COMMON STOCK PURCHASE AGREEMENT
DATED AS OF DECEMBER 7, 2000
THIS COMMON STOCK PURCHASE AGREEMENT is entered into as of the 7th day
of December, 2000 (this "Agreement"), by and between the investor identified on
Schedule A hereto (the "Buyer"), and Teligent, Inc., a corporation organized and
existing under the laws of the State of Delaware (the "Company");
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company may issue and sell to the Buyer and the
Buyer shall purchase from the Company (i) up to $250,000,000 of the Common Stock
(as defined below) from time to time as provided herein and (ii) warrants in the
form attached hereto as Exhibit A to purchase Four Million Nine Hundred
Seventy-Two Thousand Three Hundred Seventy (4,972,370) shares of Common Stock
(the "Warrants"); and
WHEREAS, such investments will be made in reliance upon the provisions
of Section 4(2) ("Section 4(2)") and Regulation D ("Regulation D") as
promulgated by the United States Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Securities Act"), and/or upon such
other exemption from the registration requirements of the Securities Act as may
be available with respect to any or all of the investments to be made hereunder.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 "Accredited Buyer" shall have the meaning set forth in
Section 3.2.
Section 1.2 "Agreement" shall have the meaning set forth in the
preamble of this Agreement.
Section 1.3 "Average Daily Trading Volume" with respect to any Draw
Down effected by the Company in accordance with Section 2.3 hereof shall mean
the average daily volume of shares of Common Stock traded on the Principal
Market as reported by Bloomberg Financial during the thirty (30) consecutive
Trading Day period ending on the Trading Day immediately preceding the date on
which a Draw Down Notice (as defined below) is deemed to have been delivered
pursuant to Section 2.3(b) hereof.
Section 1.4 "Bid Price" for any given Trading Day shall mean the
closing bid price of the Common Stock on such date on the Principal Market as
reported by Bloomberg Financial.
Section 1.5 "Bloomberg Financial" shall mean Bloomberg Financial
Markets or an equivalent reliable reporting service acceptable to and hereafter
designated by the Buyer.
Section 1.6 "Bring Down Comfort Letter" shall mean a letter from Ernst
& Young LLP ("E&Y") or another "Big Five" independent public accounting firm, in
form and substance satisfactory to the Buyer, addressed to Buyer and the Board
of Directors of the Company and dated as of the applicable Draw Down Date (i)
confirming that they are independent public accountants within the meaning of
the Securities Act and are in compliance with the applicable requirements
relating to the qualification of accountants under Rule 2-01 of Regulation S-X
of the SEC, (ii) stating, as of the applicable Draw Down Date, the conclusions
and findings of such firm with respect to the financial information and other
matters covered by the Comfort Letter and (iii) updating the Comfort Letter with
any information which would have been included in such Comfort Letter had it
been given on such Draw Down Date.
Section 1.7 "Buyer" shall have the meaning set forth in the preamble of
this Agreement.
Section 1.8 "Bylaws" shall have the meaning set forth in Section 4.3.
Section 1.9 "Capital Shares" shall mean (i) the Common Stock and (ii)
any shares of any other class of common stock, whether now or hereafter
authorized, having the right to participate in the distribution of earnings and
assets of the Company and which shall, together with the Common Stock, be
treated as one class of equity securities for purposes of determining beneficial
ownership under Section 13 and Section 16 of the Exchange Act (including the
rules and regulations promulgated thereunder).
Section 1.10 "Certificate of Incorporation" shall have the meaning set
forth in Section 4.3.
Section 1.11 "Class B Common Stock" shall have the meaning set forth in
Section 4.3.
Section 1.12 "Closing" shall have the meaning set forth in Section
2.2(a).
Section 1.13 "Closing Date" shall mean the date on which the Closing
occurs.
Section 1.14 "Comfort Letter" shall mean a letter from E&Y or another
"Big Five" independent public accounting firm satisfactory to the Buyer, in form
and substance satisfactory to the Buyer, addressed to the Buyer and the Board of
Directors of the Company and dated as of the Effective Date (i) confirming that
they are independent public accounts within the meaning of the Securities Act
and are in compliance with the applicable requirements relating to the
qualification of accountants under Rule 2-01 of Regulation S-X of the SEC and
(ii) stating, as of the Effective Date, the conclusions and findings of such
firm with respect to the financial information and other matters ordinarily
covered by accountants' "comfort letters" to underwriters in connection with
registered public offerings.
Section 1.15 "Commitment Period" shall mean the period commencing on
the earlier to occur of (i) the Effective Date or (ii) such earlier date as the
Company and the Buyer may mutually agree in writing, and expiring on the
earliest to occur of (x) the date on which the Buyer shall have purchased Draw
Down Shares pursuant to this Agreement for an aggregate Purchase Price of
$250,000,000, (y) the date this Agreement is terminated pursuant to Article VII,
or (z) the date occurring eighteen (18) months from the date of commencement of
the Commitment Period.
Section 1.16 "Common Stock" shall mean the Company's Class A common
stock, $.01 par value per share.
Section 1.17 "Common Stock Equivalents" shall mean any securities that
are convertible into or exchangeable for Common Stock or any warrants, options
or other rights to subscribe for or purchase Common Stock or any such
convertible or exchangeable securities.
Section 1.18 "Company" shall have the meaning set forth in the preamble
of this Agreement.
Section 1.19 "Company Permits" shall have the meaning set forth in
Section 4.17.
Section 1.20 "Control Person" shall have the meaning set forth in
Article X.
Section 1.21 "Damages" shall mean any loss, claim, damage, liability,
costs and expenses (including, without limitation, reasonable attorneys' fees
and disbursements and costs and expenses of expert witnesses and investigation).
Section 1.22 "Draw Down" shall mean each occasion the Company elects to
exercise its right to tender a Draw Down Notice requiring the Buyer to purchase
a dollar amount of the Company's Common Stock equal to the Investment Amount
specified in such Draw Down Notice, and at such price and on such terms and
conditions as are set forth in this Agreement.
Section 1.23 "Draw Down Cancellation" shall have the meaning set forth
in Section 6.4(a).
Section 1.24 "Draw Down Cancellation Date" shall have the meaning set
forth in Section 6.4(a).
Section 1.25 "Draw Down Cancellation Notice" shall have the meaning set
forth in Section 6.4(a).
Section 1.26 "Draw Down Date" shall mean any Trading Day during the
Commitment Period that a Draw Down Notice to sell Common Stock to the Buyer is
deemed delivered pursuant to Section 2.3(b) hereof.
Section 1.27 "Draw Down Notice" shall mean a written notice to the
Buyer in the form attached hereto as Exhibit B setting forth the Investment
Amount that the Company intends to sell to the Buyer pursuant to such Draw Down
and the Floor Price applicable to such Draw Down.
Section 1.28 "Draw Down Shares" shall mean all shares of Common Stock
issued or issuable pursuant to a Draw Down that has occurred or may occur in
accordance with the terms and conditions of this Agreement.
Section 1.29 "DWAC Transfer" shall have the meaning set forth in
Section 2.4.
Section 1.30 "Effective Date" shall mean the date on which the SEC
first declares effective a Registration Statement registering the resale of the
Registrable Securities as set forth in Section 6.2(a).
Section 1.31 "Environmental Laws" shall have the meaning set forth in
Section 4.19(a).
Section 1.32 "Event of Default" shall have the meaning set forth in
Section 7.2.
Section 1.33 "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the regulations promulgated thereunder.
Section 1.34 "Floor Price" shall mean the lowest VWAP (before taking
into account any discount used to calculate the Purchase Price hereunder) at
which the Company will sell its Common Stock as specified in the Draw Down
Notice delivered in connection with any Draw Down effected pursuant to this
Agreement, but in no event shall the Floor Price be less than $2.00.
Section 1.35 "Hazardous Materials" shall have the meaning set forth in
Section 4.19.
Section 1.36 "Information Technology" shall have the meaning set forth
in Section 4.10(a).
Section 1.37 "Intellectual Property" shall have the meaning set forth
in Section 4.10.
Section 1.38 "Investment Amount" shall mean the aggregate dollar amount
(within the range specified in Section 2.3) of any Draw Down Shares to be
purchased by the Buyer with respect to any Draw Down effected by the Company in
accordance with Section 2.3 hereof.
Section 1.39 "Investment Company" shall have the meaning set forth in
Section 4.25.
Section 1.40 "Irrevocable Transfer Agent Instructions" shall have the
meaning set forth in Article IX.
Section 1.41 "Irrevocable Transfer Agent Instructions" shall have the
meaning set forth in Article IX.
Section 1.42 "Material Adverse Effect" shall mean any material adverse
effect on (i) the Securities, (ii) the assets, liabilities, business,
properties, operations, financial condition or results of operations of the
Company and its Subsidiaries (as defined in Section 4.1 hereof), if any, taken
as a whole, (iii) the transactions contemplated hereby or by the agreements or
instruments to be entered into in connection herewith or (iv) the authority or
the ability of the Company to perform its obligations under this Agreement, the
Registration Rights Agreement or the Warrants.
Section 1.43 "Maximum Draw Down Amount" with respect to any Draw Down
effected by the Company in accordance with Section 2.3 hereof shall mean ninety
percent (90%) of the product of (x) the VWAP for the Common Stock on the Trading
Day immediately preceding the applicable Draw Down Date, multiplied by (y) the
Average Daily Trading Volume of the Common Stock applicable with respect to such
Draw Down Date.
Section 1.44 "Maximum Share Amount" shall have the meaning set forth in
Section 2.1(c).
Section 1.45 "Minimum Draw Down Amount" shall mean $1,000,000.
Section 1.46 "NASD" shall mean the National Association of Securities
Dealers, Inc.
Section 1.47 "Outstanding" when used with reference to Common Stock or
Capital Shares (collectively the "Shares"), shall mean, at any date as of which
the number of such Shares is to be determined, all issued and outstanding
Shares, and shall include all such Shares issuable in respect of outstanding
scrip or any certificates representing fractional interests in such Shares;
provided, however, that "Outstanding" shall not mean any such Shares then
directly or indirectly owned or held by or for the account of the Company.
Section 1.48 "Person" shall mean an individual, a corporation, a
partnership, an association, a trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
Section 1.49 "Principal Market" shall mean the Nasdaq National Market
("Nasdaq"), the Nasdaq SmallCap Market ("Nasdaq SmallCap"), the American Stock
Exchange (the "AMEX") or the New York Stock Exchange (the "NYSE"), whichever is
at the time the principal trading exchange or market for the Common Stock.
Section 1.50 "Prospectus Supplement" shall have the meaning set forth
in Section 6.2(o).
Section 1.51 "Purchase Price" with respect to each Trading Day during a
Valuation Period (or such other date on which the Purchase Price is calculated
in accordance with the terms and conditions of this Agreement) shall mean
ninety-five percent (95%) of the VWAP for such Trading Day.
Section 1.52 "Registrable Securities" shall mean the Draw Down Shares,
the Warrant Shares and any other shares of capital stock issued or issuable as a
dividend on or in exchange for or otherwise with respect to the Draw Down Shares
and Warrant Shares until (i) the Registration Statement has been declared
effective by the SEC and all such shares have been disposed of pursuant to the
Registration Statement, (ii) all such shares have been sold under circumstances
under which all of the applicable conditions of Rule 144 (or any similar
provision then in force) are met, (iii) all such shares have been otherwise
transferred to holders who may trade such shares without restriction under the
Securities Act, and the Company has delivered a new certificate or other
evidence of ownership for such securities not bearing a restrictive legend, (iv)
such time as, in the opinion of counsel to the Buyer, all such shares may be
sold without any time, volume or manner limitations pursuant to Rule 144(k) (or
any similar provision then in effect) under the Securities Act or (v) any
combination of the foregoing relating to all such shares.
Section 1.53 "Registration Rights Agreement" shall mean the agreement
regarding the filing of the Registration Statement for the resale of the
Registrable Securities, entered into between the Company and the Buyer as of the
Closing Date and in the form attached hereto as Exhibit C.
Section 1.54 "Registration Statement" shall mean a registration
statement on Form S-3 (if use of such form is then available to the Company
pursuant to the rules of the SEC and, if not, on such other form promulgated by
the SEC for which the Company then qualifies and which counsel for the Company
shall deem appropriate and which form shall be available for the resale of the
Registrable Securities to be registered thereunder in accordance with the
provisions of this Agreement and the Registration Rights Agreement, and in
accordance with the intended method of distribution of such securities), for the
registration of the resale by the Buyer of the Registrable Securities under the
Securities Act.
Section 1.55 "Regulation D" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.56 "Rule 144" shall mean Rule 144 promulgated under the
Securities Act (or a successor rule).
Section 1.57 "SEC" shall mean the United States Securities and Exchange
Commission.
Section 1.58 "SEC Documents" shall have the meaning set forth in
Section 4.7.
Section 1.59 "Section 4(2)" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.60 "Securities" shall mean collectively the Draw Down Shares,
the Warrants and the Warrant Shares.
Section 1.61 "Securities Act" shall have the definition ascribed to it
in the recitals of this Agreement.
Section 1.62 "Settlement Date" shall mean the fourth, seventh and tenth
Trading Day following the Draw Down Date.
Section 1.63 "Subsidiaries" shall have the meaning set forth in Section
4.1.
Section 1.64 "Trading Cushion" shall mean, at any time, the mandatory
three (3) Trading Days between the end of a Valuation Period and any subsequent
Draw Down Date.
Section 1.65 "Trading Day" shall mean any day during which the
Principal Market shall be open for trading.
Section 1.66 "Tranche" shall have the meaning set forth in Section
2.1(b).
Section 1.67 "Tranche Period" shall mean the three (3) Trading Day
period ending on and including the Trading Day immediately preceding each
Settlement Date.
Section 1.68 "Tranche Shares" shall mean, with respect to a Tranche
Period, the number of shares of Common Stock which Buyer is required to purchase
from the Company as specified in Section 2.3(c) with respect to the Trading Days
comprising such Tranche Period based on the Purchase Price applicable on each
Trading Day comprising such Tranche Period.
Section 1.69 "Valuation Period" shall mean the period of nine (9)
consecutive Trading Days following the Trading Day on which a Draw Down Notice
is deemed to be delivered pursuant to Section 2.3(b) hereof.
Section 1.70 "VWAP" for any given Trading Day shall mean the daily
volume weighted average price of the Common Stock on such date on the Principal
Market as reported by Bloomberg Financial using the AQR function.
Section 1.71 "Warrants" shall mean the Warrants, a form of which is
annexed hereto as Exhibit A.
Section 1.72 "Warrant Shares" shall mean the Common Stock issued and/or
issuable upon exercise of or otherwise pursuant to the Warrants.
Section 1.73 "Year 2000 Compliant" shall have the meaning set forth in
Section 4.10(b).
ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
Section 2.1 Investments.
(a) Purchase and Sale of Common Stock. Subject to the terms and
conditions of this Agreement, the Company, at its sole and exclusive option, may
issue and sell to the Buyer, and the Buyer shall purchase from the Company, up
to Two Hundred Fifty Million Dollars ($250,000,000) of the Company's Common
Stock, based on up to as many Draw Downs (subject to the Maximum Draw Down
Amount and the Minimum Draw Down Amount) as the Company, in its sole discretion,
shall choose to deliver during the Commitment Period until the aggregate amount
purchased under this Agreement equals Two Hundred Fifty Million Dollars
($250,000,000).
(b) Draw Downs. Upon the terms and subject to the conditions set forth
herein, on any Trading Day during the Commitment Period on which the conditions
set forth in Sections 6.2 and 6.3 hereof have been satisfied, the Company may
exercise a Draw Down by the delivery of a Draw Down Notice to the Buyer. The
aggregate number of Draw Down Shares that the Buyer shall be obligated to
purchase pursuant to such Draw Down shall be determined by dividing the relevant
portions of the Investment Amount specified in the Draw Down Notice by the
corresponding Purchase Prices for each Trading Day during the Valuation Period
as specified in Section 2.3(c). Each Draw Down shall be divided into three
tranches (each, a "Tranche"). The three Tranches within a Draw Down will be
settled on the applicable Settlement Dates following the Draw Down Date.
(c) Maximum Amount of Draw Down Shares. Unless the Company obtains the
approval of its stockholders in accordance with the corporate laws of the State
of Delaware and the applicable rules of the Principal Market, no more than
12,730,370 shares of Common Stock (the "Maximum Share Amount") may be issued and
sold pursuant to all Draw Downs hereunder.
(d) Warrants. On the Closing Date, the Company will issue and deliver
to Buyer or its permitted assignees, Warrants to purchase a number of shares of
Common Stock equal to the product of (x) $250,000,000 divided by the average of
the daily VWAPs for each of the ten (10) consecutive Trading Days immediately
preceding the date of execution of this Agreement, multiplied by (y) six percent
(6%). The Warrants will have a term of five years. The Warrant Shares to be
issued pursuant to the Warrants shall be registered for resale in accordance
with the terms of the Registration Rights Agreement. Notwithstanding any
termination of this Agreement, regardless of whether or not the Registration
Statement is or is not filed, and regardless of whether or not the Registration
Statement is approved or denied by the SEC, the Buyer shall retain full
ownership of the Warrants as partial consideration for its commitment hereunder.
Section 2.2 Investment Commitment.
(a) Investment Commitment Closing. The closing of this Agreement (the
"Closing") shall be deemed to occur when this Agreement and the Registration
Rights Agreement have been executed by both the Buyer and the Company, and the
other conditions set forth in Section 2.2(b) below have been met.
(b) Conditions to Buyer's Obligations. As a prerequisite to the Closing
and the Buyer's obligations hereunder, all of the following conditions shall
have been satisfied prior to or concurrently with the Company's execution and
delivery of this Agreement:
(1) the following documents shall have been delivered to the
Buyer: (i) the Registration Rights Agreement (executed by the
Company); (ii) the Warrant(s) (executed by the Company); (iii)
the opinion(s) of counsel in the forms attached hereto as
Exhibit D; (iv) a copy of the Irrevocable Transfer Agent
Instructions (executed by both the Company and the Transfer
Agent); (v) a Secretary's certificate as to (A) the
resolutions of the Company's Board of Directors authorizing
this transaction, (B) the Company's Certificate of
Incorporation, and (C) the Company's Bylaws; and (vi) an
Officer's Certificate in form and substance to be agreed upon
by the parties;
(2) this Agreement, executed by the Company, shall have been
received by the Buyer;
(3) the Company's Common Stock shall be listed for trading and
actually trading on the Principal Market;
(4) Since the date of filing of the Company's most recent SEC
Document, no event that had or is reasonably likely to have a
Material Adverse Effect shall have occurred; and
(5) the representations and warranties of the Company in this
Agreement shall be true and correct in all material respects
and the conditions to Buyer's obligations set forth in this
Section 2.2(b) shall have been satisfied as of the Closing;
and the Company shall deliver an Officer's Certificate, signed
by an officer of the Company, to such effect to the Buyer.
Section 2.3 Mechanics of Draw Downs.
(a) Draw Down Notice. On any Trading Day during the Commitment Period,
the Company may deliver a Draw Down Notice to the Buyer, subject to the
satisfaction of the conditions set forth in Sections 6.2 and 6.3; provided,
however, the Investment Amount for each Draw Down as designated by the Company
in the applicable Draw Down Notice shall be neither less than the Minimum Draw
Down Amount nor more than the Maximum Draw Down Amount (as determined as of the
applicable Draw Down Date); provided further, however, that if the Maximum Draw
Down Amount as of the applicable Draw Down Date is less than the Minimum Draw
Down Amount, the Company shall not be entitled to deliver any such Draw Down
Notice.
(b) Date of Delivery of Draw Down Notice. A Draw Down Notice shall be
deemed delivered on (i) the Trading Day it is received by facsimile or otherwise
by the Buyer if such notice is received prior to 3:00 p.m., New York City time,
or (ii) the immediately succeeding Trading Day if it is received by facsimile or
otherwise after 3:00 p.m., New York City time, on a Trading Day or at any time
on a day which is not a Trading Day. No Draw Down Notice may be deemed delivered
on a day that is not a Trading Day.
(c) Determination of Draw Down Shares Issuable. Subject to Sections
2.3(d) and (e) below, the number of Draw Down Shares to be purchased by the
Buyer with respect to any Draw Down shall be determined on a daily basis during
the applicable Valuation Period and shall equal with respect to any such Trading
Day the quotient of (x) one-ninth (1/9) of the Investment Amount, divided by (y)
the Purchase Price for such Trading Day. The portion of the Investment Amount
for which Draw Down Shares may be issued for each Trading Day during the
Valuation Period may not exceed one-ninth (1/9) of the Investment Amount.
(d) Floor Price Limitation. If the VWAP on any Trading Day during a
Valuation Period is less than the Floor Price specified in the applicable Draw
Down Notice, the Company shall not sell and the Buyer shall not purchase the
Draw Down Shares otherwise to be purchased for such Trading Day. In such case,
the Investment Amount shall be reduced by one-ninth (1/9) of the Investment
Amount for each such Trading Day.
(e) Minimum Trading Hours Limitation. In the event that the Common
Stock is not listed and approved for trading on a Principal Market and free from
any halts or suspensions of trading (whether imposed generally on such Principal
Market or specifically with respect to the Common Stock) for a period of at
least six (6) hours on any Trading Day during a Valuation Period, then the
portion of the Investment Amount allocable to the purchase of Draw Down Shares
with respect to such Trading Day pursuant to clause (x) of Section 2.3(c) above
shall equal the product of (x) one-ninth (1/9) of the Investment Amount,
multiplied by (y) the quotient of (A) the number of hours (or portions thereof)
during which the Common Stock actually trades on the Principal Market on such
Trading Day (exclusive of any halts or suspensions of trading imposed generally
on the Principal Market or specifically with respect to the Common Stock),
divided by (B) 6.5. In such event, the Investment Amount shall be reduced by the
difference between one-ninth (1/9) of the Investment Amount and the amount
calculated pursuant to the preceding sentence for each such Trading Day.
Section 2.4 Settlements. Subject to the provisions of Section 6.4, on
each Settlement Date the Company shall, unless otherwise instructed by the
Buyer, cause the Transfer Agent to electronically transmit shares of Common
Stock to the Buyer (by crediting the account of the Buyer's Prime Broker, as
designated by the Buyer, with the Depository Trust Corporation through its
Deposit Withdrawal Agent Commission system ("DWAC Transfer")) representing the
Tranche Shares to be purchased by the Buyer on such Settlement Date with respect
to the Tranche Period immediately preceding such Settlement Date pursuant to
Section 2.3(c) herein and, upon receipt of such Tranche Shares, the Buyer shall
deliver the portion of the Investment Amount representing the Tranche Shares to
be purchased on such Settlement Date by wire transfer of immediately available
funds to an account designated by the Company on or before the Settlement Date.
In addition, on or prior to each such Settlement Date, each of the Company and
the Buyer shall deliver all documents, instruments and writings required to be
delivered by either of them pursuant to this Agreement in order to implement and
effect the transactions contemplated herein.
Section 2.5 Liquidated Damages. In the event the Tranche Shares are not
timely delivered by the Company on any Settlement Date, the Company will pay the
Buyer, as liquidated damages for such failure to deliver and not as a penalty,
two percent (2%) of the aggregate Purchase Price for such Tranche Shares for
each seven (7) calendar day period, or part thereof, following such failure, in
cash, until such Tranche Shares have been delivered. Such amount may be
subtracted by the Buyer from the portion of the Investment Amount otherwise
payable by the Buyer with respect to such Tranche Shares.
ARTICLE III
BUYER'S REPRESENTATIONS AND WARRANTIES
The Buyer represents and warrants to the Company that:
Section 3.1 Investment Purpose. As of the date hereof, the Buyer is
purchasing the Securities for its own account and not with a present view
towards the public sale or distribution thereof, except pursuant to sales
registered or exempted from registration under the Securities Act; provided,
however, that by making the representations herein, the Buyer does not agree to
hold any of the Securities for any minimum or other specific term and reserves
the right to dispose of the Securities at any time (including, but not limited
to, during any Valuation Period) in accordance with or pursuant to a
registration statement or an exemption under the Securities Act.
Section 3.2 Accredited Buyer Status. The Buyer is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D (an "Accredited
Buyer").
Section 3.3 Information. The Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
which have been requested by the Buyer or its advisors. The Buyer and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company. Neither such inquiries nor any other due diligence investigation
conducted by Buyer or any of its advisors or representatives shall modify, amend
or affect Buyer's right to rely on the Company's representations and warranties
contained in Section 4 below. The Buyer understands that its investment in the
Securities involves a significant degree of risk.
Section 3.4 Governmental Review. The Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Securities.
Section 3.5 Transfer or Re-sale. The Buyer understands that (i) except
as provided in the Registration Rights Agreement, the sale or re-sale of the
Securities has not been and is not being registered under the Securities Act or
any applicable state securities laws, and the Securities may not be transferred
unless (a) the Securities are sold pursuant to an effective registration
statement under the Securities Act, (b) the Buyer shall have delivered to the
Company an opinion of counsel (which opinion shall be in form, substance and
scope customary for opinions of counsel in comparable transactions) to the
effect that the Securities to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration, (c) the Securities are sold or
transferred to an "affiliate" (as defined in Rule 144) of the Buyer who agrees
to sell or otherwise transfer the Securities only in accordance with this
Section 3.5 and who is an Accredited Buyer or (d) the Securities are sold
pursuant to Rule 144; (ii) any sale of such Securities made in reliance on Rule
144 may be made only in accordance with the terms of said Rule and further, if
said Rule is not applicable, any re-sale of such Securities under circumstances
in which the seller (or the person through whom the sale is made) may be deemed
to be an underwriter (as that term is defined in the Securities Act) may require
compliance with some other exemption under the Securities Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register such Securities under the Securities
Act or any state securities laws or to comply with the terms and conditions of
any exemption thereunder (in each case, other than pursuant to the Registration
Rights Agreement). Notwithstanding the foregoing or anything else contained
herein to the contrary, the Securities may be pledged as collateral in
connection with a bona fide margin account or other lending arrangement. In
connection with any sale of Registrable Securities by the Buyer pursuant to
clause (a) above, the Buyer agrees to sell all such securities in compliance
with applicable prospectus delivery requirements.
Section 3.6 Authorization; Enforcement. This Agreement and the
Registration Rights Agreement have been duly and validly authorized. This
Agreement has been duly executed and delivered on behalf of the Buyer, and this
Agreement constitutes, and upon execution and delivery by the Buyer of the
Registration Rights Agreement, such agreement will constitute, valid and binding
agreements of the Buyer enforceable in accordance with their terms.
Section 3.7 Residency. The Buyer is a resident of the jurisdiction set
forth immediately below such Buyer's name on the signature pages hereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Buyer that:
Section 4.1 Organization and Qualification. The Company and each of its
Subsidiaries (as defined below), if any, is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is incorporated, with full power and authority (corporate and other) to
own, lease, use and operate its properties and to carry on its business as and
where now owned, leased, used, operated and conducted. Schedule 4.1 sets forth a
list of all of the Subsidiaries of the Company and the jurisdiction in which
each is incorporated. The Company and each of its Subsidiaries is duly qualified
as a foreign corporation to do business and is in good standing in every
jurisdiction in which its ownership or use of property or the nature of the
business conducted by it makes such qualification necessary except where the
failure to be so qualified or in good standing would not have a Material Adverse
Effect. "Subsidiaries" means any corporation or other organization, whether
incorporated or unincorporated, in which the Company owns, directly or
indirectly, any equity or other ownership interest and which would be a
"Significant Subsidiary" of the Company as defined under Rule 1-02(w) of
Regulation S-X promulgated under the Securities Act.
Section 4.2 Authorization; Enforcement. (i) The Company has all
requisite corporate power and authority to enter into and perform this
Agreement, the Registration Rights Agreement and the Warrants and to consummate
the transactions contemplated hereby and thereby and to issue the Securities, in
accordance with the terms hereof and thereof, (ii) the execution and delivery of
this Agreement, the Registration Rights Agreement and the Warrants by the
Company and the consummation by it of the transactions contemplated hereby and
thereby (including without limitation, the issuance of the Warrants and the
issuance and reservation for issuance of the Draw Down Shares and the Warrant
Shares) have been duly authorized by the Company's Board of Directors and,
except as contemplated by Section 2.1(c), no further consent or authorization of
the Company, its Board of Directors, or its stockholders is required, (iii) this
Agreement has been duly executed and delivered by the Company, and (iv) this
Agreement constitutes, and upon execution and delivery by the Company of the
Registration Rights Agreement and the Warrants, each of such agreements and
instruments will constitute, a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer, liquidation or similar laws
relating to, or affecting generally, the enforcement of creditor's rights and
remedies or by other equitable principles of general application from time to
time in effect.
Section 4.3 Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of (i) 500,000,000 shares of Common Stock,
of which 42,423,082 shares of Common Stock are issued and outstanding,
23,729,125 shares of Common Stock are reserved for issuance pursuant to the
Company's stock option plans, 9,205,026 shares of Common Stock are reserved for
issuance pursuant to securities exercisable for, or convertible into or
exchangeable for shares of Common Stock and 5,966,844 (1.2x currently required)
shares of Common Stock are reserved for issuance upon exercise of the Warrants
(subject to adjustment pursuant to the Company's covenant set forth in Section
5.8 below); (ii) 70,000,000 shares of Class B Common Stock, par value $.01 per
share (the "Class B Common Stock"), of which 21,260,610 shares of Class B Common
Stock are issued and outstanding, 0 shares of Class B Common Stock are reserved
for issuance pursuant to the Company's stock option plans and 0 shares of Class
B Common Stock are reserved for issuance pursuant to securities exercisable for,
or convertible into or exchangeable for shares of Common Stock; and (iii)
10,000,000 shares of preferred stock, 529,289 shares of which are designated as
7 3/4 % Series A Cumulative Convertible Preferred Stock, of which 529,289 shares
are issued and outstanding. All of such outstanding shares of capital stock are,
or upon issuance will be, duly authorized, validly issued, fully paid and
nonassessable. No shares of capital stock of the Company are subject to
preemptive rights or any other similar rights of the stockholders of the Company
or any liens or encumbrances imposed through the actions or failure to act of
the Company. Except as disclosed in Schedule 4.3, as of the effective date of
this Agreement, (i) there are no outstanding options, warrants, scrip, rights to
subscribe for, puts, calls, rights of first refusal, agreements, understandings,
claims or other commitments or rights of any character whatsoever relating to,
or securities or rights convertible into or exchangeable for any shares of
capital stock of the Company or any of its Subsidiaries, or arrangements by
which the Company or any of its Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its Subsidiaries,
(ii) there are no agreements or arrangements under which the Company or any of
its Subsidiaries is obligated to register the sale of any of its or their
securities under the Securities Act (except the Registration Rights Agreement)
and (iii) there are no anti-dilution or price adjustment provisions contained in
any security issued by the Company (or in any agreement providing rights to
security holders) that will be triggered by the issuance of the Warrants, the
Draw Down Shares or Warrant Shares. The Company has furnished to the Buyer true
and correct copies of the Company's Certificate of Incorporation as in effect on
the date hereof (the "Certificate of Incorporation"), the Company's By-laws as
in effect on the date hereof (the "Bylaws"), and the terms of all securities
convertible into or exercisable for Common Stock of the Company and the material
rights of the holders thereof in respect thereto. The Company shall provide the
Buyer with a written update of this representation signed by the Company's Chief
Executive or Chief Financial Officer on behalf of the Company as of each Draw
Down Date.
Section 4.4 Issuance of Shares. The Draw Down Shares and Warrant Shares
may and will be properly issued pursuant to Regulation D and/or any applicable
state law. When issued, the Draw Down Shares and Warrant Shares shall be duly
and validly issued, fully paid, and nonassessable. Neither the sales of the Draw
Down Shares and Warrant Shares pursuant to, nor the Company's performance of its
obligations under, this Agreement, the Warrants or the Registration Rights
Agreement will (i) result in the creation or imposition of any liens, charges,
claims or other encumbrances upon the Draw Down Shares, the Warrant Shares or
any of the assets of the Company, or (ii) entitle the holders of outstanding
shares of capital stock to preemptive or other rights to subscribe to or acquire
shares of capital stock or other securities of the Company. The Draw Down Shares
and Warrant Shares shall not subject the Buyer to personal liability by reason
of the possession thereof.
Section 4.5 Acknowledgment of Dilution. The Company understands and
acknowledges the potentially dilutive effect to the Common Stock upon the
issuance of the Draw Down Shares pursuant to Draw Downs effected hereunder and
upon issuance of the Warrant Shares upon exercise of or otherwise pursuant to
the Warrants. The Company's directors and executive officers have studied and
fully understand the nature of the Securities being sold hereunder. The Company
further acknowledges that its obligation to issue Draw Down Shares and Warrant
Shares in accordance with this Agreement and the Warrants is absolute and
unconditional regardless of the dilutive effect that such issuance may have on
the ownership interests of other stockholders of the Company. Taking the
foregoing into account, the Company's Board of Directors has determined, in its
good faith business judgment, that the issuance of the Securities hereunder and
under the Warrants and the consummation of the transactions contemplated hereby
and thereby are in the best interest of the Company and its stockholders.
Section 4.6 No Conflicts. The execution, delivery and performance of
this Agreement, the Registration Rights Agreement and the Warrants by the
Company and the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the issuance and reservation
for issuance, as applicable, of the Draw Down Shares and Warrant Shares) will
not (i) conflict with or result in a violation of any provision of the
Certificate of Incorporation or By-laws or (ii) violate or conflict with, or
result in a breach of any provision of, or constitute a default (or an event
which with notice or lapse of time or both could become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture, patent, patent license or instrument
to which the Company or any of its Subsidiaries is a party, or (iii) result in a
violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations and regulations of any
self-regulatory organizations to which the Company or its securities are
subject) applicable to the Company or any of its Subsidiaries or by which any
property or asset of the Company or any of its Subsidiaries is bound or affected
(except for such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the aggregate,
have a Material Adverse Effect). Neither the Company nor any of its Subsidiaries
is in violation of its Certificate of Incorporation, By-laws or other
organizational documents and neither the Company nor any of its Subsidiaries is
in default (and no event has occurred which with notice or lapse of time or both
could put the Company or any of its Subsidiaries in default) under, and neither
the Company nor any of its Subsidiaries has taken any action or failed to take
any action that would give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its Subsidiaries is a party or by which any property or
assets of the Company or any of its Subsidiaries is bound or affected, except
for possible defaults as would not, individually or in the aggregate, have a
Material Adverse Effect. The businesses of the Company and its Subsidiaries, if
any, are not being conducted, and shall not be conducted so long as a Buyer owns
any of the Securities, in violation of any law, ordinance or regulation of any
governmental entity the violation of which would reasonably be expected to have
a Material Adverse Effect. Except as specifically contemplated by this Agreement
and as required under the Securities Act and any applicable state securities
laws, the Company is not required to obtain any consent, authorization or order
of, or make any filing or registration with, any court, governmental agency,
regulatory agency, self regulatory organization or stock market or any third
party in order for it to execute, deliver or perform any of its obligations
under this Agreement, the Registration Rights Agreement or the Warrants in
accordance with the terms hereof or thereof or to issue and sell the Draw Down
Shares and Warrants in accordance with the terms hereof and to issue the Warrant
Shares upon exercise of or otherwise pursuant to the Warrants. Except as
disclosed in Schedule 4.6, all consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date hereof. The
Company is not in violation of the listing requirements of the Nasdaq and the
Company is not aware of any event or condition that could reasonably be expected
to cause the Common Stock to be delisted by the Nasdaq in the foreseeable
future. The Company and its Subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing.
Section 4.7 SEC Documents; Financial Statements. Since December 31,
1997, the Company has timely filed all reports, schedules, forms, statements and
other documents required to be filed by it with the SEC pursuant to the
reporting requirements of the Exchange Act (all of the foregoing filed prior to
the date hereof and all exhibits included therein and financial statements and
schedules thereto and documents (other than exhibits to such documents)
incorporated by reference therein, being hereinafter referred to as the "SEC
Documents"). The Company has delivered or made available to the Buyer true and
complete copies of the SEC Documents. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at the time they
were filed with the SEC, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. None of the statements made in any such SEC
Documents is, or has been, required to be amended or updated under applicable
law (except for such statements as have been amended or updated in subsequent
filings prior to the date hereof). As of their respective dates, the financial
statements of the Company included in the SEC Documents complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. Such financial statements
have been prepared in accordance with United States generally accepted
accounting principles, consistently applied, during the periods involved (except
(i) as may be otherwise indicated in such financial statements or the notes
thereto, or (ii) in the case of unaudited interim statements, to the extent they
may not include footnotes or may be condensed or summary statements) and fairly
present in all material respects the consolidated financial position of the
Company and its consolidated Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments). Except as set forth in the financial statements of the Company
included in the SEC Documents, the Company has no liabilities, contingent or
otherwise, other than (i) liabilities incurred in the ordinary course of
business subsequent to December 31, 1999 and (ii) obligations under contracts
and commitments incurred in the ordinary course of business and not required
under generally accepted accounting principles to be reflected in such financial
statements, which, individually or in the aggregate, are not material to the
financial condition or operating results of the Company.
Section 4.8 Absence of Certain Changes. Since December 31, 1999, there
has been no material adverse change and no material adverse development in the
assets, liabilities, business, properties, operations, financial condition or
results of operations of the Company or any of its Subsidiaries (other than
changes which have been disclosed in the SEC Documents filed since such date).
Section 4.9 Absence of Litigation. There is no action, suit, claim,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its Subsidiaries, threatened against or
affecting the Company or any of its Subsidiaries, or their officers or directors
in their capacity as such, that could have a Material Adverse Effect. Schedule
4.9 contains a complete list and summary description of any pending or
threatened proceeding against or affecting the Company or any of its
Subsidiaries which could, either individually or in the aggregate, have a
Material Adverse Effect. The Company and its Subsidiaries are unaware of any
facts or circumstances which might give rise to any of the foregoing.
Section 4.10 Patents, Copyrights, etc.
(a) The Company and each of its Subsidiaries owns or possesses
the requisite licenses or rights to use all patents, patent applications, patent
rights, inventions, know-how, trade secrets, trademarks, trademark applications,
service marks, service names, trade names and copyrights ("Intellectual
Property") necessary to enable it to conduct its business as now operated (and,
except as set forth in Schedule 4.10 hereof, to the best of the Company's
knowledge, as presently contemplated to be operated in the future); there is no
claim or action by any person pertaining to, or proceeding pending, or to the
Company's knowledge threatened, which challenges the right of the Company or of
a Subsidiary with respect to any Intellectual Property necessary to enable it to
conduct its business as now operated (and, except as set forth in Schedule 4.10
hereof, to the best of the Company's knowledge, as presently contemplated to be
operated in the future); to the best of the Company's knowledge, the Company's
or its Subsidiaries' current and intended products, services and processes do
not infringe on any Intellectual Property or other rights held by any person;
and the Company is unaware of any facts or circumstances which might give rise
to any of the foregoing. The Company and each of its Subsidiaries have taken
reasonable security measures to protect the secrecy, confidentiality and value
of their Intellectual Property.
(b) All of the Company's computer software and computer
hardware, and other similar or related items of automated, computerized or
software systems that are used or relied on by the Company in the conduct of its
business or that were, or currently are being, sold or licensed by the Company
to customers (collectively, "Information Technology"), are Year 2000 Compliant.
For purposes of this Agreement, the term "Year 2000 Compliant" means, with
respect to the Company's Information Technology, that the Information Technology
is designed to be used prior to, during and after the calendar year 2000 A.D.,
and the Information Technology used during each such time period will accurately
receive, provide and process date and time data (including, but not limited to,
calculating, comparing and sequencing) from, into and between the 20th and 21st
centuries, including the years 1999 and 2000, and leap-year calculations, and
will not malfunction, cease to function, or provide invalid or incorrect results
as a result of the date or time data, to the extent that other information
technology, used in combination with the Information Technology, properly
exchanges date and time data with it.
Section 4.11 No Materially Adverse Contracts, Etc. Neither the Company
nor any of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company's officers has or is expected in the future to have a
Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a
party to any contract or agreement which in the judgment of the Company's
officers has or is expected to have a Material Adverse Effect.
Section 4.12 Tax Status. Except as set forth on Schedule 4.12, the
Company and each of its Subsidiaries has made or filed all federal, state and
foreign income and all other tax returns, reports and declarations required by
any jurisdiction to which it is subject (unless and only to the extent that the
Company and each of its Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has set aside on
its books provisions reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and the officers of the Company know of no
basis for any such claim. The Company has not executed a waiver with respect to
the statute of limitations relating to the assessment or collection of any
foreign, federal, state or local tax. Except as set forth on Schedule 4.12, none
of the Company's tax returns is presently being audited by any taxing authority.
Section 4.13 Certain Transactions. Except as set forth on Schedule 4.13
and as otherwise disclosed in the SEC Documents and except for arm's length
transactions pursuant to which the Company or any of its Subsidiaries makes
payments in the ordinary course of business upon terms no less favorable than
the Company or any of its Subsidiaries could obtain from third parties and other
than the grant of stock options disclosed on Schedule 4.3, none of the officers,
directors, or employees of the Company is presently a party to any transaction
with the Company or any of its Subsidiaries (other than for services as
employees, officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any officer, director or such employee or, to the knowledge of the
Company, any corporation, partnership, trust or other entity in which any
officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.
Section 4.14 Disclosure. All information relating to or concerning the
Company or any of its Subsidiaries set forth in this Agreement and provided to
the Buyer pursuant to Section 3.3 hereof and otherwise in connection with the
transactions contemplated hereby is true and correct in all material respects
and the Company has not omitted to state any material fact necessary in order to
make the statements made herein or therein, in light of the circumstances under
which they were made, not misleading (other than any information the Buyer has
refused to accept). No event or circumstance has occurred or exists, nor is the
Company in possession of any information, with respect to the Company or any of
its Subsidiaries or its or their business, properties, prospects, operations or
financial conditions, which has not been publicly announced or disclosed but
under applicable law, rule or regulation, requires public disclosure or
announcement by the Company (assuming for this purpose that the Company's
reports filed under the Exchange Act are being incorporated into an effective
registration statement filed by the Company under the Securities Act).
Section 4.15 Acknowledgment Regarding Buyer's Purchase of Securities.
The Company acknowledges and agrees that the Buyer is acting solely in the
capacity of an arm's length purchaser with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that the
Buyer is not acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and that any statement made by the Buyer or any of its
representatives or agents in connection with this Agreement and the transactions
contemplated hereby is not advice or a recommendation and is merely incidental
to the Buyer's purchase of the Securities and has not been relied upon by the
Company, its officers or directors in any way. The Company further represents to
the Buyer that the Company's decision to enter into this Agreement has been
based solely on the independent evaluation of the Company and its
representatives.
Section 4.16 No Integrated Offering. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would require registration under the
Securities Act of the issuance of the Securities to the Buyer. The issuance of
the Securities to the Buyer will not be integrated with any other issuance of
the Company's securities (past, current or future) for purposes of any
stockholder approval provisions applicable to the Company or its securities.
Section 4.17 No Brokers. The Company has taken no action which would
give rise to any claim by any person for brokerage commissions, finder's fees or
similar payments relating to this Agreement or the transactions contemplated
hereby.
Section 4.18 Permits; Compliance. The Company and each of its
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary to own, lease and operate its properties and to
carry on its business as it is now being conducted (collectively, the "Company
Permits") except in such instances where the failure to possess such Company
Permits would not, either individually or in the aggregate, have a Material
Adverse Effect, and there is no action pending or, to the knowledge of the
Company, threatened regarding suspension or cancellation of any of the Company
Permits, the suspension or cancellation of which would not, either individually
or in the aggregate, have a Material Adverse Effect. Neither the Company nor any
of its Subsidiaries is in conflict with, or in default or violation of, any of
the Company Permits, except for any such conflicts, defaults or violations
which, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect. Since December 31, 1999, neither the Company nor
any of its Subsidiaries has received any notification with respect to possible
conflicts, defaults or violations of applicable laws, except for notices
relating to possible conflicts, defaults or violations, which conflicts,
defaults or violations would not have a Material Adverse Effect.
Section 4.19 Environmental Matters.
(a) Except as set forth in Schedule 4.19, there are, to the
Company's knowledge, with respect to the Company or any of its Subsidiaries or
any predecessor of the Company, no past or present violations of Environmental
Laws (as defined below), releases of any material into the environment, actions,
activities, circumstances, conditions, events, incidents, or contractual
obligations which may give rise to any common law environmental liability or any
liability under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 or similar federal, state, local or foreign laws and
neither the Company nor any of its Subsidiaries has received any notice with
respect to any of the foregoing, nor is any action pending or, to the Company's
knowledge, threatened in connection with any of the foregoing. The term
"Environmental Laws" means all federal, state, local or foreign laws relating to
pollution or protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata), including, without limitation, laws relating to emissions, discharges,
releases or threatened releases of chemicals, pollutants contaminants, or toxic
or hazardous substances or wastes (collectively, "Hazardous Materials") into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved thereunder.
(b) Other than those that are or were stored, used or disposed
of in compliance with applicable law, no Hazardous Materials are contained on or
about any real property currently owned, leased or used by the Company or any of
its Subsidiaries, and no Hazardous Materials were released on or about any real
property previously owned, leased or used by the Company or any of its
Subsidiaries during the period the property was owned, leased or used by the
Company or any of its Subsidiaries, except in the normal course of the Company's
or any of its Subsidiaries' business.
(c) There are no underground storage tanks on or under any
real property owned, leased or used by the Company or any of its Subsidiaries
that are not in compliance with applicable law.
Section 4.20 Title to Property. The Company and its Subsidiaries have
good and marketable title in fee simple to all real property and good and
marketable title to all personal property owned by them which is material to the
business of the Company and its Subsidiaries, in each case free and clear of all
liens, encumbrances and defects except such as are described in Schedule 4.20 or
such as would not have a Material Adverse Effect. Any real property and
facilities held under lease by the Company and its Subsidiaries are held by them
under valid, subsisting and enforceable leases with such exceptions as would not
have a Material Adverse Effect.
Section 4.21 Insurance. The Company and each of its Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged. Neither the Company nor any such Subsidiary has any
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not have a Material Adverse Effect.
Section 4.22 Internal Accounting Controls. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient, in
the judgment of the Company's board of directors, to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
Section 4.23 Foreign Corrupt Practices. Neither the Company, nor any of
its Subsidiaries, nor any director, officer, agent, employee or other person
acting on behalf of the Company or any Subsidiary has, in the course of his
actions for, or on behalf of, the Company, used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977; or made any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment to any foreign or domestic government
official or employee.
Section 4.24 Solvency. The Company (both before and after giving effect
to the transactions contemplated by this Agreement) is solvent (i.e., its assets
have a fair market value in excess of the amount required to pay its probable
liabilities on its existing debts as they become absolute and matured). The
Company did not receive a qualified opinion from its auditors with respect to
its most recent fiscal year end and does not anticipate or know of any basis
upon which its auditors might issue a qualified opinion in respect of its
current fiscal year.
Section 4.25 No Investment Company. The Company is not, and upon the
issuance and sale of the Securities as contemplated by this Agreement will not
be, an "investment company" required to be registered under the Investment
Company Act of 1940 (an "Investment Company"). The Company is not controlled by
an Investment Company.
ARTICLE V
COVENANTS
Section 5.1 Best Efforts. The parties shall use their best efforts to
satisfy timely each of the conditions described in Sections 5 and 6 of this
Agreement.
Section 5.2 Form D; Blue Sky Laws. The Company agrees to file a Form D
with respect to the Securities as required under Regulation D and to provide a
copy thereof to the Buyer promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Securities for sale to the Buyer pursuant
to this Agreement under applicable securities or "blue sky" laws of the states
of the United States (or to obtain an exemption from such qualification), and
shall provide evidence of any such action so taken to the Buyer on or prior to
the Closing Date.
Section 5.3 Reporting Status; Eligibility to Use Form S-3, Press
Releases. The Company's Common Stock is registered under Section 12(g) of the
Exchange Act. So long as the Buyer beneficially owns any of the Securities, the
Company shall timely file all reports required to be filed with the SEC pursuant
to the Exchange Act, and the Company shall not terminate its status as an issuer
required to file reports under the Exchange Act even if the Exchange Act or the
rules and regulations thereunder would permit such termination. The Company
currently meets, and will take all necessary action to continue to meet, the
"registrant eligibility" requirements set forth in the general instructions to
Form S-3 applicable to both "primary" and "resale" registrations on Form S-3.
The Company shall issue a press release describing the material terms of the
transactions contemplated hereby as soon as practicable following the Closing
Date but in no event more than fifteen (15) days following the Closing Date, and
shall file with the SEC a Current Report on Form 8-K describing the material
terms of the transactions contemplated hereby (and attaching as exhibits thereto
this Agreement, the Registration Rights Agreement and the Warrants) as soon as
practicable following the Closing Date but in no event more than fifteen (15)
days following the Closing Date, which press release and Form 8-K shall be
subject to prior review by the Buyers.
Section 5.4 Use of Proceeds. The Company shall use the proceeds from
the sale of the Draw Down Shares and the Warrants and from the exercise of the
Warrants in the manner set forth in Schedule 5.4 attached hereto and made a part
hereof and shall not, directly or indirectly, use such proceeds for any loan to
or investment in any other corporation, partnership, enterprise or other person
(except in connection with its currently existing direct or indirect
Subsidiaries).
Section 5.5 [Intentionally Omitted.]
Section 5.6 Expenses. The Company shall pay to the Buyer at the Closing
a non-accountable expense allowance equal to Sixty Thousand Dollars ($60,000)
for all expenses incurred by it in connection with the negotiation, preparation,
execution, delivery and performance of this Agreement and the other agreements
to be executed in connection herewith. In addition, the Company shall reimburse
the Buyer for up to Twenty Thousand Dollars ($20,000) in legal, due diligence,
travel costs and related expenses incurred by the Buyer promptly upon submission
of receipts.
Section 5.7 Financial Information. The Company agrees to send the
following reports to the Buyer until the Buyer transfers, assigns, or sells all
of the Securities: (i) within ten (10) days after the filing with the SEC, a
copy of its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q and
any Current Reports on Form 8-K; (ii) within one (1) day after release, copies
of all press releases issued by the Company or any of its Subsidiaries; and
(iii) contemporaneously with the making available or giving to the stockholders
of the Company, copies of any notices or other information the Company makes
available or gives to such stockholders.
Section 5.8 Reservation of Shares. The Company shall at all times have
authorized, and reserved for the purpose of issuance, a sufficient number of
shares of Common Stock to provide for the full exercise of the Warrants and
issuance of the Warrant Shares in connection therewith (based on the Exercise
Price (as defined in the Warrants) of the Warrants in effect from time to time).
The Company shall not reduce the number of shares reserved for issuance upon
exercise of the Warrants without the consent of the Buyer. The Company shall use
its best efforts at all times to maintain the number of shares of Common Stock
so reserved for issuance at no less than 1.2 times the number that is then
actually issuable upon full exercise of the Warrants (based on the Exercise
Price (as defined in the Warrants) of the Warrants in effect from time to time).
If at any time the number of shares of Common Stock authorized and reserved for
issuance is below the number of Warrant Shares issued and issuable upon exercise
of or otherwise pursuant to the Warrants (based on the Exercise Price (as
defined in the Warrants) of the Warrants in effect from time to time), the
Company will promptly take all corporate action necessary to authorize and
reserve a sufficient number of shares, including, without limitation, calling a
special meeting of stockholders to authorize additional shares to meet the
Company's obligations under this Section 5.8, in the case of an insufficient
number of authorized shares, and using its best efforts to obtain stockholder
approval of an increase in such authorized number of shares. Prior to the
delivery of a Draw Down Notice, the Company will have reserved and the Company
shall continue to reserve and keep available at all times thereafter, free of
preemptive rights, a number of shares of Common Stock sufficient for the purpose
of enabling the Company to satisfy its obligation to issue Draw Down Shares
pursuant to such Draw Down Notice (assuming for such purposes that the Purchase
Price applicable to such Draw Down is ninety-five percent (95%) of the Floor
Price).
Section 5.9 Listing. The Company shall promptly secure the listing of
the Draw Down Shares and Warrant Shares upon the Principal Market and each other
national securities exchange or automated quotation system, if any, upon which
shares of Common Stock are then listed (subject to official notice of issuance)
and, so long as the Buyer owns any of the Securities, shall maintain, so long as
any other shares of Common Stock shall be so listed, such listing of all Draw
Down Shares and Warrant Shares from time to time issuable under this Agreement
or upon exercise of the Warrants. The Company will obtain and, so long as the
Buyer owns any of the Securities, maintain the listing and trading of its Common
Stock on a Principal Market, and will comply in all respects with the Company's
reporting, filing and other obligations under the bylaws or rules of such
Principal Market and any other exchanges or automated quotation systems on which
the Common Stock is then listed. The Company shall promptly provide to the Buyer
copies of any notices it receives from the Principal Market and any other
exchanges or automated quotation systems on which the Common Stock is then
listed regarding the continued eligibility of the Common Stock for listing on
such exchanges and quotation systems.
Section 5.10 [Intentionally Omitted].
Section 5.11 No Integration. The Company shall not make any offers or
sales of any security (other than the Securities) under circumstances that would
require registration of the Securities being offered or sold hereunder under the
Securities Act or cause the offering of Securities to be integrated with any
other offering of securities by the Company for the purpose of any stockholder
approval provision applicable to the Company or its securities.
Section 5.12 Registration Rights. The Company shall cause the
Registration Rights Agreement to remain in full force and effect and the Company
shall comply in all respects with the terms thereof.
Section 5.13 Notice of Certain Events Affecting Registration;
Suspension of Right to Deliver a Draw Down Notice. The Company will immediately
notify the Buyer upon the occurrence of any of the following events in respect
of the Registration Statement or related prospectus in respect of the resale of
the Registrable Securities: (i) receipt of any request for additional
information from the SEC or any other federal or state governmental authority
during the period of effectiveness of the Registration Statement, the response
to which would require any amendments or supplements to the Registration
Statement or related prospectus; (ii) the issuance by the SEC or any other
federal or state governmental authority of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any proceedings
for that purpose; (iii) receipt of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; (iv) the happening of any event that makes any
statement made in the Registration Statement or related prospectus or any
document incorporated or deemed to be incorporated therein by reference untrue
in any material respect or that requires the making of any changes in the
Registration Statement, related prospectus or documents so that, in the case of
the Registration Statement, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and that in the case
of the related prospectus, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and (v) the Company's reasonable
determination that a post-effective amendment or supplement to the Registration
Statement would be appropriate; and the Company will promptly make available to
the Buyer any such supplement or amendment to the related prospectus. The
Company shall not deliver to the Buyer any Draw Down Notice during the
continuation of any of the foregoing events and shall cancel an existing Draw
Down by delivering a Draw Down Cancellation Notice in the manner required by
Section 6.4 of this Agreement.
Section 5.14 Disclosure of Material Information. In the event that the
Company comes into possession of any material non-public information, the
Company shall make full and complete public disclosure in accordance with all
applicable securities laws (including all common law formulations thereof).
Section 5.15 Issuance of Draw Down Shares. The sale and issuance of the
Draw Down Shares shall be made in accordance with the provisions and
requirements of Regulation D and any applicable state law.
Section 5.16 Trading Guidelines. The Buyer has the right to sell shares
of Common Stock during the Commitment Period. The Buyer agrees, however, that
prior to and during the Commitment Period, neither the Buyer nor any of its
affiliates, nor any entity managed by the Buyer, will intentionally sell shares
of Common Stock other than the shares of Common Stock which the Buyer has
purchased under the terms of this Agreement (including for this purpose, the
number of shares of Common Stock issued and/or issuable upon exercise of the
Warrants and, in the case of a Draw Down Notice that has been delivered, an
estimate of the number of Draw Down Shares issuable in connection with such Draw
Down Notice (assuming for such purposes that the number of Draw Down Shares to
be issued pursuant to such Draw Down Notice equals the Investment Amount
specified in such Draw Down Notice divided by ninety-five percent (95%) of the
Floor Price)), whether in accounts directly or indirectly managed by the Buyer
or any affiliate of the Buyer or any entity managed by the Buyer.
ARTICLE VI
CONDITIONS TO DELIVERY OF DRAW DOWN
NOTICES AND CONDITIONS TO SETTLEMENT
Section 6.1 Conditions Precedent to the Obligation of the Company to
Issue and Sell Common Stock. The obligation hereunder of the Company to issue
and sell the Draw Down Shares to the Buyer incident to each Settlement is
subject to the satisfaction, at or before each such Settlement, of each of the
conditions set forth below.
(a) Accuracy of the Buyer's Representation and Warranties. The
representations and warranties of the Buyer shall be true and correct in all
material respects as of the date when made and as of the date of each such
Settlement as though made at each such time (except for representations and
warranties specifically made as of a particular date which shall be true and
correct in all material respects as of the date when made).
(b) Performance by the Buyer. The Buyer shall have performed,
satisfied and complied in all respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Buyer at or prior to such Settlement.
Section 6.2 Conditions Precedent to the Right of the Company to Deliver
a Draw Down Notice. The right of the Company to deliver a Draw Down Notice
hereunder is subject to the satisfaction, on the date of delivery of such Draw
Down Notice, of each of the following conditions:
(a) Registration of the Common Stock with the SEC. As set
forth in the Registration Rights Agreement, the Company shall have filed with
the SEC a Registration Statement with respect to the resale of the Registrable
Securities that shall have been declared effective by the SEC prior to the first
Draw Down Date.
(b) Effective Registration Statement. As set forth in the
Registration Rights Agreement, the Registration Statement shall have previously
been declared effective and shall remain effective and sales of all of the
Registrable Securities (including all of the Warrant Shares issued and/or
issuable upon exercise of the Warrants, all of the Draw Down Shares issued with
respect to all prior Draw Downs and all of the Draw Down Shares expected to be
issued in connection with the Draw Down specified by the current Draw Down
Notice (assuming for such purpose that the Purchase Price applicable to such
Draw Down is ninety-five percent (95%) of the Floor Price)) may be made by the
Buyer thereunder and (i) neither the Company nor the Buyer shall have received
notice that the SEC has issued or intends to issue a stop order with respect to
the Registration Statement or that the SEC otherwise has suspended or withdrawn
the effectiveness of the Registration Statement either, temporarily or
permanently, or intends or has threatened to do so, (ii) no other suspension of
the use or withdrawal of the effectiveness of the Registration Statement or
related prospectus shall exist and (iii) no event specified in Section 5.13
shall have occurred and be continuing.
(c) Accuracy of the Company's Representations and Warranties.
The representations and warranties of the Company shall be true and correct in
all material respects as of the date when made and as of the applicable Draw
Down Date as though made at such time (except for representations and warranties
specifically made as of a particular date which shall be true and correct in all
material respects as of the date when made).
(d) Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement and the Registration Rights
Agreement to be performed, satisfied or complied with by the Company at or prior
to such date.
(e) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction or any self-regulatory organization having authority over the
matters contemplated hereby that prohibits or directly and adversely affects any
of the transactions contemplated by this Agreement, and no proceeding shall have
been commenced that may have the effect of prohibiting or adversely affecting
any of the transactions contemplated by this Agreement.
(f) Material Adverse Changes. Since the date hereof, no event
that had or is reasonably likely to have a Material Adverse Effect shall have
occurred (provided that any changes resulting from general economic conditions
or the telecommunications industry in general shall not be deemed to constitute
a "Material Adverse Effect" for purposes hereof).
(g) No Suspension of Trading In or Delisting of Common Stock.
The trading of the Common Stock (including without limitation the Draw Down
Shares) shall not have been suspended by the SEC, the Principal Market or the
NASD and the Common Stock (including without limitation the Draw Down Shares)
shall have been approved for listing or quotation on and shall not have been
delisted from the Principal Market.
(h) Adequacy of Disclosure. In the reasonable opinion of
counsel to the Buyer, the disclosure contained in the Registration Statement
shall not be inadequate or misleading.
(i) Cross Default. The Company shall not be in default of a
material term, covenant, warranty or undertaking of the Company contained in the
Warrants and the Registration Rights Agreement, nor shall there have occurred an
Event of Default under this Agreement.
(j) No Knowledge. The Company shall have no knowledge of any
event that would reasonably be expected to have the effect of causing such
Registration Statement to be suspended or otherwise ineffective (which event is
more likely than not to occur within the nine (9) Trading Days following the
Trading Day on which such Draw Down Notice is deemed delivered).
(k) Trading Cushion. The Trading Cushion shall have elapsed
since the end of the preceding Valuation Period.
(l) Maximum Share Amount. Unless the Company has obtained the
requisite approval of its stockholders in accordance with the corporate laws of
the State of Delaware and the applicable rules of the Principal Market, in no
event may the Company issue a Draw Down Notice to sell an Investment Amount to
the extent that the sum of (x) the number of shares of Common Stock represented
by the quotient of (i) the requested Investment Amount, divided by (ii)
ninety-five percent (95%) of the Floor Price, plus (y) the cumulative total of
all shares of Common Stock issued under all previous Draw Downs effected
pursuant to this Agreement, would exceed the Maximum Share Amount.
(m) Price. The VWAP on the Trading Day immediately preceding
the Draw Down Date is greater than $2.00.
(n) Investment Amount Limitation. On each Draw Down Date, the
Investment Amount specified in the applicable Draw Down Notice may not exceed
the dollar amount which would result in a number of Draw Down Shares then to be
purchased by the Buyer (for purposes of this Section 6.2(n), assuming that such
number of Draw Down Shares to be issued pursuant to such Draw Down Notice equals
the Investment Amount specified in such Draw Down Notice, divided by ninety-five
percent (95%) of the Floor Price) which, when aggregated with all other shares
of Common Stock then owned by the Buyer beneficially or deemed beneficially
owned by the Buyer (excluding shares which may become issuable pursuant to
future Draw Downs hereunder and excluding shares which may be deemed
beneficially owned through the ownership of the unexercised Warrants), would
result in the beneficial ownership by the Buyer of more than 9.9% of the then
Outstanding Shares on such Draw Down Date. For purposes of the immediately
preceding sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Exchange Act and Regulation 13D-G thereunder, except as
otherwise provided above with respect to the exclusion of shares which may
become issuable pursuant to future Draw Downs.
(o) Prospectus Supplement. A supplement to the Registration
Statement (the "Prospectus Supplement"), in form and substance to be agreed upon
by the parties, setting forth information regarding the Draw Down including,
without limitation, the Draw Down Date, the Investment Amount, the number of
shares sold to the Buyer in connection with all previous Draw Downs, if not
previously disclosed in an SEC Document, and any additional information required
by SEC rules and regulations, including Item 507 of Regulation S-K, shall have
been filed with the SEC.
Section 6.3 Documents Required to be Delivered on each Draw Down Date.
The Buyer's obligation to purchase Shares pursuant to a Draw Down hereunder
shall additionally be conditioned upon the delivery to the Buyer of each of the
following documents on or before the Draw Down Date:
(a) a certificate in substantially the form and substance of
Exhibit E hereto, executed by an executive officer of the Company and to the
effect that all the conditions to such Draw Down Notice shall have been
satisfied as at the date of each such certificate;
(b) a Bring Down Comfort Letter;
(c) a Prospectus Supplement; and
(d) the opinion(s) of counsel in the forms attached
hereto as Exhibit F dated as of the Draw Down Date.
Section 6.4 Draw Down Cancellation.
(a) Mechanics of Draw Down Cancellation. If at any time during
a Valuation Period, (i) any of the events specified in Section 5.13 of this
Agreement shall occur, (ii) any of the conditions precedent to a Draw Down set
forth in Section 6.2 shall no longer be satisfied as of any date during the
Valuation Period or (iii) the Company discovers that a document set forth in
Section 6.3(a), (b) or (d) would no longer be true if delivered as of such date
during the Valuation Period, then the Company shall cancel the Draw Down (a
"Draw Down Cancellation") immediately by delivering written notice to the Buyer
in the form attached hereto as Exhibit G (the "Draw Down Cancellation Notice"),
by facsimile and overnight courier. The Draw Down Cancellation Notice shall be
deemed delivered on (i) the Trading Day it is received by facsimile or otherwise
by the Buyer if such notice is received prior to 5:00 p.m., New York City time,
or (ii) the immediately succeeding Trading Day if it is received by facsimile or
otherwise after 5:00 p.m., New York City time, on a Trading Day, or at any time
on a day which is not a Trading Day. No Draw Down Cancellation Notice may be
deemed delivered on a day that is not a Trading Day. "Draw Down Cancellation
Date" shall be the date the Draw Down Cancellation Notice is deemed delivered
pursuant to the preceding sentence.
(b) Effect of Draw Down Cancellation. If a Draw Down
Cancellation Notice has been delivered to the Buyer after a Draw Down Date, the
Valuation Period for such Draw Down shall (except as provided in the proviso to
the succeeding sentence) end on the Trading Day immediately preceding the Draw
Down Cancellation Date. In such event, the Investment Amount relating to such
Draw Down shall be reduced by one-ninth (1/9) with respect to each Trading Day
during the period beginning on and including the Draw Down Cancellation Date and
ending on the last Trading Day of such Valuation Period; provided, however,
that, except as otherwise provided in Section 2.3(e) hereof, in the event that a
Draw Down Cancellation Notice is deemed delivered on the Trading Day it is
received by the Buyer pursuant to clause (i) of the second sentence of Section
6.4(a) above, then the Investment Amount allocable to such Trading Day shall be
reduced by the difference between (x) one-ninth (1/9) of the Investment Amount
and (y) the product of (A) one-ninth (1/9) of the Investment Amount, multiplied
by (B) the quotient of (i) the number of hours (or portions thereof) during
which the Common Stock has actually traded on the Principal Market on such
Trading Day (exclusive of any halts or suspensions of trading imposed generally
on the Principal Market or specifically with respect to the Common Stock) prior
to the actual time on which the Buyer received the Draw Down Cancellation Notice
(as evidenced by the time and date set forth on Buyer's facsimile copy thereof),
divided by (ii) 6.5. Anytime a Draw Down Cancellation Notice is delivered to
Buyer, such Draw Down shall remain effective as to the portion of the Investment
Amount not canceled pursuant to the preceding sentence and the Buyer shall be
entitled to use the Registration Statement and related prospectus for sales of
the Tranche Shares issuable with respect to such non-canceled portion of the
Investment Amount.
ARTICLE VII
TERMINATION
Section 7.1 Term; Termination by Mutual Consent. Subject to the
provisions of Section 7.2, the term of this Agreement shall run until the end of
the Commitment Period; provided that the right of the Company to effect any Draw
Downs under this Agreement may be terminated at any time by mutual consent of
the parties.
Section 7.2 Termination by the Buyer. The Buyer may terminate the right
of the Company to effect any Draw Downs under this Agreement upon one (1)
Trading Day's notice if any of the following events (each, an "Event of
Default") shall occur:
(a) The Company (i) fails to issue shares of Common Stock to
the Buyer on any Settlement Date, (ii) fails to remove any restrictive legend
(or to withdraw any stop transfer instructions in respect thereof) on any
certificate or any shares of Common Stock issued to the Buyer as and when
required by this Agreement or the Registration Rights Agreement, or (iii) fails
to fulfill its obligations pursuant to Sections 5.3, 5.4, 5.6, 5.8, 5.9, 5.13,
5.14 or Article IX of this Agreement (or makes any announcement, statement or
threat that it does not intend to honor the obligations described in this
paragraph), and any such failure shall continue uncured (or any announcement,
statement or threat not to honor its obligations shall not be rescinded in
writing) for ten (10) days after the Company shall have been notified thereof in
writing by any Buyer;
(b) The Company fails to obtain effectiveness with the SEC
prior to April 7, 2001 of the Registration Statement required to be filed
pursuant to Section 2(a) of the Registration Rights Agreement, or fails to
obtain the effectiveness of any additional Registration Statement (required to
be filed pursuant to Section 3(b) of the Registration Rights Agreement) within
ninety (90) days after the Registration Trigger Date (as defined in the
Registration Rights Agreement), or any such Registration Statement, after its
initial effectiveness and during the Registration Period (as defined in the
Registration Rights Agreement), lapses in effect or sales of all of the
Registrable Securities otherwise cannot be made thereunder (whether by reason of
the Company's failure to amend or supplement the prospectus included therein in
accordance with the Registration Rights Agreement, the Company's failure to file
and obtain effectiveness with the SEC of an additional Registration Statement
required pursuant to Section 3(b) of the Registration Rights Agreement or
otherwise) for more than twenty (20) consecutive Trading Days or more than sixty
(60) Trading Days in any twelve (12) month period after such Registration
Statement becomes effective;
(c) The Company or any Subsidiary shall make an assignment for
the benefit of creditors, or apply for or consent to the appointment of a
receiver or trustee for it or for all or substantially all of its property or
business; or such a receiver or trustee shall otherwise be appointed;
(d) Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against the Company or any
subsidiary of the Company;
(e) The Company shall fail to maintain the listing of the
Common Stock on a Principal Market or trading in such Common Stock shall
otherwise be halted or suspended for a period of ten (10) consecutive Trading
Days;
(f) The sale, conveyance or disposition of all or
substantially all of the assets of the Company, the effectuation by the Company
of a transaction or series of related transactions in which more than 50% of the
voting power of the Company is disposed of, or the consolidation, merger or
other business combination of the Company with or into any other Person or
Persons when the Company is not the survivor;
(g) The Company breaches any material representation or
warranty contained in this Agreement; or
(h) Since the date hereof, an event that had a Material
Adverse Effect shall have occurred (provided that any changes resulting from
general economic conditions or the telecommunications industry in general shall
not be deemed to constitute a "Material Adverse Effect" for purposes hereof).
ARTICLE VIII
NON-DISCLOSURE OF MATERIAL NON-PUBLIC INFORMATION
Section 8.1 Non-Disclosure of Material Non-Public Information.
(a) The Company covenants and agrees that it shall refrain
from disclosing, and shall cause its officers, directors, employees and agents
to refrain from disclosing, any material non-public information to the Buyer,
unless prior to disclosure of such information the Company identifies such
information as being material non-public information and provides the Buyer and
its advisors and representatives with the opportunity to accept or refuse to
accept such material non-public information for review.
(b) The Company acknowledges and understands that the Buyer is
entering into this Agreement and the Registration Rights Agreement at the
request of the Company and in good faith reliance on (i) the Company's
representation set forth in Section 4.14 that neither it nor its agents have
disclosed to the Buyer any material non-public information; and (ii) the
Company's covenant set forth in Section 5.14 that if the Company comes into
possession of any material non-public information, the Company shall timely make
full and complete public disclosure of all or such portion of such information
in accordance with all applicable securities laws (including common law
formulations thereof).
(c) Nothing herein shall require the Company to disclose
material non-public information to the Buyer or its advisors or representatives,
and the Company represents that it does not disseminate material non-public
information to any investors who purchase stock in the Company in a public
offering, to money managers or to securities analysts; provided, however, that
notwithstanding anything herein to the contrary, the Company will, as
hereinabove provided, immediately notify the Buyer and its advisors and
representatives and, if any, underwriters, of the existence of any event or
circumstance (without any obligation to disclose the specific event or
circumstance) of which it becomes aware, constituting material non-public
information (whether or not requested of the Company specifically or generally
during the course of due diligence by such persons or entities), which, if not
disclosed in the prospectus included in the Registration Statement would cause
such prospectus to include a material misstatement or to omit a material fact
required to be stated therein in order to make the statements therein, in light
of the circumstances in which they were made, not misleading.
ARTICLE IX
TRANSFER AGENT INSTRUCTIONS
The Company shall issue irrevocable instructions in the form attached
hereto as Exhibit H to its transfer agent to electronically transmit the Draw
Down Shares to the Buyer by DWAC Transfer upon issuance of the Draw Down Shares
in accordance with the terms hereof (the "Irrevocable Transfer Agent
Instructions"). The Company warrants that no instruction other than the
Irrevocable Transfer Agent Instructions referred to in this Article IX will be
given by the Company to its transfer agent with respect to the Draw Down Shares
and that the Draw Down Shares shall otherwise be freely transferable on the
books and records of the Company as and to the extent provided in this Agreement
and the Registration Rights Agreement. Nothing in this Section shall affect in
any way the Buyer's obligations to comply with all applicable prospectus
delivery requirements, if any, upon re-sale of the Draw Down Shares.
ARTICLE X
INDEMNIFICATION
The Company agrees to indemnify and hold harmless the Buyer, its
partners, affiliates, officers, directors, employees, and duly authorized
agents, and each Person or entity, if any, who controls the Buyer within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (a
"Control Person"), from and against any Damages, joint or several, and any
action in respect thereof to which the Buyer, its partners, affiliates,
officers, directors, employees, duly authorized agents and Control Persons,
becomes subject to, resulting from, arising out of or relating to any breach or
alleged breach by the Company of any representation or warranty or to the
nonfulfillment of or failure to perform any covenant or agreement on the part of
Company contained in this Agreement or the Registration Rights Agreement in any
event as such Damages are incurred. The Company and the Buyer hereby agree to
resolve any claim for indemnification under this Article X pursuant to the
procedures for indemnification set forth in Section 6 of the Registration Rights
Agreement.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
agreements made and to be performed in the State of Delaware (without regard to
principles of conflict of laws). Both parties irrevocably consent to the
exclusive jurisdiction of the United States federal courts and the state courts
located in Delaware with respect to any suit or proceeding based on or arising
under this Agreement, the agreements entered into in connection herewith or the
transactions contemplated hereby or thereby and irrevocably agree that all
claims in respect of such suit or proceeding may be determined in such courts.
Both parties irrevocably waive the defense of an inconvenient forum to the
maintenance of such suit or proceeding. Both parties further agree that service
of process upon a party mailed by first class mail shall be deemed in every
respect effective service of process upon the party in any such suit or
proceeding. Nothing herein shall affect either party's right to serve process in
any other manner permitted by law. Both parties agree that a final
non-appealable judgment in any such suit or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on such judgment or in any other
lawful manner.
Section 11.2 Notices. Any notices required or permitted to be given
under the terms of this Agreement shall be sent by certified or registered mail
(return receipt requested) or delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile and shall be effective
five days after being placed in the mail, if mailed by regular United States
mail, or upon receipt, if delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile, in each case addressed
to a party. The addresses for such communications shall be:
If to the Company:
Teligent, Inc.
8065 Leesburg Pike, Suite 400
Vienna, Virginia 22182
Attention: General Counsel
Facsimile: (703) 762-5117
With copy to:
Cravath Swaine & Moore
825 Eighth Avenue
New York, NY 10019
Attention: Scott A. Barshay, Esq.
Facsimile: (212) 474-3700
If to a Buyer: To the address set forth immediately below such Buyer's
name on the signature pages hereto.
With copy to:
Bradley D. Houser
Akerman, Senterfitt & Eidson, P.A.
SunTrust International Center
One Southeast Third Avenue, 28th Floor
Miami, Florida 33131-1714
Facsimile: (305) 374-5095
Each party shall provide notice to the other party of any change in
address.
Section 11.3 Counterparts; Signatures by Facsimile. This Agreement may
be executed in one or more counterparts, all of which shall be considered one
and the same agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party. This Agreement, once
executed by a party, may be delivered to the other party hereto by facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.
Section 11.4 Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
Section 11.5 Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.
Section 11.6 Entire Agreement; Amendments. This Agreement, the
Warrants, the Registration Rights Agreement and the Exhibits hereto contain the
entire agreement and understanding of the parties with respect to the matters
covered herein and therein and supersede all prior and contemporaneous
agreements, negotiations and understandings between the parties, both oral and
written relating to the subject matter hereof. The terms and conditions of all
Exhibits to this Agreement are incorporated herein by this reference and shall
constitute part of this Agreement as if fully set forth herein. No provision of
this Agreement may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.
Section 11.7 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and assigns.
Neither the Company nor the Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, subject to Section 3, the Buyer may assign its
rights hereunder to any of its "affiliates," as that term is defined under the
Exchange Act, without the consent of the Company.
Section 11.8 Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
Section 11.9 Survival. The representations and warranties of the
Company and the agreements and covenants set forth in Article IV, V, VI, VIII,
IX and X shall survive the Closing and each Settlement Date hereunder
notwithstanding any due diligence investigation conducted by or on behalf of the
Buyer.
Section 11.10 Publicity. The Company and the Buyer shall have the right
to review a reasonable period of time before issuance of any press releases,
filings with the SEC, NASD or any stock exchange or interdealer quotation
system, or any other public statements with respect to the transactions
contemplated hereby; provided, however, that the Company shall be entitled,
without the prior approval of the Buyer, to make any press release or public
filings with respect to such transactions as is required by applicable law and
regulations (although the Buyer shall be consulted by the Company in connection
with any such press release or public filing prior to its release or public
filing and shall be provided with a copy thereof and be given an opportunity to
comment thereon).
Section 11.11 Further Assurances. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
Section 11.12 No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.
Section 11.13 Remedies. The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to the Buyer by vitiating
the intent and purpose of the transactions contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Agreement will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Agreement, that the
Buyer shall be entitled, in addition to all other available remedies in law or
in equity, to an injunction or injunctions to prevent or cure any breaches of
the provisions of this Agreement and to enforce specifically the terms and
provisions of this Agreement, without the necessity of showing economic loss and
without any bond or other security being required.
Section 11.14 Reporting Entity for the Common Stock. The reporting
entity relied upon for the determination of the VWAP, trading price or trading
volume of the Common Stock on any given Trading Day for the purposes of this
Agreement shall be Bloomberg Financial.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by the undersigned, thereunto duly authorized, as of the date first set
forth above.
TELIGENT, INC.
By: /s/ Alex J. Mandl
____________________________
Alex J. Mandl,
Chief Executive Officer
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital
Management, L.P.,
Investment Manager
By: RGC General Partner Corp.,
as General Partner
By: /s/ Wayne D. Bloch
____________________________
Wayne D. Bloch,
Managing Director
RESIDENCE: Cayman Islands
ADDRESS:
c/o Rose Glen Capital Management, L.P.
3 Bala Plaza East, Suite 501
251 St. Asaphs Road
Bala Cynwyd, PA 19004
Attn: Gary S. Kaminsky
Facsimile: (610) 617-0570
Telephone: (610) 617-5900
