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EXHIBIT 10.2
SERIES B CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
by and between
HIGH SPEED ACCESS CORP.
and
BROADBAND SOLUTIONS II, LLC
September 1, 1998
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SERIES B CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
THIS SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
("Agreement") is made and entered into as of the 1st day of September, 1998, by
and between HIGH SPEED ACCESS CORP., a Delaware corporation ("Company"), and
BROADBAND SOLUTIONS II, LLC, a Kentucky limited liability company ("Investor").
WITNESSETH:
Company desires to sell and issue, and Investor desires to
purchase and acquire, up to 2,000,000 shares of Company's authorized but
unissued Series B Convertible Preferred Stock ("Series B Preferred Stock"), upon
the terms and subject to the conditions contained herein.
NOW, THEREFORE, in consideration of the mutual covenants,
representations and warranties herein contained, and intending to be legally
bound, Company and Investor agree as follows:
1. Sale and Issuance of Series B Convertible Preferred Stock.
1.1 Company shall adopt and file with the Secretary of State
of the State of Delaware on or before the Closing (as defined below) a
Certificate of Amendment to the Certificate of Incorporation of the Company in
the form attached hereto as Exhibit A (the "Certificate of Amendment"). The
Series B Preferred Stock will have the rights, preferences and privileges and
restrictions set forth in the Certificate of Amendment.
1.2 Subject to the terms and conditions of this Agreement,
Investor agrees to purchase from Company, and Company agrees to sell, issue and
deliver to Investor up to 2,000,000 shares of Series B Preferred Stock for an
aggregate purchase price of Five Million Dollars ($5,000,000). At the Closing
(as defined in Section 2), Investor shall purchase, and Company shall sell,
issue and deliver to Investor, 600,000 shares of Series B Preferred Stock at a
price of Two Dollars and Fifty Cents ($2.50) per share, resulting in a total
purchase price at the Closing of One Million Five Hundred Thousand Dollars
($1,500,000). At any time and from time to time after the Closing, at the option
of Company, evidenced by a resolution of its Board of Directors and upon ten
(10) days prior written notice given by Company to Investor (unless waived in
writing by Investor), Investor agrees to purchase from Company and Company
agrees to sell, issue and deliver to Investor, up to 1,400,000 shares of Series
B Preferred Stock at a price of Two Dollars and Fifty Cents ($2.50) per share,
resulting in a total purchase price of Three Million Five Hundred Thousand
Dollars ($3,500,000) in the aggregate for such shares of Series B Preferred
Stock (the "Post Closing Capital Calls"). There may be one or more Post Closing
Capital Calls, provided that pursuant thereto Investor shall be, under no
circumstances, obligated to purchase more than 1,400,000 shares of Series B
Preferred Stock in the aggregate.
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2. Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at 10:00 a.m. on September 1, 1998,
at the offices of ▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, or at such other time, date, or place as shall be mutually agreed upon
by the parties hereto in writing (the "Closing Date"). Each of the Post Closing
Capital Calls, if any, shall be consummated at Company's option as contemplated
by Section 1.2 above by delivery of certificates representing the shares of
Series B Preferred Stock Investor is purchasing against payment of the purchase
price therefor in immediately available funds.
3. Closing Items.
3.1 At the Closing, Company shall deliver, or cause to be
delivered, the following items:
[a] The Certificate of Amendment, certified by the
Delaware Secretary of State;
[b] the Bylaws of Company ("Bylaws"), certified as to
their due adoption and continued validity by the Secretary of Company;
[c] resolutions of the Board of Directors of Company
authorizing the execution, delivery and consummation of this Agreement,
the issuance of the shares of Series B Preferred Stock, and the other
matters contemplated hereby, certified as to their due adoption and
continued validity by the Secretary of Company;
[d] resolutions of the shareholders of Company
authorizing the Certificate of Amendment, certified as to their due
adoption and continued validity by the Secretary of Company;
[e] a waiver by Company=s common shareholders of the
subscription rights provided in the Shareholders Agreement dated as of
April 3, 1998 among Company and its shareholders, in form and substance
satisfactory to Investor;
[f] the Amended and Restated Registration Rights
Agreement in the form attached hereto as Exhibit B (the "Registration
Rights Agreement");
[g] the Amended and Restated Shareholders Agreement
in the form attached hereto as Exhibit C (the "Shareholders
Agreement"); and
[h] certificates representing the shares of Series B
Preferred Stock that Investor is purchasing against payment of the
purchase price therefor in immediately available funds.
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3.2 At the Closing, Investor shall deliver, or cause to be
delivered, to Company, One Million Five Hundred Thousand Dollars ($1,500,000) in
immediately available funds, and shall execute and deliver the Registration
Rights Agreement and the Shareholders Agreement.
4. Further Assurances. Each party shall execute such additional
documents and take such other actions as the other party or parties may
reasonably request to consummate the transactions contemplated hereby and
otherwise as may be necessary to effectively carry out the terms and provisions
of this Agreement.
5. Representations and Warranties of Company. Except as set forth in
the disclosure letter dated the date hereof delivered to Investor (the
"Disclosure Letter"), Company represents and warrants to Investor, as of the
date hereof and as of the date of each issuance of Series B Preferred Stock to
Investor pursuant to Post Closing Capital Calls, as follows:
5.1 Corporate Standing. Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware. Company has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted and
as presently proposed to be conducted, to execute, deliver and perform this
Agreement, and any other agreement to which Company is a party, the execution
and delivery of which is contemplated hereby (the "Ancillary Agreements").
Company is duly qualified and is authorized to transact business and is in good
standing as to foreign corporation in each jurisdiction in which the failure to
so qualify would have a material adverse effect on its business, properties,
prospects or financial condition. Every jurisdiction where the Company is
qualified as a foreign corporation to transact business is listed in Section 5.1
of the Disclosure Letter. True and accurate copies of the certificate of
incorporation, and all amendments thereto, bylaws (and all amendments thereto)
and minute book (containing the records of all meetings and written consents of
the stockholders, the board of directors and any committees of the board of
directors) of Company have previously been delivered or made available to
Investors.
5.2 Authorization. The execution and delivery of this
Agreement and any Ancillary Agreement and the consummation of the transactions
contemplated hereby and thereby (including, without limitation, the Certificates
of Amendment attached hereto as Exhibits A and B, respectively), have been duly
authorized by all necessary corporate action on the part of Company. Each of
this Agreement and any Ancillary Agreement has been duly executed and delivered
by Company and constitutes the legal, valid and binding obligation of Company
enforceable against it in accordance with its terms except as such
enforceability may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors rights generally or (ii) general principals of equity (regardless of
whether an enforceability is considered in a proceeding at law or in equity).
5.3 Capitalization. As of the Closing Date, the authorized
capital stock of Company consists of [i] 11,900,000 Common Shares with $.01 par
value per share ("Common Shares"), of which at the date hereof 4,000,000 shares
are validly issued and outstanding, fully paid
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and nonassessable and owned, beneficially and of record, as set forth in Section
5.3 of the Disclosure Letter, [ii] 5,000,000 shares of Series A Convertible
Preferred Shares, $.01 par value per share ("Series A Preferred Stock"), of
which at the date hereof 5,000,000 shares are validly issued and outstanding and
fully paid and nonassessable and owned, beneficially and of record, by Investor,
and [iii] 2,000,000 shares of Series B Preferred Shares, none of which is
outstanding at the date hereof and all of which are to be sold pursuant to this
Agreement. 5,000,000 Common Shares have been duly and validly reserved for
issuance upon conversion of the Series A Preferred Stock, 2,000,000 Common
Shares have been duly and validly reserved for issuance upon conversion of the
Series B Preferred Stock and 900,000 Common Shares have been duly and validly
reserved for issuance under Company's 1998 Stock Option Plan. Except as set
forth in Section 5.3 of the Disclosure Letter, there are outstanding no
subscriptions, options, warrants, calls, commitments or rights (including
conversion or preemptive rights and rights of first refusal), proxy or
stockholder agreements or agreements of any character relating to shares of
Company's capital stock or the Series B Preferred Stock to be issued hereunder
or any instruments that can be converted into shares of Company's capital stock
or the Series B Preferred Stock to be issued hereunder. None of the shares of
Company's capital stock have been issued in violation of any preemptive right.
All issuances, transfers or purchases of the capital stock of Company have been
in compliance with all applicable agreements and all applicable laws, including
federal and state securities laws, and all taxes thereon, if any, have been
paid. No former or present holder of any of the shares of capital stock of
Company has any legally cognizable claim against Company based on any issuance,
sale, purchase, redemption or involvement in any transfer of any shares of
capital stock by Company. Except as set forth in Section 5.3 of the Disclosure
Letter and for obligations of Company to redeem Series B Preferred Shares, as
contemplated by Section 9.1 of this Agreement, there are no contractual
obligations of Company to repurchase, redeem or otherwise acquire any shares of
capital stock of Company. No bonds, debentures, notes or other indebtedness
having the right to vote (or convertible into or exercisable for securities
having the right to vote) on any matters on which shareholders of Company may
vote are issued or outstanding. Company is not a party or subject to any
agreement or understanding, and, to Company's best knowledge, there is no
agreement or understanding between any persons that affects or relates to the
voting or giving of written consents with respect to any security or the voting
by any director of Company.
5.4 Validly Issued Shares; Securities Exemption. The shares of
Series B Preferred Stock to be issued, sold and delivered in accordance with the
terms of this Agreement for the consideration set out herein will, upon issuance
in accordance with the terms hereof, be duly and validly issued, fully paid and
nonassessable, free of restrictions on transfer other than restrictions on
transfer under this Agreement, the Shareholders Agreement dated as of April 3,
1998 among Company, Investor and the other shareholders of Company (the
"Shareholders Agreement"), and under applicable federal and state securities
laws. The issuance of the Series B Preferred Stock to Investors pursuant to this
Agreement will comply with all applicable laws, including federal and state
securities laws, and will not violate the preemptive rights of any person.
Without limiting the immediately preceding sentence, the Company has not made a
general solicitation of the public in connection with the offering and sale of
the shares of Series B Preferred Stock to be issued hereunder. Moreover, the
Company believes that the offering and sale of the Series B Preferred
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Stock to be issued hereunder will not be integrated with any previous securities
offerings made by the Company. The Common Shares issuable upon conversion of the
Series B Preferred Stock being purchased under this Agreement will be, upon
issuance and delivery in accordance with the terms of the Articles of Amendment,
duly and validly issued, fully paid and nonassessable and free of restrictions
on transfer other than restrictions on transfer under this Agreement and the
Shareholders Agreement and under applicable federal and state securities laws.
The issuance of the Common Shares upon conversion of the Series B Preferred
Stock will comply with all applicable laws, including federal and state
securities laws (assuming the accuracy of the representations set forth in
Sections 6.2 through 6.5 of this Agreement as of the date of issuance of such
Common Shares), and will not violate the preemptive rights of any person.
5.5 No Conflict. The execution and delivery of this Agreement
and any Ancillary Agreement do not, and the consummation of the transactions
contemplated hereby and thereby will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or the loss of a material benefit under, or the creation of a
lien, pledge, security interest, charge or other encumbrance on assets (any such
conflict, violation, default, right of termination, cancellation or
acceleration, loss or creation, a "Violation") pursuant to, any provision of the
Certificate of Incorporation of Company, as amended, or Bylaws, or result in any
Violation of any material lease, agreement, obligation, instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Company or Company's properties or
assets.
5.6 Contracts and Other Commitments; Compliance. Except as set
forth in Section 5.6 of the Disclosure Letter, Company does not have and is not
bound by any material contract, agreement, lease, loan, commitment or proposed
transaction, or any judgment, order, writ or decree. No event or condition has
occurred or exists, or, to the knowledge of Company, is alleged by any of the
other parties thereto to have occurred or existed, which constitutes, or with
lapse of time or giving of notice or both might constitute, a default or breach
under any of the contracts or other items listed in Section 5.6 of the
Disclosure Letter (the "Contracts"), which default is reasonably likely to
result in a material adverse change in the financial condition, results of
operation or business of Company. Company is not in violation or default of any
provision of its Certificate of Incorporation or Bylaws or in any respect of any
provision of any Contract.
5.7 Subsidiaries. Except as set forth in Section 5.7 of the
Disclosure Letter, Company does not own or control, directly or indirectly, any
interest in any other corporation, partnership, limited liability company,
association or other business entity. Company is not a participant in any joint
venture, partnership or similar arrangement.
5.8 Consents. No consent, approval, qualification, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, or other third party is required by or
with respect to Company in connection with the execution and delivery of this
Agreement, or the consummation by Company of the transactions contemplated
hereby, which has not already been
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obtained, except for notices of sale required to be filed with the Securities
and Exchange Commission under Regulation D of the Securities Act of 1933, as
amended (the "Securities Act"), or such post closing filings as may be required
under applicable state securities laws which will be timely filed within the
applicable periods therefor.
5.9 Financial Statements. The Company=s unaudited balance
sheet as of June 30, 1998, and the related statement of income for the period
April 3, 1998 through June 30, 1998 (the "Financial Statements"), are set forth
in Section 5.9 of the Disclosure Letter. The Financial Statements present fairly
the financial condition of the Company as of June 30, 1998 and the related
results of operations for the period then ended. Absent the funding contemplated
by this Agreement, the Company expects to be unable to meet its obligations in
ordinary course of business beyond August 31, 1998. The Company has incurred and
continues to incur substantial net operating losses, and expects to continue to
incur substantial net operating losses for the foreseeable future as it
increases its capital and operating expenditures to expand its operations and
base of customers in its existing and future market areas.
5.10 Indebtedness for Borrowed Money; No Undisclosed
Liabilities. Except as set forth in Section 5.10 of the Disclosure Letter and
the Financial Statements, Company has no direct or indirect indebtedness for
borrowed money, indebtedness by way of lease-purchase arrangements, guarantees,
undertakings, chattel mortgages or other security arrangements with any bank,
financial institution or other third party. Except as and to the extent
reflected and adequately reserved against in the Financial Statements or
incurred in the ordinary course of business since the date of the Financial
Statements, as of the Closing Date, Company will not have any liability or
obligation whatsoever, whether accrued, absolute, contingent or otherwise.
5.11 Absence of Changes. Except as set forth in Section 5.11
of the Disclosure Letter, since June 30, 1998, there has not been:
[a] any change in the assets, liabilities, financial condition
or operating results of Company from that reflected in the Financial
Statements, except changes in the ordinary course of business that have
not been, in the aggregate, materially adverse;
[b] any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the business, properties,
prospects, or financial condition of Company (as such business is
presently conducted and as it is presently proposed to be conducted);
[c] any waiver or compromise by Company of a valuable right
or of a material debt owed to it;
[d] any satisfaction or discharge of any lien, claim, or
encumbrance or payment of any obligation by Company, except in the
ordinary course of business and that is not
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material to the business, properties, or financial condition of
Company (as such business is presently conducted and as it is
presently proposed to be conducted);
[e] any material change to a material contract or arrangement
by which Company or any of its assets is bound or subject;
[f] any material change in any compensation arrangement or
agreement with any employee or officer;
[g] any sale, assignment, or transfer of any intangible
assets;
[h] any resignation or termination of employment of any key
officer of Company (and Company does not know of any impending
resignation or termination of employment of any such officer);
[i] any mortgage, pledge, transfer of a security interest in,
or lien, created by Company, with respect to any of its material
properties or assets, except liens for taxes not yet due or payable;
[j] any declaration, setting aside or payment of any dividend
or other distribution of Company's assets in respect of any of
Company's capital stock, or any direct or indirect redemption,
purchase, or other acquisition of any of such stock by Company;
[k] to the best of Company's knowledge, any other event or
condition of any character that might materially and adversely affect
the business, properties, prospects or financial condition of Company
(as such business is presently conducted and as it is presently
proposed to be conducted); or
[l] any agreement or commitment by Company to do any of the
things described in this Section 5.11.
5.12 Title to Property and Assets; Leases.
[a] Company owns no real property in fee simple. Section 5.12
of the Disclosure Letter sets forth a complete and accurate list and
description of all the real property that Company leases. Company is
not bound or committed to make any capital improvement or expenditure
with respect to its owned or leased real property.
[b] Except as set forth in Section 5.12 of the Disclosure
Letter, the Company has good, valid and marketable title to all the
personal and mixed, tangible and intangible properties and assets which
it purports to own, free and clear of all liens, restrictions, claims,
charges, security interests, easements or other encumbrances of any
nature whatsoever, except for liens for current taxes not yet due and
payable. With respect to the property and
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assets that it leases, Company is in compliance with such leases and,
to Company's best knowledge, holds a valid leasehold interest, free
and clear of any liens, claims and encumbrances. All properties and
assets of Company are in the possession or control of Company, and no
other person is entitled to possession of any such properties and
assets.
5.13 Legal Proceedings. Except as set forth in Section 5.13 of
the Disclosure Letter, there are no claims of any kind or any actions, suits,
proceedings, arbitrations or investigations pending or, to Company's best
knowledge, threatened against or affecting Company against any asset, interest
or right of Company or which questions the validity of the transactions
contemplated by this Agreement and Company does not know of any facts which may
constitute a basis therefor.
5.14 Environmental Matters. Company is not in violation of any
applicable statute, law or regulation relating to the environment or
occupational health and safety (the "Environmental Laws"), and, to Company's
best knowledge, no material expenditures are required to be made by Company in
order to comply with any of the Environmental Laws.
5.15 Licenses and Permits; Compliance with Laws. Company holds
all franchises, permits, licenses, variances, exemptions, orders and approvals
of all governmental entities which are material to the operation of Company's
business and is in compliance with the terms thereof. Company has complied with
and is not in any default under (and has not been charged with or received
notice with respect to, nor is threatened with or under investigation with
respect to, any charge concerning any violation of any provision of) any
federal, state or local law, regulation, ordinance, rule or order (whether
executive, judicial, legislative or administrative) or any order, writ,
injunction or decree of any court, agency or instrumentality and no action,
suit, proceeding, hearing, investigation, charge, complaint, claim, demand, or
notice has been filed or commenced against any of them alleging any failures to
comply.
5.16 Employee Benefit Plans. Except as set forth in Section
5.16 of the Disclosure Letter, Company has no employee benefit plans including
any profit sharing, deferred compensation, incentive compensation, stock
ownership, stock purchase, phantom stock, retirement, vacation, severance,
disability, death benefit, hospitalization, medical or other plan, arrangement
or understanding (whether or not legally binding) providing benefits to any
current or former employee, officer or director of Company (collectively
"Benefit Plans"), or any employment, consulting, severance, termination or
indemnification agreement, arrangement or understanding between Company and any
officer, director or employee of Company. Company has delivered or made
available to each Investor true, complete and correct copies of each Benefit
Plan, or, in the case of any unwritten Benefit Plans, descriptions thereof. Each
Benefit Plan has been administered in all material respects in accordance with
its terms and all applicable laws.
5.17 Labor Relations.
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[a] Company is in compliance in all material respects
with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours and
occupational safety and health;
[b] There is no unfair labor practice charge or
complaint or any other matter against or involving Company pending or,
to Company's best knowledge, threatened before the National Labor
Relations Board, any other agency or any court of law;
[c] There is no labor strike, dispute, slowdown or
stoppage actually pending or, to Company's best knowledge, threatened
against Company;
[d] Company is not a party to or bound by any
collective bargaining agreement or any similar labor union arrangement;
and
[e] There are no charges, investigations,
administrative proceedings or formal complaints of discrimination
(including discrimination based upon sex, age, marital status, race,
color, religion, national origin, sexual preference, disability,
handicap or veteran status) pending or, to Company's best knowledge,
threatened, before the Equal Employment Opportunity Commission or any
federal, state or local agency or court against Company. There have
been no governmental audits of the equal employment opportunity
practices of Company and, to Company's best knowledge, no basis for any
such claim exists.
5.18 Insurance. Section 5.18 of the Disclosure Letter sets
forth a list of all insurance policies, including property, casualty, liability
and other insurance maintained with respect to the assets and business of
Company. Company is not liable for any material retroactive premium adjustments
with respect to any of its insurance policies or bonds. All such policies and
bonds are legal, valid and enforceable and in full force and effect and Company
is not in breach or default (including with respect to the payment of premiums
or the giving of notices) and no event has occurred which, with notice or the
lapse of time, would constitute such a breach or default, or permit termination,
modification or acceleration under the policy or received any notice of premium
increases or cancellations with respect to any of such policies and bonds.
Company believes the amount and type of Company's insurance coverage is adequate
for Company's business and is consistent with good business practice.
5.19 Tax Matters. Company has timely filed or caused to be
filed all federal, state, foreign and local income, franchise, gross receipts,
payroll, sales, use, withholding, occupancy, excise, real and personal property,
employment and other tax returns, tax information returns and reports ("Tax
Returns") required to be filed and all such Tax Returns were correct and
complete in all respects. Company has paid, or made adequate provisions for the
payment of, all taxes, duties or assessments of any nature whatsoever, interest
payments, penalties and additions (whether or not reflected in the returns as
filed) due and payable (and/or properly accruable for all periods ending on or
before the date of this Agreement) to any city, county, state, foreign country,
the United States or any other taxing authority. There are no security interests
on any of the assets of Company that
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arise in connection with any failure (or alleged failure) to pay any tax.
Company has withheld and paid all taxes required to have been withheld and paid
in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder or other third party. No material deficiencies
for any taxes have been proposed, asserted or assessed against Company that are
not adequately reserved for.
5.20 Related Party Transactions. Except as set forth in
Section 5.20 of the Disclosure Letter, no employee, officer or holder of
Company's capital stock or member of his or her immediate family is indebted to
Company, nor is Company indebted (or committed to make loans or extend or
guarantee credit) to any of them, other than (i) for payment of salary for
services rendered, (ii) reimbursement for reasonable expenses incurred on behalf
of Company, and (iii) for other standard employee benefits made generally
available to all employees (including stock option agreements outstanding under
any stock option plan approved by the Board of Directors of Company). To the
best of Company's knowledge, none of such persons has any direct or indirect
ownership interest in any firm or corporation with which Company has a business
relationship, or any firm or corporation that competes with Company, except that
employees, stockholders, and officers of Company and members of their immediate
families may own stock in publicly traded companies that may compete with
Company.
5.21 Brokers' and Finders' Fees. Company has not employed any
broker, finder or financial advisor or incurred any liability for fees or
commissions payable to any broker, finder or financial advisor in connection
with the negotiations relating to or the transactions contemplated by this
Agreement.
5.22 Registration Rights. Except for the Registration Rights
Agreement dated as of April 3, 1998 between Company and Investor, as amended by
that certain Letter Agreement dated July 17, 1998 among Company, Investor and
the Company=s common shareholders (the "Registration Rights Agreement"), Company
is presently not under any obligation and has not granted any rights to register
under the Securities Act any of its outstanding securities or any of its
securities that may be subsequently issued.
5.23 Small Business Concern. Company, together with any
"affiliates" (as that term is defined in Section 121.103 of Title 13 of the Code
of Federal Regulations), is a "small business concern" within the meaning of the
Small Business Investment Act of 1958, as amended (the "SBIA"), and the
regulations thereunder, including Section 121.301 of Title 13 of the Code of
Federal Regulations. Company does not presently engage in, and it shall not
hereafter engage in, any activities, nor shall it use, directly or indirectly,
the proceeds from the sale of the Series B Preferred Stock hereunder for any
purpose for which a small business investment company is prohibited from
providing funds by the SBIA and the Regulations thereunder.
5.24 Intellectual Property. Schedule 5.24 sets forth a
complete and correct list of all intellectual property, including, without
limitation, trademarks, service marks, patents, copyrights and applications used
in the conduct of the business of the Company other than commercially
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available software programs. There is no complaint, action or proceeding before
any court pending or, to the Company=s knowledge, threatened against the Company
asserting that the Company=s use of any intellectual property infringes the
rights of any third party or otherwise contesting the Company=s rights with
respect to any intellectual property, and there is no basis for such assertion
or contest. To the Company=s knowledge, no third party is infringing on the
Company=s rights with respect to its intellectual property.
5.25 Material Facts. Company has provided Investor with all
the information reasonably available to it that Investor have requested for
deciding whether to purchase the Series B Preferred Stock. This Agreement and
the documents or written statements furnished by Company to Investor in
connection with the transactions contemplated hereby, do not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements contained herein or therein, in light of the circumstances
in which they are made, not misleading.
6. Representations and Warranties of Investor. Investor hereby
represents and warrants to Company as of the date hereof and as of the date of
each issuance of Series B Preferred Stock, as follows:
6.1 Authorization; Binding Agreement. This Agreement has been
duly authorized, executed and delivered by Investor and constitutes the legal,
valid and binding obligation of Investor enforceable against it in accordance
with its terms.
6.2 Investment Representations. Investor is acquiring the
Series B Preferred Stock and the Common Shares issuable upon conversion thereof
(collectively the "Securities") solely for its own account as principal, for
investment purposes only and not with a view to resale or distribution thereof
in whole or in part, and Investor has no present intention of selling, granting
any participation in, or otherwise distributing the Securities. Except for the
members of Investor, no other person has a direct or indirect beneficial
interest in the Securities to be acquired by Investor hereunder and Investor
does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participation to any third person, with
respect to any of the Securities.
6.3 Accredited Investor; Residence. Investor is a resident of
Kentucky and is an "accredited investor" as such term is defined under
Regulation D of the Securities Act.
6.4 Receipt of Information; Restricted Securities. Investor
acknowledges that the Securities are not being and will not be registered under
the Securities Act or the securities laws of any other jurisdiction in reliance
on exemptions thereunder. The Securities have not been and will not be approved
or disapproved by the Securities and Exchange Commission or any other
governmental authority or agency of any jurisdiction. Investor represents that
it has had an opportunity to ask questions and receive answers from Company
regarding the terms and conditions of the offering of the Series B Preferred
Stock and the business, properties, prospects, and financial condition of
Company and to obtain additional information (to the extent Company possessed
such information or could acquire it without unreasonable effort or expense)
necessary to verify the
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accuracy of any information furnished to such Investor or to which such Investor
had access. Investor's representations under this Section 6, however, shall not
limit or modify the representations and warranties of Company in Section 5 of
this Agreement or the right of Investor to rely thereon.
6.5 Investment Experience. Investor is experienced in
evaluating and investing in private placement transactions of securities of
companies in a similar stage or development and acknowledges that Investor is
able to fend for itself, can bear the economic risk of its investment, and has
such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of the investment in the Series B
Preferred Stock.
7. Survival of Representations and Warranties. All representations and
warranties contained in this Agreement by any party to this Agreement and any
certificate or other instrument delivered by or on behalf of any party pursuant
to this Agreement shall be continuous and shall survive the Closing and the
issuance of all shares of Company's capital stock as contemplated hereunder.
Each party shall have the right to rely on each other party's representations
and warranties made herein, notwithstanding any investigation conducted by such
party.
8. Indemnification.
8.1 Indemnification by Company. Company shall indemnify and
reimburse Investor for any and all claims, losses, liabilities, damages
(including, without limitation, fines, penalties, and criminal or civil
judgments and settlements), costs (including, without limitation, court costs)
and expenses (including, without limitation, attorneys' and accountants' fees)
suffered or incurred by Investor and any successors or assigns thereto, as a
result of, or with respect to:
[a] Any breach or inaccuracy of any representation
or warranty of Company set forth in Section 5;
[b] Any breach of or noncompliance by Company with
any covenant or agreement of Company contained in this Agreement; and
[c] any and all actions, suits, proceedings, claims,
demands, assessments and judgments incident to any of the foregoing.
8.2 Indemnification by Investor. Investor shall indemnify and
reimburse Company for any and all claims, losses, liabilities, damages
(including, without limitation, fines, penalties, and criminal or civil
judgments and settlements), costs (including, without limitation, court costs)
and expenses (including, without limitation, attorneys' and accountants' fees)
suffered or incurred by Company or any successors or assigns thereto as a result
of, or with respect to:
[a] Any breach or inaccuracy of any representation
or warranty of Investor set forth in Section 6;
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[b] Any breach of or noncompliance by Investor with
any covenant or agreement of Investor contained in this Agreement; and
[c] any and all actions, suits, proceedings, claims,
demands, assessments and judgments incident to any of the foregoing.
9. Covenants of Company. Company hereby covenants and agrees
as follows:
9.1 Redemption Rights. At any time and from time to time from
and after September 1, 2003 but prior to the Company's completed firmly
underwritten initial public offering, Investor shall have the right and option
to sell to Company, and Company shall buy, Investor's shares of capital stock of
Company (the "Put") at a price per share (the "Put Purchase Price") equal to the
greater of (a) the initial purchase price per share of Investor's shares, plus
accrued but unpaid dividends through the date of the Put Closing (as defined
below), or (b) the fair market value per share (without application of any
discount for lack of marketability or minority position) as determined by a
qualified, independent appraiser experienced in valuation of shares of companies
similar to Company (the "Qualified Appraiser") acceptable to both Company and
Investor. If Investor and Company are unable to agree upon a Qualified
Appraiser, each of them shall separately designate a Qualified Appraiser. Such
Qualified Appraisers shall jointly designate a definitive Qualified Appraiser,
and such definitive Qualified Appraiser's determination shall be the fair market
value of Investor's shares of Company stock and shall be conclusive and binding
upon the parties. The fees and expenses of the definitive Qualified Appraiser
shall be borne equally by Company and Investor. The closing (the "Put Closing")
shall take place at a time and place mutually agreed upon by Investor and
Company on or before the 180th day after written notice of exercise of the Put
is given to Company by Investor, or if Investor and Company shall not agree on
the time and place, the Put Closing shall take place at the principal office of
Company in Louisville, Kentucky at 10:00 a.m. on the 180th day after written
notice of exercise is given, unless such day is a Saturday, Sunday or holiday,
in which case it shall occur on the next business day. The Put Purchase Price
shall be paid in cash at the Put Closing.
9.2 Reservation of Shares. On and after the Closing Date,
Company will reserve and keep reserved at all times sufficient Common Shares for
issuance upon conversion of the Series B Preferred Stock pursuant to Paragraph
B.4(a) of Article IV of the Company's Certificate of Incorporation. Immediately
prior to the occurrence of any event that would cause the number of Common
Shares into which the Series B Preferred Stock would be convertible to be
determined in accordance with Paragraph B.4(b) of Article IV of the Company's
Certificate of Incorporation, the Company shall take any and all actions
necessary to permit such conversion. Upon conversion of any shares of Series B
Preferred Stock, Company will promptly issue and deliver the Common Shares
required to be delivered.
9.3 Use of Proceeds. The proceeds from the sale of the Series
B Preferred Stock pursuant to this Agreement shall be used by Company for
working capital or for any other purpose approved by the Board of Directors of
the Company.
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9.4 Prohibited Matters. From and after the date hereof,
Company shall not, without the consent of the holders of the majority of the
then outstanding Series A Preferred Stock and Series B Preferred Stock voting
together as a single class:
[a] Effect any transaction that results in a change of control
of the Company;
[b] Materially change the nature of the Company's business;
[c] Effect a liquidation, dissolution, merger or sale of the
Company or sell substantially all of its assets;
[d] Amend its certificate of incorporation or bylaws;
[e] Redeem or pay any dividend or distribution on its common
stock;
[f] Issue any class or series of equity securities or
equivalents thereof except pursuant to a management stock option plan
approved by the Board of Directors of Company or upon conversion of the
Series A Preferred Stock or the Series B Preferred Stock;
[g] Repay any shareholder loans;
[h] Except as set forth in Section 9.4 of the Disclosure
Letter, engage in any transactions with "affiliates", which for the
purposes of this Agreement, shall mean (i) any director or officer of
Company or holder of Company's capital stock, (ii) any person or
entity, directly or indirectly, controlling, controlled by or under
common control with any such person or entity, and (iii) in the case of
a natural person, members of his or her immediate family or a trust for
their benefit; or
[i] Take any other actions that would materially affect the
holders of the Series A Preferred Stock or the Series B Preferred
Stock.
10. Public Statements. Neither Company nor Investor shall, without the
prior written approval of the other parties hereto, make any press release or
other public announcement concerning the transactions contemplated by this
Agreement. Investor and Company may disclose information with respect to the
transaction contemplated hereby to their respective employees, agents,
consultants and third parties only to the extent such persons have a need to
know such information.
11. Notices. All notices, requests, consents, and other communications
under this Agreement shall be in writing and shall be mailed by first class,
registered, or certified mail, postage prepaid, or sent via overnight courier
service, or delivered personally:
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If to Investor, to: Broadband Solutions II, LLC
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
1850 National City Tower
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
If to Company, to: High Speed Access Corp.
Attention: W. ▇▇▇▇ ▇▇▇▇▇, III
Suite 210
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
With a copy to: ▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
High Speed Access Corp.
Suite 210
1000 ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
or to such other address of which the addressee shall have notified the sender
in writing. Notices mailed in accordance with this section shall be deemed given
when mailed, and notices sent by overnight courier service shall be deemed given
when placed in the hands of a representative of such service.
12. Parties in Interest; Assignment. Except as otherwise provided
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties to this Agreement shall bind and inure to the benefit of
their respective heirs, executors, successors, and assigns, whether so expressed
or not. Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto and their respective successors and
assigns any rights, remedies, obligations or liabilities under or by reason of
this Agreement. This Agreement is not assignable and any purported assignment
shall be null and void.
13. Construction; Governing Law. The section headings contained in this
Agreement are inserted as a matter of convenience and shall not affect in any
way the construction of the terms of this Agreement. This Agreement shall be
governed by and interpreted in accordance with the laws of the Commonwealth of
Kentucky as applied to agreements among Kentucky residents entered into and
performed entirely within Kentucky.
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14. Entire Agreement; Amendment and Waiver. This Agreement, including
the Disclosure Letter and Exhibits hereto, constitutes and contains the entire
agreement between the parties hereto with respect to the transactions
contemplated hereby and supersedes any prior writing by the parties. Any term of
this Agreement may be amended and the observance of any term of this Agreement
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of Company and
Investor (or its permitted assigns). Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of any
securities purchased under this Agreement at the time outstanding (including
securities into which such securities have been converted), each future holder
of all such securities, and Company.
15. Severability. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of the
remaining provisions.
16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same Agreement.
17. Expenses. Company agrees, upon consummation of the transactions
contemplated by this Agreement, to pay all reasonable legal and out-of-pocket
expenses incurred by Investor in connection with this Agreement and the
transactions contemplated hereunder, including, without limitation all fees and
expenses of ▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇, in connection with this Agreement and the
transactions contemplated hereunder.
18. Attorneys' Fees. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement the prevailing party shall be
entitled to reasonable attorneys' fees, costs, and disbursements in addition to
any other relief to which such party may be entitled.
19. Rights of Investor. Each holder of Series B Preferred Stock (and
Common Shares issued upon conversion thereof) shall have the absolute right to
exercise or refrain from exercising any right or rights that such holder may
have by reason of this Agreement or any Series B Preferred Stock, including
without limitation the right to consent to the waiver of any obligation of
Company under this Agreement and to enter into an agreement with Company for the
purpose of modifying this Agreement or any agreement effecting any such
modification, and such holder shall not incur any liability to any other holder
or holders of Series B Preferred Stock (or Common Shares issued upon conversion
thereof) with respect to exercising or refraining from exercising any such right
or rights.
(remainder of this page left intentionally blank)
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IN WITNESS WHEREOF, Company and Investor have caused this
Agreement to be executed as of the day and year first written above.
"COMPANY"
HIGH SPEED ACCESS CORP.
By: /s/ W. ▇▇▇▇ ▇▇▇▇▇, III
________________________________
Title: CEO
_______________________________
"INVESTOR"
BROADBAND SOLUTIONS II, LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
________________________________
Title: Member
______________________________
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