EXHIBIT 10.8
FAX INTERNATIONAL, INC.
SERIES G CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
Dated as of April 10, 1995
Table of Contents
1. Authorization and Sale of Preferred Shares; Related Agreements....... 1
1.1 Authorization...................................... 1
1.2 Sale............................................... 1
1.3 Related Transactions............................... 1
2. Closing Date; Delivery............................................... 2
2.1 Closing and Closing Date........................... 2
2.2 Delivery........................................... 2
3. Representations and Warranties of the Company........................ 2
3.1 Organization, Qualifications and Corporate Power... 2
3.2 Authorization of Agreements, Etc................... 2
3.3 Validity........................................... 3
3.4 Authorized Capital Stocks; Capitalization.......... 3
3.5 Subsidiaries....................................... 4
3.6 Financial Statements; No Material Adverse Change... 5
3.7 Litigation; Compliance with Law.................... 5
3.8 Complaints......................................... 6
3.9 Governmental Approvals............................. 6
3.10 Title to Properties................................ 6
3.11 Leasehold Interests................................ 6
3.12 Patents, Trademarks, Etc........................... 7
3.13 Proprietary Information of Third Parties........... 7
3.14 Taxes.............................................. 7
3.15 Other Agreements................................... 8
3.16 Related Party Transactions......................... 10
3.17 Officers; Employees................................ 10
3.18 Loans and Advances................................. 10
3.19 Assumptions, Guaranties, Etc. of Indebtedness
of Other Persons................................... 11
3.20 Brokers............................................ 11
3.21 Significant Suppliers.............................. 11
3.22 Insurance.......................................... 11
3.23 U.S. Real Property Holding Corporation............. 11
3.24 Disclosure......................................... 11
3.25 Offering of the Shares and Borrowing of the Loans... 12
3.26 Change of Control.................................. 12
4. Representations, Warranties, and Covenants of the Purchaser.......... 12
5. Conditions to Obligations of Purchaser............................... 13
5.1 Representations and Warranties True................ 13
5.2 Performance of Obligations......................... 13
5.3 Amendment to the Certificate of Incorporation...... 14
1
5.4 Other Transactions at the Closing.................. 14
5.5 Proceedings and Documents.......................... 14
5.6 Reservation of Conversion Shares................... 14
5.7 Qualifications, Legal Investment................... 14
5.8 Opinion of the Company's Counsel................... 15
5.9 Election of ST's Directors......................... 15
6. Conditions to Obligations of the Company............................. 15
6.1 Representations and Warranties True................ 15
6.2 Performance of Obligations......................... 15
6.3 Qualifications, Legal Investment................... 15
6.4 Amendment to the Certificate of Incorporation...... 15
6.5 Other Transactions at the Closing.................. 16
7. Affirmative Covenants................................................ 16
7.1 Repayment of Certain Debt.......................... 16
7.2 Information Rights................................. 16
7.3 Right of First Refusal with Respect to Certain
Network Operations and Future Financings....................... 18
(a) Australia and the Philippines.......... 18
(b) Other New Joint Ventures............... 18
(c) ST Not Restricted...................... 19
7.4 Financial Controls................................. 19
(a) Annual Budget.......................... 19
(b) Restrictions on Capital Expenditures
and Investments........................ 19
(c) Miscellaneous.......................... 20
7.5 Board of Directors Meetings........................ 20
7.6 Other Restrictions................................. 20
7.7 Corporate Existence................................ 21
7.8 Properties, Business, Insurance.................... 21
7.9 Key-Man Insurance.................................. 21
7.10 Restrictive Agreements Prohibited.................. 21
7.11 Transactions with Affiliates....................... 21
7.12 Confidentiality Agreements......................... 21
7.13 Compliance with Laws............................... 21
7.14 By-Laws............................................ 22
7.15 U.S. Real Property Interest Statement.............. 22
7.17 Purchaser's Option To Appoint Certain Employees.... 22
8. Miscellaneous........................................................ 22
8.1 Governing Law...................................... 22
8.2 Termination and Survival........................... 22
8.3 Binding Agreement; Successors and Assigns.......... 23
8.4 Entire Agreement................................... 23
8.5 Separability....................................... 23
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8.6 Amendment and Waiver............................... 23
8.7 Notices, Etc....................................... 24
8.8 Information Confidential........................... 24
8.9 Titles and Subtitles............................... 24
8.10 Counterparts....................................... 24
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FAX INTERNATIONAL, INC.
SERIES G CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
The parties to this Agreement (this "Agreement"), dated as of April 10,
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1995, are Fax International, Inc., a Delaware corporation (the "Company"), with
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its principal office at 00 Xxxxx Xxxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxxxxxxx
00000-0000, and SingTel Global Services Pte. Ltd. (the "Purchaser"), a wholly
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owned subsidiary of Singapore Telecommunications Limited ("ST") Singapore
--
corporation with its registered office at 00 Xxxxxx Xxxx, Xxxxxxxxx, Xxxxxxxxx
0000.
1. Authorization and Sale of Preferred Shares; Related Agreements.
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1.1 Authorization. The Company has authorized the issuance and sale
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of up to an aggregate of eight million five hundred seventy thousand (8,570,000)
shares of its Series G Convertible Preferred Stock, par value U.S.$1.00 per
share (the "Shares"), having the powers, preferences, rights, restrictions, and
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privileges set forth in the Certificate of Designation of Series G Convertible
Preferred Stock, Fixing Powers, Preferences, and Rights of Such Stock attached
hereto as Exhibit B-1 (the "Certificate of Designation").
--------------------------
1.2 Sale. Subject to the terms and conditions hereof, the Company
----
hereby agrees to issue and sell to the Purchaser, and the Purchaser hereby
agrees to purchase from the Company, an aggregate of eight million five hundred
seventy thousand (8,570,000) Shares at a purchase price of Three Dollars and
Fifty Cents (U.S.$3.50) per Share, or Twenty-Nine Million Nine Hundred
Ninety-Five Thousand Dollars (U.S.$29,995,000) in the aggregate.
1.3 Related Transactions. In connection with the purchase and sale
--------------------
of the Shares hereunder, the Company is also entering into (i) a Credit
Agreement in the form attached hereto as Exhibit I (the "Credit Agreement"),
--------- ----------------
dated as of the date hereof, with ST or an affiliate, (ii) a Term Loan Agreement
- Equipment in the form attached hereto as Exhibit J (the "Equipment Loan
--------------
Agreement"), dated as of the date hereof, with ST or an affiliate, (iii) an
---------
Intercompany Operating Agreement in the form attached hereto as Exhibit K (the
---------
"Intercompany Operating Agreement"), dated as of the date hereof, with ST or an
-------------------------------
affiliate, (iv) an Amended and Restated Registration Rights Agreement in the
form attached hereto as Exhibit F (the "Amended and Restated Registration Rights
----------------------------------------
Agreement"), dated as of the date hereof, with the investors, including the
---------
Purchaser, named therein, and (v) a Stockholders Agreement in the form attached
hereto as Exhibit L (the "Stockholders Agreement"), dated as of the date hereof,
----------------------
with the stockholders, including the Purchaser, named therein. The Credit
Agreement, any note evidencing indebtedness thereunder, the Equipment Loan
Agreement, any note evidencing indebtedness thereunder, the Security Agreement
referred to in the Equipment Loan Agreement, the Intercompany Operating
Agreement, the Amended and Restated Registration Rights Agreement, the
Stockholders Agreement, and any other agreement to which the Company is a party
the execution and delivery of which is contemplated hereby or by such other
agreements are collectively referred to herein as the "Related Agreements".
------------------
Shares of the Company's Series H Convertible Preferred Stock, par value $1.00
per share, issuable under the Credit Agreement are referred to herein as the
"Series H Shares". Loans under the Credit Agreement are referred to as "Loans".
--------------- -----
2. Closing Date; Delivery.
----------------------
2.1 Closing and Closing Date. The closing of the sale and purchase
------------------------
of the Shares under this Agreement (the "Closing") shall be held at 1:00 p.rn.
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on April 10, 0000 (xxx "Xxxxxxx Xxxx"), xx xxx xxxxxxx xx Xxxxxxxxx
------------
Telecommunications Limited, 00 Xxxxxx Xxxx, Xxxxxxxxx, Xxxxxxxxx 0000, Republic
of Singapore, or at such other time and place as the Company and the Purchaser
may agree.
2.2 Delivery. At the Closing, subject to the terms and conditions
--------
hereof, the Company will deliver to the Purchaser certificates, in such
denominations and registered in such name or names as such Purchaser may
designate by notice to the Company, representing the Shares to be purchased by
such Purchaser from the Company, dated the date of such Closing, against payment
of the purchase price therefor by cashier's or bank check or by wire transfer of
funds.
3.0 Representations and Warranties of the Company. Except for the
---------------------------------------------
exceptions set forth on the Schedule of Exceptions attached hereto as Exhibit
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C-1 which shall specifically refer to the sentence of this Section to which each
---
such exemption applies, the Company represents and warrants to the Purchaser as
follows:
3.1 Organization, Qualifications and Corporate Power.
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(a) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware, U.S.A.
The Company has the corporate power and authority to own and hold its properties
and to carry on its business as now conducted and as proposed to be conducted.
The Company is duly qualified and authorized to do business, and is in good
standing as a foreign corporation, in each jurisdiction where the nature of its
activities and of its properties makes such qualification necessary and where a
failure to so qualify would have a material adverse effect on its business or
properties. The Company has all requisite legal and corporate power to execute,
deliver and perform this Agreement and the Related Agreements, to issue, sell
and deliver the Shares, to issue and deliver the Series H Shares, and to issue
and deliver the shares of Common Stock, par value U.S.$0.01 per share, of the
Company ("Common Stock") issuable upon conversion of the Shares, the Series H
------------
Shares, and Loans (the "Conversion Shares").
-----------------
(b) Attached as Exhibit B-2 are a true and complete copy of
the Certificate of Incorporation of the Company, as a-mended (the "Charter"),
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the By-laws of the Company, as amended, and the Certificates of Designation of
each class or series of the Company's preferred stock other than the Series G
Convertible Preferred Stock, as set forth in Section 3.4.
3.2 Authorization of Agreements, Etc.
--------------------------------
(a) The execution and delivery by the Company of this
Agreement and the Related Agreements, the performance by the Company of its
obligations hereunder and thereunder, the issuance, sale and delivery of the
Shares and the issuance and delivery of the
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Conversion Shares and the Series H Shares have been duly authorized by all
requisite corporate action and will not violate any provision of law, any order
of any court or other agency of government, the Charter, or the By-laws of the
Company, as amended, or any provision of any indenture, agreement or other
instrument to which the Company, or any of its properties or assets is bound, or
conflict with, result in a breach of or constitute (with due notice or lapse of
time or both) a default under any such indenture, agreement or other instrument,
or result in the creation or imposition of any lien, charge, restriction, claim
or encumbrance of any nature whatsoever upon any of the properties or assets of
the Company.
(b) The Shares have been duly authorized and, when issued
pursuant to this Agreement, will be validly issued, fully paid and nonassessable
shares of Series G Convertible Preferred Stock with no personal liability
attaching to the ownership thereof and will be free and clear of all liens,
charges, claims and encumbrances. The Series H Shares have been duly authorized
and, when issued pursuant to the Credit Agreement, will be validly issued, fully
paid and nonassessable shares of the Company's Series H Convertible Preferred
Stock, par value U.S.$1.00 per share, with no personal liability attaching to
the ownership thereof and will be free and clear of all liens, charges, claims
and encumbrances. The Conversion Shares have been duly reserved for issuance
upon conversion of the Shares, the Series H Shares, and Loans and, when so
issued, will be duly authorized, validly issued, fully paid and nonassessable
shares of Common Stock with no personal liability attaching to the ownership
thereof and will be free and clear of all liens, charges, claims and
encumbrances. Neither the issuance, sale or delivery of the Shares nor the
issuance or delivery of the Conversion Shares or the Series H Shares is subject
to any preemptive right of stockholders of the Company or to any right of first
refusal or other right in favor of any person.
3.3 Validity. This Agreement and each Related Agreement has been
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duly executed and delivered by the Company and constitutes the legal, valid and
binding obligation of the Company, enforceable in accordance with its terms,
except, in the case of the Amended and Restated Registration Rights Agreement,
to the extent that the indemnification provisions therein may be limited by
applicable federal or state securities law.
3.4 Authorized Capital Stocks; Capitalization. The authorized
-----------------------------------------
capital stock of the Company consists of (a) three million five hundred thousand
(3,500,000) shares of its Series H Convertible Preferred Stock, par value
U.S.$1.00 per share, (b) eight million five hundred seventy thousand (8,570,000)
shares of its Series G Convertible Preferred Stock, par value U.S.$1.00 per
share, (c) five hundred thousand (500,000) shares of its Series F Convertible
Preferred Stock, par value U.S.$1.00 per share, (d) one hundred fifty thousand
(150,000) shares of its Series E Convertible Preferred Stock, par value
U.S.$1.00 per share, (e) two million six hundred thousand (2,600,000) shares of
its Series D Convertible Preferred Stock, par value U.S.$1.00 per share, (f) six
hundred fifty thousand (650,000) shares of Series C Convertible Preferred Stock,
par value U.S.$l.00 per share, (g) two million seven hundred thousand
(2,700,000) shares of Series B Convertible Preferred Stock, par value U.S.$1.00
per share, (h) nine hundred seventy-five thousand five hundred (975,500) shares
of Series A Convertible Preferred Stock, par value U.S.$1.00 per share, and (i)
fifty million (50,000,000) shares of Common Stock. Immediately prior to the
Closing, no shares of Series H Convertible Preferred Stock, no shares of Series
G Convertible Preferred Stock, no shares of Series F
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Convertible Preferred Stock, no shares of Series E Convertible Preferred Stock,
2,044,871 shares of Series D Convertible Preferred Stock, 650,000 shares of
Series C Convertible Preferred Stock, 2,668,538 shares of Series B Convertible
Preferred Stock, 975,000 shares of Series A Convertible Preferred Stock and
3,323,800 shares of Common Stock will be outstanding, all of which will be
validly issued, fully paid and nonassessable with no personal liability
attaching to the ownership thereof. Each share of Series H Convertible Preferred
Stock, Series G Convertible Preferred Stock, Series F Convertible Preferred
Stock, Series E Convertible Preferred Stock, Series D Convertible Preferred
Stock, Series C Convertible Preferred Stock, Series B Convertible Preferred
Stock, and Series A Convertible Preferred Stock may be converted in accordance
with its terms into one (1) share of Common Stock. The holders of such Common
Stock and Preferred Stock are as set forth on Exhibit B-3 attached hereto. There
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is not outstanding any securities convertible into (other than the shares of
Preferred Stock referred to above) or exchangeable for, or any option, right, or
warrant to purchase, any shares of the capital stock of the Company from the
Company except for outstanding warrants and non-employee stock options to
purchase an aggregate of 1,445,292 shares of Common Stock, outstanding employee
stock options to purchase an aggregate of 1,554,619 shares of Common Stock, and
outstanding subordinated debentures convertible into an aggregate of 436,685
shares of Series D Convertible Preferred Stock, 149,180 shares of Series E
Convertible Preferred Stock, and 345,133 shares of Series F Convertible
Preferred Stock. The holders of such outstanding warrants and options, the plan
(if any) under which granted, the exercise price, the date of grant and period
of exercise are as set forth on Exhibit B4 attached hereto and the holders of
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such outstanding subordinated convertible debt, the principal amount outstanding
thereof, accrued interest, and number of shares issuable upon conversion are set
forth on Exhibit B-5. The only stock option or warrant plans the Company has are
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the 1993 Employee Stock Option Plan and 1994 Investor Stock Option Plan and the
amount of shares available for grant under such plans are 1,195,381 shares and
40,681 shares, respectively. (The Purchaser agrees to support a resolution of
the Company's Board of Directors to increase the number of shares available for
grant under the 1993 Employee Stock Option Plan by 250,000 shares so that the
aggregate number of shares available for grant under such Plan would be
1,445,381. All options issued to Xxxxxxx X. Xxxxxxx under the Employment
Agreement attached as Exhibit G and dated as of this date will be issued from
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this pool of available shares) No person has any preemptive rights or rights of
first refusal with respect to any capital stock of the Company except holders of
the shares of Preferred Stock referred to above to the extent provided in the
respective Certificates of Designations of such Preferred Stock. All outstanding
shares of the Company's capital stock have been issued pursuant to valid
exemptions from the registration and qualification provisions of the Securities
Act and any relevant state securities laws. The issuance, sale, and delivery of
the Shares, the issuance and delivery of the Series H Shares and the Conversion
Shares and the consummation of the other transactions contemplated by the
Related Agreements will not result in any anti-dilution adjustment with respect
to the conversion rights of any person.
3.5 Subsidiaries. The Company does not own or control, directly or
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indirectly, any interest in any other corporation, association, or other
business entity other than (i) Fax International Japan Co., Ltd., a Japanese
corporation. ("FIJ"), Fax International Korea, Ltd. ("FIK"), a Korean
--- ---
corporation, and Fax International U.K., Ltd., a United Kingdom corporation
("FIUK") (each, a "Subsidiary"). Each Subsidiary is a corporation duly
---- ----------
incorporated, validly
7
existing and in good standing under the laws of its jurisdiction of
incorporation, has the corporate power and authority to own and hold its
properties and to carry on its business as now conducted or proposed to be
conducted and is duly qualified and authorized to do business, and is in good
standing as a foreign corporation, in each jurisdiction where the nature of its
activities and of its properties makes such qualification necessary and where
failure to so qualify would have a material adverse effect on the business or
properties of the Company and its Subsidiaries taken as a whole. All of the
issued shares of capital stock of each Subsidiary have been duly authorized, are
validly issued, fully paid and nonassessable with no personal liability
attaching to ownership thereof, and are owned by the Company free and clear of
all liens, charges, claims and encumbrances, except in the case of FIJ, as to
which Nichimen Corporation, a Japanese corporation, and ORIX Corporation, a
Japanese corporation, collectively own 195 of the 395 outstanding shares of
FIJ's common stock.
3.6 Financial Statements; No Material Adverse Change. Annexed
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hereto as Exhibit D is the audited consolidated balance sheet of the Company as
---------
of December 31, 1994 (the "Balance Sheet") and the related consolidated
-------------
statements of income, stockholders equity (deficit) and cash flows of the
Company for the year ended December 31, 1994 (collectively, the "Financial
---------
Statements"). The Financial Statements (a) fairly present the financial
----------
position, the results of operations, and changes in the financial position of
the Company and its Subsidiaries as of and for the year ended December 31, 1994,
(b) have been prepared in accordance with generally accepted accounting
principles consistently applied, and (c) reflect all accrued liabilities and
adequate reserves for all contingent liabilities of the Company as of December
31, 1994. Since the date of the Balance Sheet, (i) there has been no change in
the assets, liabilities, financial condition, or results of operations of the
Company from that reflected in the Financial Statements except for changes in
the ordinary course of business that in the aggregate have not been materially
adverse and (ii) none of the business, prospects, financial condition,
operations, property or affairs of the Company has been materially adversely
affected by any occurrence or development, individually or in the aggregate,
whether or not insured against.
3.7 Litigation; Compliance with Law.
-------------------------------
(a) There is no (i) action, suit, claim, proceeding or
investigation pending or, to the best of the Company's knowledge (limited to the
knowledge of Xxxxxxx X. Xxxxxxx ("Xxxxxxx") and the Company's operational
-------
directors (collectively with Xxxxxxx, the "Executive Officers")), threatened
------------------
against or affecting the Company, at law or in equity, or before or by any
federal, state, municipal or other governmental court, department, commission,
board, bureau, agency or instrumentality, domestic or foreign (and the Company
has no current intention to initiate any such), (ii) arbitration proceeding
relating to the Company pending under collective bargaining agreements or
otherwise or (iii) governmental inquiry pending or, to the best of the Company's
knowledge, threatened (limited to the knowledge of the Executive Officers)
against or affecting the Company. The Company is not a party to or, to the best
of its knowledge (limited to the knowledge of the Executive Officers) named in
any order, writ, injunction, judgment or decree of any court or governmental
agency or instrumentality.
8
(b) The Company is in compliance with all material federal,
state, local and foreign statutes, rules, regulations, judgments, orders and
decrees applicable to it, including any of such related to the environment,
occupational health and safety and equal employment.
(c) The Company has all franchises, permits, licenses, and any
similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties, prospects, or financial condition of the Company, and
believes it can obtain, without undue burden or expense, any similar authority
for the conduct of its business as currently planned to be conducted. True,
correct, and complete copies of the only licenses which the Company or its
Subsidiaries require for such purpose are attached as Exhibit N. The Company is
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not in default under any of such franchises, permits, licenses, or other similar
authorities.
3.8 Complaints. The Company has received no customer complaints
----------
concerning alleged deficiencies in its services or products that, if true, would
materially adversely affect the operations or financial condition of the
Company.
3.9 Governmental Approvals. Subject to the accuracy of the
----------------------
representations a-nd warranties of the Purchaser set forth in Section 4, no
registration or filing with, or consent or approval of or other action by, any
federal, state, or other governmental agency or instrumentality is or will be
necessary for the valid execution, delivery, and performance by the Company of
this Agreement, the issuance, sale, and delivery of the Shares, or the issuance
and delivery of the Conversion Shares or the Series H Shares, other than (i) any
filings pursuant to U.S. federal and state securities laws (all of which filings
have been made or will timely be made by the Company) in connection with the
sale of the Shares, and (ii) filing of an amendment (the "Amendment") to the
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Company's Certificate of Incorporation, as previously amended, with the
Secretary of State of the State of Delaware reflecting the authorized capital
stock set forth in Section 3.4. No filing under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act") is required for
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consummation of the issuance and sale of the Shares and the other transactions
contemplated by this Agreement and the Related Agreements.
3.10 Title to Properties. Except for assets under capital leases,
-------------------
the Company has good and valid title to its properties and assets reflected on
the Balance Sheet or acquired by it since the date of the Balance Sheet (other
than proper-ties and assets disposed of in the ordinary course of business since
the date of the Balance Sheet), arid all such properties and assets are free and
clear of mortgages, pledges, security interests, liens, charges, claims,
restrictions and other encumbrances, except for (a) a lien in favor of Applied
Telecommunications Technology, Inc., (b) liens for or current taxes not yet due
and payable, (c) liens of carriers, warehousemen, mechanics and materialmen, and
(d) minor imperfections of title, if any, not material in nature or amount or
not materially detracting from the value or impairing the use of the property
subject thereto or impairing the operations or proposed operations of the
Company.
3.11 Leasehold Interests. Each lease or agreement to which the
-------------------
Company is a party under which it is a lessee of any property, real or personal,
is a valid and subsisting agreement without any current default of the Company
thereunder and, to the best of the
9
Company's knowledge, without any current default thereunder of any other party
thereto. No event has occurred and is continuing which, with due notice or lapse
of time or both, would constitute a default or event of default by the Company
under any such lease or agreement or, to the best of the Company's knowledge, by
any other party thereto. The Company's possession of such property has not been
disturbed and, to the best of the Company's knowledge the Company has a valid
leasehold interest in such property free of any liens, claims or encumbrances
and no claim has been asserted against the Company adverse to its rights in such
leasehold interests.
3.12 Patents, Trademarks, Etc. Set forth in Exhibit C-2 is a list
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of an patents, patent rights, patent applications, trademarks, trademark
applications, service marks, service xxxx applications, trade names, and
copyrights, and au applications therefor that are in the process of being
prepared, owned by or registered in the name of the Company, or of which the
Company is a licensor or licensee or in which the Company has any right, and in
each case a brief description of the nature of such right and any material
limitations on such right The Company owns or possesses adequate licenses or
other rights to use all patents, trademarks, service marks, trade names,
copyrights, manufacturing processes, formulae, trade secrets, and know-how
(collectively, "Intellectual Property") necessary or desirable to the conduct of
---------------------
its business as conducted and as proposed to be conducted, and no claim is
pending or, to the best of the Company's knowledge (limited to the knowledge of
the Executive Officers), threatened, to the effect that the operations of the
Company infringe upon or conflict with the asserted rights of any other person
under any Intellectual Property. No claim is pending or, to the best of the
Company's knowledge (limited to the knowledge of the Executive Officers)
threatened, to the effect that any Intellectual Property owned or licensed by
the Company is invalid or unenforceable by the Company. To the best of the
Company's knowledge, all material technical information developed by and
belonging to the Company that has not been patented or disclosed in a patent
application has been kept confidential.
3.13 Proprietary Information of Third Parties. To the best of the
----------------------------------------
Company's knowledge, no third party has claimed in writing or has reason to
claim that any person currently or previously employed by or affiliated with the
Company has (a) violated or may be violating any of the terms or conditions of
his employment, noncompetition or nondisclosure agreement with such third party,
(b) disclosed or may be disclosing or utilized or may be utilizing any trade
secret or proprietary information or documentation of such third party or (c)
interfered or may be interfering in the employment relationship between such
third party and any of its present or former employees. No third party has
requested information from the Company which suggests that such a claim might be
contemplated. To the best of the Company's knowledge, no person currently or
previously employed by or affiliated with the Company has employed or proposes
to employ any trade secret or any information or documentation proprietary to
any former employer, and to the best of the Company's knowledge, no person
currently or previously employed by or affiliated with the Company has violated
any confidential relationship which such person may have had with any third
party, in connection with the development, manufacture or sale of any product or
proposed product or the development or sale of any service or proposed service
of the Company, and the Company has no reason to believe there will be any such
employment or violation. To the best of the Company's knowledge, none of the
execution or delivery of this Agreement or any Related Agreement, or the
carrying on of
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the business of the Company as officers, employees or agents by any officer,
director or key employee of the Company, or the conduct or proposed conduct of
the business of the Company, will conflict with or result in a breach of the
terms, conditions or provisions of or constitute a default under any contract,
covenant or instrument under which any such person is obligated.
3.14 Taxes. The Company has filed all tax returns, federal,
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state, foreign and local, required to be filed by it, and such returns are true
and correct in all material respects. The Company has paid all taxes shown to be
due by such returns as well as all other taxes, assessments and governmental
charges which have become due or payable, including without limitation all taxes
which the Company is obligated to withhold from amounts owing to employees,
creditors and third parties, other than taxes being contested in good faith, and
adequate reserves have been established for all taxes accrued but not yet
payable. The federal income tax returns of the Company have never been audited
by the Internal Revenue Service and the Company has never executed any waiver of
any statute of limitations on the assessment or collection of any tax or
governmental charge. No deficiency assessment with respect to or proposed
adjustment of the Company's federal, state, county or local taxes is pending or,
to the best of the Company's knowledge, threatened. There is no tax lien,
whether imposed by any federal, state, county or local taxing authority,
outstanding against the assets, properties or business of the Company, other
than liens resulting from taxes that have not yet become delinquent. The Company
does not have in effect any election to be treated as an S corporation or a
collapsible corporation pursuant to Section 1362(a) or Section 341(f) of the
Internal Revenue Code of 1986, as amended (the "Code").
----
3.15 Other Agreements. The Company is not a party to or otherwise
----------------
bound by any written or oral contract or instrument or other restriction which
individually or in the aggregate could materially adversely affect the business,
prospects, financial condition, operations, property or affairs of the Company.
The Company is not a party to or otherwise bound by any:
(a) agreement granting rights to manufacture, provide, distribute,
license, or market or sell the Company's services or products, other than the
Intercompany Operating Agreement and that certain Intercompany Operating
Agreement dated as of March 25, 1994 between the Company and FIJ (the "FIJ
---
Intercompany Operating Agreement"), which is not terminable on less than ninety
--------------------------------
(90) days' notice without cost or other liability to the Company (except for
contracts which, in the aggregate, are not material to the business of the
Company);
(b) sales contract which entitles any customer to a rebate or right
of set-off, to return any product to the Company after acceptance thereof or to
delay the acceptance thereof, or which varies in any material respect from the
Company's standard form contracts;
(c) contract with any labor union (and, to the knowledge of the
Company, no organizational effort is being made with respect to any of its
employees);
(d) contract for the future purchase of fixed assets or for the
future purchase of materials, supplies or equipment in excess of its normal
operating requirements;
11
(e) contract (other than contracts specifically referred to herein
or required to be entered into pursuant hereto) for the employment of any
officer, employee or other person (whether of a legally binding nature or in the
nature of informal understandings) on a full-time or consulting basis which is
not terminable on notice without cost or other liability to the Company, except
customary severance arrangements and accrued vacation pay;
(f) any bonus, pension, profit-sharing, retirement,
hospitalization, insurance, stock purchase, stock option or other plan, contract
or understanding pursuant to which benefits are provided to any employee of the
Company (other than group insurance plans applicable to employees generally, and
other than the 1993 Stock Option Plan of the Company, as amended);
(g) except as set forth in Exhibit E, any promissory note, agreement
---------
or indenture relating to the borrowing of money or to the mortgaging or pledging
of, or otherwise placing a lien or security interest on, any asset of the
Company except for certain equipment covered by leases;
(h) guaranty of any obligation for borrowed money or otherwise;
(i) agreement, or group of related agreements with the same party or
any group of affiliated parties, under which the Company has advanced or agreed
to advance money or has agreed to lease any property as lessee or lessor except
for leases of office space by the Company and leases for certain equipment;
(j) agreement or obligation (contingent or otherwise) to issue, sell
or otherwise distribute or to repurchase or otherwise acquire or retire any
share of its capital stock or any of its other equity securities except pursuant
to the conversion or exercise of the preferred stock, warrants, and options
referred to in Section 3.4 and except as set forth in certain subscription
agreements between the Company and certain holders of its Common Stock listed on
Exhibit E.
---------
(k) assignment, license or other agreement with respect to
Intellectual Property or any form of intangible property, other than the
Intercompany Operating Agreement and the FIJ Intercompany Operating Agreement;
(l) agreement under which it has granted any person any registration
rights, except as set forth in the Amended and Restated Registration Rights
Agreement, and except as set forth in certain warrants issued by the Company
(which registration rights are subordinated to the registration rights under the
Amended and Restated Registration Rights Agreement as and to the extent
contemplated by Section 11 of the Amended and Restated Registration Rights
Agreement);
(m) agreement under which it has limited or restricted its
right to compete with any person in any respect;
(n) any shareholders or other agreement that relates to the voting
of any of its capital stock (other than (i) the Stockholders Agreement, and (ii)
an agreement dated as of February 1, 1995 between Antaeus Enterprises, Xxxxxxx,
and the Company in which Xxxxxxx
12
makes certain agreements with respect to the voting of his stock in the Company
if a loan to the Company from BayBank is not repaid and there is a draw under a
letter of credit arranged to be furnished to BayBank by Antaeus Enterprises in
connection therewith), and, to the best of the Company's knowledge, there are no
such agreements or understandings between any other persons (except that Xxxxxxx
has a proxy to vote certain shares of the Preferred Stock of the Company); and
(o) except for the Shareholders Agreement dated as of March 25, 1994
as to which the Company, FIJ, and the other shareholders of FIJ are parties (the
"FIJ Shareholders Agreement"), any other contract or group of related contracts
--------------------------
with the same party involving more than U.S.$25,000 or continuing over a period
of more than six (6) months from the date or dates thereof (including renewals
or extensions optional with another party), which contract or group of contracts
is not terminable by the Company without penalty upon notice of thirty (30) days
or less, but excluding any contract or group of contracts with a customer of the
Company for the sale, lease or rental of the Company's products or services if
such contract or group of contracts was entered into by the Company in the
ordinary course of business.
The Company, and to the best of the Company's knowledge, each other party
thereto have in all material respects performed all the obligations required to
be performed by them to date, have received no notice of default and are not in
default (with due notice or lapse of time or both) under any lease, agreement or
contract now in effect to which the Company is a party or by which it or its
property may be bound. The Company has no knowledge of any breach or anticipated
breach by the other party to any contract or commitment to which the Company is
a party. The Company is in full compliance with all of the terms and provisions
of its Charter and By-laws, as amended.
3.16 Related Party Transactions. No employee, officer, or director
--------------------------
of the Company or member of his or her immediate family is indebted to the
Company, nor is the Company indebted (or committed to make loans or extend or
guarantee credit) to any of them except as set forth on Exhibit E and except for
---------
outstanding liabilities for compensation and reimbursement of expenses accruing
to or incurred by such individual in the ordinary course of business. To the
best of the Company's knowledge (limited to the knowledge of the Executive
Directors), none of such persons has any direct or indirect ownership interest
in any firm or corporation with which the Company is affiliated or with which
the Company has a business relationship, or any firm or corporation that
competes with the Company, except that employees, officers, or directors of the
Company and members of their immediate families may own stock in the Company
(and, hence, indirectly, in the Company's Subsidiaries) and in publicly traded
companies that may compete with the Company. To the best of the Company's
knowledge, no officer or director or any member of their immediate families is,
directly or indirectly, interested in any contract (other than contracts
relating to the provision of employment or consulting services) with the
Company.
3.17 Officers; Employees. No officer or key employee of the Company
-------------------
has advised the Company (orally or in writing) that he intends to terminate
employment with the Company. The Company has entered into an Employment
Agreement with Xxxxxxx in the form of Exhibit G and such Employment Agreement is
---------
in full force and effect. Each of the executive
13
officers and managers of the Company (other than Xxxxxxx) has executed an
employee confidentiality agreement containing provisions substantially in the
form of Exhibit H (the "Confidentiality Agreements"), and such agreements are in
--------- --------------------------
full force and effect. The Company has complied in all material respects with
all applicable laws relating to the employment of labor, including provisions
relating to wages, hours, equal opportunity, collective bargaining and the
payment of social security and other taxes, and with the Employee Retirement
Income Security Act of 1974, as amended. There is no strike or labor dispute
pending or threatened (limited to the knowledge of the Executive Officers)
between the Company and its employees.
3.18 Loans and Advances. The Company does not have any outstanding
------------------
loans or advances to any person and is not obligated to make any such loans or
advances, except, in each case, for advances to employees of the Company in
respect of reimbursable business expenses anticipated to be incurred by them in
connection with their performance of services for the Company and accounts
receivable arising in the ordinary course of business.
3.19 Assumptions, Guaranties, Etc. of Indebtedness of Other
------------------------------------------------------
Persons. The Company has not assumed, guaranteed, endorsed or otherwise become
-------
directly or contingently liable on any indebtedness of any other person
(including, without limitations liability by way of agreement, contingent or
other-wise, to purchase, to provide funds for payment, to supply funds to or
otherwise invest in the debtor, or otherwise to assure the creditor against
loss), except for guaranties by endorsement of negotiable instruments for
deposit or collection in the ordinary course of business.
3.20 Brokers. The Company has no contract, arrangement or
-------
understanding with any broker, finder or similar agent with respect to the
transactions contemplated by this Agreement.
3.21 Significant Suppliers. No supplier that was significant to the
---------------------
Company during the period covered by the Financial Statements or thereafter has
terminated, materially reduced, or is currently threatening in writing to
terminate or materially reduce its provision of products or services to the
Company.
3.22 Insurance. The Company maintains insurance of the kinds and in
---------
the amounts that it believes are appropriate based on the size of the Company
and on the business in which the Company is engaged to protect the Company and
its financial condition against the anticipated risks involved in the business
conducted by the Company.
3.23 U.S. Real Property Holding Corporation. The Company is not now
--------------------------------------
and has never been a United States real property holding corporation," as
defined in Section 897(c)(2) of the Code and Section 1.897-2(b) of the
Regulations promulgated by the U.S. Internal Revenue Service.
3.24 Disclosure. Neither this Agreement, nor any Exhibit attached
----------
hereto, nor any other document delivered pursuant hereto, nor any statement,
report, business plan, or other document delivered to the Purchaser or ST in
connection with the transactions contemplated by this Agreement, when read
together, contains an untrue statement of a material fact or omits a
14
material fact necessary to make the statements contained herein or therein, in
light of the circumstances under which they were made, not misleading. The
Company knows (limited to the knowledge of the Executive Officers) of no
information or fact that has or would have a material adverse effect on the
business, prospects, assets, financial condition, operations, property, or
affairs of the Company that has not been disclosed herein or such exhibits or
other statements, reports, business plans, or other documents. Any written
projections furnished in any of such materials were prepared in good faith based
on reasonable assumptions and represent the Company's best estimate of the
results set forth therein based on the information available to the Company as
of the date thereof.
15
3.25 Offering of the Shares and Borrowing of the Loans. Neither the
-------------------------------------------------
Company nor any person authorized or employed by the Company as agent, broker,
dealer or otherwise in connection with the offering or sale of the Shares or any
security of the Company similar to the Shares has offered the Shares or any such
similar security for sale to, or solicited any offer to buy the Shares or any
such similar security from, or otherwise approached or negotiated with respect
thereto with, any person or persons, and neither the Company nor any person
acting on its behalf has taken or will take any other action (including, without
limitations any offer, issuance or sale of any security of the Company under
circumstances which might require the integration of the offering of such
security with the offering of the Shares under the Securities Act of 1933, as
amended (the "1933 Act") or the rules and regulations of the Commission
thereunder), in either case so as to subject the offering, issuance or sale of
the Shares to the registration provisions of the 1933 Act. Subject to the
accuracy of the representations and warranties of the Purchaser set forth in
Section 4, the offer, sale and issuance of the Shares as contemplated by this
agreement and the Borrowing of the Loans as contemplated by the Credit Agreement
are exempt from the registration requirements of the 1933 Act, and neither the
Company nor any agent acting on its behalf will take any action that could cause
the loss of such exemption.
3.26 Change of Control. The execution, delivery, and performance
-----------------
by the Company of this Agreement and the Related Agreements and the consummation
of the transactions contemplated hereby and thereby (including, under certain
circumstances, the acquisition by the Purchaser of over fifty percent (50%) of
the capital stock of the Company and, under certain circumstances, ultimate
control of the Company) will not give rise to any rights in favor of any person
(other than as provided in Section 6(b) of the FIJ Shareholders Agreement) or
result in any loss of any right by the Company or have any material adverse
effect on the Company's business or prospects, provided, that with respect to
any such loss of right or material adverse effect as a result of governmental
regulations of telecommunications, this representation is made only as to such
regulations as are in effect in the United States, Japan, Korea, or the United
Kingdom on the date of this Agreement.
4.0 Representations, Warranties, and Covenants of the Purchaser.
-----------------------------------------------------------
The Purchaser hereby represents, warrants, and covenants to the Company as
follows, and the Purchaser acknowledges that the Purchaser has full knowledge
that the Company intends to rely on such representations, warranties, and
covenants:
4.1 The Purchaser is an "accredited investor" within the meaning of
Regulation D under the Securities Act.
4.2 The Purchaser understands that the Purchaser must bear the
economic risk of this investment for an indefinite period of time; that the
Shares have not been registered under the 1933 Act, or under any applicable
state securities or 'blue sky" laws, and, therefore, cannot be resold unless
they are subsequently registered under the 1933 Act or under such applicable
state laws or unless an exemption from such registration is available; that the
Purchaser is purchasing Shares for investment for the account of the Purchaser
and not with any present view toward resale or other distribution thereof; that
the Purchaser agrees not to resell or otherwise dispose of all or any part of
the Shares purchased by the Purchaser, except as permitted by law,
16
including, without limitation, any and all applicable provisions of this
Agreement and any regulations under the 1933 Act; and that, except as may be
required by the Amended and Restated Registration Rights Agreement, the Company
does not intend to register the Shares under the 1933 Act or to supply the
information which may be necessary to enable the Purchaser to sell any Shares.
4.3 The Purchaser has no contract, arrangement or understanding with
any broker, finder or similar agent with respect to the transactions
contemplated by this Agreement.
4.4 The Purchaser understands and acknowledges that the certificates
evidencing the Shares shall be endorsed with legends substantially as follows,
and the Purchaser hereby agrees to comply with the provision of such legends:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE SHARES HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY
BE SOLD, ASSIGNED, MORTGAGED, PLEDGED, OR OTHERWISE TRANSFERRED ONLY IN
ACCORDANCE WITH THE PROVISIONS OF REGULATION S PROMULGATED UNDER THE ACT, UNLESS
THE SHARES ARE REGISTERED UNDER THE ACT AND REGISTERED OR QUALIFIED UNDER ANY
APPLICABLE STATE SECURITIES LAWS, OR UNLESS THE COMPANY HAS RECEIVED AN OPINION
OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, TO THE
EFFECT THAT SUCH SALE, ASSIGNMENT, OR TRANSFER IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS."
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
CERTIFICATE OF DESIGNATION AND TO THE RESTRICTIONS UPON TRANSFER SET FORTH
THEREIN. THE COMPANY WILL FURNISH A COPY OF SUCH CERTIFICATE OF DESIGNATION
TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CAUSE."
It is further agreed and understood that the Company shall not recognize
any purported transfer of Shares made in violation of the provisions of this
subsection, and that in the event of such a transfer the record owner shall for
all purposes be treated as and remain the owner of such Shares.
5. Conditions to Obligations of Purchaser. The Purchaser's
--------------------------------------
obligation to purchase the Shares at the Closing is subject to the fulfillment,
at or prior to the Closing, of all of the following conditions, any of which may
be waived by such Purchaser.
5.1 Representations and Warranties True. The representations and
-----------------------------------
warranties made by the Company in Section 3 hereof will be true and correct on
the Closing Date with the same force and effect as if they had been made on and
as of that date.
17
5.2 Performance of Obligations. All covenants, agreements and
--------------------------
conditions contained in this Agreement to be performed or complied with by the
Company on or prior to the Closing Date shall have been performed or complied
with.
5.3 Amendment to the Certificate of Incorporation. The Amendment
---------------------------------------------
shall have been filed with the Secretary of State of the State of Delaware.
5.4 Other Transactions at the Closing.
---------------------------------
(a) The Company shall have executed and delivered the Credit
Agreement, and the Credit shall be in full force and effect.
(b) The Company shall have executed and delivered the
Equipment Loan Agreement, and the Equipment Loan Agreement shall be in full
force and effect.
(c) The Company shall have executed and delivered the
Intercompany Operating Agreement, and the Intercompany Operating Agreement shall
be in full force and effect.
(d) The Company shall have executed and delivered the Amended
and Restated Registration Rights Agreement, the Registration Rights Agreement of
the Company dated as of December 31, 1992 shall have been duly amended and
restated thereby, and the Amended and Restated Registration
Rights Agreement shall be in full force and effect.
(e) The Company shall have executed and delivered the
Stockholders Agreement, and the "Stockholders Agreement" shall be in full force
and effect.
5.5 Proceedings and Documents. All corporate and other proceedings
-------------------------
in connection with the transactions contemplated at the Closing hereby and all
documents and instruments incident to such transactions shall have been
reasonably approved by the Purchaser, and the Purchaser shall have received all
such counterpart originals or certified or other copies of such documents as
they may reasonably request.
5.6 Reservation of Conversion Shares. The Conversion Shares have
--------------------------------
been duly authorized and reserved for issuance upon the conversion of the
Shares, the Series H Shares, and the Loans.
5.7 Qualifications, Legal Investment. All authorizations,
--------------------------------
approvals, or permits, if any, of any governmental authority or regulatory body
of the United States or of any state that are required in connection with the
lawful sale and issuance of the Shares pursuant to this Agreement and the
consummation of the transactions contemplated by the Related Agreements shall
have been duly obtained and shall be effective on and as of the Closing. No stop
order or other order enjoining the sale of the Shares, the proposed issuance of
the Conversion Shares, or the consummation of the transactions contemplated by
the Related Agreements shall have been issued and no proceedings for such
purpose shall be pending or, to the knowledge of the Company, threatened by the
Securities and Exchange Commission, or any
18
commissioner of corporations or similar officer of any state having jurisdiction
over this transaction. At the time of the Closing, the sale and issuance of the
Shares, the proposed issuance of the Conversion Shares, and the consummation of
the transactions contemplated by the Related Agreements shall be legally
permitted by all laws and regulations to which the Company is subject.
5.8 Opinion of the Company's Counsel. The Purchaser shall have
--------------------------------
received from counsel to the Company an opinion letter or letters substantially
in the form attached hereto as Exhibit M, addressed to them, dated the Closing
Date. In rendering the opinion called for under this Section 5.8, counsel may
rely as to factual matters on certificates of public officials, officers of the
Company, and officers of the Purchaser.
5.9 Election of ST's Directors. Effective as of the Closing, the
--------------------------
authorized number of Directors of the Company shall be five (5) or seven (7) (as
determined in accordance with the Stockholders Agreement) and the designees of
ST or an affiliate of ST (as determined in accordance with the Stockholders
Agreement) shall be elected as Directors of the Company.
6. Conditions to Obligations of the Company. The Company's
----------------------------------------
obligation to issue and sell the Shares to the Purchaser at the Closing is
subject to the fulfillment to the Company's satisfaction, on or prior to the
Closing, of the following conditions, any of which may be waived by the Company:
6.1 Representations and Warranties True. The representations and
-----------------------------------
warranties made by the Purchaser in Section 4 hereof shall be true and correct
on the Closing Date with the same force and effect as if they had been made on
and as of that date.
6.2 Performance of Obligations. The Purchaser shall have performed
--------------------------
and complied with all agreements and conditions herein required to be performed
or complied with by it on or before the Closing.
6.3 Qualifications, Legal Investment. All authorizations,
--------------------------------
approvals, or permits, if any, of any governmental authority or regulatory body
of the United States or of any state that are required in connection with the
lawful sale and issuance of the Shares pursuant to this Agreement and the
consummation of the transactions contemplated by the Related Agreements shall
have been duly obtained and shall be effective on and as of the Closing. No stop
order or other order enjoining the sale of the Shares, the proposed issuance of
the Conversion Shares, or the consummation of the transactions contemplated by
the Related Agreements shall have been issued and no proceedings for such
purpose shall be pending or, to the knowledge of the Company, threatened by the
Securities and Exchange Commission, or any commissioner of corporations or
similar officer of any state having jurisdiction over this transaction. At the
time of the Closing, the sale and issuance of the Shares, the proposed issuance
of the Conversion Shares, and the consummation of the transactions contemplated
by the Related Agreements shall be legally permitted by all laws and regulations
to which the Company is subject. It is agreed and understood that the Company
will use its best efforts to cause the foregoing conditions to be satisfied on
and as of the Closing.
19
6.4 Amendment to the Certificate of Incorporation. The Amendment
---------------------------------------------
shall have been filed with the Secretary of State of the State of Delaware. It
is agreed and understood that the Company will use its best efforts to cause the
foregoing condition to be satisfied on and as of the Closing.
20
6.5 Other Transactions at the Closing.
---------------------------------
(a) ST or an affiliate shall have executed and delivered the
Credit Agreement to the Company, and the Credit Agreement shall be in full force
and effect.
(b) ST or an affiliate shall have executed and delivered the
Equipment Loan Agreement to the Company, and the Equipment Loan Agreement shall
be in full force and effect.
(c) ST shall have executed and delivered the Intercompany
Operating Agreement to the Company, and the Intercompany Operating Agreement
shall be in full force and effect.
(d) The Purchaser shall have executed and delivered the
Amended and Restated Registration Rights Agreement, the Registration Rights
Agreement of the Company dated as of December 31, 1992 shall have been duly
amended and restated thereby, and the Amended and Restated Registration Rights
Agreement shall be in full force and effect.
(e) The Purchaser shall have executed and delivered the
Stockholders Agreement, and the Stockholders Agreement shall be in full force
and effect.
7. Affirmative Covenants. The Company hereby covenants and agrees
---------------------
as follows:
7.1 Repayment of Certain Debt. The Company shall, within thirty
-------------------------
(30) days of the Closing, use up to $5 million to repay in full all outstanding
indebtedness of the Company for borrowed money stated on Exhibit E; provided,
--------- --------
that if and to the extent any such indebtedness may not be prepaid by the
Company without prior notice, the Company shall instead (a) within such thirty
(30) day period provide the holder thereof with due notice of prepayment setting
forth the Company's intent to pay such indebtedness in full after the expiration
of the minimum permitted notice period, and (b) to the extent such indebtedness
remains outstanding (and has not been converted into equity of the Company or
otherwise retired) at the expiration of such notice period, the Company shall
repay such indebtedness in full on the date of such expiration. To the extent
the Company uses less than $5 million to repay outstanding indebtedness pursuant
to this Section 7.1 (e.g. because certain holders of convertible debt convert
prior to repayment), the Company will use the remaining funds to offer to
repurchase and redeem from financial investors (but not from employees or
ex-employees of the Company) outstanding equity securities (or warrants) of the
Company in the manner provided for in Section 7.6 (c).
7.2 Information Rights.
------------------
(a) The Company shall furnish to the Purchaser, for so long as
it and its Affiliates (as defined below) owns Shares, Series H Shares, and/or
Conversion Shares equivalent in the aggregate to at least 100,000 shares of
Common Stock, and to each transferee of a Purchaser who with its Affiliates then
owns Shares, Series H Shares, and/or Conversion Shares equivalent in the
aggregate to at least 100,000 shares of Common Stock:
21
(i) within thirty (30) days after the end of each
fiscal year of the Company a consolidated balance sheet of the Company and its
subsidiaries, if any, as of the end of such fiscal year and the related
consolidated statements of income, stockholders' equity and cash flows for the
fiscal year then ended, prepared in accordance with generally accepted
accounting principles, setting forth in each case in comparative form the
figures for or as of the end of the previous fiscal year, and certified by a
firm of independent public accountants of recognized national standing selected
by the Board of Directors of the Company;
(ii) within thirty (30) days after the end of each
fiscal quarter in each fiscal year (other than the last fiscal quarter in each
fiscal year) a consolidated balance sheet of the Company and its subsidiaries,
if any, and the related consolidated statements of income, stockholders' equity
and cash flows, unaudited but prepared in accordance with generally accepted
accounting principles and certified by the chief financial or accounting officer
of the Company, such consolidated balance sheet to be as of the end of such
fiscal quarter and such consolidated statements of income, stockholders' equity
and cash flows to be for such fiscal quarter and for the period from the
beginning of the fiscal year to the end of such fiscal quarter, in each case
with comparative statements for (or as of the end of) the corresponding period
in the prior fiscal year;
(iii) within thirty (30) days after the end of each
month a consolidated balance sheet of the Company and its subsidiaries, if any,
and the related consolidated statements of income, stockholders' equity and cash
flows, unaudited but prepared in accordance with generally accepted accounting
principles and certified by the chief financial or accounting officer of the
Company, such consolidated balance sheet to be as of the end of such month and
such consolidated statements of income, stockholders' equity and cash flows to
be for such month and for the period from the beginning of the fiscal year to
the end of such month, in each case with comparative statements for (or as of
the end of) the corresponding period in the prior fiscal year;
(iv) together with the financial statements
furnished pursuant to clauses (i), (ii) and (iii), a comparison and analysis of
such financial statements against the corresponding figures from the Company's
Annual Budget (as defined below), showing the percentage differences and where
such percentage difference exceeds ten percent (10%) a brief explanation of the
reasons therefor; and
(v) with reasonable promptness, such other
information and data with respect to the Company and its subsidiaries as any
such person may from time to time reasonably request.
(b) The Company will permit any Purchaser or transferee
referred to in subsection (a) (or its representative) to visit and inspect (at
such Purchaser's expense) any of the properties of the Company, including its
books of account and other records (and to make copies thereof and take extracts
therefrom), and to discuss its affairs, finances and accounts with the Company's
officers, its independent public accountants, and its outside counsel, all at
such reasonable times during regular business hours and upon reasonable advance
notice and as often as any such person may reasonably request.
22
(c) "Affiliate" of any person or entity shall mean any other
---------
person or entity controlled by, controlling, or under common control with such
person or entity.
7.3 Right of First Refusal with Respect to Certain Network
------------------------------------------------------
Operations and Future Financings.
--------------------------------
(a) Australia and the Philippines. The Company hereby agrees
-----------------------------
to offer ST, subject to the terms and conditions of this Section 7.3, a right of
first refusal to acquire, on terms to be negotiated and agreed in good faith, a
forty-nine percent (49%) interest (or such lesser interest as the Company and ST
may agree) in any joint venture subsidiary established by the Company in either
(or both) of Australia or the Philippines for the purpose of providing facsimile
network transmission services from those countries under an agreement
corresponding generally to the arrangements set forth in the FIJ Intercompany
Operating Agreement. It is agreed and understood that any such joint venture
subsidiary shall be established pursuant to arrangements corresponding generally
(and except with respect to the amount to be invested by ST for its share, which
shall be determined payment to good faith negotiations as the amount of capital
required by the subsidiary to achieve positive cash flow) to the arrangements
already implemented with respect to FIJ by the Company and its current joint
venture partners in FIJ. In the event the Company (in its sole discretion)
determines to establish any such new joint venture subsidiary, the Company will
provide ST with written notice containing a detailed description of any such
proposal (including the country or countries involved, a general business plan
therefor, the amount and nature of the contemplated investment and/or other
accommodations and services sought from the Company's joint venture partner, and
the period over which such investment, accommodations, or other services will be
required); if ST desires to participate in the joint venture on substantially
the terms indicated, it shall give the Company written notice of its desire
within forty-five (45) days of its receipt of such notice. If ST fails timely to
indicate its desire to participate, or if after good-faith negotiations the
Company and ST are unable to close a joint venture transaction within ninety
(90) days of the expiration of the forty-five (45) day notice period, the
Company will be free to enter into a joint venture subsidiary transaction with
other parties for a period of up to nine (9) months from the notice date or
response expiration date, as applicable, on terms generally similar in all
material relevant respects to and (taken as a whole) not less advantageous to
the Company than those set forth in its proposal to ST.
(b) Other New Joint Ventures. The Company hereby agrees to
offer ST, subject to the terms and conditions of this Section 7.3, a right of
first refusal to acquire an interest in any joint venture subsidiary hereafter
established by the Company. Notwithstanding the foregoing, it is agreed and
understood that this right shall not apply (i) to the extent Section 7.3(a)
applies, (ii) to any venture of the Company either established or in the process
of being negotiated as of the date of this Agreement in China solely for the
purpose of providing facsimile network transmission services, or (iii) where and
to the extent the joint venture requires (as determined by the Company in its
good faith judgment; provided, that ST shall be given prompt written notice of
any such determination) a local partner for the Company because of regulatory
restrictions or other practical business considerations. In the event the
Company (in its sole discretion) determines to establish any new joint venture
subsidiary to which this subsection applies, the Company will provide ST with
written notice containing a detailed
23
description of any such proposal (including the country or countries involved, a
general business plan therefor, the amount and nature of the contemplated
investment and/or other accommodations and services sought from the Company's
joint venture partner, and the period over which such investment,
accommodations, or other services will be required); if ST desires to
participate in the joint venture on substantially the terms indicated, it shall
give the Company written notice of its desire within forty-five (45) days of its
receipt of such notice. If ST fails timely to indicate its desire to
participate, or if after good-faith negotiations the Company and ST are unable
to close a joint venture transaction within ninety (90) days of the expiration
of the forty-five (45) day notice period, the Company will be free to enter into
a joint venture subsidiary transaction with other parties for a period of up to
nine (9) months from the notice date or response expiration date, as applicable,
on terms generally similar in all material relevant respects to and (taken as a
whole) not less advantageous to the Company than those set forth in its proposal
to ST.
(c) ST Not Restrictedc) ST Not Restricted. Nothing contained
in this Section 7.3 shall limit ST's right to pursue any business or investment
with respect to providing facsimile transmission services to or from Australia,
the Philippines, or any other country, whether or not in competition with the
Company.
7.4 Financial Controls.
------------------
(a) Annual Budget. Subject to Section 8.2(b), the Company will
-------------
use its best efforts to prepare and adopt, by vote of two-thirds (2/3) of the
Board of Directors, at least thirty (30) days prior to the commencement of each
calendar year (or by May 30, 1995 with respect to 1995), an annual budget for
the Company for that calendar year (the "Annual Budget"). The Annual Budget
-------------
shall be prepared with utmost diligence and good faith and shall set forth with
appropriate particularity (and broken down into appropriate detail) the
Company's projections for monthly revenues, expenses, and expenditures during
that calendar year and any proposed financings. The Company shall use its best
efforts to prepare and adopt promptly, by vote of two-thirds (2/3) of the Board
of Directors, such amendments to the Annual Budget as may become necessary or
appropriate in the event (i) the information and projections in the Annual
Budget (as theretofore amended) shall become materially and significantly
inaccurate with the result that (ii) the Annual Budget (as theretofore amended)
ceases to be an effective or appropriate business planning tool for the Company,
as the Board of Directors may determine in good faith. The parties acknowledge
that it is their intention to include (without limitation) the following 13
designated countries in the Company's business plan, provided that in the case
of each such country the Company's Board of Directors determines by two-thirds
(2/3) vote that, in their judgment, under sound and prudent business principles,
the proposed business plan for such country is commercially justified and
desirable: the United States, Canada, the United Kingdom, France, Germany,
Italy, Japan, Korea, China, Hong Kong, Taiwan, Australia, and the Philippines.
(b) Restrictions on Capital Expenditures and Investments.
----------------------------------------------------
Subject to Section 8.2(b), the Company shall not make any expenditure for fixed
or capital assets or for other investments (or incur any commitments for such
expenditures) exceeding Fifty Thousand Dollars (U.S.$50,000) in any particular
transaction (provided that no transaction shall be
24
artificially broken down to avoid this limitation), unless such expenditure is
specifically provided for in the Annual Budget or is approved by two-thirds
(2/3) of the Board of Directors.
(c) Miscellaneous. The Company will: (i) maintain an
-------------
appropriate amount of reserved Common Stock for conversion of the Shares and
(ii) maintain sound bookkeeping and accounting practices.
7.5 Board of Directors Meetings. Subject to Section 8.2(b), the
---------------------------
Company shall use its best efforts to ensure that meetings of its Board of
Directors are held at least four times each year and at least once each quarter.
The Company shall distribute to all Directors that ST and its Affiliates shall
have the right to designate under the Stockholders Agreement an agenda for each
meeting and sufficient information with respect to all matters scheduled to be
considered at such meeting for such Directors to fully consider such matters, in
each case reasonably in advance of such meeting and, in the case of regularly
scheduled meetings, at least five (5) business days prior to such meeting.
7.6 Other Restrictions.
------------------
(a) Subject to Section 8.2(b), without the approval of not
less than two-thirds (2/3) of the Board of Directors, the Company will not: (i)
make, or permit any subsidiary to make, any material change in the nature of its
business as of the date hereof, (ii) consolidate or merge the Company with or
into, or sell all or substantially all its assets to, another entity or entities
in one or a series of related transactions, (iii) loan funds to or provide a
guarantee of or security interest in connection with any borrowing by any other
person or entity (other than a subsidiary wholly owned by the Company), other
than, in the ordinary course of business, effecting bank and similar deposits or
acquiring certificates of deposit of financial institutions and/or obligations
or the U.S. government, its subdivisions, or their respective agencies and
instrumentalities, (iv) redeem, purchase, or otherwise acquire for value any
shares of its capital stock (other than pursuant to conversion rights and as
provided by Sections 7.1 and 7.6(c)), (v) declare or pay a dividend or other
distribution (including any cash dividend or distribution of securities or
assets other than a dividend payable in shares of the Common Stock), (vi)
authorize or issue any capital stock senior to or on a parity with the Shares as
to dividend rights or liquidation preference, (vii) liquidate, voluntarily wind
up, or dissolve the Company, (viii) issue, or grant any registration rights in
respect of, any equity or debt securities (including financing leases with
respect to machinery or equipment), or rights, options, or warrants to purchase
any equity or debt securities of the Company, (ix) incur any indebtedness for
borrowed money, or (x) invest in the equity of any other corporation or other
entity.
(b) The limitation in clause (a)(viii) above on issuances of
securities or rights, options, or warrants to purchase such securities shall not
apply to any issuance of capital stock or rights, options, or warrants to
subscribe for, purchase, or otherwise acquire capital stock of the Company upon
(i) the conversion by the holder thereof of convertible preferred stock or
convertible debt of the Company, (ii) the exercise of any outstanding option,
warrant, or other right to acquire securities of the Company, or (iii) the grant
of an incentive or non-qualified stock option pursuant to the Company's 1993
Stock Option Plan, as amended, or pursuant to any other stock option (including
without limitation warrants) plan ratified and
25
adopted after the date hereof by majority vote, on a fully converted basis, of
the Company's stockholders and by vote of a majority of the Company's Board of
Directors who are not officers of the Company or designated by officers of the
Company.
(c) It is further agreed and understood that it is
contemplated that promptly after the closing the Company will offer to
repurchase and redeem from financial investors (but not from any employee or
ex-employee of the Company) up to $10 million of outstanding equity securities
(or warrants) of the Company, such repurchase and redemption to be funded by
means of Redemption Loans (as that term is defined in the Credit Agreement), at
a price of $3.50 per share of Common Stock or Preferred Stock (or the net of
such amount and the exercise price in the case of a repurchase of outstanding
warrants).
7.7 Corporate Existence. The Company shall maintain and (except to
-------------------
the extent determined by the Board of Directors) cause each of its subsidiaries
to maintain its respective corporate existence, rights, and franchises in full
force and effect.
7.8 Properties, Business, Insurance. The Company shall maintain and
-------------------------------
cause each of its subsidiaries to maintain as to its respective properties and
business, with financially sound and reputable insurers, insurance against such
casualties and contingencies and of such types and in such amounts as is deemed
by the Company to be sufficient based on the size of the Company (or each such
subsidiary) and on the business in which the Company (or each such subsidiary)
is engaged.
7.9 Key-Man Insurance. The Company shall maintain in force, as
-----------------
long as any of the Shares are outstanding (including any Conversion Shares), a
key-man term insurance policy covering the risk of death or permanent disability
of Xxxxxxx in an amount not less than One Million Dollars (U.S.$1,000,000),
naming the Company as the owner and beneficiary thereof.
7.10 Restrictive Agreements Prohibited. Neither the Company nor any
---------------------------------
of its subsidiaries shall become a party to any agreement which by its terms
restricts the Company's performance of this Agreement, any Related Agreement, or
the Charter.
7.11 Transactions with Affiliates. Subject to Section 8.2(b),
----------------------------
except for transactions contemplated by this Agreement or the Related Agreements
or as otherwise approved by disinterested members of the Board of Directors,
neither the Company nor any of its subsidiaries shall enter into any transaction
with any director, officer, employee, or holder of more than 5% of the
outstanding capital stock of any class or series of capital stock of the Company
or any of its subsidiaries, member of the family of any such person, or any
corporation, partnership, trust, or other entity in which any such person or
family member thereof is a director, officer, trustee, partner or holder of more
than 5% of the outstanding capital stock thereof, except for transactions on
customary terms related to such person's employment (other than any employment
agreement with Xxxxxxx).
7.12 Confidentiality Agreements. The Company shall use its best
--------------------------
efforts to obtain, and shall cause its subsidiaries to use their best efforts to
obtain, Confidentiality
26
Agreements containing provisions substantially in the form of Exhibit H from all
future managers and executive officers of the Company or any of its
subsidiaries, upon their employment by the Company or any of its subsidiaries.
7.13 Compliance with Laws. The Company shall comply, and cause each
--------------------
subsidiary to comply, with all applicable laws, rules, regulations, and orders,
noncompliance with which could materially adversely affect its business or
condition, financial or otherwise.
7.14 By-Laws. The Company shall use its best efforts to cause its
-------
By-laws to provide at all times that the number of directors fixed in accordance
therewith shall in no event conflict with any of the terms or provisions of the
Stockholders Agreement. The Company shall use its best efforts to cause its
By-laws and/or its Charter to maintain at all times provisions indemnifying all
directors against liability and absolving all directors from liability to the
Company and its stockholders to the maximum extent permitted under the laws of
the State of Delaware; provided, that it is agreed and understood that under
--------
such laws as in effect as of the date hereof, the provisions of the Company's
By-laws and its Charter as in effect as of the date hereof shall be deemed to
satisfy the requirements of this sentence.
7.15 U.S. Real Property Interest Statement. The Company shall not
-------------------------------------
become a "United States real property holding company" as defined in Section
897(c) of the Code and Section 1.897-2(b) of the Regulations promulgated by the
U.S. Internal Revenue Service or any successor Code provision or regulation
7.16 International Investment Survey Act of 1976. The Company shall
-------------------------------------------
file all reports required of it under 22 U.S.C. (s)3104, or any similar statute,
relating to a foreign person's direct or indirect investment in the Company.
Each Purchaser who is a "foreign person" or a U.S. affiliate of a foreign person
agrees to cooperate with the Company in making the necessary filings.
7.17 Purchaser's Option To Appoint Certain Employees: As long as
-----------------------------------------------
the Purchaser and its Affiliates own at least 6,000,000 Shares, the Purchaser
shall have the right to appoint one member of the Company's executive staff
(Vice President level position) and up to three members of the Manager level
staff.
8. Miscellaneous
-------------
8.1 Governing Law. This Agreement shall be governed by and
-------------
construed under the internal substantive laws of the State of Delaware. THE
PARTIES HEREBY IRREVOCABLY WAIVE ANY RIGHT TO A JURY TRIAL WITH RESPECT TO ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. The parties
agree that neither party shall be liable hereunder for any special, indirect,
consequential, or incidental damages, including, without limitation, damages for
lost profits or business.
8.2 Termination and Survival.
------------------------
27
(a) The representations, warranties, covenants, and agreements
made herein shall survive any investigation made by the Purchaser and the
closing of the transactions contemplated hereby; provided, that the covenants
set forth in Section 7, other than Section 7.3, 7.4, 7.6, 7.10, 7.14 and 7.16
shall terminate and be of no further force or effect upon the consummation of
the first underwritten public offering of Common Stock of the Company pursuant
to a registration statement filed by the Company under the Securities Act of
1933, as amended, having an aggregate offering price to the public of at least
U.S.$20,000,000 and a price paid by the purchasers per share of at least
U.S.$10.50 (appropriately adjusted to reflect the occurrence of any stock
dividend, stock split, reverse stock split, or the like).
(b) Sections 7.4(a), 7.4(b), 7.5,7.6, and 7.11 shall terminate
upon the termination of the Stockholders Agreement in accordance with its terms.
8.3 Binding Agreement; Successors and Assigns. Except as otherwise
-----------------------------------------
expressly provided herein, the provisions hereof shall inure to the benefit of,
and be binding upon, the parties hereto and their successors, permitted assigns,
heirs, executors, and administrators, including without limitation permitted
transferees of any Shares, Series H Shares, Loans, or Conversion Shares.
8.4 Entire Agreement. This Agreement, the Exhibits hereto, the
----------------
Related Agreements, and the other documents delivered pursuant hereto constitute
the full and entire understanding and agreement among the parties with regard to
the subjects hereof and no party shall be liable or bound to any other party in
any manner by any representations, warranties, covenants, or agreements except
as specifically set forth herein or therein. 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, except as expressly
provided herein.
8.5 Separability. Any invalidity, illegality, or limitation of the
------------
enforceability with respect to any Purchaser of any one or more of the
provisions of this Agreement, or any part thereof, whether arising by reason of
the law of any such Purchaser's domicile or otherwise, shall in no way affect or
impair the validity, legality, or enforceability of this Agreement with respect
to other Purchasers. In case any provision of this Agreement shall be invalid,
illegal, or unenforceable, it shall to the extent practicable, be modified so as
to make it valid, legal and enforceable and to retain as nearly as practicable
the intent of the parties, and the validity, legality, and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
8.6 Amendment and Waiver. 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 (other than Section 1.2) either retroactively
or prospectively, and either for a specified period of time or indefinitely),
with the written consent of the Company and the holders of not less than
fifty-one percent (51%) of the Shares (treated as if converted at the conversion
rate then in effect and including, for such purposes, on a proportional basis,
any shares of Conversion Shares into which any Shares have been converted that
have not been sold to the public); provided, however, that no such amendment or
waiver shall reduce the aforesaid
28
percentage of Shares and Conversion Shares the holders of which are required to
consent to any waiver or supplemental agreement without the consent of the
record or beneficial holders of all of the Shares and such Conversion Shares.
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 the Company. Upon the
effectuation of each such amendment or waiver, the Company shall promptly give
written notice thereof to the record holders of the Shares and such Conversion
Shares who have not previously consented thereto in writing.
8.7 Notices, Etc. All notices and other communications required or
------------
permitted hereunder shall be in writing and shall be deemed effectively given
upon personal delivery, and in the case where delivery is made by any
established and reputable next day delivery service, delivery shall be deemed to
occur on the day after delivery to such delivery service for domestic delivery,
two business days after delivery to such delivery service for international
deliveries from Asia to the United States and three business days after delivery
to such delivery service for international deliveries from the United States to
Asia, or on the fifth (5th) day following mailing by registered or certified
mail, return receipt requested, postage prepaid, addressed: (a) if to a
Purchaser, at such Purchaser's address as set forth in the preamble hereto, or
at such other address as such Purchaser shall have furnished to the Company in
writing, with a copy to Xxxxxx X. XxXxXxxxx, Esq., Xxxxxxxx & Xxxxxxxx, 000
Xxxxx Xxxxxx, Xxx Xxxx, XX 00000, or (b) if to the Company, at its address as
set forth at the beginning of this Agreement, with a copy to Xxxxxx-Xxxxx
Xxxxxx, Esq., Xxxxxxx, Xxxx & Xxxxx, 000 Xxxxxxx Xxxxxx, Xxxxxx, XX 00000, or at
such other address as the Company shall have furnished to the Purchaser in
writing.
8.8 Information Confidential. The Purchaser acknowledges that the
------------------------
information received by it pursuant hereto is confidential and for such
Purchaser's use only, and it will refrain from using such information or
reproducing, disclosing or disseminating such information to any other person
(other than its employees, affiliates, agents, or partners having a need to know
the contents of such information and its attorneys), except in connection with
the exercise of rights under this Agreement or other agreements referred to
herein or contemplated hereby, unless the Company has made such information
available to the public generally or it is required by a governmental, judicial,
or regulatory body to disclose such information; provided, that each such
--------
Purchaser agrees to use all reasonable efforts (excluding instituting any legal
proceedings) to minimize the need for any such disclosure.
8.9 Titles and Subtitles. The titles of the Sections and
--------------------
Subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
8.10 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.
29
The foregoing Series G Convertible Preferred Stock Purchase Agreement is
hereby executed as an instrument under seal as of the date first above written.
FAX INTERNATIONAL, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
-------------------------------
Xxxxxxx X. Xxxxxxx, President
Purchaser:
/s/ various purchasers
-------------------------------
30
Schedule of Exhibits
--------------------
Exhibit A [Omitted]
Exhibit B-1 Certificate of Designation
Exhibit B-2 Charter, By-laws, and Other Certificates of Designation
Exhibit B-3 Holders of Common Stock and Preferred Stock
Exhibit B-4 Holders of Warrants and Options
Exhibit B-5 Holders Of Convertible Debt
Exhibit C-1 Schedule of Exceptions
Exhibit C-2 Patents, Trademarks, Etc.
Exhibit D Financial Statements
Exhibit E Promissory Notes
Exhibit F Amended and Restated Registration Rights Agreement
Exhibit G Employment Agreement with Xxxxxxx Xxxxxxx
Exhibit H Employee Confidentiality Provisions
Exhibit I Credit Agreement
Exhibit J Equipment Loan Agreement
Exhibit K Intercompany Operating Agreement
Exhibit L Stockholders Agreement
Exhibit M Opinion of Xxxxxxx, Xxxx & Xxxxx
Exhibit N Telecommunications Licenses
31
