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STOCK PURCHASE AGREEMENT
By and Between
WORLD ACCESS, INC.
And
THE 1818 FUND III, L.P.
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Dated April 19, 1999
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Table of Contents
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ARTICLE 1 DEFINITIONS.............................................1
1.1 Definitions.............................................1
1.2 Accounting Terms; Financial Covenants...................9
ARTICLE 2 PURCHASE AND SALE OF PREFERRED STOCK...................10
2.1 Purchase and Sale of Preferred Stock...................10
2.2 Certificate of Designation.............................11
2.3 Fees...................................................11
2.4 Closing................................................11
ARTICLE 3 CONDITIONS TO THE OBLIGATION
OF THE PURCHASER TO CLOSE..............................11
3.1 Representations and Warranties True....................11
3.2 Compliance with this Agreement.........................12
3.3 Officer's Certificate..................................12
3.4 Secretary's Certificate................................12
3.5 Documents..............................................12
3.6 Purchase Permitted by Applicable Laws; Legal
Investment.............................................12
3.7 Filing of Certificate of Designation...................12
3.8 Opinion of Counsel.....................................12
3.9 Approval of Counsel to the Purchaser...................12
3.10 Consents and Approvals.................................13
3.11 No Material Adverse Change.............................13
3.12 Due Diligence..........................................13
3.13 Conduct of Business....................................13
3.14 Registration Rights Agreement..........................13
3.15 Charter and By-Laws of the Company.....................13
3.16 Market Conditions......................................13
3.17 No Litigation..........................................14
3.18 No Default or Breach...................................14
3.19 Commission Documents...................................14
3.20 Amendment to the Credit Agreement......................14
ARTICLE 4 CONDITIONS TO THE OBLIGATION
OF THE COMPANY TO CLOSE................................14
4.1 Representations and Warranties True....................14
4.2 Compliance with this Agreement.........................14
4.3 Issuance Permitted by Applicable Laws..................15
4.4 Approval of Counsel to the Company.....................15
4.5 Consents and Approvals.................................15
4.6 Amendment to the Credit Agreement......................15
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ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE COMPANY..........15
5.1 Corporate Existence and Power..........................15
5.2 Corporate Authorization; No Contravention..............16
5.3 Governmental Authorization; Third Party Consents.......16
5.4 Binding Effect.........................................16
5.5 No Legal Bar...........................................17
5.6 Litigation.............................................17
5.7 No Default or Breach...................................17
5.8 Title to Properties....................................18
5.9 Taxes..................................................18
5.10 Financial Condition....................................18
5.11 No Material Adverse Change.............................18
5.12 Commission Documents...................................18
5.13 Environmental and Other Matters........................19
5.14 Investment Company.....................................20
5.15 Subsidiaries...........................................20
5.16 Capitalization.........................................21
5.17 Solvency...............................................21
5.18 Private Offering.......................................21
5.19 Broker's, Finder's or Similar Fees.....................21
5.20 No Defaults............................................21
5.21 Full Disclosure........................................22
5.22 Year 2000 Compliance...................................22
5.23 Regulatory Compliance..................................22
5.24 Registration Rights Agreement..........................23
5.25 Trade Relations........................................23
5.26 Material Contracts.....................................23
5.27 Business Plan..........................................23
5.28 No Undisclosed Financial Liabilities...................24
ARTICLE 6 REPRESENTATIONS AND WARRANTIES
AND COVENANTS OF THE PURCHASER.........................24
6.1 Existence and Power....................................24
6.2 Authorization; No Contravention........................24
6.3 Binding Effect.........................................25
6.4 No Legal Bar...........................................25
6.5 Purchase for Own Account...............................25
6.6 Broker's, Finder's or Similar Fees.....................26
6.7 Investment Knowledge...................................26
6.8 HSR Act................................................26
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ARTICLE 7 INDEMNIFICATION........................................26
7.1 Indemnification by the Company.........................26
7.2 Notification...........................................27
7.3 Registration Rights Agreement..........................28
ARTICLE 8 AFFIRMATIVE COVENANTS..................................28
8.1 Financial Statements...................................28
8.2 Certificates; Other Information........................29
8.3 Preservation of Corporate Existence....................29
8.4 Payment of Obligations.................................30
8.5 Compliance with Laws...................................30
8.6 Notices................................................30
8.7 Issue Taxes............................................31
8.8 Reservation of Shares..................................31
8.9 Inspection.............................................31
8.10 Board Representation...................................32
8.11 Registration and Listing...............................33
8.12 HSR Act Filing.........................................34
8.13 Private Offering.......................................34
8.14 Additional Registration Rights.........................34
ARTICLE 9 NEGATIVE COVENANTS.....................................35
9.1 Consolidated Net Worth.................................35
9.2 Consolidations and Mergers.............................35
9.3 Transactions with Affiliates...........................36
9.4 No Inconsistent Agreements.............................36
9.5 Issuance of Preferred Stock............................36
ARTICLE 10 DISPOSITIONS...........................................36
10.1 Dispositions by ▇▇▇▇▇▇▇▇...............................36
10.2 Dispositions by the Purchaser..........................38
ARTICLE 11 MISCELLANEOUS..........................................39
11.1 Survival of Provisions.................................39
11.2 Notices................................................39
11.3 Successors and Assigns.................................40
11.4 Amendment and Waiver...................................41
11.5 Counterparts...........................................41
11.6 Headings...............................................41
11.7 Determinations.........................................41
11.8 Governing Law..........................................41
11.9 Jurisdiction...........................................41
11.10 Severability...........................................42
11.11 Rules of Construction..................................42
11.12 Remedies...............................................42
11.13 Entire Agreement.......................................42
11.14 Attorneys' Fees........................................42
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11.15 Publicity.................................................43
11.16 Expenses..................................................43
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EXHIBITS
Exhibit A Form of Certificate of Designation
Exhibit B Form of Registration Rights Agreement
SCHEDULES
Schedule 5.3 Governmental Authorizations: Third Party Consents
Schedule 5.6 Litigation
Schedule 5.11 No Material Adverse Change
Schedule 5.15 Subsidiaries
Schedule 5.16 Capitalization
Schedule 5.22 Year 2000 Compliance
Schedule 5.23 Regulatory Compliance
Schedule 5.24 Registration Rights Agreements
Schedule 5.26 Material Contracts
Schedule 5.28 Financial Liabilities
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STOCK PURCHASE AGREEMENT, dated April 19, 1999, by and between World
Access, Inc., a corporation organized under the laws of Delaware (the
"Company"), and The 1818 Fund III, L.P., a Delaware limited partnership (the
"Purchaser").
The Company proposes that the Company issue to the Purchaser, and the
Purchaser purchase, up to 70,000 shares of the Company's 4.25% Cumulative Senior
Perpetual Convertible Preferred Stock, Series A, par value $.01 per share, upon
the terms and subject to the conditions set forth in this Agreement.
In consideration of the mutual covenants and agreements set forth
herein and for good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. As used in this Agreement, and unless the context
requires a different meaning, the following terms have the meanings indicated:
"Additional Closing" has the meaning assigned that term in Section
2.1(b).
"Additional Closing Date" has the meaning assigned that term in Section
2.1(b).
"Additional Purchase Price" has the meaning assigned that term in
Section 2.1(b).
"Additional Shares has the meaning assigned to that term in Section
2.1(b).
"Affiliate" has the meaning ascribed to such term in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act; provided that for purposes
of this Agreement the Purchaser shall not be deemed an Affiliate of the Company.
"Agreement" means this Agreement as the same may be amended,
supplemented or modified in accordance with the terms hereof.
"Business Day" means any day other than a Saturday, Sunday or other day
on which commercial banks in the City of New York, New York or Atlanta, Georgia
are authorized or required by law or executive order to close.
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"Business Plan" has the meaning assigned to that term in Section 5.27.
"Certificate of Designation" means the Certificate of Designation with
respect to the Preferred Stock (the form of which is attached hereto as Exhibit
A) to be adopted by the Board of Directors of the Company and filed with the
Secretary of State of the State of Delaware.
"Change of Control" of the Corporation shall mean such times as:
(i) Any Person or "group" (within the meaning of Section 13(d)(3) of
the Exchange Act) is or becomes the beneficial owner, directly or indirectly, of
outstanding shares of stock of the Corporation entitling such Person or Persons
to exercise 50% or more of the total votes (excluding the Preferred Stock)
entitled to be cast at a regular or special meeting, or by action by written
consent, of shareholders of the Corporation (the term "beneficial owner" shall
be determined in accordance with Rule 13d-3, promulgated by the Commission under
the Exchange Act);
(ii) A majority of the Board of Directors of the Corporation shall
consist of Persons other than Continuing Directors. The term "Continuing
Director" shall mean any member of the Board of Directors on the Closing Date
(as defined in the Stock Purchase Agreement) and any other member of the Board
of Directors who shall be recommended or elected to succeed or become a
Continuing Director by a majority of Continuing Directors who are then members
of the Board of Directors.
(iii) The shareholders of the Corporation shall have approved a
recapitalization, reorganization, merger, consolidation or similar transaction,
in each case with respect to which all or substantially all the Persons who were
the respective beneficial owners, directly or indirectly, of the outstanding
shares of capital stock of the Corporation immediately prior to such
recapitalization, reorganization, merger, consolidation or similar transaction,
will own less than 50% of the combined voting power of the then outstanding
shares of capital stock of the Corporation resulting from such recapitalization,
reorganization, merger, consolidation or similar transaction; provided that any
such recapitalization shall not be considered a Change of Control if the holders
of Preferred Stock have the right to participate on at least a pari passu basis.
(iv) The shareholders of the Corporation shall have approved of the
sale or other disposition of all or substantially all the assets of the
Corporation in one transaction or in a series of related transactions;
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(v) Any transaction occurs (other than one described in (iii) above or
(vi) below), the result of which is that the Common Stock is not required to be
registered under Section 12 of the Exchange Act and that the holders of Common
Stock do not receive common stock of the Person surviving such transaction which
is required to be registered under Section 12 of the Exchange Act; or
(vi) Immediately after any merger, consolidation, recapitalization or
similar transaction, ▇▇▇▇▇▇▇▇ or a "group" (within the meaning of Section
13(d)(3) of the Exchange Act) shall be the beneficial owners, directly or
indirectly, of outstanding shares of capital stock of the Company (or any Person
surviving such transaction) entitling them collectively to exercise 50% or more
of the total voting power of shares of capital stock of the Company (or the
surviving Person in such transaction) and in connection with or as a result of
such transaction, the Company (or such surviving Person) shall have incurred or
issued additional indebtedness such that the total indebtedness so incurred or
issued equals at least 50% of the consideration payable in such transaction;
provided that any such transactions shall not be considered a Change of Control
if the holders of Preferred Stock have the right to participate on at least a
pari passu basis.
"Claim" has the meaning assigned to that term in Section 5.13.
"Closing" has the meaning assigned to that term in Section 2.4.
"Closing Date" means the date specified in Section 2.4.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission or any
similar agency then having jurisdiction to enforce the Securities Act.
"Commission Documents" means all registration statements, proxy
statements, reports and other documents (and all amendments thereto), required
to be filed by the Company since January 1, 1997 under the Securities Act or the
Exchange Act.
"Common Stock" shall mean the common stock, par value $.01 per share,
and each other class of capital stock of the Company into which such stock is
reclassified or reconstituted.
"Company" means World Access, Inc., a Delaware corporation.
"Condition of the Company" means the assets, business, properties or
financial condition of the Company and its Subsidiaries taken as a whole.
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"Consolidated Net Worth" means, as of the date of determination with
respect to any Person, the consolidated stockholders' equity (which, in the case
of the Company, shall include the Preferred Stock) of such Person and its
Subsidiaries, determined in accordance with GAAP.
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability of that Person with respect to any Indebtedness, lease,
dividend, guaranty, letter of credit or other obligation (the "primary
obligation") of another Person (the "primary obligor"), including, without
limitation, any obligation of such first-mentioned Person, whether or not
contingent, (a) to purchase, repurchase or otherwise acquire such primary
obligations or any property constituting direct or indirect security therefor,
or (b) to advance or provide funds (i) for the payment or discharge of any such
primary obligation, or (ii) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency or any
balance sheet item, level of income or financial condition of the primary
obligor, or (c) to purchase property, securities or services primarily for the
purpose of assuring the beneficiary of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation, or
(d) otherwise to assure or hold harmless the beneficiary of any such primary
obligation against loss in respect thereof. The amount of any Contingent
Obligation shall be deemed to be an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Contingent Obligation
is made or, if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof as determined by the Company in good faith.
"Contractual Obligations" means as to any Person, any provision of any
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument to which such Person is a
party or by which it or any of its property is bound.
"Credit Agreement" means the Credit Agreement dated December 30, 1998,
among Telco Systems, Inc. and World Access Holdings, Inc., the Lenders from time
to time party thereto, and NationsBank, N.A., Fleet National Bank and Bank
Austria Creditanstalt Finance, Inc., as amended.
"DTC" means the Depositary Trust Company.
"Environmental Claims" means any notification, whether formal or
informal, written or oral, pursuant to Environmental Laws or principles of
common law relating to pollution, or protection of the environment that any of
the current or past operations of the Company or any of its Subsidiaries, or any
by- product thereof, or any of the property currently or formerly owned, leased
or operated by the Company or any of its Subsidiaries, or the operations or
property of any predecessor of the Company or any of its Subsidiaries, is or may
be implicated in or subject to any Claim by any Governmental Authority or any
other Person.
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"Environmental Compliance Costs" means any expenditures, costs,
assessments or expenses (including any expenditures, costs, assessments or
expenses in connection with the conduct of any Remedial Action, as well as
reasonable fees, disbursements and expenses of attorneys, experts, personnel and
consultants), necessary to bring the operations, real property, assets,
equipment or facilities owned, leased, operated or used by the Company or any of
its Subsidiaries from noncompliance into compliance with any and all
requirements of Environmental Laws, principles of common law concerning
pollution or protection of the environment, or Permits issued pursuant to
Environmental Laws; provided, however, that Environmental Compliance Costs do
not include expenditures, costs, assessments or expenses necessary in connection
with normal maintenance of such real property, assets, equipment or facilities
or the replacement of equipment in the normal course of events due to ordinary
wear and tear.
"Environmental Laws" means any applicable federal, state, territorial,
provincial or local law, common law doctrine, rule, order, decree, judgment,
injunction, license, permit or regulation in effect as of the Closing Date and
each Additional Closing Date, relating to environmental matters, including those
pertaining to air, soil, surface water, ground water (including the protection,
cleanup, removal, remediation or damage thereof), or any other environmental
matter, together with any other laws (federal, state, territorial, provincial or
local) relating to emissions, discharges, releases or threatened releases of any
contaminant including, without limitation, medical, biological, biohazardous or
radioactive waste and materials, into ambient air, land, surface water,
groundwater, personal property or structures, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transportation, discharge or handling of any contaminant, including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C. ss. 9601 et seq.), the Hazardous Material
Transportation Act (49 U.S.C. ss. 1801 et seq.), the Resource Conservation and
Recovery Act (42 U.S.C. ss. 6901 et seq.), the Federal Water Pollution Control
Act (33 U.S.C. ss. 1251 et seq.), the Clean Air Act (42 U.S.C. ss. 7401 et
seq.), the Toxic Substances Control Act (15 U.S.C. ss. 2601 et seq.), the
Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. ss. 136 et seq.),
and the Oil Pollution Act of 1990 (33 U.S.C. ss. 2701 et seq.).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission thereunder.
"FCC" means the Federal Communications Commission.
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"GAAP" means generally accepted accounting principles with respect to
Preferred Shares or Common Stock or Subordinated Notes issued upon conversion or
exchange of the Preferred Shares in the United States in effect from time to
time.
"Governmental Authority" means the government of any nation, state or
other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Hazardous Materials" means those substances that are regulated by or
form the basis of liability under any Environmental Laws.
"Hazardous Substance" means any toxic waste, pollutant, contaminant,
hazardous substance, toxic substance, hazardous waste, special waste, industrial
substance or waste, petroleum or petroleum-derived substance or waste,
radioactive substance or waste, or any constituent of any such substance or
waste, or any other substance regulated under or defined by any Environmental
Law.
"Holder", with respect to Preferred Shares or Common Stock or
Subordinated Notes issued upon conversion or exchange of the Preferred Shares,
means the Purchaser and any subsequent direct or indirect transferee of such
security; provided that the term Holder shall not include any Person who owns
such security if it has been registered under the Securities Act or if it has
been transferred to such Person after such security has been the subject of a
distribution to the public pursuant to Rule 144 (or any successor provision)
under the Securities Act or otherwise distributed under circumstances not
requiring a legend.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended, and the rules and regulations of the Federal Trade Commission
thereunder.
"Indebtedness" means as to any Person, without duplication, (a) all
obligations of such Person for borrowed money (including, without limitation,
reimbursement and all other obligations with respect to surety bonds, letters of
credit and bankers' acceptances, whether or not matured), (b) all obligations
evidenced by notes, bonds, debentures or similar instruments, (c) all
obligations to pay the deferred purchase price of property or services, except
trade accounts payable and accrued liabilities arising in the ordinary course of
business, (d) all interest rate and currency swaps and similar agreements under
which payments are obligated to be made, whether periodically or upon the
happening of a contingency, (e) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (f) all obligations under leases which have
7
been or should be, in accordance with GAAP, recorded as capital leases, (g) all
indebtedness secured by any Lien (other than Liens in favor of lessors under
leases other than leases included in clause (f)) on any property or asset owned
or held by that Person regardless of whether the indebtedness secured thereby
shall have been assumed by that Person or is non-recourse to the credit of that
Person, (h) all obligations of such Person to reimburse or prepay any bank or
other Person in respect of amounts paid under a letter of credit, banker's
acceptance or similar instrument, (i) all capital stock issued by such Person
subject to mandatory redemption that is not contingent upon future events or
circumstances, and (j) any Contingent Obligation.
"Indemnified party" has the meaning assigned to that term in Section
7.1.
"Indenture" means the indenture dated October 1, 1997 by the Company
and First Union National Bank, as trustee, with respect to certain notes, as
amended by the First Supplemental Indenture dated October 28, 1998 among the
Company, WA Telecom Products Co., Inc. and First Union National Bank.
"Initial Preferred Shares" has the meaning assigned to that term in
Section 2.1(a).
"Initial Purchase Price" has the meaning assigned to that term in
Section 2.1(a).
"Liability" has the meaning assigned to that term in Section 7.1.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, encumbrance, lien (statutory or other) or preference, priority or
other security interest or preferential arrangement of any kind or nature
whatsoever (including, without limitation, those created by, arising under or
evidenced by any conditional sale or other title retention agreement, the
interest of a lessor under a capitalized lease obligation, or any financing
lease having substantially the same economic effect as any of the foregoing).
"NASDAQ" means the National Market System of the National Association
of Securities Dealers, Inc. Automated Quotations System.
"1998 Audited Financials" has the meaning assigned to that term in
Section 5.10.
"1998 Interim Financials" has the meaning assigned to that term in
Section 5.10.
"1997 Audited Financials" has the meaning assigned to that term in
Section 5.10.
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"NYSE" means the New York Stock Exchange, Inc.
"Person" means any individual, firm, corporation, partnership, limited
liability company, trust, incorporated or unincorporated association, joint
venture, joint stock company, Governmental Authority or other entity of any
kind, and shall include any successor (by merger or otherwise) of such entity.
"▇▇▇▇▇▇▇▇" has the meaning assigned to that term in Section 10.1(a).
"PORTAL" means Private Offerings, Resales and Trading through Automated
Linkages.
"Preferred Shares" means the Initial Preferred Shares and the
Additional Shares.
"Preferred Stock" means the 4.25% Cumulative Senior Perpetual
Convertible Preferred Stock, Series A, par value $.01 per share, of the Company.
"Purchase Price" means the Initial Purchase Price and the Additional
Purchase Price.
"Purchaser" means The 1818 Fund III, L.P., a Delaware limited
partnership.
"Registration Rights Agreement" means the Registration Rights Agreement
in the form attached hereto as Exhibit B.
"Release" means any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
or through the environment, including the movement of Hazardous Substances
through or in the air, soil, surface water, ground water or property.
"Remedial Action" means all actions, whether voluntary or involuntary,
reasonably necessary to comply with, or discharge any obligation under,
Environmental Laws to (i) clean up, remove, treat, cover or in any other way
remediate Hazardous Substances in the indoor or outdoor environment; (ii)
prevent or control the Release of Hazardous Substances so that they do not
migrate or endanger or threaten to endanger public health or welfare or the
environment; or (iii) perform remedial studies, investigations, restoration and
post-remedial studies, investigations and monitoring on, about or in any real
property.
"Requirements of Law" means as to any Person, the Certificate of
Incorporation and By-laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a
9
court or other Governmental Authority, in each case applicable or binding upon
such Person or any of its property or to which such Person or any of its
property is subject.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission thereunder.
"Solvent" means, with respect to any Person, that the fair saleable
value on a going concern basis of the assets and property of such Person is, on
the date of determination, greater than the total amount of liabilities
(including contingent and unliquidated liabilities) of such Person as of such
date and that, as of such date, such Person is able to pay all liabilities of
such Person as such liabilities mature. In computing the amount of contingent or
liquidated liabilities at any time, such liabilities will be computed as the
amount which, in light of all the facts and circumstances existing at such time,
represents the amount that is probable to become an actual or matured liability.
"Subordinated Notes" means the subordinated notes of the Company which
may be issued in exchange for the Preferred Shares as set forth in the
Certificate of Designation.
"Subsidiary" means, with respect to any Person, another Person of which
50% or more of the voting power of the voting equity securities or equity
interest is owned, directly or indirectly, by such first-mentioned Person.
Unless otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of
the Company.
"USTs" means any underground storage tanks or related piping or
dispensers.
"Year 2000 Compliance" has the meaning assigned that term in Section
5.22.
1.2 Accounting Terms; Financial Covenants. All accounting terms used
herein not expressly defined in this Agreement shall have the respective
meanings given to them in accordance with sound accounting practice. The term
"sound accounting practice" shall mean such accounting practice as, in the
opinion of the independent accountants regularly retained by the Company,
conforms at the time to GAAP applied on a consistent basis except for changes
with which such accountants concur. If any changes in accounting principles are
hereafter occasioned by promulgation of rules, regulations, pronouncements or
opinions by or are otherwise required by the Financial Accounting Standards
Board or the American Institute of Certified Public Accountants (or successors
thereto or agencies with similar functions), and any of such changes results in
a change in the method of calculation of, or affects the results of such
calculation of, any of the financial covenants, standards or terms found herein,
then the parties hereto agree to enter into
10
and diligently pursue negotiations in order to amend such financial covenants,
standards or terms so as to reflect fairly and equitably such changes, with the
desired result that the criteria for evaluating the Company's financial
condition and results of operations shall be the same after such changes as if
such changes had not been made.
ARTICLE 2
PURCHASE AND SALE OF PREFERRED STOCK
2.1 Purchase and Sale of Preferred Stock.
(a) Subject to the terms and conditions herein set forth, the
Company agrees that it will issue to the Purchaser, and the Purchaser agrees
that it will acquire from the Company, at the Closing, 50,000 shares of
Preferred Stock (the "Initial Preferred Shares") for an aggregate purchase price
of $50,000,000 (the "Initial Purchase Price"), in cash, by wire transfer of
immediately available funds to an account designated by the Company in a notice
delivered to the Purchaser one day prior to the Closing Date.
(b) The Purchaser (or an Affiliate) has the option of
acquiring from time to time (in multiples of $5,000,000 of Liquidation
Preference) before June 30, 2000 up to 20,000 additional shares of Preferred
Stock (the "Additional Shares") at a price of $1,000 per share. Purchaser shall
give the Company written notice of its election to purchase Additional Shares on
a date specified (which date shall be a Business Day occurring at least 10
Business Days after the date of such notice and which date shall be extended, as
necessary, to permit the Company and the Purchaser or its Affiliates to obtain
any consents of Governmental Authorities or make any filings necessary to issue
the Additional Shares or to comply with all Requirements of Law including the
Securities Act, the Exchange Act and the HSR Act ). Such notice shall specify
the number of Preferred Shares to be purchased and the name or names (with
address) in which a certificate or certificates for the Additional Shares are to
be issued. Purchase of the Additional Shares shall occur on the date specified
in such notice (each, an "Additional Closing Date"). On each Additional Closing
Date, the Company will issue to the Purchaser (or its Affiliate) the number of
shares of Preferred Shares to be purchased on such date and the Purchaser shall
deliver the purchase price therefore (the "Additional Purchase Price") in cash,
by wire transfer of immediately available funds to an account designated by the
Company in a notice delivered to the Purchaser at least one day prior to the
Additional Closing Date. On each Additional Closing Date, the Purchaser shall
deliver to the Company a certificate signed by a General Partner stating that
the representations and warranties contained in Section 6 are true and correct
as if made as of such Additional Closing Date and the President or a Vice
President of the Company shall deliver to the Purchaser a certificate stating
that the representations and warranties contained in Section 5 are true and
correct in all material respects as of such Additional Closing Date as if made
as of such date (or, if any representation or warranty is not true and correct
as of such Date, providing
11
information as to its accuracy in such representation or warranty) and the
Company is in compliance with its obligations in Article 8 or 9. If such
representations and warranties are not true in all material respects on any
Additional Closing Date, Purchaser (or its Affiliates) shall have no obligation
to purchase any Additional Shares on such Additional Closing Date.
2.2 Certificate of Designation. The Preferred Shares shall have the
rights and preferences set forth in the Certificate of Designation.
2.3 Fees. The Company agrees it will pay to the Purchaser or its
designee at the Closing, a facility fee of $2,000,000 in cash, by wire transfer
of immediately available funds to an account or accounts designated by the
Purchaser in a notice delivered to the Company at least one day prior to the
Closing, provided that if prior to the Closing, at the Company's request, the
Purchaser executes and delivers a commitment letter, and upon such execution and
delivery the Company has paid the Purchaser $500,000, then the amount of the
facility fee due under this Section 2.3 at the Closing shall be $1,500,000.
2.4 Closing. Subject to Articles 3 and 4, the purchase and issuance of
the Initial Preferred Shares shall take place at the closing (the "Closing") to
be held at the offices of ▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, 1285 Avenue
of the Americas, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ on April 21, 1999, or such later
date on or prior to April 30, 1999 as the parties may agree (the "Closing
Date"), at 10:00 a.m., New York City time. The location and time of each
purchase and issuance of Additional Shares (each an "Additional Closing") shall
be set forth in the written notice from the Purchaser referred to in Section
2.1(b). At the Closing and each Additional Closing, subject to the terms and
conditions set forth herein, the Company shall sell the Preferred Shares to the
Purchaser by delivering to the Purchaser Preferred Shares registered in the name
of the Purchaser or its designees, with appropriate issue stamps, if any,
affixed at the expense of the Company, free and clear of any Lien, and the
Purchaser shall purchase the Preferred Shares in accordance with the provisions
of ss. 2.1.
ARTICLE 3
CONDITIONS TO THE OBLIGATION
OF THE PURCHASER TO CLOSE
The obligation of the Purchaser to purchase the Initial Preferred
Shares, to pay the Purchase Price at the Closing and to perform any obligations
hereunder shall be subject to the satisfaction or waiver of the following
conditions on or before the Closing Date:
3.1 Representations and Warranties True. The representations and
warranties of the Company contained in Section 5 hereof shall be true and
correct in all material respects at and as of the Closing Date as if made at and
as of such date.
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3.2 Compliance with this Agreement. The Company shall have performed
and complied with all of its agreements and conditions set forth or contemplated
herein that are required to be performed or complied with by the Company on or
before the Closing Date.
3.3 Officer's Certificate. The Purchaser shall have received a
certificate, dated the Closing Date and signed by the President or a
Vice-President of the Company, certifying that the conditions set forth in
Sections 3.1 and 3.2 hereof have been satisfied on and as of such date.
3.4 Secretary's Certificate. The Purchaser shall have received a
certificate, dated the Closing Date and signed by the Secretary or an Assistant
Secretary of the Company, certifying the truth and correctness of attached
copies of the Certificate of Incorporation and By-laws of the Company and
resolutions of the Board of Directors of the Company approving this Agreement
and the transactions contemplated hereby.
3.5 Documents. The Purchaser shall have received copies of such
documents as it reasonably may request in connection with the sale of the
Initial Preferred Shares and the transactions contemplated hereby, all in form
and substance reasonably satisfactory to the Purchaser.
3.6 Purchase Permitted by Applicable Laws; Legal Investment. The
acquisition of and payment for the Initial Preferred Shares to be acquired by
the Purchaser hereunder and the consummation of the transactions contemplated
hereby (a) shall not be prohibited by any applicable law or governmental
regulation and (b) shall not subject the Purchaser to any penalty or, in its
reasonable judgment, other onerous condition under or pursuant to any applicable
law or governmental regulation.
3.7 Filing of Certificate of Designation. The Certificate of
Designation shall have been duly filed by the Company with the Secretary of
State of the State of Delaware.
3.8 Opinion of Counsel. The Purchaser shall have received the opinion
of Long, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP counsel to the Company, and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
counsel to the Company, each dated the Closing Date, in form satisfactory to the
Purchaser.
3.9 Approval of Counsel to the Purchaser. All actions and proceedings
hereunder and all documents required to be delivered by the Company hereunder or
in connection with the consummation of the transactions contemplated hereby, and
all other related matters, shall have been reasonably acceptable to ▇▇▇▇, Weiss,
Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, counsel to the Purchaser, as to their form and
substance.
13
3.10 Consents and Approvals. All consents, exemptions, authorizations,
or other actions by, or notices to, or filings with, Governmental Authorities
and other Persons, including, with respect to Contractual Obligations of the
Company, those consents noted on Schedule 5.3, necessary or required in
connection with the execution, delivery or performance (including, without
limitation, the payment of dividends on the Preferred Stock and the issuance of
Common Stock or Subordinated Notes upon the conversion or exchange of the
Preferred Stock) by the Company or enforcement against the Company of this
Agreement, the Preferred Shares or the Registration Rights Agreement shall have
been obtained and be in full force and effect, and the Purchaser shall have been
furnished with appropriate evidence thereof.
3.11 No Material Adverse Change. Since December 31, 1998, there shall
have been no material adverse change, nor shall any such change be threatened,
in the Condition of the Company since that date.
3.12 Due Diligence. The Purchaser shall have completed its due
diligence review of the assets, business, properties, pending litigations,
prospects, operations and financial and other condition of the Company and its
Subsidiaries, and shall be reasonably satisfied with the results of such review.
3.13 Conduct of Business. The Company shall have conducted its business
in the ordinary course from the date hereof to the Closing Date, and no
transaction not in the ordinary course of business shall have occurred without
the Purchaser's consent.
3.14 Registration Rights Agreement. The Company shall have duly
executed and delivered to the Purchaser the Registration Rights Agreement.
3.15 Charter and By-Laws of the Company. Except for the Certificate of
Designation, no amendments to the Certificate of Incorporation or By-Laws of the
Company as in effect on the date hereof shall have been effected.
3.16 Market Conditions. Between the date of this Agreement and the
Closing Date, (a) trading in the Common Stock shall not have been suspended by
the Commission or by the NASDAQ, (b) trading in securities generally on the NYSE
or NASDAQ shall not have been suspended or limited or minimum or maximum prices
shall not have been generally established on such exchange, or additional
material governmental restrictions, not in force on the date of this Agreement,
shall not have been imposed upon trading in securities generally by such
exchange or by order of the Commission or any court or other Governmental
Authority, (c) a general banking moratorium shall not have been declared by
either Federal or New York State authorities and (d) any material adverse change
in the financial or securities markets in the United States or in political,
financial or economic conditions in the United States or any outbreak or
material escalation of hostilities or declaration by the United
14
States of a national emergency or war or other calamity or crisis shall not have
occurred.
3.17 No Litigation. No action, suit, proceeding, claim or dispute shall
have been brought or otherwise arisen at law, in equity, in arbitration or
before any Governmental Authority against the Company or any of its Subsidiaries
which would, if adversely determined, (i) have a material adverse effect on the
Condition of the Company or (ii) have a material adverse effect on the ability
of the Company to perform its obligations under this Agreement, the Preferred
Shares or the Registration Rights Agreement.
3.18 No Default or Breach. Neither the Company nor any of its
Subsidiaries shall have been in default under or with respect to any Contractual
Obligation in any respect, which, individually or together with all such
defaults, would be materially adverse to the Condition of the Company or which
could materially adversely affect the ability of the Company to perform its
obligations under this Agreement, the Preferred Shares or the Registration
Rights Agreement.
3.19 Commission Documents. The Company shall have filed its Form 10-K
for the year ended December 31, 1998 and provided a copy to the Purchaser.
3.20 Amendment to the Credit Agreement. The Purchaser shall have
received a copy of an amendment to the Credit Agreement permitting the issuance
of the Preferred Stock and payment of dividends on the Preferred Stock.
ARTICLE 4
CONDITIONS TO THE OBLIGATION
OF THE COMPANY TO CLOSE
The obligations of the Company to issue and sell the Initial Preferred
Shares, and to consummate the transactions contemplated herein on the Closing
Date, shall be subject to the satisfaction or waiver of the following conditions
on or before the Closing Date:
4.1 Representations and Warranties True. The representations and
warranties of the Purchaser contained in Section 6 hereof shall be true and
correct in all material respects at and as of the Closing Date as if made at and
as of such date.
4.2 Compliance with this Agreement. The Purchaser shall have performed
and complied with all of its agreements and conditions set forth or contemplated
herein that are required to be performed or complied with by the Purchaser on or
before the Closing Date.
15
4.3 Issuance Permitted by Applicable Laws. The issuance of the
Preferred Shares and the consummation of the transactions contemplated hereby by
the Company (a) shall not be prohibited by any applicable law or governmental
regulation, (b) shall not subject the Company to any penalty or, in its
reasonable judgment, other onerous condition under or pursuant to any applicable
law or governmental regulation and (c) shall be permitted by the laws and
regulations of the jurisdictions in which is it subject.
4.4 Approval of Counsel to the Company. All actions and proceedings
hereunder and all documents required to be delivered by the Purchaser hereunder
or in connection with the consummation of the transactions contemplated hereby,
and all other related matters, shall have been reasonably acceptable to Long,
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, counsel to the Company, as to their form and substance.
4.5 Consents and Approvals. All consents, exemptions, authorizations,
or other actions by, or notices to, or filings with, Governmental Authorities
and other Persons necessary or required in connection with the execution,
delivery or performance by the Purchaser or enforcement against the Purchaser of
this Agreement shall have been obtained and be in full force and effect, and the
Company shall have been furnished with appropriate evidence thereof.
4.6 Amendment to the Credit Agreement. The Company shall have received
a copy of an amendment to the Credit Agreement permitting the issuance of the
Preferred Stock and payment of dividends on the Preferred Stock.
ARTICLE 5
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchaser as follows:
5.1 Corporate Existence and Power. The Company and each of its
Subsidiaries:
(a) is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization;
(b) has (i) full corporate (or other organizational) power and
authority and (ii) all governmental licenses, authorizations, consents and
approvals to own and operate its property, to lease the property it operates as
lessee and to conduct the business in which it is currently, or is currently
proposed to be, engaged;
16
(c) is duly qualified as a foreign person, licensed and in
good standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such
qualification; and
(d) is in compliance with all Requirements of Law;
except, in the case of (b)(ii), (c) or (d) of this Section 5.1, to the extent
that the failure to do so would not have a material adverse effect on the
Condition of the Company.
5.2 Corporate Authorization; No Contravention. The execution, delivery
and performance by the Company of this Agreement, the Registration Rights
Agreement and the transactions contemplated hereby and thereby, including
without limitation the issuance of the Preferred Shares and the Common Stock and
Subordinated Notes issuable upon the conversion or exchange of the Preferred
Shares:
(a) is within the Company's corporate power and authority and
has been duly authorized by all necessary corporate action; and
(b) subject to obtaining the consent set forth on Schedule
5.3, will not violate, conflict with or result in any breach or contravention of
or the creation of any Lien under, any Contractual Obligation of the Company or
any of its Subsidiaries (including, without limitation, those listed on Schedule
5.26 but excluding Contractual Obligations which are not material to the
Condition of the Company), or any order or decree directly relating to the
Company or any of its Subsidiaries.
5.3 Governmental Authorization; Third Party Consents. Except as set
forth on Schedule 5.3 and for any filings under the HSR Act with respect to any
Additional Closing, no approval, consent, exemption, authorization, or other
action by, or notice to, or filing with, any Governmental Authority or any other
Person, is necessary or required in connection with the execution, delivery or
performance by the Company or enforcement against the Company of this Agreement,
the Preferred Shares, the Registration Rights Agreement or the transactions
contemplated hereby or thereby. The issuance of and payment of dividends on the
Preferred Stock are not prohibited by the terms of the Credit Agreement or the
Indenture and the Company does not reasonably anticipate that any such term is
likely to be breached during the term of the Credit Agreement or Indenture as a
result of such issuance or payment as of the Closing Date. As of the Closing
Date, the consents listed on Schedule 5.3 will have been obtained and be in full
force and effect.
5.4 Binding Effect. This Agreement has been duly executed and delivered
by the Company, and at the Closing the Registration Rights Agreement and the
Initial Preferred Shares will be duly executed and delivered by the Company.
This Agreement constitutes the legal, valid and binding obligations of the
Company enforceable against the Company in accordance with its terms, except as
enforcement
17
may be limited by applicable bankruptcy, insolvency, or similar laws affecting
the enforcement of creditors' rights generally or by equitable principles
relating to enforceability. At the Closing, the Registration Rights Agreement
and the Preferred Shares will constitute the legal, valid and binding
obligations of the Company enforceable against the Company in accordance with
their respective terms, except as enforcement may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles relating to enforceability.
5.5 No Legal Bar. Subject to the expiration of the waiting period under
the HSR Act with respect to any Additional Closing, neither the execution,
delivery or performance of this Agreement or the Registration Rights Agreement
nor the issuance or performance of the terms of the Preferred Shares will
violate any Requirement of Law or any rule or regulation of NASDAQ.
5.6 Litigation.
(a) Except as set forth on Schedule 5.6, there are no actions,
suits, proceedings, claims or disputes pending, or to the knowledge of the
Company, threatened, at law, in equity, in arbitration or before any
Governmental Authority against the Company or any of its Subsidiaries:
(i) with respect to this Agreement, the Preferred
Shares or the Registration Rights Agreement or any of the transactions
contemplated hereby or thereby; or
(ii) which would, if adversely determined, (i) have a
material adverse effect on the Condition of the Company or (ii) have a material
adverse effect on the ability of the Company to perform its obligations under
this Agreement, the Preferred Shares or the Registration Rights Agreement.
(b) No injunction, writ, temporary restraining order, decree
or any order of any nature has been issued by any court or other Governmental
Authority purporting to enjoin or restrain the execution, delivery and
performance of this Agreement, the Preferred Shares or the Registration Rights
Agreement.
5.7 No Default or Breach. No event has occurred and is continuing which
constitutes a default under or breach of any of the provisions of Article 8 or
9. No event which constitutes a default under or breach of any of the provisions
of Article 8 or 9 is likely to result from the incurring of obligations by the
Company under this Agreement, or the Registration Rights Agreement or from the
issuance of the Preferred Shares. Neither the Company nor any of its
Subsidiaries is in default under or with respect to any Contractual Obligation
in any respect, which, individually or together with all such defaults, would
have a material adverse effect on the Condition of the Company or on the ability
of the Company to perform its
18
obligations under this Agreement, the Preferred Shares or the Registration
Rights Agreement.
5.8 Title to Properties. The Company and each of its Subsidiaries have
good and defensible title to, or hold leases in full force and effect in all
their real property, except for such defects in title as could not, individually
or in the aggregate, have a material adverse effect on the Condition of the
Company or the ability of the Company to perform its obligations under this
Agreement, the Preferred Shares or the Registration Rights Agreement.
5.9 Taxes. The Company and its Subsidiaries have filed or caused to be
filed, or have properly filed extensions for, all income tax returns which are
required to be filed and have paid or caused to be paid all taxes as shown on
said returns and on all assessments received by it to the extent that such taxes
have become due, except taxes the validity or amount of which is being contested
in good faith by appropriate proceedings and with respect to which adequate
reserves have been set aside. The Company and its Subsidiaries have paid or
caused to be paid, or have established reserves that the Company reasonably
believes to be adequate for all income tax liabilities applicable to the Company
and its Subsidiaries for all fiscal years which have not been examined and
reported on by the taxing authorities (or closed by applicable statutes).
5.10 Financial Condition. The Company heretofore has delivered to the
Purchaser true and correct copies of audited consolidated financial statements
of the Company and its Subsidiaries dated as of December 31, 1997 (the "1997
Audited Financials), December 31, 1998 (the "1998 Audited Financials") and the
unaudited consolidated financial statements of the Company and its Subsidiaries
dated as of March 31, 1998, June 30, 1998 and September 30, 1998 (the "1998
Interim Financials"). The 1997 Audited Financials, 1998 Audited Financials and
the 1998 Interim Financials have been prepared in accordance with GAAP applied
consistently and present fairly in all material respects the consolidated
financial condition of the Company as of the dates thereof and the consolidated
results of operations of the Company for the period, or portion thereof, then
ended (except in the case of the 1998 Interim Financials, for normal year-end
adjustment and the absence of footnotes).
5.11 No Material Adverse Change. Except as set forth on Schedule 5.11,
since December 31, 1998, there has not been any material adverse change, nor to
the knowledge of the Company is any such change threatened, in the Condition of
the Company.
5.12 Commission Documents. The Company, NACT Telecommunications, Inc.
and Telco Systems, Inc. have filed all registration statements, proxy
statements, reports and other documents required to be filed by them under the
Securities Act or the Exchange Act, and all amendments thereto. The Company has
furnished or made available to the Purchaser copies of all Commission
19
Documents, each as filed with the Commission. Each Commission Document when
filed with the Commission was true and accurate in all material respects and in
compliance in all material respects with the requirements of its respective
report form.
5.13 Environmental and Other Matters.
(a) Neither the Company nor any of its Subsidiaries is or has
been in violation of any applicable Environmental Law or other Requirement of
Law, except to the extent that any such violation would not have a material
adverse effect on the Condition of the Company.
(b) The Company and its Subsidiaries have all Permits required
pursuant to Environmental Laws that are material to the conduct of the business
of the Company or any of its Subsidiaries, all such Permits are in full force
and effect, no action, cause of action, suit, claim, complaint, demand,
litigation or legal, administrative or arbitral proceeding or investigation
(collectively, "Claims") to revoke, limit or modify any of such Permits is
pending and the Company and each of its Subsidiaries is in compliance in all
material respects with all terms and conditions thereof.
(c) Neither the Company nor any of its Subsidiaries has
received, or will receive pursuant to any environmental property transfer law
due to the consummation of this transaction, any Environmental Claim.
(d) The Company and its Subsidiaries have filed all notices
required under Environmental Laws indicating the past or present Release,
generation, treatment, storage or disposal of Hazardous Substances.
(e) Neither the Company nor any of its Subsidiaries has
entered into any written agreement with any Governmental Body or any other
Person by which the Company or any of the Subsidiaries has assumed
responsibility, either directly or as a guarantor or surety, for the remediation
of any condition arising from or relating to a Release or threatened Release of
Hazardous Substances into the environment.
(f) To the knowledge of the Company or any of its
Subsidiaries, there is not now and has not been at any time in the past a
Release or threatened Release of Hazardous Substances for which the Company or
any of its Subsidiaries reasonably expects to be subject to an Environmental
Claim in an amount in excess of $50,000.
(g) Except in cases that are not reasonably expected to give
rise to any liability for the Company or any of its Subsidiaries under any
Environmental Law in excess of $50,000, there is not now and has not been at, on
or in any of the real properties owned, leased or operated by the Company or any
of its Subsidiaries during the time of the Company's or its Subsidiaries'
ownership, lease or
20
operation of such real properties, and, to the knowledge of the Company or any
of its Subsidiaries, there was not at, on or in any real property previously
owned, leased or operated by the Company or any of its Subsidiaries or any
predecessor: (i) any generation, use, handling, Release, treatment, recycling,
storage or disposal of any Hazardous Substances; (ii) any UST, surface
impoundment, lagoon, landfill, solid waste disposal area, or other containment
facility (past or present) for the temporary or permanent storage, treatment or
disposal of Hazardous Substances; (iii) any asbestos-containing material; (iv)
any polychlorinated biphenyls (PCBs) used in hydraulic oils, electrical
transformers or other equipment; (v) any Release or threatened Release, or any
visible signs of Releases or threatened Releases, of a Hazardous Substance in
form or quantity requiring Remedial Action under Environmental Laws; or (vi) any
Hazardous Substances present at such property, excepting such quantities as are
handled in accordance with applicable manufacturer's instructions and
Environmental Laws and in proper storage containers, and as are necessary for
the operations of the Company and its Subsidiaries.
(h) To the knowledge of the Company or any of its
Subsidiaries, there is no basis or reasonably anticipated basis, individually or
in the aggregate, for any Environmental Claim or Environmental Compliance Costs
to be asserted against or required of the Company or any of its Subsidiaries in
excess of $50,000.
(i) Neither the Company nor any of its Subsidiaries has
transported, stored, treated or disposed, nor has it allowed or arranged for any
third persons to transport, store, treat or dispose, any Hazardous Substance to
or at: (i) any location other than a site lawfully permitted to receive such
substances for such purposes, or (ii) any location designated for Remedial
Action pursuant to Environmental Laws where such Remedial Action is reasonably
expected to result in liability for the Company or any of its Subsidiaries in
excess of $50,000; nor has it performed, arranged for or allowed by any method
or procedure such transportation or disposal in contravention of any
Environmental Laws or in any other manner that may result in Environmental
Compliance Costs or in an Environmental Claim for or against the Company or any
of its Subsidiaries.
(j) The Company and each of its Subsidiaries is in material
compliance with the upgrade requirements for USTs in effect as of December 31,
1998 pursuant to the Resource Conservation and Recovery Act, 42 U.S.C. ss.6901
et seq.
5.14 Investment Company. Neither the Company nor any Person controlling
the Company is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
5.15 Subsidiaries. Schedule 5.15 sets forth a complete and accurate
list of all of the Subsidiaries of the Company together with their respective
21
jurisdictions of incorporation or organization. Except as set forth on Schedule
5.15, each such Subsidiary is directly or indirectly wholly owned by the
Company.
5.16 Capitalization. As of the date hereof, the authorized capital
stock of the Company consists of 150,000,000 shares of Common Stock, par value
$.0l per share, and 10,000,000 shares of preferred stock, par value $.01 per
share, of which as of the date hereof, 44,866,395 shares of Common Stock and no
shares of preferred stock are issued and outstanding. Except as set forth on
Schedule 5.16, there are no shares of capital stock of the Company reserved for
issuance. All of the outstanding shares of capital stock of the Company have
been duly authorized and are fully paid and non-assessable. The Preferred Shares
when issued upon payment of the Purchase Price, and the shares of Common Stock
when issued upon conversion or exchange of the Preferred Shares, will be duly
authorized, and, in each case, validly issued, fully paid and nonassessable. The
Subordinated Notes, when issued upon exchange for the Preferred Shares, will be
duly authorized and validly issued. Except as set forth on Schedule 5.16 or in
the Certificate of Designation, there are no options, warrants or other rights
to any Person to purchase shares of capital stock or other securities of the
Company, and the Company is not obligated in any manner to issue shares of its
capital stock or other securities. Except as contemplated hereby and for
relevant state and federal securities laws, there are no restrictions on the
transfer of shares of capital stock of the Company.
5.17 Solvency. On and as of the Closing Date, after giving effect to
the transactions contemplated in this Agreement, the Company will be Solvent.
5.18 Private Offering. No form of general solicitation or general
advertising was used by the Company or, to its knowledge, its representatives in
connection with the offer or sale of the Preferred Shares. No registration of
the Preferred Shares pursuant to the provisions of the Securities Act or any
state securities or "blue sky" laws will be required by the offer, sale or
issuance of the Preferred Shares pursuant to this Agreement. The Company agrees
that neither it, nor anyone acting on its behalf, will offer or sell the
Preferred Shares or any other security so as to require the registration of the
Preferred Shares pursuant to the provisions of the Securities Act or any state
securities or "blue sky" laws, unless such Preferred Shares are so registered.
5.19 Broker's, Finder's or Similar Fees. Except as set forth herein,
there are no brokerage commissions, finder's fees or similar fees or commissions
payable in connection with the transactions contemplated hereby based on any
agreement, arrangement or understanding with the Company or any of its
Subsidiaries, or any action taken by any such entity.
5.20 No Defaults. After giving effect to the issuance of the Preferred
Shares, and the conversion or exchange of the Preferred Stock into Common Stock,
neither the Company nor any of its Subsidiaries would be in default under or
with respect to any covenant in the Indenture or Credit Agreement.
22
5.21 Full Disclosure. No statement by the Company contained in (i) this
Agreement or (ii) any certificates delivered to the Purchaser in connection with
the purchase and sale of the Preferred Shares at or prior to the Closing
contains (or will contain) an untrue statement of a material fact or omits (or
will omit) to state a material fact required to be stated therein or necessary
to make the statements made, in the light of the circumstances in which made,
not materially false or misleading.
5.22 Year 2000 Compliance. The Company and its Subsidiaries have taken
reasonable steps to determine whether the failure of any third parties
(including any third party providers of computer hardware and software) to
achieve Year 2000 Compliance would have a material adverse effect on the
Condition of the Company. Year 2000 Compliance shall mean all computer hardware
and software in question (including all computer hardware and software contained
in embedded systems) is designed or is being modified to be used, prior to,
during and after the calendar year 2000, and such hardware and software will
continue to operate during such time period to accurately process date data
(including, but not limited to, calculating, comparing and sequencing) from,
into and between the twentieth and twenty-first centuries, including leap year
calculations. Except as disclosed on Schedule 5.22, all computer hardware and
software (including all computer hardware and software contained in embedded
systems) (collectively, the "Technology Systems") that the Company identified as
critical (whether such Technology Systems are owned by the Company and its
Subsidiaries or licensed from third parties) are Year 2000 Compliant, provided
that all third party Technology Systems (other than Technology Systems
incorporated in the products of the Company or its Subsidiaries) with which such
Technology Systems of the Company and its Subsidiaries come into contact
properly exchanges date data with it. The occurrence of the calendar year 2000
and its effect on the Technology Systems of the Company and its Subsidiaries
will not have a material adverse effect on the Condition of the Company. Except
as set forth on Schedule 5.22, all transport and network access products have
been determined either to be Year 2000 Compliant, or may be upgraded at no
charge. Software required for upgrades is presently available and may be
downloaded from the Internet. Except as set forth on Schedule 5.22, all
switching products have been determined to be Year 2000 Compliant, or may be
upgraded at no charge.
5.23 Regulatory Compliance. The Company and its Subsidiaries, in their
ownership, management and operation of their business, as now conducted and as
contemplated to be conducted in the future, are not operating any communications
facilities or services for which any authorization is required from the FCC or
any similar regulatory body in any country in which the Company or its
Subsidiaries operate, other than the communications facilities or services for
which an appropriate regulatory authorization has been obtained and is in
effect. Schedule 5.23 sets forth all such authorizations held by the Company and
its Subsidiaries, issued by the FCC or similar regulatory body.
23
5.24 Registration Rights Agreement. Schedule 5.24 sets forth all
agreements to which the Company or any Subsidiary is a party or by which it is
bound relating to the registration of its securities or, in the case of a
Subsidiary, the securities of the Company. None of the agreements listed on
Schedule 5.24 grants any registration rights to any Person which are
inconsistent with the rights to be granted to the Purchaser in the Registration
Rights Agreement.
5.25 Trade Relations. To the knowledge of the Company, there exists no
actual or threatened termination, cancellation or limitation of, or any material
adverse modification or material change in, the business relationship or
business of the Company and its Subsidiaries taken as a whole or their business
with any customer or any group of customers which is individually or in the
aggregate material to the business of the Company and its Subsidiaries taken as
a whole, or with any supplier, which is material to the business of the Company
and its Subsidiaries, taken as a whole.
5.26 Material Contracts. Neither the Company nor any of its
Subsidiaries is a party to any Contractual Obligation and is not subject to any
charge, corporate restriction, judgment, injunction, decree or Requirement of
Law which is likely to have a material adverse affect on the Condition of the
Company. Schedule 5.26 lists all contracts, agreements and commitments of the
Company and any Subsidiary, whether written or oral, for (i) sales of
telecommunications switching equipment and related products and services in
excess of $200,000, which are subject to vendor financing; (ii) sales of
telecommunications access and transport equipment and related products and
services with the ten largest customers in fiscal year 1998; (iii) purchases of
international telecommunications services with the five largest suppliers in
fiscal year 1998; (iv) sales of international telecommunications services with
the five largest purchasers in fiscal year 1998; and (v) all contracts with
MCI/WorldCom and (vi) all other contracts material to the Condition of the
Company, other than (a) this Agreement and the Registration Rights Agreement and
(b) purchase orders in the ordinary course of the Company's and any Subsidiary's
business. All of the contracts, agreements and commitments of the Company and
its Subsidiaries listed in Schedule 5.26 are in full force and effect and
binding upon the parties thereto in accordance with their terms. Neither the
Company nor any of its Subsidiaries, nor, to the knowledge of the Company or any
of its Subsidiaries, any other party to the contracts, agreements and
commitments listed on Schedule 5.26, is in default thereunder, and no condition
exists that with notice or lapse of time, or both would constitute a default
thereunder, in each case other than defaults that individually or in the
aggregate are not material to the Condition of the Company. Neither the Company
nor any of its Subsidiaries has any knowledge of any proposed, pending, or
likely cancellation or termination of any such contract, agreement or
commitment.
5.27 Business Plan. Prior to the date hereof, the Company delivered to
the Purchaser its business plans for fiscal year 1999 (the "Business Plan"). The
assumptions used in preparation of the Business Plan were reasonable when made
and
24
continue to be reasonable as of the Closing Date. The Business Plan has been
prepared in good faith and the Business Plan gives effect to the transactions
contemplated by this Agreement. The Purchaser acknowledges that the Business
Plan contain assumptions about future events and that actual results during the
period or periods covered may differ from the data and results contained in such
Business Plan.
5.28 No Undisclosed Financial Liabilities. Except as set forth on
Schedule 5.28, the Company and its Subsidiaries, after giving effect to the
transactions contemplated hereby, will not have any material direct or indirect
indebtedness, liability (including, without limitation, product liability or
warranty claim), obligation, whether known or unknown, fixed or unfixed,
contingent or otherwise, and whether or not of a kind required by GAAP to be set
forth on a financial statement, other than (i) Liabilities fully and adequately
reflected on the 1998 Audited Financials, (ii) those incurred since December 31,
1998 in the ordinary course of business, (iii) Liabilities incurred pursuant to
this Agreement and (iv) Liabilities which individually or in the aggregate would
not have a material adverse effect on the Condition of the Company.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
AND COVENANTS OF THE PURCHASER
The Purchaser represents and warrants to, and covenants and agrees
with, the Company as follows:
6.1 Existence and Power. The Purchaser:
(a) is duly organized and validly existing under the laws of
the jurisdiction of its organization; and
(b) has the power and authority to own and operate its
property, to lease the property it operates as lessee and to conduct the
business in which it is currently, or is currently proposed to be, engaged.
6.2 Authorization; No Contravention. The execution, delivery and
performance by the Purchaser of this Agreement:
(a) is within the Purchaser's power and authority and has been
duly authorized by all necessary action;
(b) does not contravene the terms of the Purchaser's Agreement
of Limited Partnership, or any amendment thereof;
25
(c) will not violate, conflict with or result in any breach or
contravention of or the creation of any Lien under, any Contractual Obligation
of the Purchaser, or any order or decree directly relating to the Purchaser, and
(d) does not require approval, consent, exemption,
authorization or other action by, or notice to, or filing with, any Governmental
Authority or any other Person, except for any filing required under the HSR Act
with respect to any Additional Closing and the expiration of the waiting period
related thereto.
6.3 Binding Effect. This Agreement and, when executed by the Company on
the Closing Date, the Registration Rights Agreement has been duly executed and
delivered by the Purchaser, constitutes the legal, valid and binding obligation
of the Purchaser enforceable against it in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws affecting the enforcement of creditors' rights generally or by equitable
principles relating to enforceability.
6.4 No Legal Bar. The execution, delivery and performance of this
Agreement will not violate any Requirement of Law or any Contractual Obligation
of the Purchaser.
6.5 Purchase for Own Account. The Preferred Shares (including, for
purposes of this Section 6.5, the Common Shares and Subordinated Notes issuable
upon conversion or exchange of the Preferred Shares) to be acquired by the
Purchaser pursuant to this Agreement are being acquired for its own account and
with no intention of distributing or reselling such securities or any part
thereof in any transaction that would be in violation of the securities laws of
the United States of America, or any state, without prejudice, however, to the
rights of such Purchaser at all times to sell or otherwise dispose of all or any
part of the Preferred Shares under an effective registration statement under the
Securities Act, or under an exemption from such registration available under the
Securities Act, or pursuant to Article 10 hereof, and subject, nevertheless, to
the disposition of the Purchaser's property being at all times within its
control. If the Purchaser should in the future decide to dispose of any of the
Preferred Shares, the Purchaser understands and agrees that it may do so only in
compliance with the Securities Act and applicable state securities laws, as then
in effect, and that stop-transfer instructions to that effect, where applicable,
will be in effect with respect to the Preferred Shares. If the Purchaser should
decide to dispose of the Preferred Shares, other than pursuant to the provisions
of the Registration Rights Agreement or Article 10 hereof, the Purchaser, if
requested by the Company, will have the obligation in connection with such
disposition, at the Purchaser's expense, of delivering an opinion of counsel of
recognized standing in securities law, in connection with such disposition to
the effect that the proposed disposition of the Preferred Shares would not be in
violation of the Securities Act or any applicable state securities laws and,
assuming such opinion is required and is otherwise appropriate in form and
substance under the circumstances, the Company
26
will accept, and will recommend to any applicable transfer agent or trustee for
any of the Preferred Shares that it accept, such opinion. The Purchaser agrees
to the imprinting, so long as required by law, of a legend on certificates
representing all of the Preferred Shares and the shares of Common Stock and
Subordinated Notes issued on conversion or exchange thereof to the following
effect:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE
AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATION
REQUIREMENTS OF SUCH ACT OR SUCH LAWS."
6.6 Broker's, Finder's or Similar Fees. There are no brokerage
commissions, finder's fees or similar fees or commissions payable in connection
with the transactions contemplated hereby based on any agreement, arrangement or
understanding with the Purchaser or any action taken by the Purchaser.
6.7 Investment Knowledge. The Purchaser is an "accredited investor"
within the meaning of Rule 501 promulgated under the Securities Act.
6.8 HSR Act. Neither the Purchaser, nor any Person that is an "ultimate
parent entity" of the Purchaser (as defined in Rule 801.1 promulgated by the
Federal Trade Commission under the HSR Act) has total assets or annual net sales
(as determined pursuant to the regulations promulgated under the HSR Act) of ten
million dollars ($10,000,000) or more.
ARTICLE 7
INDEMNIFICATION
7.1 Indemnification by the Company. In addition to all other sums due
hereunder or provided for in this Agreement, the Company agrees to indemnify and
hold harmless the Purchaser and its Affiliates (including, without limitation,
▇▇▇▇▇ Brothers ▇▇▇▇▇▇▇▇ & Co.) and their respective officers, directors, agents,
employees, subsidiaries, partners and controlling persons (each, an "indemnified
party") to the fullest extent permitted by law from and against any and all
losses, claims, damages, expenses (including reasonable fees, disbursements and
other charges of counsel) or other liabilities ("Liabilities") resulting from
any breach of any covenant, agreement, representation or warranty of the Company
in this Agreement or any legal, administrative or other actions (including
actions brought by the Company or any equity holders of the Company or
derivative actions brought by any Person claiming through the Company or in the
Company's name), proceedings or investigations (whether formal or informal), or
written threats thereof, based upon, relating to or arising out of this
Agreement, the Preferred Shares, the Registration
27
Rights Agreement, the transactions contemplated hereby or thereby, or
any indemnified person's role therein or in the transactions contemplated hereby
or thereby; provided, however, that the Company shall not be liable under this
Section 7.1: (a) for any amount paid in settlement of claims without the
Company's consent (which consent shall not be unreasonably withheld), (b) with
respect to Liabilities arising solely out of actions brought by the partners of
the Purchaser against an indemnified party or by one indemnified party against
another, or (c) to the extent that it is finally judicially determined that such
Liabilities resulted primarily from (i) the willful misconduct, bad faith or
gross negligence of such indemnified party or (ii) a breach of the Purchaser's
representations in Article 6 or any breach of the Purchaser's obligations under
this Agreement or the Registration Rights Agreements, or (d) any Liabilities
arising solely from the transfer of the Preferred Stock by the Purchaser to any
Person; provided, further, that if and to the extent that such indemnification
is unenforceable for any reason, the Company shall make the maximum contribution
to the payment and satisfaction of such indemnified liability which shall be
permissible under applicable laws. In connection with the obligation of the
Company to indemnify for expenses as set forth above, the Company further agrees
to reimburse each indemnified party for all such expenses (including reasonable
fees, disbursements and other charges of counsel) as they are incurred by such
indemnified party; provided, however, that if an indemnified party is reimbursed
hereunder for any expenses, such reimbursement of expenses shall be refunded to
the extent it is finally judicially determined that the Liabilities in question
resulted primarily from the willful misconduct, bad faith or gross negligence of
such indemnified party.
7.2 Notification. Each indemnified party under this Article 7 will,
promptly after the receipt of notice of the commencement of any action or other
proceeding against such indemnified party in respect of which indemnity may be
sought from the Company under this Article 7, notify the Company in writing of
the commencement thereof. The omission of any indemnified party so to notify the
Company of any such action shall not relieve the Company from any liability
which it may have to such indemnified party (i) other than pursuant to this
Article 7 or (ii) under this Article 7 unless, and only to the extent that, such
omission results in the Company's forfeiture of substantive rights or defenses.
In case any such action or other proceeding shall be brought against any
indemnified party and it shall promptly notify the Company of the commencement
thereof, the Company shall be entitled to participate therein and, to the extent
that it may wish, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party; provided, however, that any indemnified
party may, at its own expense, retain separate counsel to participate in such
defense. Notwithstanding the foregoing, in any action or proceeding in which
both the Company and an indemnified party is, or is reasonably likely to become,
a party, such indemnified party shall have the right to employ separate counsel
at the Company's expense and to control its own defense of such action or
proceeding if, in the reasonable opinion of counsel to such indemnified party,
(a) there are or may be legal defenses available to such indemnified party or to
other indemnified parties that are different from or additional to those
available to the
28
Company or (b) any conflict or potential conflict exists between the Company and
such indemnified party that would make such separate representation advisable;
provided, however, that in no event shall the Company be required to pay
unreasonable fees or expenses or fees and expenses under this Section 7 for more
than one firm of attorneys in any jurisdiction in any one legal action or group
of related legal actions. The Company agrees that the Company will not, without
the prior written consent of the Purchaser, settle, compromise or consent to the
entry of any judgment in any pending or threatened claim, action or proceeding
relating to the matters contemplated hereby (if any indemnified party is a party
thereto or has been actually threatened to be made a party thereto) unless such
settlement, compromise or consent includes an unconditional release of the
Purchaser and each other indemnified party from all liability arising or that
may arise out of such claim, action or proceeding. The rights accorded to
indemnified parties hereunder shall be in addition to any rights that any
indemnified party may have at common law, by separate agreement or otherwise.
7.3 Registration Rights Agreement. Notwithstanding anything to the
contrary in this Article 7, the indemnification and contribution provisions of
the Registration Rights Agreement shall govern any claim made with respect to
registration statements filed pursuant thereto or sales made thereunder.
ARTICLE 8
AFFIRMATIVE COVENANTS
The Company hereby covenants and agrees with the Purchaser and any
Affiliate of the Purchaser, so long as the Purchaser or such Affiliate holds any
Registrable Securities or Preferred Shares, Subordinated Notes, or shares of
Common Stock issued or issuable upon conversion or exchange of the Preferred
Stock:
8.1 Financial Statements. The Company shall deliver to the Purchaser
and any of its Affiliates that are Holders:
(a) as soon as available, but not later than one hundred (100)
days after the end of each fiscal year of the Company, a copy of the audited
consolidated balance sheet of the Company and its Subsidiaries as of the end of
such year and the related consolidated statements of income and cash flows for
such fiscal year, setting forth in each case in comparative form the figures for
the previous year, all in reasonable detail and accompanied by a management
discussion and analysis of the operations of the Company and its Subsidiaries
for such fiscal year and by the opinion of Ernst & Young (or any successor
thereto) or another nationally recognized independent public accounting firm
which report shall state that such consolidated financial statements present
fairly in all material respects the financial position for the periods indicated
in conformity with GAAP applied on a basis consistent with prior years (except
for changes with respect to which such accounting firm concurs);
29
provided, however, that the delivery of a copy of the Company's Annual Report on
Form 10-K shall satisfy the requirements of this Section 8.1(a);
(b) commencing with the fiscal period ending on June 30, 1999,
as soon as available, but in any event not later than forty-five (45) days after
the end of each of the first three fiscal quarters of each year, the unaudited
consolidated balance sheet of the Company and its Subsidiaries, and the related
consolidated statements of income and cash flow for such quarter and for the
period commencing on the first day of the fiscal year and ending on the last day
of such quarter, all certified by an appropriate officer of the Company;
provided, however, that the delivery of a copy of the Company's Quarterly Report
on Form 10-Q shall satisfy the requirements of this Section 8.1(b);
(c) annual budgets and such other financial and operating data
of the Company and its Subsidiaries, as the Purchaser reasonably may request, to
the extent that such information is formally prepared for the Company's
Chairman, President, Board of Directors and/or banks or other lenders;
(d) at any time when it is not subject to Section 13 or 15(d)
of the Exchange Act, upon request, to the Purchaser and prospective purchasers
of the Preferred Shares, information of the type that would satisfy the
requirement of subsection (d)(4)(i) of Rule 144A (or any similar successor
provision) under the Securities Act; and
(e) except as otherwise provided in Sections 8.1(a) and (b),
promptly after the same are filed, copies of all Commission Documents.
8.2 Certificates; Other Information. The Company shall furnish to the
Purchaser and to any Affiliate of the Purchaser that is a Holder:
(a) concurrently with the delivery of the financial statements
referred to in Section 8.1(a), a certificate of the Company's Chief Financial
Officer stating that to the knowledge of such officer there is no default under
or breach of Articles 8 and 9, except as specified in such certificates; and
(b) concurrently with the delivery of the financial statements
referred to in Sections 8.1(a) and (b), a certificate of an officer of the
Company including calculations set forth in reasonable detail showing the
Company's compliance with the financial covenants contained herein.
8.3 Preservation of Corporate Existence. The Company shall, and shall
cause each of its Subsidiaries to:
(a) preserve and maintain in full force and effect its
corporate or organizational existence and good standing under the laws of its
jurisdiction of incorporation or organization except as permitted by Section
9.2;
30
(b) preserve and maintain in full force and effect all
material rights, privileges, qualifications, licenses and franchises necessary
in the normal conduct of its business; and
(c) use its reasonable efforts to preserve its business
organization.
8.4 Payment of Obligations. The Company shall, and shall cause its
Subsidiaries to, pay and discharge as the same shall become due and payable, all
their respective obligations and liabilities, including without limitation:
(a) all tax liabilities, assessments and governmental charges
or levies upon it or its properties or assets, unless the same are being
contested in good faith by appropriate proceedings and adequate reserves in
accordance with GAAP are being maintained by the Company or such Subsidiary;
(b) all lawful claims which the Company and each of its
Subsidiaries is obligated to pay, which are due and which, if unpaid, might by
law become a Lien upon its property (other than Liens which individually or in
the aggregate would not have a material adverse effect on the Condition of the
Company), unless the same are being contested in good faith by appropriate
proceedings and adequate reserves in accordance with GAAP are being maintained
by the Company or such Subsidiary; and
(c) all payments of principal of and interest on Indebtedness
when due (giving effect to any grace periods relating thereto).
8.5 Compliance with Laws. The Company shall comply, and shall cause
each Subsidiary to comply, in all material respects with all Requirements of Law
and with the directions of any Governmental Authority having jurisdiction over
it or its business, except such as to which such failure to comply would not
have a material adverse effect on the Condition of the Company.
8.6 Notices. Upon knowledge of the Chief Executive Officer, the
President or the Chief Financial Officer of the Company of the events described
below, the Company shall give written notice within 10 days to the Purchaser of:
(a) the occurrence of any default under, or breach of, any
provision of Article 8 or 9 accompanied by a certificate specifying the nature
of such default or breach, the period of existence thereof and the action that
the Company has taken or proposes to take with respect thereto; and
(b) any (i) material default or event of default under any
material Contractual Obligation, including the Credit Agreement and Indenture,
of the Company or any of its Subsidiaries, or (ii) material dispute, litigation,
investigation,
31
proceeding or suspension which may exist at any time between the Company or any
of its Subsidiaries and any Governmental Authority;
each accompanied by a statement setting forth details of the occurrence referred
to therein and stating what action the Company proposes to take with respect
thereto.
8.7 Issue Taxes. The Company shall pay, or cause to be paid, all
documentary and similar taxes levied under the laws of any applicable
jurisdiction in connection with the issuance of the Preferred Shares and the
execution and delivery of the other agreements and documents contemplated hereby
and any modification of the Preferred Shares or such other agreements and
documents and will hold the Purchaser harmless, without limitation as to time,
against any and all Liabilities with respect to all such taxes.
8.8 Reservation of Shares.
(a) The Company shall reserve and keep available until June
30, 2000 out of its authorized Preferred Stock, solely for the purpose of sale
to the Purchaser of the Additional Shares, 20,000 Preferred Shares. The
Additional Shares shall be duly and validly issued and, upon payment of the
Additional Purchase Price, be fully paid and non-assessable.
(b) The Company shall at all times reserve and keep available
out of its authorized Common Stock, solely for the purpose of issue or delivery
upon conversion or exchange of the Preferred Shares as provided in the
Certificate of Designation, such number of shares of Common Stock as shall then
be issuable or deliverable upon the conversion or exchange of all outstanding
Preferred Shares. Such shares of Common Stock shall, when issued or delivered in
accordance with the Certificate of Designation, be duly and validly issued and
fully paid and non-assessable. The Company shall issue the Common Stock into
which the Preferred Shares are convertible or exchangeable upon the proper
surrender of the Preferred Shares in accordance with the provisions of the
Certificate of Designation and shall otherwise comply with the terms thereof.
8.9 Inspection.
(a) The Company will permit, and will cause each of its
Subsidiaries to permit, representatives of the Purchaser to visit and inspect
any of its properties, to examine its corporate, financial and operating records
and make copies thereof or abstracts therefrom, and to discuss its affairs,
finances and accounts with their respective officers and independent public
accountants, all at such reasonable times during normal business hours and as
often as may be reasonably requested, upon reasonable advance notice to the
Company.
(b) The Purchaser and any Holder which is an Affiliate of the
Purchaser agrees that any confidential information relating to the Company and
its
32
Subsidiaries obtained (i) in negotiation and execution of this Agreement, (ii)
during any inspection pursuant to Section 8.9, (iii) pursuant to Section 8.1(c)
or 8.10 or (iv) from the Company or any of its Subsidiaries or representatives
thereof which is clearly marked "Confidential" on the first or cover page
thereof (collectively, the "Information") shall be kept confidential by the
Purchaser and such Affiliate, and that they shall use their best efforts to
cause any person designated pursuant to Section 8.10 to attend meetings of the
Board of Directors to keep all Information confidential.
The term "Information" shall not include any information which (i) at
the time of disclosure or thereafter is generally available to or known by the
public (other than as a result of its disclosure by the Purchaser or such
Affiliate), (ii) was available to the Purchaser or such Affiliate on a
non-confidential basis prior to disclosure to the Purchaser or such Affiliate by
the Company, (iii) becomes available to the Purchaser or such Affiliate on a
non-confidential basis from a Person who is not to the Purchaser's or such
Affiliate's knowledge otherwise bound by a confidentiality agreement with the
Company, or (iv) has been independently developed by the Purchaser or its
Affiliates.
Notwithstanding the foregoing, the Purchaser and its Affiliates may
disclose Information to: (i) their advisors, representatives, agents, partners
or employees and (ii) any prospective transferee of the Preferred Stock or of an
interest in the Purchaser or in a successor fund sponsored by ▇▇▇▇▇ Brothers
▇▇▇▇▇▇▇▇ & Co. if such transferee enters into a confidentiality agreement having
substantially the same terms as this Section 8.9(b).
8.10 Board Representation.
(a) The Company shall, within 30 days after the Closing Date,
promptly cause one vacancy to be created on its Board of Directors (by
increasing the number of members of the Board of Directors or otherwise) and at
such time shall cause one person designated by the Purchaser (unless, after
customary investigation of such Person's qualifications, the Board of Directors
reasonably determines in good faith that such Person is not qualified or
acceptable under standards applied fairly and equally to all nominees) to be
selected to fill such vacancy. Such designee shall serve until the next
succeeding annual meeting of stockholders of the Company to be held after such
election.
(b) Commencing with such next succeeding annual meeting of
stockholders of the Company referred to in Section 8.10(a), so long as the
Purchaser holds 20% of the shares of Common Stock issued or issuable upon
conversion of the Preferred Shares (whether or not the Preferred Shares have
been converted) the Purchaser shall be entitled to designate (in addition to any
rights granted to the holders of Preferred Stock as set forth in the Certificate
of Designation) one director to the Company's Board of Directors and, at
relevant future annual meetings of the stockholders of the Company, a successor
to replace such director
33
upon expiration of his or her term. The Company shall cause such designee of the
Purchaser (unless, after customary investigation of such Person's
qualifications, the Board of Directors reasonably determines in good faith that
such Person is not qualified or acceptable under standards applied fairly and
equally to all nominees) be included in the slate of nominees recommended by the
Board to the Company's stock holders for election as directors, and the Company
shall use its reasonable best efforts to cause the election of such designee,
including voting all shares for which the Company holds proxies (unless
otherwise directed by the stockholder submitting such proxy) or is otherwise
entitled to vote, in favor of the election of such person. Notwithstanding the
foregoing, if the Purchaser has not designated a person pursuant to Section
8.10(a), or if the Purchaser is entitled to designate a director to the
Company's Board of Directors by virtue of the first sentence of this Section
8.10(b) and the Purchaser does not designate one director to the Company's Board
of Directors, the Purchaser shall be entitled to receive all notices and
materials distributed to the members of the Board of Directors of the Company,
and to designate one person who shall be entitled to attend all meetings of the
Board of Directors and committees thereof and to receive minutes of all such
meetings upon preparation thereof.
(c) In the event such designee of the Purchaser shall cease to
serve as a director for any reason, other than by reason of the Purchaser not
being entitled to designate a designee as provided in Section 8.10(a) or
8.10(b), the Company shall use its reasonable best efforts to cause the vacancy
resulting thereby to be filled by a designee of the Purchaser.
(d) For so long as the Purchaser shall have the rights granted
pursuant to Sections 8.10(a), (b) and (c) above, the Purchaser shall have the
right (in addition to such other rights) to have a representative attend all
regular and special meetings of the Board of Directors of the Company. These
visitation rights shall include the right to receive the same notice and
materials provided to Board and committee members.
8.11 Registration and Listing. If any shares of Common Stock required
to be reserved for purposes of conversion or exchange of the Preferred Shares as
provided in the Certificate of Designation require registration with or approval
of any Governmental Authority under any Federal or state or other applicable law
before such Common Stock may be issued or delivered upon conversion or exchange,
the Company will endeavor in good faith and as expeditiously as possible to
cause such Common Stock to be duly registered or approved, as the case may be,
unless such registration or approval is required solely because of a breach of
the Purchaser's representation contained in Section 6.5. So long as the Common
Stock is quoted on the NASDAQ or listed on any national securities exchange, the
Company, if permitted by the rules of such system or exchange, will quote or
list and keep quoted or listed on such system or exchange, upon official notice
of issuance, all Common Stock issuable or deliverable upon conversion or
exchange of the Preferred Shares. In addition, at the request of the
34
Purchaser, the Company will endeavor in good faith and as expeditiously as
practicable to obtain private placement numbers for the Preferred Shares and the
Common Stock or Subordinated Notes issued upon conversion or exchange of the
Preferred Shares, assigned by the CUSIP Service Bureau of Standard & Poors'
ratings group and make such securities PORTAL and DTC eligible.
8.12 HSR Act Filing. In connection with the first Additional Closing,
the Company shall prepare and file, and cooperate with the Purchaser so that it
may prepare and file, within five Business Days of a request by the Purchaser,
notification and report forms in compliance with the HSR Act, and shall
otherwise fully comply with the requirements of the HSR Act. The Company shall
prepare and file and use its reasonable best efforts to obtain, all other
governmental consents necessary to allow the Purchaser or its Affiliates to
purchase Additional Shares. The Company shall bear all of its own expenses and
all out-of-pocket expenses (including filing fees and reasonable attorneys'
fees, charges and expenses) of the Purchaser in connection with any such
preparation and filing.
8.13 Private Offering. In the event the Company proposes to sell Common
Stock in an offering not required to be registered under the Securities Act, it
will give the Purchaser at least 20 Business Days prior notice. If the Purchaser
elects by written notice to the Company within 15 Business Days after receipt of
such notice, it may participate in the sale (under the same terms and conditions
as set out in such offering), by including in such sale in place of an equal
number of shares of Common Stock to be sold by the Company, such aggregate
number of shares of Common Stock as is equal to the product obtained by
multiplying (i) the number of shares of Common Stock proposed to be sold by the
Company by (ii) a fraction (A) the numerator of which is the number of shares of
Common Stock into which the Preferred Shares held by the Purchaser have
heretofore been or may be converted and (B) the denominator of which is the sum
of (x) the amount of such numerator and (y) the total number of shares of Common
Stock outstanding at such time. The provisions of this Section 8.13 shall not
apply to issuances of Common Stock in connection with: (1) acquisitions by the
Company, (2) the exercise of options or conversion of convertible securities and
(3) services rendered to the Company.
8.14 Additional Registration Rights. The Company shall not provide any
registration rights with respect to its securities which are superior or
inconsistent with those granted under the Registration Rights Agreement.
35
ARTICLE 9
NEGATIVE COVENANTS
The Company hereby covenants and agrees with the Purchaser and any
Affiliate of the Purchaser so long as such Person holds any shares of Preferred
Stock or Subordinated Notes, that without the prior consent of such Person in
accordance with Section 11.4:
9.1 Consolidated Net Worth. The Company's Consolidated Net Worth shall
not be less than the sum of (a) $300 million (excluding reductions caused by
pooling of interest mergers), and (b) 100% of the proceeds of the issuance of
any capital stock (excluding the Preferred Shares) by the Company or any of its
Subsidiaries to any Person from the Closing Date to the date such Consolidated
Net Worth is determined.
9.2 Consolidations and Mergers. The Company shall not merge,
consolidate with or into, or convey, transfer, lease or otherwise dispose of
(whether in one transaction or in a series of transactions) all or substantially
all of its assets (whenever acquired), except the Company may consolidate or
merge with or into, or sell all or substantially all of its assets to, any
Person if:
(a) The corporation or partnership formed by such
consolidation or surviving such merger or the Person which acquires all or
substantially all of the assets of the Company shall be (after giving effect to
such transaction) a Solvent corporation or partnership organized or formed, as
the case may be, and existing under, the laws of the United States, any state
thereof, or the District of Columbia and shall expressly assume in writing all
of the obligations of the Company under this Agreement, the Preferred Shares and
the Registration Rights Agreement;
(b) immediately after giving effect to such transaction, no
default under, or breach of, provisions of Article 8 and 9 exists;
(c) the corporation or partnership formed by or surviving any
such transaction or the Person which acquires all or substantially all of the
assets of the Company shall have a Consolidated Net Worth at least equal to the
Consolidated Net Worth of the Company immediately prior to such transaction; and
(d) the Company shall have furnished to the Holders (i) an
opinion of counsel satisfactory to a majority in interest of the Holders
addressing the matters (other than Solvency) set forth in clause (a) above and
(ii) the certificate of the Chief Financial Officer of the Company to the effect
that such transaction has been consummated in compliance with the foregoing
requirements; provided that nothing in this Section 9.2 shall affect the rights
of any Holder under this Agreement, the Preferred Shares or the Registration
Rights Agreement.
36
9.3 Transactions with Affiliates. The Company shall not, and shall not
permit any of its Subsidiaries to, enter into any transaction with any Affiliate
of the Company or of any such Subsidiary, except on terms no less favorable to
the Company or such Subsidiary than those the Company or such Subsidiary would
obtain in a comparable arm's-length transaction with a Person not an Affiliate
of the Company or such subsidiary; provided that any transaction approved by a
majority of the independent directors of the Company shall be conclusively
deemed to be on such terms.
9.4 No Inconsistent Agreements. Neither the Company nor any of its
Subsidiaries shall enter into any loan or other agreement, or enter into any
amendment or other modification to any currently existing agreement, which by
its terms restricts or prohibits the ability of the Company to pay dividends on
the Preferred Stock, to issue Common Stock upon conversion or exchange of the
Preferred Stock in accordance with the Certificate of Designation and this
Agreement; provided, however, that the foregoing shall not prevent the Company
from entering into loan or other agreements that contain restrictions on the
ability of the company to pay dividends on the Preferred Stock either (i) during
the existence of an event of default under such agreements or (ii) if such
payment or repurchase would, although not in itself a breach of any covenant in
any such agreement, result in the occurrence of a default or event of default
arising from a breach by the Company of one or more covenants regarding the
financial condition of the Company so long as, on the date such agreement is
entered into, (x) the terms of any such covenants would not prohibit such
payment on such date and (y) the Company does not reasonably anticipate that any
of the terms of such covenants is likely to be breached during the term of such
agreement as a result of such payment of dividend.
9.5 Issuance of Preferred Stock. The Company shall not issue any
Preferred Stock except pursuant to this Agreement. If the Purchaser does not
purchase all the Additional Shares by June 30, 2000, the Company will amend the
Certificate of Designation to reduce the number of authorized Preferred Shares
to equal that amount outstanding on the date of such amendment.
ARTICLE 10
DISPOSITIONS
10.1 Dispositions by ▇▇▇▇▇▇▇▇.
(a) If ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇") at any time or from time
to time proposes or agrees to sell or transfer to a Person or a "group" (within
the meaning of Section 13(d)(3) of the Exchange Act) of Persons, any shares of
Common Stock held by him, and so long as the Purchaser and all Holders that are
Affiliates of the Purchaser hold collectively at least five percent of the
Common Stock issued or issuable upon conversion of the Preferred Stock, ▇▇▇▇▇▇▇▇
shall give written notice of such proposed sale to the Purchaser within 15
Business Days prior to the date of such
37
sale, which notice shall state the price and other terms of the proposed
transaction and shall state the number of shares proposed to be sold; provided,
however, that the provisions of this Section 10.1(a) shall not apply to the sale
or transfer of any shares of Common Stock held by ▇▇▇▇▇▇▇▇ unless the sum of
such shares plus all other shares of Common Stock sold or transferred by
▇▇▇▇▇▇▇▇ during the period from the Closing Date to the date of the proposed
sale or transfer of such share shall be equal to or greater than 35% of the
number of shares of Common Stock held by ▇▇▇▇▇▇▇▇ on the date hereof (assuming
the exercise of all options held by ▇▇▇▇▇▇▇▇). So long as the Purchaser and all
Holders that are Affiliates of the Purchaser hold collectively at least five
percent of the Common Stock issued or issuable upon conversion of the Preferred
Stock the Purchaser and each such Holder may, upon giving written notice thereof
to ▇▇▇▇▇▇▇▇ within ten Business Days after receipt of the notice provided for in
the first sentence of this Section 10.1, participate in such sale on the same
terms and conditions as those offered by ▇▇▇▇▇▇▇▇ to such third party or
parties, by including in such sale in place of an equal number of shares of
Common Stock held by ▇▇▇▇▇▇▇▇ (excluding any shares with respect to which the
provisions of this Section 10.1(a) shall not apply in accordance with the
preceding sentence hereof) such aggregate number of shares of Common Stock as is
equal to the product obtained by multiplying (i) the number of shares of Common
Stock proposed to by sold by ▇▇▇▇▇▇▇▇ by (ii) a fraction (A) the numerator of
which is the number of shares of Common Stock into which the Preferred Shares
held by the Purchaser and each such Holder have theretofore been converted or
exchanged or may be converted and (B) the denominator of which is the sum of (x)
the amount of such numerator and (y) 1,542,340 (which number shall be adjusted
appropriately for any subdivision, combination, reclassification or similar
event with respect to the Common Stock).
(b) Notwithstanding anything to the contrary in this
Agreement, including, without limitation, Section 10.1(a) hereof, the provisions
of this Section 10.1 shall not apply to any sale or transfer by ▇▇▇▇▇▇▇▇ of any
part of his shares of Common Stock (i) to (A) a spouse, (B) any of his lineal
descendants, (C) a partnership or trust set up for the benefit of one or more of
such persons or (D) any entity controlled by ▇▇▇▇▇▇▇▇; provided, however, that
any proposed sale or transfer by any of such transferees shall be deemed to be a
sale or transfer by ▇▇▇▇▇▇▇▇ for purposes of this Section 10.1, or (ii) pursuant
to a transaction intended to be a charitable contribution.
(c) The provisions of this Section 10.1 shall terminate upon
the death or disability of ▇▇▇▇▇▇▇▇ or if ▇▇▇▇▇▇▇▇ is no longer either an
officer or director of the Company. The term "disability" shall mean, with
respect to ▇▇▇▇▇▇▇▇, that due to physical or mental infirmity, whether total or
partial, ▇▇▇▇▇▇▇▇ is permanently unable to perform his usual duties for the
Company.
38
10.2 Dispositions by the Purchaser.
(a) Except as set forth below, until the earlier to occur of
(i) the second anniversary of the Closing Date, (ii) the date on which the
Purchaser and all Holders that are Affiliates of the Purchaser collectively
cease to own at least five percent of the Common Stock issued or issuable upon
conversion of the Preferred Stock, (iii) the occurrence of a Change of Control
and (iv) the occurrence of a breach with respect to any of the covenants set
forth in Sections 8.8, 8.9, 8.10, 8.11, 8.13 and 8.14 and Article 9 ,which
breach remains uncured ten Business Days after written notice is provided to the
Company (the "Transfer Restriction Period"), the Purchaser shall not transfer
its Common Stock or Preferred Shares.
(b) During the Transfer Restriction Period, if the Purchaser
shall desire to sell or otherwise transfer more than 50% of its Common Stock or
Preferred Shares pursuant to the provisions of Rule 144A (or any successor rule
promulgated under the Securities Act) or in any other transaction, other than
pursuant to the provisions of Rule 144 (or any successor rule promulgated under
the Securities Act), not constituting a public offering, the Purchaser shall
give the Company written notice of its desire to sell such securities,
specifying the number of such securities the Purchaser desires to sell and the
price at, and the terms and conditions on, which the Purchaser desires to sell
such securities, and offering to sell such securities to the Company at such
price and on such terms and conditions. If, within ten Business Days of
receiving such notice, the Company does not accept such offer in writing, the
Purchaser shall be free for a period of 40 Business Days to sell such securities
to any Person at a price not less than 95% of the price offered to the Company,
and on terms and conditions substantially equivalent to those offered to the
Company. If the Purchaser does not sell such securities subject to such notice
within such 40 Business Day period, the Purchaser may not thereafter sell or
transfer such securities without again complying with the provisions of the
first sentence of this Section 10.2(b). If the Company accepts such offer within
the time period specified in the preceding sentence, then the Company shall
purchase the securities specified in such notice as promptly as is reasonably
practicable, but in no event later than 20 Business Days following such
acceptance. If after such acceptance the Company for whatever reason fails to
purchase securities on or prior to the date specified in the preceding sentence,
the Purchaser may, among other remedies available to it, sell such securities to
any Person at any price and on any terms.
(c) Notwithstanding anything in this Section 10.2 to the
contrary, the Purchaser may, at any time and from time to time, sell or
otherwise transfer Common Stock or Preferred Shares (i) pursuant to an exchange
offer or a tender offer not opposed by a majority of the Company's Board of
Directors, (ii) pursuant to any all cash tender offer made by any Person for all
of the issued and outstanding Common Stock, (iii) pursuant to the Registration
Rights Agreement, or (iv) to any of the Purchaser's Affiliates, or (v) to the
Purchaser's limited partners pursuant to a pro rata distribution; provided,
however, that any Affiliates (or limited
39
partners) of the Purchaser to which such securities are transferred shall agree
to be bound by all of the transfer restrictions set forth in this Section 10.2.
(d) Except as otherwise provided in Section 10.2(c), any
securities transferred by the Purchaser shall not thereafter be subject to the
provisions of this Section 10.2.
ARTICLE 11
MISCELLANEOUS
11.1 Survival of Provisions. All warranties, representations and
covenants made by the Company in or under this Agreement shall be considered to
have been relied upon by the Purchaser and shall survive the execution and
delivery of this Agreement and the issuance to the Purchaser of the Preferred
Shares, regardless of any investigation made by the Purchaser or on its behalf.
All warranties, representations and covenants made by the Purchaser or on its
behalf shall survive the execution and delivery of this Agreement and the
issuance to the Purchaser of the Preferred Shares. Except as otherwise set forth
in Article 8 or 9, all of the representations and warranties made herein and
each of the provisions of Articles 5, 6, 7 and 11 shall survive the execution
and delivery of this Agreement, any investigation by or on behalf of the
Purchaser or any Affiliate, acceptance of the Preferred Shares and payment
therefor, payment or prepayment of the Preferred Shares upon redemption or
otherwise, conversion or exchange of the Preferred Shares or termination of this
Agreement; provided that the representations and warranties set forth in
Articles 5 and 6 shall expire and terminate upon the conversion or exchange of
all of the Preferred Stock into or for Common Stock.
11.2 Notices. All notices, demands and other communications provided
for or permitted hereunder shall be made in writing and shall be by registered
or certified first-class mail, return receipt requested, telecopier, courier
service or personal delivery:
(a) if to the Purchaser at the following address:
The 1818 Fund III, L.P.
c/o Brown Brothers ▇▇▇▇▇▇▇▇ & Co.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
40
with a copy to:
▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
1285 Avenue of the Americas
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
(b) if to the Company at the following address:
World Access, Inc.
Suite 2240
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
with a copy to:
Long, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP
One Peachtree Center, Suite 5300
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: H. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; when delivered by
courier, if delivered by commercial overnight courier service; five Business
Days after being deposited in the mail, postage prepaid, if mailed; and when
receipt is acknowledged, if telecopied.
11.3 Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and permitted assigns of the parties
hereto. The Purchaser may assign any of its rights under this Agreement only to
any of its Affiliates; provided that any such Affiliate (including any limited
partner) agrees to be bound by the provisions in this Agreement. The Company may
not assign any of its rights under this Agreement without the written consent of
the Purchaser. Except as provided in Article 7, no Person other than the parties
hereto is intended to be a beneficiary of this Agreement, the Preferred Shares
or the Registration Rights Agreement. Nothing in this Section 11.3 shall
prohibit the Purchaser from transferring its Common Stock, Preferred Stock or
Subordinated Notes to any person nor shall anything in this Section affect any
Holder's rights under the Registration Rights Agreement.
41
11.4 Amendment and Waiver. No failure or delay on the part of the
Company or the Purchaser in exercising any right, power or remedy hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right, power or remedy preclude any other or further exercise thereof
or the exercise of any other right, power or remedy. The remedies provided for
herein are cumulative and are not exclusive of any remedies that may be
available to the Company or the Purchaser at law, in equity or otherwise. Any
amendment, supplement, modification or termination of or to any provision of
this Agreement, any waiver of any provision of this Agreement, and any consent
to any departure by the Company from the terms of any provision of this
Agreement, shall be effective only in the specific instance and for the specific
purpose for which made or given and shall be effective only when signed in
writing by or on behalf of holders of at least 50% of the Common Stock issued
and issuable upon conversion of the Preferred Shares (whether or not converted)
(it being understood that the terms of this Agreement may be waived or amended
with the written consent of holders of at least 50% of the Common Stock issued
and issuable upon conversion of the Preferred Shares (whether or not converted).
Except where notice is specifically required by this Agreement, no notice to or
demand on the Company in any case shall entitle the Company to any other or
further notice or demand in similar or other circumstances.
11.5 Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
11.6 Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
11.7 Determinations. Except where any provision expressly requires that
a determination be reasonable or a consent not be unreasonably withheld, or be
subject to qualifications to similar effect, all determinations to be made by
the Company, the Purchaser or any Holder hereunder in its opinion or judgment or
with its approval or otherwise shall be made by it in its sole discretion.
11.8 Governing Law. This Agreement has been negotiated, executed and
delivered in the State of New York and shall be governed by and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of law.
11.9 Jurisdiction. Each party to this Agreement hereby irrevocably
agrees that any legal action or proceeding arising out of or relating to this
Agreement or any agreements or transactions contemplated hereby shall be brought
only in the courts of the State of New York located in New York City or of the
United States of America for the Southern District of New York and hereby
expressly submits to the personal jurisdiction and venue of such courts for the
purposes thereof and expressly waives any claim of improper venue and any claim
that such courts are an
42
inconvenient forum. Each party hereby irrevocably consents to the service of
process of any of the aforementioned courts in any such suit, action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to the address set forth in Section 11.2, such service to
become effective 10 days after such mailing.
11.10 Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired, unless the
provisions held invalid, illegal or unenforceable shall substantially impair the
benefits of the remaining provisions hereof.
11.11 Rules of Construction. Unless the context otherwise requires,
"or" is not exclusive, and references to sections or subsections refer to
sections or subsections of this Agreement.
11.12 Remedies. If a breach of this Agreement or the Certificate of
Designation by the Company occurs and is continuing, any Holder may pursue any
available remedy by proceeding at law or in equity to enforce the performance
(including, without limitation, the specific performance) of any provision of
this Agreement or the Certificate of Designation. A Holder may maintain a
proceeding even if it does not possess any of the Preferred Shares or does not
produce any of them in the proceeding. Except as otherwise provided by law, a
delay or omission by any Holder in exercising any right or remedy accruing upon
any such breach shall not impair the right or remedy or constitute a waiver of
or acquiescence in any such breach. No remedy is exclusive of any other remedy.
All available remedies are cumulative.
11.13 Entire Agreement. This Agreement, together with the exhibits and
schedules hereto, the Certificate of Designation and the Registration Rights
Agreement, is intended by the parties as a final expression of their agreement
and intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained
herein and therein. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein or therein. This
Agreement, together with the exhibits and schedules hereto, the Certificate of
Designation, the Registration Rights Agreement supersede all prior agreements
and understandings between the parties with respect to such subject matter.
11.14 Attorneys' Fees. In any action or proceeding brought to enforce
any provision of this Agreement, the Certificate of Designation or the
Registration Rights Agreement or any other document or instrument contemplated
hereby or thereby, or where any provision hereof or thereof is validly asserted
as a defense, the
43
successful party shall be entitled to recover reasonable attorneys' fees,
charges and disbursements in addition to any other available remedy.
11.15 Publicity. Except as may be required by applicable law, neither
party hereto shall issue a publicity release or announcement or otherwise make
any public disclosure concerning this Agreement or the transactions contemplated
hereby, without prior approval by the other party hereto. If any announcement is
required by law to be made by either party hereto, prior to making such
announcement such party will deliver a draft of such announcement to the other
party and shall give the other party an opportunity to comment thereon.
11.16 Expenses. The company acknowledges and agrees that whether or not
the transactions contemplated hereby are consummated, the Company shall
reimburse the Purchaser for all (i) reasonable out-of-pocket expenses and all
consulting and legal fees and expenses and other charges of the Purchaser in
connection with the negotiation, execution and delivery of this Agreement, the
Preferred Shares and the Registration Rights Agreement (including, without
limitation, all fees, disbursements and related charges of ▇▇▇▇, Weiss, Rifkind,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇) and (ii) reasonable out-of pocket expenses for attendance at
meetings of the Board of Directors of the Company by the Purchaser's Director
and any representative. The Company agrees that it will make such reimbursements
as such fees and expenses are incurred, upon request from the Purchaser.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their respective representatives hereunto duly
authorized as of the date first above written.
WORLD ACCESS, INC.
By: _________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: CEO
THE 1818 FUND III, L.P.
By: ▇▇▇▇▇ Brothers ▇▇▇▇▇▇▇▇ & Co.,
General Partner
By: _________________________
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Partner
44
The undersigned hereby agrees to be
bound by and perform in accordance
with Section 10.1 of this Agreement.
_________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
