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