JATO COMMUNICATIONS CORP.
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STOCK PURCHASE AGREEMENT
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JATO COMMUNICATIONS CORP.
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made as of the 9th day of February,
2000 (the "EFFECTIVE DATE") by and among JATO COMMUNICATIONS CORP., a
Delaware corporation (the "COMPANY"), and U.S. TELESOURCE, INC., a Delaware
corporation ("PURCHASER").
WHEREAS, Purchaser and the Company wish to form a strategic
relationship, which will include, among other things, an investment by
Purchaser in the Company;
WHEREAS, the Company has filed a registration statement with the
Securities and Exchange Commission with respect to the planned initial public
offering ("IPO") of shares of its Common Stock;
WHEREAS, the Purchaser is an "institutional investor" and wishes to
purchase from the Company $2,500,000.00 of shares of the Company's Common
Stock at the IPO price per share in a transaction exempt from registration
under the Securities Act of 1933, as amended, such purchase to close
immediately following the closing of the IPO; and
WHEREAS, the Company desires to issue a warrant to Purchaser to purchase
a number of shares of the Company's Common Stock based on an aggregate
exercise price of $5,000,000.00 and an exercise price per share of the IPO
price per share plus 20% in a transaction exempt from registration under the
Securities Act of 1933, as amended, such issuance to close immediately
following the closing of the IPO; and.
NOW, THEREFORE, the parties hereto agree as follows:
1. SALE OF SHARES AND ISSUANCE OF WARRANT
1.1 SALE OF SHARES. Subject to the terms and conditions hereof, at the
IPO Closing (as hereinafter defined), the Company hereby agrees to issue and
sell to Purchaser and Purchaser agrees to purchase $2,500,000.00 of shares of
the Company's Common Stock (the "IPO SHARES" and collectively with the
Alternative Shares (as defined in Section 7.2), the "SHARES") at a price per
share equal to the price per share at which the Company's Common Stock is
sold to the public in the IPO (the "IPO PURCHASE PRICE" and collectively with
the Alternative Purchase Price (as defined in Section 7.2), the "PURCHASE
PRICE").
1.2 ISSUANCE OF WARRANTS. Subject to the terms and conditions hereof,
at the IPO Closing (as hereinafter defined), the Company hereby agrees to
issue to Purchaser a warrant in the form attached hereto as EXHIBIT A-1 (the
"IPO WARRANT") to purchase a number of shares of the Company's Common Stock
based on an aggregate exercise price of $5,000,000.00 and an exercise price
per share equal to the price per share at which the Company's Common Stock is
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sold to the public in the IPO plus 20%. Hereinafter, the IPO Warrant and the
Alternative Warrant (as defined in Section 7.1) shall be referred to
collectively as the Warrant.
2. THE CLOSING
2.1 CLOSING DATE.
(a) Except as otherwise provided in Section 7, the closing of the
purchase and sale of the IPO Shares and the issuance of the IPO Warrant (the
"IPO CLOSING") shall occur immediately after the closing of the IPO. The
Company will give Purchaser three (3) business days' notice of the date of
the IPO Closing (the "IPO CLOSING DATE"); provided that the IPO Closing Date
shall be no later than December 31, 2000. The Company will notify the
Purchaser of the IPO price per share promptly after it is determined by the
Company's pricing committee.
(b) A closing under Section 7 of the purchase and sale of the
Alternative Shares and the issuance of the Alternative Warrant (either a
"CHANGE OF CONTROL CLOSING" or a "ALTERNATIVE CLOSING") shall occur upon (a)
in the event of a Change of Control, within five (5) days prior to the
closing of a Change of Control transaction (the "CHANGE OF CONTROL CLOSING
DATE") or (b) if the Company has not closed its IPO by December 31, 2000,
within three (3) business days after the Purchaser gives notice to the
Company under Section 7.3(b) that it is exercising its option to purchase the
Alternative Shares (the "ALTERNATIVE CLOSING DATE"). Hereinafter, the IPO
Closing, Change of Control Closing and Alternative Closing shall collectively
be referred to as the "CLOSING." Hereinafter, the IPO Closing Date, Change
of Control Closing Date and the Alternative Closing Date shall be referred to
collectively as the "CLOSING DATE."
(c) Notwithstanding the foregoing, in the event that the Purchaser
does not exercise its option to purchase the Alternative Shares, the Company
shall issue the Alternative Warrant (1) in the event of a Change of Control,
within five (5) days prior to the Change of Control Closing Date or (2) if
the Company has not closed its IPO by December 31, 2000, within three (3)
business days after December 31, 2000.
2.2 DELIVERY. At the Closing (i) Purchaser will deliver to the Company
a check or wire transfer funds in the amount of the IPO Purchase Price of the
IPO Shares or the Alternative Purchase Price of the Alternative Shares, as
appropriate, (ii) the Company shall deliver a certificate representing the
IPO Shares or the Alternative Shares, as appropriate, registered in the name
of Purchaser, and (iii) the Company shall deliver either the IPO Warrant or
the Alternative Warrant, registered in the name of Purchaser.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY
Except as set forth on a Schedule of Exceptions delivered by the Company
to the Purchaser on the date of this Agreement, the Company hereby represents
and warrants to Purchaser as of the date of this Agreement as follows:
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3.1 ORGANIZATION AND STANDING; CERTIFICATE OF INCORPORATION AND BYLAWS.
The Company and each Subsidiary (as defined in Section 3.3 below) is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware or, with respect to Jato Communications Corp.
of Virginia, the Commonwealth of Virginia. Each of the Company and
Subsidiary has all requisite corporate power and authority to own and operate
their respective properties and assets. Each of the Company and Subsidiary
has the requisite corporate power and authority to carry on its business as
presently conducted and as presently proposed to be conducted. Each of the
Company and Subsidiary is duly qualified and is authorized to do business and
is in good standing as a foreign corporation in all jurisdictions in which
the nature of their respective activities and of their respective properties
(both owned and leased) make such qualifications necessary, except for those
jurisdictions in which failure to do so would not have a material adverse
effect on the Company or Subsidiary or their respective businesses. The
Company has made available to the Purchaser true, correct and complete copies
of the Company's Restated Certificate of Incorporation and Amended Bylaws,
each as amended to date and in full force and effect on the date hereof. The
Company has made available to the Purchaser true, correct and complete copies
of Subsidiary's Certificate of Incorporation and Bylaws, each as amended to
date and in full force and effect on the date hereof. Since its inception,
Subsidiary has had no operations and has not incurred any material
obligations.
3.2 CORPORATE POWER. The Company has all requisite legal and corporate
power and authority to execute and deliver this Agreement, to sell and issue
the Shares and the Warrant hereunder and to carry out and perform its
obligations under the terms of this Agreement.
3.3 SUBSIDIARIES. Other than Jato Operating Corp., a Delaware
corporation, Jato Operating Two Corp., a Delaware corporation, and Jato
Communications Corp. of Virginia, a Virginia corporation (collectively, the
"SUBSIDIARY"), the Company owns no equity securities of any other
corporation, limited partnership or similar entity. The Company is not a
participant in any joint venture, partnership or similar arrangement. The
Company owns shares of the Subsidiary free and clear of all encumbrances.
3.4 CAPITALIZATION. The authorized capital stock of the Company,
immediately prior to the Effective Date of this Agreement, consists of (a)
eighty million (80,000,000) shares of Common Stock, of which six million
seven hundred ninety-seven thousand eight hundred fourteen (6,797,814) shares
are issued and outstanding, and (b) thirty million (30,000,000) shares of
Preferred Stock, of which one million seven hundred fifty-one thousand nine
hundred eighty-five (1,751,985) shares are designated Series A Preferred
Stock, of which one million seven hundred fifty-one thousand nine hundred
eighty five (1,751,985) are issued and outstanding, of which thirteen million
six hundred fifteen thousand three hundred twenty-two (13,615,322) shares are
designated Series B Preferred Stock, of which thirteen million six hundred
fifteen thousand three hundred twenty-two (13,615,322) are issued and
outstanding, of which four million nine hundred thirty-two thousand three
hundred eight (4,932,308) shares are designated Series C Preferred Stock, of
which four million nine hundred thirty-two thousand three hundred eight
(4,932,308) are issued and outstanding, and of which five million (5,000,000)
shares are
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designated Series D Preferred Stock, one million seven hundred eighty-five
thousand seven hundred fourteen (1,785,714) are issued and outstanding. All
issued and outstanding shares of the Company's Common Stock (i) have been
duly authorized and validly issued, (ii) are fully paid and nonassessable and
(iii) were issued in compliance with all applicable state and federal laws
concerning the issuance of securities. Except as set forth on the Schedule of
Exceptions and except as may be granted pursuant to this Agreement or the
Second Amended and Restated Investors' Rights Agreement, there are no
outstanding options, warrants, rights (including conversion or preemptive
rights and rights of first refusal), proxy or stockholder agreements, or
agreements of any kind for the purchase or acquisition from the Company of
any of its securities. The Shares have been duly authorized and, when issued
in compliance with the provisions of this Agreement and the Certificate, will
be validly issued (including, without limitation, issued in compliance with
applicable state and federal securities laws), fully paid and nonassessable,
subject to no preemptive rights, and will be free of any liens or
encumbrances; PROVIDED, HOWEVER, that the Shares may be subject to
restrictions on transfer under state and/or federal securities laws as set
forth herein or as otherwise required by such laws at the time transfer is
proposed.
3.5 AUTHORIZATION. All corporate action on the part of the Company,
its directors and stockholders necessary for the authorization, execution,
delivery and performance of this Agreement by the Company, the authorization,
sale, issuance and delivery of the Shares and the Warrant and the performance
of all of the Company's obligations hereunder has been taken or will be taken
prior to the Closing. This Agreement and the Warrant, when executed and
delivered by the Company, shall constitute valid and binding obligations of
the Company, enforceable in accordance with their terms, except as subject to
laws of general application relating to bankruptcy, insolvency and the relief
of debtors and rules of law governing specific performance, injunctive relief
or other equitable remedies. The Shares, when issued in compliance with the
provisions of this Agreement, will be validly issued, will be fully paid and
nonassessable and will be free of any liens or encumbrances; provided,
however that the Shares may be subject to restrictions on transfer under the
state and/or federal securities laws.
3.6 FINANCIAL STATEMENTS. The Company has delivered to Purchaser (i)
its audited balance sheet as at December 31, 1998 and audited statement of
income and cash flows for the period from inception and ending December 31,
1998 and (ii) its unaudited balance sheet as at November 30, 1999 (the
"STATEMENT DATE") and unaudited consolidated statement of income for the
eleven-month period ending on the Statement Date (collectively, the
"FINANCIAL STATEMENTS"). The Financial Statements, together with the notes
thereto, are complete and correct in all material respects, have been
prepared in accordance with generally accepted accounting principles applied
on a consistent basis throughout the periods indicated, except as disclosed
therein, and present fairly the financial condition and position of the
Company as of December 31, 1998 and the Statement Date; PROVIDED, HOWEVER,
that the unaudited financial statements are subject to normal recurring
year-end audit adjustments (which are not expected to be material), and may
not contain all footnotes required under generally accepted accounting
principles.
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3.7 LIABILITIES. The Company has no material liabilities and, to its
knowledge, knows of no material contingent liabilities not otherwise
disclosed in the Financial Statements, except current liabilities incurred in
the ordinary course of business subsequent to the Statement Date which have
not been, either in any individual case or in the aggregate, materially
adverse.
3.8 AGREEMENTS; ACTION.
(a) Except as set forth on the Schedule of Exceptions and except
for agreements explicitly contemplated hereby, there are no agreements,
understandings or proposed transactions between the Company and any of its
officers, directors, affiliates or their respective affiliates.
(b) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to
which the Company is a party or to its knowledge by which it is bound which
may involve (i) obligations (contingent or otherwise) of, or payments to, the
Company in excess of $25,000, or (ii) the license of any patent, copyright,
trade secret or other proprietary right to or from the Company (other than
licenses arising from the purchase of "off the shelf" or other standard
products), or (iii) provisions restricting or affecting the development,
manufacture or distribution of the Company's products or services, or (iv)
indemnification by the Company with respect to infringements of proprietary
rights.
(c) The Company has not (i) declared or paid any dividends, or
authorized or made any distribution upon or with respect to any class or
series of its capital stock, (ii) incurred any indebtedness for money
borrowed or any other liabilities (other than with respect to indebtedness
and other obligations incurred in the ordinary course of business or as
disclosed in the Financial Statements) individually in excess of $25,000 or,
in the case of indebtedness and/or liabilities individually less than
$25,000, in excess of $75,000 in the aggregate, (iii) made any loans or
advances to any person, other than ordinary advances for travel expenses, or
(iv) sold, exchanged or otherwise disposed of any of its assets or rights,
other than the sale of its inventory in the ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including
persons or entities the Company has reason to believe are affiliated
therewith) shall be aggregated for the purpose of meeting the individual
minimum dollar amounts of such subsections.
3.9 OBLIGATIONS TO RELATED PARTIES. There are no obligations of the
Company to officers, directors, stockholders, or employees of the Company
other than (a) for payment of salary for services rendered, (b) reimbursement
for reasonable expenses incurred on behalf of the Company and (c) for other
standard employee benefits made generally available to all employees
(including stock option agreements outstanding under any stock option plan
approved by the Board of Directors of the Company). No such officer,
director or stockholder, or any member of their immediate families is,
directly or indirectly, interested in any material contract with the
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Company (other than such contracts as relate to any such person's ownership
of capital stock or other securities of the Company). The Company is not a
guarantor or indemnitor of any indebtedness of any other person, firm or
corporation.
3.10 ABSENCE OF CHANGES. Except as set forth on the Schedule of
Exceptions, since the Statement Date, there has not been:
(a) Any change in the assets, liabilities, financial condition,
earnings or operations of the Company from that reflected in the Financial
Statements, other than changes in the ordinary course of business, none of
which individually or in the aggregate has had or is expected to have a
material adverse effect on such assets, liabilities, financial condition,
earnings or operations of the Company;
(b) Any resignation or termination of any key officers of the
Company; and the Company, to the best of its knowledge, does not know of the
impending resignation or termination of employment of any such officer;
(c) Any material change in the contingent obligations of the
Company by way of guaranty, endorsement, indemnity, warranty or otherwise;
(d) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, business or
prospects or financial condition of the Company;
(e) Any waiver by the Company of a valuable right or of a material
debt owed to it;
(f) Any direct or indirect loans made by the Company to any
stockholder, employee, officer or director of the Company, other than
immaterial advances made in the ordinary course of business;
(g) Any material change in any compensation arrangement or
agreement with any employee, officer, director or stockholder including,
without limitation, any (i) increase in the compensation payable or to become
payable by the Company to any of the Company's employees, (ii) any bonus,
incentive compensation, service award or other like benefit, granted, made or
accrued, contingently or otherwise, to or for the credit of the Company's
employees, or (iii) any employee welfare, pension, retirement, profit-sharing
or similar payment or arrangement (whether or not subject to ERISA) made or
agreed to by the Company;
(h) Any declaration or payment of any dividend or other
distribution of the assets of the Company;
(i) Any labor organization activity;
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(j) Any debt, obligation or liability incurred, assumed or
guaranteed by the Company, except those for immaterial amounts and for
current liabilities incurred in the ordinary course of business;
(k) Any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets;
(l) Any change in any material agreement to which the Company is a
party or by which it is bound which materially and adversely affects the
business, assets, liabilities, financial condition, operations or prospects
of the Company;
(m) (i) Any change in practice with respect to taxes, (ii) any
making, changing or revoking of any tax election, or (iii) any settlement or
compromise of any dispute involving a tax liability;
(n) Any change in the number of shares of capital stock of the
Company issued and outstanding;
(o) Any failure to conduct the business of the Company in the
ordinary course;
(p) Any change in the method of accounting or accounting practice
of the Company;
(q) Any change in the Company's lines of business; or
(r) Any other event or condition of any character that, either
individually or cumulatively, has materially and adversely affected the
business, assets, liabilities, financial condition, operations or prospects
of the Company. For purposes of this subsection (r), a material and adverse
effect shall only be deemed to occur if its monetary impact exceeds, or with
the passage of time, will exceed $75,000.
3.11 REAL PROPERTIES; TANGIBLE PERSONAL PROPERTY.
(a) REAL PROPERTIES. The Schedule of Exceptions sets forth each
lease or other agreement (including easements) under which the Company leases
or has rights in any real property (the "REAL PROPERTY LEASES," and, each
individually, a "REAL PROPERTY LEASE"). The Company has a valid and
subsisting leasehold interest in all the real property which is the subject
of each Real Property Lease. The Company does not presently own, and has
never owned, any real property and does not presently operate, and has never
operated, any real property, other than as a lessee.
(b) TANGIBLE PERSONAL PROPERTY. Except as set forth on the
Schedule of Exceptions, (i) the Company has good, marketable and valid title
to all of the items of tangible
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personal property used in its operations and (ii) all such tangible personal
property is reflected on the Company's unaudited Financial Statements, except
as sold or disposed of subsequent to the date thereof in the ordinary course
of business consistent with past practices. The tangible personal property
of the Company is in good repair and working order, reasonable wear and tear
excepted, and constitutes all of the tangible personal property necessary for
the operation of the business as currently conducted.
3.12 PATENTS AND TRADEMARKS. The Company is the sole owner, free of any
lien or encumbrance, of, or has a valid license, on commercially reasonable
terms, to, all U.S. and foreign patents, registered designs, copyrights,
computer software and databases, trademarks, service marks and trade names,
whether or not registered, and other trade secrets, research and development,
formulae, inventions, processes, know-how and proprietary and intellectual
property rights and information, including all grants, registrations and
applications relating thereto (collectively, the "PROPRIETARY RIGHTS")
necessary for the conduct of its business as now conducted (the "COMPANY
RIGHTS"). The Company's rights in the Company Rights are, to the Company's
knowledge, valid and enforceable. The Company has received no demand, claim,
notice or inquiry from any person in respect of the Company Rights which
challenges, threatens to challenge or inquires as to whether there is any
basis to challenge, the validity of, or the rights of the Company in, any
such Company Rights. There are no outstanding options, licenses or
agreements of any kind relating to the Company Rights, nor is the Company
bound by or a party to any options, licenses or agreements of any kind with
respect to the Proprietary Rights of any other person or entity other than
such licenses or agreements arising from the purchase of "off the shelf" or
standard products. The Company has taken, and will take, all actions which
are necessary in order to protect the Company Rights and to acquire
additional Proprietary Rights, consistent with prudent commercial practices
in the telecommunications industry. To the knowledge of the Company, the
Company is not in violation or infringement of, and has not violated or
infringed, any Proprietary Rights of any other person. To the knowledge of
the Company, no person is infringing any Company Rights. The Company is not
aware that any of its employees is obligated under any contract (including
licenses, covenants or commitments of any nature) or other agreement, or
subject to any judgment, decree or order of any court or administrative
agency, that would interfere with their duties to the Company's business by
the employees of the Company, nor will, to the Company's knowledge, the
conduct of the Company's business as proposed conflict with or result in a
breach of the terms, conditions or provisions of, or constitute a default
under, any contract, covenant or instrument under which any employee is now
obligated. The Company does not believe it is or will be necessary to
utilize any inventions, trade secrets or proprietary information of any of
its employees made prior to their employment by the Company, except for
inventions, trade secrets or proprietary information that have been assigned
to the Company.
3.13 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in violation
or default of any term of its Certificate or Amended Bylaws, or of any
provision of any mortgage, indenture, contract, agreement, instrument or
contract to which it is party or by which it is bound or of any judgment,
decree, order, writ or any statute, rule or regulation applicable to the
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Company which would materially and adversely affect the business, assets,
liabilities, financial condition, operations or prospects of the Company.
The execution, delivery, and performance of and compliance with this
Agreement and the Warrant and the issuance and sale of the Shares pursuant
hereto, will not, with or without the passage of time or giving of notice,
result in any such material violation, or be in conflict with or constitute a
default under any such term, or result in the creation of any mortgage,
pledge, lien, encumbrance or charge upon any of the properties or assets of
the Company or the suspension, revocation, impairment, forfeiture or
nonrenewal of any permit, license, authorization or approval applicable to
the Company, its business or operations or any of its assets or properties.
3.14 LITIGATION. There is no action, suit, proceeding or investigation
pending, or to the Company's knowledge, currently threatened against the
Company that questions the validity of this Agreement or to consummate the
transactions contemplated hereby or thereby, or which might result, either
individually or in the aggregate, in any material adverse change in the
assets, condition, affairs or prospects of the Company, financially or
otherwise, or any change in the current equity ownership of the Company, nor
is the Company aware that there is any basis for the foregoing. The
foregoing includes, without limitation, actions pending or threatened (or any
basis therefor known to the Company) involving the prior employment of any of
the Company's employees, their use in connection with the Company's business
of any information or techniques allegedly proprietary to any of their former
employers, or their obligations under any agreements with prior employers.
The Company is not a party or subject to the provisions of or in violation of
any order, writ, injunction, judgment or decree or any rule or regulation of
any court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company currently pending or which the
Company intends to initiate.
3.15 TAX RETURNS AND PAYMENTS. The Company has timely filed all tax
returns (federal, state and local) required to be filed by it. All taxes
shown to be due and payable on such returns, any assessments imposed, and to
the Company's knowledge all other taxes due and payable by the Company have
been paid or will be paid prior to the time they become delinquent. The
Company has not been advised (i) that any of its returns, federal, state or
other, have been or are being audited as of the date hereof, or (ii) of any
deficiency in assessment or proposed judgment to its federal, state or other
taxes. The Company has no knowledge of any liability of any tax to be
imposed upon its properties or assets as of the date of this Agreement that
is not adequately provided for. Neither the Company nor the Subsidiary is a
party to any agreement relating to allocating or sharing the payment of, or
liability for taxes with respect to, any taxable period. Neither the Company
nor Subsidiary has any deferred income reportable for a period ending after
the Effective Date of this Agreement that is attributable to a transaction
(e.g., an installment sale) occurring in, or resulting from a change of
accounting method for, a period ending on or prior to the Effective Date of
this Agreement.
3.16 EMPLOYEES. The Company is not a party to or bound by any currently
effective employment contract, deferred compensation arrangement, bonus plan,
incentive plan, profit sharing plan, retirement agreement or other employee
compensation plan or agreement. Neither
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the Company, nor any entity which is required to be aggregated with the
Company pursuant to Sections 414(b), (c), (m) or (o) of the Internal Revenue
Code of 1986 has any liability whether actual or contingent, with respect to
any employee benefit plan or arrangement. To the Company's knowledge, no
employee of the Company, nor any consultant with whom the Company has
contracted, is in violation of any term of any employment contract,
proprietary information agreement or any other agreement relating to the
right of any such individual to be employed by, or to contract with, the
Company because of the nature of the business to be conducted by the Company;
and to the Company's knowledge the continued employment by the Company of its
present employees, and the performance of the Company's contracts with its
independent contractors, will not result in any such violation. The Company
has not received any notice alleging that any such violation has occurred.
No employee of the Company has been granted the right to continued employment
by the Company or to any material compensation following termination of
employment with the Company. The Company is not aware that any officer or
key employee, or that any group of key employees, intends to terminate their
employment with the Company, nor does the Company have a present intention to
terminate the employment of any officer, key employee or group of key
employees. To the Company's knowledge, the Company is in compliance with all
laws and orders relating to the employment of labor, including, without
limitation, all such laws and orders relating to wages, hours,
discrimination, civil rights, safety and the collection and payment of
withholding and/or Social Security taxes and similar taxes. There are no
complaints, charges or claims against the Company pending, or, to the
Company's knowledge, threatened to be brought or filed, with any governmental
entity or arbitrator based on, arising out of, in connection with, or
otherwise relating to the employment or termination of employment of any
individual by the Company.
3.17 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS. Each current
employee, officer and consultant of the Company has executed a Proprietary
Information and Inventions Agreement that effectively waives any ownership
rights in the invention or authorship of any Company Rights and has assigned
to the Company all rights with respect thereto. No current employee, officer
or consultant of the Company has excluded works or inventions made prior to
his or her employment with the Company from his or her assignment of the
works or inventions pursuant to such employee, officer or consultant's
Non-Competition, Proprietary Information and Inventions Agreement in the form
attached hereto as EXHIBIT B.
3.18 OBLIGATIONS OF MANAGEMENT. Each officer of the Company is
currently devoting one hundred percent (100%) of his business time to the
conduct of the business of the Company. The Company is not aware of any
officer or key employee of the Company planning to work less than full time
at the Company in the future.
3.19 REGISTRATION RIGHTS. Except as required pursuant to the Investors'
Rights Agreement, the Company is presently not under any obligation, and has
not granted any rights, to register (as defined in Section 1 of the
Investors' Rights Agreement) any of the Company's presently outstanding
securities or any of its securities that may hereafter be issued.
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3.20 COMPLIANCE WITH LAWS; PERMITS. The Company is not in violation of
any applicable statute, rule, regulation, order or restriction of any
domestic or foreign government or any instrumentality or agency thereof in
respect of the conduct of its business or the ownership of its properties
which violation would materially and adversely affect the business, assets,
liabilities, financial condition, operations or prospects of the Company. No
governmental orders, permissions, consents, approvals or authorizations are
required to be obtained and no registrations or declarations are required to
be filed in connection with the execution and delivery of this Agreement and
the issuance of the Shares, except such as has been duly and validly obtained
or filed, or with respect to any filings that must be made after the date
hereof, as will be filed in a timely manner. The Schedule of Exceptions sets
forth the states in which the Company has obtained all franchises, permits,
licenses and any similar authority necessary for the conduct of its business
as now being conducted by it, the lack of which could materially and
adversely affect the business, properties, prospects or financial condition
of the Company.
3.21 FULL DISCLOSURE. This Agreement, the Exhibits hereto, the Schedule
of Exceptions and all other documents delivered by the Company to Purchaser
or its attorneys or agents in connection herewith or therewith or with the
transactions contemplated hereby or thereby, do not contain any untrue
statement of a material fact nor omit to state a material fact necessary in
order to make the statements contained herein or therein not misleading.
There is no fact peculiar to the Company and known to the Company which
materially adversely affects, or reasonably could be expected to materially
adversely affect in the future, the business, property or assets, or
financial condition of the Company, which has not been set forth in this
Agreement or in the other documents described herein or furnished to the
Purchaser by or on behalf of the Company prior to the date hereof in
connection with the transactions contemplated hereby.
3.22 CERTAIN LIMITATIONS. Neither the nature of the Company, nor any of
its respective businesses or properties, nor any relationship between the
Company and any other person, nor any circumstance in connection with the
offer, issue, sale or delivery of the Shares (other than in any such case,
any matter relating to the Purchaser) is, such as to require or give rise to
any limitation on any Purchaser's ownership of any equity securities of the
Company.
3.23 ENVIRONMENTAL.
(a) To the Company's knowledge, the Company complies, and at all
times has complied, in all material respects with all applicable
Environmental Laws. For the purposes hereof, "ENVIRONMENTAL LAW" shall mean
any judgment, decree, order, law, permit, license, rule, regulation or agency
requirement relating to or addressing the environment, health or safety (to
the extent relating to exposure to any hazardous substance), including,
without limitation, the Comprehensive Environmental Response, Compensation
and Liability Act, as amended, the Resource Conservation and Recovery Act, as
amended, the Superfund Amendments and Reauthorization Act of 1986, the
Federal Clean Water Act, the Federal Clean Air Act, the Toxic Substances
Control Act and any federal, state, local or foreign statute, regulation,
ordinance,
12
order or decree relating to health, safety (in the case of health and safety
to the extent relating to exposure in the workplace or otherwise to any
Hazardous Substance) or the environment.
(b) There is not now pending or, to the Company's knowledge,
threatened any action, claim, proceeding or investigation nor has the Company
received any notice, claim, demand letter, or request for information at any
time, alleging that the Company may be in violation of, or liable under, any
Environmental Law.
(c) To the Company's knowledge, without initiating any inquiry,
there are no hazardous substances located on the properties currently or
formerly owned or operated by the Company (including soil, groundwater or
surface features and buildings or structures thereon) other than as permitted
under applicable Environmental Laws, and none of the properties contain, or
has contained, any underground storage tank.
3.24 INSURANCE. The Company maintains and/or is covered by valid
policies of workers' compensation insurance and of insurance with respect to
its properties and business. The Company currently maintains, in full force,
insurance covering the risks of the Company, if any, of such types and in
such amounts and with such deductibles as are customary for other companies
engaged in similar lines of business and with good and responsible insurance
companies.
3.25 OFFERING. The Company, nor any person or entity acting on its
behalf, has not engaged in any form of general solicitation or advertising in
connection with the offer and sale of the Company's Series A, Series B,
Series C and Series D Preferred Stock (the "SERIES PREFERRED"). No offers to
sell the Series Preferred were made by any person or entity other than the
Company. The offer and sale of the shares of the Series Preferred were made
solely to accredited investors or qualified institutional buyers. Neither
the Company nor any affiliate has been subject to any order, judgment, or
decree of any court of competent jurisdiction enjoining either the Company or
such affiliate for failure to comply with Rule 503 of Regulation D. Assuming
the accuracy of the representations and warranties of the Purchaser contained
in Section 4.6 hereof, the Company has given Purchaser the opportunity to
discuss the Company's business, management and financial affairs with the
Company's management and the opportunity to review the Company's business
plan.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Company with respect
to the purchase of the Shares as follows:
4.1 EXPERIENCE. It is capable of evaluating the merits and risks of
its investment in the Company and has the capacity to protect its own
interests.
4.2 ABILITY TO BEAR ECONOMIC RISK. The Purchaser acknowledges that
investment in the Shares involves a high degree of risk, and represents that
it is able, without materially
13
impairing its financial condition, to hold the Shares for an indefinite
period of time and to suffer a complete loss of its investment.
4.3 INVESTMENT. It is acquiring the Shares for investment for its own
account, not as a nominee or agent, and not with the view to, or for resale
in connection with, any distribution thereof. It understands that the Shares
have not been, and will not be when issued, sold or transferred, registered
under the Securities Act by reason of a specific exemption from the
registration provisions of the Securities Act, the availability of which
depends upon, among other things, the bona fide nature of the investment
intent and the accuracy of the Purchaser's representations as expressed
herein. Purchaser was not formed solely for the purpose of acquiring the
Shares.
4.4 RULE 144. It acknowledges that the Shares must be held
indefinitely unless subsequently registered under the Securities Act or
unless an exemption from such registration is available. It acknowledges and
understands that the provisions of Rule 144 promulgated under the Securities
Act which permit limited resale of shares purchased in a private placement
subject to the satisfaction of certain conditions, including, among other
things, the existence of a public market for the Shares, the availability of
certain current public information about the Company, the resale occurring
not less than one year after a party has purchased and paid for the security
to be sold, the sale being effected through a "broker's transaction" or in
transactions directly with a "market maker" and the number of shares being
sold during any three-month period not exceeding specified limitations, and
it agrees to comply fully with such provisions as in effect from time to time.
4.5 NO PUBLIC MARKET. It understands that no public market now exists
for any securities issued by the Company nor will one be created prior to the
Closing.
4.6 ACCESS TO DATA. It has had an opportunity to discuss the Company's
business, management and financial affairs with the Company's management and
the opportunity to review the Company's business plan. The Purchaser
acknowledges that it has received all the information it has requested from
the Company and it considers necessary or appropriate for deciding whether to
acquire the Shares. The Purchaser represents that it has had an opportunity
to ask questions and receive answers from the Company regarding the terms and
conditions of the offering of the Shares and to obtain any additional
information necessary to verify the accuracy of the information given the
Purchaser.
4.7 AUTHORIZATION. All action (corporate or partnership, as
appropriate) on the part of the Purchaser necessary for the authorization,
execution, delivery and performance of this Agreement by Purchaser and the
performance of all of the Purchaser's obligations hereunder has been taken or
will be taken prior to the Closing. This Agreement when executed and
delivered by the Purchaser will constitute a valid and legally binding
obligation of the Purchaser, enforceable in accordance with its terms, and
subject to laws of general application relating to
14
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies.
4.8 FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting
the representations set forth above, the Purchaser further agrees not to make
any disposition of all or any portion of the Shares unless and until:
(a) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is
made in accordance with such registration statement; or
(b) The Purchaser shall have notified the Company of the proposed
disposition and shall have furnished the Company with a reasonably detailed
statement of the circumstances surrounding the proposed disposition and, if
reasonably requested by the Company, the Purchaser shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company,
that such disposition will not require registration under the Securities Act
or any applicable state securities laws.
4.9 ACCREDITED INVESTOR. The Purchaser is an "accredited investor" as
such term is defined in Rule 501 under the Securities Act.
4.10 FURTHER ASSURANCES. The Purchaser agrees and covenants that at any
time and from time to time it will promptly execute and deliver to the
Company such further instruments and documents and take such further action
as the Company may reasonably require in order to carry out the full intent
and purpose of this Agreement.
5. CONDITIONS TO CLOSING OF COMPANY
The Company's obligation to sell and issue the Shares and the Warrant at
the Closing Date is, at the option of the Company, subject to the fulfillment
as of the Closing Date of the following conditions:
5.1 REPRESENTATIONS. With respect to a Change of Control Closing or an
Alternative Closing only, the representations and warranties made by
Purchaser in Section 4 hereof shall be true and correct in all material
respects as of the Change of Control Closing Date or the Alternative Closing
Date, as appropriate.
5.2 COVENANTS. All covenants, agreements and conditions contained in
this Agreement to be performed by the Purchaser on or prior to the Closing
Date shall have been performed or complied with in all material respects.
5.3 CONSENTS, PERMITS, AND WAIVERS. The Company shall have obtained
any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions
15
contemplated by this Agreement (except for such as may be properly obtained
subsequent to the Closing).
5.4 CLOSING OF THE IPO. For the IPO Closing, the Company shall have
closed the IPO.
6. CONDITION TO CLOSING OF PURCHASER.
The Purchaser's obligation to purchase the Shares and the Warrant at the
Closing is subject to the fulfillment as of the Closing Date of the following
conditions:
6.1 REPRESENTATIONS. With respect to a Change of Control Closing or an
Alternative Closing, the representations and warranties made by the Company
in Section 3 hereof shall be true and correct in all material respects as of
the Change of Control Closing Date or the Alternative Closing Date, as
appropriate.
6.2 COVENANTS. All covenants, agreements and conditions contained in
this Agreement to be performed by the Company on or prior to the Closing Date
shall have been performed or complied with in all material respects.
6.3 LEGAL OPINION. Purchaser shall have received from Xxxxxx Godward
LLP, counsel to the Company, an opinion letter substantially in the form
attached hereto as EXHIBIT C addressed to it, dated as of the date of the
Closing.
6.4 CLOSING OF IPO. For the IPO Closing, the Company shall have closed
the IPO.
7. ADDITIONAL COVENANTS OF THE COMPANY
The Company agrees that if the Company has not closed the IPO by
December 31, 2000 or if there is a Change of Control (as defined below) prior
to the closing of the IPO, then:
7.1 WARRANT. The Company will issue a warrant to Purchaser in the form
attached hereto as EXHIBIT A-2 (the "ALTERNATIVE WARRANT") upon the earlier
of (a) the Alternative Closing or (b) the Change of Control Closing.
7.2 PURCHASE OF COMMON STOCK. Purchaser will have the option under
this Agreement, but not the obligation, to purchase 297,619 shares of the
Company's Common Stock (the "ALTERNATIVE SHARES") at a price per share of
$8.40 (the "ALTERNATIVE PURCHASE PRICE").
7.3 NOTICES.
(a) In the event of a transaction contemplated in connection with
a Change of Control, the Company agrees to give written notice to Purchaser
in the manner set forth in Section 8.5 at least twenty (20) days prior to the
proposed Change of Control Closing Date. Purchaser agrees to give written
notice in the manner set forth in Section 8.5 to the Company no
16
later than ten (10) days prior to the proposed Change of Control Closing Date
as set forth in the Company's notice to Purchaser of its intention to
purchase the Alternative Shares.
(b) Purchaser agrees to give written notice in the manner set
forth in Section 8.5 to the Company by December 31, 2000 if the Company has
not closed the IPO by such date of its intention to purchase the Alternative
Shares.
7.4 CHANGE OF CONTROL. For purposes of this Section 7, "CHANGE OF
CONTROL" shall mean: (a) any consolidation or merger in which the
stockholders of the Company immediately after such consolidation or merger,
hold less than 50% of the outstanding voting power of the surviving entity;
(b) any transaction or series of related transactions in which in excess of
50% of the Company's voting power is transferred; (c) a sale, lease or other
disposition of all or substantially all of the assets of the Company; or (d)
changes in the membership of the Company's Board of Directors such that
Continuing Board Members (as defined below) are no longer a majority of the
Company's Board of Directors during any 12 month period. "CONTINUING BOARD
MEMBERS" will mean, as of any date of determination, any member of the
Company's Board of Directors who (1) was a member of the Company's Board of
Directors as of the date of Purchasers' initial investment in Series D Stock
(the "INITIAL INVESTMENT"), or (2) was nominated for election or was elected
to the Company's Board of Directors with (X) the affirmative vote of a
majority of the Continuing Board Members who were members of the Board of
Directors at the time of such nomination or election (or any successor
Continuing Board Member appointed by such Continuing Board Members or their
successors) or (Y) the affirmative vote of the existing stockholders of the
Company as of the date of the Initial Investment.
8. MISCELLANEOUS
8.1 GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Colorado without regard to its
conflict-of-laws rules.
8.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
(a) With respect to an IPO Closing, the representations, covenants
and warranties contained in this Agreement shall survive for a period of one
year from the IPO Closing Date.
(b) With respect to either an Alternative Closing or a Change of
Control Closing, the representations, covenants and warranties contained in
this Agreement shall survive for a period of one year from the Alternative
Closing Date or the Change of Control Closing Date, as applicable.
8.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors
17
and administrators of the parties hereto, PROVIDED, HOWEVER, that the right
and obligation of the Purchaser to purchase the Shares shall not be
assignable without the consent of the Company.
8.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other
documents delivered pursuant hereto at the Closing constitute the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof, and no party shall be liable or bound to any
other party in any manner by any warranties, representations or covenants
except as specifically set forth herein or therein. Except as expressly
provided herein, neither this Agreement nor any term hereof may be amended,
waived, discharged or terminated other than by a written instrument signed by
the party against whom enforcement of any such amendment, waiver, discharge
or termination is sought.
8.5 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by
messenger, addressed (a) if to the Purchaser, at the Purchaser's address set
forth on the signature page hereto, or at such other address as the Purchaser
shall have furnished to the Company in writing, or (b) if to the Company, one
copy to its address set forth on the signature page of this Agreement and
addressed to the attention of the President, or at such other address as the
Company shall have furnished to the Purchaser. Notices may also be sent by
telecopier, with a confirmation copy by certified or registered mail.
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given when delivered if
delivered personally, or, if sent by mail, at the earlier of its receipt or
72 hours after the same has been deposited in a regularly maintained
receptacle for the deposit of the United States mail, addressed and mailed as
aforesaid, or upon electronic confirmation of receipt if sent by telecopier.
8.6 DELAYS OR OMISSIONS. Except as expressly provided herein, no delay
or omission to exercise any right, power or remedy accruing to any holder of
any Shares, upon any breach or default of the Company under this Agreement,
shall impair any such right, power or remedy of such holder nor shall it be
construed to be a waiver of any such breach or default, or an acquiescence
therein, or waiver of or acquiescence in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character
on the part of any holder of any breach or default under this Agreement, or
any waiver on the part of any holder of any provisions or conditions of this
Agreement, must be in writing and be executed by the party to be bound
thereby, and shall be effective only to the extent specifically set forth in
such writing. All remedies, either under this Agreement or by law or
otherwise afforded to any holder, shall be cumulative and not alternative.
8.7 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be enforceable against the party actually executing such
counterpart(s), and all of which together shall constitute one instrument.
18
8.8 SEVERABILITY. In the event that any provisions of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provisions; provided, that no such severability shall be
effective if it materially changes the economic benefit of this Agreement to
any party.
8.9 TITLE AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing
or interpreting this Agreement.
8.10 ATTORNEYS' FEES. In the event that any dispute among the parties
to this Agreement, the prevailing party in such dispute shall be entitled to
recover from the losing party all fees, costs and expenses of enforcing any
right of such prevailing party under or with respect to this Agreement,
including without limitation, such reasonable fees and expenses of attorneys
and accountants, which shall include, without limitation, all fees, costs and
expenses of appeals.
8.11 FURTHER ASSURANCES AND COOPERATION. From and after the Effective
Date, the parties agree to use their best efforts to satisfy the Closing
Conditions set forth in Sections 5 and 6 above.
19
IN WITNESS WHEREOF, the parties have executed this STOCK PURCHASE
AGREEMENT as of the date first written above.
COMPANY:
JATO COMMUNICATIONS CORP.
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------------
President and Chief Executive Officer
Address: 0000 00xx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Facsimile number: 000-000-0000
PURCHASER:
U.S. TELESOURCE, INC.
By: /s/ Xxxx X. Xxxxxxxx
-------------------------------------
Name: Xxxx X. Xxxxxxxx
-----------------------------------
Title: President
----------------------------------
Address: 000 Xxxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Facsimile number: 000-000-0000
EXHIBITS
Exhibit A-1: Form of IPO Warrant
Exhibit A-2: Form of Alternative Warrant
20
EXHIBIT A-1
FORM OF IPO WARRANT
No. WCS-__ _____________, 2000
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND
ANY APPLICABLE STATE SECURITIES LAWS.
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
OF JATO COMMUNICATIONS CORP.
(VOID AFTER [ONE YEAR FROM THE DATE OF ISSUANCE], 2001)
THIS CERTIFIES that U.S. TELESOURCE, INC. (the "HOLDER"), for value
received, is entitled to purchase from JATO COMMUNICATIONS CORP., a Delaware
corporation (the "COMPANY"), having a place of business at 0000 00xx Xx.,
Xxxxxx, Xxxxxxxx 00000, [$5,000,000.00 DIVIDED BY THE STOCK PURCHASE PRICE]
shares (the "WARRANT SHARES") of fully paid and nonassessable shares of
Company's Common Stock (the "COMMON STOCK") at a price of $[PRICE PER SHARE
AT WHICH THE COMPANY'S COMMON STOCK IS SOLD TO THE PUBLIC IN THE COMPANY'S
INITIAL PUBLIC OFFERING PLUS 20%] per share (the "STOCK PURCHASE PRICE"), at
any time or from time to time beginning on the date hereof and ending on the
earlier to occur of (i) up to and including 5:00 p.m. (Colorado time)
[ONE YEAR FROM THE DATE OF ISSUANCE], 2001 or (ii) the Acquisition (as
defined below) of the Company (collectively, the "EXPIRATION DATE") upon
surrender to the Company at its principal office (or at such other location
as the Company may advise the Holder in writing) of this Warrant properly
endorsed with the Notice of Exercise and Investment Representation Statement
attached hereto duly filled in and executed and, if applicable, upon payment
in cash or by check of the aggregate Stock Purchase Price for the number of
shares for which this Warrant is being exercised determined in accordance
with the provisions hereof. The Stock Purchase Price and the number of
shares purchasable hereunder are subject to adjustment as provided in Section
3 of this Warrant. For purposes hereof, an "Acquisition" shall mean any of
the following: (1) a sale of all or substantially all of the assets of the
Company; (2) a merger, reorganization or consolidation pursuant to which the
stockholders of the Company or its successor immediately prior to such
merger, reorganization or consolidation: (A) hold less than 50% of the voting
power of the surviving company following the merger, reorganization or
consolidation, or (B) in the event that the securities of an affiliated
entity are issued to the stockholders of the Company in the transaction in
exchange for their shares in the Company, hold less than 50% of the voting
power of such affiliated entity.
1. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
(a) GENERAL. This Warrant is exercisable at the option of the
Holder of record hereof, at any time or from time to time, up to the
Expiration Date for all or any part of the shares of Common Stock (but not
for a fraction of a share) which may be purchased hereunder.
(b) ISSUANCE OF CERTIFICATES. The Company agrees that the shares
of Common Stock purchased under this Warrant shall be and are deemed to be
issued to the Holder hereof as the record owner of such shares as of the
close of business on the date on which this Warrant shall have
1
been surrendered, properly endorsed and payment (if any) made for such
shares. Certificates for the shares of Common Stock so purchased, together
with any other securities or property to which the Holder hereof are entitled
upon such exercise, shall be delivered to the Holder hereof by the Company at
the Company's expense within a reasonable time after the rights represented
by this Warrant have been so exercised. In case of a purchase of less than
all the shares which may be purchased under this Warrant, the Company shall
cancel this Warrant and execute and deliver a new Warrant or Warrants of like
tenor for the balance of the shares purchasable under the Warrant surrendered
upon such purchase to the Holder hereof within a reasonable time. Each stock
certificate so delivered shall be in such denominations of Common Stock as
may be requested by the Holder hereof and shall be registered in the name of
such Holder or as directed by such Holder.
(c) NET ISSUE EXERCISE. Notwithstanding any provisions herein to
the contrary, if the fair market value of one share of the Company's Common
Stock is greater than the Stock Purchase Price (at the date of calculation as
set forth below), in lieu of exercising this Warrant for cash, the Holder may
elect to receive shares equal to the value (as determined below) of this
Warrant (or the portion thereof being canceled) by surrender of this Warrant
at the principal office of the Company and notice of such election in which
event the Company shall issue to the Holder a number of shares of Common
Stock computed using the following formula:
X = Y (A-B)
-------
A
Where X = the number of shares of Common Stock to be issued to the
Holder
Y = the number of shares of Common Stock purchasable under the
Warrant or, if only a portion of the Warrant is being exercised,
the portion of the Warrant being canceled (at the date of such
calculation)
A = the fair market value of one share of the Company's Common
Stock (at the date of such calculation)
B = Stock Purchase Price (as adjusted to the date of such
calculation)
For purposes of the above calculation, the fair market value of one share of
Common Stock shall be determined by the Company's Board of Directors in good
faith; PROVIDED, HOWEVER, that in the event Holder exercises this Warrant in
connection with the Company's initial public offering of its Common Stock,
the fair market value per share shall equal to the per share offering price
to the public of the Company's initial public offering; and, PROVIDED,
FURTHER, that following the Company's initial public offering of its Common
Stock, the fair market value per share shall be the average of the closing
prices quoted on any exchange or the Nasdaq Stock Market, whichever is
applicable, on which the Common Stock is listed for the ten (10) trading days
prior to the date of determination of fair market value.
2. SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company
covenants and agrees that all shares of Common Stock which may be issued upon
the exercise of the rights represented by this Warrant will, upon issuance,
be duly authorized, validly issued, fully paid and nonassessable and free
from all preemptive rights of any stockholders and free of all taxes, liens
and charges with respect to the issue thereof. The Company further covenants
and agrees that during the period within which the rights represented by this
Warrant may be exercised, the Company will
2
at all times have authorized and reserved, for the purpose of issue or
transfer upon exercise of the subscription rights evidenced by this Warrant,
a sufficient number of shares of authorized but unissued Common Stock, or
other securities and property, when and as required to provide for the
exercise of the rights represented by this Warrant. The Company will take
all such action as may be necessary to assure that such shares of Common
Stock may be issued as provided herein without violation of any applicable
law or regulation, or of any requirements of any domestic securities exchange
upon which the Common Stock may be listed.
3. ADJUSTMENT OF STOCK PURCHASE PRICE AND NUMBER OF SHARES. The Stock
Purchase Price and the number of shares purchasable upon the exercise of this
Warrant shall be subject to adjustment from time to time upon the occurrence
of certain events described in this Section 3. Upon each adjustment of the
Stock Purchase Price, the Holder of this Warrant shall thereafter be entitled
to purchase, at the Stock Purchase Price resulting from such adjustment, the
number of shares obtained by multiplying the Stock Purchase Price in effect
immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment, and dividing the
product thereof by the Stock Purchase Price resulting from such adjustment.
(a) SUBDIVISION OR COMBINATION OF STOCK. In case the Company
shall at any time subdivide its outstanding shares of Common Stock into a
greater number of shares, the Stock Purchase Price in effect immediately
prior to such subdivision shall be proportionately reduced, and conversely,
in case the outstanding shares of Common Stock of the Company shall be
combined into a smaller number of shares, the Stock Purchase Price in effect
immediately prior to such combination shall be proportionately increased.
(b) DIVIDENDS IN COMMON STOCK, OTHER STOCK, PROPERTY,
RECLASSIFICATION. If at any time or from time to time any holder of Common
Stock (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received or become entitled to
receive, without payment therefor,
(i) Common Stock or any shares of stock or other securities
which are at any time directly or indirectly convertible into or exchangeable
for Common Stock, or any rights or options to subscribe for, purchase or
otherwise acquire any of the foregoing by way of dividend or other
distribution;
(ii) Any cash paid or payable otherwise than as a cash
dividend; or
(iii) Common Stock or additional stock or other securities or
property (including cash) by way of spin-off, split-up, reclassification,
combination of shares or similar corporate rearrangement (other than (a)
shares of Common Stock issued as a stock split, adjustments in respect of
which shall be covered by the terms of Section 3(a) above or (b) an event for
which adjustment is otherwise made pursuant to Section 3(c) below);
then and in each such case, the Holder hereof shall, upon the
exercise of this Warrant, be entitled to receive, in addition to the number
of shares of Common Stock receivable thereupon, and without payment of any
additional consideration therefor, the amount of stock and other securities
and property (including cash in the case referred to in clause 3(b)(ii)
above) which such Holder would hold on the date of such exercise had they
been the holder of record of such
3
Common Stock as of the date on which Holder of Common Stock received or
became entitled to receive such shares or all other additional stock and
other securities and property.
(c) REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR
SALE. If any capital reorganization of the capital stock of the Company, or
any consolidation or merger of the Company with another corporation, or the
sale of all or substantially all of its assets to another corporation shall
be effected in such a way that a holder of Common Stock shall be entitled to
receive stock, securities, or other assets or property, then, as a condition
of such reorganization, reclassification, consolidation, merger or sale,
lawful and adequate provisions shall be made whereby the Holder hereof shall
thereafter have the right to purchase and receive (in lieu of the shares of
the Common Stock of the Company immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby) such shares of
stock, securities or other assets or property as may be issued or payable
with respect to or in exchange for a number of outstanding shares of such
Common Stock equal to the number of shares of such stock immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby PROVIDED, HOWEVER, that in the event the value of the
stock, securities or other assets or property (determined in good faith by
the Board of Directors of the Company) issuable or payable with respect to
one share of the Common Stock of the Company immediately theretofore
purchasable and receivable upon the exercise of the rights represented hereby
is in excess of the Stock Purchase Price hereof effective at the time of a
merger and securities received in such reorganization, if any, are publicly
traded, then this Warrant shall expire unless exercised prior to such
reorganization, consolidation, merger or sale of assets. The Company will
not effect any such reorganization, consolidation, merger or sale unless,
prior to the consummation thereof, the successor corporation (if other than
the Company) or such corporation's parent resulting from such consolidation
or the corporation purchasing such assets shall assume by written instrument,
executed and mailed or delivered to the registered Holder hereof at the last
address of such Holder appearing on the books of the Company, the obligation
to deliver to such Holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such Holder may be entitled to
purchase.
(d) ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. If the Company
at any time or from time to time subsequent to the date hereof (the "ORIGINAL
ISSUE DATE") issues or sells any Additional Shares of Common Stock (as
hereinafter defined), other than as provided in the last paragraph of this
Section 3(d), for a consideration per share less than the lower of (x) the
Stock Purchase Price or (y) the Current Market Price (as defined below) per
share of Common Stock (in each case, determined as of the date specified in
the next succeeding paragraph), the Stock Purchase Price upon each such
issuance or sale shall be adjusted to the price calculated pursuant to the
following clauses (i) and (ii), as applicable, of this Section 3(d) and shall
be determined by:
(i) in the event that the consideration per share is less
than the Stock Purchase Price as of the date specified below, the Stock
Purchase Price upon each such issuance or sale shall be adjusted to the price
determined by dividing (A) an amount equal to the sum of (1) the number of
shares of Common Stock outstanding immediately prior to such issue or sale
multiplied by the Stock Purchase Price in effect as of the date specified in
the next succeeding paragraph plus (2) the aggregate consideration, if any,
received by the Company upon such issue or sale, by (B) the total number of
shares of Common Stock outstanding immediately after such issue or sale; and
(ii) in the event that the consideration per share is less
than the Current Market Price as of the date specified below, the Stock
Purchase Price upon each such issuance or
4
sale shall be adjusted to the price determined by multiplying the Stock
Purchase Price in effect as of the date specified in the next succeeding
paragraph by a fraction the numerator of which is (A) the sum of (1) the
number of shares of Common Stock outstanding immediately prior to such issue
or sale multiplied by the Current Market Price per share of Common Stock
immediately prior to such issue or sale plus (2) the aggregate consideration,
if any, received by the Company upon such issue or sale, divided by (B) the
total number of shares of Common Stock outstanding immediately after such
issue or sale, and the denominator of which is the Current Market Price per
share of Common Stock immediately prior to such issue or sale.
For purposes of this Section 3(d), the date as of which the Stock
Purchase Price and Current Market Price shall be determined shall be the
earlier of (i) the date on which the Company shall enter into a firm contract
for the issuance or sale of such shares of Common Stock and (ii) the date of
actual issuance or sale of such shares of Common Stock.
For purposes of this Section 3(d), "CURRENT MARKET PRICE" means on any
particular date (i) the closing bid price per share of the Common Stock on
such date on the Nasdaq or, if the Common Stock is not then quoted on the
Nasdaq, any subsequent market on which the Common Stock is then listed or if
there is no such price on such date, then the closing bid price on such
exchange or quotation system on the date nearest preceding such date, or (ii)
if the Common Stock is not listed then on the Nasdaq or any subsequent
market, the closing bid price for a share of Common Stock in the
over-the-counter market, as reported by the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its functions
of reporting prices) at the close of business on such date.
For purposes of this Section 3(d), "ADDITIONAL SHARES OF COMMON STOCK"
means all shares of Common Stock issued by the Company and any rights or
options for the purchase of, or stock or other securities convertible into or
exchangeable for shares of Common Stock of the Company, whether or not such
rights or options or the right to convert or exchange any such convertible
securities are immediately exercisable (the "CONVERTIBLE SECURITIES"), and
whether or not such shares or convertible securities are subsequently
reacquired or retired by the Company, other than (A) shares of Common Stock
issued upon conversion of any shares of the Company's preferred stock, (B)
Approved Issuances and (C) shares of Common Stock issued pursuant to the
exercise of options, warrants or convertible securities outstanding as of the
Original Issue Date. "APPROVED ISSUANCES" shall mean shares of Common Stock
and/or options, warrants or other Common Stock purchase rights, and the
Common Stock issued pursuant to such options, warrants or other rights after
the Original Issue Date to employees, officers or directors of, or
consultants or advisors to the Company or any subsidiary pursuant to stock
purchase or stock option plans or other arrangements that are approved by the
Board of Directors.
For the purpose of the adjustment required under this Section 3(d), if
the Company issues or sells Convertible Securities, and if the consideration
per share of the Convertible Securities is less than the lower of the Current
Market Price or the then-effective Stock Purchase Price, in each case the
Company shall be deemed to have issued at the time of the issuance of such
Convertible Securities the maximum number of Additional Shares of Common
Stock issuable upon exercise or conversion or exchange thereof and to have
received as consideration for the issuance of such shares an amount equal to
the total amount of the consideration, if any, received by the Company for
the issuance of such Convertible Securities, plus the minimum amounts of
consideration, if any, payable to the Company upon the exercise of such
Convertible Securities, plus, the minimum
5
amounts of consideration, if any, payable to the Company (other than by
cancellation of liabilities or obligations evidenced by such Convertible
Securities) upon the conversion thereof; PROVIDED, THAT, that if the minimum
amount of consideration payable to the Company upon the exercise or
conversion of the Convertible Securities is reduced over time or on the
occurrence or non-occurrence of specified events other than by reason of
antidilution adjustments, the consideration per share of the Convertible
Securities shall be recalculated using the figure to which such minimum
amount of consideration is reduced; PROVIDED, FURTHER, that if the minimum
amount of consideration payable to the Company upon the exercise or
conversion of such rights, options or Convertible Securities is subsequently
increased, the consideration per share of the Convertible Securities shall be
again recalculated using the increased minimum amount of consideration
payable to the Company upon the exercise or conversion of such Convertible
Securities. No further adjustment of the then-effective Stock Purchase
Price, as adjusted upon the issuance of such Convertible Securities, shall be
made as a result of the actual issuance of Additional Shares of Common Stock
on the exercise of any such rights or options or the conversion of any such
Convertible Securities. If any such rights or options or the conversion
privilege represented by any such Convertible Securities shall expire without
having been exercised, the then-effective Stock Purchase Price, as adjusted
upon the issuance of such Convertible Securities shall be readjusted to the
Stock Purchase Price which would have been in effect had an adjustment been
made on the basis that the only Additional Shares of Common Stock so issued
were the Additional Shares of Common Stock, if any, actually issued or sold
on the exercise of such rights or options or rights of conversion of such
Convertible Securities, and such Additional Shares of Common Stock, if any,
were issued or sold for the consideration actually received by the Company
upon such exercise, plus the consideration, if any, actually received by the
Company for the granting of all such rights or options, whether or not
exercised, plus the consideration received for issuing or selling the
Convertible Securities actually converted, plus the consideration, if any,
actually received by the Company (other than by cancellation of liabilities
or obligations evidenced by such Convertible Securities) on the conversion of
such Convertible Securities, PROVIDED THAT such readjustment shall not apply
to prior conversions of Preferred Stock.
No adjustment of the Stock Purchase Price shall be made under this
Section 3(d) upon the issuance of (i) any shares of capital stock which are
distributed to holders of Common Stock pursuant to a stock dividend or
subdivision for which an adjustment is provided under Section 3(a) or 3(b);
or (ii) any shares of capital stock which are issued in connection with a
capital reorganization, reclassification, consolidation, merger or sale
pursuant to Section 3(c).
(e) NOTICE OF ADJUSTMENT. Upon any adjustment of the Stock
Purchase Price or any increase or decrease in the number of shares
purchasable upon the exercise of this, the Company shall give written notice
thereof, by first class mail, postage prepaid, addressed to the registered
Holder of this Warrant at the address of such Holder as shown on the books of
the Company. The notice shall be signed by the Company's chief financial
officer and shall state the Stock Purchase Price resulting from such
adjustment and the increase or decrease, if any, in the number of shares
purchasable at such price upon the exercise of this Warrant, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.
(f) CERTAIN EVENTS. If any change in the outstanding Common Stock
of the Company or any other event occurs as to which the other provisions of
this Section 3 are not strictly applicable or if strictly applicable would
not fairly protect the purchase rights of the Holder of the Warrant in
accordance with such provisions, the Board of Directors of the Company shall
make an
6
adjustment in the number and class of shares available under the Warrant, the
Stock Purchase Price or the application of such provisions, so as to protect
such purchase rights as aforesaid. The adjustment shall be such as will give
the Holder of the Warrant upon exercise for the same aggregate Stock Purchase
Price the total number, class and kind of shares as they would have owned had
the Warrant been exercised prior to the event and had they continued to hold
such shares until after the event requiring adjustment.
4. ISSUE TAX. The issuance of certificates for shares of Common Stock
upon the exercise of the Warrant shall be made without charge to the Holder
of the Warrant for any issue tax (other than any applicable income taxes) in
respect thereof; PROVIDED, HOWEVER, that the Company shall not be required to
pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of the
then Holder of the Warrant being exercised.
5. CLOSING OF BOOKS. The Company will at no time close its transfer
books against the transfer of any warrant or of any shares of Common Stock
issued or issuable upon the exercise of any warrant in any manner which
interferes with the timely exercise of this Warrant.
6. NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY. Nothing
contained in this Warrant shall be construed as conferring upon the Holder
hereof the right to vote or to consent or to receive notice as a stockholders
of the Company or any other matters or any rights whatsoever as a
stockholders of the Company. Except as otherwise provided herein, no
dividends or interest shall be payable or accrued in respect of this Warrant
or the interest represented hereby or the shares purchasable hereunder until,
and only to the extent that, this Warrant shall have been exercised. No
provision hereof in the absence of affirmative action by the Holder to
purchase shares of Common Stock, and no mere enumeration herein of the rights
or privileges of the Holder hereof, shall give rise to any liability of such
Holder for the Stock Purchase Price or as a stockholders of the Company,
whether such liability is asserted by the Company or by its creditors.
7. MARKET STAND-OFF AGREEMENT. Holder shall not sell, dispose of,
transfer, make any short sale of, grant any option for the purchase of, or
enter into any hedging or similar transaction with the same economic effect
as a sale, any Common Stock (or other securities) of the Company held by
Holder, for a period of time specified by the managing underwriter(s) (not to
exceed one hundred eighty (180) days following the effective date of a
registration statement of the Company filed under the Securities Act of 1933.
Holder agrees to execute and deliver such other agreements as may be
reasonably requested by the Company and/or the managing underwriter(s) which
are consistent with the foregoing or which are necessary to give further
effect thereto. In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to such Common Stock (or other
securities) until the end of such period.
8. ADDITIONAL RIGHTS. Upon exercise of this Warrant by execution of
the attached Notice of Exercise, the Holder of this Warrant shall become a
party to the Second Amended and Restated Investors Rights' Agreement by and
among the Company and certain investors which shall be in effect at the time
of the exercise of this Warrant (the "INVESTORS RIGHTS' AGREEMENT"), and the
Warrant Shares shall be "Registrable Securities" as such term is defined in
the Investors Rights' Agreement.
7
9. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The rights and
obligations of the Company, of the Holder of this Warrant and of the Holder
of shares of Common Stock issued upon exercise of this Warrant, shall survive
the exercise of this Warrant.
10. NOTICES. Any notice, request or other document required or
permitted to be given or delivered to the Holder hereof or the Company shall
be delivered or shall be sent by certified mail, postage prepaid, to each
such holder at its address as shown on the books of the Company or to the
Company at the address indicated therefor in the first paragraph of this
Warrant or such other address as either may from time to time provide to the
other and shall be deemed to be received four days after deposit in the U.S.
Mail or two days after deposit with a nationally recognized overnight courier.
11. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon
any corporation succeeding the Company by merger, consolidation or
acquisition of all or substantially all of the Company's assets. All of the
obligations of the Company relating to the Common Stock issuable upon the
exercise of this Warrant shall survive the exercise and termination of this
Warrant. All of the covenants and agreements of the Company shall inure to
the benefit of the successors and assigns of the Holder hereof.
12. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description headings
of the several sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. This Warrant
shall be construed and enforced in accordance with, and the rights of the
parties shall be governed by, the laws of the State of Colorado.
13. LOST WARRANTS. The Company represents and warrants to the Holder
hereof that upon receipt of evidence reasonably satisfactory to the Company
of the loss, theft, destruction, or mutilation of this Warrant and, in the
case of any such loss, theft or destruction, upon receipt of an indemnity
reasonably satisfactory to the Company, or in the case of any such mutilation
upon surrender and cancellation of such Warrant, the Company, at its expense,
will make and deliver a new Warrant, of like tenor, in lieu of the lost,
stolen, destroyed or mutilated Warrant.
14. FRACTIONAL SHARES. No fractional shares shall be issued upon
exercise of this Warrant. The Company shall, in lieu of issuing any
fractional share, pay the holder entitled to such fraction a sum in cash
equal to such fraction multiplied by the then effective Stock Purchase Price.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
8
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its officers, thereunto duly authorized this ___ day of
__________, 2000.
JATO COMMUNICATIONS CORP.
a Delaware Corporation
By:
----------------------------------
Xxxxxx X. Xxxxxxxx
President and Chief Executive Officer
9
NOTICE OF EXERCISE
Date: ___________________
Jato Communications Corp.
Attention: Chief Executive Officer
Ladies and Gentlemen:
/ / The undersigned hereby elects to exercise the warrant issued to it by Jato
Communications Corp. (the "COMPANY") and dated _________________, 2000,
Warrant No. WCS-__ (the "WARRANT") and to purchase thereunder
__________________________________ shares of Common Stock of the Company
(the "SHARES") at a purchase price of __________________Dollars ($________)
per Share or an aggregate purchase price of
________________________________ Dollars ($__________) (the "PURCHASE
PRICE").
/ / The undersigned hereby elects to convert _______________________ percent
(____%) of the value of the Warrant pursuant to the provisions of Section
1(c) of the Warrant.
Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
___________________________________
(name)
___________________________________
___________________________________
(address)
Pursuant to the terms of the Warrant the undersigned has delivered the
Purchase Price herewith in full in cash or by certified check or wire
transfer. The undersigned also makes the representations set forth on the
attached Investment Representation Letter.
Very truly yours,
-----------------------------------
By:
--------------------------------
Title:
-----------------------------
INVESTMENT REPRESENTATION STATEMENT
TO: Jato Communications Corp.
With respect to the __________ shares of Common Stock ("SHARES") of JATO
COMMUNICATIONS CORP. ("COMPANY") which the undersigned ("PURCHASER") has
purchased from the Company today, the Purchaser hereby represents and
warrants as follows:
1. The Purchaser acknowledges that it has received no formal
prospectus or offering memorandum describing the business and operations of
the Company. It has, however, by virtue of his relationship with the Company,
been given access to all information that it believes is material to his
decision to purchase the Shares. The Purchaser has had the opportunity to
ask questions of, and receive answers from, representatives of the Company
concerning its business operations. Any questions raised by the Purchaser
have been answered to his satisfaction.
2. The Shares are being acquired by the Purchaser for its account, for
investment purposes only, and not with a view to the distribution or resale
thereof.
3. No representations or promises have been made concerning the
marketability or value of the Shares. The Purchaser understands that there
is currently no market for the transfer of the Shares. The Purchaser further
acknowledges that, because the Shares have not been registered under the
Securities Act of 1933, as amended (the "ACT"), or applicable state
securities laws, they cannot be resold unless they are subsequently
registered under the Act or applicable state securities laws, or an exemption
from registration is available, and the Purchaser must continue to bear the
economic risk of his investment in the Shares for an indefinite period of
time. Purchaser acknowledges that any transfers must be made in compliance
with the provisions of the Investors' Rights Agreement. The Company has not
agreed or represented to the Purchaser that the Shares will be purchased or
redeemed from the Purchaser at any time in the future. The Purchaser further
understands that a notation will be made on the appropriate records of the
Company and on the stock certificate representing the Shares so that the
transfers of Shares will not be effected on those records without compliance
with the restrictions referred to above.
Date: By:
------------------------ ---------------------------
Name:
-------------------------
Title:
------------------------
EXHIBIT A-2
FORM OF ALTERNATIVE WARRANT
No. WCS-__ _____________, 2000
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND
ANY APPLICABLE STATE SECURITIES LAWS.
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
OF JATO COMMUNICATIONS CORP.
(VOID AFTER [ONE YEAR FROM THE DATE OF ISSUANCE], 200_)
THIS CERTIFIES that U.S. TELESOURCE, INC. (the "HOLDER"), for value
received, is entitled to purchase from JATO COMMUNICATIONS CORP., a Delaware
corporation (the "COMPANY"), having a place of business at 0000 00xx Xx.,
Xxxxxx, Xxxxxxxx 00000, 496,031 shares (the "WARRANT SHARES") of fully paid
and nonassessable shares of Company's Common Stock (the "COMMON STOCK") at a
price of $10.08 per share (the "STOCK PURCHASE PRICE"), at any time or from
time to time beginning on the date hereof and ending on the earlier to occur
of (i) up to and including 5:00 p.m. (Colorado time) [ONE YEAR FROM THE DATE
OF ISSUANCE IF THIS WARRANT IS ISSUED PURSUANT TO AN ALTERNATIVE CLOSING AS
DEFINED IN THE STOCK PURCHASE AGREEMENT OR ONE YEAR FROM A CHANGE OF CONTROL
CLOSING DATE IF THIS WARRANT IS ISSUED PURSUANT TO A CHANGE OF CONTROL CLOSING
AS DEFINED IN THE STOCK PURCHASE AGREEMENT], 200_ or (ii) the Acquisition (as
defined below) of the Company, provided that the consideration in the
Acquisition is for cash (collectively, the "EXPIRATION DATE") upon surrender
to the Company at its principal office (or at such other location as the
Company may advise the Holder in writing) of this Warrant properly endorsed
with the Notice of Exercise and Investment Representation Statement attached
hereto duly filled in and executed and, if applicable, upon payment in cash
or by check of the aggregate Stock Purchase Price for the number of shares
for which this Warrant is being exercised determined in accordance with the
provisions hereof. The Stock Purchase Price and the number of shares
purchasable hereunder are subject to adjustment as provided in Section 3 of
this Warrant. For purposes hereof, an "Acquisition" shall mean any of the
following: (1) a sale of all or substantially all of the assets of the
Company; (2) a merger, reorganization or consolidation pursuant to which the
stockholders of the Company or its successor immediately prior to such
merger, reorganization or consolidation: (A) hold less than 50% of the voting
power of the surviving company following the merger, reorganization or
consolidation, or (B) in the event that the securities of an affiliated
entity are issued to the stockholders of the Company in the transaction in
exchange for their shares in the Company, hold less than 50% of the voting
power of such affiliated entity.
1. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
(a) GENERAL. This Warrant is exercisable at the option of the
Holder of record hereof, at any time or from time to time, up to the
Expiration Date for all or any part of the shares of Common Stock (but not
for a fraction of a share) which may be purchased hereunder.
(b) ISSUANCE OF CERTIFICATES. The Company agrees that the shares
of Common Stock purchased under this Warrant shall be and are deemed to be
issued to the Holder hereof as the
1
record owner of such shares as of the close of business on the date on which
this Warrant shall have been surrendered, properly endorsed and payment (if
any) made for such shares. Certificates for the shares of Common Stock so
purchased, together with any other securities or property to which the Holder
hereof are entitled upon such exercise, shall be delivered to the Holder
hereof by the Company at the Company's expense within a reasonable time after
the rights represented by this Warrant have been so exercised. In case of a
purchase of less than all the shares which may be purchased under this
Warrant, the Company shall cancel this Warrant and execute and deliver a new
Warrant or Warrants of like tenor for the balance of the shares purchasable
under the Warrant surrendered upon such purchase to the Holder hereof within
a reasonable time. Each stock certificate so delivered shall be in such
denominations of Common Stock as may be requested by the Holder hereof and
shall be registered in the name of such Holder or as directed by such Holder.
(c) NET ISSUE EXERCISE. Notwithstanding any provisions herein to
the contrary, if the fair market value of one share of the Company's Common
Stock is greater than the Stock Purchase Price (at the date of calculation as
set forth below), in lieu of exercising this Warrant for cash, the Holder may
elect to receive shares equal to the value (as determined below) of this
Warrant (or the portion thereof being canceled) by surrender of this Warrant
at the principal office of the Company and notice of such election in which
event the Company shall issue to the Holder a number of shares of Common
Stock computed using the following formula:
X = Y (A-B)
-------
A
Where X = the number of shares of Common Stock to be issued to the
Holder
Y = the number of shares of Common Stock purchasable under the
Warrant or, if only a portion of the Warrant is being exercised,
the portion of the Warrant being canceled (at the date of such
calculation)
A = the fair market value of one share of the Company's Common
Stock (at the date of such calculation)
B = Stock Purchase Price (as adjusted to the date of such
calculation)
For purposes of the above calculation, the fair market value of one share of
Common Stock shall be determined by the Company's Board of Directors in good
faith; PROVIDED, HOWEVER, that in the event Holder exercises this Warrant in
connection with the Company's initial public offering of its Common Stock,
the fair market value per share shall equal to the per share offering price
to the public of the Company's initial public offering; and, PROVIDED,
FURTHER, that following the Company's initial public offering of its Common
Stock, the fair market value per share shall be the average of the closing
prices quoted on any exchange or the Nasdaq Stock Market, whichever is
applicable, on which the Common Stock is listed for the ten (10) trading days
prior to the date of determination of fair market value.
2. SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company
covenants and agrees that all shares of Common Stock which may be issued upon
the exercise of the rights represented by this Warrant will, upon issuance,
be duly authorized, validly issued, fully paid and nonassessable and free
from all preemptive rights of any stockholders and free of all taxes, liens
and charges with respect to the issue thereof. The Company further covenants
and agrees that during
2
the period within which the rights represented by this Warrant may be
exercised, the Company will at all times have authorized and reserved, for
the purpose of issue or transfer upon exercise of the subscription rights
evidenced by this Warrant, a sufficient number of shares of authorized but
unissued Common Stock, or other securities and property, when and as required
to provide for the exercise of the rights represented by this Warrant. The
Company will take all such action as may be necessary to assure that such
shares of Common Stock may be issued as provided herein without violation of
any applicable law or regulation, or of any requirements of any domestic
securities exchange upon which the Common Stock may be listed.
3. ADJUSTMENT OF STOCK PURCHASE PRICE AND NUMBER OF SHARES. The Stock
Purchase Price and the number of shares purchasable upon the exercise of this
Warrant shall be subject to adjustment from time to time upon the occurrence
of certain events described in this Section 3. Upon each adjustment of the
Stock Purchase Price, the Holder of this Warrant shall thereafter be entitled
to purchase, at the Stock Purchase Price resulting from such adjustment, the
number of shares obtained by multiplying the Stock Purchase Price in effect
immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment, and dividing the
product thereof by the Stock Purchase Price resulting from such adjustment.
(a) SUBDIVISION OR COMBINATION OF STOCK. In case the Company
shall at any time subdivide its outstanding shares of Common Stock into a
greater number of shares, the Stock Purchase Price in effect immediately
prior to such subdivision shall be proportionately reduced, and conversely,
in case the outstanding shares of Common Stock of the Company shall be
combined into a smaller number of shares, the Stock Purchase Price in effect
immediately prior to such combination shall be proportionately increased.
(b) DIVIDENDS IN COMMON STOCK, OTHER STOCK, PROPERTY,
RECLASSIFICATION. If at any time or from time to time any holder of Common
Stock (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received or become entitled to
receive, without payment therefor,
(i) Common Stock or any shares of stock or other securities
which are at any time directly or indirectly convertible into or exchangeable
for Common Stock, or any rights or options to subscribe for, purchase or
otherwise acquire any of the foregoing by way of dividend or other
distribution;
(ii) Any cash paid or payable otherwise than as a cash
dividend; or
(iii) Common Stock or additional stock or other securities or
property (including cash) by way of spin-off, split-up, reclassification,
combination of shares or similar corporate rearrangement (other than (a)
shares of Common Stock issued as a stock split, adjustments in respect of
which shall be covered by the terms of Section 3(a) above or (b) an event for
which adjustment is otherwise made pursuant to Section 3(c) below);
then and in each such case, the Holder hereof shall, upon the
exercise of this Warrant, be entitled to receive, in addition to the number
of shares of Common Stock receivable thereupon, and without payment of any
additional consideration therefor, the amount of stock and other securities
and property (including cash in the case referred to in clause 3(b)(ii)
above) which
3
such Holder would hold on the date of such exercise had they been the holder
of record of such Common Stock as of the date on which Holder of Common Stock
received or became entitled to receive such shares or all other additional
stock and other securities and property.
(c) REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR
SALE. If any capital reorganization of the capital stock of the Company, or
any consolidation or merger of the Company with another corporation, or the
sale of all or substantially all of its assets to another corporation shall
be effected in such a way that a holder of Common Stock shall be entitled to
receive stock, securities, or other assets or property, then, as a condition
of such reorganization, reclassification, consolidation, merger or sale,
lawful and adequate provisions shall be made whereby the Holder hereof shall
thereafter have the right to purchase and receive (in lieu of the shares of
the Common Stock of the Company immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby) such shares of
stock, securities or other assets or property as may be issued or payable
with respect to or in exchange for a number of outstanding shares of such
Common Stock equal to the number of shares of such stock immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby PROVIDED, HOWEVER, that in the event the value of the
stock, securities or other assets or property (determined in good faith by
the Board of Directors of the Company) issuable or payable with respect to
one share of the Common Stock of the Company immediately theretofore
purchasable and receivable upon the exercise of the rights represented hereby
is in excess of the Stock Purchase Price hereof effective at the time of a
merger and securities received in such reorganization, if any, are publicly
traded, then this Warrant shall expire unless exercised prior to such
reorganization, consolidation, merger or sale of assets. The Company will
not effect any such reorganization, consolidation, merger or sale unless,
prior to the consummation thereof, the successor corporation (if other than
the Company) or such corporation's parent resulting from such consolidation
or the corporation purchasing such assets shall assume by written instrument,
executed and mailed or delivered to the registered Holder hereof at the last
address of such Holder appearing on the books of the Company, the obligation
to deliver to such Holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such Holder may be entitled to
purchase.
(d) ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. If the Company
at any time or from time to time subsequent to the date hereof (the "ORIGINAL
ISSUE DATE"), issues or sells, or is deemed by the express provisions of this
Section 3(d) to have issued or sold, Additional Shares of Common Stock (as
hereinafter defined), other than as provided in subsection (d)(iv) below, for
an Effective Price (as hereinafter defined) less than the then-effective
Stock Purchase Price, then and in each such case the then-effective Stock
Purchase Price shall be reduced, but not increased as of the opening of
business on the date of such issue or sale to a price determined by
multiplying the then-effective Stock Purchase Price by a fraction (i) the
numerator of which shall be (A) the number of shares of Common Stock deemed
outstanding (as defined below) immediately prior to such issue or sale plus
(B) the number of shares of Common Stock which the aggregate consideration
received (as defined in subsection d(ii)) by the Company for the total number
of
4
Additional Shares of Common Stock so issued would purchase at such
then-effective Stock Purchase Price, and (ii) the denominator of which shall
be the number of shares of Common Stock deemed outstanding (as defined below)
immediately prior to such issue or sale plus the total number of Additional
Shares of Common Stock so issued. For the purposes of the preceding
sentence, the number of shares of Common Stock deemed to be outstanding as of
a given date shall be the sum of (A) the number of shares of Common Stock
actually outstanding, (B) the number of shares of Common Stock into which the
then-outstanding shares of Preferred Stock of the Company could be converted
if fully converted on the day immediately preceding the given date, and (C)
the number of shares of Common Stock which could be obtained through the
exercise or conversion of all other rights, options and convertible
securities then exercisable or convertible on the day immediately preceding
the given date.
(i) For the purpose of making any adjustment required under
this Section 3(d), the consideration received by the Company for any issue or
sale of securities shall (A) to the extent it consists of cash, be computed
at the net amount of cash received by the Company after deduction of any
underwriting or similar commissions, compensation or concessions paid or
allowed by the Company in connection with such issue or sale but without
deduction of any expenses payable by the Company, (B) to the extent it
consists of property other than cash, be computed at the fair value of that
property as determined in good faith by the Board of Directors (including a
majority of the Series B Directors (as defined in the Company's Restated
Certificate of Incorporation)), and (C) if Additional Shares of Common Stock,
Convertible Securities (as hereinafter defined or rights or options to
purchase either Additional Shares of Common Stock or Convertible Securities
are issued or sold together with other stock or securities or other assets of
the Company for a consideration which covers both, be computed as the portion
of the consideration so received that may be reasonably determined in good
faith by the Board of Directors (including a majority of the Series B
Directors) to be allocable to such Additional Shares of Common Stock,
Convertible Securities or rights or options.
(ii) For the purpose of the adjustment required under this
Section 3(d), if the Company issues or sells any rights or options for the
purchase of, or stock or other securities convertible into or exchangeable
for, Additional Shares of Common Stock (such convertible or exchangeable
stock or securities being herein referred to as "CONVERTIBLE SECURITIES")
whether or not such rights or options or the right to convert or exchange any
such convertible securities are immediately exercisable, and if the Effective
Price of such Additional Shares of Common Stock is less than the
then-effective Stock Purchase Price, in each case the Company shall be deemed
to have issued at the time of the issuance of such rights or options or
Convertible Securities the maximum number of Additional Shares of Common
Stock issuable upon exercise or conversion or exchange thereof and to have
received as consideration for the issuance of such shares an amount equal to
the total amount of the consideration, if any, received by the Company for
the issuance of such rights or options or Convertible Securities, plus, in
the case of such rights or options, the minimum amounts of consideration, if
any, payable to the Company upon the exercise of such rights or options,
plus, in the case of Convertible Securities, the minimum amounts of
consideration, if any, payable to the Company (other than by cancellation of
liabilities or obligations evidenced by such Convertible Securities) upon the
conversion thereof; PROVIDED, THAT, that if the minimum amount of
consideration payable to the Company upon the exercise or conversion of
rights, options or Convertible Securities is reduced over time or on the
occurrence or non-occurrence of specified events other than by reason of
antidilution adjustments, the Effective Price shall be recalculated using the
figure to which such minimum amount of consideration is reduced; PROVIDED,
FURTHER, that
5
if the minimum amount of consideration payable to the Company upon the
exercise or conversion of such rights, options or Convertible Securities is
subsequently increased, the Effective Price shall be again recalculated using
the increased minimum amount of consideration payable to the Company upon the
exercise or conversion of such rights, options or Convertible Securities. No
further adjustment of the then-effective Stock Purchase Price, as adjusted
upon the issuance of such rights, options or Convertible Securities, shall be
made as a result of the actual issuance of Additional Shares of Common Stock
on the exercise of any such rights or options or the conversion of any such
Convertible Securities. If any such rights or options or the conversion
privilege represented by any such Convertible Securities shall expire without
having been exercised, the then-effective Stock Purchase Price, as adjusted
upon the issuance of such rights, options or Convertible Securities shall be
readjusted to the Stock Purchase Price which would have been in effect had an
adjustment been made on the basis that the only Additional Shares of Common
Stock so issued were the Additional Shares of Common Stock, if any, actually
issued or sold on the exercise of such rights or options or rights of
conversion of such Convertible Securities, and such Additional Shares of
Common Stock, if any, were issued or sold for the consideration actually
received by the Company upon such exercise, plus the consideration, if any,
actually received by the Company for the granting of all such rights or
options, whether or not exercised, plus the consideration received for
issuing or selling the Convertible Securities actually converted, plus the
consideration, if any, actually received by the Company (other than by
cancellation of liabilities or obligations evidenced by such Convertible
Securities) on the conversion of such Convertible Securities, PROVIDED THAT
such readjustment shall not apply to prior conversions of Preferred Stock.
(iii) "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued by the Company or deemed to be issued pursuant
to this Section 3(d), whether or not subsequently reacquired or retired by
the Company other than (A) shares of Common Stock issued upon conversion of
the Company's Preferred Stock; (B) Approved Issuances; and (C) shares of
Common Stock issued pursuant to the exercise of options, warrants or
convertible securities outstanding as of the Original Issue Date. The
"EFFECTIVE PRICE" of Additional Shares of Common Stock shall mean the
quotient determined by dividing the total number of Additional Shares of
Common Stock issued or sold, or deemed to have been issued or sold by the
Company under this Section 3(d), into the aggregate consideration received,
or deemed to have been received by the Company for such issue under this
Section 3(d), for such Additional Shares of Common Stock. "APPROVED
ISSUANCES" shall mean shares of Common Stock and/or options, warrants or
other Common Stock purchase rights, and the Common Stock issued pursuant to
such options, warrants or other rights after the Original Issue Date to
employees, officers or directors of, or consultants or advisors to the
Company or any subsidiary pursuant to stock purchase or stock option plans or
other arrangements that are approved by the Board of Directors.
(iv) No adjustment of the then-effective Stock Purchase Price
shall be made under this Section 3(d) upon the issuance of any shares of
capital stock which are (i) distributed to holders of Common Stock pursuant
to a stock dividend or subdivision for which an adjustment is provided under
Sections 3(a) or 3(b) or (ii) issued in connection with a capital
reorganization, reclassification, consolidation, merger or sale pursuant to
Section 3(c).
(e) NOTICE OF ADJUSTMENT. Upon any adjustment of the Stock
Purchase Price or any increase or decrease in the number of shares
purchasable upon the exercise of this, the Company shall give written notice
thereof, by first class mail, postage prepaid, addressed to the registered
Holder of this Warrant at the address of such Holder as shown on the books of
the
6
Company. The notice shall be signed by the Company's chief financial officer
and shall state the Stock Purchase Price resulting from such adjustment and
the increase or decrease, if any, in the number of shares purchasable at such
price upon the exercise of this Warrant, setting forth in reasonable detail
the method of calculation and the facts upon which such calculation is based.
(f) CERTAIN EVENTS. If any change in the outstanding Common Stock
of the Company or any other event occurs as to which the other provisions of
this Section 3 are not strictly applicable or if strictly applicable would
not fairly protect the purchase rights of the Holder of the Warrant in
accordance with such provisions, the Board of Directors of the Company shall
make an adjustment in the number and class of shares available under the
Warrant, the Stock Purchase Price or the application of such provisions, so
as to protect such purchase rights as aforesaid. The adjustment shall be
such as will give the Holder of the Warrant upon exercise for the same
aggregate Stock Purchase Price the total number, class and kind of shares as
they would have owned had the Warrant been exercised prior to the event and
had they continued to hold such shares until after the event requiring
adjustment.
4. ISSUE TAX. The issuance of certificates for shares of Common Stock
upon the exercise of the Warrant shall be made without charge to the Holder
of the Warrant for any issue tax (other than any applicable income taxes) in
respect thereof; PROVIDED, HOWEVER, that the Company shall not be required to
pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of the
then Holder of the Warrant being exercised.
5. CLOSING OF BOOKS. The Company will at no time close its transfer
books against the transfer of any warrant or of any shares of Common Stock
issued or issuable upon the exercise of any warrant in any manner which
interferes with the timely exercise of this Warrant.
6. NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY. Nothing
contained in this Warrant shall be construed as conferring upon the Holder
hereof the right to vote or to consent or to receive notice as a stockholders
of the Company or any other matters or any rights whatsoever as a
stockholders of the Company. Except as otherwise provided herein, no
dividends or interest shall be payable or accrued in respect of this Warrant
or the interest represented hereby or the shares purchasable hereunder until,
and only to the extent that, this Warrant shall have been exercised. No
provision hereof in the absence of affirmative action by the Holder to
purchase shares of Common Stock, and no mere enumeration herein of the rights
or privileges of the Holder hereof, shall give rise to any liability of such
Holder for the Stock Purchase Price or as a stockholders of the Company,
whether such liability is asserted by the Company or by its creditors.
7. MARKET STAND-OFF AGREEMENT. Holder shall not sell, dispose of,
transfer, make any short sale of, grant any option for the purchase of, or
enter into any hedging or similar transaction with the same economic effect
as a sale, any Common Stock (or other securities) of the Company held by
Holder, for a period of time specified by the managing underwriter(s) (not to
exceed one hundred eighty (180) days following the effective date of a
registration statement of the Company filed under the Securities Act of 1933.
Holder agrees to execute and deliver such other agreements as may be
reasonably requested by the Company and/or the managing underwriter(s) which
are consistent with the foregoing or which are necessary to give further
effect thereto. In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to such Common Stock (or other
securities) until the end of such period.
7
8. ADDITIONAL RIGHTS. Upon exercise of this Warrant by execution of
the attached Notice of Exercise, the Holder of this Warrant shall become a
party to the Second Amended and Restated Investors Rights' Agreement by and
among the Company and certain investors which shall be in effect at the time
of the exercise of this Warrant (the "Investors Rights' Agreement"), and the
Warrant Shares shall be "Registrable Securities" as such term is defined in
the Investors Rights' Agreement.
9. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The rights and
obligations of the Company, of the Holder of this Warrant and of the Holder
of shares of Common Stock issued upon exercise of this Warrant, shall survive
the exercise of this Warrant.
10. NOTICES. Any notice, request or other document required or
permitted to be given or delivered to the Holder hereof or the Company shall
be delivered or shall be sent by certified mail, postage prepaid, to each
such holder at its address as shown on the books of the Company or to the
Company at the address indicated therefor in the first paragraph of this
Warrant or such other address as either may from time to time provide to the
other and shall be deemed to be received four days after deposit in the U.S.
Mail or two days after deposit with a nationally recognized overnight courier.
11. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon
any corporation succeeding the Company by merger, consolidation or
acquisition of all or substantially all of the Company's assets. All of the
obligations of the Company relating to the Common Stock issuable upon the
exercise of this Warrant shall survive the exercise and termination of this
Warrant. All of the covenants and agreements of the Company shall inure to
the benefit of the successors and assigns of the Holder hereof.
12. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description headings
of the several sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. This Warrant
shall be construed and enforced in accordance with, and the rights of the
parties shall be governed by, the laws of the State of Colorado.
13. LOST WARRANTS. The Company represents and warrants to the Holder
hereof that upon receipt of evidence reasonably satisfactory to the Company
of the loss, theft, destruction, or mutilation of this Warrant and, in the
case of any such loss, theft or destruction, upon receipt of an indemnity
reasonably satisfactory to the Company, or in the case of any such mutilation
upon surrender and cancellation of such Warrant, the Company, at its expense,
will make and deliver a new Warrant, of like tenor, in lieu of the lost,
stolen, destroyed or mutilated Warrant.
14. FRACTIONAL SHARES. No fractional shares shall be issued upon
exercise of this Warrant. The Company shall, in lieu of issuing any
fractional share, pay the holder entitled to such fraction a sum in cash
equal to such fraction multiplied by the then effective Stock Purchase Price.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
8
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its officers, thereunto duly authorized this ___ day of
__________, 2000.
JATO COMMUNICATIONS CORP.
a Delaware Corporation
By:
----------------------------------
Xxxxxx X. Xxxxxxxx
President and Chief Executive Officer
9
NOTICE OF EXERCISE
Date: ___________________
Jato Communications Corp.
Attention: Chief Executive Officer
Ladies and Gentlemen:
/ / The undersigned hereby elects to exercise the warrant issued to it by Jato
Communications Corp. (the "COMPANY") and dated _________________, 2000,
Warrant No. WCS-__ (the "WARRANT") and to purchase thereunder
__________________________________ shares of Common Stock of the Company
(the "SHARES") at a purchase price of __________________Dollars ($________)
per Share or an aggregate purchase price of
________________________________ Dollars ($__________) (the "PURCHASE
PRICE").
/ / The undersigned hereby elects to convert _______________________ percent
(____%) of the value of the Warrant pursuant to the provisions of Section
1(c) of the Warrant.
Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
___________________________________
(name)
___________________________________
___________________________________
(address)
Pursuant to the terms of the Warrant the undersigned has delivered the
Purchase Price herewith in full in cash or by certified check or wire
transfer. The undersigned also makes the representations set forth on the
attached Investment Representation Letter.
Very truly yours,
------------------------------
By:
---------------------------
Title:
------------------------
INVESTMENT REPRESENTATION STATEMENT
TO: Jato Communications Corp.
With respect to the __________ shares of Common Stock ("SHARES") of JATO
COMMUNICATIONS CORP. ("COMPANY") which the undersigned ("PURCHASER") has
purchased from the Company today, the Purchaser hereby represents and
warrants as follows:
1. The Purchaser acknowledges that it has received no formal
prospectus or offering memorandum describing the business and operations of
the Company. It has, however, by virtue of his relationship with the Company,
been given access to all information that it believes is material to his
decision to purchase the Shares. The Purchaser has had the opportunity to
ask questions of, and receive answers from, representatives of the Company
concerning its business operations. Any questions raised by the Purchaser
have been answered to his satisfaction.
2. The Shares are being acquired by the Purchaser for its account, for
investment purposes only, and not with a view to the distribution or resale
thereof.
3. No representations or promises have been made concerning the
marketability or value of the Shares. The Purchaser understands that there
is currently no market for the transfer of the Shares. The Purchaser further
acknowledges that, because the Shares have not been registered under the
Securities Act of 1933, as amended (the "ACT"), or applicable state
securities laws, they cannot be resold unless they are subsequently
registered under the Act or applicable state securities laws, or an exemption
from registration is available, and the Purchaser must continue to bear the
economic risk of his investment in the Shares for an indefinite period of
time. Purchaser acknowledges that any transfers must be made in compliance
with the provisions of the Investors' Rights Agreement. The Company has not
agreed or represented to the Purchaser that the Shares will be purchased or
redeemed from the Purchaser at any time in the future. The Purchaser further
understands that a notation will be made on the appropriate records of the
Company and on the stock certificate representing the Shares so that the
transfers of Shares will not be effected on those records without compliance
with the restrictions referred to above.
Date: By:
------------------------ ---------------------------
Name:
-------------------------
Title:
------------------------
