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Exhibit 99.4
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GOLDEN SKY HOLDINGS, INC.
178,075 Shares of Series B
Convertible Participating Preferred Stock
STOCK PURCHASE AGREEMENT
Dated as of November 24, 1997
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Golden Sky Holdings, Inc.
Stock Purchase Agreement
Dated as of November 24, 1997
INDEX
Page
1.1 Description of Series A Convertible Preferred Stock and
Common Stock..........................................................1
1.2 Description of Series B Convertible Preferred Stock.....................2
1.3 Conversion of Series B Convertible Notes................................2
1.4 Reserved Shares.........................................................2
1.5 Termination of Series A Stock Purchase Agreement........................3
1.6 Sale and Purchase.......................................................3
1.7 Closing.................................................................3
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................3
2.1 Organization and Corporate Power........................................3
2.2 Authorization...........................................................4
2.3 Non-contravention.......................................................4
2.4 Capitalization of the Company...........................................4
2.5 Financial Statements....................................................6
2.6 Absence of Undisclosed Liabilities......................................6
2.7 Absence of Certain Developments.........................................6
2.8 Accounts Receivable.....................................................7
2.9 Title to Properties.....................................................7
2.10 Tax Matters............................................................8
2.11 Contracts and Commitments..............................................8
2.12 Proprietary Rights; Employee Restrictions..............................9
2.13 Litigation............................................................11
2.14 Offeree...............................................................11
2.15 Business; Compliance with Laws........................................11
2.16 Information Supplied to Series B Outside Investors....................12
2.17 Investment Banking; Brokerage.........................................12
2.18 Solvency..............................................................12
2.19 Environmental Matters.................................................12
2.20 Employee Benefit Programs.............................................13
2.21 Product and Services Claims...........................................15
2.22 Employees; Labor Matters..............................................15
2.23 Relationship with Subscribers, Retailers and Distributors.............16
2.24 Corporate Records; Copies of Documents................................16
2.25 Affiliate Transactions................................................16
2.26 Investments Related to Certain Foreign Countries......................16
2.27 Small Business Concern, Etc...........................................16
2.28 Insurance.............................................................17
SECTION 3. CONDITIONS OF PURCHASE.............................................17
3.1 Satisfaction of Conditions.............................................17
3.2 Opinion of Counsel.....................................................18
3.3 Authorization..........................................................18
3.4 Effectiveness of Preferred Stock Terms.................................18
3.5 Stockholders' Agreement................................................18
3.6 All Proceedings Satisfactory...........................................18
3.7 Delivery of Documents..................................................18
3.8 SBIC Deliveries........................................................19
SECTION 3A. POST-CLOSING COVENANT OF COMPANY..................................19
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SECTION 4. COVENANTS OF THE COMPANY...........................................20
4.1 Financial Statements; Minutes..........................................20
4.2 Budget and Operating Forecast..........................................20
4.3 Conduct of Business....................................................21
4.4 Payment of Taxes, Compliance with Laws, etc............................21
4.5 Insurance..............................................................21
4.6 Maintenance of Properties..............................................22
4.7 Affiliated Transactions................................................22
4.8 Management Compensation................................................22
4.9 Use of Proceeds........................................................22
4.10 Board of Directors Meetings; Meetings with Investors..................22
4.11 Sales of Additional Securities........................................23
4.12 Stockholders' Agreement, Non-Competition Agreements and
Confidentiality and Proprietary Rights Agreements...................23
4.13 Distributions on, and Redemptions of, Capital Stock...................24
4.14 Merger, Consolidation, Sale of Assets, Acquisitions and
Other Actions.......................................................25
4.15 No Amendments to Amended and Restated Certificate
of Incorporation....................................................26
4.16 Capital Expenditures..................................................26
4.17 Life Insurance........................................................26
4.18 Annual Updates; Number of Stockholders; Use of Proceeds; Regulatory
Violation; Economic Impact Information; Amendment...................26
SECTION 5. SERIES B OUTSIDE INVESTOR REPRESENTATIONS..........................27
SECTION 6. INDEMNIFICATION....................................................29
6.1 Indemnification for Vicarious Liability................................29
6.2 Notice; Defense of Claims..............................................30
6.3 Satisfaction of Indemnification Obligations............................31
SECTION 7. GENERAL............................................................31
7.1 Amendments, Waivers and Consents.......................................31
7.2 Survival of Representations, Warranties and Covenants;
Assignability of Rights..............................................32
7.3 Governing Law..........................................................33
7.4 Section Headings; Counterparts.........................................33
7.5 Notices and Demands....................................................33
7.6 Severability...........................................................33
7.7 Expenses...............................................................33
7.8 Integration............................................................34
7.9 Certain Provisions Applicable to SBIC Investors........................34
7.10 Stockholder Confirmation and Waiver...................................34
APPENDIX A - List of Investors
EXHIBITS
Exhibit A - Amended and Restated Certificate of Incorporation
Exhibit B - Stockholders' Agreement
Exhibit C - Non-Competition Agreement
Exhibit D - Form of Indemnification Agreement
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SCHEDULES
Schedule 1.3 - Founding Investors
Schedule 2.4 - Capitalization and Beneficial Ownership
Schedule 2.6 - Undisclosed Liabilities
Schedule 2.7 - Material Developments
Schedule 2.8 - Accounts Receivable
Schedule 2.9 - Title to Properties
Schedule 2.10 - Tax Matters
Schedule 2.11 - Material Contracts
Schedule 2.12 - Proprietary Rights
Schedule 2.13 - Litigation
Schedule 2.15 - Business; Compliance with Laws
Schedule 2.16 - Business Plan
Schedule 2.19 - Environmental Matters
Schedule 2.21 - Product and Services Claims
Schedule 2.22 - Employees; Labor Matters
Schedule 2.25 - Affiliate Transactions
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STOCK PURCHASE AGREEMENT
AGREEMENT made as of this 24th day of November, 1997 by and among
Golden Sky Holdings, Inc., a Delaware corporation (the "Company"), Golden Sky
Systems, Inc., a Delaware corporation and wholly-owned subsidiary of the Company
("GSS"), ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (the "Founder"), the investors identified on the
signature pages hereto as the Series A Outside Investors (the "Series A Outside
Investors"), the investors identified on the signature pages hereto as the
Series B Outside Investors (the "Series B Outside Investors", and together with
the Series A Outside Investors where no distinction is required, the "Outside
Investors") and the investors identified on the signature pages as the Founding
Investors (the "Founding Investors"). The Series A Outside Investors, the Series
B Outside Investors and the Founding Investors are herein collectively referred
to, where no distinction is required, as the "Investors" and individually as an
"Investor."
SECTION 1. TERMS OF PURCHASE
1.1 Description of Series A Convertible Preferred Stock and Common
Stock. GSS previously authorized the issuance and sale to the Series A Outside
Investors and the Founding Investors of 406,000 shares (the "GSS Series A
Convertible Preferred Shares") of its authorized but unissued Series A
Convertible Participating Preferred Stock, par value $.01 per share (the "GSS
Series A Convertible Preferred Stock"), for a purchase price of $100.00 per GSS
Series A Convertible Preferred Share, and 100 shares (the "GSS Common Shares")
of its authorized but unissued Common Stock, par value $.01 per share (the "GSS
Common Stock"), for a purchase price of $1.00 per GSS Common Share, and pursuant
to a Stock Purchase Agreement dated February 12, 1997 by and among GSS, the
Founder, the Series A Outside Investors and the Founding Investors (including
any amendments) (the "Series A Stock Purchase Agreement"), issued and sold the
GSS Series A Convertible Preferred Shares and the GSS Common Shares to such
Series A Outside Investors and Founding Investors. Pursuant to an Agreement and
Plan of Merger dated as of September 9, 1997 by and among the Company, GSS
Mergersub Inc., a Delaware corporation and wholly-owned subsidiary of the
Company ("Mergersub"), and GSS, Mergersub merged with and into GSS, with GSS
being the surviving corporation. Upon the consummation of such merger: (a) each
GSS Series A Convertible Preferred Share was converted into a share
(collectively, the "Series A Convertible Preferred Shares") of the Company's
authorized but unissued Series A Convertible Preferred Stock, par value $.01 per
share (the "Series A Convertible Preferred Stock"); (b) each GSS Common Share
was converted into a share (collectively, the "Common Shares") of the Company's
authorized but unissued Common Stock, par value $.01 per share (the "Common
Stock"); and (c) each share of Common Stock of Mergersub was converted into a
GSS Common Share, thereby causing GSS to become a wholly-owned subsidiary of the
Company. Pursuant to a letter agreement dated as of September 9, 1997 by and
between the Company and GSS, GSS assigned and the Company assumed all of the
rights and obligations of GSS under the Series A Stock Purchase Agreement.
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1.2 Description of Series B Convertible Preferred Stock. The Company
has authorized the issuance and sale to the Series B Outside Investors of
178,075 shares of its authorized but unissued Series B Convertible Participating
Preferred Stock, par value $.01 per share (the "Series B Convertible Preferred
Stock" and, together with the Series A Convertible Preferred Stock where no
distinction is required, the "Convertible Preferred Stock"), for a purchase
price of $200.00 per share.
1.3 Conversion of Series B Convertible Notes. The Company previously
authorized the issuance and sale to the Series B Outside Investors of
convertible promissory notes of the Company in the aggregate principal amount of
$10,000,000 (the "Series B Convertible Notes") and pursuant to a Note Purchase
Agreement dated as of November 6, 1997 by and among the Company and the Series B
Outside Investors (the "Note Purchase Agreement") issued and sold the Series B
Convertible Notes to the Series B Outside Investors. Each Series B Convertible
Note provides by its terms that in the event that the Company consummates a
Qualifying Financing (as defined in such Note), the principal amount of such
Note (together with, at the option of the Payee (as defined in such Note),
accrued interest thereon) shall automatically convert into the Applicable Number
(as defined in such Note) of Equity Securities (as defined in such Note). Each
party hereby agrees that: (a) the issuance and sale to the Series B Outside
Investors of 178,075 shares of the Company's authorized but unissued Series B
Convertible Preferred Stock pursuant to this Agreement for a purchase price of
$200 per share shall be deemed to be a Qualifying Financing and the shares of
Series B Convertible Preferred Stock issued therein shall be deemed to be Equity
Securities, in each case within the meaning of the Series B Convertible Notes;
and (b) upon the consummation of such financing the principal amount of each
Series B Convertible Note (together with accrued interest thereon) shall
automatically convert into the Applicable Number of shares of Series B
Convertible Preferred Stock. The principal amount of each Series B Convertible
Note (together with accrued interest thereon) as of the Closing Date (as
hereinafter defined) and the Applicable Number of shares of Series B Convertible
Preferred Stock to be issued at the Closing (as hereinafter defined) upon the
conversion of such Series B Convertible Note are set forth opposite the name of
the applicable Series B Outside Investor in Columns 1 and 2, respectively, of
Appendix A hereto. The shares of Series B Convertible Preferred Stock issued and
sold pursuant to this Agreement and those issued upon conversion of the Series B
Convertible Notes are herein collectively referred to as the "Series B
Convertible Preferred Shares." Each Series B Convertible Preferred Share
(including those issued upon conversion of the Series B Convertible Notes) shall
be deemed to have been issued and sold pursuant to this Agreement, and each
Series B Outside Investor shall be entitled to all of the benefits and subject
to all of the obligations of this Agreement with respect to all Series B
Convertible Preferred Shares issued to such Series B Outside Investor (including
those issued upon conversion of the Series Be Convertible Notes.)
1.4 Reserved Shares. The Company has authorized and has reserved, and
covenants to continue to reserve, a sufficient number of shares of the Common
Stock and the Company's Series A and Series B Redeemable Preferred Stock, par
value $.01 per share (the "Series A Redeemable Preferred Stock" and the "Series
B Redeemable Preferred Stock," respectively, and together where no distinction
is required, the "Redeemable Preferred Stock"), to satisfy the rights of
conversion of the holders of the Series A and Series B Convertible Preferred
Stock, respectively. Any shares of Common Stock, Redeemable Preferred Stock or
any successor class of capital stock of the Company hereafter issued or issuable
upon conversion of the Series A or Series B Convertible Preferred Shares are
herein referred to as "Series A Conversion Shares" and "Series B Conversion
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Shares," respectively, and together where no distinction is required, as
"Conversion Shares." The Series A Preferred Shares and Conversion Shares are
herein referred to as the "Series A Securities," the Series B Preferred Shares
and Conversion Shares as the "Series B Securities," and together where no
distinction is required, as the "Securities."
1.5 Termination of Series A Stock Purchase Agreement. The Series A
Stock Purchase Agreement is hereby terminated, and shall be of no further force
and effect, except that the representations and warranties of the parties
thereto shall survive such termination and shall continue to be of full force
and effect.
1.6 Sale and Purchase. At the Closing and subject to the terms and
conditions herein set forth, the Company shall issue and sell to each of the
Series B Outside Investors, and each Series B Outside Investor severally and not
jointly shall purchase from the Company, the number of Series B Convertible
Preferred Shares set forth opposite the name of such Series B Outside Investor
in Column 3 of Appendix A hereto for the aggregate purchase price set forth in
the corresponding row of Column 4 of Appendix A.
1.7 Closing. The closing (the "Closing") of the sale and purchase, and
issuance upon conversion of the Series B Convertible Notes, of the Series B
Convertible Preferred Shares shall take place at the offices of Faegre & ▇▇▇▇▇▇
LLP, 2200 Norwest Center, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇, at 10:00 A.M., on the date hereof, or such other date, time and
place as shall be mutually agreed upon by the Company and fifty-eight percent in
interest of the Series B Outside Investors (the "Closing Date"). At the Closing,
the Company will deliver the Series B Convertible Preferred Shares being
acquired by each Series B Outside Investor in the form of a certificate, issued
in such Series B Outside Investor's name or in the name of its nominee (of which
the Series B Outside Investor shall notify the Company not less than two
business days prior to the Closing), against payment of the full purchase price
therefor by check or wire transfer, and the surrender of the applicable Series B
Convertible Note, by or on behalf of each Series B Outside Investor to the
Company.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce the Series B Outside Investors to enter into this
Agreement, the Company (which term shall be deemed to include, for purposes of
this Section 2, any subsidiary or subsidiaries of the Company existing at the
date of this Agreement, including without limitation GSS), subject to Section
7.2 hereof, hereby represents and warrants to the Series B Outside Investors
that as of the date hereof:
2.1 Organization and Corporate Power. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and is qualified to do business as a foreign corporation in
each jurisdiction in which such qualification is required, except where failure
to so qualify would not have a material adverse effect on the business, assets,
operations or condition (financial or otherwise) of the Company. The Company has
all required corporate power and authority to own its property, to carry on its
business as presently conducted or contemplated to enter into and perform this
Agreement and the agreements contemplated hereby, and generally to carry out the
transactions contemplated hereby and thereby. The copies of the Certificate of
Incorporation and By-laws of the Company, each as amended to date, which have
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been furnished to counsel for the Investors, are correct and complete at the
date hereof. The Company is not in violation of any term of its Certificate of
Incorporation or By-laws or, except as set forth in Schedule 2.1, any material
agreement, instrument, judgment, decree, order, statute, rule or government
regulation applicable to the Company.
2.2 Authorization. This Agreement and all documents and instruments
executed pursuant hereto or contemplated hereby are valid and binding
obligations of the Company, enforceable in accordance with their terms against
the Company. The execution, delivery and performance of this Agreement and all
documents and instruments contemplated hereby and the delivery and issuance of
the Series B Securities have been duly authorized by all necessary corporate or
other action of the Company. Assuming the accuracy of the Series B Outside
Investor representations set forth in Section 5 hereof, no consent, approval or
authorization of, or designation, declaration or filing with, any governmental
authority is required of the Company in connection with the execution, delivery
and performance of this Agreement, or the issuance and delivery by the Company
of the Series B Securities in accordance with the terms of this Agreement, or
the performance or consummation of any other transaction contemplated hereby.
2.3 Non-contravention. The execution, delivery and performance by the
Company of this Agreement and each of the other agreements and instruments to
which it is a party and which are contemplated hereby will not: (a) conflict
with or result in any default under any contract, obligation or commitment of
the Company or any charter provision, by-law or corporate restriction of the
Company; (b) result in the creation of any lien, charge or encumbrance of any
nature upon any of the properties or assets of the Company; or (c) violate any
instrument, agreement, judgment, decree, order, statute, rule or regulation of
any federal, state or local government or agency applicable to the Company or to
which the Company is a party.
2.4 Capitalization of the Company. The authorized capital stock of the
Company consists of: (a) 1,000,000 shares of Common Stock, of which 100 shares
are, and will be as of the Closing, duly and validly issued, outstanding, fully
paid, and nonassessable; (b) 1,293,800 shares of designated preferred stock, par
value $.01 per share, of which (i) 418,000 shares have been designated as Series
A Convertible Participating Preferred Stock, all of which are duly and validly
issued, outstanding, fully paid, and nonassessable, (ii) 228,500 shares have
been designated as Series B Convertible Preferred Stock, all of which will be,
as of the Closing, duly and validly issued, outstanding, fully paid, and non
assessable, and (iii) 418,000 shares have been designated as Series A Redeemable
Preferred Stock, and 228,500 shares have been designated as Series B Redeemable
Preferred Stock, none of which are outstanding or will be outstanding as of the
Closing; and (c) 300,000 shares of undesignated preferred stock, par value $.01
per share. Except for 62,525 shares of Common Stock reserved for issuance under
the Company's Stock Option Plan adopted on July 24, 1997 (the "Stock Option
Plan") and 5,682 shares of Common Stock issuable upon the exercise of warrants
issued to the certain investment funds affiliated with Alta Communications, Inc.
(the "Alta Investors") in connection with loans extended by the Alta Investors
to the Company (the "Warrants" and any shares of Common Stock or any successor
class of capital stock of the Company hereafter issued or issuable upon exercise
of the Warrants, the "Warrant Shares") and except as otherwise disclosed in
Schedule 2.4, the Company has not issued any other shares of its capital stock
and there are no outstanding warrants, options or other rights to purchase or
acquire any of such shares, nor any outstanding securities convertible into such
shares or outstanding warrants, options or other rights to acquire any such
convertible securities. As of the Closing, all of the outstanding shares of
capital stock of the Company will have been offered, issued, sold and delivered
in compliance with applicable federal and state securities laws. The Series A
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Convertible Preferred Shares and the Common Shares are duly and validly
authorized, issued, outstanding, fully paid and nonassessable. The Series A
Convertible Preferred Shares are currently convertible into 418,000 shares of
Series A Redeemable Preferred Stock and 418,000 shares of Common Stock
representing 58.48% of the Common Stock of the Company on a fully-diluted basis
after giving effect to the issuance of the 62,525 shares reserved for issuance
under the Stock Option Plan and the exercise, exchange or conversion of any
other securities exercisable or exchangeable for or convertible into Common
Stock (including the Series B Convertible Preferred Shares and the Warrants).
The Series B Convertible Preferred Shares are duly and validly authorized and,
as of the Closing, will be validly issued, outstanding, fully paid and
non-assessable. The Series B Convertible Preferred Shares are, and as of the
Closing will be, initially convertible into 228,442 shares of Series B
Redeemable Convertible Preferred Stock and 228,442 shares of Common Stock
representing 31.97% of the Common Stock of the Company on a fully diluted basis
after giving effect to the issuance of the 62,525 shares reserved for issuance
under the Stock Option Plan and the exercise, exchange or conversion of any
other securities exercisable or exchangeable for or convertible into Common
Stock (including the Series A Convertible Preferred Shares and the Warrants).
The relative rights, preferences, restrictions and other provisions relating to
the Convertible Preferred Stock and the Redeemable Preferred Stock are as set
forth in the Company's Amended and Restated Certificate of Incorporation
attached as Exhibit A hereto. The Company has authorized and reserved for
issuance upon conversion of the Series A Preferred Shares not less than 418,000
shares of Series A Redeemable Preferred Stock and 418,000 shares of Common Stock
and has authorized and reserved for issuance upon conversion of the Series B
Convertible Preferred Shares not less than 228,442 shares of Series B Redeemable
Preferred Stock and 228,442 shares of Common Stock, and the Conversion Shares
issuable upon such conversion will be, when issued in accordance with the
Amended and Restated Certificate of Incorporation of the Company, duly and
validly authorized and issued, fully paid and nonassessable. The Company has
authorized and reserved for issuance upon exercise of the Warrants not less than
5,682 shares of Common Stock, and the Warrant Shares issuable upon such exercise
will be, when issued in accordance with the Amended and Restated Certificate of
Incorporation of the Company, duly and validly authorized and issued, fully paid
and nonassessable.
Except as set forth in the Stockholders' Agreement referred to in
Section 3.5 hereof, there are no preemptive rights or rights of first refusal
with respect to the issuance or sale of the Company's capital stock, other than
rights to which holders of the Securities are entitled as set forth in Section
4.11 hereof. No officer, director or employee of the Company or any other person
or entity has, claims to have or has any right to claim to have any interest in
the Company's capital stock other than as disclosed in Schedule 2.4 or as a
Series B Outside Investor hereunder. There are no restrictions on the transfer
of the Company's capital stock other than those arising from federal and state
securities laws or under this Agreement, or the Stockholders' Agreement referred
to in Section 3.5 hereof. Except as set forth in the Stockholders' Agreement,
there are no rights, obligations or restrictions on the voting of any of the
Company's capital stock or the registration of such capital stock for offering
to the public pursuant to the Securities Act of 1933, as amended (the
"Securities Act"). After giving effect to the transactions contemplated by this
Agreement, the Investors will be the only stockholders of the Company.
Except for GSS, which is a wholly-owned subsidiary of the corporation,
and Argos Support Services Company, which is a wholly-owned subsidiary of GSS,
the Company has no subsidiaries or investments in any other corporation or
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business organization. Except as set forth in Schedule 2.4, the Company does not
own or have any direct or indirect interest in, a loan or advance to, or control
over any corporation, partnership, joint venture or other entity of any kind.
2.5 Financial Statements. The Company has heretofore furnished to the
Series B Outside Investors drafts of the following financial statements: (i) an
audited income statement of GSS for the eight months ended August 31, 1997; and
(ii) an audited balance sheet of GSS as of August 31, 1997 (the "Audited Balance
Sheet"). Such financial statements and schedules of GSS have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis, except that such financial statements have been prepared without footnote
disclosures and year-end audit adjustments, which will not, in any event, be
material. Such financial statements contain notations for all significant
accruals or contingencies, fairly represent the financial condition of GSS in
all material respects as of the date thereof, and are true and correct as of the
date thereof in all respects. Nothing has come to the attention of management of
the Company since such dates that would indicate that the financial statements
were not true and correct as of the date thereof.
2.6 Absence of Undisclosed Liabilities. Since the date of its
incorporation (and, in the case of GSS, since the date of GSS' incorporation)
and after giving effect to the transactions contemplated hereby, the Company
does not have any material liability or liabilities of any nature, whether
accrued, absolute, contingent or otherwise, asserted or unasserted, known or
unknown, which are or would be required to be disclosed in accordance with
generally accepted accounting principles, except as and to the extent disclosed
in Schedule 2.6 or as otherwise set forth in the Audited Balance Sheet, and, to
the best knowledge of the Company, there exists no set of facts or circumstances
which should be reasonably anticipated to form the basis for any such material
liabilities.
2.7 Absence of Certain Developments. Except as disclosed in Schedule
2.7, since the date of the Company's incorporation (and, in the case of GSS,
since the date of GSS' incorporation), there has been (i) no adverse change in
the condition, financial or otherwise, of the Company or in the assets,
liabilities, business or prospects of the Company, (ii) no declaration, setting
aside or payment of any dividend or other distribution with respect to, or any
direct or indirect redemption or acquisition of, any of the capital stock of the
Company, (iii) no waiver of any valuable right of the Company or cancellation of
any debt or claim held by the Company, (iv) no loan by the Company to any
officer, director, employee or stockholder of the Company or affiliates of any
of the foregoing or any agreement or commitment therefor, (v) no compensation
paid or payable to the Founding Investors or any increase in the compensation
paid or payable to any other officer, director, employee or agent of the Company
or affiliates of any of the foregoing, (vi) no material loss, destruction or
damage to any property of the Company, whether or not insured, (vii) no labor
trouble involving the Company and no material change in the personnel of the
Company or the terms and conditions of their employment and (viii) no
acquisition or disposition of any assets (or any contract or arrangement
therefor) nor any other transaction by the Company otherwise than for fair value
in the ordinary course of business.
2.8 Accounts Receivable. To the best knowledge of the Company, all of
the accounts receivable of the Company represent bona fide completed sales made
in the ordinary course of business and are valid and enforceable claims, subject
to no express set-off or counterclaim. Except as disclosed on Schedule 2.8, the
Company has no accounts receivable from any person, firm or corporation which is
affiliated with it or from the Founder or any of its directors, officers,
employees or shareholders or any affiliates of any of the foregoing.
2.9 Title to Properties. The Company has good and marketable title to
all of its material properties and assets, free and clear of all liens,
restrictions or encumbrances, except as disclosed in Schedule 2.9, and such
properties and assets constitute all of the assets necessary for the conduct of
the Company's business as presently conducted. To the best knowledge of the
Company, the Company's current management systems and executive personnel are
adequate to manage the business of the Company as contemplated to be conducted.
All machinery and equipment included in such properties which is necessary to
the business of the Company is in good condition and repair and all leases of
real or personal property to which the Company is a party are fully effective
and afford the Company peaceful and undisturbed possession of the subject matter
of the lease. The Company is not in violation of any material zoning, building
or safety ordinance, regulation or requirement or other law or regulation
applicable to the operation of its owned or leased properties, nor has the
Company received any notice of violation with which it has not complied.
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2.10 Tax Matters. Except as set forth in Schedule 2.10 attached
hereto:
(a) The Company has paid or caused to be paid all federal, state,
local, foreign, and other taxes, including without limitation, income taxes,
estimated taxes, alternative minimum taxes, excise taxes, sales taxes, franchise
taxes, employment and payroll-related taxes, withholding taxes, transfer taxes,
and all deficiencies, or other additions to tax, interest, fines and penalties
owed by it (collectively, "Taxes"), required to be paid by it through the date
hereof whether disputed or not. All taxes and other assessments and levies which
the Company is required to withhold or collect have been withheld and collected
and have been paid over to the proper governmental authorities. The Company has,
in accordance with applicable law, timely and properly filed all federal, state,
local and foreign tax returns required to be filed by it through the date
hereof, all such returns correctly and accurately set forth the amount of any
Taxes relating to the applicable period and any deductions from, or credits
against any Taxes or taxable income relating to such returns are valid and
proper items of deduction or credit.
(b) Neither the Internal Revenue Service ("IRS") nor any other
governmental authority is now asserting or, to the knowledge of the Company or
threatening to assert against the Company any deficiency or claim for additional
Taxes. No claim has ever been made by an authority in a jurisdiction where the
Company does not file reports and returns that the Company is or may be subject
to taxation by that jurisdiction. There are no security interests on any of the
assets of the Company that arose in connection with any failure (or alleged
failure) to pay any Taxes. The Company has never entered into a closing
agreement pursuant to Section 7121 of the Internal Revenue Code of 1986, as
amended (the "Code"). The Company is not and never has been a "personal holding
company" as defined under Section 541 of the Code. There has not been any audit
of any tax return filed by the Company, no such audit is in progress, and the
Company has not been notified by any tax authority that any such audit is
contemplated or pending. No extension of time with respect to any date on which
a tax return was or is to be filed by the Company is in force, and no waiver or
agreement by the Company is in force for the extension of time for the
assessment or payment of any Taxes. The Company does not have any liability for
the Taxes of any person or entity other than the Company.
(c) For purposes of this Agreement, all references to Sections of
the Code shall include any predecessor provisions to such Sections and any
similar provisions of federal, state, local or foreign law.
2.11 Contracts and Commitments. The Company is not a party to any
contract, obligation or commitment (whether written or oral) which involves a
potential commitment in excess of $100,000 or which is otherwise material and
not entered into in the ordinary course of business, nor is the Company a party
to any employment contracts; stock restriction, voting, redemption or purchase
agreements; loan, capital lease or other financing agreements; licenses;
distributor or sales representative agreements; agreements with the Founder or
any other officers, directors, employees or stockholders of the Company or
persons or organizations related to or affiliated with any such persons; leases;
agreements relating to the merger, consolidation or acquisition of the Company
or disposition of any assets or capital stock; agreements relating to the
licensing, distribution, development or maintenance of Direct Broadcast
Satellite ("DBS") services, including without limitation any contract with the
National Rural Telecommunications Cooperative (the "NRTC") or with ▇▇▇▇▇▇
Communications Galaxy, Inc. ("▇▇▇▇▇▇"); material agreements with subscribers of
the Company's services, including without limitation, leases or rental
agreements for satellite receiving systems for DirecTV ("DSS Systems") with
subscribers; powers of attorney; or pension, profit-sharing, retirement or stock
option plans, except in each case as are described in Schedule 2.11. The Company
does not know of any basis for the termination, expiration or modification of
any such agreements prior to the expiration date thereof, which termination,
expiration or modification may have an adverse effect on the assets,
liabilities, business, financial condition or prospects of the Company. The
Company is not in default under any contract, obligation or commitment
12
(including without limitation the Acquisition Agreements, as defined below, and
to the best knowledge of the Company, there is no state of facts which upon
notice or lapse of time or both would constitute such a default. The Company is
not a party to any contract or arrangement the performance of which under
circumstances now foreseeable is likely to have an adverse effect on the assets,
liabilities, business or condition, financial or otherwise, of the Company. The
Company does not have any liability for renegotiation of any government
contracts or subcontracts. The copies of the various agreements relating to the
acquisition of NRTC and DBS DirecTV franchises and the contracts with the NRTC
(including in each case all related schedules, amendments, assignments and
consents) (the "Acquisition Agreements") that have been furnished to the Series
B Outside Investors are correct and complete as of the date hereof, and, to the
best knowledge of the Company, no term therein or in the agreement by and
between ▇▇▇▇▇▇ and the NRTC, pursuant to which the NRTC acquired the rights to
market DirecTV services in certain rural areas of the United States, has been
waived, modified or amended as of the date hereof. Without limiting the
generality of the foregoing, the Founder and all other key employees of the
Company and each of its subsidiaries have entered into a Non-Competition
Agreement containing non-competition, non-solicitation and confidentiality
provisions with the Company in form of Exhibit C hereto, which agreements
continue in full force and effect.
2.12 Proprietary Rights; Employee Restrictions. Set forth in Schedule
2.12 is a list and brief description of all patents, patent rights, patent
applications, trademarks, trademark applications, service marks, service ▇▇▇▇
applications, trade names, licenses, sublicenses and copyrights owned by or
registered in the name of the Company, or of which the Company is a licensor or
licensee or in which the Company has any right, and in each case a brief
description of the nature of such right. The Company owns or possesses exclusive
licenses to use, free and clear of claims or rights of any other person, all
patents, patent applications, trademarks, trademark applications, service marks,
service ▇▇▇▇ applications, trade names, copyrights, licenses, sublicenses, trade
secrets and know how (collectively "Intellectual Property") necessary to the
conduct of its business as presently conducted and as proposed to be conducted.
All Intellectual Property that is used or incorporated into the Company's
business and which is unique or proprietary to the Company was developed by or
for the Company by the employees of the Company or its predecessors in interest
and is owned exclusively by the Company, free and clear of claims or rights of
any other person. The Company is not aware of any infringement by any other
person of any rights of the Company under any Intellectual Property. No claim is
pending or threatened against the Company nor has the Company received any
notice from any third parties, to the effect that any Intellectual Property
13
owned or licensed by the Company, or which the Company otherwise has the right
to use, or the operation, products or services of the Company infringe upon or
conflict with the asserted rights of any other person under any Intellectual
Property, and, to the best knowledge of the Company, there is no basis for any
such claim (whether or not pending or threatened). No claim is pending or
threatened against the Company, nor has the Company received any notice from any
third parties, to the effect that any Intellectual Property owned or licensed by
the Company, or which the Company otherwise has the right to use, is invalid or
unenforceable by the Company, as the case may be, and, to the best knowledge of
the Company, there is no basis for any such claim (whether or not pending or
threatened).
All licenses or other agreements under which the Company is granted
rights in Intellectual Property are listed in Schedule 2.12. All such licenses
or other agreements are in full force and effect, there is no material default
by any party thereto, and, except as set forth on Schedule 2.12, all of the
rights of the Company thereunder are freely assignable. True and complete copies
of all such licenses or other agreements, and any amendments thereto, have been
provided to the Series B Outside Investors and, to the best knowledge of the
Company, the licensors under such licenses and other agreements have and had all
requisite power and authority to grant the rights purported to be conferred
thereby.
All licenses or other agreements under which the Company has granted
rights to others in Intellectual Property are listed in Schedule 2.12. All of
said licenses or other agreements are in full force and effect, there is no
material default by any party thereto, and, except as set forth on Schedule
2.12, all of the rights of Company thereunder are freely assignable. True and
complete copies of all such licenses or other agreements, and any amendments
thereto, have been made available to the Series B Outside Investors.
All technical information developed by or belonging to the Company and
which is material to the business of the Company which has not been patented has
been kept confidential. The Company is not making unlawful use of any
Intellectual Property of any other person, including without limitation any
former employer of any past or present employees of the Company. Except as
disclosed in Schedule 2.12, neither the Company nor any of its employees,
officers or consultants has any agreements or arrangements with former employers
of such employees, officers or consultants relating to any Intellectual Property
of such employers, which interfere or conflict with the performance of such
employee's duties for the Company or results in any former employers of such
employees having any rights in, or claims on, the Company's Intellectual
Property. The activities of the Company's employees and officers do not, to the
Company's best knowledge, violate any agreements or arrangements which any such
employees have with former employers. The Company has taken all commercially
reasonable steps required to establish and preserve its ownership of all of the
Intellectual Property; each current and former employee and officer of the
Company has executed an agreement regarding confidentiality, proprietary
information and assignment of inventions to the Company substantially in the
form of Exhibit B hereto, and, to the knowledge of the Company, none of such
employees are in violation of such agreements.
Without limitation of any of the foregoing and except as otherwise
expressly disclosed in Schedule 2.12 hereto: (a) the Company has taken
reasonable security measures to guard against unauthorized disclosure or use of
any of the Intellectual Property; and (b) the Company has no reason to believe
that any person (including without limitation any former employee of the
Company) has unauthorized possession of any of the Intellectual Property, or any
part thereof, or that any person has obtained unauthorized access to any of the
Intellectual Property.
2.13 Litigation. Except as disclosed in Schedule 2.13, there is no
litigation or governmental proceeding or investigation pending or, to the best
knowledge of the Company, threatened against the Company, or any officer or key
employee of the Company, which relates to the Company or its business or affairs
or which may call into question the validity or hinder the enforceability or
14
performance of this Agreement or the agreements and transactions contemplated
hereby or which could be reasonably expected to have an adverse effect on the
assets, liabilities, business or condition (financial or otherwise) of the
Company; nor, to the best knowledge of the Company, has there occurred any event
nor does there exist any condition on the basis of which any such litigation,
proceeding or investigation might properly be instituted.
2.14 Offeree. Neither the Company nor anyone acting on its behalf has
in the past or will sell, offer for sale or solicit offers to buy any securities
of the Company so as to bring the offer, issuance or sale of the Series B
Convertible Preferred Shares or the Series B Conversion Shares, as contemplated
by this Agreement, within the provisions of Section 5 of the Securities Act,
unless such offer, issuance or sale was or will be within the exemptions of
Section 4 thereof. The Company has and will comply with all applicable state
"blue-sky" or securities laws in connection with the issuance and sale of its
Common Stock, Convertible Preferred Shares, Warrants and other securities
heretofore issued and to be issued upon the closing of the Agreement. The
Company has in the past complied with all applicable federal and state
securities laws in connection with the offer, solicitation of offers and sales
of its securities.
2.15 Business; Compliance with Laws. Except as disclosed in Schedule
2.15, the Company has all necessary franchises, permits, licenses and other
rights and privileges necessary to permit it to own its property and to conduct
its business as it is presently conducted. The Company is not in violation, in
any respect, of any law, regulation, authorization or order of any public
authority. The Company is in compliance, in all material respects, with all
federal (including all laws and regulations of the Federal Communications
Commission), state and local laws and regulations (including all applicable
environmental laws and regulations) relating to its business as presently
conducted, except as disclosed in Schedule 2.15, and has been approved as an
NRTC franchisee and NRTC Affiliate Member. Neither the Company nor any of its
affiliates has been: (a) subject to a voluntary or involuntary petition under
the federal bankruptcy laws or any state insolvency law or the appointment of a
receiver, fiscal agent or similar officer by a court for his business or
property; (b) convicted in a criminal proceeding or named as a subject of a
pending criminal proceeding (excluding traffic violations and other minor
offenses); (c) subject to any order, judgment, or decree (not subsequently
reversed, suspended or vacated) of any court of competent jurisdiction
permanently or temporarily enjoining it, him or her from, or otherwise imposing
limits or conditions on its, his or her, engaging in any securities, investment
advisory, banking, insurance or other type of business or acting as an officer
or director of a public company; or (d) found by a court of competent
jurisdiction in a civil action or by the Securities and Exchange Commission or
the Commodity Futures Trading Commission to have violated any federal or state
commodities, securities or unfair trade practices law or regulations of any
regulatory agency, which such judgment or finding has not been subsequently
reversed, suspended or vacated.
2.16 Information Supplied to Series B Outside Investors. This
Agreement and the Schedules (including the long-term business plan included
herein as Schedule 2.16), taken as a whole, do not contain any untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements contained therein not misleading. Such business plan was prepared
by the Company in good faith and fairly presents the business and prospects of
the Company in all material respects as of its date. The forecasts and
projections of future financial results contained in such business plan were
prepared by the Company in good faith and are based upon information available
to the Company as of the date thereof and upon assumptions believed by the
15
Company to be reasonable. There is no material fact directly relating to the
assets, liabilities, business or condition (financial or otherwise) of the
Company (other than facts which relate to general economic or industry trends or
conditions) presently known to the Company which has not been disclosed to the
Series B Outside Investors that materially adversely affects or in the future
may reasonably be expected to materially adversely affect the same.
2.17 Investment Banking; Brokerage. No broker, finder, agent or
similar intermediary has acted on behalf of the Company or the Founder in
connection with this Agreement or the transactions contemplated hereby and there
are no brokerage commissions, finders fees or similar fees or commissions
payable in connection therewith (other than the Warrants issued to the Alta
Investors). The Company agrees to indemnify and hold the Series B Outside
Investors harmless from any losses, damages, costs or expenses they may suffer
or incur as a result of a breach of this representation (including any dilution
or diminution in value of their investment in the Company).
2.18 Solvency. The Company has not: (a) made a general assignment for
the benefit of creditors; (b) filed any voluntary petition in bankruptcy or
suffered the filing of any involuntary petition by its creditors; (c) suffered
the appointment of a receiver to take possession of all, or substantially all,
of its assets; (d) suffered the attachment or other judicial seizure of all, or
substantially all, of its assets; (e) admitted in writing its inability to pay
its debts as they come due; or (f) made an offer of settlement, extension or
composition to its creditors generally. After giving effect to the transactions
provided for or contemplated herein: (a) the Company will be able to pay its
debts as they come due in the usual course of business and will have adequate
capital to conduct its business; and (b) the Company's total assets will be
greater than its total liabilities (total assets for this purpose being
determined on the basis of the "fair saleable value" thereof).
2.19 Environmental Matters.
(a) Except as set forth in Schedule 2.19, (i) the Company has
never generated, transported, used, stored, treated, disposed of, or managed any
Hazardous Waste (as defined below); (ii) to the best knowledge of the Company,
no Hazardous Material (as defined below) has ever been or is threatened to be
spilled, released, or disposed of by the Company, at any site presently or
formerly owned, operated, leased, or used by the Company, or has ever come to be
located in the soil or groundwater at any such site; (iii) to the best knowledge
of the Company, no Hazardous Material of the Company has ever been transported
from any site presently or formerly owned, operated, leased, or used by the
Company for treatment, storage, or disposal at any other place; (iv) to the best
knowledge of the Company, the Company presently does not own, operate, lease, or
use, nor has the Company previously owned, operated, leased, or used, any site
on which underground storage tanks are or were located; and (v) no lien has ever
been imposed by any governmental agency on any property, facility, machinery, or
equipment owned, operated, leased, or used by the Company with the presence of
any Hazardous Material and based upon any action or inaction of the Company.
(b) Except as set forth in Schedule 2.19, (i) the Company has no
liability under, nor has it ever violated in any respect, any Environmental Law
(as defined below); (ii) the Company, any property owned, operated, leased, or
used by the Company, and any facilities and operations thereon are presently in
compliance in all respects with all applicable Environmental Laws; (iii) the
16
Company has never entered into or been subject to any judgment, consent decree,
compliance order, or administrative order with respect to any environmental or
health and safety matter or received any request for information, notice, demand
letter, administrative inquiry, or formal or informal complaint or claim with
respect to any environmental or health and safety matter or the enforcement of
any Environmental Law; and (iv) none of the items enumerated in clause (iii) of
this paragraph will be forthcoming.
(c) Except as set forth in Schedule 2.19, to the best knowledge
of the Company, no site owned, operated, leased or used by the Company contains
any asbestos or asbestos-containing material, any polychlorinated biphenyls
("PCBs") or equipment containing PCBs, or any urea formaldehyde foam insulation.
(d) The Series B Outside Investors have been provided with copies
of all documents, records, and information available concerning any
environmental or health and safety matter relevant to the Company, whether
generated in connection with the Company's business or otherwise, including,
without limitation, environmental audits, environmental risk assessments, site
assessments, documentation regarding off-site disposal of Hazardous Materials,
spill control plans, and reports, correspondence, permits, licenses, approvals,
consents, and other authorizations related to environmental or health and safety
matters issued by any governmental agency.
(e) For purposes of this Section 2.19, (i) "Hazardous Material"
shall mean and include any hazardous waste, hazardous material, hazardous
substance, petroleum product, oil, toxic substance, pollutant, contaminant, or
other substance which may pose a threat to the environment or to human health or
safety, as defined or regulated under any Environmental Law; (ii) "Hazardous
Waste" shall mean and include any hazardous waste as defined or regulated under
any Environmental Law; (iii) "Environmental Law" shall mean any environmental or
health and safety-related law, regulation, rule, ordinance, or by-law at the
federal, state, or local level, whether existing as of the date hereof, or
subsequently enacted; and (iv) "Company" shall include the Company, and any
predecessor to the Company.
2.20 Employee Benefit Programs.
(a) The Company has never maintained (as defined below) an
Employee Program (as defined below) which has at any time been intended to
qualify under Section 401(a) or 501(c)(9) of the Code.
(b) Each Employee Program that has ever been maintained by the
Company has been maintained in compliance in all material respects with all
applicable laws. With respect to any Employee Program ever maintained by the
Company, there has occurred no "prohibited transaction," as defined in Section
406 of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or Section 4975 of the Code (for which there exists neither a
statutory nor regulatory exception), or material breach of any duty under ERISA
or other applicable law (including, without limitation, any health care
continuation requirements or any other tax law requirements, or conditions to
favorable tax treatment, applicable to such plan or to any person in regard to
such plan), which could result, directly or indirectly (including, without
17
limitation, through any obligation of indemnification or contribution), in any
taxes, penalties or other liability to the Company or any of its affiliates. No
litigation, arbitration or governmental administrative proceeding (or
investigation) or other proceeding (other than those relating to routine claims
for benefits) is pending or, to the best knowledge of the Company, threatened
with respect to any such Employee Program.
(c) Neither the Company nor any Affiliate (as defined below) (i)
has ever maintained any Employee Program which has been subject to Title IV of
ERISA or Section 412 of the Code (including, but not limited to, any
Multiemployer Plan (as defined below)) or (ii) has ever provided health care or
any other non-pension benefits to any employees after their employment is
terminated (other than as required by part 6 of subtitle B of Title I of ERISA)
or has ever promised to provide such post-termination benefits.
(d) With respect to each Employee Program maintained by or on
behalf of the Company or any affiliate since its incorporation, complete and
correct copies of the following documents (if applicable to such Employee
Program) have previously been delivered to the Series B Outside Investors: (i)
all documents embodying or governing such Employee Program, and any funding
medium for the Employee Program (including, without limitation, trust
agreements), as they may have been amended to the date hereof; (ii) the most
recent IRS determination or approval letter with respect to such Employee
Program under Code Section 401 or 501(c)(9), and any applications for
determination or approval subsequently filed with the IRS; (iii) the three most
recently filed IRS Forms 5500, with all applicable schedules and accountants'
opinions attached thereto; (iv) the summary plan description for such Employee
Program (or other descriptions of such Employee Program provided to employees)
and all modifications thereto; (v) any insurance policy (including any fiduciary
liability insurance policy and any excess loss policy) related to such Employee
Program; (vi) any documents evidencing any loan to an Employee Program that is a
leveraged employee stock ownership plan; and (vii) all other materials
reasonably necessary for the Company to perform any of its responsibilities with
respect to any Employee Program subsequent to the Closing (including, without
limitation, health care continuation requirements).
(e) For purposes of this Section 2.20:
(i) "Employee Program" means (A) all employee benefit plans
within the meaning of ERISA Section 3(3), including, but not limited to,
multiple employer welfare arrangements (within the meaning of ERISA Section
3(40)), plans to which more than one unaffiliated employer contributes and
employee benefit plans (such as foreign or excess benefit plans) which are
not subject to ERISA; and (B) all stock or cash option plans, restricted
stock plans, bonus or incentive award plans, severance pay policies or
agreements, deferred compensation agreements, supplemental income
arrangements, vacation plans, and all other employee benefit plans,
agreements, and arrangements not described in (A) above. In the case of an
Employee Program funded through an organization described in Code Section
501(c)(9), each reference to such Employee Program shall include a
reference to such organization.
(ii) An entity "maintains" an Employee Program if such
entity sponsors, contributes to, or provides (or has promised to provide)
benefits under such Employee Program, or has any obligation (by agreement
or under applicable law) to contribute to or provide benefits under such
Employee Program, or if such Employee Program provides benefits to or
otherwise covers employees of such entity (or their spouses, dependents, or
beneficiaries).
18
(iii) An entity is an "Affiliate" of the Company if it would
have ever been considered a single employer with the Company or any Entity
under ERISA Section 4001(b) or part of the same "controlled group" as the
Company for purposes of ERISA Section 302(d)(8)(C).
(iv) "Multiemployer Plan" means a (pension or non-pension)
employee benefit plan to which more than one employer contributes and which
is maintained pursuant to one or more collective bargaining agreements.
2.21 Product and Services Claims. Except as set forth on Schedule
2.21, (i) there are no pending or, to the best knowledge of the Company,
threatened material product or service claims with respect to any products or
services provided by the Company prior to the Closing Date nor are there any
facts upon which a claim of such nature could reasonably be anticipated to be
based and (ii) the Company does not have any contractual liability for breach of
warranty or service claims. No claims have been made against the Company for
renegotiation or price redetermination of any business transaction resulting
from or relating to defective products or services, and, to the best knowledge
of the Company, there are no facts upon which any such claim should reasonably
be anticipated to be based.
2.22 Employees; Labor Matters. The Company employs a total of
approximately 254 full-time employees and 31 part-time employees and generally
enjoys good employer-employee relationships. The Company is not delinquent in
payments to any of its employees for any material amount of wages, salaries,
commissions, bonuses or other direct compensation for any services performed for
it to the date hereof or amounts required to be reimbursed to such employees.
The Company does not have any policy, practice, plan or program of paying
severance pay or any form of severance compensation in connection with the
termination of employment, except as set forth in Schedule 2.22. The Company is
in compliance in all material respects with all applicable laws and regulations
respecting labor, employment, fair employment practices, work place safety and
health, terms and conditions of employment, and wages and hours. There are no
charges of employment discrimination or unfair labor practices, nor are there
any strikes, slowdowns, stoppages of work or any other concerted interference
with normal operations which are existing, pending or threatened against or
involving the Company. The Company has not received any information indicating
that any of its employment policies or practices is currently being audited or
investigated by any federal, state or local government agency. The Company is,
and at all times since its incorporation has been, in compliance with the
requirements of the Immigration Reform Control Act of 1986. Schedule 2.22 sets
forth a complete list of each officer, employee and sales representative who is
scheduled to receive total remuneration from the Company on an annualized basis
in excess of $50,000 for the calendar year ending December 31, 1997.
2.23 Relationship with Subscribers, Retailers and Distributors. The
relationships of the Company with its subscribers, retailers and distributors
are good commercial working relationships. The Company has never intentionally
solicited, nor intentionally encouraged any of its representatives or any other
person to solicit, nor has the Company employed any scheme or device for the
purpose of encouraging nor has the Company encouraged any of its representatives
or any other person to employ any scheme or device for the purposes of
19
encouraging persons residing outside the Company's designated DBS service areas,
or persons not otherwise eligible, to become subscribers of the DBS services
offered in the ordinary course of the Company's business.
2.24 Corporate Records; Copies of Documents. The corporate record
books of the Company accurately record all corporate action taken by its
stockholder and board of directors and committees. The copies of the corporate
records of the Company, as made available to the Series B Outside Investors for
review, are true and complete copies of the originals of such documents. The
Company has made available for inspection by the Investor and their counsel true
and correct copies of all documents referred to in this Section 2.24 or in the
Schedules delivered pursuant to this Agreement.
2.25 Affiliate Transactions. Except as set forth in Schedule 2.25
hereto, neither the Company nor any officer, employee or director of the Company
(other than the Outside Investor Representatives (as hereinafter defined)) or
any of their respective spouses or family members or any of their affiliates,
owns, directly or indirectly, on an individual or joint basis, any material
interest in, or serves as an officer, director, partner or in another similar
capacity of, any competitor of the Company, or any organization which has a
contract or arrangement with the Company.
2.26 Investments Related to Certain Foreign Countries. Neither the
Company nor any affiliate of the Company has participated in, or is
participating in, an anti-Israeli boycott within the scope of Chapter 7 of Part
2 of Division 4 of Title 2 of the California Government Code, as in effect from
time to time.
2.27 Small Business Concern, Etc.
(a) The Company, together with its "affiliates" (as that
term is defined in 13 CFR ss.121.103), is a "smaller business" within the
meaning of SBIC Regulations, including 13 CFR Section 107.710. The information
regarding the Company and its affiliates set forth in SBA Form 480, Form 652 and
Section A of Form 1031 delivered on or prior to the Closing Date is accurate and
complete. The Company does not presently engage in, nor shall hereafter engage
in, any activities, and the Company shall not use the proceeds of the sale of
the Series B Convertible Preferred Shares hereunder directly or indirectly for
any purpose, for which an SBIC is prohibited from providing funds by SBIC
Regulations (including 13 CFR Section 107.720).
(b) As of the date hereof, the primary business activity of
the Company is (i) providing DBS services and (ii) classified under Standard
Industrial Classification Code number 4841 (Cable and Other Pay Television
Services), and the annual receipts (as such term is used in 13 CFR Section
121.201) of the Company are less than $11,000,000.
(c) For all purposes of this Agreement, the following terms
shall have the following meanings:
(i) "SBA" means the United States Small Business
Administration, and any successor agency performing the
functions thereof;
(ii) "SBIC" means a Small Business Investment Company
licensed by the SBA under the SBIC Act;
20
(iii) "SBIC Act" means the Small Business Investment
Act of 1958, as amended; and
(iv) "SBIC Regulations" means the SBIC Act and the
regulations issued by the SBA thereunder, codified at Title
13 of the Code of Federal Regulations ("13 CFR"), Parts 107
and 121.
2.28 Insurance. The Company maintains insurance which is adequate to
protect the Company and its financial condition against the risks involved in
the business conducted by the Company.
SECTION 3. CONDITIONS OF PURCHASE
The Series B Outside Investors' obligation to purchase and pay for the
Series B Convertible Preferred Shares shall be subject to compliance by the
Company and each of its subsidiaries, including without limitation GSS, with the
Company's agreements herein contained and to the fulfillment to the Series B
Outside Investors' satisfaction on or before the Closing Date of the following
conditions:
3.1 Satisfaction of Conditions. The representations and warranties of
the Company contained in this Agreement (including, but not limited to, the
representations and warranties made in Section 2 hereof) shall be true and
correct in all material respects on and as of the Closing Date; each of the
conditions specified in this Section 3 shall have been satisfied or waived in
writing; and on the Closing Date, certificates to such effect executed by the
President and the principal financial officer of the Company shall be delivered
to the Series B Outside Investors.
3.2 Opinion of Counsel. The Series B Outside Investors shall have
received an opinion, dated the Closing Date, in form and substance satisfactory
to them on the organization and authority of the Company and each of its
subsidiaries, the enforceability of this Agreement and any related agreements,
absence of conflicts with organizational documents and other agreements, absence
of litigation and such other matters as requested by the Series B Outside
Investors.
3.3 Authorization. The Board of Directors of the Company shall have
duly adopted resolutions in form reasonably satisfactory to the Series B Outside
Investors authorizing the Company to consummate the transactions contemplated
hereby in accordance with the terms hereof, and the Series B Outside Investors
shall have received a duly executed certificate of the Secretary of the Company
setting forth a copy of such resolutions and the Amended and Restated
Certificate of Incorporation and By-laws of the Company and such other matters
as may be requested by the Series B Outside Investors.
3.4 Effectiveness of Preferred Stock Terms. The Board of Directors of
the Company shall have adopted a resolution establishing the terms of the Series
B Preferred Stock and Series B Convertible Redeemable Preferred Stock as set
forth in Exhibit A hereto and such action shall have been made effective by the
required approval thereof by the holders of the Series A Convertible Preferred
21
Stock and the Common Stock and the filing of an Amended and Restated Certificate
of Incorporation with the Secretary of State for the State of Delaware.
3.5 Stockholders' Agreement. The Company, the Investors and all other
stockholders of the Company, if any, shall have executed and delivered a
Stockholders' Agreement in the form of Exhibit B hereto (the "Stockholders'
Agreement").
3.6 All Proceedings Satisfactory. All corporate and other proceedings
taken prior to or at the Closing in connection with the transactions
contemplated by this Agreement, and all documents and evidences incident
thereto, shall be reasonably satisfactory in form and substance to fifty-eight
percent in interest of the Series B Outside Investors, the Series B Outside
Investors shall have received such copies thereof and other materials
(certified, if requested) as they may reasonably request in connection
therewith. The issuance and sale of the Series B Convertible Preferred Shares to
the Series B Outside Investors shall be made in conformity with all applicable
state and federal securities laws.
3.7 Delivery of Documents. The Company shall have executed and
delivered to the Series B Outside Investors (or shall have caused to be executed
and delivered to the Series B Outside Investors by the appropriate persons) the
following:
(a) Certificates for the Series B Convertible Preferred Shares;
(b) Certified copies of resolutions of the Board of Directors and
Stockholders of the Company authorizing the execution and delivery of this
Agreement, the Stockholders' Agreement, the Amended and Restated Certificate of
Incorporation creating the Series B Convertible Preferred Shares, the issuance
of the Series B Convertible Preferred Shares and, upon conversion of the Series
B Convertible Preferred Shares, the issuance of the Series B Conversion Shares;
(c) A copy of the corporate charter of the Company, as amended,
certified as of a recent date by the Secretary of State of the State of
Delaware;
(d) A copy of the By-laws of the Company certified by the
Company's secretary;
(e) Certificates issued by the Secretary of State of the States
of Delaware and Missouri, certifying that the Company and each of its
subsidiaries is in good standing in their respective states; and
(f) Such other supporting documents and certificates as the
Series B Outside Investors may reasonably request.
3.8 SBIC Deliveries. The Company shall have delivered to Norwest
Equity Partners V ("Norwest"):
(a) duly completed and executed SBA Forms 480, 652 and Part A of
1031;
(b) if not delivered prior to the Closing, a business plan
showing the Company's financial projections for a five-year period from the
Closing;
22
(c) a written statement from the Company regarding its intended
use of the proceeds from the sale of the Series B Preferred Shares; and
(d) a list, after giving effect to the Closing, of (i) the name
of each of the Company's directors, (ii) the name and title of each of the
Company's officers, and (iii) the name of each of the Company's stockholders
setting forth the number and class of shares held.
SECTION 3A. POST-CLOSING COVENANT OF COMPANY.
The Company hereby covenants that, promptly following Closing and in
accordance with the terms of the Stockholders' Agreement, the size of the
Company's Board of Directors shall be fixed at seven (7) members and two (2)
designees of the Series B Outside Investors shall be elected to the Company's
Board of Directors (herein referred to, together with any successors as
replacements, as the "Series B Outside Investor Representatives"). The designees
of the Series A Outside Investors to the Company's Board of Directors are herein
referred to, together with any successors as replacements, as the "Series A
Outside Investor Representatives" and, together with the Series B Outside
Investor Representatives where no distinction is required, the "Outside Investor
Representatives." Promptly following Closing, the Company shall enter into an
Indemnification Agreement with each of the Series B Outside Investor
Representatives in substantially the form of Exhibit D hereto.
SECTION 4. COVENANTS OF THE COMPANY
The Company (which term shall be deemed to include, for purposes of
this Section 4, any subsidiary or subsidiaries of the Company existing at or
formed after the date of this Agreement) shall comply with the following
covenants except as shall otherwise be expressly agreed pursuant to a written
consent or consents executed by the holders of sixty-four percent in interest of
the Series A Convertible Preferred Shares and by the holders of fifty-eight
percent in interest of the Series B Convertible Preferred Shares, until such
time as all of the applicable series of Convertible Preferred Shares shall have
been redeemed in accordance with their terms or converted into Common Stock and
Redeemable Preferred Stock upon the vote of holders of fifty-eight percent in
interest of such series of Preferred Shares, upon the closing of an underwritten
public offering pursuant to an effective registration statement under the
Securities Act covering the offer and sale of Common Stock of the Company to the
public in which the proceeds received by the Company, net of underwriting
discounts and commissions, equal or exceed $35 million and the shares are
offered to the public at a price per share, in the case of the Series A
Convertible Preferred Shares, of no less than $300.00, and in the case of the
Series B Convertible Preferred Shares, of no less than $600.00 (in each case as
appropriately adjusted for any stock split, combination, reorganization,
recapitalization, reclassification, stock distribution, stock dividend or
similar event) (a "Qualified Public Offering") or as otherwise provided in the
Amended and Restated Certificate of Incorporation; provided, however, that the
covenants set forth in Section 4.18 shall not terminate upon any such event but
shall continue to be of full force and effect.
4.1 Financial Statements; Minutes. The Company will maintain a
comparative system of accounts in accordance with generally accepted accounting
principles, keep full and complete financial records and furnish to the
23
Investors the following reports: (a) within 90 days after the end of each fiscal
year, a copy of the consolidated balance sheet of the Company as at the end of
such year, together with a consolidated statement of income and retained
earnings of the Company for such year, audited and certified by independent
public accountants of recognized national standing reasonably satisfactory to
the Investors, prepared in accordance with generally accepted accounting
principles and practices consistently applied; (b) within 45 days after the end
of each quarter, commencing with the quarter ending December 31, 1997, a
consolidated unaudited balance sheet of the Company as at the end of such
quarter and a consolidated unaudited statement of income and retained earnings
for the Company for such quarter and for the year to date; (c) within 30 days
after the end of each month, commencing with the month ended October 31, 1997, a
consolidated unaudited balance sheet of the Company as at the end of such month
and a consolidated unaudited statement of income and retained earnings for the
Company for such month and for the year to date, each of the foregoing balance
sheets and statements of earnings and retained earnings to set forth in
comparative form the corresponding figures for the prior fiscal period; and (d)
such other financial information as the holders of fifty-eight percent in
interest of the Series A Preferred Shares and the holders of fifty-eight percent
in interest of the Series B Convertible Preferred Shares may reasonably request,
including without limitation, certificates of the principal financial officer of
the Company concerning compliance with the covenants of the Company under this
Section 4.
4.2 Budget and Operating Forecast. Commencing with the fiscal year
beginning January 1, 1999, the Company will prepare and submit to the Board of
Directors of the Company a budget for the Company for each fiscal year of the
Company at least 60 days prior to the beginning of such fiscal year, together
with management's written discussion and analysis of such budget; with respect
to the fiscal year beginning January 1, 1998, such budget and management's
written discussion and analysis shall be submitted to the Board of Directors by
no later than January 1, 1998. The budget shall be accepted as the budget for
such fiscal year when it has been approved by a majority of the full Board of
Directors of the Company and, thereupon, a copy of such budget promptly shall be
sent to the Investors. The Company shall review the budget periodically and
shall advise the Board of Directors and the Investors of all changes therein and
all material deviations therefrom.
4.3 Conduct of Business. The Company will continue to engage
principally in the business now conducted by the Company or a business or
businesses similar thereto or reasonably compatible therewith, and shall not
engage in any other business or businesses without the approval of the holders
of fifty-eight percent in interest of the Series A Convertible Preferred Shares
and of the holders of fifty-eight percent in interest of the Series B
Convertible Preferred Shares. The Company shall conduct its business in a manner
that does not cause the Outside Investors to recognize any item of gross income
which would generate "unrelated business taxable income" (as that term is
defined in Sections 512 through 514 of the Code), including without limitation
any income derived from or on account of any "debt-financed property" (as
defined in Section 514 of the Code), or gross income directly attributable to a
"trade or business" (within the meaning of Sections 512 and 513 of the Code).
24
The Company will keep in full force and effect its corporate existence and all
intellectual property rights useful in its business (except such rights as the
Board of Directors has reasonably determined are not material to the Company's
continuing operations) and shall use its best efforts to cause each new key
employee of the Company to execute a non-competition, non-solicitation and
confidentiality agreement with substantially the same terms as are set forth in
the form of Non-Competition Agreement attached hereto as Exhibit C.
4.4 Payment of Taxes, Compliance with Laws, etc. The Company will pay
and discharge all lawful taxes, assessments and governmental charges or levies
imposed upon it or upon its income or property before the same shall become in
default, as well as all lawful claims for labor, materials and supplies which,
if not paid when due, might become a lien or charge upon its property or any
part thereof; provided, however, that the Company shall not be required to pay
and discharge any such tax, assessment, charge, levy or claim so long as the
validity thereof is being contested by the Company in good faith by appropriate
proceedings and an adequate reserve therefor has been established on its books.
The Company will comply with all applicable laws and regulations in the conduct
of its business, including, without limitation, all applicable federal and state
securities laws in connection with the issuance of any shares of its capital
stock.
4.5 Insurance. The Company will keep its insurable properties insured,
upon reasonable business terms, by financially sound and reputable insurers
against liability, and the perils of casualty, fire and extended coverage in
amounts of coverage at least equal to those customarily maintained by companies
in the same or similar business as the Company. The Company will also maintain
with such insurers insurance against other hazards and risks and liability to
persons and property to the extent and in the manner customary for companies
engaged in the same or similar business.
4.6 Maintenance of Properties. The Company will maintain all
properties used or useful in the conduct of its business in good repair, working
order and condition, ordinary wear and tear excepted, as necessary to permit
such business to be properly and advantageously conducted.
4.7 Affiliated Transactions. All transactions by and between the
Company and the Founder and any officer or key employee of the Company or
persons controlling, controlled by, under common control with or otherwise
affiliated with the Founder or such officer or key employee, shall be conducted
on an arm's-length basis, shall be on terms and conditions no less favorable to
the Company than could be obtained from nonrelated persons and shall be approved
in advance by the disinterested members of the Board of Directors after full
disclosure of the terms thereof.
4.8 Management Compensation. Compensation paid by the Company to its
management will be comparable to compensation paid to management in companies in
the same or similar businesses of similar size and maturity and with comparable
financial performance. In furtherance of the foregoing, the Company hereby
agrees that no compensation or other remuneration at an annualized rate in
excess of $50,000 shall be paid to, nor shall any capital stock of the Company
be issued to, or options to purchase any of its capital stock granted to, any
officer or employee of the Company or any of its subsidiaries, without the
approval of a compensation committee of the Board of Directors, a majority of
the members of which committee shall be comprised of the Outside Investor
Representatives (including at least one Series A and one Series B Outside
Investor Representative) and/or other non-employee members of the Board of
Directors. Any grants of capital stock or options hereunder shall be conditioned
upon the grantee agreeing to be bound by the terms of the Stockholders'
Agreement.
4.9 Use of Proceeds. The Company shall use the proceeds of the sale of
the Series B Convertible Preferred Shares to finance acquisitions of NRTC
franchises and for working capital. Pending use for the above described
25
purposes, said proceeds shall be temporarily invested in short-term interest
bearing securities, including U.S. Government securities, shares of money market
mutual funds and certificates of deposit and similar instruments of federally or
state-chartered banks.
4.10 Board of Directors Meetings; Meetings with Investors.
(a) The Company will ensure that meetings of its Board of
Directors are held at least six times each year and at intervals of not more
than three months and will reimburse Directors for their reasonable travel and
other out-of-pocket expenses incurred in connection with attending meetings of
the Board of Directors or performing such other business on behalf of the
Company as may be approved by the Company in advance. The Amended and Restated
Certificate of Incorporation or By-laws of the Company will at all times during
which any nominee of the Investors serves as director of the Company provide for
indemnification of the directors and limitations on the liability of the
directors to the fullest extent permitted under applicable state law. The
Company will use its best efforts to obtain and maintain on reasonable business
terms directors and officers' liability insurance coverage of at least
$1,000,000 per occurrence and will notify its Directors promptly of any lapse of
such coverage.
(b) The Outside Investors shall be entitled to consult with and
advise the Board of Directors on significant business issues with respect to the
Company, including management's proposed annual operating plans for the Company,
and management will meet with the Outside Investors regularly during each year
at the Company's facilities at mutually agreeable times and intervals for such
consultation and advice and to review progress in achieving said plans. The
Outside Investors may examine the books and records of the Company and inspect
its facilities and may request information at reasonable times and intervals
concerning the general status of the financial condition and operations of the
Company, provided that access to highly confidential proprietary information and
facilities need not be provided. If an Outside Investor is not represented on
the Board of Directors, the Company shall invite a representative of such
Outside Investor to attend all meetings of its Board of Directors relating to
the Company in a non-voting observer capacity, and in this respect shall give
such representative copies of all notices, minutes, consents, and other material
that it provides to all of its directors and which relate to the Company.
4.11 Sales of Additional Securities.
(a) The Company covenants and agrees that it shall not accept
subscriptions for or issue, sell, give away, transfer, pledge, mortgage, assign
or otherwise dispose of any shares of capital stock or any other equity
interests, or other securities convertible into or exchangeable for capital
stock or other equity interests or options, warrants or rights carrying any
rights to purchase capital stock or other equity interests or convertible or
exchangeable securities, without the express written consent of holders of
fifty-eight percent in interest of the Series A Convertible Preferred Shares and
of holders of fifty-eight percent in interest of the Series B Convertible
Preferred Shares, except as provided in Section 4.11(b) hereof. In addition, the
Company covenants and agrees that, except as otherwise expressly permitted by
Section 4.11(b) hereof, it will not sell or issue any (i) shares of capital
stock of the Company, or bonds, certificates of indebtedness, debentures or
other securities convertible into or exchangeable for capital stock of the
Company, or options, warrants or rights carrying any rights to purchase capital
stock or convertible or exchangeable securities of the Company (collectively,
"Additional Equity Securities") or (ii) subordinated notes, bonds, certificates
of indebtedness, debentures or other mezzanine debt securities (collectively,
"Additional Debt Securities" and together with Additional Equity Securities
where no distinction is required, "Additional Securities") unless (x) the
Company shall have received a bona fide arms-length offer (which may be in
response to a solicitation by the Company) to purchase such Additional
Securities from a third party, and (y) the Company first submits a written offer
to the Investors who are then holders of Convertible Preferred Shares
identifying the third party to whom such Additional Securities are proposed to
be sold and the terms of the proposed sale, and offering to such Investors the
opportunity to purchase such securities on terms and conditions, including
price, not less favorable than those on which the Company proposes to sell such
securities to the third party. Each of such Investors shall have the right to
26
purchase its proportionate share of such securities based on the ratio which the
number of shares of Common Stock into which such Convertible Preferred Shares
owned by such Investor are then convertible bears to the number of shares of
Common Stock into which all Convertible Preferred Shares owned by all Investors
immediately prior to such issuance are then convertible. Any Investor may
transfer its right to be offered any such opportunity to any transferee of
shares of its Convertible Preferred Shares, in which event such transferee shall
be deemed to be an Investor for purposes of this Section 4.11. The Company's
offer to such Investors shall remain open and irrevocable for a period of at
least 45 days. Any securities so offered to such Investors which are not
purchased pursuant to such offer shall be offered to such Investors wishing to
purchase any such securities, and thereafter may be sold by the Company to the
third party originally named in the offer to such Investors on terms and
conditions, including price, not more favorable to the third party than those
set forth in such offer at any time within 75 days following the date of such
offer, but may not be sold to any other person or on terms and conditions,
including price, that are more favorable to the purchaser than those set forth
in such offer or after such 75-day period without renewed compliance with this
Section 4.11.
(b) Notwithstanding the foregoing, the Company may (i) issue, or
issue options, warrants or rights to subscribe for, up to an aggregate of 62,525
shares of its Common Stock to officers, directors, employees, consultants or
agents of the Company pursuant to the terms of the Stock Option Plan and Section
4.8 hereof and issue shares of its Common Stock upon the exercise of such stock
options; (ii) issue Conversion Shares upon the conversion of the Preferred
Shares; (iii) issue Warrant Shares upon the exercise of the Warrants; (iv)
declare, make or issue a dividend or other distribution payable in shares of the
Common Stock in respect of outstanding shares of the Common Stock or the
Convertible Preferred Stock in accordance with the Company's Amended and
Restated Certificate of Incorporation, as amended; (v) issue shares of Common
Stock in connection with a Qualified Public Offering; or (vi) with the prior
consent of holders of fifty-eight percent in interest of the Series A
Convertible Preferred Shares and of holders of fifty-eight percent in interest
of the Series B Convertible Preferred Shares, issue, or issue options, warrants
or rights to subscribe for, shares of its Common Stock in connection with any
debt, capital lease or other similar financing transaction.
4.12 Stockholders' Agreement, Non-Competition Agreements and
Confidentiality and Proprietary Rights Agreements. The Company will diligently
enforce all of its rights under the Stockholders' Agreement described in Section
3.5 hereof, and the agreements described in Section 3.6 hereof. The Company will
not effect any transfer of any of the outstanding capital stock of the Company
on the stock record books of the Company unless such transfer is made in
27
accordance with the terms of the Stockholders' Agreement referred to in Section
3.5 hereof. The Company will not waive or release any rights under, or consent
to the amendment of, any such agreement without the requisite written approval
of the parties thereto.
4.13 Distributions on, and Redemptions of, Capital Stock. Except as
otherwise expressly provided in this Agreement or in Exhibit A hereto, the
Company will not declare or pay any dividends or make any distributions of cash,
property or securities of the Company with respect to any shares of its Common
Stock or any other class of its capital stock, or directly or indirectly redeem,
purchase, or otherwise acquire for consideration any shares of its Common Stock
or any other class of its capital stock; provided, however, that this
restriction shall not apply to the repurchase of shares of the Common Stock
pursuant to stock repurchase agreements under which the Company has the option
to repurchase such shares upon the occurrence of certain events, including the
termination of employment and involuntary transfers, by operation of law,
provided that the repurchase price paid by the Company does not exceed the
purchase price paid to the Company for such shares. Any redemption, repurchase
or other acquisition by the Company of any shares of its capital stock shall be
made in compliance with all laws, including but not limited to federal and state
securities laws.
4.14 Merger, Consolidation, Sale of Assets, Acquisitions and Other
Actions. The Company will not without the prior written consent of 58% in
interest of the Series A Convertible Preferred Shares and of holders of 58% in
interest of the Series B Convertible Preferred Shares: (a) merge or consolidate
with or into another entity (with respect to which less than a majority of the
outstanding voting power of such surviving entity is held by stockholders of the
Company immediately prior to such event), provided the provisions of clause (b)
below are not violated by such merger or consolidation, or sell, lease or
otherwise dispose of (whether in one transaction or a series of related
transactions) all, or substantially all, of the assets of the Company determined
on a consolidated basis, (b) acquire any other corporation or business concern,
whether by acquisition of assets, capital stock, merger or otherwise, and
whether in consideration of the payment of cash, the issuance of capital stock
or otherwise (other than acquisitions of any NRTC franchisee for a purchase
price not greater than $20,000,000 or acquisitions of any other entity for a
purchase price not greater than $5,000,000), (c) voluntarily liquidate or wind
up its operations, (d) issue any shares of its capital stock which are senior to
or on a parity with the Convertible Preferred Shares with respect to dividends,
conversion, liquidation or redemptions or with any special voting rights, (e)
create, incur, assume, become liable for, or permit to exist any indebtedness
for borrowed money or any indebtedness as a result of any acquisition, capital
leases, or other similar commitments or obligations, which, for any one such
borrowing or series of related borrowings, is in excess of $20,000,000, (f)
grant or permit to exist any liens securing indebtedness in excess of
$20,000,000 or security interests or encumbrances on any of the Company's assets
or properties with a value in excess of $20,000,000, or (g) enter into any
agreement with any party which by its terms restricts the payments due the
holders of the Convertible Preferred Shares pursuant to Exhibit A hereto.
In addition, the Company will not, without the prior approval of at
least five of the seven members of the Company's Board of Directors (including
at least two Series A Outside Investor Representatives and at least one Series B
Outside Investor Representative): (w) sell, lease or otherwise dispose of
(whether in one transaction or a series of related transactions) assets with a
value in excess of $1,000,000, (x) acquire any other corporation or business
concern, whether by acquisition of assets, capital stock or otherwise, and
whether in consideration of the payment of cash, the issuance of capital stock
28
or otherwise, (y) create, incur, assume, become liable for, or permit to exist
any indebtedness for borrowed money or any indebtedness as a result of any
acquisition, capital leases, or other similar commitments or obligations, which,
for any one such borrowing or series of related borrowings, is in excess of
$1,000,000, or (z) grant or permit to exist any liens securing indebtedness in
excess of $1,000,000 or security interests or encumbrances on any of the
Company's assets or properties with a value in excess of $1,000,000.
4.15 No Amendments to Amended and Restated Certificate of
Incorporation. The Company will not make any amendment to its Amended and
Restated Certificate of Incorporation or make any amendment to its By-laws (a)
so as to adversely affect the rights of holders of Convertible Preferred Stock
or Redeemable Preferred Stock with respect to dividends, liquidation
preferences, conversion or redemption, or (b) that affects any other
preferences, powers, rights or privileges of holders of Convertible Preferred
Stock or Redeemable Preferred Stock without the prior written consent of holders
of fifty-eight percent in interest of each series of Preferred Shares.
4.16 Capital Expenditures. The Company will not, without the prior
approval of at least five of the seven members of the Board of Directors of the
Company, including at least two Series A Outside Investor Representatives and at
least one Series B Outside Investor Representative, make any expenditures for
fixed or capital assets, or any commitments for such expenditures, exceeding an
amount of $500,000 for any one such expenditure or series of related
expenditures in any one year.
4.17 Life Insurance. The Company shall use its best efforts to obtain,
maintain and continue to pay the premiums on, a key-man term life insurance
policy on the life of the Founder in the amount of at least $10,000,000, such
policy to name the Company as sole beneficiary thereof.
4.18 Annual Updates; Number of Stockholders; Use of Proceeds;
Regulatory Violation; Economic Impact Information; Amendment.
(a) As long as an SBIC Investor holds any of the Securities, the
Company shall, on an annual basis, provide to such SBIC Investor the information
required under 13 CFR Section 107.620(b) and shall provide the information and
access required by 13 CFR Section 107.620(c). For purposes of this Agreement, an
"SBIC Investor" shall mean BancBoston and Norwest, an affiliate of BancBoston or
Norwest that has been licensed as an SBIC and holds the Securities or any other
Outside Investor or any permitted transferee of an Outside Investor that has
been licensed as an SBIC and holds the Securities.
(b) The closing of the transactions contemplated by this
Agreement will cause the number of record holders of the Company's voting stock
to increase from fewer than 50 to 50 or more.
(c) Within seventy-five (75) days after the Closing, and at the
end of each month thereafter until all of the proceeds from the sale of Series B
Convertible Preferred Shares hereunder have been used by the Company, the
Company shall deliver to all Outside Investors a written statement certified by
the Company's president or chief financial officer describing in reasonable
detail the use of the proceeds of the purchase of Series B Convertible Preferred
29
Shares hereunder by the Company. In addition to any other rights granted
hereunder, the Company shall grant all Outside Investors and the SBA access to
the Company's records for the purpose of verifying the use of such proceeds.
(d) Upon the occurrence of a Regulatory Violation (as defined
below) or in the event that any SBIC Investor determines in its reasonable good
faith judgment that a Regulatory Violation has occurred, in addition to any
other rights and remedies to which it may be entitled (whether under this
Agreement or any other agreement), such SBIC Investor shall have the right, to
the extent required under SBIC Regulations, to demand the immediate repurchase
of all of the outstanding Securities owned by such SBIC Investor at a price
equal to the purchase price paid for such Securities hereunder plus accrued
dividends by delivering written notice of such demand to the Company; provided,
however, that, in the event of a Regulatory Violation, any SBIC Investor shall,
prior to demanding the repurchase of all of the outstanding Securities owned by
such SBIC Investor, use reasonable efforts to retain its investment in the
Securities, including, without limitation, petitioning the SBA for its approval
with respect to any unforeseen changes in the principal business activity of the
Company. The Company shall pay the purchase price for such Securities by a
cashier's or certified check or by wire transfer of immediately available funds
to such SBIC Investor within thirty (30) days after the Company's receipt of the
demand notice, and, upon such payment, such SBIC Investor shall deliver the
certificates, if any, evidencing the Securities being repurchased duly endorsed
for transfer or accompanied by duly executed forms of assignment.
For purposes of this Agreement, "Regulatory Violation" means a change
in the principal business activity of the Company to an ineligible business
activity (within the meaning of the SBIC Regulations), if such change occurs
within one (1) year after the date of the initial purchase by the affected SBIC
Investor of Securities hereunder.
(e) Promptly after the end of each fiscal year (but in any event
prior to February 28 of each year), the Company shall deliver to each Investor a
written assessment of the economic impact of the total investment by all SBIC
Investors in the Company, specifying the full-time equivalent jobs created or
retained in connection with the investment, the impact of the investment on the
businesses of the Company in terms of expanded revenue and taxes, and the other
economic benefits resulting from the investment, including but not limited to,
technology development or commercialization, minority business development,
urban or rural business development and expansion of exports, together with all
other information reasonably requested by any SBIC Investor in order to provide
the information required by 13 CFR Section 107.630.
(f) Notwithstanding anything herein to the contrary, the
provisions of this Section 4.18 shall not be amended without the prior written
consent of holders of a majority of the issued and outstanding Securities of any
SBIC Investors (determined on an as converted basis).
SECTION 5. SERIES B OUTSIDE INVESTOR REPRESENTATIONS
It is the understanding of the Company, and each Series B Outside
Investor hereby severally represents with respect to such Series B Outside
Investor's purchase of Series B Convertible Preferred Shares hereunder that:
30
(a) The execution of this Agreement has been duly authorized by
all necessary action on the part of the Series B Outside Investor, has been duly
executed and delivered, and constitutes a valid, binding and enforceable
agreement of the Series B Outside Investor.
(b) The Investor is acquiring the Series B Convertible Preferred
Shares for its own account, for investment, and not with a present view to any
"distribution" thereof within the meaning of the Securities Act. The Series B
Outside Investor was not formed or organized for the purpose of acquiring the
Series B Convertible Preferred Shares.
(c) The Series B Outside Investor understands that because the
Series B Convertible Preferred Shares have not been registered under the
Securities Act, it cannot dispose of any or all of the Series B Convertible
Preferred Shares or the Series B Conversion Shares issuable upon conversion
thereof unless such securities are subsequently registered under the Securities
Act or exemptions from such registration are available. The Series B Outside
Investor understands that each certificate representing the Series B Convertible
Preferred Shares will bear the following legend or one substantially similar
thereto:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"). These securities have been acquired for investment and
not with a view to distribution or resale, and may not be sold,
mortgaged, pledged, hypothecated or otherwise transferred without
an effective registration statement for such securities under the
Act or the availability of an exemption from such registration
requirements.
(d) The Series B Outside Investor is sufficiently knowledgeable
and experienced in the making of venture capital investments so as to be able to
evaluate the risks and merits of its investment in the Company, and is able to
bear the economic risk of loss of its investment in the Company. The Series B
Outside Investor acknowledges that the Company may, subject to the restrictions
set forth in this Agreement, enter into one or more acquisitions, joint ventures
or additional types of financings in the future which could result in a
valuation for the capital stock of the Company that is significantly below the
purchase price for the Series B Convertible Preferred Shares hereunder.
(e) The Series B Outside Investors have been advised that the
Series B Convertible Preferred Shares have not been and are not being registered
under the Securities Act or under the "blue sky" laws of any jurisdiction and
that the Company in issuing the Series B Convertible Preferred Shares is relying
upon, among other things, the representations and warranties of the Series B
Outside Investors contained in this Section 5.
(f) No broker, finder, agent or similar intermediary has acted on
behalf of the Series B Outside Investor in connection with this Agreement or the
transactions contemplated hereby and there are no brokerage commissions,
finder's fees or similar fees or commissions payable in connection therewith.
(g) The Series B Outside Investor is an "accredited investor" as
defined in Regulation D of the Securities Act.
31
SECTION 6. INDEMNIFICATION
6.1 Indemnification for Vicarious Liability. Subject to Section 7.2
hereof, the Company shall, to the full extent permitted by law, and in addition
to any such rights that the Investors and persons serving as officers,
directors, partners, employees or agents of each Investor may have pursuant to
statute, the Company's Amended and Restated Certificate of Incorporation or
By-laws, or otherwise, indemnify and hold harmless each Investor (including its
respective directors, officers, partners, employees and agents, an "Indemnified
Investor") and each person (a "Controlling Person") (collectively with the
Indemnified Investors, the "Indemnified Parties" and individually an
"Indemnified Party") who controls any of them within the meaning of Section 15
of the Securities Act, or Section 20 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), from and against any and all losses, claims,
damages, expenses and liabilities, joint or several, including any
investigation, legal and other expenses incurred in connection with the
investigation, defense, settlement or appeal of, and any amount paid in
settlement of, any action, suit or proceeding or any claim asserted ("Losses" or
"Loss"), to which they, or any of them, may become subject by reason of their
status as a security holder, creditor, director, agent, representative or
controlling person of the Company (including, without limitation, any and all
Losses under the Securities Act, the Exchange Act or other federal or state
statutory law or regulation, at common law or otherwise, which relates directly
or indirectly to the registration, purchase, sale or ownership of any securities
of the Company or any of its subsidiaries or to any fiduciary obligation owed
with respect thereto); provided, however, that the Company will not be liable to
the extent that such Loss arises from and is based on an untrue statement or
omission or alleged untrue statement or omission in a registration statement or
prospectus which is made in reliance on and in conformity with written
information furnished to the Company in an instrument duly executed by or on
behalf of such Indemnified Party specifically stating that it is for use in the
preparation thereof. The indemnification and contribution provided for in this
Section 6.1 will remain in full force and effect regardless of any investigation
made by or on behalf of the Indemnified Parties or any officer, director,
employee, agent or Controlling Person of the Indemnified Parties.
If the indemnification provided for in this Section 6.1 is for any
reason held by a court of competent jurisdiction to be unavailable to an
Indemnified Party in respect of any Losses referred to therein, then the
Company, in lieu of indemnifying such Indemnified Party thereunder, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such Losses (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company and the Investor relating to such Indemnified
Party or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company and the Investor relating to such Indemnified Party in connection
with the action or inaction which resulted in such Losses, as well as any other
relevant equitable considerations. In connection with any registration of the
Company's securities, the relative benefits received by the Company and the
Investors shall be deemed to be in the same respective proportions as the net
proceeds from the offering (before deducting expenses) received by the Company
and the Investors, in each case as set forth in the table on the cover page of
the applicable prospectus, bear to the aggregate public offering price of the
securities so offered. The relative fault of the Company and the Investors shall
be determined by reference to, among other things, whether the untrue or alleged
32
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or the Investors
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company and the Investors agree that it would not be just and
equitable if contribution pursuant to the foregoing paragraph were determined by
pro rata or per capita allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in the
immediately preceding paragraph. In connection with any registration of the
Company's securities, in no event shall an Investor be required to contribute
any amount under this Section 6.1 in excess of the lesser of (i) that proportion
of the total of such Losses indemnified against equal to the proportion of the
total securities sold under such registration statement which is being sold by
such Investors or (ii) the proceeds received by such Investor from its sale of
securities under such registration statement. No person found guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
found guilty of such fraudulent misrepresentation.
6.2 Notice; Defense of Claims. Promptly after receipt by an
Indemnified Party of notice of any third party or other claim, liability or
expense to which the indemnification obligations hereunder would apply,
including in connection with any governmental proceeding, the Indemnified Party
shall give notice thereof in writing to the Company, but the omission to so
notify the Company promptly will not relieve the Company from any liability
except, and only to the extent, that the Company shall have been materially
prejudiced as a result of the failure or delay in giving such notice. Such
notice shall state the information then available regarding the amount and
nature of such claim, liability or expense.
In the case of any third party claim, if within twenty (20) days after
receiving the notice described in the preceding paragraph the Company (i) gives
written notice to the Indemnified Party or Parties stating that it intends to
defend in good faith against such claim, liability or expense at its own cost
and expense and (ii) provides assurance and security reasonably acceptable to
such Indemnified Party or Parties that such indemnification will be paid fully
and promptly if required and such Indemnified Party or Parties will not incur
cost or expense during the proceeding, then counsel for the defense shall be
selected by the Company (subject to the consent of such Indemnified Party or
Parties, which consent shall not be unreasonably withheld) and such Indemnified
Party or Parties shall not be required to make any payment with respect to such
claim, liability or expense as long as the Company is conducting a good faith
and diligent defense at its own expense; provided, however, that the assumption
of defense of any such matters by the Company shall relate solely to the claim,
liability or expense that is subject or potentially subject to indemnification.
If the Company assumes such defense in accordance with the preceding sentence,
it shall have the right, with the consent of such Indemnified Party or Parties,
which consent shall not be unreasonably withheld, to settle all indemnifiable
matters related to claims by third parties which are susceptible to being
settled provided the Company's obligation to indemnify such Indemnified Party or
Parties therefor will be fully satisfied and the settlement includes a complete
release of such Indemnified Party or Parties. The Company shall keep such
Indemnified Party or Parties apprised of the status of the claim, liability or
expense and any resulting suit, proceeding or enforcement action, shall furnish
such Indemnified Party or Parties with all documents and information that such
Indemnified Party or Parties shall reasonably request and shall consult with
such Indemnified Party or Parties prior to acting on major matters, including
33
settlement discussions. Notwithstanding anything herein stated, such Indemnified
Party or Parties shall at all times have the right to fully participate in such
defense at its or their own expense directly or through counsel; provided,
however, if the named parties to the action or proceeding include both the
Company and the Indemnified Party or Parties and representation of both parties
by the same counsel would be inappropriate under applicable standards of
professional conduct, the expense of separate counsel for such Indemnified Party
or Parties shall be paid by the Company. The Indemnified Party or Parties shall
make available all information and assistance that the Company may reasonably
request and shall cooperate with the Company in such defense.
If the Company does not give notice of its intent to defend against
any third party or other claim, liability or expense in accordance with the
foregoing paragraph, or if such diligent good faith defense is not being or
ceases to be conducted, the Indemnified Party or Parties will have the right to
retain its or their own counsel in any such action and all fees, disbursements
and other charges incurred in the investigation, defense and/or settlement of
such action shall be advanced and reimbursed by the Company promptly as they are
incurred and shall have the right to compromise or settle such claim, liability
or expense; provided, however, that the Indemnified Party or Parties shall agree
to repay any expenses so advanced hereunder if it is ultimately determined by a
court of competent jurisdiction that the Indemnified Party or Parties to whom
such expenses are advanced is or are not entitled to be indemnified as a matter
of law or under the terms of this Agreement.
6.3 Satisfaction of Indemnification Obligations. Any indemnity payable
pursuant to this Section 6 shall be paid within the later of (a) ten (10) days
after the Indemnified Party's request therefor or (b) ten (10) days prior to the
date on which the Loss upon which the indemnity is based is required to be
satisfied by the Indemnified Party.
SECTION 7. GENERAL
7.1 Amendments, Waivers and Consents. For the purposes of this
Agreement and all agreements, documents and instruments executed pursuant
hereto, except as otherwise specifically set forth herein or therein, no course
of dealing between the Company and the Founder, on the one hand, and any
Investor, on the other, and no delay on the part of any party hereto in
exercising any rights hereunder or thereunder shall operate as a waiver of the
rights hereof and thereof. No covenant or other provision hereof or thereof may
be waived otherwise than by a written instrument signed by the party so waiving
such covenant or other provision; provided, however, that except as otherwise
provided herein or therein, changes in or additions to, and any consents
required by, this Agreement may be made, and compliance with any term, covenant,
condition or provision set forth herein may be omitted or waived (either
generally or in a particular instance and either retroactively or prospectively)
with respect to the holders of a series of Convertible Preferred Shares by a
consent or consents in writing signed by the holders of fifty-eight percent in
interest of such series of Convertible Preferred Shares (including for such
purposes, on a proportional basis, any Conversion Shares into which any of such
series of Convertible Preferred Shares have been converted that have not been
sold to the public) and (in the case of any such change or addition) the
Company; provided, however, that the amendment, modification or waiver of any
provision which by its terms requires the consent or approval of holders of more
than fifty-eight percent in interest of any series of Convertible Preferred
Shares or the consent or approval of certain Outside Investors shall only be
effective with respect to the holders of such series of Convertible Preferred
34
Shares if it is signed by holders of such requisite percentage or such Outside
Investors. All references in this Agreement to holders of fifty-eight percent in
interest of a series of Convertible Preferred Shares refer to holders of 58% of
the outstanding Convertible Preferred Shares of such series. Any amendment or
waiver effected in accordance with this Section 7.1 shall be binding upon each
holder of Convertible Preferred Shares of the applicable series at the time
outstanding (including securities into which such Convertible Preferred Shares
have been converted), each future holder of all such securities and the Company.
7.2 Survival of Representations, Warranties and Covenants;
Assignability of Rights. Except as otherwise set forth in Section 1.5 hereof,
all covenants, agreements, representations and warranties of the Company and/or
the Founder made herein or in the Series A Stock Purchase Agreement and in the
certificates, lists, exhibits, schedules or other written information delivered
or furnished by or on behalf of the Company and/or the Founder to any Investor
in connection herewith or therewith shall be deemed material and to have been
relied upon by such Investor, and, except as otherwise provided in this
Agreement, shall survive the delivery of the Series B Convertible Preferred
Shares regardless of any instruction and shall not merge in the performance of
any obligation and shall bind the Company's or the Founder's successors, assigns
and heirs, whether so expressed or not, and, except as otherwise provided in
this Agreement, all such covenants, agreements, representations and warranties
shall inure to the benefit of such Investor's successors and assigns and to
transferees of the Securities of such Investor, whether so expressed or not.
Every assignee of a Series A Outside Investor or a Series B Outside Investor
shall be deemed to be a Series A Outside Investor or a Series B Outside
Investor, as the case may be, under this Agreement. It is contemplated by the
parties hereto that Norwest will assign two-thirds and one-third of its interest
in this Agreement and the Stockholders' Agreement to Norwest Equity Partners VI
and Norwest Venture Partners VI, respectively, and that, upon such assignment,
Norwest Equity Partners VI and Norwest Venture Partners VI shall be deemed for
all purposes to have been the parties in interest in this Agreement and the
Stockholders' Agreement from the date hereof and thereof. Notwithstanding
anything to the contrary contained herein, the Founding Investors shall have no
recourse against the Company or the Outside Investors (including, without
limitation, any rights of indemnification under Section 6 hereof) with respect
to any breach of the representations and warranties made by the Company in
Section 2 of this Agreement (or Section 2 of the Series A Stock Purchase
Agreement) of which they had knowledge or any breach of the representations and
warranties made by the Company in Section 2 of this Agreement (or Section 2 of
the Series A Stock Purchase Agreement) as and to the extent that the Founder has
given a similar representation in Section 2A of the Series A Stock Purchase
Agreement. The representations and warranties made by the Series B Outside
Investors in Section 5 of this Agreement (and by the Series A Outside Investors
in Section 5 of the Series A Stock Purchase Agreement) shall survive the
delivery of the Series B Convertible Preferred Shares and shall bind the Outside
Investors' successors and assigns and shall inure to the benefit of the
Company's successors and assigns.
7.3 Governing Law. This Agreement shall be deemed to be a contract
made under, and shall be construed in accordance with, the laws of the State of
New York (without giving effect to principles of conflicts of law the effect of
which would cause the application of domestic substantive laws of any other
jurisdiction).
7.4 Section Headings; Counterparts. The descriptive headings in this
Agreement have been inserted for convenience only and shall not be deemed to
35
limit or otherwise affect the construction of any provision thereof or hereof.
This Agreement may be executed simultaneously in any number of counterparts,
each of which when so executed and delivered shall be taken to be an original;
but such counterparts shall together constitute but one and the same document.
7.5 Notices and Demands. Any notice or demand which, by any provision
of this Agreement or any agreement, document or instrument executed pursuant
hereto or thereto, except as otherwise provided therein, is required or provided
to be given shall be deemed to have been sufficiently given or served and
received for all purposes when delivered or five days after being sent by
certified or registered mail, postage and charges prepaid, return receipt
requested, or, in the case of a nationally recognized overnight courier service,
on the day following the date of such mailing, or by express delivery providing
receipt of delivery, to the following addresses: if to the Company, at its
address as shown on the signature page hereof, or at any other address
designated by the Company to each of the Investors in writing; if to an
Investor, at its mailing address as shown on Appendix A hereto, or at any other
address designated by such Investor to the Company and the other Investors in
writing; and if to an assignee of an Investor, at its address as designated to
the Company and the other Investors in writing.
7.6 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be deemed
prohibited or invalid under such applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, and such
prohibition or invalidity shall not invalidate the remainder of such provision
or the other provisions of this Agreement.
7.7 Expenses. The Company shall pay all costs and expenses that each
of it and the Outside Investors incurs with respect to the negotiation,
execution, delivery and performance of this Agreement and any amendments hereto
and the agreements, documents and instruments contemplated hereby or executed
pursuant hereto and the Founding Investors shall pay all costs and expenses that
they incur with respect to the negotiation, execution, delivery and performance
of this Agreement and the agreements, documents and instruments contemplated
hereby or executed pursuant hereto. The Company shall reimburse all documented
costs and out-of-pocket expenses of each of the Outside Investor Representatives
(or any person acting on such Outside Investor Representative's behalf) that are
incurred in connection with attendance at Board meetings, at other Company
related meetings and activities and at industry related meetings and seminars.
7.8 Integration. Except to the extent set forth in Section 1.3 hereof,
this Agreement together with the Stockholders' Agreement, including the
exhibits, documents and instruments referred to herein or therein, constitutes
the entire agreement, and supersedes all other prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof.
7.9 Certain Provisions Applicable to SBIC Investors. Sections 2.27,
3.8 and 4.18 hereof contain certain provisions that are included herein solely
for the benefit of SBIC Investors. A stockholder of the Company may not assert
any rights or claims with respect to such provisions arising at any time after
it has ceased to be an SBIC.
7.10 Stockholder Confirmation and Waiver. Each of the Series A Outside
Investors and the Founding Investors hereby confirms that he, she or it approves
and consents to the Amended and Restated Certificate of Incorporation of the
Company in the form attached hereto as Exhibit A, and waives any right to
subscribe for or purchase shares of Series B Preferred Stock (pursuant to
Section 4.11 of the Series A Stock Purchase Agreement or otherwise) except to
the extent, if any, that such Investor is purchasing such shares hereunder.
[Remainder of Page Intentionally Left Blank]
36
IN WITNESS WHEREOF, the undersigned have executed this Agreement as a
sealed instrument as of the day and year first above written.
GOLDEN SKY HOLDINGS, INC.
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Executive Officer
GOLDEN SKY SYSTEMS, INC.
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Executive Officer
FOUNDER:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
SERIES B OUTSIDE INVESTORS:
NORWEST EQUITY PARTNERS V, A
MINNESOTA LIMITED PARTNERSHIP
By: Itasca Partners V, L.L.P.
General Partner
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Partner
37
▇▇▇▇▇▇▇ VENTURE PARTNERS
V-DIRECT FUND L.P.
By: HVP V-Direct Associates, LLC
By: HarbourVest Partners, LLC
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Partner
ALTA SUBORDINATED DEBT
PARTNERS III, L.P.
By: Alta Subordinated Debt
Management III, L.P.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: General Partner
ALTA COMMUNICATIONS VI, L.P.
By: Alta Communications VI Management
Partners, L.P.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: General Partner
ALTA-COMM S BY S, LLC
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Member
38
LION INVESTMENTS LIMITED
By: /s/ ▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇▇
Title: Director
WESTPOOL INVESTMENT TRUST
By: /s/ ▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇▇
Title: Director
▇▇▇▇▇ FAMILY TRUST dated 1/6/89
By: /s/ ▇.▇. ▇▇▇▇▇
--------------------------
Name: ▇.▇. ▇▇▇▇▇
Title: Trustee
BANCBOSTON VENTURES INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
GENERAL ELECTRIC CAPITAL
CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Manager, Operations
THE MILLENNIAL FUND
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇.
--------------------------
Name: ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Jr.
39
BUILDER INVESTMENT
PARTNERSHIP
By: /s/ ▇▇▇▇▇ ▇. Builder
--------------------------
Name: ▇▇▇▇▇ ▇. Builder
Title: General Partner
SERIES A OUTSIDE INVESTORS:
ALTA SUBORDINATED DEBT
PARTNERS III, L.P.
By: Alta Subordinated Debt
Management III, L.P.,
General Partner
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: General Partner
ALTA COMMUNICATIONS VI, L.P.
By: Alta Communications VI
Management Partners,
L.P., General Partner
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: General Partner
ALTA-COMM S BY S, LLC
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Member
40
SPECTRUM EQUITY INVESTORS L.P.
By: Spectrum Equity Associates L.P.,
General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: General Partner
SPECTRUM EQUITY
INVESTORS II, L.P.
By: Spectrum Equity Associates II,
L.P., General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: General Partner
BANCBOSTON VENTURES INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
41
FOUNDING INVESTORS:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Revocable Trust Dated
10/25/95
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Trustee
▇.▇. ▇▇▇▇▇ III Revocable Trust
By: /s/ ▇.▇. ▇▇▇▇▇
--------------------------
Name: ▇.▇. ▇▇▇▇▇
Title: Trustee
▇▇▇▇▇ ▇▇▇▇▇ Revocable Trust
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Trsutee
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
▇▇▇ ▇. ▇▇▇▇▇▇
/s/ Jo ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Jo ▇▇▇▇▇ ▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
42
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
A Delaware Trust
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Trustee
▇▇▇▇▇▇ Trust Dated 12/14/95
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇, Trustee
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
--------------------------
▇▇▇▇ ▇▇▇▇▇▇, Trustee
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇
43
Appendix A
List of Investors
Principal Amount Number of Series B Number of Series B Aggregate Purchase Total Number of
of Series B Convertible Convertible Preferred Convertible Preferred Price Series B Convertible
Note plus Accrued Shares Issuable Shares Purchased Preferred Shares
Interest Upon Conversion Issuable
(Column 1) (Column 2) (Column 3) (Column 4) (Column 5)
---------- ---------- ---------- ---------- ----------
Name
Series B Outside Investors:
Norwest Equity Partners V $3,473,276 17,367 57,758.62 $11,551,724 75,125.62
c/o Norwest Venture Capital
Management, Inc.
2800 ▇▇▇▇▇ ▇▇▇▇▇▇▇ Tower
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Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ Venture Partners $3,473,276 17,367 57,758.62 $11,551,724 75,125.62
V-Direct Fund L.P.
c/o HarbourVest Partners, LLC
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Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ Subordinated Debt $ 514,343.15 2,572 8,553.24 $ 1,710,648 11,125.24
Partners III, L.P.
Alta Communications VI, L.P. $ 855,493.69 4,278 14,226.375 $ 2,845,275 18,504.375
Alta-Comm S By S, LLC $ 19,473.16 98 323.835 $ 64,767 421.835
c/o Alta Combinations, Inc.
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Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Lion Investments Limited $ 289,330.55 1,447 3,563.76 $ 712,752 5,010.76
Westpool Investment Trust plc $ 867,993.66 4,340 10,691.27 $ 2,138,254 15,031.27
c/o London Merchant Securities
Carlton House
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Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇
44
Principal Amount Number of Series B Number of Series B Aggregate Purchase Total Number of
of Series B Convertible Convertible Preferred Convertible Preferred Price Series B Convertible
Note plus Accrued Shares Issuable Shares Purchased Preferred Shares
Interest Upon Conversion Issuable
(Column 1) (Column 2) (Column 3) (Column 4) (Column 5)
---------- ---------- ---------- ---------- ----------
▇▇▇▇▇ Family Trust $ 434.12 3 72.845 $14,569 75.845
dated 1/6/89
c/o ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
BancBoston Ventures Inc. $578,879.67 2,895 9,626.435 $1,925,287 12,521.435
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Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
General Electric Capital Corporation -- -- 15,000 $3,000,000 15,000
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▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇
The Millennial Fund -- -- 250 $50,000 250
c/o ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Jr.
The Centennial Funds
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▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Builder Investment Partnership -- -- 250 $50,000 ▇▇▇
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Attn: ▇▇▇▇▇ ▇. Builder
Series A Outside Investors:
Alta Subordinated Debt Partners III, L.P.
Alta Communications VI, L.P.
Alta-Comm S By S, LLC
c/o Alta Communications, Inc.
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Spectrum Equity Investors L.P.
Spectrum Equity Investors II L.P.
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Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
45
Principal Amount Number of Series B Number of Series B Aggregate Purchase Total Number of
of Series B Convertible Convertible Preferred Convertible Preferred Price Series B Convertible
Note plus Accrued Shares Issuable Shares Purchased Preferred Shares
Interest Upon Conversion Issuable
(Column 1) (Column 2) (Column 3) (Column 4) (Column 5)
---------- ---------- ---------- ---------- ----------
BancBoston Ventures Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
The Millennial Fund
c/o ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Jr.
The Centennial Funds
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Builder Investment Partnership
Five ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. Builder
Founding Investors:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Revocable Trust
Dated 10/25/95
▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇▇▇ III Revocable Trust
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ Revocable Trust
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇.
▇▇▇'▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Jo ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇.
▇▇▇'▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
46
Principal Amount Number of Series B Number of Series B Aggregate Purchase Total Number of
of Series B Convertible Convertible Preferred Convertible Preferred Price Series B Convertible
Note plus Accrued Shares Issuable Shares Purchased Preferred Shares
Interest Upon Conversion Issuable
(Column 1) (Column 2) (Column 3) (Column 4) (Column 5)
---------- ---------- ---------- ---------- ----------
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇. or ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇. tenants w/ rights of survivorship
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
A Delaware Trust
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Trustee
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ Trust Dated 12/14/95
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
