Exhibit 10.23
NOTE PURCHASE AGREEMENT
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This NOTE PURCHASE AGREEMENT (the "Agreement") is made among NETWORK ACCESS
SOLUTIONS CORPORATION, a Delaware corporation (the "Company") and those
investors set forth on Exhibit A hereto (each a "Purchaser" and collectively,
the "Purchasers"), dated as of March 31, 1999. In consideration of the recitals
and the mutual covenants contained herein, the parties hereby agree as follows:
1. General. This Agreement sets forth the terms upon which the
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Purchasers will purchase convertible promissory notes in the form attached
hereto as Exhibit B (the "Notes") from the Company or invest in the Company,
providing for loans to the Company or an investment in the Company in an
aggregate amount of $10,000,000.
2. Purchase Price and Payment.
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(a) The Notes. The Purchasers hereby purchase the Notes in the
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aggregate amount of $5,000,000 and in accordance with the allocation set forth
on Exhibit A.
(b) Subsequent Investment. Subject to the truth and accuracy of the
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representations and warranties set forth herein and if there are no Events of
Default (as defined in the Notes), the Purchasers hereby agree that they will
invest in the Company as set forth below upon the earliest to occur of a Third
Party Financing (as defined below), an IPO (as defined below), a CO Request (as
defined below) or December 31, 1999.
(i) A "Third Party Financing" shall mean the sale of at least
$10,000,000 in shares of the Company's capital stock by the Company to one or
more third party investors, including without limitation, a private equity
investment or a sale to a strategic investor (excluding the Purchasers). In an
investment in connection with a Third Party Financing, the Purchasers will
invest $5,000,000 in the Company (in accordance with the allocation set forth on
Exhibit A) by purchasing shares of the class or series of securities issued by
the Company in the Third Party Financing at the price per share at which such
securities were sold by the Company in such financing.
(ii) An "Initial Public Offering" shall mean the closing of
the initial public offering of the Company's Common Stock pursuant to a
registration statement declared effective by the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended (the "Act"),
having an aggregate offering price to the public of not less than $25,000,000,
based on a pre-money valuation of at least $200,000,000. In an investment in
connection with an Initial Public Offering, the Purchasers will invest
$5,000,000 in the Company (in accordance with the allocation set forth on
Exhibit A) by purchasing shares of the Company's Common Stock at the initial per
share price to the public specified in the final prospectus with respect to the
Initial Public Offering.
(iii) A "CO Request" shall mean the election of the Company at
any
time after the Company has taken possession of at least ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇
central offices for the purpose of installing the Company's digital subscriber
line access multiplexing equipment. In an investment in connection with a CO
Request, the Purchasers will invest $5,000,000 in the Company (in accordance
with the allocation set forth on Exhibit A) by purchasing shares of the
Company's Common Stock at Fair Market Value (as defined below) as determined by
a Qualified Appraiser (as defined below). "Fair Market Value" shall mean the
fair market value of a share of the Company's Common Stock as determined on the
basis of a sale of 100% of the Company taking into account all relevant factors
determinative of value. "Qualified Appraiser" shall mean, at the election of the
Holder, (i) ▇▇▇▇▇▇▇▇▇, Lufkin & ▇▇▇▇▇▇▇▇ (ii) Bear, ▇▇▇▇▇▇▇ & Co. Inc. or (iii)
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Inc.
(iv) In an investment upon December 31, 1999, the Purchasers
will invest $5,000,000 in the Company (in accordance with the allocation set
forth on Exhibit A) by purchasing shares of the Company's Common Stock at Fair
Market Value (as defined above) as determined by a Qualified Appraiser (as
defined above).
(v) Notwithstanding anything contained herein to the
contrary, the Purchasers shall have no obligation to make any subsequent
investment pursuant to this Section 2(b) upon and after a Change in Control (as
defined below). A "Change of Control" shall mean a sale or transfer of all or
substantially all of the property or assets of the Company, the consolidation or
merger of the Company with or into one or more companies or another similar
transaction in which the Company shall not be the surviving entity.
3. Representations and Warranties of the Company. The Company hereby
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represents and warrants to the Purchasers that: (i) the Company is a corporation
duly organized and validly existing under the laws of the State of Delaware with
full corporate power and authority to execute, deliver and perform this
Agreement and the Notes; (ii) other than the authorization and issuance of the
shares of capital stock upon the investments contemplated by Section 2(b) above
and the conversion of the Notes, this Agreement has been duly authorized by all
necessary corporate action of the Company and constitute legal, valid and
binding obligations of the Company enforceable against it in accordance with its
terms; (iii) neither the execution and delivery of this Agreement and the Notes
nor the completion of the transactions contemplated hereby or thereby will
contravene or violate (a) any provision of the organizational documents of the
Company, or (b) any law or order of any court or governmental agency applicable
to the Company; and (iv) any consents, approvals, authorizations or filings
required on the part of the Company in connection with the transactions
contemplated hereby have been obtained.
4. Representations and Warranties of the Purchasers. Each of the
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Purchasers severally and not jointly represents and warrants to, and agrees
with, the Company that: (i) this Agreement constitutes its legal, valid and
binding obligation enforceable against it in accordance with its terms; (ii) the
Note and any shares of the Company's capital stock (such shares, the "New
Shares") to be acquired by the Purchasers in connection with the transactions
contemplated hereby to be acquired by it will be acquired for investment for its
own account, not as a nominee or agent, and not with a view to the distribution
thereof; and (iii) such Purchaser acknowledges that the Note and the New Shares
have not been registered under the Act.
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5. Reservation of Shares. The Company agrees to use its best efforts to
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reserve an adequate number of shares of its capital stock for the investments
contemplated by Section 2(b) above and for conversion of the Notes, whether or
not such securities are currently authorized.
6. Miscellaneous. The representations, warranties and covenants of the
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Company and the Purchasers contained herein or made pursuant to this Agreement
shall survive the execution and delivery hereof and delivery of the Notes. The
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties. Nothing in
this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement. This Agreement shall be governed
by and construed under the internal laws of the State of Delaware as applied to
agreements entered into and to be performed entirely within the State of
Delaware. This Agreement, together with the Notes, constitutes the entire
agreement of the parties with respect to its subject matter. Any term of this
Agreement may be amended and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Purchasers.
7. Legal Fees. The Company shall pay the reasonable and documented legal
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fees and expenses of one counsel to the Purchasers in connection with the
negotiation and documentation of the transactions contemplated hereby, up to a
maximum of $7,500.
{signatures on next page}
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date
first written above.
NETWORK ACCESS SOLUTIONS CORPORATION
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
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Its: Chief Financial Officer
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SPECTRUM EQUITY INVESTORS II, L.P.
By: Spectrum Equity Associates II, L.P.
Its: General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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Its: Managing General Partner
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FBR TECHNOLOGY VENTURE PARTNERS L.P.
By: FBR Venture Capital Managers, Inc.
Its: General Partner
By: /s/ Hooks ▇. ▇▇▇▇▇▇▇▇
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Managing Director
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EXHIBIT A
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Purchaser Initial Investment Subsequent Investment
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Spectrum Equity Investors II, L.P. $4,250,000 $4,250,000
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FBR Technology Venture Partners L.P. $750,000 $750,000
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EXHIBIT B
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Form of Convertible Promissory Note
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CONVERTIBLE NOTE
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$[_________] March [___], 1999
FOR VALUE RECEIVED, the undersigned, Network Access Solutions
Corporation, a Delaware corporationa corporation organized and existing under
the laws of the State of Delaware (the "Company"), hereby promises to pay to the
order of [______________________] (hereinafter, the "Holder"), at
[________________________], or at such other place or to such other party as the
holder of this Note may from time to time designate in writing, the principal
sum of [__________________ ($______________)] with simple interest on the
principal balance outstanding from time to time at the rate of interest (the
"Interest Rate") of 8% per annum. All payments hereunder shall be made in
lawful currency of the United States and in immediately available funds.
Interest shall be calculated on the basis of the actual number of days elapsed
over a 360-day year. This Convertible Note (the "Note") is being issued
pursuant to the terms and conditions of that certain Note Purchase Agreement of
even date herewith (the "Purchase Agreement").
1. Payments. Unless the entire principal and interest amount of this
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Note has been converted pursuant to the terms set forth in Section 4 below, the
entire unpaid amount of this Note, together with all accrued, but unpaid,
interest and all other fees, costs, and charges, if any, shall be due and
payable on December 31, 1999 (the "Maturity Date"). If any amounts due under
this Note are due on a day which is not a business day, then such amounts shall
be due on the next following day which is a regular business day.
2. Application of Payments. All payments on account of the
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indebtedness evidenced by this Note prior to the Maturity Date shall be applied
first, to any and all costs, expenses, or charges then owed the Holder by the
Company pursuant to this Note, second, to accrued and unpaid interest hereunder,
and third, to the unpaid principal balance hereof.
3. Costs of Collections. If all sums due under this Note are not
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paid, in full, when due, the Company agrees to pay, in addition to the sums due
hereunder, all reasonable costs of collection (including reasonable attorneys'
fees and expenses), whether or not suit is brought.
4. Conversion.
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(a) If not converted sooner pursuant to Sections 4(b), 4(c) or
4(d), the entire then-outstanding principal and interest amount hereof shall
automatically convert into shares of the Company's capital stock upon a Third
Party Financing. A "Third Party Financing" shall mean the sale of at least
$10,000,000 in shares of the Company's capital stock by the Company to one or
more third party investors, including without limitation, a private equity
investment or a sale to a strategic investor (other than the Holder) prior to or
on the Maturity Date. Any amount converted pursuant to this Section 4(a),
Section 4(b), Section 4(c) or Section 4(d) shall be referred to herein as the
Conversion Amount. Upon a conversion pursuant to this Section 4(a), the
Conversion Amount shall be converted into such class or series of securities
issued by the Company in the Third Party Financing at the price per share at
which such securities were sold
by the Company in such financing. In such conversion, the outstanding Conversion
Amount shall be converted automatically without any further action by the Holder
and whether or not this Note has been tendered to the Company and this Note
shall be deemed retired and canceled; provided, that the Company shall not be
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obligated to issue to the Holder certificates evidencing the shares of capital
stock issuable such conversion unless this Note has been tendered by the Holder
to the Company.
(b) If not converted sooner pursuant to Sections 4(a), 4(c) or 4(d),
at the election of the Holder, all or some of the then-outstanding principal and
interest amount hereof may be converted into shares of the Company's Common
Stock upon the initial public offering of the Company's Common Stock pursuant to
a registration statement declared effective by the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended (the "Act"),
having an aggregate offering price to the public of not less than $25,000,000,
based on a pre-money valuation of at least $200,000,000. Upon such conversion,
the Conversion Amount shall be converted into such number of shares of the
Company's Common Stock as shall be equal to the Conversion Amount divided by the
initial per share price to the public specified in the final prospectus with
respect to the offering. Before the Holder shall be entitled to convert this
Note pursuant to this Section, the Holder shall surrender this Note duly
endorsed, at the office of the Company. The Company shall, promptly thereafter,
issue and deliver to Holder at the address specified by Holder, or to the
nominee or nominees of Holder, a certificate or certificates for the shares of
Common Stock to which Holder shall be entitled.
(c) If not converted sooner pursuant to Sections 4(a), 4(b) or
4(d), all of the then-outstanding principal and interest amount hereof shall be
converted into shares of the Company's Common Stock automatically upon a CO
Request. A "CO Request" shall mean at the election of the Company at any time
after the Company has taken possession of at least ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ central
offices for the purpose of installing the Company's digital subscriber line
access multiplexing equipment. Upon such conversion, the Conversion Amount shall
be converted into such number of shares of the Company's Common Stock as shall
be equal to the Conversion Amount divided by the Fair Market Value (as defined
below) as determined by a Qualified Appraiser (as defined below). "Fair Market
Value" shall mean the fair market value of a share of the Company's Common Stock
as determined on the basis of a sale of 100% of the Company taking into account
all relevant factors determinative of value. "Qualified Appraiser" shall mean,
at the election of the Holder, (i) ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, (ii) Bear,
▇▇▇▇▇▇▇ & Co. Inc. or (iii) ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Inc. In such conversion, the
outstanding Conversion Amount shall be converted automatically without any
further action by the Holder and whether or not this Note has been tendered to
the Company and this Note shall be deemed retired and canceled; provided, that
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the Company shall not be obligated to issue to the Holder evidencing the shares
of capital stock issuable such conversion unless this Note has been tendered by
the Holder to the Company.
(d) If not converted sooner pursuant to Sections 4(a), 4(b) or
4(c), all of the then-outstanding principal and interest amount hereof shall be
converted into shares of the Company's Common Stock automatically on December
31, 1999. Upon such conversion, the Conversion Amount shall be converted into
such number of shares of the Company's Common Stock as shall be equal to the
Conversion Amount divided by the Fair Market Value as
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determined by a Qualified Appraiser. In such conversion, the outstanding
Conversion Amount shall be converted automatically without any further action by
the Holder and whether or not this Note has been tendered to the Company and
this Note shall be deemed retired and canceled; provided, that the Company shall
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not be obligated to issue to the Holder certificates evidencing the shares of
capital stock issuable such conversion unless this Note has been tendered by the
Holder to the Company.
(e) No fractional shares of Common Stock shall be issued upon
conversion of this Note and the number of shares of Common Stock to be issued
shall be rounded up to the nearest whole share.
5. Change of Control. All outstanding principal and interest amounts
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due hereunder shall become immediately due and payable without notice or demand
upon the occurrence of a Change of Control (as defined below). A "Change of
Control" shall mean a sale or transfer of all or substantially all of the
property or assets of the Company, the consolidation or merger of the Company
with or into one or more companies or another similar transaction in which the
Company shall not be the surviving entity.
6. Events of Default. This Note shall, at Holder's option, become
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immediately due and payable without notice or demand upon the occurrence of one
or more of any of the following events (herein, "Events of Default"): (a) the
Company shall fail to pay as and when due the principal and interest due on this
Note or any portion thereof, and such failure shall continue for a period of ten
days; (b) the Company shall be dissolved, make any assignment for the benefit of
creditors or commit any act of bankruptcy; (c) there shall be filed or brought
against the Company and either (i) adjudicated adversely to it, or (ii)
consented to or acquiesced in by it in any manner, or (iii) not dismissed within
90 days, any petition in bankruptcy or any insolvency, receivership,
trusteeship, reorganization, debt adjustment, arrangement, composition,
extension, debtor relief, relief, dissolution, liquidation, winding up or any
similar proceeding, or any proceeding in which its ability to discharge its
obligations as they become due, or its ability or right to continue in business
and in possession and management of its property as a going concern under the
control of its stockholders, is in issue; or (d) final judgment for the payment
of money shall be rendered against the Company and any judgment shall not be
discharged or appealed within 90 days with a stay of execution. Upon the
occurrence of any Event of Default, and at any time thereafter, Holder shall
have all of the rights and remedies provided herein and under applicable law.
7. Waivers. All parties to the transaction evidenced by this Note
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hereby jointly and severally waive all exemption rights, whether under any state
constitution, homestead exemption or otherwise, and also severally waive demand,
presentment for payment, notice of dishonor, valuation and appraisement and
expressly agree that the payment dates hereof may be extended from time to time
without in any way affecting the liability of the Company, any guarantor, surety
or endorser.
8. Assignment. This Note and the obligations hereunder may not be
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assigned by either party hereto without the consent of the other party. This
Note shall be binding upon the Company and its successors and assigns and shall
inure to the benefit of the Holder and its
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successors and assigns.
9. Miscellaneous. This Note shall be governed by, and construed in
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accordance with, the laws of the State of Delaware. In the event any one or
more of the provisions contained in this Note shall, for any reason, be held to
be invalid, illegal, or unenforceable in any respect, such invalidity,
illegality, or unenforceability shall not affect any other provision of this
Note and this Note shall be construed as if such invalid, illegal, or
unenforceable provision had never been contained herein. This Note may not be
changed orally, but only by an agreement in writing signed by the parties
against whom enforcement of any waiver, change, modification or discharge is
sought.
IN WITNESS WHEREOF, the Company has duly executed this Note as of the
day and year first above written.
ATTEST: COMPANY:
NETWORK ACCESS SOLUTIONS
CORPORATION
By:_______________________(SEAL)
----------------------------- Name:_____________________
Title:____________________
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