Investor Rights
Agreement or described in the Schedule of Exceptions, the Company is not under
any contractual obligation to register the offer or sale of any of its presently
outstanding securities or any of its securities which may hereafter be issued
under the Securities Act or applicable state securities laws.
r. GOVERNMENTAL CONSENT, ETC. No consent, approval or authorization
of or designation, declaration or filing with any governmental authority on the
part of the Company is required in connection with (i) the valid execution and
delivery of this Agreement, the Warrants or the Other Transaction Documents,
(ii) the offer, sale or issuance of the Shares or the Warrants, and the issuance
of the Series B Common Stock upon conversion of the Series A Shares and upon
exercise of the Warrants or (iii) the consummation of any other transaction
contemplated hereby, except (a) the filing of the Restated Articles in the
office of the California Secretary of State, and (b) the filing of a Notice on
Form D with the Securities Exchange Commission and applicable state securities
authorities that have been made or will be made in a timely manner following the
applicable Closing.
s. OFFERING. Assuming the accuracy of the representations and
warranties of the Purchasers contained in Section 4 hereof, the offer, sale and
issuance of the Shares and the Warrants and the issuance of the Series B Common
Stock upon conversion of the Series A Shares and upon exercise of the Warrants
will be exempt from the registration requirements of Section 5 of the Securities
Act of 1933, as amended (the "Securities Act") and will have been registered or
qualified (or are exempt from registration and qualification) under the
registration, permit or qualification requirements of all applicable state
securities laws.
t. BROKERS OR FINDERS. Except as described in the Schedule of
Exceptions, the Company has not incurred, and will not incur, directly or
indirectly, as a result of any action taken by the Company, any liability for
brokerage or finders' fees or commissions or any similar charges in connection
with this Agreement.
u. PERMITS. The Company and its Subsidiaries have all permits,
licenses, orders and approvals, certificates of public convenience and
necessity, and tariffs of any federal, state, local or foreign governmental or
regulatory body, including, without limitation, under the rules of the Federal
Communication Commission and the California Public Utility Commission
(collectively, the "Permits") that are material to or necessary in the conduct
of their business as now conducted; all such Permits are in full force and
effect; no violations have been recorded in respect of any such Permits; and no
proceeding is pending or, to the best knowledge of the Company, threatened to
revoke or limit any such Permits. The Schedule of Exceptions contains a true,
accurate and complete list of all of the Permits.
v. ENVIRONMENTAL AND SAFETY LAWS. To the best of the Company's
knowledge, neither the Company nor any of the Company's Subsidiaries is in
violation of any applicable statute, law or regulation relating to the
environment or occupational health and safety which could materially and
adversely affect the business, properties, prospects, or financial condition of
the Company and its
11
Subsidiaries, taken as a whole. To the best of the Company's knowledge, no
material expenditures are or will be required in order to comply with any such
existing statute, law or regulation.
w. MINUTE BOOKS. The minute books of the Company and its Subsidiaries
have been made available for inspection to Spectra 3 and Enron, and the
respective counsel of each, and contain a summary of all meetings of directors
and shareholders since the time of incorporation and reflect all transactions
referred to in such minutes accurately in all material respects.
x. PROJECT STATUS. The Schedule of Exceptions contains a fair and
accurate description of the status of the Company's negotiations and/or other
arrangements with The Irvine Company and the cities of Orange and Santa Ana,
California as of the date of this Agreement.
y. FULL DISCLOSURE. This Agreement, the Warrants, the Exhibits
hereto, the Other Transaction Documents, and all other documents delivered by
the Company to Spectra 3 and Enron or their counsel or agents in connection
therewith or with the transactions contemplated hereby or thereby, do not
contain any untrue statement of material fact nor, to the Company's best
knowledge, omit to state a material fact necessary in order to make the
statements contained herein or therein not misleading.
SECTION 4.
REPRESENTATIONS AND WARRANTIES OF
THE PURCHASERS
Each Purchaser hereby severally represents and warrants to the Company as
follows:
a. REQUISITE POWER AND AUTHORITY. Such Purchaser has all requisite
corporate, partnership or limited liability company (as applicable) power and
authority to execute and deliver this Agreement and the Other Transaction
Documents to which it is a party and to carry out the provisions hereof and
thereof. All action on such Purchaser's part required for the lawful execution
and delivery of this Agreement and the Other Transaction Documents to which it
is a party have been taken. Upon their execution and delivery, this Agreement
and the Other Transaction Documents to which it is a party will be valid and
binding obligations of such Purchaser, enforceable in accordance with their
respective terms, except as limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights, (ii) general principles of equity that
restrict the availability of equitable remedies, and (iii) to the extent that
the enforceability of the indemnification provisions of Section 2.9 of the
Investor Rights Agreement may be limited by applicable laws.
b. ACCREDITED INVESTOR; EXPERIENCE. Such Purchaser is an "accredited
investor" as defined in Rule 501(a) under the Securities Act (as set forth on
Exhibit K). Such Purchaser has substantial experience in evaluating and
investing in private placement transactions of securities in companies similar
to the Company so that it is capable of evaluating the merits and risks of its
investment in the Company and has the capacity to protect its own interests.
Such Purchaser must bear the economic risk of this investment indefinitely
unless the Shares or Warrants are registered pursuant to the Securities Act, or
an exemption from registration is available for the disposition of such Shares
and Warrants. Such Purchaser understands that the Company has no present
intention of registering the Shares or the Warrants. Such Purchaser also
understands that there is no assurance that any exemption from registration
under the Securities Act will be available and that, even if available, such
exemption may not allow such Purchaser to transfer all or any portion of the
Shares or Warrants under the circumstances, in the amounts or at the times such
Purchaser might propose.
12
c. INVESTMENT. Such Purchaser is acquiring the Shares and Warrants
for such Purchaser's own account for investment only, and not with the view to,
or for resale in connection with, any distribution thereof. Such Purchaser
understands that the Shares and Warrants to be purchased have not been, and will
not be, registered under the Securities Act by reason of a specific exemption
from the registration provisions of the Securities Act, the availability of
which depends upon, among other things, the bona fide nature of the investment
intent and the accuracy of such Purchaser's representations as expressed herein.
d. RULE 144. Such Purchaser acknowledges that the Shares and Warrants
must be held indefinitely unless subsequently registered under the Securities
Act or unless an exemption from such registration is available. Such Purchaser
has been advised and is aware of the provisions of Rule 144 promulgated under
the Securities Act, which permit limited resale of shares purchased in a private
placement subject to the satisfaction of certain conditions, including (except
as otherwise provided in Rule 144(k)), among other things, the existence of a
public market for the shares, the availability of certain current public
information about the Company, the resale occurring not less than one year after
a party has purchased and paid for the security to be sold, the sale being
effected through a "broker's transaction" or in transactions directly with a
"market maker" and the number of shares being sold during any three-month period
not exceeding specified limitations.
e. NO PUBLIC MARKET. Such Purchaser understands that no public market
now exists for any of the securities issued by the Company and that the Company
has made no assurances that a public market will ever exist for the Company's
securities.
f. ACCESS TO DATA. Such Purchaser has received and read the
Financial Statements and has had an opportunity to discuss the Company's
business, management and financial affairs with its management. Such Purchaser
has also had an opportunity to ask questions of and receive answers from
officers of the Company regarding the terms and conditions of this investment,
which questions were answered to such Purchaser's satisfaction.
g. RESIDENCE. The office of such Purchaser in which its respective
investment decision was made is located at the address of such Purchaser as set
forth on the signature page hereto.
SECTION 5.
CONDUCT AND AGREEMENTS PENDING CLOSING
a. CONDUCT OF BUSINESS. From the date of this Agreement until the
Closing, the Company will (i) carry on its business only in the ordinary course
in substantially the same manner as heretofore; (ii) maintain and keep its
properties and equipment in good repair, working order and condition, except for
ordinary wear and tear; (iii) keep in full force and effect insurance comparable
in amount and scope of coverage to that now maintained by it; (iv) perform in
all material respects all of its obligations under all contracts and commitments
applicable to its business or properties; (v) use its best efforts to maintain
and preserve its business organization intact; (vi) maintain its books of
account and records in the usual and regular manner; (vii) comply in all
material respects with all laws and regulations applicable to it and to the
conduct of its business; (viii) not amend its Existing Charter or Existing
Bylaws; (ix) not enter into or assume any contract, agreement or commitment
outside the ordinary course of business; (x) not merge or consolidate with, or
agree to merge or consolidate with, or purchase substantially all of the assets
of, or otherwise acquire, any business of any corporation,
13
partnership, association or other business organization or division thereof; and
(xi) promptly advise the Purchasers in writing of any materially adverse change
in its business, prospects or financial condition.
b. ACCESS, INFORMATION, DOCUMENTS. The Company will (i) give to the
Purchasers and their counsel and other representatives full and free access at
all reasonable times to all of its properties, books, contracts, commitments and
records and (ii) furnish to the Purchasers all such other information with
respect to its properties, business and affairs as the Purchasers from time to
time may reasonably request. The Purchasers shall treat such information as
confidential, and if this Agreement is terminated prior to the Closing, all such
information in documentary form shall be returned upon request.
c. COOPERATION. The Company and the Purchasers shall cooperate and
use their commercially reasonable efforts with respect to all steps required to
effect the transactions contemplated by the Agreement, including promptly
furnishing the information required in connection with (i) the preparation of
all necessary documents, (ii) the preparation of all filings and obtaining all
approvals required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, and (iii) all other consents and approvals which are required in order to
consummate the transactions.
d. NO SOLICITATION. Prior to the Closing (or the earlier termination
of this Agreement in accordance with its terms), neither the Company nor any of
its affiliates, directors, officers, employees, representatives or agents,
shall, directly or indirectly, solicit or initiate any discussions, submissions
of proposals or offers or negotiations with, or, subject to any fiduciary
obligations under applicable law after taking into account the advice of counsel
with respect thereto, participate in any negotiation or discussions with, or
provide any information or data of any nature whatsoever to, or otherwise
cooperate in any other way with, or assist or participate in, facilitate or
encourage any effort or attempt by, any corporation, partnership, person or
other entity or group, other than the Purchasers and their representatives,
agents and affiliates, concerning any sale of shares of capital stock or other
equity securities, debt financing or similar transaction involving the Company
or any subsidiary that would provide funding for the Company in lieu of, or that
would adversely affect, the transactions contemplated by this Agreement (all
such transactions being referred to herein as "Alternative Transactions"). The
Company shall immediately notify Spectra 3 and Enron if any proposal, offer,
inquiry or other contact is received by, any information is requested from, or
any discussions or negotiations are sought to be initiated or continued with,
the Company in respect of any Alternative Transaction, and shall, in any such
notice to Spectra 3 and Enron, indicate the identity of the offeror and the
terms and conditions of any proposals or offers or the nature of any inquiries
or contacts. This Section 5.d. shall not, however, prohibit the Company from
pursuing high-yield debt financing as previously discussed with Spectra 3 and
Enron.
e. SHAREHOLDER APPROVALS AND OTHER CONSENTS. The Company shall use all
commercially reasonable efforts to obtain all consents, permits and waivers
necessary or appropriate in connection with the authorization, execution and
delivery of this Agreement by the Company and the consummation by it of the
transactions contemplated hereby, including, without limitation, the consent of
Foothill Capital Corporation to the transactions contemplated hereby and (i) the
conversion of all outstanding shares of the Company's Preferred Stock into
Common Stock, (ii) approval of the Restated Articles, including classification
of all outstanding Common Stock as "Series B Common Stock," (iii) approval of
the Restated Bylaws, (iv) approval of the terms of the transactions contemplated
by this Agreement, including the Business Opportunity Agreement, and (v)
approval of the Investor Rights Agreement and related consents (all such
required approvals being the "Shareholder Approvals").
f. PUBLIC ANNOUNCEMENTS. The Company, Spectra 3 and Enron shall
consult with each other before issuing any press release with respect to this
Agreement or the transactions
14
contemplated hereby and shall not issue any such press release or make any such
public statement without the prior written consent of the others, except as
required by law.
g. FINANCIAL ADVISOR AGREEMENTS. The Company, the ▇▇▇▇▇ Entities and
Enron shall consult with each other and use their reasonable best efforts to
amend or terminate the Company's existing agreements with ▇.▇. ▇▇▇▇▇▇, ING
Capital and ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ to the reasonable satisfaction of Spectra 3 and
Enron, including, without limitation, reaching agreements with respect to the
fees payable by the Company to such entities in connection with the sale of
Shares and Warrants to the Purchasers under this Agreement.
h. BOARD OF DIRECTORS. The Company shall take all such action as is
necessary to cause (i) three designees of the ▇▇▇▇▇ Entities, (ii) two designees
of Enron, (iii) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as a management representative, and (iv) ▇▇▇▇
▇. ▇▇▇▇▇▇, to be elected to serve as directors of the Company immediately
following the Closing. The ▇▇▇▇▇ Entities and Enron shall notify the Company of
the names of its designees no later than two business days prior to the Closing.
i. EMPLOYEE SEVERANCE PROGRAM. The Company shall take all action
necessary to approve the employee severance program set forth on Exhibit L
hereto.
j. AMENDMENTS TO EMPLOYEE STOCK OPTIONS. The Company shall take all
action necessary to approve amendments to all outstanding Company employee stock
options to provide that in the event that the Company terminates the employment
of an employee without "cause" within six (6) months following the Closing all
options held by such employee would become immediately vested and exercisable.
For this purpose, "cause" shall exist in any of the following circumstances:
(i) the employee's conviction of a felony or conduct involving dishonesty, fraud
or breach of trust, (ii) the employee's willful misconduct or gross negligence
in the performance of his duties to the Company, or (iii) the employee's willful
and substantiated nonperformance of his assigned duties, which continues for
more than ten (10) days after written notice from the Company and an opportunity
to cure.
SECTION 6.
CONDITIONS TO CLOSING OF PURCHASERS
The obligation of each Purchaser to purchase the Shares and the Warrants
at the applicable Closing is, at the option of such Purchaser, subject to the
fulfillment of the following conditions:
a. REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties made by the Company in Section 3 hereof shall be true and correct in
all material respects as of the Closing Date with the same force and effect as
if they had been made as of the Closing Date.
b. COVENANTS. All covenants, agreements and conditions contained in
this Agreement to be performed or complied with by the Company on or prior to
the Closing Date shall have been performed or complied with.
c. BLUE SKY. The Company shall have obtained all necessary blue sky
law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Shares and the
Warrants to the Purchasers.
d. OPINIONS OF COMPANY'S COUNSELS. The Purchasers shall have received
from the Company's counsel an opinion addressed to them, dated the Closing Date,
substantially in the form of
15
Exhibit M-1 hereto. The Purchasers shall also have received from the Company's
regulatory counsel an opinion addressed to them, dated the Closing Date,
substantially in the form of Exhibit M-2 hereto.
e. SHAREHOLDER APPROVALS; OTHER CONSENTS. The Company shall have
obtained the Shareholder Approvals and any and all other consents, permits and
waivers necessary or appropriate for consummation of the transactions
contemplated by this Agreement (except for such as may be properly obtained
subsequent to the Closing), and shall have provided Spectra 3 and Enron with all
documentation thereof as they may reasonably request.
f. FILING OF RESTATED ARTICLES; ADOPTION OF RESTATED BYLAWS. The
Restated Articles shall have been filed with the Secretary of State of
California and shall be in full force and effect. The Restated Bylaws shall
have been adopted and shall be in full force and effect.
g. RESERVATION OF SERIES B COMMON STOCK. The shares of Series B
Common Stock issuable upon exercise of the Warrants and conversion of the Series
A Shares shall have been duly authorized and reserved for issuance upon
exercise.
h. COMPLIANCE CERTIFICATE. The Company shall have delivered to the
Purchasers a compliance certificate, executed by such officers of the Company as
the Purchasers shall request and dated as of the date of the Closing, to the
effect that the conditions specified in the subsections of this Section 6 have
been satisfied.
i. INVESTOR RIGHTS AGREEMENT. The Investor Rights Agreement,
substantially in the form attached hereto as Exhibit F shall have been executed
and delivered by the parties thereto.
▇. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ FILING. The applicable waiting period, including
any extension thereof, under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act shall have expired or the
parties shall have been granted early termination with respect thereto.
In addition, the respective obligations of each of Spectra 3 and Enron to
purchase the shares and warrants at the applicable Closing is, at the option of
each, subject to the fulfillment of the following additional conditions:
k. CONTEMPORANEOUS INVESTMENT BY SPECTRA 3 AND ENRON. The purchase of
Series A Shares and Warrants by Spectra 3 and Enron at the Initial Closing
pursuant to this Agreement shall close contemporaneously with each other.
l. CORPORATE DOCUMENTS. The Company shall have delivered to Spectra 3
and Enron or their respective counsel copies of all corporate documents of the
Company as they shall reasonably request.
m. BOARD OF DIRECTORS. The Company and its Board of Directors
shall have taken all necessary steps such that the Board of Directors
immediately upon Closing shall be comprised as set forth in Section 5.h. hereof.
n. MANAGEMENT SERVICES AGREEMENTS. The Company, Corporate Managers,
L.L.C. and Enron shall have executed the Management Services Agreements
substantially in the forms of Exhibits I-1 and I-2, hereto, respectively,
pursuant to which Corporate Managers, L.L.C. and Enron will provide management
services to the Company for three years following the Closing for an annual
management fee of $500,000 each, plus out-of-pocket expenses.
16
o. BUSINESS OPPORTUNITY AGREEMENT. The Company, the ▇▇▇▇▇ Entities
and Enron shall have executed the Business Opportunity Agreement substantially
in the form of Exhibit H hereto.
p. FINANCIAL ADVISOR AGREEMENTS. The Company shall have amended or
terminated the agreements with ▇.▇. ▇▇▇▇▇▇, ING Capital and ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
as provided in Section 5.g. hereof.
▇. ▇▇▇▇▇ WARRANT AMENDMENT. The Company shall have executed the ▇▇▇▇▇
Warrant Amendment substantially in the form of Exhibit J hereto.
r. PAYMENT OF TRANSACTION FEES AND EXPENSES. The Company shall have
paid to each of Spectra 3 and Enron, or such of their affiliates as they may
designate, a transaction fee of six percent (6%) of the gross amount of the
purchase price paid by such party at the applicable Closing. The transaction
fee payable at the Initial Closing shall consist of $900,000 payable to Spectra
3 or its designated affiliate(s) and $900,000 payable to Enron or its designated
affiliate(s).
s. PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated at the Closing hereby and all
documents and instruments incident to such transactions shall be reasonably
satisfactory in substance and form to Spectra 3 and Enron and the respective
counsel of each, and Spectra 3 and Enron and the respective counsel of each
shall have received all such counterpart originals or certified or other copies
of such documents as they may reasonably request.
SECTION 7.
CONDITIONS TO CLOSING OF COMPANY
The Company's obligation to sell and issue the Shares and the Warrants at
the applicable Closing Date is, at the option of the Company, subject to the
fulfillment as of the Closing Date of the following conditions:
a. REPRESENTATIONS. The representations and warranties made by the
Purchasers in Section 4 hereof shall be true and correct in all material
respects as of the Closing Date, with the same force and effect as if they had
been made on and as of the Closing Date.
b. BLUE SKY. The Company shall have obtained all necessary blue sky
law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Shares and the
Warrants at such Closing.
c. LEGAL MATTERS. All material matters of a legal nature which
pertain to this Agreement, and the transactions contemplated hereby, shall have
been reasonably approved by counsel to the Company.
d. PERFORMANCE OF OBLIGATIONS. Each Purchaser shall have performed
and complied with all agreements and conditions herein required to be performed
or complied with by it on or before the Closing.
e. FILING OF RESTATED ARTICLES. The Restated Articles shall have been
filed with the Secretary of State of California and shall be in full force and
effect.
17
f. INVESTOR RIGHTS AGREEMENT. The Investor Rights Agreement
substantially in the form attached hereto as Exhibit F shall have been executed
and delivered by the purchasers.
g. SHAREHOLDER APPROVALS; OTHER CONSENTS. The Company shall have
obtained the Shareholder Approvals. In addition, the Company shall have
obtained any and all other consents, permits and waivers necessary or
appropriate for consummation of the transactions contemplated by the Agreement
(except for such as may be properly obtained subsequent to the Closing).
▇. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ FILING. The applicable waiting period, including
any extension thereof, under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act shall have expired or the
parties shall have been granted early termination with respect thereto.
i. CONTEMPORANEOUS INVESTMENT BY SPECTRA 3 AND ENRON. The purchase of
Series A Shares and Warrants by Spectra 3 and Enron at the Initial Closing
pursuant to this Agreement shall close contemporaneously with each other.
▇. ▇▇▇▇▇ WARRANT AMENDMENT. Spectra 1 and Spectra 2 shall have
executed the ▇▇▇▇▇ Warrant Amendment substantially in the form of Exhibit J
hereto.
SECTION 8.
INDEMNIFICATION
a. INDEMNIFICATION. The Company agrees to indemnify, defend and hold
harmless each Purchaser, and its officers, directors, managers, members,
shareholders, agents, employees, attorneys, affiliates, successors and assigns,
from and against, and pay or reimburse each of them for, any and all claims,
losses, damages (including any diminution in value of any equity held in the
Company by Purchaser), judgments, amounts paid in settlement, costs and legal,
accounting or other expenses (collectively, "Losses") that any of them may
sustain or incur as a result of any misrepresentation, any inaccuracy in, or any
breach of, any warranty or representation or any non-performance of any covenant
or other obligation on the part of the Company contained in this Agreement.
b. INDEMNIFICATION PROCEDURES.
(i) Promptly after receipt by a party entitled to
indemnification hereunder (an "Indemnified Party") of notice of any claim or of
the commencement of any action, investigation, suit or proceeding ("Proceeding")
with respect to which such party may make a claim for indemnification hereunder,
the Indemnified Party will notify the party against whom indemnification is
sought (the "Indemnifying Party") in writing of such claim or Proceeding, and
the Indemnifying Party may in his or its discretion assume the defense of such
claim or Proceeding, in which case he or it shall employ counsel reasonably
satisfactory to the Indemnified Party and shall pay the fees and expenses of
such counsel. Notwithstanding the preceding sentence, an Indemnified Party will
be entitled to employ counsel separate from counsel to the Indemnifying Party
and to participate in the defense of such claim or Proceeding at the Indemnified
Party's expense. No settlement or compromise of any claim or Proceeding shall
give rise to liability of the Indemnifying Party unless such party shall have
been notified of any proposed settlement or compromise and shall have consented
thereto. The Indemnifying Party shall obtain the written consent of the
Indemnified Party, which consent shall not be unreasonably withheld, prior to
ceasing to defend, settling or otherwise disposing of any such claim or
Proceeding.
18
(ii) In the event that any Indemnified Party suffers a Loss or
otherwise becomes entitled to indemnification hereunder from an Indemnifying
Party in a situation that does not involve a Proceeding being instituted by a
third party, the Indemnified Party shall send notice as it would pursuant to
Section 8.b.(i) in order to provide reasonable notice to the Indemnifying Party
as to the nature and extent of the Loss.
(iii) Any notice of a claim or Proceeding or a claim for indemnity
provided for herein shall be in writing and shall specify, to the extent known
by the Indemnified Party, the nature and extent of the claim or Proceeding and
the amount being asserted as damages or Losses, as the case may be.
Notwithstanding the foregoing, the failure to so provide notice on a timely and
adequate basis shall not relieve the Indemnifying Party of its obligations to
indemnify hereunder except to the extent that such Indemnifying Party can
establish prejudice to it by the lack of timely or adequate notice.
SECTION 9.
MISCELLANEOUS
a. GOVERNING LAW. This Agreement shall be governed in all respects by
the internal laws of the State of California.
b. SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive, and shall in no way be affected by, any
investigation made by any Purchaser of the subject matter thereof and the
closing of the transactions contemplated hereby.
c. SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto;
provided, however, that the rights of a Purchaser to purchase the Series A
Shares and the Warrants shall not be assignable without the consent of the
Company and provided further that the Company may not assign its rights
hereunder.
d. ENTIRE AGREEMENT; AMENDMENT. This Agreement, the Exhibits and
Schedules hereto, and the other documents delivered pursuant hereto constitute
the full and entire understanding and agreement between the parties with regard
to the subjects hereof and thereof, and no party shall be liable or bound to any
other party in any manner by any warranties, representations or covenants except
as specifically set forth herein or therein. Without limiting the generality of
the foregoing, this Agreement supersedes the letter of understanding dated
November 25, 1997 among the Company, Spectra 1 and Spectra 2 and Enron, which
shall be of no further force or effect. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought.
e. NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger,
addressed (a) if to a Purchaser, at such Purchaser's address as set forth on the
signature page herein, or at such other address as the Purchaser shall have
furnished to the Company in writing or (b) if to the Company, one copy should be
sent to its address as set forth on the cover page of this Agreement and
addressed to the attention of the Corporate Secretary, or at such other address
as the Company shall have furnished to the Purchasers.
19
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given when delivered if
delivered personally or by messenger, or, if sent by mail, at the earlier of its
receipt or seventy two (72) hours after the same has been deposited in a
regularly maintained receptacle for the deposit of the United States mail,
addressed and mailed as aforesaid.
f. DELAYS OR OMISSIONS. Except as expressly provided herein, no
delay or omission to exercise any right, power or remedy accruing to the
Purchasers upon any breach or default of the Company under this Agreement shall
impair any such right, power or remedy of the Purchasers nor shall it be
construed to be a waiver of any such breach or default or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of the Purchasers of
any breach or default under this Agreement, or any waiver on the part of the
Purchasers of any provisions or conditions of this Agreement, must be in writing
and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement or by law or otherwise
afforded to any holder, shall be cumulative and not alternative.
g. EXPENSES. The Company shall bear its own expenses incurred with
respect to this Agreement and the transactions contemplated hereby. In
addition, the Company shall reimburse all reasonable costs and expenses of the
▇▇▇▇▇ Entities and Enron incurred from September 10, 1997 through January 15,
1998 with respect to this Agreement and the transactions contemplated hereby
(including, without limitation, (a) (i) legal fees and customary reimbursable
expenses of Enron's and the ▇▇▇▇▇ Entities' outside legal counsel and (ii) all
out-of-pocket fees, taxes (except income taxes), assessments, duties and other
expenses in connection with the due diligence review and assessment,
negotiation, preparation and review, execution, delivery, performance,
collection and enforcement of this Agreement) up to a maximum of One Hundred
Thousand Dollars ($100,000.00) for the ▇▇▇▇▇ Entities and Enron in the
aggregate, of which up to Fifty Thousand Dollars ($50,000.00) shall be
reimbursed to the ▇▇▇▇▇ Entities and up to Fifty Thousand Dollars ($50,000.00)
shall be reimbursed to Enron, unless the ▇▇▇▇▇ Entities and Enron agree to a
different allocation of such expense limits, plus (b) all required filing fees
under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act.
h. SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.
i. TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
j. FINDERS.
(1) The Company represents and warrants to the Purchasers that,
except as set forth in the Schedule of Exceptions, no person is entitled,
directly or indirectly, to compensation from the Company by reason of any
contract or understanding or contact with the Company as a finder or broker in
connection with the sale and purchase of the Series A Shares or Warrants
contemplated by this Agreement. The Company agrees to indemnify and hold each
Purchaser harmless against and in respect of any claim for brokerage or other
commissions or similar fees relative to this Agreement or the transactions
contemplated hereby which arises as a result of a contract or understanding made
by the
20
Company with any such broker or finder in connection with the sale and purchase
of the Series A Shares or Warrants contemplated by this Agreement.
(2) Each Purchaser severally represents and warrants to the
Company that no person is entitled, directly or indirectly, to compensation from
such Purchaser by reason of any contract or understanding or contact with such
Purchaser as a finder or broker in connection with the sale and purchase of the
Series A Shares or Warrants contemplated by this Agreement. Each Purchaser
severally agrees to indemnify and hold the Company harmless against and in
respect of any claim for brokerage or other commissions or similar fees relative
to this Agreement or the transactions contemplated hereby which arises as a
result of a contract or understanding made by such Purchaser with any such
broker or finder in connection with the sale and purchase of the Series A Shares
or Warrants contemplated by this Agreement.
k. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
l. TERMINATION. This Agreement may be terminated (i) at any time by
the mutual written consent of the Company, the ▇▇▇▇▇ Entities and Enron, or (ii)
by the Company, the ▇▇▇▇▇ Entities or Enron upon written notice to the others if
the Closing shall not have occurred by January 16, 1998. Termination shall not
affect any rights a party hereto may have by reason of any breach of this
Agreement by another party prior to termination.
m. ADDITIONAL FEES. In the event that (i) the Closing does not occur
on or before January 16, 1998 for any reason other than a breach of this
Agreement by the ▇▇▇▇▇ Entities or Enron, and (ii) on or prior to June 30, 1998,
the Company obtains debt and/or equity financing (either individually or in the
aggregate) of at least $15,000,000, then the Company shall pay a fee of $500,000
to the ▇▇▇▇▇ Entities and $500,000 to Enron. Notwithstanding the foregoing,
however, no such fee shall be payable in the event that all conditions to the
Closing set forth in Sections 6 and 7 have been satisfied on or before January
16, 1998, other than (a) the condition regarding the financial advisor
agreements in Section 6.p. hereof (unless the ▇▇▇▇▇ Entities and Enron have
agreed to waive such condition) and (b) the conditions that this Agreement and
the Other Transaction Documents be approved by the Managers of Spectra 3 or the
Board of Directors of Enron. The parties acknowledge and agree that the
determination of the damages suffered by Spectra 3 and Enron under such
circumstances are difficult to calculate. The fees provided for by this Section
9.m. are intended to reflect the reasonable expectations of the parties with
respect to such damages incurred by Spectra 3 and Enron, and not as a penalty.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
21
The foregoing agreement is hereby executed as of the date first above written.
"COMPANY"
SPECTRANET INTERNATIONAL
a California corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇, President
"PURCHASERS"
ENRON CAPITAL & TRADE RESOURCES CORP.,
a Delaware corporation
If by mail:
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
If by personal delivery:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ 7702
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
----------------------------------
Title: Vice President
-------------------------------
COLORADO SPECTRA 3, L.L.C., a Colorado
limited liability company
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Manager
"NOTEHOLDERS"
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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22
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5025 So. ▇▇▇▇▇▇ ▇▇▇▇
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H. ▇▇▇▇▇ ▇▇▇▇▇▇
Acct 1 M
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H. ▇▇▇▇▇ ▇▇▇▇▇▇
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Prof. Admin. Services
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Its: President
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▇▇▇ ▇▇▇▇▇▇ (or authorized signatory)
▇▇▇▇▇▇ ▇▇▇▇▇ (CNA Trust Corporation)
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▇▇▇▇▇▇ ▇▇▇▇▇ (or authorized signatory)
24
