Exhibit 4.1
SECURITIES PURCHASE AGREEMENT dated
as of September 28, 1999 (the "Agreement")
by and among FIBERNET TELECOM GROUP, INC., a
Nevada corporation (the "Company"), and the
purchasers listed on ANNEX I hereto, and any
successors or assigns thereto (the
"Purchasers").
PREAMBLE
The Company wishes to sell and issue to the Purchasers the Notes (as
defined below), and the Purchasers desire to purchase and accept such Notes all
upon and subject to the terms and conditions hereof. The Notes to be purchased
under this Agreement are referred to as "Securities."
NOW THEREFORE, the parties to this Agreement hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINED TERMS. Capitalized terms used in this Agreement and not otherwise
defined herein shall have the meanings assigned thereto in the Notes. As used in
this Agreement, the following terms shall have the following respective
meanings:
"ACT" shall mean the Securities Act of 1933, together with any
applicable regulations, as the same may be amended from time to time.
"AFFILIATE" shall mean, with respect to any Person, (i) a director or
officer of such Person, (ii) a spouse, parent, sibling or descendant of such
Person (or a spouse, parent, sibling or descendant of any director or executive
officer of such Person), and (iii) any other Person that, directly or indirectly
through one or more intermediaries, Controls, or is Controlled by, or is under
common Control with, such Person.
"AGREEMENT" shall have the meaning given to such term in the caption.
"ALL OR SUBSTANTIALLY ALL" means, for the purposes thereof, (i) all or
substantially all of the assets of the Company, (ii) 50% or more of the
Company's interest in any Subsidiary and/or (iii) all or substantially all of
the assets of any Subsidiary.
"APPLICABLE LAW" shall mean, with respect to any Person, property,
transaction or event, all present and future applicable laws, statutes,
regulations, treaties, judgments and decrees and all applicable official
directives, rules, consents, approvals, authorizations, orders, guidelines and
policies of any Governmental Authority or Persons having authority over or
applicable to such Person or any of its assets or properties.
"BANKRUPTCY CODE" shall mean the United States Bankruptcy Code, 11
U.S.C.ss.11 eT Seq., as amended from time to time.
"BOARD" shall mean the Board of Directors of the Company.
"BUILDINGS AND FIXTURES" means all plant, buildings, structures,
erections, improvements, appurtenances and fixtures (including fixed machinery
and fixed equipment) situate on any of the Real Property.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or a
day on which banks are authorized or required to be closed in New York, New
York.
"CAPITAL LEASE OBLIGATIONS" shall mean, with respect to any Person on
any date, the obligations of such Person to pay rent or other amounts under any
lease of (or other arrangement conveying the right to use) real or personal
property, or a combination thereof, which obligations are required to be
classified and accounted for as capital leases on a balance sheet of such Person
as of such date computed in accordance with GAAP.
"CLOSING" shall mean the issuance and purchase of the Securities on the
Closing Date hereunder.
"CLOSING DATE" shall mean September 28, 1999, or such other date as the
Purchasers and the Company shall agree.
"CODE" shall mean the Internal Revenue Service Code of 1986, as
amended, and the rules and regulations thereunder, as from time to time in
effect, or any successor thereto.
"COLLATERAL" shall mean all of the "Collateral" as respectively defined
in the Collateral Agreements.
"COLLATERAL AGENT" shall mean the Majority in Interest, in its capacity
as collateral agent together with its successors and assigns in such capacity,
for the Purchasers and the May Purchasers.
"COLLATERAL AGENT AGREEMENT" shall mean the Collateral Agent Agreement
dated as of May 7, 1999 by and among the Collateral Agent and the May
Purchasers, as amended from time to time.
"COLLATERAL AGENT AGREEMENT JOINDER" shall mean the Joinder dated as of
the date hereof by which each Purchaser shall become a party to the Collateral
Agent Agreement.
"COLLATERAL AGREEMENTS" shall mean the Pledge Agreement, Parent Pledge
Agreement, Security Agreement, and Guaranty.
"COMMON STOCK" means the common stock, par value $.001 per share, of
the Company.
"COMPANY" shall have the meaning given to such term in the caption.
"CONTAMINANT" includes, but is not limited to, any pollutants,
dangerous substances, liquid waste, industrial waste, hauled liquid waste, toxic
substances, hazardous
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wastes, hazardous materials, hazardous substances or contaminants, including any
of the foregoing as defined in any Environmental Law and other terms of similar
import.
"CONTROL" shall mean, with respect to any Person, the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
"EMPLOYEE PLAN" means any "employee benefit plan" (as defined in
Section 3(3) of ERISA) as well as any other plan, program or arrangement
involving direct and indirect compensation, under which the Company or any ERISA
Affiliate of the Company has any present or future obligations or liability on
behalf of its employees or former employees, contractual employees or their
dependents or beneficiaries.
"ENCUMBRANCES" means all security interests, Liens, pledges, charges,
easements and restrictions.
"ENVIRONMENTAL ACTIVITY" means any past, present or future activity,
event or circumstance in respect to a Contaminant, including, without
limitation, its storage, use, holding, collection, purchase, accumulation,
assessment, generation, manufacture, construction, processing, treatment,
stabilization, disposition, handling or transportation, or its Release, escape,
leaching, dispersal or migration into the natural environment, including the
movement through or in the air, soil, surface water or groundwater.
"ENVIRONMENTAL LAWS" at any date shall mean all provisions of
Applicable Law or any Judgments relating to the environment, occupational health
or safety, or any Environmental Activity, whether or not having the force of
law, including all administrative orders, directed duties, licenses,
authorizations and permits of, and agreements with, any Governmental Authority.
"EQUAL ACCESS" shall mean FiberNet Equal Access, L.L.C., a New York
limited liability company.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations promulgated thereunder.
"ERISA AFFILIATE" means any Person (including any trade or business,
whether incorporated or not) which together with any Loan Party would be deemed
to be a member of the same "controlled group" within the meaning of Section
414(b) of the Code, under "common control" within the meaning of Section 414(c)
of the Code or a member of the same "affiliated service group" within the
meaning of Section 414(m) of the Code.
"EVENT OF DEFAULT" shall mean any of the events set forth in Article
VII of this Agreement.
"EXCHANGE ACT" shall mean the Securities Exchange of 1934, together
with any applicable regulations, as the same may be amended from time to time.
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"FAIR MARKET VALUE" shall mean the good faith determination of the
Board of Directors of the Company of the value of the shares of Common Stock as
provided in the Notes minus ten percent (10%) illiquidity discount.
"FIBERNET TELECOM" shall mean FiberNet Telecom, Inc., a Delaware
corporation.
"FINANCIAL OFFICER" of any Person shall mean its chief financial
officer or principal accounting officer.
"FIRST AMENDMENT TO THE SECURITY AGREEMENT" shall mean the First
Amendment to the Security Agreement dated as of the date hereof by the Loan
Parties and Signal, as Collateral Agent, in favor of the Collateral Agent.
"FIRST AMENDMENT TO THE GUARANTY" shall mean the First Amendment to the
Guaranty dated as of the date hereof by FiberNet Telecom, Local Fiber and Equal
Access and Signal, as Majority in Interest, to the May Purchasers and the
Purchasers.
"FIRST AMENDMENT TO THE PARENT PLEDGE AGREEMENT" shall mean the First
Amendment to the Parent Pledge Agreement dated as of the date hereof between the
Company and the Collateral Agent.
"FIRST AMENDMENT TO THE PLEDGE AGREEMENT" shall mean the First
Amendment to the Pledge Agreement dated as of the date hereof between FiberNet
Telecom and the Collateral Agent.
"FISCAL YEAR" shall mean, with respect to any Loan Party, the one-year
period ending on December 31 of any year.
"GOVERNMENTAL AUTHORITY" shall mean Congress, any legislature,
assembly, council or other legislative body and any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, or any court or any judicial or quasi-judicial body or
authority, in each case whether of or involving the United States of America or
any political subdivision thereof.
"GUARANTY" shall mean the Guaranty Agreement dated as of May 7, 1999
among the May Purchasers, FiberNet Telecom, Local Fiber and Equal Access, as
amended from time to time.
"HISTORICAL FINANCIAL STATEMENTS" shall mean the audited consolidated
financial statements of the Company and its Subsidiaries for the fiscal year
ended December 31, 1997 and the audited consolidated financial statements of the
Company and its Subsidiaries for the fiscal year ended December 31, 1998.
"INDEBTEDNESS" of any Person, without duplication, (i) all obligations
of such Person for borrowed money or with respect to deposits or advances of any
kind, (ii) all obligations of such Person evidenced by (or which customarily
would be evidenced by) bonds, debentures, notes or similar instruments, (iii)
all reimbursement obligations of such Person with respect to letters of credit
and similar instruments, (iv) all obligations of such Person under
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conditional sale or other title retention agreements relating to property or
assets purchased by such Person, (v) all obligations of such Person issued or
assumed as the deferred purchase price of property or services, other than
accounts payable incurred and paid on terms customary in the business of such
Person (it being understood that the "deferred purchase price" in connection
with any purchase of property or assets shall include only that portion of the
purchase price which shall be deferred beyond the date on which the purchase is
actually consummated), (vi) all obligations of others secured by (or for which
the holder of such Indebtedness has an existing right, contingent or otherwise,
to be secured by) any Lien on property owned or acquired by such Person, whether
or not the obligations secured thereby have been assumed, (vii) all obligations
of such Person under forward sales, futures, options and other similar hedging
arrangements (including interest rate hedging or protection agreements), (viii)
all obligations of such Person to purchase or otherwise pay for merchandise,
materials, supplies, services or other property under an arrangement which
provides that payment for such merchandise, materials, supplies, services or
other property shall be made regardless of whether delivery of such merchandise,
materials, supplies, services or other property is ever made or tendered, (ix)
any Guaranties by such Person of obligations of others and (x) all Capital Lease
Obligations of such Person.
"INTELLECTUAL PROPERTY RIGHTS" means all industrial and intellectual
property rights, including, without limitation, patents, patent applications,
patent rights, trademarks, trademark applications, trade names, service marks,
service ▇▇▇▇ applications, copyrights, copyright applications, know-how, trade
secrets, proprietary processes and formulae, confidential information,
franchises, licenses, inventions, instructions, marketing materials, trade
dress, logos and designs and all documentation and media constituting,
describing or relating to the foregoing, including, without limitation, manuals,
memoranda and records.
"JOINT VENTURE" shall mean any partnership or collaboration between or
among Persons effected pursuant to the execution of agreements providing for
such partnership or collaboration.
"JUDGMENTS" shall mean all judgments, injunctions, orders and decrees
of all courts and arbitrators in proceedings or actions in which the Person in
question is a party or by which any of its assets or properties is bound.
"LIABILITY" means any liability or obligation, whether known or
unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated and whether due or to become due, regardless of when
asserted.
"LIEN" shall mean, with respect to any asset, (i) any mortgage, deed of
trust, lien, pledge, encumbrance, charge or security interest of any kind
whatsoever in or on such asset (including the filing of or agreement to give any
financing statement under the Uniform Commercial Code of any jurisdiction), (ii)
the interest of a vendor or a lessor under any conditional sale agreement,
capital lease or title retention agreement relating to such asset and (iii) in
the case of securities, any purchase option, call, appreciation right or similar
right of a third party with respect to such securities.
"LOAN PARTIES" shall mean the Company, Local Fiber, Equal Access and
FiberNet Telecom (each, a "Loan Party").
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"LOCAL FIBER" shall mean Local Fiber, L.L.C., a New York limited
liability company.
"LPS" shall mean LPS Consultants, Inc.
"LTJ" shall mean LTJ Group, Inc.
"MAJORITY IN INTEREST" shall mean Signal so long as (i) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇. ("▇▇▇▇▇▇▇") or ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇") are employed by Signal or its
Affiliates and have primary responsibility for decisions in connection with
Signal's investment in the Company and (ii) the aggregate number of shares of
Common Stock into which the May Note (Signal) issued to Signal is convertible
(the "SIGNAL INVESTMENT AMOUNT") is greater than the aggregate number of shares
of Common Stock into which the May Notes (Trident) issued to Trident are
convertible (the "TRIDENT INVESTMENT AMOUNT"); PROVIDED, that if (x) (a) the
Trident Investment Amount is greater than the Signal Investment Amount or (b)
both ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇ to be involved in the capacity described in
clause (i) above and (y) ▇▇▇▇▇▇ ▇▇▇▇▇ ("KUZON") is employed by Trident or its
Affiliates and has primary responsibility for decisions in connection with
Trident's investment in the Company, then "MAJORITY IN INTEREST" shall mean
Trident (all of such conditions described immediately above referred to as the
"MAJORITY REQUIREMENTS"); and FURTHER PROVIDED, that when the Majority
Requirements no longer apply, "MAJORITY IN INTEREST" shall mean the Person or
Persons controlling no less than fifty percent (50%) of the outstanding number
of shares of Common Stock into which the Preferred Stock and May Notes are
convertible.
"MANAGING PURCHASER" shall mean Signal.
"MATERIAL ADVERSE EFFECT" shall mean (i) a material adverse effect on
the business, assets, liabilities, operations, results of operations, condition
(financial or otherwise), ability to carry on its business or a significant part
thereof or prospects of Equal Access and Local Fiber individually, and the
Company and FiberNet Telecom taken as a whole, (ii) any impairment of the
ability of Equal Access and Local Fiber individually, and the Company and
FiberNet Telecom taken as a whole to perform any of its material obligations
under any Transaction Document to which such Loan Party is a party or (iii) any
impairment of any security interest or Lien of the Purchasers or Collateral
Agent in the Collateral. If a dispute shall arise as to whether there has been a
Material Adverse Effect, such dispute shall be conclusively resolved by the
Majority in Interest in their good faith reasonable discretion.
"MAY NOTE (SIGNAL)" shall mean the 4% Senior Secured Convertible Note
in $4,534,751 aggregate principal amount issued to Signal by the Company
pursuant to the May Purchase Agreement.
"MAY NOTES (TRIDENT)" shall mean the 4% Senior Secured Convertible Note
in $320,513.19 aggregate principal amount and the 8% Senior Secured Convertible
Note in $3,869,201.81 aggregate principal amount issued to Trident by the
Company pursuant to the May Purchase Agreement.
"MAY NOTE PURCHASE PRICE" shall mean the purchase price of the May
Notes purchased by the May Purchasers pursuant to the May Purchase Agreement.
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"MAY NOTES" shall mean the 4% and 8% Senior Secured Convertible Notes
issued by the Company to the May Purchasers pursuant to the May Purchase
Agreement.
"MAY PURCHASE AGREEMENT" shall mean the Securities Purchase Agreement
dated as of May 7, 1999 by and among the Company and the May Purchasers.
"MAY PURCHASERS" shall mean the purchasers named in the May Purchase
Agreement.
"MAY TRANSACTION DOCUMENTS" shall mean the May Purchase Agreement, the
Registration Rights Agreement, the Stockholders Agreement, the May Notes and the
Collateral Agreements.
"OBLIGATIONS" shall mean the respective obligations of each Loan Party
under any Loan Document to which such Loan Party is party.
"ORGANIZATIONAL DOCUMENT" shall mean, with respect to any Person, each
instrument or other document that (i) defines the existence of such Person,
including its articles or certificate of incorporation or organization, as filed
or recorded with an applicable Governmental Authority (where required to be so
filed), or (ii) governs the internal affairs of such Person, including its
by-laws, in each case as amended, supplemented or restated.
"PARENT PLEDGE AGREEMENT" shall mean the Pledge Agreement dated as of
May 7, 1999 between the Company and the Collateral Agent, as amended from time
to time.
"PERMITTED ENCUMBRANCES" means (i) Encumbrances for Taxes not yet due
and payable or being contested in good faith by appropriate proceedings and for
which there are adequate reserves on the books, (ii) workers or unemployment
compensation liens arising in the ordinary course of business; and (iii)
mechanic's, materialman's, supplier's, vendor's or similar liens arising in the
ordinary course of business securing amounts that are not delinquent.
"PERMITTED LIENS" shall mean (i) liens arising by operation of law in
the ordinary course of business that, individually and in the aggregate, do not
in any material respect interfere with the use of any of the assets subject
thereto, (ii) minor imperfections of title which do not materially detract from
the value of the property affected or materially impair the operations of the
Company or any Loan Party and (iii) liens for taxes not yet due and payable.
"PERSON" shall be construed broadly and shall include any natural
person, company, partnership, joint venture, corporation, business trust,
unincorporated organization or Governmental Authority.
"PLEDGE AGREEMENT" shall mean the Pledge Agreement dated as of May 7,
1999 between FiberNet Telecom and the Collateral Agent, as amended from time to
time.
"PREFERRED STOCK" shall mean the Series C Convertible Preferred Stock,
$.001 par value per share, of the Company.
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"PURCHASERS' DIRECTOR" shall mean the director designated by the
Purchaser to the Board, who shall initially be ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇.
"QUALIFIED PUBLIC OFFERING" shall mean a fully underwritten public
offering (underwritten by a reputable underwriter of national reputation) of
shares of Common Stock registered pursuant to the Securities Act with proceeds
to the Company of at least $30,000,000 (net of underwriting discounts and
expenses) or otherwise on terms reasonably acceptable to the Majority in
Interest.
"REGISTRATION RIGHTS AGREEMENT" shall mean the Registration Rights
Agreement dated as of May 7, 1999 by and among the May Purchasers and the
Company, as amended from time to time.
"REGISTRATION RIGHTS AGREEMENT JOINDER" shall mean the Joinder dated as
of the date hereof by which each Purchaser shall become a party to the
Registration Rights Agreement.
"RELEASE" includes discharge, spray, inject, inoculate, abandon,
deposit, spill, leak, seep, pour, emit, empty, throw, dump, place and exhaust,
(and words of similar import) and when used as a noun, has a similar meaning.
"RESPONSIBLE OFFICER" of any Person shall mean the Chief Executive
Officer, Financial Officer or Secretary of such Person.
"SEC" means the Securities and Exchange Commission.
"SECURITY AGREEMENT" shall mean the Security Agreement dated as of May
7, 1999 by the Loan Parties in favor of the Collateral Agent, as amended from
time to time.
"SEPTEMBER LOAN DOCUMENTS" shall mean this Agreement, the Notes, the
Collateral Agreements, the Registration Rights Agreement Joinder and the
Stockholders Agreement Joinder.
"SEPTEMBER OBLIGATIONS" shall mean the respective obligations of each
Loan Party under any Loan Document to which such Loan Party is party.
"SIGNAL" means Signal Equity Partners, L.P., a Delaware limited
partnership (formerly Signal Capital Partners, L.P.).
"SMFS" shall mean SMFS, Inc.
"STOCKHOLDERS AGREEMENT" shall mean the Stockholders Agreement dated as
of May 7, 1999 by and among the Company, the May Purchasers, SMFS, LPS and LTJ,
as amended from time to time.
"STOCKHOLDERS AGREEMENT JOINDER" shall mean the Joinder dated as of the
date hereof by which each Purchaser shall become a party to the Stockholders
Agreement.
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"SUBSIDIARIES" shall mean FiberNet Telecom, Equal Access and Local
Fiber and/or any successors thereto.
"TAXES" means, with respect to any Person, (i) all income taxes
(including any tax on or based upon net income, gross income, income as
specially defined, earnings, profits or selected items of income, earnings or
profits) and all gross receipts, sales, use, ad valorem, capital and transfer,
transfer, franchise, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property or windfall profits taxes,
alternative or add-on minimum taxes, customs duties and other taxes, fees,
assessments or charges of any kind whatsoever, together with all interest and
penalties, additions to tax, surtaxes and other additional amounts imposed by
any taxing authority (domestic or foreign) on such entity (if any) and (ii) any
liability for the payment of any amount of the type described in the immediately
preceding clause (i) as a result of being a "transferee" (within the meaning of
Section 6901 of the Code or any other Applicable Law) of another entity or a
member of an affiliated or combined group.
"TRANSACTION DOCUMENTS" shall mean this Agreement, the Registration
Rights Agreement Joinder, the Stockholders Agreement Joinder, the Collateral
Agent Agreement Joinder and the September Loan Documents.
"TRIDENT" means Trident Telecom Partners LLC, a Delaware limited
liability company.
1.2 TERMS GENERALLY.
The definitions in Section 1.1 shall apply equally to the singular and
plural forms of the terms defined. Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms. The words
"include", "includes" and "including" shall be deemed to be followed by the
phrase "without limitation".
1.3 USE OF DEFINED TERMS.
Terms defined in this Agreement and used in any Exhibit, Schedule,
Certificate, Annex or any Transaction Document or other document delivered in
connection with this Agreement, shall have the meanings assigned herein unless
otherwise defined or the context otherwise requires.
1.4 CROSS-REFERENCES.
Unless otherwise specified, references in this Agreement or any
Transaction Document to any Article or Section are references to such Article or
Section of this Agreement or such Transaction Document, as the case may be, and
references in any Article, Section or definition to any clause are references to
such clause of such Section, Article or definition.
1.5 ACCOUNTING TERMS; GAAP.
Except as otherwise expressly provided herein, all terms of an
accounting or financial nature shall be construed in accordance with GAAP,
consistently applied, and all financial
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statements or accounting determinations required herein to be prepared or made
in accordance with GAAP shall be prepared or made in accordance with GAAP
applied on a consistent basis.
ARTICLE II
ISSUANCE OF THE NOTE
2.1 ISSUANCE OF THE NOTE.
Subject to the terms and conditions contained herein, at the Closing,
the Company has authorized the issuance of the 8% Senior Secured Convertible
Notes due September 28, 2004 of the Company dated the Closing Date in the
principal aggregate amount of $7,770,000 (the "NOTE PURCHASE PRICE") in the form
attached hereto as EXHIBIT A (the "NOTES" and each, a "NOTE").
2.2 AGREEMENT TO SELL SECURITIES.
(a) At the Closing, the Company shall sell to each Purchaser and each
Purchaser shall purchase from the Company, a Note in the principal amount set
forth opposite such Purchaser's name on ANNEX I.
(b) On or prior to October 11, 1999 (the "LANCER/TRIDENT CLOSING
DATE"), the Company may sell ("LANCER/TRIDENT CLOSING") to (i) Lancer Offshore,
Inc. ("LANCER") a Note in the principal amount, which amount shall not exceed
$1,000,000 in exchange for cash equal to the principal amount thereof, to be set
forth in an ANNEX III (to be attached hereto on the Lancer/Trident Closing Date)
in exchange for cash equal to the principal amount thereof and/or (ii) to
Trident a Note in the principal amount, which amount shall not exceed $2,000,000
in exchange for cash equal to the principal amount thereof, to be set forth in
ANNEX III, and the Company shall cause each of Lancer and/or Trident to execute,
and be bound by all terms and conditions of, (i) this Agreement, (ii) the
Collateral Agent Agreement Joinder, (iii) Registration Rights Agreement Joinder,
(iv) the Stockholders Agreement Joinder and (v) any such other document as the
Company shall reasonably require, and the definition of Purchasers hereunder
shall include Lancer and/or Trident upon consummation of the Lancer/Trident
Closing.
(c) The Company may sell to a third party ("SECOND FINANCING INVESTOR")
an aggregate principal amount of Notes equal to $12,500,000 minus the Note
Purchase Price and the aggregate principal amount of Notes purchased by Lancer
and Trident at a closing ("SECOND CLOSING") in exchange for cash equal to the
principal amount thereof, which Second Closing shall take place no later than
February 1, 2000, and the Company shall cause any Second Financing Investor to
execute, and be bound by all terms and conditions of, (i) this Agreement, (ii)
the Collateral Agent Agreement Joinder, (iii) Registration Rights Agreement
Joinder, (iv) the Stockholders Agreement Joinder and (v) any such other document
as the Company shall reasonably require, and the definition of Purchasers
hereunder shall include any such Second Financing Investor upon consummation of
the Second Closing.
2.3 DELIVERY OF SECURITIES.
(a) At the Closing, the Company shall deliver to each Purchaser a Note
(each payable to the order of such Purchaser), as duly executed by the Company.
If applicable, at the Lancer/Trident Closing and Second Closing, the Company
shall deliver to Lancer and/or Trident
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and each Second Financing Investor a Note (each payable to the order of Lancer
and/or Trident and each Second Financing Investor), as duly executed by the
Company.
(b) Delivery shall be made against receipt by the Company of each such
Purchaser's proportionate share of the Note Purchase Price as set forth on ANNEX
I by wire transfer of immediately available funds by each such Purchaser.
(c) Delivery shall be made against receipt by the Company of Lancer's
and/or Trident's and each such Second Financing Investor's proportionate share
of the Note Purchase Price to be set forth on an ANNEX II and ANNEX III, which
shall be attached to this Agreement and distributed to the Purchasers.
2.4 THE CLOSING.
The Closing hereunder, subject to the satisfaction or waiver of the
conditions set forth in Article IV, will take place at the offices of ▇'▇▇▇▇▇▇▇▇
Graev & Karabell, LLP, ▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
simultaneously with the execution and delivery of this Agreement. The
Lancer/Trident Closing and/or the Second Closing will take place at the offices
of ▇'▇▇▇▇▇▇▇▇ Graev & Karabell, LLP, ▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇ in accordance with the terms and conditions hereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMPANY
Each Loan Party, as applicable, represents and warrants to each
Purchaser as of the date hereof as set forth below.
3.1 ORGANIZATION, ETC.
Each of the Company and FiberNet Telecom is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated. Each of Equal Access and Local Fiber
is a limited liability company duly organized, validly existing and in good
standing under the laws of the State of New York. Each Loan Party has all
requisite power and authority and has all governmental licenses, approvals,
consents and authorizations necessary to own or lease its property and assets
and to carry on its business as currently conducted and is qualified to do
business in each jurisdiction in which the nature of the business conducted or
the property owned or leased by it requires such qualification. SCHEDULE 3.1
sets forth (a) a correct and complete list of each jurisdiction in which each
Loan Party is qualified to do business and (b) the jurisdiction where each Loan
Party is incorporated.
3.2 CORPORATE POWER AND AUTHORITY; NO REQUIRED CONSENTS OR APPROVALS.
(a) Each Loan Party has the power to execute, deliver and perform its
obligations under each Transaction Document to which it is a party, to grant
Liens pursuant to the Collateral Agreements to which it is a party and, in the
case of the Company, to issue and sell the Securities hereunder and to deliver
the Securities to the Purchasers.
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(b) The execution, delivery and performance by each Loan Party of each
Transaction Document to which it is a party, including the execution and
delivery of the Notes by the Company, have been duly authorized by all required
corporate, partnership and/or stockholder action, as applicable, of such Loan
Party and will not (i) violate any provision of Applicable Law, any Judgment or
any Organizational Document of any Loan Party, (ii) conflict with, result in a
breach of or constitute (alone or with notice or lapse of time or both) a
default (or give rise to any right of termination, modification, cancellation or
acceleration) under, any Contract (as defined below) to which any Loan Party is
party or (iii) result in the creation or imposition of any Lien (other than a
Permitted Lien) upon any property of any Loan Party.
(c) The Company has delivered to the Purchasers correct and complete
copies of the respective Organizational Documents of each Loan Party. All
minutes of meetings and all written consents of the directors and stockholders
or members of each of Loan Party were delivered to counsel for the Purchasers.
(d) Except as set forth on SCHEDULE 3.2(D), and except for the filing
of financing statements, no filing with or consent or approval of, or other
action by, any Governmental Authority or other Person is or will be required by
any Applicable Law or agreement in connection with the execution, delivery and
performance by each Loan Party of any Transaction Document to which it is a
party, any borrowings hereunder or the grant by the applicable September Loan
Party to the Purchasers of any Lien pursuant to the Collateral Agreements.
3.3 ENFORCEABILITY.
Each Transaction Document to which each Loan Party is a party has been
duly executed and delivered by such Loan Party, and constitutes the legal, valid
and binding obligation of such Loan Party, enforceable in accordance with its
terms.
3.4 FINANCIAL INFORMATION.
(a) SCHEDULE 3.4(A) sets forth the following financial statements (the
"FINANCIAL STATEMENTS"): (i) the PRO FORMA consolidated balance sheets and
income statement of the Company and its Subsidiaries as of the date hereof,
giving effect to the transactions contemplated by this Agreement (the "OPENING
BALANCE SHEET"), (ii) the unaudited balance sheet of the Company and its
Subsidiaries as of August 31, 1999, and the related unaudited statements of
operations and cash flows for the periods then ended and (iii) the Historical
Financial Statements.
(b) Except as set forth on SCHEDULE 3.4(B), the Financial Statements,
including the notes thereto, (i) present fairly the consolidated financial
position and results of operations of the respective entities at the dates and
for the periods indicated, (ii) are in accordance with the books and records of
such entities, and (iii) have been prepared in accordance with GAAP.
(c) Except as set forth on SCHEDULE 3.4(C), at the date of the Opening
Balance Sheet, neither the Company nor any Subsidiary had any liability of any
nature or any loss contingency (as such term is used in the Statement of
Financial Accounting Standards No. 5 issued by the Financial Accounting
Standards Board in March 1975) that was not adequately disclosed or provided for
on the Opening Balance Sheet, including the notes thereto.
12
(d) The net accounts receivable reflected in the Opening Balance Sheet
arose from bona fide transactions in the ordinary course of business with
unaffiliated third parties, and the goods and services involved have been sold,
delivered and performed to the account obligors, and no further goods are
required to be provided and no further services are required to be rendered in
order to complete the sales and fully render the services and to entitle the
Company to collect such accounts receivable in full. Except as pursuant to the
Security Agreement, such net accounts receivable (i) have not been assigned or
pledged to any other person or entity and (ii) are not subject to any right of
set-off in respect of any obligations of the Company or otherwise. Adequate
provision has been made for collection, losses, contractual discounts and other
adjustments from third-party payors.
3.5 ABSENCE OF CHANGES.
Except as set forth on SCHEDULE 3.5, since May 7, 1999, there has not
been:
(a) any adverse change in the condition (financial or otherwise),
assets, liabilities, operations, earnings or prospects of any Loan Party;
(b) any damage, destruction or loss (whether or not covered by
insurance) affecting any asset of any Loan Party in excess of $25,000;
(c) any liability or loss contingency incurred by any Loan Party that
would have to be disclosed on financial statements (including the notes thereto)
in accordance with GAAP, other than liabilities incurred in the ordinary course
of business consistent with past practice;
(d) any commitment to borrow money or provide financial support to any
person or entity entered into by any Loan Party;
(e) any payment or discharge of any liability by any Loan Party outside
the ordinary course of business consistent with past practice;
(f) any sale, assignment, license, or other disposition of any material
asset or right of any Loan Party outside the ordinary course of business
consistent with past practice;
(g) any declaration or payment of any dividend or other distribution
with respect to any shares of capital stock of any Loan Party;
(h) any labor trouble, problem or grievance affecting the business of
any Loan Party;
(i) any write-down of the value of any inventory of any Loan Party, or
any write-off as uncollectible of any accounts or notes receivable of any Loan
Party, in each case outside the ordinary course of business consistent with past
practice;
(j) any general uniform increase in the direct or indirect compensation
of employees of any Loan Party (including, without limitation, any increase
pursuant to any bonus, pension, profit-sharing, deferred compensation, or other
plan or commitment);
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(k) any capital expenditure or commitment therefor by any Loan Party
for additions to property, plant or equipment in excess of $100,000;
(l) any change in the accounting or tax methods, practices, or
assumptions followed by any Loan Party; or
(m) any other transaction or event relating to any Loan Party not in
the ordinary course of business consistent with past practice.
3.6 LITIGATION.
There are no actions (including derivative actions), suits or
proceedings at law or in equity instituted or, to the Company's knowledge,
threatened with respect to the transactions contemplated by the Transaction
Documents. Except as set forth on SCHEDULE 3.6, there are no other actions
(including derivative actions), suits or proceedings at law or in equity or by
or before any Governmental Authority instituted or, to the knowledge of the
Company after due inquiry, threatened against or affecting any Loan Party or any
of their respective businesses, properties or rights, and no Loan Party is a
party to any arbitration, or currently anticipates becoming a party to any
arbitration. None of such actions, suits or proceedings disclosed on SCHEDULE
3.6 has resulted or could reasonably be expected to result in a Material Adverse
Effect. No Loan Party is subject to or, if subject to, in default with respect
to, any order, injunction or decree of any Governmental Authority which has
resulted or could reasonably be expected to result in a Material Adverse Effect.
3.7 COMPLIANCE WITH LAWS.
Except as set forth on SCHEDULE 3.7, no Loan Party is in violation of,
or in default with respect to, any Applicable Law (including, without
limitation, the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, and all
Environmental Laws) or Judgment.
3.8 EMPLOYEE PLANS.
SCHEDULE 3.8 contains a list of all Employee Plans sponsored,
maintained or contributed to by each Loan Party and their Affiliates and ERISA
Affiliates. Except as disclosed on SCHEDULE 3.8, no Loan Party, or any of their
Affiliates or ERISA Affiliates, has in the six-year period ending on the Closing
Date sponsored, made contributions to, or had any liability to any Employee
Plan; each Employee Plan sponsored by or maintained by each Loan Party or any
ERISA Affiliate is maintained and administered in material compliance with all
provisions of ERISA, the Code and all other Applicable Law; each Employee Plan
sponsored by each Loan Party has been operated and administered in compliance
with all Applicable Law; no Loan Party nor any ERISA Affiliate has breached the
fiduciary rules of ERISA, the Code or any other corresponding rules under any
other Applicable Law; all required employer and employee contributions and
premiums under all Employee Plans have been made by each Loan Party or ERISA
Affiliates in a timely manner; there are no existing past funding obligations of
any kind owed by any Loan Party or ERISA Affiliate with respect to any Employee
Plan; no Loan Party or ERISA Affiliate has agreed to provide any post-retirement
health or welfare benefits to any employees, former employees or retired
employees of any Loan Party, or any ERISA Affiliate.
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3.9 TAXES.
Except as set forth on SCHEDULE 3.9: (i) Each Loan Party has filed or
caused to be filed all tax returns, reports or statements ("TAX RETURNS")
required to have been filed by it or them on or before the date hereof and such
Tax Returns are true, correct and complete in all material respects, (ii) each
Loan Party has paid all Taxes shown to be due on the Tax Returns referred to in
clause (i) and any other Taxes for which it could be required to pay under the
filings in clause (i), (iii) no Loan Party has waived in writing any statute of
limitations in respect of Taxes which waiver is currently in effect, (iv) no
issues that have been raised in writing by the relevant taxing authority in
connection with the examination of the Tax Returns referred to in clause (i) are
currently pending, (v) all deficiencies asserted or assessments made as a result
of any examination of the Tax Returns referred to in clause (i) by a taxing
authority have been paid in full, (vi) no Loan Party has incurred any liability
to make any payments that either alone or in conjunction with any other payments
could constitute a "parachute payment" within the meaning of Section 280G of the
Code, (vii) no Loan Party is presently required to make any adjustments or
changes either on, before, or after the Closing Date, to its accounting methods,
(ix) no Loan Party has ever been a member of an affiliated, consolidated or
unitary group for Tax purposes other than a group in which it currently is a
member; and (x) no Loan Party has ever been a party to a Tax sharing, indemnity
or similar agreement.
Except as set forth on SCHEDULE 3.9, each Loan Party has properly and
timely filed or caused to be filed all federal and local tax returns, reports or
statements that are required to be filed by it and has paid or caused to be paid
all taxes shown to be due and payable on such returns or on any assessments
(including taxes with respect to real property) received by it, other than any
taxes or assessments the validity of which it is contesting in good faith by
appropriate proceedings and with respect to which adequate accounting reserves
have been set aside to the extent required by GAAP. The charges, accruals and
reserves of each Loan Party in respect of taxes and other governmental charges
are adequate.
3.10 REAL PROPERTY - OWNED OR LEASED.
(a) SCHEDULE 3.10(A) contains a list and brief description of all of
the owned real property of the Company and each of its Subsidiaries (the "OWNED
PROPERTY") and all real property in which the Company or any of its Subsidiaries
has a leasehold interest held under leases (the "LEASED PROPERTY") including the
name of the lessor and any requirement of consent of the lessor to consummate
the transactions contemplated hereby. The Owned Property and the Leased Property
(together, the "REAL PROPERTY") constitute all real properties used or occupied
by the Company and its Subsidiaries.
(b) With respect to the Real Property, except as set forth in SCHEDULE
3.10(B):
(i) no portion thereof is subject to any pending condemnation
proceeding by any public or quasi-public authority or Governmental
Authority and there is no threatened condemnation or proceedings with
respect thereto;
(ii) the physical condition of the Real Property is sufficient
to permit the continued conduct of the business of the Company or its
Subsidiaries as presently
15
conducted and as presently proposed to be conducted subject to the
provision of usual and customary maintenance and repair performed in
the ordinary course with respect to similar properties of like age and
construction;
(iii) with respect to the Leased Property, the Company or one
its Subsidiaries is the owner and holder of all the leasehold estates
purported to be granted by such related lease and each such lease is in
full force and effect and constitutes a valid and binding obligation of
the Company or such Subsidiary;
(iv) no notice of any increase in the assessed valuation of
the Real Property and no notice of any contemplated special assessment
has been received by the Company or any of its Subsidiaries and there
is no threatened special assessment pertaining to any of the Real
Property;
(v) there are no Contracts, written or oral, to which the
Company or any of its Subsidiaries is a party, granting to any party or
parties the right of use or occupancy of any portion of the parcels of
the Real Property;
(vi) there are no parties (other than the Company or any of
its Subsidiaries) in possession of the Owned Property;
(vii) with respect to the Leased Property, there have been no
discussions or correspondence with the landlord or lessor concerning
renewal terms for those leases scheduled to expire within six months of
the date hereof;
(viii) all of the Buildings and Fixtures on the Owned Property
were constructed in accordance with all Applicable Laws and the Company
or its Subsidiaries has adequate rights of ingress and egress into the
Owned Property for the operation of the business of the Company or its
Subsidiaries;
(ix) none of the Owned Property or the Buildings and Fixtures
thereon, nor their use, operation or maintenance for the purpose of
carrying on the business of the Company or its Subsidiaries, violates
any restrictive covenant or any provision of any Law or encroaches on
any property owned by any other Person; and
(x) there are no outstanding work orders from or required by
any municipality, police department, fire department, sanitation,
health or safety authorities or from any other Person and there are no
matters under discussion with or by the Company or any of its
Subsidiaries relating to work orders.
(C) LEASED REAL PROPERTY. Except as set forth on SCHEDULE 3.10(C),
neither the Company nor any of its Subsidiaries is a party to, or under any
agreement to become a party to, any lease with respect to real property other
than the Leased Property, true, correct and complete copies of which have been
provided to the Purchasers, if requested by the Purchasers. With respect to each
lease (i) the lease (or a notice in respect of the lease) has been properly
registered in the appropriate land registry office, (ii) all rents and
additional rents have been paid, (iii) no waiver, indulgence or postponement of
the lessee's obligations has been granted by the lessor, (iv) there exists no
event of default or event, occurrence, condition or act (including the
16
transactions contemplated hereby) which, with the giving of notice, the lapse of
time or the happening of any other event or condition, could become a default
under the lease, and (v) all of the covenants to be performed by any party under
the leases have been fully performed. Each of the Leased Properties is adequate
and suitable for the purposes for which it is presently being used and as
presently proposed to be used and the Company or its Subsidiaries have adequate
rights of ingress and egress into each of the Leased Properties.
3.11 INTELLECTUAL PROPERTY.
(a) To the Company's Knowledge (as defined herein), the Company and
each of its Subsidiaries have the unimpaired right to use, sell, license and
dispose of, and have the right to bring actions for the infringement of, all
Intellectual Property Rights necessary or required for the conduct of the
business of the Company or its Subsidiaries as currently conducted and as
currently proposed to be conducted and such rights to use, sell, license,
dispose of and bring actions are sufficient for such conduct of the business of
the Company or its Subsidiaries.
(b) To the Company's Knowledge, except as set forth in SCHEDULE 3.11
there are no royalties, honoraria, fees or other payments payable by the Company
or any of its Subsidiaries to any Person by reason of the ownership, use,
license, sale or disposition of the Intellectual Property Rights.
(c) To the Company's Knowledge, except as set forth in SCHEDULE
3.11(C), no activity, service or procedure currently conducted or currently
proposed to be conducted by the Company or any of its Subsidiaries violates or
will violate any Contract of such Person with any third party or infringes any
Intellectual Property Right of any other party.
(d) To the Company's Knowledge, except as set forth in SCHEDULE 3.11,
neither the Company nor any of its Subsidiaries has received from any third
party in the past five years any notice, charge, claim or other assertion that
the Company or such Subsidiary is infringing any Intellectual Property Right of
any third party or committed any acts of unfair competition, and no such claim
is impliedly threatened.
(e) To the Company's Knowledge, except as set forth in SCHEDULE 3.11,
neither the Company nor any of its Subsidiaries has sent to any third party in
the past five years or otherwise communicated to another Person any notice,
charge, claim or other assertion of infringement by or misappropriation of any
Intellectual Property Right of the Company or such Subsidiary by such other
Person or any acts of unfair competition by such other Person, nor is any such
infringement, misappropriation or unfair competition occurring or threatened.
(f) SCHEDULE 3.11 contains a true and complete list of all
applications, filings and other formal actions made or taken pursuant to
Applicable Laws by the Company or any of its Subsidiaries to perfect or protect
its or the Subsidiary's interest in the Intellectual Property Rights.
(g) To the Company's Knowledge, except as set forth on SCHEDULE 3.11,
no Person other than the Company or any of its Subsidiaries has been granted any
interest in a right to use all or any portion of the Intellectual Property
Rights necessary or required for the conduct of the business of the Company or
its Subsidiaries.
17
(h) If requested by the Purchasers, the Purchasers have been provided
with a true and complete copy of all Contracts that comprise or are related to
the Intellectual Property Rights used in or required for the conduct of the
business of the Company or its Subsidiaries.
(i) For purposes of this Section 3.11, "KNOWLEDGE" shall mean the good
faith due diligence, investigation and imputed knowledge of the Company.
3.12 CONTRACTS.
SCHEDULE 3.12 sets forth a complete list as of the Closing Date hereof
of each material agreement, contract, guaranty, indenture or instrument to which
a Loan Party is a party or by which any of their respective properties are or
may be bound (collectively, "CONTRACTS"), correct and complete copies of which
have been provided to the Purchasers, if requested by the Purchasers. Each
Contract is the binding obligation of the respective Loan Parties thereto and,
to the knowledge of the Company, the binding obligation of each of the other
parties thereto, in each case, enforceable in accordance with its terms. No Loan
Party is in default in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any Contract to which it is a
party. No Loan Party is a party to any agreement, instrument or corporate
restriction that has resulted or could reasonably be expected to result in a
Material Adverse Effect.
3.13 NO MATERIAL MISSTATEMENTS.
All information, including financial information, provided, or to be
provided from time to time, to the Purchasers in connection with this Agreement
and the other Transaction Documents is true and correct and none of the
documentation furnished to the Purchasers by the Company or any of its
Subsidiaries, including the Historical Financial Statements nor any other
statement furnished by or on behalf of the Company or any of its Subsidiaries or
any other Loan Party to the Purchasers in connection with the negotiation or
confirmation of the transactions as contemplated hereby or by the other
Transaction Documents, contains or will contain any untrue statement of a
material fact or omits or will omit as of such time, a material fact necessary
to make the statements contained therein, in light of the circumstances in which
they were made, not misleading, and all such statements, taken as a whole,
together with this Agreement, do not and will not contain any untrue statement
of a material fact or omit a material fact necessary to make the statements
contained herein or therein not misleading and all expressions of expectation,
intention, belief and opinion contained therein were, and will be, honestly made
on reasonable grounds after due and careful inquiry by the Company (and any
other person who furnished such material). There is not, and will not be, any
fact which the Company or any other Loan Party has not disclosed to the
Purchasers in writing which has had a Material Adverse Effect, or is reasonably
likely to have a Material Adverse Effect.
3.14 OUTSTANDING DEBT.
SCHEDULE 3.14 lists all Indebtedness of each Loan Party immediately
after giving effect to the use of proceeds in accordance with Section 6.8. There
does not exist any breach, default or event of default (however defined) under
any Contract relating to or evidencing any
18
Indebtedness of the Loan Parties (or any event which, with only the giving of
notice or the passage of time or both, would result in such a breach or
default).
3.15 INVESTMENT COMPANY ACT AND PUBLIC UTILITY HOLDING COMPANY ACT.
No Loan Party is an "investment company" or an "affiliate" of an
"investment company" as defined in, or subject to regulation under, the
Investment Company Act of 1940, as amended. No Loan Party is a "holding company"
as defined in, or subject to regulation under, the Public Utility Holding
Company Act of 1935, as amended.
3.16 SOLVENCY.
Each Loan Party is not, and immediately following the issuance of the
Notes and giving effect to the Loan Parties' obligation to repay the same, will
not be, "insolvent" nor an "insolvent person" within the meaning of the
Bankruptcy Code, the Uniform Fraudulent Transfer Act as in effect on the date
hereof in the State of New York or any other applicable fraudulent conveyance or
preference laws, as applicable. The fair value of the aggregate assets of each
Loan Party exceeds, and immediately following the issue of the Notes and giving
effect to such Loan Party's obligation to repay same, will exceed its total
liabilities (including subordinated, unmatured, unliquidated, disputed and
contingent liabilities). Neither the assets of any Loan Party are nor
immediately following the sale of the Note hereunder will they be, unreasonably
small in relation to any business or transaction in which such corporation is or
is about to be engaged. No Loan Party intends to, nor believes that it will, nor
should it reasonably believe it will, incur debts beyond its ability to pay such
debts as they mature (taking into account the timing and amounts of cash to be
received by each Loan Party and the amounts to be payable on or in respect of
its obligations).
3.17 CAPITAL STOCK; EQUITY CAPITAL.
Except as set forth on SCHEDULE 3.17, there are no restrictions upon
the voting rights associated with, or the transfer of, any of the capital stock
of the Company, except as provided by (a) United States or state securities laws
or (b) the terms and provisions of the Transaction Documents or May Transaction
Documents.
3.18 CAPITALIZATION.
The authorized share capital (or limited liability company membership
interests) of each Loan Party is as set forth on SCHEDULE 3.18. Except as set
forth on SCHEDULE 3.18, all issued and outstanding shares of capital stock of
each of the Loan Parties are duly authorized and validly issued, fully paid,
nonassessable, free and clear of all Liens other than those in favor of
Purchasers, and such shares were issued in compliance with all applicable state,
provincial and federal laws concerning the issuance of securities. The capital
stock of each of the Loan Parties is owned by the stockholders or members in the
amounts set forth on SCHEDULE 3.18. No shares of the capital stock of any Loan
Party other than those described above, are issued and outstanding. Except as
set forth on SCHEDULE 3.18, there are no preemptive or other outstanding rights,
options, warrants, conversion rights or similar agreements or understandings for
the purchase or acquisition from any Loan Party of any shares of capital stock
or other securities of any such entity.
19
3.19 EMPLOYEE DISPUTES.
Except as set forth on SCHEDULE 3.19, there are no disputes pending or,
to the best knowledge of the Company after diligent inquiry, threatened, between
any Loan Party and any of their respective employees, other than individual
employee grievances arising in the ordinary course of business which could not
reasonably be expected to result in a Material Adverse Effect.
3.20 TELECOMMUNICATIONS PERMITS.
Except as set forth on SCHEDULE 3.20, the Company and its Subsidiaries
possess all permits, licenses, approvals or rulings (collectively, "PERMITS")
from the applicable Governmental Authority related to the conduct of the
business of the Company and its Subsidiaries, and all such Permits are valid and
will not expire and no action by the Company or its Subsidiaries is required to
renew or maintain the validity of such Permits within six months of the date
hereof.
3.21 SECURITIES LAWS.
The offering, sale and purchase of the Securities contemplated hereby
are exempt from registration under the Securities Act. The issuance of all other
shares of capital stock of the Company on or before the date hereto has been
made in compliance with the Securities Act and all applicable state securities
or blue sky laws.
3.22 ACCOUNTS AND NOTES RECEIVABLE.
Except as set forth in SCHEDULE 3.22, all the accounts receivable and
notes receivable owing to the Company or any of its Subsidiaries as of the date
hereof constitute, and as of the Closing Date will constitute, legal, valid and
enforceable, claims arising from bona fide transactions in the ordinary course
of business, subject to bankruptcy, insolvency, moratorium, reorganization and
other similar laws affecting creditors' rights generally, and there are no
asserted claims, refusals to pay or other rights of set-off against any thereof
and none of such accounts or notes receivable is in jeopardy of non-payment.
Neither the Company nor any of its Subsidiaries has accelerated the collection
of accounts receivable, other than in the ordinary course of business consistent
with past custom and practice. SCHEDULE 3.22 sets forth a complete and accurate
aging of all accounts receivable as of date hereof from both the due date and
the invoice date.
3.23 ACCOUNTS AND NOTES PAYABLE.
Except as set forth in SCHEDULE 3.23, all accounts payable and notes
payable by the Company or any of its Subsidiaries to third parties as of the
date hereof arose, and as of the Closing will have arisen, in the ordinary
course of business, and there is no such account payable or note payable
delinquent in its payment other than accounts and notes payable being disputed
in good faith. Neither the Company nor any of its Subsidiaries has delayed or
postponed the payment of accounts payable and other obligations and Liabilities,
other than in the ordinary course of business, consistent with past custom and
practice.
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3.24 SUPPLIERS AND VENDORS.
Except in the ordinary course of business, no supplier to or vendor of
the Company or any of its Subsidiaries has (i) canceled or otherwise terminated,
or, threatened to cancel or otherwise terminate, its relationship with the
Company or any of its Subsidiaries, (ii) decreased, limited or otherwise
adversely modified, or threatened to decrease, limit or otherwise adversely
modify, the services, supplies or materials it provides to the Company or any of
its subsidiaries, or (iii) failed to honor any warranty obligations, and the
transactions proposed to be consummated pursuant to this Agreement and the other
Transaction Documents shall not materially adversely affect the relationship of
the Company or any of its Subsidiaries with any supplier, vendor, franchisee or
licensee.
3.25 CUSTOMER RELATIONS, PROFITABILITY.
Neither the Company nor any of its Subsidiaries has notice that any
customer, agent, representative or supplier of the Company or any of its
Subsidiaries intends to discontinue, diminish or change its relationship with
the Company or any of its Subsidiaries. Each such relationship is in material
conformity with standard industry terms and conditions. Each such relationship
wherein the Company or such Subsidiary is obligated to perform under contract
services with respect to the business of the Company or its Subsidiaries is
priced at a profit level reasonably consistent with the Company's or such
Subsidiary's practices.
3.26 YEAR 2000.
(a) All hardware and software products used by the Company and its
Subsidiaries in the administration and business operations of the Company and
its Subsidiaries will be able to accurately process date data (including, but
not limited to, calculating, comparing and sequencing) from, into and between
the twentieth century (through year 1999), the year 2000 and the twenty-first
century, including leap year calculations, when used in accordance with the
product documentation accompanying such hardware and software products.
(b) All software products offered by the Company or any of its
Subsidiaries will be able to accurately process date data (including, but not
limited to, calculating, comparing and sequencing) from, into and between the
twentieth century (through your 1999), the year 2000 and the twenty-first
century, including leap year calculations, when used in accordance with the
product documentation accompanying such software products.
3.27 SEC FILINGS.
SCHEDULE 3.27 lists all filings made by the Company pursuant to the
rules and regulations of the Act and the Exchange Act. Except as set forth on
SCHEDULE 3.27, the Company has filed all filings required by the Act and
Exchange Act ("FILINGS" and each, a "FILING") with the SEC. The Company's
Statement Pursuant to Section 14(f) of the Exchange Act and Rule 14f-1
thereunder (filed May 12, 1999), Form 10-QSB (filed May 17, 1999) and Form
10-QSB (filed August 13, 1999), each as filed with the SEC, do not contain an
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
21
3.28 EQUIPMENT.
Except as set forth on SCHEDULE 3.28, all computer, switching and
voice, data and video communication devices and equipment, information
management systems and all related peripheral devices or equipment
(collectively, "EQUIPMENT"), is state of the art Equipment functioning and in
working order consistent with the intended use of such Equipment.
3.29 RELATED TRANSACTIONS.
Except as set forth on SCHEDULE 3.29, and except for compensation to
regular employees of the Company and its Subsidiaries, no current or former
director or officer of the Company or its Subsidiaries or holder of any capital
stock of the Company or its Subsidiaries has been (i) a party to any material
transaction with the Company or its Subsidiaries, or (ii) the direct or indirect
owner of an interest (other than non-affiliated holdings in publicly held
companies) in any business organization that is or was a competitor, supplier or
customer of the Company or its Subsidiaries.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
4.1 PURCHASERS REPRESENTATIONS AND WARRANTIES.
Each Purchaser, severally and only with respect to itself, represents
and warrants to the Company as follows:
(a) Such Purchaser is acquiring the Securities to be purchased by it or
him and, should such Purchaser acquire other securities of the Company issuable
upon conversion, redemption, or exercise of any Securities, it or he will
acquire such other securities, for its or his own account, for investment and
not with a view to the distribution thereof, nor with any present intention of
distributing the same.
(b) Such Purchaser understands that the Securities have not been, and
any other securities of the Company issuable upon conversion, redemption, or
exercise of any Securities, will not be, registered under the Act, by reason of
their issuance in a transaction exempt from the registration requirements of the
Act, and that they must be held indefinitely unless a subsequent disposition
thereof is registered under the Act or is exempt from registration.
(c) Such Purchaser is an "accredited investor," as defined in Rule 501
(the provisions of which are known to such Purchaser) promulgated under the Act
and has been advised by individuals with such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment in the Company, has the ability to bear the economic
risks of its investment for an indefinite period of time, has been furnished
with and has had access to such information as reasonably requested and has had
the opportunity to ask, and has received satisfactory answers for, questions of
the Company.
22
4.2 AUTHORITY.
Such Purchaser has all requisite power and authority to enter into the
Transaction Documents to which it is a party, to perform its or his obligations
thereunder, and to consummate the transactions contemplated thereby. Such
Purchaser has not been organized, reorganized or recapitalized specifically for
the purpose of investing in the Company.
4.3 ENFORCEABILITY.
Such Purchaser has taken all requisite corporate, partnership or other
action necessary to authorize its or his execution and delivery of the
Transaction Documents to which it or he is a party, its or his performance of
its or his obligations thereunder, and its or his consummation of the
transactions contemplated thereby. Each Transaction Document has been executed
and delivered by an officer or duly authorized representative of each Purchaser
in accordance with such authorization. This Agreement constitutes and, upon
their execution and delivery, the other Transaction Documents to which it is a
party will constitute, valid and binding obligations of such Purchaser,
enforceable in accordance with their terms, subject to applicable bankruptcy,
reorganization, insolvency, and similar laws affecting creditors' rights
generally and to general principles of equity.
4.4 BROKERS AND FINDERS.
No person or entity acting on behalf or under the authority of such
Purchaser is or will be entitled to any broker's, finder's, or similar fee or
commission in connection with the transactions contemplated hereby which would
become an obligation of the Company.
ARTICLE V
CONDITIONS TO PURCHASE
5.1 CONDITIONS TO OBLIGATIONS OF PURCHASERS ON THE CLOSING DATE.
The obligation of the Purchasers to purchase the Securities hereunder
is subject to the satisfaction of the following conditions:
(a) NOTES. Each Purchaser shall have received a duly executed Note from
the Company in accordance with the provisions of Section 2.3.
(b) STOCKHOLDERS AGREEMENT JOINDER. The Company shall have duly
executed and delivered the Stockholders Agreement Joinder substantially in the
form of EXHIBIT B attached hereto, and the Purchasers shall have received a duly
executed counterpart thereof.
(c) REGISTRATION RIGHTS AGREEMENT JOINDER. The Company shall have duly
executed and delivered the Registration Rights Agreement Joinder substantially
in the form of EXHIBIT C attached hereto, and the Purchasers shall have received
a duly executed counterpart thereof.
(d) COLLATERAL AGREEMENTS. The applicable Loan Party shall have duly
executed and delivered the amendments to the Collateral Agreements substantially
in the forms of EXHIBIT
23
D1-D4 attached hereto and any other agreements, documents or instruments
required in connection therewith and the Purchasers shall have received a duly
executed counterpart thereof. The Collateral Agreements shall be in full force
and effect and no default or Event of Default shall have occurred and be
continuing thereunder. Each Purchaser shall have received evidence satisfactory
to it or him of the perfection and priority of all security interests and Liens
contemplated by the Collateral Agreements or arrangements satisfactory to the
Purchasers shall have been made for such perfection.
(E) CORPORATE DOCUMENTS. The Purchasers shall have received:
(i) a copy of the certificate of incorporation or articles of
organization, as applicable, of each Loan Party, including all
amendments thereto, certified as of a recent date by an appropriate
public official of its jurisdiction of incorporation and a certificate
as to the good standing or existence of such party in such
jurisdiction;
(ii) a certificate of a Responsible Officer of the Company and
each other Loan Party dated the Closing Date certifying (A) a correct
and complete copy of each Organizational Document of such party as in
effect on the Closing Date and at all times since a date prior to the
date of the resolutions described in the following clause (B), (if
applicable), (B) a correct and complete copy of resolutions duly
adopted by the board of directors (or general and/or limited partners)
of such party, authorizing the execution, delivery and performance of
the Transaction Documents, the sale of the Securities hereunder, the
granting of Liens pursuant to the Collateral Agreements and the other
transactions contemplated hereby and thereby, as applicable, (C) that
the certificate of incorporation (or articles of organization) of such
party has not been amended since the date of the last amendment thereto
shown on the certificate of good standing or existence furnished
pursuant to clause (i) above, and (D) as to the incumbency and specimen
signature of each officer of such party who shall execute any
Transaction Document or any other document delivered in connection
herewith;
(iii) a certificate from the Secretary of State of each state
in the United States of America in which each Loan Party is required to
be qualified to do business as a foreign corporation, certifying as to
such qualification and such party's good standing in such state or
province; and
(iv) such other documents as the Purchasers or ▇▇▇▇▇▇▇▇▇▇ &
▇▇▇▇▇ LLP, counsel to the Purchasers, may reasonably request.
(f) AMENDMENT TO FINANCING STATEMENTS. ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, counsel
to the Purchasers, shall have received evidence satisfactory to it that
appropriate amendments to the Uniform Commercial Code financing statements filed
in connection with the May Purchase Agreement and the transactions contemplated
therein have been filed on or prior to the Closing reflecting the name change of
Signal, as Collateral Agent, from "Signal Capital Partners, L.P." to "Signal
Equity Partners, L.P.," as Collateral Agent.
(g) NO DEFAULTS. Each Loan Party shall be in compliance with the terms
and provisions set forth in the Transaction Documents and May Transaction
Documents to which it is
24
a party. Neither the Company nor any Loan Party shall
be in material default under any Contract and no Event of Default under this
Agreement shall have occurred and be continuing or shall occur upon consummation
of this Agreement.
(h) REQUISITE APPROVALS. Each Loan Party shall have obtained all
required governmental, and other consents, licenses, permits and approvals
relating to the transactions contemplated by this Agreement and the other
Transaction Documents, which consents, licenses, permits and approvals shall be
acceptable to Purchasers and their counsel.
(i) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of each Loan Party contained herein and in any other Transaction Document and in
any certificate or other instrument delivered pursuant to any of the foregoing
shall be correct as though made on and as of the Closing Date.
(j) OFFICER'S CERTIFICATE. The Purchasers shall have received
certificates signed by a Responsible Officer of each Loan Party confirming
compliance with the conditions precedent set forth herein on and as of the
Closing Date.
(k) BOARD OF DIRECTORS. The size of the Board shall have been increased
to seven (7) directors, and Signal, Concordia and Trident shall have taken any
and all necessary actions to elect the Purchaser's Director to the Board.
(l) LEGAL OPINIONS. The Purchasers shall have received a legal opinion
from (i) ▇'▇▇▇▇▇▇▇▇ Graev & Karabell, LLP, counsel to the Company, covering the
matters set forth on EXHIBIT E attached hereto, and as the Purchasers shall
reasonably request, (ii) a regulatory opinion from ▇▇▇▇▇▇▇ Berlin Shereff
▇▇▇▇▇▇▇▇, LLP, special telecommunications counsel to the Company, covering such
matters as the Purchasers shall reasonably request and (iii) ▇▇▇▇▇▇ ▇▇▇▇▇▇,
Nevada counsel to the Company, covering such matters as the Purchasers shall
reasonably request.
(m) CONTRACTS. The Purchasers shall have received true and complete
copies of, if requested by the Purchasers, and be satisfied with the terms of,
each Contract.
(n) AGENT FOR SERVICE OF PROCESS. The Purchasers shall have received
and been satisfied with a letter appointing National Registered Agents, Inc. as
the agent for service of process of each Loan Party.
(o) LEGAL MATTERS. All matters relating to this Agreement and the other
Transaction Documents and the transactions contemplated hereby and thereby shall
be satisfactory to the Purchasers and ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, counsel to the
Purchasers.
(p) OTHER MATTERS. The Purchasers shall have received such other
consents, documents and financial information as they may require.
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ARTICLE VI
COVENANTS
From the Closing Date until the indefeasible payment of the Notes by
the Company, the Company covenants as follows in this Article VI.
6.1 PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST.
The Company shall duly and punctually pay the principal of (and
premium, if any) and interest on the Notes in accordance with the terms of the
Notes and this Agreement.
6.2 CORPORATE EXISTENCE.
The Company shall and shall cause each of its Subsidiaries to do or
cause to be done all things necessary to preserve, renew and keep in full force
and effect their corporate (or partnership or limited liability company)
existence and any necessary state or other qualifications.
6.3 OBLIGATIONS AND TAXES.
The Company shall and shall cause each of its Subsidiaries to pay or
discharge, or cause to be paid or discharged, before the same shall become
delinquent (a) all Taxes imposed upon them or upon their income or profits or in
respect of their business or property unless such Taxes are being paid in
accordance with the terms of an agreement with the applicable Taxing authority
or are being contested in good faith and adequate reserves have been established
on the books of the Company therefor, (b) all lawful claims for labor, materials
and supplies, (c) all required payments under any Indebtedness and (d) all other
obligations; PROVIDED, HOWEVER, that it shall not be required to pay or
discharge or to cause to be paid or discharged any such amount so long as the
validity or amount thereof shall be contested in good faith in an appropriate
manner and appropriate reserves and accruals have been made with respect
thereto.
6.4 PERFORMANCE UNDER AGREEMENTS.
The Company shall and shall cause each of its Subsidiaries, as
applicable, to perform their obligations under this Agreement, each Transaction
Document, each May Transaction Document and each other Contract to which they
are a party; PROVIDED, HOWEVER, that neither the Company nor any of its
Subsidiaries shall be required to so perform their obligations under any
Contract (other than this Agreement and any other Transaction Document and May
Transaction Document) to the extent it is reasonably contesting such obligations
in good faith and in an appropriate manner and, if required by GAAP, they have
made appropriate reserves and accruals with respect thereto.
6.5 ACCESS TO PROPERTIES AND INSPECTIONS.
The Company shall and shall cause and each of its Subsidiaries to
maintain financial records in accordance with accounting practices and controls
sufficient to allow the Company to prepare the financial statements,
certificates and reports required by Section 6.11 and to provide such
information with respect to the Collateral as the Managing Purchaser may
reasonably request; and, upon written notice, at all reasonable times and as
often as the Managing Purchaser may reasonably request, permit any authorized
representative or agent of the Managing Purchaser to visit and inspect their
properties and records (including all records relating to
26
Collateral), and to make extracts from such records and permit any authorized
representative or agent of the Managing Purchaser to discuss its affairs,
finances and condition with such officers, key employees and independent
chartered accountants acting as auditors as the Managing Purchaser shall deem
appropriate. Delivery of a copy of this Agreement to the respective independent
chartered accountants acting as auditors shall constitute instructions to such
accountants to discuss the financial condition of the Loan Parties with the
Managing Purchaser and their representatives, and to permit the Managing
Purchaser and their representatives to inspect, copy and make extracts from all
financial statements, analyses, work papers and other documents and information
(including electronically stored documents and information) prepared by such
accountants with respect to the Loan Parties.
6.6 DEFENSE OF CLAIMS.
The Company shall and shall cause each of its Subsidiaries to
diligently defend themselves and their properties from and against any lawsuits
or claims.
6.7 NOTICES OF LITIGATION, CLAIMS, ETC.
The Company shall (or, if applicable, shall cause its Subsidiaries to),
promptly upon obtaining notice of the occurrence thereof (but in no event more
than 10 days after obtaining notice of the occurrence thereof), provide the
Managing Purchaser with written notice of any of the following events:
(a) the issuance by any Governmental Authority of any injunction, order
or decision involving any Loan Party or any of their respective properties;
(b) the filing or commencement of any action, suit or proceeding
against or affecting any Loan Party or the properties of any of the same,
whether at law or in equity or by or before any court or any United States,
state, municipal, foreign or other Governmental Authority;
(c) the imposition of any Lien which is not a Permitted Lien;
(d) any claim, demand or action impairing title to any of the
properties or assets of any Loan Party;
(e) any other adverse action by or notice from a Governmental Authority
with respect to any Loan Party or any of their respective properties;
(f) any Event of Default under the Notes;
(g) any default by any Loan Party under any Contract evidencing
Indebtedness if such default is likely to have a Material Adverse Effect; and
(h) any development in the business or affairs of any Loan Party which
is likely to have a Material Adverse Effect.
27
Each notice shall specify, as applicable, (i) the nature and extent thereof,
(ii) any rights of any other parties thereto with respect to termination,
acceleration or similar provisions and (iii) any corrective action taken or
proposed to be taken with respect thereto.
6.8 PROCEEDS.
The Company shall use the proceeds of the sale of the Securities for
general working capital purposes.
6.9 COMPLIANCE.
The Company and each of its Subsidiaries shall comply in all material
respects with all Applicable Law and Judgments, including Environmental Laws
and, subject to Section 6.10, maintain all required clearances, consents,
permits and approvals of Governmental Authorities.
6.10 BUSINESS AND PROPERTIES.
The Company and each of its Subsidiaries shall:
(a) at all times do or cause to be done all things necessary to (i)
preserve, renew and keep in full force and effect the material rights, licenses,
permits, franchises and concessions necessary to, or used or useful in the
conduct of, its business; and (ii) keep its assets and properties used or useful
in the conduct of its business in good repair, working order and condition,
ordinary wear and tear excepted, and from time to time make, or cause to be
made, all necessary and proper repairs, renewals and replacements, betterments
and improvements thereto, all as in the reasonable judgment of the Company may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; and
(b) as promptly as possible after obtaining knowledge of the occurrence
thereof, furnish written notice to the Purchasers of the institution of any
proceeding for the condemnation or other taking of any property of the Company
or any of its Subsidiaries.
6.11 FINANCIAL STATEMENTS AND REPORTS.
(a) The Company shall furnish to the Managing Purchaser:
(i) as soon as available but in any event within ninety (90)
days after the end of each Fiscal Year (commencing with the Fiscal Year
ending December 31, 1999 consolidated and consolidating balance sheets,
income statements and cash flow statements of the Company and its
Subsidiaries, showing its financial condition as at the end of such
Fiscal Year and the results of its operations for such Fiscal Year, all
the foregoing financial statements (other than the consolidating
schedules) to be audited by independent accountants of
nationally-recognized standing in the United States reasonably
acceptable to the Purchasers and prepared in accordance with GAAP;
(ii) as soon as available but in any event within 30 days
after the commencement of each Fiscal Year, current and projected
annual budgets, operating
28
plans and financial projections for the Company and its Subsidiaries on
a consolidated and consolidating basis (presented on a monthly basis)
for such fiscal year;
(iii) as soon as available but in any event within 30 days
after the end of each month, commencing with November, 1999, the
unaudited consolidated and consolidating balance sheets, income
statements and cash flow statements (along with comparisons to budget),
showing the financial condition as at the end of such month, and the
results of operations for such month and for the then elapsed portion
of the Fiscal Year, for the Company and its Subsidiaries in each case
prepared in accordance with GAAP, subject to normal year-end
adjustments (none of which alone or in the aggregate would result in a
Material Adverse Effect) and the absence of notes thereto;
(iv) as soon as received, copies of any notice of potential
liability or charge or complaint received by any Loan Party from any
Governmental Authority;
(v) concurrently with the statements provided pursuant to
clauses (a) and (c), certificate of a Financial Officer containing a
narrative discussion by a Financial Officer of the financial condition
and results of operation of the Company for the periods covered by such
statements;
(vi) promptly upon their becoming available, copies of any
statements, reports and other communications, if any, which the Company
shall have provided to its stockholders;
(vii) promptly upon receipt thereof, copies of all financial
and management reports submitted to the Company by its independent
auditors in connection with each annual audit of the books of the
Company and its Subsidiaries; and
(viii) promptly, from time to time, such other information (in
writing if so requested) regarding the assets and properties (including
the Collateral) and operations, business affairs and financial
condition of any Loan Party as the Purchasers may reasonably request.
Each certificate of the Financial Officer of the Company (and, in the case of
year-end financial statements and reports, the independent auditors of the
Company) delivered under this Section 6.11 shall certify that the statement or
report to which such certificate relates fairly presents in all material
respects the financial position and results of operations of the Company and its
Subsidiaries at the dates thereof and for the periods then ended and has been
prepared in accordance with GAAP, in the case of unaudited financial statements,
subject to normal year-end audit adjustments (none of which alone or in the
aggregate would result in a Material Adverse Effect) and the absence of notes
thereto. The audit report with respect to the financial statements referred to
in clause (a) shall not contain a "going concern" or like qualification or
exception or any qualification arising out of the scope of the audit. For
purposes of this Section 6.11, the parties hereto agree that to the extent such
information required to be delivered to the Managing Purchaser hereunder shall
have been delivered to the Managing Purchaser pursuant to the May Purchase
Agreement, the Company's obligations under this Section 6.11 shall have been
satisfied.
29
(b) The Company shall furnish to the Purchasers all filings and reports
filed by the Company with the SEC pursuant to the Exchange Act and any press
releases issued by the Company within 30 days of any such filing or issuance.
6.12 INSURANCE.
The Company and each of its Subsidiaries shall maintain insurance
(including business interruption insurance) on the business and properties of
the Company and its Subsidiaries to such extent and against such risks,
including fire and other risks insured against by extended coverage, and
workers' compensation insurance and public liability insurance against claims
for personal injury or death or property damage occurring upon, in, about or in
connection with, the use of any properties owned, occupied or controlled by the
Company or any Subsidiary of the Company, in each case as is customary with
companies similarly situated and in the same or similar businesses, and shall
provide evidence to the Managing Purchaser of such insurance upon its request.
6.13 EMPLOYEE PLANS.
The Company and each other Loan Party shall (and shall cause their
ERISA Affiliates) to (a) comply in all material respects with the provisions of
all Applicable Law which is applicable to any Employee Plan (including ERISA and
the Code, if such party is subject to such laws); (b) operate and administer
each Employee Plan in accordance with all Applicable law; (c) not terminate or
withdraw from any Employee Plan if such withdrawal could result in a material
liability to accrue against any Loan Party (or any ERISA Affiliates); (d) not
fail to make full payment when due of all amounts which, under the provisions of
any Employee Plan, any Loan Party (or any ERISA Affiliate) is required to pay as
a contribution or premium payment thereto; (e) furnish to each Lender, as soon
as possible, and in any event with ten (10) days after any Responsible Officer
of a Loan Party knows or has reason to know of any of the following events,
written notice of the same: (i) the withdrawal from or termination of any
Employee Plan by any Loan Party or any ERISA Affiliate), if such termination or
withdrawal could result in any material liability to any Loan Party (or ERISA
Affiliate); (ii) that any Employee Plan is not in compliance with any Applicable
Law; or (iii) that any required employer or employee contributions or premiums
have not been made on a timely basis to any Employee Plan sponsored by or
contributed to by any Loan Party (or ERISA Affiliate).
6.14 LOCAL FIBER APPROVAL.
The Company and/or Local Fiber shall have taken any and all necessary
steps to (i) obtain the approval of the New York State Public Utilities
Commission required under Section 101 of the New York Public Service Laws
("Approval") regarding Local Fiber and (ii) to keep the Guaranty in full force
and effect in accordance with the terms and provisions thereof after the
Closing.
6.15 FURTHER ASSURANCES.
The Company and each of its Subsidiaries shall duly execute and
deliver, or cause to be duly executed and delivered, at its own cost and
expense, such further instruments and documents and take or cause to be taken
all such action, in each case as may be necessary or
30
proper in the reasonable judgment of the Managing Purchaser, to carry out the
provisions and purposes of this Agreement and the other Transaction Documents
and to better assure and confirm unto the Managing Purchaser, its rights and
remedies under this Agreement and the other Transaction Documents.
6.16 TRANSFER OF SECURITIES.
(a) The Securities shall only be transferable in accordance with the
Stockholders Agreement.
(b) Each certificate representing the Notes (or any Common Stock into
which such Notes are Convertible) shall be stamped or otherwise imprinted with a
legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR THE SECURITIES LAW OF ANY STATE. THESE SECURITIES MAY NOT BE
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM. IN ADDITION, THE TRANSFER OF
THIS NOTE IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE SECURITIES
PURCHASE AGREEMENT DATED AS OF SEPTEMBER 28, 1999 BY AND AMONG FIBERNET
TELECOM GROUP, INC. AND THE PURCHASERS NAMED THEREIN. NO TRANSFER OF
THESE SECURITIES SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE
BEEN FULFILLED."
6.17 POST-CLOSING COVENANTS.
Subject to approval by the Board, within 90 days after Closing the
Company shall move its jurisdiction of incorporation from Nevada to Delaware.
6.18 SECOND CLOSING.
The Company agrees that the selection of any Second Investor shall be
subject to the approval of the Board and the Majority in Interest.
6.19 NEGATIVE COVENANTS.
For so long as the Notes remain outstanding or the Preferred Stock is
issued and outstanding, except as expressly contemplated by this Agreement or
any other Transaction Document, the Company shall not and shall not cause each
of its Subsidiaries without the affirmative written consent of the Majority in
Interest to:
(a) sell, lease, transfer or assign any of its assets, tangible or
intangible, other than as relating to the conduct of the business of the Company
or its Subsidiaries in the ordinary course, consistent with past custom and
practice;
31
(b) sell or transfer all or substantially all equity interests of the
Company and/or any Subsidiary;
(c) enter into any Contract (or series of related Contracts) that
requires expenditures; and/or the incurrence of obligations not provided for in
the Operating Budget (as defined herein);
(d) permit its capital expenditures and commitments therefor to exceed
or be less than the amounts budgeted in the current capital expenditure budget
(the "OPERATING BUDGET"), a true, correct and complete copy of which has been
delivered to the Investor on or prior to the date hereof;
(e) delay or postpone the payment of accounts payable and other
obligations and Liabilities or accelerate the collection of accounts receivable,
other than in the ordinary course of business consistent with past custom and
practice;
(f) enter into any employment Contract or collective bargaining
agreement, written or oral, or modify the terms of any such existing Contract or
agreement outside the ordinary course of business;
(g) grant any increase in the base compensation of any of its executive
officers or employees above the amounts provided for in the budget prepared by
the Company in excess of 5%;
(h) adopt, amend, modify or terminate any Employee Plan, bonus,
incentive, severance or other plan, Contract or commitment for the benefit of
any of its officers or employees;
(i) enter into any transaction with any of its officers, employees or
Affiliates (or any directors, officers or employees of such Affiliate), other
than ordinary course employment arrangements entered into in accordance with
past custom or practice;
(j) in any manner take or cause to be taken any action which is
designed, intended or might reasonably be anticipated to have the effect of
discouraging customers, employees, suppliers, lessors, and other associates of
the Company or any of its Subsidiaries from maintaining the same business
relationships with the Company or any of its Subsidiaries after the date of this
Agreement as were maintained prior to the date of this Agreement;
(k) issue or sell any equity interests or issue or sell any securities
convertible into, exercisable or exchangeable for or options or warrants to
purchase or rights to subscribe for, any equity interests;
(l) declare or pay a distribution on any equity interests, change the
number of authorized shares of its equity interests or reclassify, combine,
split, subdivide or redeem or otherwise repurchase any of its equity interests,
or issue, deliver, pledge or encumber any additional equity interests or other
securities equivalent to, or exchangeable for, equity interests or enter into
any Contract to do any of the foregoing;
32
(m) incur any Indebtedness above $250,000 or issue any securities
evidencing any Indebtedness;
(n) create or suffer to exist any Encumbrance above $250,000 on any of
its assets or properties other than Permitted Encumbrances;
(o) change its accounting principles or policies;
(p) engage in any business or activity other than those conducted or
proposed to be conducted by the Company and the Subsidiaries as of the date
hereof;
(q) take or omit to take any action which would result in the
representations and warranties contained in this Agreement and the other
Transaction Documents being untrue on the Closing Date;
(r) change the primary business or activity of FiberNet Telecom as a
holding company of limited liability company interests of Equal Access and Local
Fiber;
(s) create any subsidiary or Joint Venture; and/or
(t) agree or otherwise commit to take any of the actions set forth
above.
ARTICLE VII
EVENTS OF DEFAULT
(a) The following events shall constitute an "Event of Default" under
the Notes issued pursuant to this Agreement:
(i) default shall be made in any payment of principal of this
or any Note issued pursuant to this Agreement when the same shall
become due and payable;
(ii) default shall be made in any payment of interest on the
Notes when the same shall become due and payable, and such interest
shall remain unpaid for 3 days after such due date;
(iii) default shall be made in any payment in principal or
interest on any other Indebtedness of the Company and its Subsidiaries
that had not been cured in accordance with the terms of such
Indebtedness and/or any Indebtedness of any Loan Party in excess of
$200,000 shall be declared due and payable prior to its stated maturity
by reason of an event of default with respect thereto;
(iv) any redemption of the Preferred Stock by the Company and
its Subsidiaries;
(v) any representation, covenant or warranty made by any Loan
Party under or in connection with any Transaction Document, or any
certificate or other instrument furnished in connection with any
Transaction Document or the transactions contemplated thereby, shall
prove to have been false or misleading when made in any
33
material respect, and such default (if curable) shall remain uncured
and unwaived for a period of 5 days;
(vi) default shall be made in the due observance or
performance of any covenant or agreement (other than as contemplated by
clause (i) or (ii) above) to be observed or performed by any Loan Party
under the Notes or any Transaction Document, and such default (if
curable) shall remain uncured and unwaived for a period of 10 days;
(vii) the Company or any Loan Party shall (A) voluntarily
commence any proceeding or file any petition seeking relief under Title
11 of the United States Code or any other Federal or state bankruptcy,
insolvency or similar law, (B) consent to the institution of any such
proceeding or the filing of any such petition, (C) apply for or consent
to the appointment of a receiver, trustee, custodian, sequestrator or
similar official for the Company or such Loan Party or for all or a
substantial part of its properties, (D) file an answer admitting the
material allegations of a petition filed against it in any such
proceeding, (E) make a general assignment for the benefit of creditors,
or (F) admit in writing its inability to pay its debts as they become
due;
(viii) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent
jurisdiction seeking (A) relief in respect of the Company or any Loan
Party, or of all or a substantial part of the properties thereof, under
Title 11 of the United States Code or any other Federal or state
bankruptcy, insolvency or similar law, (B) the appointment of a
receiver, trustee, custodian, sequestrator or similar official for the
Company or any Loan Party or for a substantial part of the properties
thereof, or (C) the winding up or liquidation of the Company or any
Loan Party; and an order or decree approving or ordering any of the
foregoing shall be issued by a court having jurisdiction and continue
unstayed and in effect for 60 days;
(ix) final judgment for the payment of money in excess of
$200,000 shall be rendered against the Company or any Loan Party and
the same shall remain undischarged or unbonded for a period of 60
consecutive days during which execution shall not be effectively
stayed; or
(x) any officer of the Company or any Loan Party shall have
been convicted of any felony or of any other crime relevant to his
office or employment.
(b) In case of any Event of Default and at any time thereafter during
the continuance of such Event of Default, the Majority in Interest may, by
written notice to the Company, declare its Note or Notes to be due and payable
in full both as to principal and interest; PROVIDED, HOWEVER, that no notice
need be given to the Company if acceleration is based upon the Events of Default
described in clause (viii) or (ix) of paragraph (a) above, in either of which
cases the Notes shall automatically become due and payable without any action on
the part of any Holder. Upon a declaration by the Majority in Interest that its
Note or Notes is or are due and payable as provided in this clause (b) and
written notice by the Majority in Interest to the remaining Holders of the same,
the Notes held by the remaining Holders shall be deemed to be due and payable in
full both as to principal and interest.
34
(c) In case an Event of Default shall have occurred and be continuing,
the Majority in Interest may proceed to protect and enforce their rights either
by suit in equity or by action at law, whether for the specific performance of
any covenant or agreement contained in this Agreement or the Notes or in aid of
the exercise of any power granted in this Agreement or the Notes, or proceed to
enforce the payment of this Note or to enforce any other legal or equitable
right of the Holders. No remedy conferred hereunder is intended to be exclusive
of any other remedy and each such remedy shall be cumulative and shall be in
addition to every other remedy given hereunder or currently or hereafter
existing at law or in equity or by statute or otherwise.
ARTICLE VIII
MISCELLANEOUS
8.1 COMMUNICATION.
Subject to the express provisions of this Agreement, all communications
provided for or permitted hereunder shall be in writing, personally delivered to
an officer or other responsible employee of the addressee or sent by registered
mail, charges prepaid, or by telecopy with confirmed receipt (with hard copy to
follow), telegram or other means of recorded telecommunication, charges prepaid,
to the applicable address set forth below or to such other address as either
party hereto may from time to time designate to the other in such manner,
provided that no communication shall be sent by mail pending any threatened or
during any actual postal strike or other disruption of postal service in the
United States. Any communication so personally delivered shall be deemed to have
been validly and effectively given on the date of such delivery. Any
communication so sent by registered mail shall be deemed to have been validly
and effectively given on the tenth Business Day next following the day on which
it is sent. Any communication so sent by telecopy, telegram or other means of
recorded telecommunication shall be deemed to have been validly and effectively
given on the Business Day next following the day on which it is sent.
Communications sent to any Loan Party shall be addressed to:
FiberNet Telecom Group, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
35
▇'▇▇▇▇▇▇▇▇ GRAEV & KARABELL, LLP
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Communications sent to the Purchasers shall be addressed to each
Purchaser's address listed on ANNEX I:
With a copy to:
▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
8.2 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
All agreements, representations, warranties and covenants made by or on
behalf of the Company in the Transaction Documents, including due diligence
costs, and otherwise with respect thereto or any transactions contemplated
thereby are material, shall be considered to have been relied upon by the
Purchasers and shall survive the execution and delivery of the Transaction
Documents or any investigation made at any time by or on behalf of the
Purchasers and any disposition or payment of the Notes until repayment in full
of all Indebtedness of the Company to the Purchasers (including the Note and the
other amounts due under this Agreement). All statements contained in any
certificate or other instrument delivered by or on behalf of the Company
pursuant to the Transaction Documents or in connection with the transactions
contemplated hereby shall be deemed representations and warranties made by the
Company pursuant hereto. The obligations of the Company pursuant to Sections 8.5
and 8.6 shall survive the payment in full and the cancellation of the Notes and
the termination of this Agreement for the period of three years from the
termination of this Agreement.
8.3 SUCCESSORS AND ASSIGNS.
This Agreement shall inure to the benefit of and be binding on the
parties hereto, their respective successors and any assignees or transferees of
some or all of the parties' rights or obligations hereunder; provided that,
except as provided in the following sentence, neither this Agreement, nor the
benefit hereof, may be assigned by the Company without the prior written consent
of the Purchasers.
8.4 EXPENSES OF THE PURCHASERS.
The Company agrees to pay all out-of-pocket expenses reasonably
incurred by the Purchasers associated with the preparation, execution and
delivery of this Agreement and the other Transaction Documents, including due
diligence costs, and reasonably incurred by the
36
Purchasers in connection with the purchase of the Notes hereunder, all filings
with any Governmental Authority, compliance with any Applicable Law, or
otherwise in connection with this Agreement, any other Transaction Document or
the Notes issued hereunder, including, but not limited to, the fees and
disbursements of ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, counsel for the Purchasers. All amounts
due under this Section 8.4 shall be payable on demand of the Purchasers therefor
by wire transfer of immediately available funds to any designated bank account.
All statements, reports, certificates, opinions, appraisals and other documents
or information required to be furnished to the Purchasers by the Company under
this Agreement shall be supplied by the Company without cost to the Purchasers.
8.5 INDEMNIFICATION.
(a) In addition to all rights and remedies available to the Purchasers
at law or in equity, the Company shall indemnify the Purchasers, each subsequent
holder of the Note and their respective affiliates, stockholders, officers,
directors, employees, agents, representatives, counsel, successors and permitted
assigns (collectively, the "INDEMNIFIED PERSONS") and save and hold each of them
harmless against and pay on behalf of or reimburse such party as and when
incurred for any loss (including, without limitation, diminutions in value and
consequential damages), liability, demand, claim, action, cause of action, cost,
damage, deficiency, tax (including any taxes imposed with respect to such
indemnity payments), penalty, fine or expense, whether or not arising out of any
claims by or on behalf of any other Loan Party or any third party, including
interest, penalties, reasonable attorneys' fees and expenses and all amounts
paid in investigation, defense or settlement of any of the foregoing
(collectively, "LOSSES") which any such party may suffer, sustain or become
subject to, as a result of, in connection with, relating or incidental to or by
virtue of:
(i) any misrepresentation or breach of warranty on the part of
the Company under Article III of this Agreement or under any
Transaction Document;
(ii) without duplication of subsection (a)(i) above, any
misrepresentation in or omission from any of the representations,
warranties, statements, schedules and exhibits hereto, certificates or
other instruments or documents furnished to the Purchasers by the
Company and/or any other Loan Party made in or pursuant to this
Agreement or under any other Transaction Document;
(iii) any nonfulfillment or breach of any covenant or
agreement on the part of the Company or any other Loan Party under this
Agreement or under any other Transaction Document;
(iv) any action, demand, proceeding, investigation or claim by
any third party (including, without limitation, Governmental
Authorities) against or affecting any Indemnified Person which, if
successful, would give rise to or evidence the existence of or relate
to a breach of any of the representations, warranties or covenants of
the any other Loan Party;
(v) any claim (whenever made) relating in any way to a Loan
Party and any claim (whenever made) arising out of, relating to,
resulting from or caused by any
37
transaction, status, event, condition, occurrence or situation relating
to, arising out of or in connection with (A) the status or conduct of
any Loan Party, (B) the execution, performance and delivery of the
Transaction Documents and the documents and agreements contemplated
thereby or (C) any actions taken by or omitted to be taken by any of
the Indemnified Persons in connection with this Agreement or any other
Transaction Document or the documents and agreements contemplated
hereby and thereby.
(b) Notwithstanding the foregoing, and subject to the following
sentence, upon judicial determination, which is final and no longer appealable,
that the act or omission giving rise to the indemnification hereinabove provided
resulted out of or was based upon the Indemnified Person's gross negligence,
fraud or willful misconduct was by the Indemnified Person, the Company shall not
be responsible for any Losses sought to be indemnified in connection therewith
by such Indemnified Person, and the Company shall be entitled to recover from
the Indemnified Person all amounts previously paid in full or partial
satisfaction of such indemnity with interest thereon at the rate of 15.0% per
annum calculated on the basis of a year of 365 days, together with all costs and
expenses of the Company reasonably incurred in effecting such recovery, if any.
(c) All indemnification rights hereunder shall survive the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby, regardless of any investigation, inquiry or examination
made for or on behalf of, or any knowledge of the Purchasers and/or any of the
Indemnified Persons or the acceptance by the Purchasers of any certificate or
opinion. In addition, for purposes of determining whether there has been a
breach, and the amount of any Losses that are the subject matter of a claim for
indemnification hereunder, each representation and warranty contained in this
Agreement shall be read without regard and without giving effect to any
materiality or knowledge standard or qualification contained in such
representation or warranty.
(d) If for any reason the indemnity provided for in this Section 8.5 is
unavailable to any Indemnified Person or is insufficient to hold each such
Indemnified Person harmless from all such Losses arising with respect to the
transactions contemplated by this Agreement, then the Company shall contribute
to the amount paid or payable in respect of such Loss in such proportion as is
appropriate to reflect not only the relative benefits received by any Loan Party
on the one hand and such Indemnified Person on the other but also the relative
fault of any Loan Party and the Indemnified Person as well as any relevant
equitable considerations. In addition, Company agrees to reimburse any
Indemnified Person upon demand for all reasonable expenses (including legal
counsel fees) incurred by such Indemnified Person or any such other Person in
connection with investigating, preparing or defending any such action or claim.
The indemnity, contribution and expenses reimbursement obligations that the
Company has under this Section 8.5 shall be in addition to any liability that
the Company may otherwise have. The Company further agrees that the
indemnification and reimbursement commitments set forth in this Agreement shall
apply whether or not the Indemnified Person is a formal party to any such
lawsuits, claims or other proceedings.
38
8.6 ENVIRONMENTAL LIABILITY.
In addition to any indemnification of the Purchasers provided for in
this Section 8.5, the Company shall indemnify and hold harmless the Indemnified
Persons against and from any and all Losses of any nature whatsoever suffered or
incurred by any Indemnified Person whether upon realization of any security for
the Obligations, or as a lender to the Company, or as successor to or assignee
of any right or interest of the Company, or as a result of any order,
investigation or action by any Governmental Authority relating to the Company or
its business or assets, or as mortgagee in possession, or as
successor-in-interest to the Company by foreclosure deed or deed in lieu of
foreclosure, under or on account of any Environmental Law, including the
assertion of any lien thereunder, with respect to:
(a) the Release or threat of Release of a Contaminant, or the presence
of any Contaminant at, on or near any property owned, leased or controlled by
any Loan Party;
(b) the Release of a Contaminant owned by, or under the charge,
management or control of any Loan Party or any predecessor or assignor of any
Loan Party, at a place other than property owned, leased or controlled by any
Loan Party;
(c) any costs of removal or remedial action incurred by any
Governmental Authority or any costs incurred by any other Person or damages from
injury to, destruction, or loss of natural resources in relation to any property
owned, leased or controlled by any Loan Party or any contiguous real property or
elsewhere, including reasonable costs of assessing such injury, destruction or
loss incurred pursuant to any Environmental Laws;
(d) liability for personal injury or property damage arising under any
statutory or common law tort theory, including, without limitation, damages
assessed for the maintenance of a public or private nuisance or for the carrying
on of a dangerous activity at, on or near any property owned, leased or
controlled by any Loan Party or elsewhere; and/or
(e) any other environmental matter within the jurisdiction of any
Governmental Authority.
(f) The Company's obligation under this Section 8.6(f) shall arise upon
the discovery of the presence of any Contaminant, whether or not any
Governmental Authority has taken or threatened any action in connection with the
presence of any Contaminant.
(g) Any indemnification of the Purchasers or any other Indemnified
Person by the Company pursuant to this Section 8.6 shall be effected by wire
transfer of immediately available funds from the Company to an account
designated by the Purchasers or any other Indemnified Person within fifteen (15)
days after the determination thereof.
8.7 GOVERNING LAW.
(A) ALL QUESTIONS CONCERNING THE CONSTRUCTION, INTERPRETATION AND
VALIDITY OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE DOMESTIC LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY
39
CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER IN THE STATE OF NEW YORK OR
ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
(B) THE PARTIES TO THIS AGREEMENT AGREE THAT JURISDICTION AND VENUE IN
ANY ACTION BROUGHT BY ANY PARTY HERETO PURSUANT TO THIS AGREEMENT SHALL PROPERLY
(BUT NOT EXCLUSIVELY) LIE IN ANY FEDERAL OR STATE COURT LOCATED IN THE STATE OF
NEW YORK. BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE PARTIES HERETO
IRREVOCABLY SUBMIT TO THE JURISDICTION OF SUCH COURTS FOR THEMSELVES AND IN
RESPECT OF THEIR PROPERTY WITH RESPECT TO SUCH ACTION. THE PARTIES HERETO
IRREVOCABLY AGREE THAT VENUE WOULD BE PROPER IN SUCH COURT, AND HEREBY WAIVE ANY
OBJECTION THAT SUCH COURT IS AN IMPROPER OR INCONVENIENT FORUM FOR THE
RESOLUTION OF SUCH ACTION.
(C) THE COMPANY HEREBY DESIGNATES AND APPOINTS NATIONAL REGISTERED
AGENTS, INC. AND SUCH OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY THE COMPANY
WITH THE WRITTEN CONSENT OF THE PURCHASERS WHICH IRREVOCABLY AGREE IN WRITING TO
SO SERVE AS ITS AGENT TO RECEIVE ON ITS BEHALF SERVICE OF ALL PROCESS IN ANY
SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY
THE COMPANY TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. A COPY OF ANY
SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL TO THE COMPANY AT ITS
ADDRESS PROVIDED IN SECTION 8.1 EXCEPT THAT UNLESS OTHERWISE PROVIDED BY
APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF
SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY THE COMPANY REFUSES TO ACCEPT
SERVICE, THE COMPANY HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE
SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE PURCHASERS TO
BRING PROCEEDINGS AGAINST THE COMPANY IN THE COURTS OF ANY OTHER JURISDICTION.
(D) DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS
ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON.
THEREFORE, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER
THIS AGREEMENT OR ANY DOCUMENTS RELATED HERETO.
40
8.8 RIGHTS AND WAIVERS.
(a) The rights and remedies of the Purchasers under the Transaction
Documents and in connection therewith: (i) are cumulative, (ii) may be exercised
as often and in such order as the Purchasers consider appropriate, (iii) are in
addition to the rights and remedies of the Purchasers under the general law, and
(iv) shall not be capable of being waived or varied except by virtue of an
express waiver or variation in writing signed by an officer of the Purchasers;
and in particular any failure to exercise or any delay in exercising any of such
rights and remedies shall, to the extent permitted by law, not operate as a
waiver or variation of that or any other such right or remedy; any defective or
partial exercise of any of such rights shall, to the extent permitted by law,
not preclude any other or future exercise of that or any other such right or
remedy; and no act or course of conduct or negotiation on the part of the
Purchasers or on its behalf shall, to the extent permitted by law, in any way
preclude the Purchasers from exercising any such right or remedy or constitute a
suspension or variation of any such right or remedy.
(b) No Transaction Document nor any provision thereof, may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the parties thereto.
8.9 AMENDMENTS
No amendments to, or modification of, this Agreement shall be made
without the written consent of the Company and the Majority in Interest.
8.10 NO FIDUCIARY RELATIONSHIP.
No provision in this Agreement or in any of the other Transaction
Documents and no course of dealing between the parties shall be deemed to create
any fiduciary duty by the Purchasers to any other Loan Party.
8.11 NO DUTY.
All attorneys, accountants, appraisers, and other professional Persons
and consultants retained by the Purchasers shall have the right to act
exclusively in the interest of the Purchasers and shall have no duty of
disclosure, duty of loyalty, duty of care, or other duty or obligation of any
type or nature whatsoever to the Company or any of the Company's shareholders or
any other Person.
8.12 CONSTRUCTION.
The Company and the Purchasers acknowledge that each of them has had
the benefit of legal counsel of its own choice and has been afforded an
opportunity to review this Agreement and the other Transaction Documents with
its legal counsel and that this Agreement and the other Transaction Documents
shall be construed as if jointly drafted by the Purchasers and the Company.
41
8.13 SEVERABILITY.
Whenever possible, each provision of this Agreement will be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or any other jurisdiction, and such invalid, void or otherwise unenforceable
provisions shall be null and void. It is the intent of the parties, however,
that any invalid, void or otherwise unenforceable provisions be automatically
replaced by other provisions which are as similar as possible in terms to such
invalid, void or otherwise unenforceable provisions but are valid and
enforceable to the fullest extent permitted by law.
8.14 COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of
which when executed and delivered shall deemed to be an original, but all of
which when taken together shall constitute but one and the same instrument;
either party may execute this Agreement by signing any counterpart of it.
8.15 HEADINGS.
Article and Section headings and the Table of Contents used herein are
for convenience of reference only and are not to affect the construction of, or
to be taken into consideration in interpreting, this Agreement.
8.16 ENTIRE AGREEMENT.
This Agreement, together with the other Transaction Documents,
constitutes the entire agreement between the parties relating to the subject
matter hereof and, except as stated herein or in the instruments and documents
to be executed and delivered pursuant hereto, contains all the representations
and warranties of the respective parties relating to the subject matter hereof.
8.17 TIME OF ESSENCE.
Time shall be of the essence of this Agreement and the other
Transaction Documents, provided that the time for doing or completing any matter
provided for herein may be extended or abridged by an agreement in writing
signed by the parties or by their respective counsel who are hereby expressly
appointed in this regard.
42
IN WITNESS WHEREOF, the parties hereto have caused this
Securities Purchase Agreement to be duly executed by their authorized officers,
all as of the day and year first above written.
FIBERNET TELECOM GROUP, INC.
By:
---------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: President and CEO
SIGNAL EQUITY PARTNERS, L.P.
By: Signal Equity Advisors, L.P.
Its: General Partner
By: Signal Equity Advisors, Inc.
Its: General Partner
By:
---------------------------------
Name:
Title:
EXETER CAPITAL PARTNERS IV, L.P.
By: Exeter IV Advisors, L.P.
Its: General Partner
By: Exeter IV Advisors, Inc.
Its: General Partner
By:
-------------------------------
Name:
Title:
EXETER EQUITY PARTNERS, L.P.
By: Exeter Equity Advisors, L.P.
Its: General Partner
By: Exeter Equity Advisors, Inc.
Its: General Partner
By:
------------------------------
Name:
Title:
WATERVIEW PARTNERS, LP
By: BRCM LLC
Its: General Partner
By:
------------------------------
Name:
Title:
BURDEN DIRECT INVESTMENT FUND III
By: ▇▇▇▇▇▇▇ A.M. Burden & Co., L.P.
Its: Managing General Partner
By: Burden Brothers, Inc.
Its: Sole General Partner
By:
------------------------------
Name:
Title:
▇▇▇▇▇ ▇▇▇▇ PARTNERS, L.P.
By: ▇▇▇▇▇ ▇▇▇▇ Associates, L.P.
Its: General Partner
By: ▇▇▇▇▇ ▇▇▇▇, Inc.
Its: General Partner
By:
------------------------------
Name:
Title:
DELTA OPPORTUNITY FUND, LTD.
By:
------------------------------
Name:
Title:
DELTA OPPORTUNITY FUND (INSTITUTIONAL), LLC
By: ▇▇▇▇ & ▇▇▇▇▇▇▇▇ MANAGEMENT, LLC
By:
------------------------------
Name:
Title:
OVERBROOK FUND I, LLC
By:
------------------------------
Name:
Title:
------------------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
MADISON INVESTMENT PARTNERS II LP
By: Madison Investment Partners II LLC
Its: General Partner
By:
------------------------------
Name:
Title:
------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
FIBER ISLAND, LLC
By:
------------------------------
Name:
Title:
------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
ANNEX I
PURCHASERS
------------------------------------------------------------- -------------------------------------------------------
PURCHASERS NOTE PURCHASE
NAME AND ADDRESS PRICE
------------------------ -------------------------------------------------------
Signal Capital Partners, L.P. $1,200,000
▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
------------------------ -------------------------------------------------------
Waterview Partners, LP $1,000,000
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
------------------------ -------------------------------------------------------
Exeter Capital Partners IV, L.P. $1,500,000
c/o The Exeter Group
▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
------------------------------------------------------------- ------------------
Exeter Equity Partners, L.P. $500,000
c/o The Exeter Group
▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
------------------------------------------------------------- ------------------
Burden Direct Investment Fund III $1,000,000
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
------------------------------------------------------------- ------------------
------------------------------------------------------------- ------------------
Delta Opportunity Fund, Ltd. $600,000
c/o International Fund Administration, Ltd.
▇▇▇▇▇ ▇▇▇
▇▇ ▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
------------------------------------------------------------- ------------------
Delta Opportunity Fund, (Institutional), LLC $400,000
c/o Diaz & Altschul Management, LLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
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▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇ $25,000
New York, New York
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Overbrook Fund I, LLC $250,000
c/o Overbrook Management Corporation
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Fiber Island, LLC $500,000
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Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (212) 421-0169
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Madison Investment Partners II LP $500,000
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▇▇▇▇▇ ▇▇▇▇ Partners, L.P. $250,000
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ $25,000
c/o ▇'▇▇▇▇▇▇▇▇ Graev & Karabell, LLP
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ $10,000
c/o ▇'▇▇▇▇▇▇▇▇ Graev & Karabell, LLP
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ c/o ▇'▇▇▇▇▇▇▇▇ Graev & Karabell, LLP $10,000
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