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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 23, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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JATO COMMUNICATIONS CORP.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 4813 84-1466226
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
incorporation or organization) Classification Code Number) Number)
</TABLE>
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1099 18(TH) STREET
SUITE 2200
DENVER, CO 80202
(303) 226-8400
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------------------
GERALD K. DINSMORE
PRESIDENT AND CHIEF EXECUTIVE OFFICER
JATO COMMUNICATIONS CORP.
1099 18(TH) STREET
SUITE 2200
DENVER, CO 80202
(303) 226-8400
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPIES TO:
JAMES C.T. LINFIELD, ESQ. RICHARD L. NEVINS, ESQ.
COOLEY GODWARD LLP BAKER & MCKENZIE
2595 CANYON BOULEVARD, SUITE 250 805 THIRD AVENUE
BOULDER, CO 80302 NEW YORK, NY 10022
(303) 546-4000 (212) 751-5700
--------------------------
Approximate date of commencement of proposed sale to the public:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
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<CAPTION>
PROPOSED MAXIMUM AMOUNT OF
TITLE OF SECURITIES AGGREGATE OFFERING REGISTRATION
TO BE REGISTERED PRICE(1)(2) FEE
<S> <C> <C>
Common Stock, $.01 par value...................................................... $125,000,000 $33,000
</TABLE>
(1) Includes shares that the underwriters have the option to purchase solely to
cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(o).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED DECEMBER 23, 1999
PROSPECTUS
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE
SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME
THIS PROSPECTUS IS DELIVERED IN FINAL FORM. THIS PROSPECTUS IS NOT AN OFFER TO
SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
SHARES
[LOGO]
JATO COMMUNICATIONS CORP.
COMMON STOCK
------------------
This is our initial public offering of common stock. We are offering all of
the shares in this offering. This is a firm commitment underwriting.
We expect the public offering price to be between $ and $ per
share. Currently, no public market exists for the shares. After pricing of the
offering, we expect that the common stock will trade on the Nasdaq National
Market under the symbol "JATO."
INVESTING IN THE COMMON STOCK INVOLVES RISKS WHICH ARE DESCRIBED IN THE
"RISK FACTORS" SECTION BEGINNING ON PAGE 3 OF THIS PROSPECTUS.
---------------------
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<CAPTION>
PER SHARE TOTAL
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<S> <C> <C>
Public Offering Price................................................. $ $
Underwriting Discounts................................................ $ $
Proceeds, before expenses, to Jato.................................... $ $
</TABLE>
------------------------
The underwriters may also purchase up to an additional shares, at the
public offering price, less the underwriting discount, within 30 days from the
date of this prospectus to cover over-allotments.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
We expect that the shares of common stock will be ready for delivery in New
York, New York on or about , 2000.
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MERRILL LYNCH & CO. BEAR, STEARNS & CO. INC.
----------------
The date of this prospectus is , 2000.
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[Inside cover -- Map of United States highlighting selected markets throughout
the United States in which we currently provide and intend to provide service by
the end of 2000.
Text: "JATO'S HERE."]
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
Summary.................................................................................................... 1
Risk Factors............................................................................................... 3
Use of Proceeds............................................................................................ 15
Dividend Policy............................................................................................ 15
Capitalization............................................................................................. 16
Dilution................................................................................................... 17
Selected Consolidated Financial Data....................................................................... 19
Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 20
Business................................................................................................... 26
Management................................................................................................. 45
Principal Stockholders..................................................................................... 53
Certain Relationships and Related Transactions............................................................. 55
Description of Capital Stock............................................................................... 57
Shares Eligible for Future Sale............................................................................ 61
Underwriting............................................................................................... 63
Legal Matters.............................................................................................. 65
Experts.................................................................................................... 65
Where You Can Find Additional Information.................................................................. 65
Index to Consolidated Financial Statements................................................................. F-1
</TABLE>
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FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to risks,
uncertainties and assumptions about Jato, including, among other things:
- Our anticipated growth strategies;
- Our intention to introduce new applications and services;
- Our future expenditures for network deployment;
- Our ability to continue to control costs and maintain quality; and
- Anticipated trends in our business, including trends in technology
and the growth of broadband applications and services.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties, and assumptions, the forward-looking
events discussed in this prospectus might not occur.
------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE YOU ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS. IF THEY GIVE YOU SUCH INFORMATION OR MAKE SUCH REPRESENTATIONS, YOU
MUST NOT RELY UPON THEM AS HAVING BEEN AUTHORIZED BY US OR THE UNDERWRITERS.
THIS PROSPECTUS IS NOT AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO BUY,
ANY SECURITIES OTHER THAN THESE REGISTERED SECURITIES. IT IS ALSO NOT AN OFFER
TO, OR A SOLICITATION OF AN OFFER FROM, ANY PERSON IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY OFFER OR SALE SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT WE HAVE HAD NO CHANGE IN OUR BUSINESS SINCE THE DATE OF THIS
PROSPECTUS OR THAT THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT AT
ANY TIME AFTER THE DATE OF THIS PROSPECTUS.
i
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS CERTAIN INFORMATION REGARDING OUR BUSINESS AND DOES
NOT PURPORT TO BE COMPLETE AND IS QUALIFIED BY THE MORE DETAILED INFORMATION
APPEARING ELSEWHERE IN THIS PROSPECTUS. YOU SHOULD CAREFULLY READ AND CONSIDER
THIS ENTIRE PROSPECTUS, INCLUDING THE "RISK FACTORS" AND THE CONSOLIDATED
FINANCIAL STATEMENTS AND ALL RELATED NOTES BEFORE MAKING AN INVESTMENT DECISION.
UNLESS OTHERWISE NOTED, (A) THE "COMPANY," "JATO," "WE," "US" AND "OUR" REFER TO
JATO COMMUNICATIONS CORP. AND ITS CONSOLIDATED SUBSIDIARIES, AND (B) ALL COMMON
STOCK NUMBERS IN THIS PROSPECTUS ASSUME THE CONVERSION OF ALL OUTSTANDING SHARES
OF PREFERRED STOCK INTO COMMON STOCK AND THE ASSUMED CASH EXERCISE OF WARRANTS
TO PURCHASE 25,000 SHARES OF COMMON STOCK UPON THE CLOSING OF THIS OFFERING AND
THAT THE UNDERWRITERS WILL NOT EXERCISE THEIR OVER-ALLOTMENT OPTION.
JATO COMMUNICATIONS CORP.
OVERVIEW
We provide broadband network connectivity and associated applications and
services to small- and medium-sized businesses in secondary markets. We are
developing a secure and reliable nationwide network that will enable us to offer
our customers scalable data-centric solutions tailored to meet their business
needs. Our suite of value added applications, marketed as JatoDirect Solutions,
presently includes high speed "always on" Internet, wide area and local area
networking access, as well as Internet based applications such as e-commerce
services, Web hosting and e-mail. To deliver these solutions in our target
markets, we currently utilize digital subscriber line, or DSL technology, and
expect to utilize other high-speed local access technologies to meet our
customers' needs.
We intend to exploit our advantage as an early entrant in our target markets
to become a leading provider of broadband applications and services. We market
our applications and services primarily through direct sales channels including
account managers, telesales personnel and specialized account groups. In
addition, we intend to supplement our direct sales approach through strategic
partnerships with ISPs and value added resellers.
We began offering commercial services in June 1999 and plan to deploy our
network in a total of 50 markets nationwide, comprised of 145 cities, by the end
of 2000. As of November 30, 1999, we had collocated our network equipment in
over 130 central offices and expect to be in approximately 875 central office
locations by the end of 2000. As of , we had approximately
lines in service, and we are currently under contract to supply over
additional DSL lines to our business customers.
We have entered into a strategic alliance with Lucent Technologies to
rapidly deploy, integrate, monitor and maintain our broadband network. As part
of this alliance, Lucent has agreed to provide $50 million in vendor financing
for our network-related expenditures. Lucent has also agreed to provide
financial support to market co-branded products and services.
Since inception, we have raised $49 million in equity from a group of
investors that includes the following entities or their affiliates: ABN-AMRO,
CEA Capital, Crest Communications, Hambrecht & Quist, Mayfield Fund and TCI
Satellite Entertainment.
MARKET OPPORTUNITY
We believe that we have a significant business opportunity as a result of
the following factors:
- Significant and growing demand for high-speed connectivity among small-
and medium-sized businesses
- Attractive, growing and underserved target markets
- Growth of outsourced data networking
- Limitations of existing communications alternatives
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OUR SOLUTION
We believe our network effectively addresses many of the unsatisfied data
communications needs of small- and medium-sized businesses in secondary markets
by offering an attractive combination of service, quality, performance and
price. Our solution consists of:
- High-speed, cost-effective connectivity
- Broadband applications and services
- Focus on the end user
- Nationwide secure network
OUR STRATEGY
Our objective is to become the nation's leading provider of network-enabled
applications and services to small- and medium-sized businesses in secondary
markets. Our strategy includes the following key elements:
- Exploit first-mover advantage in our target secondary markets
- Drive customer acquisition through direct marketing
- Offer a wide array of broadband applications and services
- Provide superior customer care and support
THE OFFERING
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<S> <C>
Common stock offered.............. shares
Common stock outstanding after
this offering................... shares(1)
Use of proceeds................... We intend to use the net proceeds from the offering to
fund capital expenditures and operating losses related
to expansion of our network, hiring additional sales,
marketing and other personnel, for working capital and
other general corporate purposes.
Dividend policy................... We currently intend to retain any future earnings to
fund the growth and development of our business.
Therefore, we do not currently anticipate paying cash
dividends.
Risk Factors...................... See "Risk Factors" and other information included in
this prospectus for a discussion of factors you should
carefully consider before deciding to invest in our
common stock.
Proposed Nasdaq National Market
Symbol.......................... JATO
</TABLE>
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(1) Based on the number of shares outstanding on September 30, 1999. Includes
19,306,021 shares of common stock to be issued upon conversion of our
preferred stock and 25,000 shares of common stock to be issued upon the
assumed cash exercise of outstanding warrants at an exercise price of $3.00
per share upon the closing of this offering. Excludes 2,809,750 shares of
common stock issuable upon the exercise of stock options outstanding as of
September 30, 1999, with a weighted average exercise price of $2.27 per
share, 88,750 of which are exercisable. See "Capitalization."
We own applications for federal registration and claim rights in the service
mark Jato. We also claim rights in the service marks JatoBridge and JatoDirect.
This prospectus also refers to trade names and trademarks of other companies.
We were incorporated in Delaware on June 12, 1998. Our principal executive
office is located at 1099 18(th) Street, Suite 2200, Denver, Colorado 80202 and
our telephone number is (303) 226-8400. The information contained on our Web
site, www.jato.net, does not constitute part of this prospectus.
2
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RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISKS AND UNCERTAINTIES DESCRIBED BELOW
AND THE OTHER INFORMATION IN THIS PROSPECTUS BEFORE DECIDING WHETHER TO INVEST
IN SHARES OF OUR COMMON STOCK. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE
NOT THE ONLY ONES WE FACE. ADDITIONAL RISKS AND UNCERTAINTIES NOT PRESENTLY
KNOWN TO US OR THAT WE CURRENTLY DEEM IMMATERIAL MAY ALSO IMPAIR OUR BUSINESS.
WE CANNOT PREDICT OUR SUCCESS BECAUSE WE HAVE A SHORT OPERATING HISTORY
We were formed in June 1998 and have limited historical financial and
operating data upon which you can evaluate our business and prospects. Prior to
December 1999, we were considered a development stage company. We commenced
commercial operations in June 1999 and have not recognized significant revenues
to date.
BECAUSE OUR MARKET IS NEW AND EVOLVING, WE CANNOT PREDICT ITS FUTURE GROWTH OR
ULTIMATE SIZE
The market for DSL and other broadband services is in its early stage of
development. If the market for these services, or the 50 target markets we have
identified, fail to develop, grow more slowly than anticipated or become
saturated with competitors, these events could materially and adversely affect
our business, prospects, operating results and financial condition. Since this
market is new and evolving and because our current and future competitors are
likely to introduce competing services, we cannot accurately predict the rate at
which this market will grow, if at all, or whether new or increased competition
will result in market saturation. Various providers of similar communications
services are testing products from various suppliers for various applications,
and suppliers have not broadly adopted an industry standard.
WE CANNOT PREDICT OUR SUCCESS BECAUSE OUR BUSINESS MODEL IS UNPROVEN
We believe that the combination of our unproven business model and the
highly competitive and fast changing market in which we compete makes it
impossible to predict the extent to which our network services will achieve
market acceptance and our overall success. Our larger competitors have chosen to
target the largest, most populous markets in the U.S., while we have elected to
focus on smaller, less populous markets. To be successful, we must develop and
market network services that are widely accepted by businesses at profitable
prices. We may never be able to deploy our network as planned, achieve
significant market acceptance, achieve favorable operating results or
profitability or generate sufficient cash flow to repay our debt.
WE EXPECT OUR LOSSES AND NEGATIVE CASH FLOW TO CONTINUE
We have incurred losses and experienced negative operating cash flow for
each month since our formation. As of September 30, 1999, we had an accumulated
deficit of approximately $7.1 million. We intend to rapidly and substantially
increase our capital expenditures and will incur materially higher operating
expenses in an effort to expand our network services. Furthermore, as a result
of recent stock and option grants, we anticipate that there will be significant
charges to earnings in future periods. As a result of these factors, we expect
to incur substantial operating and net losses and negative operating cash flow
for the foreseeable future. We will need to obtain additional financing to
expand our network, pay our expenses, and make payments on our debt. We cannot
give you any assurance about whether or when we will have sufficient revenues to
satisfy our funding requirements or pay our debt service obligations.
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OUR FAILURE TO ACHIEVE OR SUSTAIN MARKET ACCEPTANCE AT DESIRED PRICING LEVELS
COULD IMPAIR OUR ABILITY TO ACHIEVE PROFITABILITY OR POSITIVE CASH FLOW
We are expanding our operations based in part upon our prediction of future
prices that we will attain for our services. Our failure to achieve or sustain
market acceptance at desired pricing levels could impair our ability to achieve
profitability or positive cash flow, which would have a material adverse effect
on our business, prospects, operating results and financial condition. Prices
for high-speed Internet access and other data transport and networking services
have fallen historically and we expect this trend will continue and may
accelerate. In addition, to expedite customer acquisition in new markets, we
have reduced and expect that we will need to continue to reduce installation
costs, provide customer premise equipment at prices below our own costs and
provide discounted monthly service fees. Accordingly, we cannot predict to what
extent we may need to reduce our prices to remain competitive or whether we will
be able to sustain future pricing levels as our competitors introduce competing
services or similar services at lower prices.
OUR OPERATING RESULTS IN ONE OR MORE FUTURE PERIODS ARE LIKELY TO FLUCTUATE
SIGNIFICANTLY AND MAY FAIL TO MEET OR EXCEED THE EXPECTATIONS OF SECURITIES
ANALYSTS OR INVESTORS
Our annual and quarterly operating results are likely to fluctuate
significantly in the future due to numerous factors, many of which are outside
of our control. These factors include:
- our ability or inability to deploy our network on a timely basis;
- the rate of customer acquisition and turnover;
- the prices our customers are willing to pay;
- the amount and timing of expenditures relating to the expansion of our
network and service offerings;
- the timing and availability of central office collocation facilities and
transport facilities;
- the expansion and success of our strategic alliances and relationships;
- introduction of new services or technologies by our competitors;
- price competition;
- the ability of our equipment, applications and service suppliers to meet
our needs;
- regulatory developments, including interpretations of the 1996
Telecommunications Act;
- technical difficulties or network downtime; and
- the condition of the communications and network service industries and
general economic conditions.
Because of these factors, our operating results in one or more future
periods could fail to meet or exceed the expectations of securities analysts or
investors. In that event, the trading price of our common stock would likely
decline.
WE DEPEND ON OUR BILLING, CUSTOMER SERVICE AND INFORMATION SUPPORT SYSTEMS
Information and processing systems are vital to our growth and ability to
monitor costs, bill customers, process customer orders and achieve operating
efficiencies. Our plans for the development and implementation of our
operational and support systems rely, for the most part, on acquiring products
and services offered by third-party vendors and integrating those products and
services in-house to produce efficient operational solutions. However, we may
not successfully identify all of our
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information and processing needs or implement these systems on a timely basis or
at all, and these systems may not perform as expected.
We have only recently begun to acquire rights to use these vital products
and services. In addition, our right to use these systems will be dependent upon
license agreements with third-party vendors. Some of those agreements may be
cancelable by the vendor and the cancellation or nonrenewal of these agreements
may have a material adverse effect on our business, prospects, operating results
and financial condition.
WE DEPEND ON INCUMBENT CARRIERS FOR COLLOCATION AND TRANSMISSION FACILITIES
We must use copper telephone lines controlled by the incumbent carriers to
provide DSL connections to customers. We also depend on the incumbent carriers
for collocation and for a substantial portion of the transmission facilities we
use to connect our equipment in incumbent carrier central offices to our
network. In addition, we depend on the incumbent carriers to test and maintain
the quality of the copper lines that we use. We have not established a
meaningful history of obtaining access to collocation and transmission
facilities from incumbent carriers in significant volumes. In many cases, we may
be unable to obtain access to collocation and transmission facilities from the
incumbent carriers, or to gain access at acceptable rates, terms and conditions,
including timeliness. We have experienced, and expect to experience in the
future, lengthy periods between our request for and the actual provision of the
collocation space and telephone lines. During these periods, we will incur
significant expenses in advance of the receipt of revenues. If sales that we
forecast for a particular period do not occur due to these delays, or due to the
loss of potential customers, our business, prospects, operating results, and
financial condition could be materially and adversely affected. An inability to
obtain adequate and timely access to collocation space or transmission
facilities on acceptable terms and conditions from incumbent carriers would have
a material and adverse effect on our business, prospects, operating results and
financial condition.
Because we will compete with incumbent carriers in our markets, they may be
reluctant to cooperate with us. The incumbent carriers may experience, or claim
to experience, a shortage of collocation space or transmission capacity. If this
occurs, we may not have alternate means of connecting our DSL equipment with the
copper lines or connecting our equipment in central offices to our switching
centers. The number of other competitive carriers that request collocation space
will also affect the availability of collocation space and transmission
capacity. If we are unable to obtain physical collocation space or transmission
capacity from our targeted incumbent carriers, we may face delays, additional
costs or an inability to provide services in certain locations. In many cases
where our application for physical collocation is rejected, we expect to have
the option of adjacent location where we install our equipment in a building
that is very close to the incumbent carrier central office or may use virtual
collocation where the incumbent carrier manages and operates our equipment.
Adjacent and virtual collocation would reduce our control over our equipment,
and therefore may reduce the level of quality and service we can provide to our
customers. Delays in obtaining access to collocation space and telephone lines
or the rejection of our applications for collocation could result in delays in,
and increased expenses associated with, the rollout of our services, which in
turn could have a material and adverse effect on our business, prospects,
operating results and financial condition.
WE ARE UNABLE TO CONTROL THE TERMS AND CONDITIONS UNDER WHICH WE GAIN ACCESS TO
INCUMBENT CARRIER COLLOCATION AND TRANSMISSION FACILITIES
We cannot control the terms under which we collocate our equipment, connect
to copper lines or gain the use of an incumbent carrier's transmission
facilities. State tariffs, state public utility commissions and interconnection
agreements with the incumbent carriers determine the price, terms and conditions
under which collocation space is made available. Interconnection agreements and
state public utility commissions also determine the terms and conditions of
access to copper lines and other
5
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components of an incumbent carrier's network. We may be unable to negotiate or
enter into requisite interconnection agreements on acceptable terms or at all.
In addition, we cannot be sure that incumbent carriers will abide by their
obligations under those agreements. Delays in obtaining interconnection
agreements would delay our entry into those markets. In addition, disputes may
arise between us and the incumbent carriers with respect to interconnection
agreements, and we may be unable to resolve disputes in our favor. If we are
unable to enter into or experience a delay in obtaining interconnection
agreements, this inability or delay could adversely affect our business,
prospects, operating results and financial condition. Further, interconnection
agreements are generally short term, and we may be unable to renew the
interconnection agreements on acceptable terms or at all. State public utility
commissions, the Federal Communications Commission, or FCC, and the courts
oversee, in varying degrees, interconnection arrangements as well as the terms
and conditions under which we gain access to incumbent carrier copper lines and
transmission facilities. These government entities may modify the terms or
prices of our interconnection agreements and our access to incumbent carrier
copper lines and transmission facilities in ways that would be adverse to our
business. If carriers are unable to negotiate rates, state regulatory
commissions establish through ongoing public hearings the rates for DSL-capable
copper lines, as well as other terms and conditions for dealings with the
incumbent carriers. Participation in these hearings may involve significant
management time and expense. Incumbent carriers may from time to time propose
new rates, and the outcome of rate hearings and rulings could have a material
and adverse effect on our business, prospects, operating results and financial
condition.
WE DEPEND ON THIRD PARTIES FOR OUR BACKHAUL AND BACKBONE TRANSPORT CIRCUITS
We depend on the availability of backhaul and backbone transport circuits
from third parties to connect our equipment within and between markets. These
third party carriers include interexchange carriers, incumbent carriers and
other competitive carriers. Many of these entities are, or may become, our
competitors. This approach includes a number of risks. For instance, we may be
unable to negotiate and renew favorable supply agreements. Further, we depend on
the timeliness of these companies to process our orders for customers who seek
to use our services. Moreover, the backhaul and backbone transport providers
whose networks we lease may be unable to obtain or maintain permits and
rights-of-way necessary to develop and operate existing and future networks.
WE WILL RELY ON DIRECT SALES, WHICH MAY NOT BE COST-EFFECTIVE
We will market and sell our products through a direct sales force supported
by a dedicated marketing staff. The market for DSL and other broadband services
is new, and our direct sales efforts may not be a cost-effective means of
selling these services to businesses. Many of our competitors are selling their
services indirectly through Internet service providers, other carriers,
value-added resellers, and system integrators. Our direct method may prove to be
a more costly approach. Although we believe that our success depends largely on
maintaining a dedicated marketing staff and sales force, we may not achieve a
level of sales sufficient to justify maintaining our own marketing staff and
sales force.
WE WILL ALSO RELY ON INDIRECT SALES, WHICH MAY BE INEFFECTIVE
We will also rely on indirect sales channels for the marketing and sales of
our network services. We will seek to establish relationships with numerous
service providers, including ISPs, interexchange carriers, other competitive
carriers and value added resellers to gain access to customers. All of our
agreements to date with service providers are non-exclusive, and we anticipate
that future agreements will also be on a non-exclusive basis, allowing service
providers to resell services offered by our competitors. These agreements are
generally short term, and can be cancelled by the service provider without
significant financial or other consequences. We cannot control how these service
providers
6
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perform and cannot be certain that their performance will be satisfactory to us
or our customers. Many of these companies also compete with us. If the number of
customers we obtain through indirect sales channels is significantly lower than
our forecast for any reason, or if the service providers with which we have
contracted are unsuccessful in competing in their own intensely competitive
markets, these events would have a material and adverse effect on our business,
prospects, operating results and financial condition.
THE MARKET IN WHICH WE OPERATE IS HIGHLY COMPETITIVE, AND WE MAY NOT BE ABLE TO
COMPETE EFFECTIVELY, ESPECIALLY AGAINST ESTABLISHED INDUSTRY COMPETITORS WITH
SIGNIFICANTLY GREATER FINANCIAL RESOURCES
Our industry is highly competitive. We have not obtained significant market
share in any of the areas where we offer or intend to offer services, nor do we
expect to do so in the near future given the size of the local
telecommunications market, the intense competition and the diversity of customer
needs. In each market area in which we provide or intend to provide services, we
compete or will compete with several other service providers and the variety of
technologies they use for local access, high-speed connections. We anticipate
the level of competition in our industry to intensify in the future due, in
part, to increasing consolidation. We anticipate significant competition from:
- Incumbent local exchange carriers, which have begun deploying DSL-based
services or other high-speed data communications services, combined with
existing wide area, metropolitan and local area networks;
- DSL-based competitive local exchange carriers which are currently
providing DSL-based services in numerous areas;
- Interexchange carriers which are building and expanding their networks to
support high-speed local access, including competitive DSL-based services,
combined with metropolitan and wide area networks, as well as offering a
full range of Internet services and applications;
- Cable modem service providers which are offering high-speed Internet
access over cable networks, and principally to residential customers, have
positioned themselves to do the same for businesses;
- Traditional competitive local exchange carriers which have recently begun
offering DSL services to their customers;
- ISPs which have begun to develop high-speed access capabilities to augment
their existing products and services; and
- Providers utilizing alternative technologies, such as wireless and
satellite-based data service providers.
Most of our current and potential competitors have longer operating
histories, larger customer bases, more established relationships with customers
and suppliers in their respective industries, greater name recognition and
significantly greater financial, technical, marketing, service support and other
resources than Jato. We also face intense competition with respect to the prices
and types of services and products we offer. As a result, our competitors may be
able to respond more quickly than we can to new and evolving opportunities,
technologies or customer demands. For more information regarding our competition
see "Business -- Competition."
WE WILL NEED SIGNIFICANT ADDITIONAL FUNDS, WHICH WE MAY NOT BE ABLE TO OBTAIN
We have yet to generate significant revenues, and have no assurance of
future revenues. During 1999, we raised additional working capital funds and
believe that our cash and cash equivalents at September 30, 1999, the proceeds
from this offering and amounts available under our Lucent credit facility, will
be adequate to fund our capital expenditures and operating losses until
September 2000.
7
<PAGE>
We will not have completed our network deployment by then and will need
additional capital, whether or not our estimate on how long current capital
resources will last is accurate. If we are not able to raise additional funds
when needed, we would be required to significantly scale back our operations.
This would have a material adverse effect on our business, prospects, operating
results and financial condition. There can be no assurance that additional
capital will be available on terms acceptable to us, or at all.
The expansion and development of our business will require significant
additional capital. To realize our network deployment objectives, we estimate
that we will spend approximately $30 million in 1999, plus an additional $165 to
$175 million in 2000. We will require additional financing to fund our capital
expenditures and operating losses in the future. Our actual funding requirements
may differ materially if our assumptions are incorrect. Therefore, you should
consider the following facts:
- we have no meaningful history of operations or revenues;
- our estimated funding requirements do not reflect any contingency amounts
and may increase, perhaps substantially, if we are unable to generate
revenues in the amount and within the time frame we expect or if we have
unexpected cost increases; and
- we face many challenges and risks, including those discussed elsewhere in
"Risk Factors."
We may be unable to obtain any future equity or debt financing on acceptable
terms or at all. Recently the financial markets have experienced extreme price
fluctuations. A market downturn or general market uncertainty may adversely
affect our ability to secure additional financing. If we are unable to obtain
additional capital or are required to obtain it on terms less satisfactory than
what we desire, we will need to delay deployment of our services or take other
actions that could adversely affect our business, prospects, operating results
and financial condition. To date, our cash flow from operations has been
insufficient to cover our expenses and capital needs. Please see "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."
WE MAY NOT BE ABLE TO SERVICE EXISTING AND FUTURE DEBT OBLIGATIONS, WHICH MAY BE
SUBSTANTIAL, OR COMPLY WITH RESTRICTIVE COVENANTS IMPOSED BY OUR LENDERS
Lucent has provided us with a $50 million credit facility which is secured
by substantially all of our network equipment. We expect to borrow the entire
amount of this facility. We expect to seek additional financing in the near
future, which may include the incurrence of substantial debt obligations. We are
not currently generating cash flows, and have no assurances of future cash
flows, sufficient to fund our operations or repay existing or future debt. Thus,
there is no assurance that we will be able to repay our existing debt or any
additional debt in the future. In addition to the restrictive covenants imposed
on us by our credit facility with Lucent, any debt we are able to raise in the
future will likely contain restrictive covenants that would place additional
burdens on our ability to execute our business plan or incur additional debt.
OUR SERVICES ARE SUBJECT TO GOVERNMENT REGULATION, AND CHANGES IN CURRENT OR
FUTURE LAWS OR REGULATIONS COULD RESTRICT THE WAY WE OPERATE OUR BUSINESS
We are subject to regulation by the FCC, and by state public service and
public utility commissions as a provider of telecommunications services. Changes
in existing laws, policies or regulations in the states and localities we serve
or by the FCC could materially and adversely affect our business, prospects,
operating results or financial condition, particularly if those legal,
regulatory or policy changes increase the cost and regulatory burdens of
providing services. There can be no assurance that regulatory authorities in the
areas we serve or the FCC will not take actions having an adverse effect on our
business, prospects, financial condition or operating results. The 1996
Telecommunications Act
8
<PAGE>
has significantly altered regulation of the telecommunications industry by
preempting state and local laws to the extent that they prevent competition and
by imposing a variety of new duties on competitive carriers and incumbent
carriers in order to promote competition in local exchange and access services.
Although we believe that the 1996 Telecommunications Act and other trends in
federal and state legislation and regulation that favor increased competition
are to our advantage, there can be no assurance that the increased competitive
opportunities or other changes in current regulations or future regulations at
the federal or state level will not have a material adverse effect on our
business, prospects, operating results or financial condition. See "Business --
Government Regulation."
OUR FAILURE TO MANAGE GROWTH COULD ADVERSELY AFFECT US
To meet our objectives, we need to rapidly and significantly expand our
operations. Our expansion to date has challenged our management, financial
controls, operations systems, personnel and other resources. Any future rapid
expansion would increase these strains. If our marketing strategy is successful,
we may experience difficulties responding to customer demand for services and
technical support in a timely manner and in accordance with customer
expectations. As a result, rapid growth of our business would make it difficult
to implement successfully our strategy to provide superior customer service. To
manage the expected growth of our operations, we must:
- improve existing and implement new operational, financial and management
information controls, reporting systems and procedures;
- hire, train and manage additional qualified personnel;
- expand and upgrade our core technologies; and
- effectively manage multiple relationships with our customers, suppliers
and other third parties.
We may not be able to install management information and control systems in
an efficient and timely manner, and our current or planned personnel, systems,
procedures and controls may not be adequate to support our future operations.
Failure to manage our future growth effectively could adversely affect the
expansion of our customer base and service offerings. Any failure to
successfully address these issues could materially and adversely affect our
business, prospects, operating results and financial condition.
THE TELECOMMUNICATIONS INDUSTRY IS UNDERGOING RAPID TECHNOLOGICAL CHANGE, AND
NEW TECHNOLOGIES MAY BE SUPERIOR TO THE TECHNOLOGY WE USE
The telecommunications industry is subject to rapid and significant
technological changes, such as continuing developments of alternative
technologies for providing high-speed data communications. We may be unable to
obtain access to new technologies on acceptable terms or at all, and we may be
unable to adapt to new technologies and offer services in a competitive manner.
New technologies and products may not be compatible with our technologies, and
we cannot predict the effect of technological changes on our business. We will
rely in part on third parties, including certain of our competitors and
potential competitors, for the development of and access to communications and
networking technology. We expect that new products and technologies applicable
to our market will emerge. New products and technologies may be superior and/or
render obsolete the products and technologies that we currently use. Our future
success will depend, in part, on our ability to anticipate and adapt to
technological changes and evolving industry standards. We believe that the
telecommunications industry must set standards to allow for the compatibility of
various products and technologies. However, the industry may not set standards
on a timely basis or at all. In addition, many of the products and technologies
that we intend to use in our network services are relatively new and unproven
and may be unreliable.
9
<PAGE>
WE MAY BE UNABLE TO EFFECTIVELY EXPAND OUR NETWORK SERVICES AND PROVIDE HIGH
PERFORMANCE TO A SUBSTANTIAL NUMBER OF END USERS
Due to the limited deployment to date of our network services, we cannot
guarantee that our network will be able to connect and manage a substantial
number of end users while achieving high performance. Further, our network may
be unable to achieve and maintain competitive digital transmission speeds.
Actual transmission speeds on our network will depend on a variety of factors
and many of these factors are beyond our control, including the type of DSL
technology deployed, the distance an end user is located from a central office,
the quality of the telephone lines, the presence of interfering transmission on
nearby lines and other factors. As a result, we may not be able to achieve and
maintain digital transmission speeds that are attractive in the market.
OUR SERVICES MAY SUFFER BECAUSE THE TELEPHONE LINES WE REQUIRE MAY BE
UNAVAILABLE OR IN POOR CONDITION
Our ability to provide DSL-based services to potential customers depends on
the quality, physical condition, availability and maintenance of telephone lines
within the control of the incumbent carriers. We believe that the current
condition of telephone lines in many cases will be inadequate to permit us to
fully implement our network services. In addition, the incumbent carriers may
not maintain the telephone lines in a condition that will allow us to implement
our network effectively. The telephone lines may not be of sufficient quality or
the incumbent carriers may claim they are not of sufficient quality to allow us
to fully implement or operate our network services. Further, some customers use
technologies other than copper lines to provide telephone services, and DSL
might not be available to these customers.
OUR SUCCESS DEPENDS ON OUR KEY PERSONNEL AND OUR ABILITY TO ATTRACT AND RETAIN
SKILLED EMPLOYEES
Our success depends on the performance of our key personnel in executing our
business plan. Several members of our senior management team have joined Jato
very recently. If they are unable to effectively integrate themselves into our
business or work together as a management team, our business will suffer. See
"Management." In addition, our employees, including members of our senior
management team, may terminate their employment with us at any time. We also do
not have "key person" life insurance policies on any of our employees. If any of
our key employees left or was seriously injured and unable to work and we were
unable to find a qualified replacement, our business could be harmed. Our future
success also depends on our continuing ability to identify, attract, motivate
and retain highly skilled personnel. We plan to significantly expand our
operations, and we will need to hire additional personnel as our business grows.
The industry in which we compete has a high level of employee mobility and
aggressive recruiting of skilled personnel. We face intense competition for
qualified personnel, particularly in network engineering, sales and marketing
and product development. If we are unable to continue to employ our key
personnel or to attract and retain qualified personnel in the future our
business, prospects, operating results and financial condition could be
materially and adversely affected.
RELIANCE ON LUCENT FOR NETWORK DEPLOYMENT AND MONITORING
We entered into a strategic alliance with Lucent to install, integrate,
monitor and maintain our nationwide broadband network. Any failure or inability
by Lucent to perform these functions in a timely manner could cause significant
delays and costs in providing services to our existing and prospective customers
and deploying our network in our target markets. Any such failure could
materially and adversely affect our business, prospects, operating results and
financial condition. In addition, our alliance with Lucent is non-exclusive;
they are providing or may provide similar services to our competitors.
10
<PAGE>
WE DEPEND ON THIRD PARTIES FOR EQUIPMENT, INSTALLATION AND PROVISION OF FIELD
SERVICE
We currently plan to purchase all of our equipment from a number of vendors
and outsource substantially all of the installation and field service of our
networks to third parties, principally Lucent. Our reliance on third party
vendors involves a number of risks, including the absence of guaranteed capacity
and reduced control over delivery schedules, quality assurance, production
yields and costs. If any of our suppliers reduces or interrupts its supply, or
if any significant installer or field service provider interrupts its service to
us, this reduction or interruption could disrupt our business. Our suppliers may
be unable to manufacture and deliver the amount of equipment we order, or the
available supply may be insufficient to meet our demand. If our suppliers or
licensors enter into competition with us, or if our competitors enter into
exclusive or restrictive arrangements with the suppliers or licensors, then
these events may materially and adversely affect the availability and pricing of
the equipment we purchase.
WE DEPEND ON NETWORK INFRASTRUCTURE
Our success will depend upon the capacity, reliability and security of our
network. Our failure to maintain and expand our network infrastructure on a
timely basis or adapt it to either changing customer requirements or evolving
industry standards could have a material adverse effect on our business,
prospects, operating results and financial condition. Because we expect that a
substantial portion of our future revenues will be derived from providing
tailored value-added applications and services to our customers, we must
continue to expand and adapt our network infrastructure as the number of end
users and the amount of information they wish to transfer increase and as
customer requirements change. Our network currently accommodates data transfer
rates of up to 1.5 Mbps. Other DSL providers offer or are capable of offering
significantly faster transmission speeds. If end user demand evolves to favor
higher downstream transmission speeds, we cannot be sure that we will be able to
expand or adapt our network infrastructure to meet this additional demand or our
customers' changing requirements on a timely basis, at a commercially reasonable
cost, or at all.
INTERFERENCE OR CLAIMS OF INTERFERENCE COULD DELAY OUR NETWORK DEPLOYMENT OR
HARM OUR SERVICES
All transport technologies deployed on copper telephone lines have the
potential to interfere with, or to be interfered by, other transport
technologies on the copper telephone lines. We believe that our DSL
technologies, like other transport technologies, do not interfere with existing
voice services. We believe that a workable plan that takes into account all
technologies could be implemented in a scalable way across all incumbent
carriers using existing plant engineering principles. There are several
initiatives underway to establish national standards and principles for the
deployment of DSL technologies. We believe that our technologies can be deployed
consistently with these evolving standards. Nevertheless, incumbent carriers may
claim that the potential for interference permits them to restrict or delay our
deployment of DSL services. Interference could degrade the performance of our
services or make us unable to provide service on selected lines. The procedures
to resolve interference issues between competitive carriers and incumbent
carriers are still being developed, and these procedures may not be effective.
We may be unable to successfully negotiate interference resolution procedures
with incumbent carriers. Moreover, incumbent carriers may make claims regarding
interference or unilaterally take action to resolve interference issues to the
detriment of our services. State or federal regulatory bodies could also
institute responsive actions. Interference, or claims of interference, if
widespread, would adversely affect our speed of deployment, reputation, brand
image, service quality and customer satisfaction and retention.
11
<PAGE>
UNCERTAIN FEDERAL AND STATE TAX AND OTHER SURCHARGES ON OUR SERVICES MAY
INCREASE OUR PAYMENT OBLIGATIONS
Telecommunications providers pay a variety of surcharges and fees on their
gross revenues from interstate and intrastate services. The division of our
services between interstate and intrastate services is a matter of
interpretation, and in the future the FCC or relevant state commission
authorities may contest this division. A change in the characterization of the
jurisdiction of our services could cause our payment obligations to increase. In
addition, pursuant to periodic revisions by state and federal regulators of the
applicable surcharges, we may be subject to increases in the surcharges and fees
currently paid.
OUR INTELLECTUAL PROPERTY PROTECTION MAY BE INADEQUATE TO PROTECT OUR
PROPRIETARY RIGHTS, AND WE MAY BE SUBJECT TO INFRINGEMENT CLAIMS
We rely on a combination of licenses, confidentiality agreements and other
contracts to establish and protect our intellectual property rights. We have
applied for service marks on certain terms and symbols that we believe are
important for our business. We currently have no patents or patent applications
pending. The steps we have taken may be inadequate to protect our technology or
other intellectual property. Third parties may assert infringement claims
against us and, in the event of an unfavorable ruling on any claim, we may be
unable to obtain a license or similar agreement to use intellectual property we
rely upon to conduct our business. In addition, these claims may divert
management's attention and be costly to defend. We also rely on unpatented trade
secrets and know-how to maintain our competitive positions, which we seek to
protect, in part, by confidentiality agreements with employees, consultants and
others. However, these agreements may be breached or terminated, and we may not
have adequate remedies for any breach. In addition, our competitors may
otherwise learn or discover our trade secrets. Our management personnel were
previously employees of other telecommunications companies. In many cases, these
individuals are conducting activities for us in areas similar to those in which
they were involved prior to joining us. As a result, we or our employees could
be subject to allegations of violation of trade secrets and other similar
claims.
RISKS ASSOCIATED WITH POTENTIAL GENERAL ECONOMIC DOWNTURN
In the last few years the general health of the economy has been relatively
strong and growing, which has led to increased capital spending by individuals
and growing companies to keep pace with rapid technological advances. To the
extent the general economic health of the U.S. declines from recent historically
high levels, or to the extent businesses and individuals fear a decline is
imminent, these businesses and individuals may reduce expenditures for our
services. Any decline or concern about an imminent decline could delay decisions
among certain of our customers to roll out our services or could delay decisions
by prospective customers to make initial evaluations of our services. Any delays
would have a material and adverse effect on our business, prospects, operating
results and financial condition.
OUR PRINCIPAL STOCKHOLDERS AND MANAGEMENT OWN A SIGNIFICANT PERCENTAGE OF OUR
COMPANY, AND WILL BE ABLE TO EXERCISE SIGNIFICANT INFLUENCE OVER OUR COMPANY
Following the offering, our executive officers, directors and our
stockholders who currently own over five percent of our common stock will, in
the aggregate, beneficially own approximately % of our outstanding common
stock. These stockholders, if they vote together, will be able to significantly
influence matters that we require our stockholders to approve, including
electing directors and approving significant corporate transactions. This
concentration of ownership may also have the effect of delaying or preventing a
change in control of Jato, which could result in a lower stock price. See
"Principal Stockholders" for information about the ownership of common stock by
our executive officers, directors and principal stockholders.
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OUR FAILURE AND THE FAILURE OF THIRD PARTIES TO BE YEAR 2000 COMPLIANT COULD
NEGATIVELY IMPACT OUR BUSINESS
Many computer programs have been written using two digits rather than four
to define the applicable year. This poses a problem at the end of the century
because these computer programs may recognize a date using "00" as the year 1900
rather than the year 2000. This, in turn, could result in major system failures
or miscalculations. The expenses associated with our efforts to remedy any Year
2000 problems, the expenses or liabilities to which we may become subject as a
result of such problems or the impact of Year 2000 problems on the ability of
existing or future suppliers and customers to do business with us could have a
material adverse effect on our business, prospects, operating results and
financial condition.
We believe that our Year 2000 problems will be less significant than older
telecommunications providers because our limited history of operations means our
computer systems and software are relatively new and thus subject to less risk.
Notwithstanding this fact we cannot assess the impact of potential Year 2000
problems on incumbent carriers operating traditional telephone systems or other
service providers (such as electric and utility) in the markets in which we
operate. Because our systems will be interconnected with those of incumbent
carriers who operate these traditional telephone systems and other service
providers, any disruption of operations in the computer programs of these
service providers would likely have an impact on our systems in our markets.
Such an impact might have a material adverse effect on our business, prospects,
operating results and financial condition. In addition, to the extent that our
suppliers or customers fail to address Year 2000 issues in a timely and
effective manner, our ability to provide uninterrupted, reliable service to
customers serviced through these networks may be adversely affected. Moreover,
the profitability and stability of our customers may be adversely affected by
Year 2000 problems not related to their relationships with us. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -- Year
2000 Readiness Disclosure" for more information on the status of our preparation
relating to this issue.
WE EXPECT OUR STOCK PRICE TO BE VOLATILE
You should be aware that the stock of companies in our industry have
experienced extreme price and volume fluctuations. The price at which our common
stock will trade will depend upon many factors, including our quarterly and
annual operating results, variations between our actual results and analyst and
investor expectations, announcements by us or others and developments affecting
our business, investor perceptions of our company and comparable public
companies, changes in our industry and general market and economic conditions.
Some of these factors are beyond our control.
WE HAVE NOT PAID AND DO NOT INTEND TO PAY DIVIDENDS
We have not paid any dividends, and we do not intend to pay cash dividends
in the foreseeable future. Our current financing documents contain provisions
which restrict our ability to pay dividends.
ANTI-TAKEOVER PROVISIONS COULD NEGATIVELY IMPACT OUR STOCKHOLDERS
Some of the provisions that will be included in our restated certificate of
incorporation and bylaws may discourage, delay or prevent a merger or
acquisition at a premium price. These provisions include:
- authorizing the issuance of "blank check" preferred stock;
- providing for a classified Board of Directors with staggered, three-year
terms and limiting the removal of directors by the stockholders to removal
for cause;
- eliminating the ability of stockholders to act by written consent in lieu
of a stockholder meeting or to call a special meeting of stockholders;
13
<PAGE>
- requiring a super-majority stockholder vote to effect certain amendments;
and
- requiring advance notice of stockholder proposals and stockholder
nominations of directors.
In addition, certain provisions of the Delaware General Corporation Law may
deter someone from acquiring or merging with us, including a transaction that
results in stockholders receiving a premium over the market price for the shares
of common stock held by them. Section 203 of the Delaware General Corporation
Law also imposes certain restrictions on mergers and other business combinations
between us and any holder of more than 15% and less than 85% of our common
stock. See "Description of Capital Stock -- Possible Anti-Takeover Matters."
THE PRICE OF OUR COMMON STOCK MAY DECLINE DUE TO SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of common stock in the public market following
this offering, or the appearance that a large number of shares is available for
sale, could adversely affect the market price for the common stock. The number
of shares of common stock available for sale in the public market will be
limited by lock-up agreements under which the holders of substantially all of
our outstanding shares of common stock and options and warrants to purchase
common stock will agree not to sell or otherwise dispose of any of their shares
for a period of 180 days after the date of this prospectus without the prior
written consent of Merrill Lynch & Co. However, Merrill Lynch & Co. may, in its
sole discretion and at any time without notice, release all or any portion of
the securities subject to lock-up agreements. In addition to the adverse effect
a price decline could have on holders of common stock, that decline would likely
impede our ability to raise capital through the issuance of additional shares of
common stock or other equity securities. See "Description of Capital Stock --
Registration Rights" and "Shares Eligible for Future Sale."
YOU WILL INCUR IMMEDIATE AND SUBSTANTIAL DILUTION OF APPROXIMATELY $ PER
SHARE
The initial public offering price is substantially higher than the net
tangible book value per share of the outstanding common stock immediately after
this offering. Accordingly, if you purchase common stock in this offering, you
will incur immediate and substantial dilution of $ in the net tangible book
value per share of the common stock from the price you pay for the common stock
in this offering.
MANAGEMENT HAS BROAD DISCRETION TO USE THE PROCEEDS FROM THIS OFFERING
Our management will have broad discretion over the use of proceeds we raise
in this offering, and you must rely on the judgment of management in the
application of our net offering proceeds. See "Use of Proceeds."
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<PAGE>
USE OF PROCEEDS
We estimate that our net proceeds from the sale of the shares of
common stock in this offering will be approximately $ million, or
approximately $ million if the underwriters' over-allotment options are
exercised in full, based upon an assumed initial public offering of $ per
share, after deducting underwriting discounts and commissions and estimated
expenses payable by us.
We expect to use our net proceeds from this offering to fund capital
expenditures and operating losses related to expansion of our network, the
hiring of additional sales, marketing and other personnel, for working capital
and other general corporate purposes.
In particular, we expect to make capital expenditures of approximately
$30 million during 1999 for equipment purchases and expansion of our network,
plus an additional $165 to $175 million in 2000. We expect to require additional
financing to fund our capital expenditures and operating losses in the future.
The amounts we actually expend in such areas may vary significantly and will
depend on a number of factors, including our future revenues. Accordingly,
management will retain broad discretion in the use of the net proceeds of this
offering. You will not have the opportunity to evaluate the economic, financial
or other information on which we base our decisions on how to use the proceeds.
Pending such uses, the net proceeds of this offering will be invested in short
term, interest bearing, investment grade securities.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock. We
currently intend to retain any future earnings to finance the growth and
development of our business and therefore do not anticipate paying any cash
dividends in the foreseeable future. Any future determination to pay cash
dividends will be at the discretion of our board of directors and will depend
upon our financial condition, operating results, capital requirements, covenants
in our debt instruments and such other factors as the board of directors deems
relevant.
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<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of September 30, 1999:
- on an actual basis; and
- on a pro forma basis to reflect the issuance, for no consideration, of
984,666 additional shares of Series C preferred stock to existing holders
of Series C preferred stock to effect an adjustment to the per share
purchase price of the Series C preferred stock previously issued; and
- on a pro forma and as adjusted basis to reflect the automatic conversion
of all of the outstanding shares of our preferred stock and the assumed
cash exercise of warrants to purchase 25,000 shares of common stock upon
the closing of this offering and the receipt of the estimated net proceeds
from the sale of common stock in this offering, after deducting estimated
underwriting discounts and estimated offering expenses payable by us.
You should read this table in conjunction with our consolidated financial
statements and the related notes and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1999
(UNAUDITED)
-----------------------------------------
PRO FORMA
ACTUAL(1) PRO FORMA AS ADJUSTED
----------- --------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents.................................................. $ 29,517 $ 29,517 $
========= ========= =========
DEBT:
Long-term debt............................................................. $ 9,449 $ 9,449
STOCKHOLDERS' EQUITY:
Series A preferred stock, $.01 par value, 1,751,985 shares authorized
actual and pro forma and no shares authorized pro forma as adjusted;
1,751,985 shares issued and outstanding actual and pro forma and no
shares issued and outstanding pro forma as adjusted...................... 1,301 1,301
Series B preferred stock, $.01 par value, 13,615,322 shares authorized
actual and pro forma and no shares authorized pro forma as adjusted;
13,615,322 shares issued and outstanding actual and pro forma and no
shares issued and outstanding pro forma as adjusted...................... 20,174 20,174
Series C preferred stock, $.01 par value; 5,714,285 shares authorized
actual, 8,550,000 shares authorized pro forma and no shares authorized
pro forma as adjusted; 3,938,714 shares issued and outstanding actual,
4,923,380 pro forma and no shares issued and outstanding pro forma as
adjusted................................................................. 27,560 27,560
Common stock, $.01 par value, 80,000,000 shares authorized actual and pro
forma and pro forma as adjusted; 6,792,814 shares issued and outstanding
actual and pro forma and shares issued and outstanding pro forma as
adjusted................................................................. 68 68
Additional paid-in capital................................................. 6,559 6,559
Note receivable from TCI Satellite Entertainment, Inc.(2).................. (3,000) (3,000)
Deferred compensation...................................................... (5,905) (5,905)
Deficit accumulated during development stage............................... (7,100) (7,100)
--------- --------- ---------
Total stockholders' equity............................................... 39,657 39,657
--------- --------- ---------
Total capitalization................................................... $ 49,106 $ 49,106 $
========= ========= =========
</TABLE>
- ------------------------------
(1) The number of shares of common stock in this table excludes:
- 25,000 shares of common stock subject to issuance upon exercise of
warrants outstanding as of September 30, 1999, all of which will expire if
not exercised prior to the closing of this offering;
- 2,809,750 shares of common stock issuable upon exercise of options
outstanding under our 1998 equity incentive plan as of September 30, 1999.
(2) The note receivable from TCI Satellite Entertainment, Inc. was repaid at
maturity in November 1999.
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DILUTION
Our pro forma net tangible book value as of September 30, 1999 was $
per share. Pro forma net tangible book value represents the amount of total
tangible assets less total liabilities, divided by the number of shares of
common stock outstanding after giving effect to the issuance of the Series C
preferred stock, including the issuance, for no consideration, of 984,666
additional shares of Series C preferred stock to existing holders of Series C
preferred stock to effect an adjustment of the per share purchase price of the
Series C preferred stock previously issued, and the conversion of all
outstanding shares of preferred stock into common stock and the issuance of
25,000 shares of common stock upon the assumed cash exercise of outstanding
warrants upon the closing of this offering. Without taking into account any
other changes in the net tangible book value after September 30, 1999, other
than to give effect to our receipt of the net proceeds from the sale of the
shares of common stock in this offering at an assumed initial public
offering price of $ per share, our pro forma net tangible book value as of
September 30, 1999 would have been approximately $ or $ per share.
This represents an immediate increase in net tangible book value of $ per
share to existing stockholders and an immediate dilution of $ per share to
new investors. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share........... $
Pro forma net tangible book value per share at September
30, 1999..............................................
Increase per share attributable to new investors........
---------
Pro forma net tangible book value per share after this
offering
---------
Dilution per share to new investors(1).................... $
=========
</TABLE>
- ------------------------
(1) If the underwriters' over-allotment option is exercised in full, dilution
per share to new investors would be $ .
The following table summarizes, on a pro forma basis as of September 30,
1999, the differences between existing stockholders and the new investors with
respect to:
- the number of shares of common stock purchased from us, after giving
effect to the issuance, for no consideration, of 984,666 additional shares
of Series C preferred stock to existing holders of Series C preferred
stock to effect an adjustment of the per share purchase price of the
Series C preferred stock previously issued and assuming conversion of all
outstanding shares of preferred stock into common stock and the issuance
of 25,000 shares of common stock upon the assumed cash exercise of
outstanding warrants upon the closing of this offering;
- the total consideration paid to us; and
- the average price per share existing stockholders and new investors pay
when they buy common stock in this offering before deduction of estimated
underwriting discounts and offering expenses.
17
<PAGE>
The calculation in this table with respect to shares to be purchased by new
investors in this offering reflect an assumed initial public offering price of
$ per share.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------ ----------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.................................. % $ % $
New investors.......................................... $
------------ --------- --------- ---------
Total................................................ 100.0% $ 100.0%
============ ========= ========= =========
</TABLE>
The foregoing discussion and tables exclude all common stock issuances after
September 30, 1999 and assume no exercise of the underwriters' over-allotment
option or of any outstanding stock options or warrants after September 30, 1999.
As of September 30, 1999, there were outstanding options to purchase an
aggregate of 2,809,750 shares of common stock at a weighted average exercise
price of $2.27 per share. There will be further dilution to new investors to the
extent any of these options are exercised.
18
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data for the period from
June 12, 1998 (date of inception) to December 31, 1998 have been derived from
our audited financial statements and notes. The selected consolidated financial
data as of and for the nine months ended September 30, 1999 and for the period
from June 12, 1998 (date of inception) to September 30, 1999 have been derived
from our unaudited financial statements. Both the audited and the unaudited
consolidated financial statements are included elsewhere in this prospectus. The
unaudited consolidated financial statements include, in our management's
opinion, all adjustments (consisting only of normal recurring adjustments)
necessary to fairly present the data for such interim periods. Our results of
operations for the nine month period ended September 30, 1999 are not
necessarily indicative of results that may be expected for the entire year. You
should read the following data together with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our consolidated
financial statements and the related notes included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
INCEPTION TO NINE MONTHS
DECEMBER 31, ENDED SEPTEMBER 30, INCEPTION TO
1998 1999 SEPTEMBER 30, 1999
------------ ------------------- ------------------
<S> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................................................. $ -- $ 44 $ 44
Operating Expenses:
Network and product costs.............................................. -- 246 246
Marketing expenses..................................................... -- 1,352 1,352
Selling, general and administrative.................................... 404 5,061 5,465
Amortization of deferred compensation.................................. -- 250 250
Depreciation and amortization.......................................... 1 139 140
---------- --------- ----------
Operating loss........................................................... (405) (7,004) (7,409)
Interest income.......................................................... 9 300 309
---------- --------- ----------
Net loss................................................................. $ (396) $ (6,704) $ (7,100)
========== ========= ==========
Net loss per common share (basic and diluted)............................ $ (0.07) $ (1.06) $ (1.15)
Shares used in computing net loss per share.............................. 6,000 6,313 6,192
Unaudited pro forma net loss per common share (basic and diluted)(1)..... $ (0.06) $ (0.47) $ (0.62)
Shares used in computing pro forma net loss per share.................... 6,770 14,366 11,420
OTHER FINANCIAL DATA:
EBITDA(2)................................................................ $ (404) $ (6,615) $ (7,019)
Capital expenditures..................................................... 58 10,735 10,793
Cash flows from operating activities..................................... (123) (3,808) (3,931)
Cash flows from investing activities..................................... (85) (11,448) (11,533)
Cash flows from financing activities..................................... 1,478 43,503 44,981
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1999
(UNAUDITED)
-------------------------------------
<S> <C> <C> <C>
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
----------- ----------- -----------
(IN THOUSANDS)
BALANCE SHEET DATA(3):
Cash and cash equivalents................................................................. $ 29,517 $ 29,517
Property and equipment, net............................................................... 20,302 20,302
Total assets.............................................................................. 52,267 52,267
Total liabilities......................................................................... 12,610 12,610
Deferred compensation..................................................................... 5,905 5,905
Total stockholders' equity................................................................ 39,657 39,657
</TABLE>
- ------------------------------
(1) Unaudited pro forma net loss per share gives effect to the automatic
conversion of the preferred stock into common stock and the issuance of
25,000 shares of common stock upon the cash exercise of outstanding
warrants, which will occur upon the closing of this offering.
(2) EBITDA consists of the net loss excluding net interest, depreciation and
amortization of capital assets and deferred compensation expense. EBITDA is
presented to enhance an understanding of our operating results and is not
intended to represent cash flow or results of operations in accordance with
generally accepted accounting principles for the period indicated and may be
calculated differently than EBITDA for other companies.
(3) The balance sheet data is unaudited. The pro forma balance sheet information
reflects the issuance of an additional 984,666 shares of Series C preferred
stock, for no consideration, to existing holders of Series C preferred stock
to effect an adjustment to the per share purchase price for Series C
preferred stock previously issued. In addition, the pro forma as adjusted
balance sheet information reflects the automatic conversion of the preferred
stock, the assumed cash exercise of warrants to purchase 25,000 shares of
common stock upon the closing of this offering and the receipt of the
estimated net proceeds from the sale of common stock in this offering, after
deducting estimated underwriting discounts and estimated offering expenses
payable by us.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results
of operations should be read in conjunction with "Selected Consolidated
Financial Data" and our consolidated financial statements and related notes
included elsewhere in this prospectus. In the discussion below, we refer to the
period from June 12, 1998 (date of inception) to December 31, 1998 as "1998."
OVERVIEW
We provide broadband applications and data-centric services to small- and
medium-sized businesses in secondary markets. We initiated our service in June
1999. As of November 30, 1999, we provided services in three markets and had
collocated our equipment in six additional markets. We intend to expand our
services into a total of 50 markets nationwide, comprised of 145 cities, by the
end of 2000.
Since inception on June 12, 1998, our principal activities have included:
- obtaining required state and federal governmental authorizations;
- negotiating and entering into interconnection agreements with incumbent
carriers;
- acquiring collocation space and deploying our network equipment;
- identifying, pursuing and negotiating agreements with potential strategic
partners;
- developing criteria for market selection and analyzing potential markets
against these criteria;
- refining our customer targeting parameters;
- launching service in target markets;
- selling and marketing our applications and services;
- hiring management and other personnel;
- raising capital; and
- developing and implementing our operations support system and other back
office systems.
We have incurred operating losses, net losses and negative earnings before
interest, taxes, depreciation and amortization, or EBITDA, during each month
since June 12, 1998. As of December 31, 1998 and September 30, 1999, we had an
accumulated deficit of $396,000 and $7.1 million, respectively. We intend to
substantially increase our capital expenditures and will incur materially higher
operating expenses in an effort to rapidly deploy our network and introduce our
applications and services. We expect to incur substantial operating losses, net
losses and negative EBITDA as we expand our operations.
We incur significant network and operations expenses, sales and marketing
expenses and capital expenditures when we enter a new market. Once we have
deployed our network in a market, the majority of our additional expenditures
depend on orders to connect new end users. These additional expenditures
primarily include DSL line cards, incremental digital subscriber line access
multiplexers, or DSLAMs, and customer premise equipment, or CPE. In addition to
the capital expenditures required to enter a market, we will be required to fund
each market's cash flow deficit as we build our customer base.
As a result of recent stock and option grants, we anticipate that there will
be significant charges to earnings in future periods. As of September 30, 1999,
Jato had recorded $5.9 million of unamortized deferred compensation. Such amount
will be charged to earnings over the next several years.
20
<PAGE>
FACTORS AFFECTING FUTURE OPERATIONS
REVENUES. Initially, we expect to derive a majority of our revenues from
broadband connectivity and communications services. Currently, we offer our
services through our ISP and value added reseller customers directly to the end
user. We bill these customers in advance for monthly recurring charges based on
the data transfer speeds selected by the end user. We currently offer flat rate
plans at wholesale prices for our high-speed access and connectivity services.
We expect to offer our services directly to end users at retail prices in the
future. These monthly fees will include charges for high-speed access and
connectivity, Internet access and value-added applications and services we
provide. In addition to monthly service fees, end users are billed for
nonrecurring service activation, CPE and installation charges. To encourage
potential customers to adopt our services, we may offer reduced monthly prices
for an initial period of time or reduced service activation, CPE, or
installation charges. We expect that, as a result of competition, prices for our
services will decline over time.
As our business develops and we begin to offer additional value-added
applications and services, we expect to become less dependent on access and
broadband connectivity revenues. By providing network-enabled applications, we
expect to enhance our overall gross margins by adding additional revenues
without incurring incremental fixed costs. We also believe that these additional
services will enable us to build customer loyalty and effectively minimize
customer turnover, or "churn."
We seek to price our services competitively in relation to those of the
incumbent carriers and other competitive carriers in each market. Current
standard line prices that we charge to our wholesale customers for our services
generally range from $70 per month for 144 Kbps service to $195 per month for
1.5 Mbps service before any discounts. During the past several years, market
prices for many telecommunications services have been declining. Therefore, we
anticipate prices for our services to decrease each year. As prices decline for
any given speed of service, we expect that the total number of end users and the
proportion of our end users purchasing our higher-speed, higher-priced services
will increase. Our incremental cost to upgrade an end user's speed is generally
minimal.
Our future financial performance and our ability to achieve positive
operating cash flow, if ever, will depend on a number of factors, some of which
we cannot control. We believe that improvements in our financial performance
depend largely on our ability to:
- rapidly and cost-effectively deploy our network, including collocating our
equipment in numerous central office facilities;
- provide high quality services at competitive prices;
- offer additional value-added applications;
- acquire customers in a cost-effective manner through direct and indirect
sales channels;
- attract qualified personnel, particularly in sales and marketing;
- minimize customer turnover;
- retain installation and wiring contractors to install equipment and wiring
at customer premises on a timely and cost-effective basis;
- cost-effectively manage increased selling, marketing, general and
administrative expenses; and
- indentify and integrate the necessary administrative and operations
support systems to effectively manage our growth.
NETWORK AND PRODUCT COSTS. Our network expenses consist of nonrecurring and
monthly recurring charges for the transport elements we choose to lease rather
than own. We expect that these costs will increase significantly in the future.
Nonrecurring network expenses include installation fees related to transport and
local loop circuits. We expect these costs will be largely related to the
activation of new
21
<PAGE>
central offices and new end users. Monthly recurring network expenses include
transport fees, facility rent, power, license fees for value-added applications
and other fees charged by incumbent carriers, competitive carriers and other
providers. Additionally, we pay monthly network maintenance and monitoring fees
to Lucent. As our end user base grows, we expect the largest element of network
expenses to be incumbent carrier charges for leased copper lines, which are
typically approximately $20 per line per month, depending on the identity of the
incumbent carrier and the location of the lines.
MARKETING EXPENSES. Our marketing expenses consist primarily of expenses
related to the development of our brand name, promotional materials and
advertising. We expect that our marketing expenses will grow significantly as we
enter new markets and offer our services on a nationwide basis.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Our general and
administrative expenses consist primarily of costs related to personnel,
customer service, finance, administrative services, recruiting and legal
services. We expect that our selling and marketing costs will grow significantly
as we expand our operations. However, we expect these expenses to decline as a
percentage of our revenue as we build our customer base and the number of end
users connected to our network increases.
To attract and retain a highly qualified sales force, we plan to offer our
sales personnel a compensation package consisting of a base salary plus
commissions and stock options. We currently incent our sales personnel with
commissions based on the number of lines sold. Previously earned commissions are
reduced as a result of customer turnover.
AMORTIZATION OF DEFERRED COMPENSATION. Deferred compensation arose as a
result of granting stock awards to employees with purchase or exercise prices
per share subsequently determined to be below the fair values per share for
financial reporting purposes of our common stock at the purchase or grant dates.
The deferred compensation is being amortized over the applicable vesting period
(generally 4 years).
DEPRECIATION AND AMORTIZATION EXPENSES. Depreciation and amortization
expenses include:
- depreciation of network equipment;
- depreciation of furniture, fixtures, computers and equipment; and
- amortization of collocation costs.
We expect depreciation and amortization expense to increase significantly as
more of our network becomes operational and as we increase capital expenditures
to expand our operations. Depreciation is computed on a straight-line basis over
estimated useful lives ranging from three to seven years.
INTEREST EXPENSE. We expect interest expense to increase substantially as
we borrow funds under our credit facility with Lucent.
TAXATION. We have not generated any taxable income to date and therefore
have not paid any federal income taxes since inception. We expect to generate
significant operating loss carryforwards. Use of our net operating loss
carryforwards may be subject to limitations under Section 382 of the Internal
Revenue Code of 1986, as amended. We have recorded a full valuation allowance on
our deferred tax asset, consisting primarily of net operating loss
carryforwards, because of uncertainty regarding its recoverability.
RESULTS OF OPERATIONS
REVENUES. We first introduced services in June 1999 and recognized $44,000
of revenue for the nine months ended September 30, 1999. As of September 30,
1999, we had 88 installed DSL lines. Average recurring revenue per installed
line for the period approximated $80 per month. As of September 30, 1999, we had
over 550 lines sold that were pending installation. We expect revenues to
22
<PAGE>
increase rapidly as our installed subscriber base increases. Initially, we will
derive a majority of our revenue from DSL access and connectivity services. In
the future, we expect to supplement our transport revenues by providing
value-added applications and services to our customers.
NETWORK AND PRODUCT COSTS. We did not incur any network and product costs
during 1998. For the nine months ended September 30, 1999, network and product
costs totaled $246,000.
MARKETING EXPENSES. Marketing expenses totaled $1.4 million for the nine
months ended September 30, 1999 and principally related to launch of our service
in the Denver, Colorado market.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses in 1998 and for the nine months ended September 30, 1999
were approximately $404,000 and $5.1 million, respectively. This increase was
primarily due to increases in our personnel.
AMORTIZATION OF DEFERRED COMPENSATION. No amortization of deferred
compensation was recognized in 1998. For the nine months ended September 30,
1999, amortization of deferred compensation was $250,000. The unamortized
balance of $5.9 million at September 30, 1999 will be amortized over the vesting
period of each grant, which is generally four years.
DEPRECIATION AND AMORTIZATION EXPENSES. Depreciation and amortization
expenses in 1998 and for the nine months ended September 30, 1999 were
approximately $1,000 and $139,000, respectively.
INTEREST EXPENSE (INCOME). Net interest income for 1998 and for the nine
months ended September 30, 1999 was approximately $9,000 and $300,000
respectively, and was primarily related to interest earned on invested balances.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1999, we had an accumulated deficit of approximately
$7.1 million and cash and cash equivalents of approximately $29.5 million.
During 1998 and for the nine months ended September 30, 1999, the net cash used
in our operating activities was approximately $123,000 and $3.8 million,
respectively. This cash was used for a variety of operating purposes, including
personnel costs, consulting and legal expenses, network operations and other
administrative expenses. The net cash used in investing activities during 1998
and for the nine months ended September 30, 1999 was approximately $85,000 and
$11.4 million, respectively, and was used primarily for the payment of
collocation costs and the purchase of networking and other equipment. Net cash
provided by financing activities in 1998 and for the nine months ended
September 30, 1999 was approximately $1.5 million and $43.5 million,
respectively, and primarily resulted from the sale of common and preferred
stock.
The development and expansion of our business will require significant
capital expenditures. The principal capital expenditures incurred to enter each
market include the procurement, design and construction of collocation space,
and the purchase and installation of all necessary telecommunications equipment.
The number of central offices that we expect to target in a market will
vary, as will the average capital cost in a given market. Capital expenditures,
exclusive of $9.4 million funded by the Lucent credit facility, including
collocation fees, were approximately $58,000 and $10.7 million in 1998 and for
the nine months ended September 30, 1999, respectively. We expect to make
capital expenditures of approximately $30 million during 1999, plus an
additional $165 to $175 million in 2000.
Since inception, we have raised $49 million in equity from a group of
investors that includes ABN-AMRO, CEA Capital, Crest Communications,
Hambrecht & Quist, Mayfield Fund and TCI Satellite Entertainment.
In July 1999, Jato Operating Corp., a wholly-owned subsidiary, entered into
a senior secured credit facility with Lucent that provides up to $50 million of
vendor financing for equipment and network
23
<PAGE>
services provided by Lucent and certain other third party vendor equipment
utilized in Jato's DSLAM and switching center. The facility is fully and
unconditionally guaranteed by Jato, and each direct or indirect subsidiary of
Jato Operating Corp. Borrowings under the facility are available in two separate
tranches. The first tranche of $30 million is available through July 2001. The
second tranche of $20 million becomes available upon the full utilization or
expiration of the first tranche and must be utilized by July 2002. Borrowings
under the senior secured credit facility are restricted based upon the company's
leverage ratio and capitalization. Commencing September 30, 2002, principal
repayment installments are required in accordance with a schedule, until final
maturity on May 31, 2006. Borrowings under the facility bear interest at the
rate of LIBOR plus 4.5% per year or an alternative base rate, which is generally
equal to the greater of 3.5% over the prime rate or 4% over the federal funds
rate per year. The facility is secured by liens against certain network
equipment and imposes certain financial and other covenants. As of
September 30, 1999, we had drawn down $9.4 million under the Lucent credit
facility at an interest rate of 10%.
We believe that the net proceeds from this offering, together with our
existing cash balances, amounts available under our credit facility, will be
sufficient to fund our operating losses, capital expenditures, lease payments
and working capital requirements until September 2000. We expect our operating
losses and capital expenditures to increase substantially as we expand our
network. We expect that additional financing will be required in the future. We
may attempt to finance our future capital needs through some combination of
commercial bank borrowings, leasing, vendor financing and the sale of additional
equity or debt securities.
Our capital requirements will vary based upon the timing and the success of
implementation of our business plan and as a result of regulatory, technological
and competitive developments or if:
- demand for our services or our cash flow from operations varies from
projections;
- our development plans or projections change or prove to be inaccurate;
- we make any acquisitions; or
- we accelerate deployment of our network or otherwise alter the schedule or
targets of our business plan implementation.
We will be required to raise additional capital to complete our network
deployment. There can be no assurance that additional capital will be available
on terms acceptable to us, or at all. While we would be able to sustain some
level of operations throughout all of 2000 absent additional capital, including
the proceeds from this offering, we would be required to significantly scale
back our operations and delay the expansion of our network. This would have a
material adverse effect on our business, financial condition and results of
operations.
As of September 30, 1999, we had not entered into any financial instruments
that expose us to material market risk.
YEAR 2000 READINESS DISCLOSURE. Many currently installed computer systems
and software products are coded to accept only two-digit entries in the date
code field. In order to distinguish 21st century dates from 20th century dates,
the date code field needs to be expanded to 4 digits. As a result, many
companies' software and computer systems may need to be upgraded or replaced in
order to comply with these Year 2000 requirements. The use of software and
computer systems that are not Year 2000 compliant could result in system
failures or miscalculations resulting in disruptions of operations, including
among other things, a temporary inability to process transactions, send
invoices, or engage in normal business activities.
Since we have been recently organized, we have been able to build our
internal business systems with Year 2000 compliance in mind. In the future, we
will seek assurance from vendors that new business systems that we purchase will
be Year 2000 compliant. We have not reviewed our non-information technology
systems for year 2000 issues relating to embedded microprocessors.
24
<PAGE>
Our current service offerings are not date sensitive and do not rely on, and
do not need to process, date-related information in order to function as
designed, either prior to and after the year 2000.
Based on the foregoing, we have no reason to believe that our current
service offerings and our business systems will not be Year 2000 compliant.
Failure of our business systems or current service offerings to operate properly
with regard to the Year 2000 and thereafter could require us to incur
significant unanticipated expenses to remedy any problems or replace affected
vendors and could have a material adverse effect on our business, operating
results and financial condition.
We can provide no assurance that the traditional local telephone companies
and other vendors will be Year 2000 compliant or that Year 2000 problems among
our target customers will not negatively impact their decision to buy our
service. We have received assurances from US West that their core operational
support systems and networks are Year 2000 compliant. However, any Year 2000
related disruption of operations of the traditional local telephone companies or
other providers would likely have a material adverse impact on our business,
operation results, and financial condition. Furthermore, Year 2000 issues may
affect the purchasing decisions of our customers as companies expend significant
resources to correct their current systems for Year 2000 compliance.
To date, we have not incurred significant costs in order to comply with Year
2000 requirements and we do not believe we will incur significant costs in the
foreseeable future. We have determined the risks associated with a reasonably
likely worst-case scenario and have formulated a contingency plan to address
these risks.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use," which provides guidance that requires
capitalization of certain costs incurred during an internal-use software
development project. SOP 98-1 is effective for fiscal years beginning after
December 15, 1998. The adoption of this policy has not had a material effect on
our results of operations.
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-Up Activities," which provides guidance on the financial reporting of
start-up costs and organizational costs. It requires costs of start-up
activities and organizational costs to be expensed as incurred. SOP 98-5 is
effective for fiscal years beginning after December 15, 1998. We have not
capitalized any such costs to date. Accordingly, the adoption of SOP 98-5 has
not had an impact on our financial statements.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This statement
establishes accounting and reporting standards for derivatives and hedging
activities. Among other things, this statement requires that an entity recognize
all derivative instruments on the balance sheet as either assets or liabilities,
and to account for those instruments at fair value. The Company does not believe
adoption of SFAS No. 133 will have a material impact on its financial position
or results of operations.
In December 1999, the Securities and Exchange Commission staff released
Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition." SAB 101 provides
interpretive guidance on the recognition, presentation and disclosure of revenue
in financial statements. SAB 101 must be applied to financial statements no
later than the first fiscal quarter of 2000. The Company is currently evaluating
the impact, if any, to its current accounting policies and results of
operations. The Company does not believe application of SAB 101 will have a
material impact on its financial position or results of operations.
25
<PAGE>
BUSINESS
OVERVIEW
We provide broadband network connectivity and associated applications and
services to small- and medium-sized businesses in secondary markets. We are
developing a secure nationwide network that will allow us to tailor our
broadband solutions to meet the needs of our business customers. We offer
high-speed Internet access together with a suite of value added applications
including web hosting, e-mail and e-commerce services under the brand name
JatoDirect Solutions. Digital subscriber line, or DSL technology, which utilizes
standard copper telephone lines, is our primary high-speed connection platform.
In order to maximize our network footprint, we intend to use a variety of
broadband local access technologies in our target markets.
We intend to exploit our advantage as an early entrant in secondary markets
to become a leading provider of network enabled applications and services. We
plan to rapidly deploy our network nationwide in markets that we believe are
presently underserved. In order to establish a direct customer relationship, we
market our applications and services primarily through direct sales channels
including account managers, telesales personnel and specialized account groups.
In addition, we supplement our direct sales efforts through strategic
partnerships with ISPs and value added resellers. We believe our tailored
solutions and direct sales approach, combined with our broadband network
platform will allow us to attract and retain high value data-centric customers.
We began offering commercial services in June 1999 and, as of November 30,
1999, we provided our services in three markets and had collocated our equipment
in six additional markets. We intend to offer our services in a total of 50
markets nationwide, comprised of 145 cities, by the end of 2000. As of
November 30, 1999, we had collocated our network equipment in over 130 incumbent
carrier central offices and expect to be in approximately 875 central office
locations by the end of 2000. We have obtained competitive carrier certification
in 43 states and expect to have competitive carrier certification in all 48
contiguous states by the end of the first quarter 2000. To date, we have signed
interconnection agreements with Ameritech, BellSouth, Pacific Bell, Southwestern
Bell and U S WEST, and expect to execute interconnection agreements covering
substantially all of our target markets by the end of the first quarter 2000.
We have entered into a strategic alliance with Lucent Technologies to
install, integrate, monitor and maintain our nationwide network. Lucent will
also provide $50 million in vendor financing for our network related
expenditures as well as financial support to market co-branded products and
services. We believe this strategic alliance will allow us to rapidly deploy our
network and introduce our applications and services on a national scale.
Our senior management team has extensive experience in broadband
communications, next generation data technology and business and consumer
marketing. Our President and CEO, Jerry Dinsmore, was previously a senior
executive with GTE serving as president of GTE's Business Development and
Integration Group. Mr. Dinsmore has over 23 years of experience in data
networking and telecommunications. Bill Myers, our CFO, has held several senior
executive positions with Tele-Communications, Inc., most recently as Vice
President and Treasurer of TCI Satellite Entertainment/ PrimeStar. To date, in
addition to the $50 million provided by Lucent, we have raised $49 million in
equity from a group of investors that includes the following entities or their
affiliates: ABN-AMRO, CEA Capital, Crest Communications, Hambrecht & Quist,
Mayfield Fund and TCI Satellite Entertainment.
26
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MARKET OPPORTUNITY
We believe that we have a significant business opportunity as a result of
the following factors:
SIGNIFICANT AND GROWING DEMAND FOR HIGH-SPEED CONNECTIVITY AMONG SMALL- AND
MEDIUM-SIZED BUSINESSES
Our target customers, which include small- and medium-sized businesses,
professionals working in home offices and telecommuters, are increasingly
demanding high-speed data networking applications and services to remain
competitive. These end users are becoming dependent on high-speed connectivity
to communicate more efficiently with employees, customers and suppliers to
facilitate e-commerce transactions and to access critical information and
business applications. Industry commentators project that the total market for
business Internet access and data networking services will grow from
$3.7 billion in 1998 to approximately $40.3 billion by 2002, which represents a
compounded annual growth rate of 81.7%.
OUR TARGET SECONDARY MARKETS ARE ATTRACTIVE, GROWING AND UNDERSERVED
The rate of business formation in our target markets is among the fastest
growing in the U.S. From 1994 through 1998, the number of businesses within our
target markets increased by an average of 8.2% compared to only 5.5% for markets
outside of our target service area. Our secondary markets, in the aggregate,
encompass approximately 2.8 million businesses and approximately 28 million
households. Industry studies have estimated that approximately 98% of all
businesses in our target markets are small- to medium-sized businesses with
fewer than 100 employees. We believe other broadband communication providers are
focusing their deployment efforts on larger markets, leaving secondary markets
with limited broadband communications alternatives. With less competition, we
believe that marketing and administrative expenses in these secondary markets
will be lower than those in larger primary markets. As a result, we believe
these current conditions provide a significant opportunity to effectively market
our bundled suite of applications and services.
THE GROWTH OF OUTSOURCED DATA NETWORKING SYSTEMS
We believe many small- and medium-sized businesses lack the resources to
properly administer increasingly complex data networking systems. Outsourced
solutions allow these businesses to reduce costs and to focus resources on their
core business activities. Industry sources estimate that spending in the U.S. on
distributed networking, network services and applications will grow from
$54.2 billion in 1998 to $173 billion in 2002.
LIMITATIONS OF EXISTING COMMUNICATIONS ALTERNATIVES
Traditionally, small- and medium-sized businesses have been forced to choose
between low-speed or high cost alternatives for Internet access and data
transport services. According to industry analysts, through 1998, dial-up
connections and integrated services digital network, or ISDN, lines represented
93% of all U.S. business Internet access methods, as measured as a percentage of
total circuits. Market research reports estimate that slow Internet connections
now jeopardize approximately $4.4 billion a year in online sales. For higher
speed transport, these businesses have had to purchase T1 connections, which
provide an "always-on" high-speed digital transmission link, but are relatively
expensive (typically up to $800 per month depending upon distance and region)
and complex to order, install and maintain. As a result, neither of the
traditional low-speed alternatives (dial-up modems or ISDN lines) nor the
relatively expensive T1 services provides small- and medium-sized businesses
with an adequate or cost-effective solution for their high-speed communications
needs.
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FAVORABLE REGULATORY ENVIRONMENT CREATED BY THE TELECOMMUNICATIONS ACT OF
1996
The Telecommunications Act of 1996 established a legal framework that
encourages the utilization of incumbent carrier infrastructure to compete with
the incumbent local exchange carriers. The 1996 Telecommunications Act mandates
that incumbent local exchange carriers: (i) allow competitive carriers to lease
telephone lines on a line-by-line basis, (ii) provide space in the incumbent
carriers' central offices for competitive carriers' equipment to connect to the
leased lines; (iii) provide access to backbone fiber networks; and (iv) provide
access to operations support systems to permit competitive carriers to access
customer databases. Under the 1996 Telecommunications Act, in order to be able
to offer long distance services in their local service area, incumbent carriers
must demonstrate to the satisfaction of state public utilities commissions that
they have permitted competitive access to their local telephone networks.
Although DSL technology predated the 1996 Telecommunications Act, by opening the
local telephone loop to competition, the 1996 Telecommunications Act made it
possible for competitive carriers focused on high-speed data communications to
integrate their equipment and service offering with the public switched
telephone network.
OUR SOLUTION
We believe our JatoDirect Solutions effectively address many of the
unsatisfied data communications needs of small- and medium-sized businesses in
secondary markets by offering an attractive combination of service, quality,
performance and price. Our solution, which we believe will enable us to achieve
higher penetration in our target markets, achieve higher revenue per customer
and maximize customer retention, consists of:
HIGH-SPEED, COST-EFFECTIVE CONNECTIVITY
We offer our customers high-speed broadband connectivity that is dedicated
and "always-on." These "always on" connections provide customers with the
ability to readily and continuously access the Internet instead of having to
dial into a network for access. We currently utilize a broadband platform that
is DSL based, yet designed to integrate a variety of high-speed local access
technologies. Through our SDSL services we currently offer symmetrical
transmission speeds to and from the end user up to 1.5 Mbps and we have the
capability to provide symmetrical transmission speeds up to 3 Mbps using
standard multiplexing technology. In addition, we expect that evolving
technologies will facilitate even faster transmission speeds. For customers that
subscribe to our 1.5 Mbps service, the transfer rate is over 25 times faster
than a 56.6 Kbps dial-up modem, at a fraction of the cost of a dedicated T1
connection.
BROADBAND APPLICATIONS AND SERVICES
We offer a full range of value-added applications and services that are
tailored to meet the needs of small- and medium-sized businesses. In addition to
providing broadband transport, we offer a suite of network-enabled applications
and services, including WAN and RLAN networking, high-speed Internet access,
e-mail and Web hosting and authoring services. We also intend to continually
upgrade our portfolio of applications and services as additional applications
and features become available so that we may continue to effectively meet our
customers' growing communication needs.
FOCUS ON THE END USER
We provide our customers with a single point of contact for their
sophisticated data networking and communications needs. Through our
relationships with application developers, we are able to offer our customers a
wide selection of applications and services. In addition, our customer care and
support services form an integral part of our overall package of services. We
believe customer care is especially important to small- and medium-sized
businesses because they typically do not have dedicated internal
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support staffs to effectively manage their sophisticated data networking needs.
Through our dedicated customer service group, we provide call center and
Internet based customer care services 24 hours a day, seven days a week.
NATIONWIDE SECURE NETWORK
Our nationwide broadband network enables businesses with multiple sites to
connect their distributed business activities to one central computing location.
We also enable remote local area networks, or RLANs, that tie into corporate
LANs, to service the requirements of the remote telecommuter. Our WANs provide
customers with high-speed, secure and reliable end-to-end connections. Through
our strategic relationships, we will be able to provide our customers with VPN
and other broadband services across multiple cities through a nationwide
network.
FLEXIBILITY AND SCALABILITY
We have designed our network and service offerings to enable customers to
not only purchase the level of service and network performance that meets their
current requirements but also enables them to easily upgrade their service level
as their demand for bandwidth increases. In most cases we can implement customer
bandwidth upgrades remotely, without the need to add additional hardware or to
send a technician to the customer's premises.
OUR STRATEGY
Our objective is to become a leading provider of broadband applications and
services to small- and medium-sized businesses in secondary markets. Our
strategy includes the following key elements:
EXPLOIT FIRST-MOVER ADVANTAGE IN TARGET SECONDARY MARKETS
We believe that by being the first, or one of the first, providers of
broadband applications and services in our target markets, we will not only
encounter less competition but will also be able to capture significant limited
resources, including collocation space, key customer relationships and important
distribution channels. As of November 30, 1999, we provided our services in
three markets and had collocated our equipment in six additional markets. We
expect to offer our services in a total of 50 markets nationwide, comprised of
145 cities, by the end of 2000. Through our alliance with Lucent, we anticipate
being able to rapidly deploy our nationwide, broadband network. We believe that
this alliance will allow us to gain significant time to market advantages
relative to our potential competitors, permitting us to establish ourselves as
the leading provider of broadband connectivity and associated applications and
services in our markets. We also believe that our early entrant status in our
target markets will provide us with inherent pricing flexibility and lower
operating and marketing costs.
DRIVE CUSTOMER ACQUISITION THROUGH DIRECT MARKETING
In marketing our services, we intend to emphasize direct sales through
account managers, telesales personnel and specialized account groups. We expect
our emphasis on direct sales will enable us to quickly establish a branded
presence and achieve significant market penetration in each market that we
enter. By using JatoBridge, our proprietary database marketing system, we can
develop a list of potential customers that is prioritized by characteristics
that indicate a need for bandwidth intensive data communications services and
applications. This allows us to streamline our sales and marketing activities
and to focus our efforts on potential customers with the highest propensity to
purchase broadband services. In addition, we have specialized account groups
that sell into vertical sectors, such as the healthcare, travel, and real estate
businesses, which have growing demands for industry-specific broadband
applications and services. Our indirect sales approach is designed to expand our
distribution capabilities through strategic relationships with ISPs and value
added resellers. We intend to establish
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mutually beneficial sales and marketing relationships with these providers that
will allow us to accelerate customer acquisition in our markets. We intend to
retain the relationship with our customers so that we can ensure high quality
service, offer new applications and services as they become available, and
enhance brand recognition and loyalty.
OFFER A WIDE ARRAY OF BROADBAND APPLICATIONS AND SERVICES
We seek to provide a superior value proposition to our customers by
partnering with a variety of independent network and application services
providers to offer our customers a wide range of value-added applications as
well as enhanced network solutions. We intend to offer the ability to initiate,
develop and manage Internet-based business operations beginning with services
such as domain name registration, Web site creation, Web hosting and e-commerce.
Our relationships with companies such as Netopia and Network Solutions Inc.
allow us to offer our customers basic applications and services, such as e-mail
and Web hosting and authoring. We believe that our approach of offering a suite
of applications will further differentiate us from our competitors and result in
increased penetration of our target customer base.
PROVIDE SUPERIOR CUSTOMER CARE AND SUPPORT
We believe that customer care is critical to the retention of our target
customers and we intend to further differentiate ourselves from our competition
by developing and implementing state-of-the-art customer support systems and
capabilities. Our dedicated business unit provides order management,
provisioning, customer care, operations support and billing services. We have
designed our provisioning and service systems to enable our customers to be
self-sufficient and yet have rapid access to additional support services, if
needed. Our customer support services are available 24 hours a day, seven days a
week.
STRATEGIC ALLIANCES
We seek to establish alliances with third parties that allow us to leverage
their individual expertise, and thus enhance our network capabilities.
In July 1999, we entered into a strategic alliance with Lucent Technologies
to rapidly deploy, integrate, monitor and maintain our broadband network. We
believe our alliance with Lucent will provide us a significant advantage in
designing and rapidly deploying our nationwide broadband network. Under the
terms of our alliance, Lucent has agreed to provide up to $50 million in vendor
financing to assist in the deployment of our network. Lucent has also agreed to
provide additional financial support to market co-branded products and services.
Lucent's highly qualified personnel will be responsible for the installation of
our DSLAMs in central offices, maintaining that equipment, monitoring our
network from its network operations center, and performing any necessary
maintenance on our network. Through Lucent's national network facilities and
technical service organization, in conjunction with our own efforts, we can
provide our customers proactive network monitoring and service maintenance
capabilities 24 hours a day, seven days a week.
APPLICATIONS AND SERVICES
A core element of our strategy is the establishment of relationships with
companies that have either developed applications or provide services that meet
the specific needs of small- and medium-sized businesses. Our relationships with
companies such as Netopia and Web Perfect provide us the ability to offer our
customers a variety of value-added applications and services at cost-effective
prices. We have non-exclusive agreements with these companies to license and
resell their applications or services. We may also agree to jointly market our
services with our partners.
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CURRENT APPLICATIONS AND SERVICES
The foundation of our bundled offerings is JatoDirect Solutions, which is
comprised of high-speed Internet access, broadband applications and services and
data network services. Our JatoDirect Solutions service includes the following:
- BROADBAND SERVICES. Our broadband service provides customers with
high-speed Internet access and other network services. We support a
variety of broadband access speeds that afford our customers a dedicated
and "always on" connection. We supply Internet access through our
relationships with several ISPs.
- WIDE AREA AND REMOTE LOCAL AREA NETWORKS. In each market we enter we offer
wide area network connectivity between distributed customer sites. WANs
provide our customers with a relatively inexpensive dedicated network
through which they can share and exchange data at broadband transmission
speeds. RLANs allow teleworkers to connect to their corporate LAN with a
DSL modem at high transmission speeds.
- WEB HOSTING AND AUTHORING. Our relationship with Netopia allows us to
provide Web hosting and two levels of Web authoring services. The entry
level services allow our customers to utilize a Web site template to
create a basic e-brochure Web site. For our customers who demand extended
Web site capabilities, we are able to offer professional level solutions
to create a fully customized Web site.
- E-COMMERCE. Our Netopia relationship also provides customers desiring to
sell their products and services over the Internet with a more elaborate
Web presence. These additional services include, among others, product
cataloging, online shopping cart capability, credit card transaction
processing, and order fulfillment notification.
- E-MAIL SERVICES. We provide outsourced e-mail services for our customers,
thus allowing them to eliminate the overhead typically associated with
managing in-house e-mail platforms.
EXTENDED APPLICATIONS AND SERVICES
We are continually examining a broad range of additional applications and
services. These future services may include, among others:
- PBX EXTENSION. We believe that an exceptional opportunity exists to
provide our small- and medium-sized business customers the ability to
extend their office PBX phone system to their workers' offsite locations.
This technology would permit us to offer our customers, over existing
copper loops, high-speed data and simultaneous PBX phone extension
services, such as four digit dialing, conference calling and speed
dialing. We expect our customers to be able to reduce their intra-company
long distance telephone charges, increase their data communications
capabilities as well as create a closer relationship with remote workers
through this service offering. We are currently engaged in technical
engineering trials of this technology over our network architecture.
- VOICE OVER DSL. In contrast to our proposed PBX extension service where
the end-to-end telephone connection is transmitted over a dedicated DSL
wide area network, our anticipated Voice over DSL offering will transmit
voice traffic over our network onto the public telephone exchange system.
Voice over DSL service allows customers to avoid separate local access
charges for stand-alone telephone service. We are currently testing this
voice capability over our network architecture with Copper Mountain
Networks and Tollbridge. To facilitate this service, we expect to resell
voice capacity from other competitive carriers.
- VIRTUAL PRIVATE NETWORKS. Virtual Private Networks, or VPNs, are an
evolution of WANs. Whereas WAN offerings involve the deployment of
dedicated lines to a customer over a private
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backbone, VPNs will permit private networks to be deployed over shared
public networks, thereby reducing subscriber costs.
- MULTI-TENANT ACCESS. Multi-tenant access involves the installation of a
DSLAM at the customer premises instead of at a central office. This
offering would be focused on serving commercial customers occupying a
dense office park or high-rise. Because our DSLAM would be located on the
customer's site, we would be able to offer more customers our higher speed
services as a result of the decreased loop length. Further, our ability to
rapidly provision customers would be enhanced because we would not be
depending on the incumbent carrier to provision the existing copper line
to the customer's premise.
TARGET CUSTOMERS
We believe that small- and medium-sized businesses in secondary markets have
specific needs for which our applications and services are well suited. These
target customers tend to have the following characteristics:
- Growing high-speed Internet access and high bandwidth network needs;
- Inadequate or nonexistent information technology staff and departments;
- Fewer than 100 employees;
- Existing ISDN or dial-up Internet access service;
- Reliance on traditional high-speed alternatives, such as T1 lines which
are significantly more expensive; and
- Underserved by existing service providers.
MARKETING AND SALES
We create market awareness and promote our applications and services to
small- and medium-sized businesses through our focused marketing efforts, our
direct sales approach and indirectly through marketing partners, such as ISPs
and value added resellers.
MARKETING
The goal of our marketing efforts is to establish the Jato brand as a
preferred provider of network-enabled value-added applications and services. We
believe that our marketing approach will help to make us a market share leader
in each of the markets we offer, or intend to offer, our services. Our marketing
group is focused on enhancing brand recognition, differentiating us from other
data communication providers, leveraging our early entrant advantage and
dominating selected vertical sectors of our markets. We believe that our
alliance with Lucent will give us a significant advantage in achieving these
objectives as Lucent has agreed to provide us with financial support to market
co-branded products and services in each market we deploy our network. Our
marketing approach will differ in each market, depending upon such factors as
the presence or absence of direct competitors, the nature of any competitive
advertising and promotional offers, preconceptions or lack of awareness about
DSL and other high-speed Internet access options, and our time-to-market
advantage relative to other providers. We also support our direct and wholesale
sales efforts with coordinated public relations programs, which are designed to
educate consumers, develop active interest from our target customer base and,
most importantly, enhance our brand recognition. With this approach, we believe
that we will be able to deepen our market penetration and increase customer
retention.
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DIRECT SALES
Key elements of our direct sales approach include:
- NEW MARKET LAUNCH TEAM. To facilitate a new market launch, we dispatch our
new market launch team to establish our local sales office and recruit and
hire local sales personnel to service that market. Because our new market
launch team repeats this market development process in each of our target
markets, we can quickly and efficiently establish our sales presence.
- JATOBRIDGE DATABASE. Our proprietary database marketing system, called
JatoBridge, targets and pre-qualifies potential customers in each of our
target markets. With JatoBridge, we aggregate and process demographic,
marketing, and geographic data relative to small- and medium-sized
businesses in our target markets using a combination of proprietary
selection algorithms, statistical modeling and analytical tools to develop
a pre-qualified list of potential customers with the highest probability
of acquiring DSL technology and enabled applications. In addition, through
our geographic information systems, we can determine the capability of
delivering broadband services to prospective customers' sites based on
central office and individual customer locations. We believe JatoBridge
will allow us to increase and accelerate market penetration, reduce
customer acquisition expenses, increase customer retention rates, and
facilitate the sale of additional applications and services.
- ACCOUNT MANAGERS. Our account managers are responsible for identifying and
soliciting potential customers within their geographic region. We hire
account managers within each market who have specific experience selling
communications or other similar services. Our account managers work in
tandem with our telesales personnel to efficiently establish a local
presence and facilitate the sale of our applications and services. Account
managers are compensated with a base salary and commissions based on the
number of lines sold.
- TELESALES PERSONNEL. Our telesales personnel cover territories around
central offices where we have deployed, or intend to deploy, our network
applications and services. Our telesales personnel are compensated with a
base salary and commissions based on the number of lines sold in a
particular market. We believe that our telesales approach, when combined
with JatoBridge and our account managers, will enable us to penetrate our
potential customer base more quickly and efficiently, and will facilitate
the sale of our applications and services.
- SPECIALIZED ACCOUNT GROUPS. We have established specialized account groups
to sell applications and services to small-and medium-sized businesses in
specific, data intensive industries. Account groups have initially been
established in the healthcare, travel and real estate sectors. We staff
these specialized account groups with professionals who have expertise and
experience in the particular sector that they will serve.
INDIRECT SALES
We also market our services to end users through strategic marketing
partners, including ISPs, interexchange carriers and value added resellers. We
offer each indirect sales partner high-speed network access services that it can
bundle with its own product offerings.
CUSTOMER CARE AND SUPPORT SERVICES
We believe that a dedicated customer service group, exceptional operations
support systems and seamless process integration are all critical ingredients to
delivering customer care that meets or exceeds our customers' expectations,
reduces churn and increases our ability to sell new services to existing
customers. Beginning with our initial customer contact through provisioning,
billing and ongoing support services, we provide our customers with a single
point of contact. We have designed our provisioning and service systems to
enable our customers to be self-sufficient and yet have rapid
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access to additional support if needed. Our customer care system is designed to
interact with our customers via e-mail, call center or directly through our
extranet 24 hours a day, seven days a week.
Our workflow management system provides intelligent routing and management
of customer orders through the appropriate internal and external organizations
from the point of order entry through incumbent carrier provisioning and on-site
installation. Our systems have been designed to be both flexible and scalable in
order to support our expected future back office requirements. Our intelligent
routing and management capability allows us to efficiently manage our
provisioning process and immediately recognize and address potential or incurred
customer order problems on a real-time basis. We have applied performance
metrics to each step in the provisioning process so that we may anticipate and
quickly react to potential problems or conditions that could cause a delay or
disruption in service.
PROVISIONING
Our business model requires the lease of unbundled local loops from the
incumbent carrier. Our experience shows that the timely and accurate transfer of
information between ourselves and the incumbent carrier is crucial for success.
Thus, we have entered into an agreement with Mantiss as our provider of the
incumbent carrier gateway platform for provisioning management. We have selected
this company based on their technical architecture and their ability to
proactively manage the interface changes inherent in incumbent carrier order
gateways. We believe that through this electronic data interface with the
incumbent carriers we will be able to further reduce the time required to
provision unbundled local loops.
BILLING
Flexible and scalable billing capabilities are critical to our direct sales
strategy. We have chosen to implement Solect Technology Group's IAF billing
system application. Solect's IAF Horizon is a leading IP billing software
solution for service providers. IAF Horizon provides an integrated approach to
billing, customer care and service management. Its platform architecture will
enable flexibility, scalability and adaptability. Solect's key customers
include, among others, GTE Data Services, Eircom, and AT&T Canada.
NETWORK DEPLOYMENT
We collocate our equipment in selected central offices to cover on average
over 80% of the businesses in our target markets. We believe this enables us to
maximize our capital expenditure efficiencies while reaching a significant
portion of our markets. As of November 30, 1999, we provided services in three
markets and had collocated our equipment in six additional markets. We intend to
offer our services in a total of 50 markets nationwide, comprised of 145 cities,
by the end of 2000.
NETWORK ARCHITECTURE
DSL TECHNOLOGY
Our DSL access service allows customers to choose the speed and performance
level that they require today with the option to upgrade in the future. In most
cases, our customer premise equipment does not require any hardware
modifications or an on-site service call to upgrade to a higher level of
service. Substantially all upgrades can be configured remotely through software
configuration changes. Subject to the distance and other limitations described
below, our customers are able to change their level of service with the help of
a customer support representative or by logging into our extranet. For our
customers who desire to increase their network performance but are presently
limited from upgrade due to their distance from the central office, we can, in
many cases, double the speed of any
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of our service offerings by utilizing standard multiplexing technology. We
believe that prospective customers will find this to be a very attractive,
cost-effective solution to their networking needs.
SYMMETRIC DIGITAL SUBSCRIBER LINE. We primarily offer a variation of DSL
called SDSL, or symmetric digital subscriber line. SDSL transmission speeds are
the same to and from the end user. In contrast to other DSL technologies, SDSL
permits us to provision customers at a specific transmission speed. Customers
order the speed they desire and pay additional subscription charges to increase
the speed. We offer SDSL at speeds that range from 144 Kbps to 1.5 Mbps. For
customers that are generally located within 9,000 feet of a central office, we
can provide transmission speeds that are equivalent to T1 services at a fraction
of the price. Through standard multiplexing technology, we can extend T1
equivalent speeds up to 13,500 feet of a central office. At lower SDSL
transmission speeds, we are generally able to provide services to end users that
are within 20,000 feet of a central office. The speeds at which we provision
customers are designed to meet the typical bandwidth requirements of small- to
medium-sized businesses.
INTEGRATED DIGITAL SUBSCRIBER LINE. We also offer IDSL, or integrated
digital subscriber line, technology. This technology allows us to reach end
users within 35,000 feet of a central office service area. We target these
services to current ISDN subscribers because IDSL can typically utilize the
customer's existing ISDN equipment. We believe IDSL compares favorably with ISDN
on a price/ performance basis. IDSL service is significantly less expensive,
when the flat rate of IDSL is compared with the ISDN per minute or flat rate
charges. IDSL operates at speeds up to 144 Kbps, or 288 Kbps using standard
multiplexing technology, whereas ISDN is limited to 128 Kpbs. Moreover, because
IDSL is "always-on," as compared to the dial-up ISDN service, customers can
readily and continuously access the Internet. We also offer IDSL to customers
that do not have lines consisting of continuous copper, such as certain
customers who tend to be served with Digital Loop Carrier services from their
incumbent carrier.
OTHER BROADBAND ACCESS SOLUTIONS
We expect to utilize a variety of wireline and wireless broadband access
technologies to supplement our core DSL network and maximize our nationwide
footprint. We intend to deploy complementary technologies in areas where DSL is
not accessible or cost effective.
NETWORK DESIGN, IMPLEMENTATION AND MANAGEMENT
We have designed and are deploying our network through engineering,
equipment and service alliances with national suppliers. We have a strategic
alliance with Lucent to install, monitor and maintain our central office
equipment, local area and national networks. Lucent will provide us with
end-to-end network management 24 hours a day, seven days a week through their
national network operations center that can respond to every level of our
network beginning with individual customer lines, through our central office
equipment and through our local area and national backbone circuits. We believe
that our expertise in technology and alliance management allows us to focus and
maximize the technical specialties of each of our suppliers and assemble a
network that is reliable, rapidly expandable and capital efficient. We have
established a network engineering and management staff within our organization
that will provide management oversight of our network deployment and operations
and provide supplementary deployment and other services. We believe that our
network strategy enables us to quickly deploy our national network, minimize our
capital expenditure and overhead requirements and rapidly fulfill and adapt to
the needs of our customers.
NETWORK COMPONENTS
DSL MODEMS AND CUSTOMER PREMISE INSTALLATION. We purchase DSL modems
primarily from Netopia and arrange for the on-site installation and wiring
through outside vendors including CMC
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Telecor and Integrated Systems Installers. We ensure the successful connection
of the modem into the local loop.
LEASED LOCAL ACCESS LINES. We lease the copper line running from our
central office equipment to the end user. We provision the line from the
incumbent carrier and perform tests to ensure line quality. We also monitor this
line via the Turnstone equipment that we receive through our Lucent relationship
to proactively ensure the quality of the connection. Through our Turnstone
monitoring capabilities we are able to remotely diagnose and temporarily correct
problems by re-routing customer traffic resulting in minimal service disruption
to the end user. The Turnstone equipment enables us to reduce our operating
costs and improve service quality.
CENTRAL OFFICE EQUIPMENT. Through our relationship with Lucent, we utilize
Copper Mountain DSLAM equipment in our central office locations. Lucent
installs, maintains and monitors all of our equipment in our central office
locations. This arrangement allows us to deploy our central office equipment
quickly and consistently across our nationwide network. We believe that by
utilizing the national service infrastructure of Lucent we will reduce our
central office installation costs and we will be able to focus on managing the
quality of installation services and on the efficient and rapid deployment of
our network. We have also deployed Turnstone equipment in each of our central
office locations.
SWITCHING CENTER. Our switching center is a local point of presence, or
POP, within a market where local traffic is aggregated from our central office
locations. The switching center houses our asynchronous transfer mode, or ATM,
switches and IP routers. We design our switching centers for high availability
including backup power, redundant equipment and active network monitoring.
BACKHAUL SERVICES We utilize backhaul network services to transport traffic
from central offices to our switching centers, as well as route traffic from our
switching centers to the local POP of our ISP partners or backbone provider.
These backhaul services are provided by national and global networking carriers
such as Level 3 Communications and MCI WorldCom. Through our relationships with
these communications companies, we can offer our customers seamless, broadband
data networking capabilities.
BACKBONE SERVICES We will interconnect our switching centers through
backbone providers such as Level 3 Communications and MCI WorldCom. Through our
backbone providers, we will create a nationwide broadband infrastructure. Our
integrated backbone network will enable us to provide advanced data services
such as VPN. In the future, we expect to add additional transmission protocols,
including frame relay and ATM services.
COMPETITION
We expect to face competition from many competitors with significantly
greater financial resources, well-established brand names and large, existing
installed customer bases. Moreover, we expect to face increased competition in
the future. We expect significant competition from:
INCUMBENT LOCAL EXCHANGE CARRIERS. Incumbent local exchange carriers, such
as Bell Atlantic, SBC Communications and U S WEST, have begun deploying
DSL-based services and other high speed data communications services. Such
carriers are also leasing wide area connections and have existing metropolitan
area networks and circuit switched local area networks. We believe that
incumbent carriers have the potential to quickly overcome many of the issues
that have delayed widespread deployment of DSL services in the past. As a result
of owning copper lines, these incumbent carriers can bundle digital data
services with their existing voice services to attain a significant competitive
advantage in serving customers. Incumbent carriers also possess sufficient
capital to deploy DSL services rapidly and are in a position to offer service
from central offices where we may be unable to
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secure collocation space. In addition, the FCC is considering establishing
requirements for separate subsidiaries through which these carriers could
provide DSL service on a substantially deregulated basis. As such, we expect
these carriers to be strong competitors in each of our target markets.
INTEREXCHANGE CARRIERS. Many of the leading interexchange carriers,
including AT&T, MCI WorldCom and Sprint, are building and expanding their
networks to support high-speed, end-to-end network services. Increasingly, their
bundled services include high-speed local access combined with metropolitan and
wide area networks, and a full range of Internet services and applications.
These carriers have deployed national networks, have strong brand recognition,
and in many cases have announced the deployment of DSL services in combination
with their current fiber networks as a result of interconnection agreements and
collocation spaces with many incumbent local exchange carriers. More recent
national carriers, such as Level 3 Communications, IXC Communications and Qwest
Communications are building and managing high-bandwidth, nationwide IP-based
packet networks and partnering with Internet service providers to offer services
directly to the public, including business customers.
CABLE MODEM SERVICE PROVIDERS. Cable modem service providers, like
Excite@Home and its cable partners, are offering or preparing to offer
high-speed Internet access over hybrid fiber coaxial cable networks to
consumers. @Work has positioned itself to do the same for businesses. Where
deployed, these networks provide local access service similar to our services,
and in some cases at higher speeds and lower prices.
DSL-BASED COMPETITIVE LOCAL EXCHANGE CARRIERS. Certain competitive
carriers, such as Covad Communications, DSL.net, HarvardNet, Network Access
Solutions, NorthPoint and Rhythms NetConnections, are offering DSL-based data
services. We also anticipate competition from other national and regional
carriers. Other competitive carriers are likely to do so in the future. The 1996
Telecommunications Act specifically grants competitive carriers the right to
negotiate interconnection agreements with incumbent carriers, including
interconnection agreements which may be identical to, or more favorable than,
our agreements.
TRADITIONAL COMPETITIVE LOCAL EXCHANGE CARRIERS. Traditional competitive
carriers such as Allegiance, BTI, Electric Lightwave, e.spire, Intermedia and
McCleodUSA have extensive fiber-based networks in many metropolitan areas,
primarily providing voice and high-speed data circuits to business users. Many
of these carriers have begun offering DSL services to their customers.
INTERNET SERVICE PROVIDERS. Internet service providers, like America
Online, Flashcom and UUnet, provide Internet access to residential and business
customers. These companies generally provide Internet access over the incumbent
carriers' circuit switched networks at integrated services digital network
(ISDN) speeds or below. However, some Internet service providers have begun
offering DSL-based access using their own DSL services, or DSL services offered
by the incumbent carrier or other DSL-based competitive carriers. Some Internet
service providers, such as Concentric Network Corporation, Mindspring
Enterprises, Inc., PSINet Inc. and Verio, have significant and even nationwide
marketing presences and combine these with strategic or commercial alliances
with DSL-based competitive carriers.
WIRELESS AND SATELLITE DATA SERVICE PROVIDERS. Several new companies,
including Advanced Radio Telecom, Teligent and WinStar Communications, are
emerging as wireless data service providers, over a variety of frequency
allocations. Satellite-based data service providers, such as Motorola Satellite
Systems and Hughes Communications are also emerging. These companies use a
variety of new and emerging technologies, such as terrestrial wireless services,
point-to-point and point-to-multipoint fixed wireless services, satellite-based
networking and high-speed wireless digital communications.
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We may be unable to compete successfully with these or future competitors.
The most significant competitive factors include: price, performance,
transmission speed, service reliability, breadth of product offerings, network
security, ease of access and use, customer support, brand recognition, operating
experience, capital and exclusive contracts with customers and Internet service
providers and businesses with multiple locations. Additionally, the
telecommunications industry is subject to rapid and significant changes in
technology. As such, we cannot assess the effect such technological changes will
have on our business, particularly the developments in DSL technology and
alternative high-speed data communications technologies. These developments
could have a material adverse effect on our competitive position.
GOVERNMENT REGULATION
Jato is a telecommunications common carrier. As a result, we are subject to
substantial federal, state and local regulation of our services and facilities.
The Federal Communications Commission exercises jurisdiction over state-to-state
and international services. Each state public utility and service commission has
jurisdiction over services within that state. In addition, cities and other
local governments may require us to obtain licenses or franchises to operate our
networks in or across a public right-of-way.
FEDERAL REGULATION
In 1996, the federal government enacted the 1996 Telecommunications Act,
which establishes a pro-competitive, de-regulatory framework for the provision
of local and state-to-state telecommunications services by all
telecommunications providers. The 1996 Telecommunications Act imposes three
levels of duties on telecommunications carriers: (1) general obligations
applicable to all entities offering local exchange services, (2) additional
obligations applicable to the previous monopoly local exchange carriers (the
so-called incumbent local exchange carriers), and (3) special duties of the
former Bell System operating companies (the so-called Regional Bell Operating
Companies or RBOCs).
All local exchange carriers, including Jato, must:
- not prohibit or unduly restrict resale of their services;
- provide number portability;
- provide dialing parity and nondiscriminatory access to telephone numbers,
operator services, directory assistance and directory listings;
- afford access to poles, ducts, conduits and rights-of-way; and
- establish reciprocal compensation arrangements for the transport and
termination of local telecommunications traffic.
Incumbent local exchange carriers must also comply with additional
obligations intended to enable new competitors to compete with the incumbent's
services. Incumbent carriers must negotiate local interconnection agreements in
good faith, make those agreements available to all competitors on a
nondiscriminatory basis and permit competitors to interconnect their networks in
order to exchange calls between their respective subscribers. Incumbent carriers
must provide this interconnection at any technically feasible point within the
incumbent carrier's network and on just, reasonable and nondiscriminatory rates,
terms and conditions. In addition, the 1996 Telecommunications Act permits
competitors to utilize portions of the incumbent carrier's network on an
individual basis in order to offer any telecommunications service, to co-locate
their equipment at the incumbent carrier's network locations, and to obtain the
incumbent carrier's retail services at wholesale prices for resale to end users.
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In addition, the 1996 Telecommunications Act imposes a number of
restrictions on the ability of RBOCs to manufacture telecommunications equipment
and to provide long distance and other services. Under section 271 of the 1996
Telecommunications Act, the RBOCs must comply with certain safeguards and offer
interconnection that satisfies a prescribed 14-point checklist before they may
provide long distance services within their local territories. These safeguards
are designed to ensure that the RBOCs' competitors have fully opened their
networks to competitors and to promote competition by preventing RBOCs from
using their market power in local exchange services to obtain an
anti-competitive advantage in the provision of other services.
The overriding purpose of the 1996 Telecommunications Act is to create
competitive opportunities for companies to offer all types of telecommunications
services. In so doing, the 1996 Telecommunications Act granted important
regulatory relief to industry segments which compete with competitive local
exchange carriers. The Federal Communications Commission was given authority to
refrain from applying most statutes and regulations to our competitors
(including the incumbent carriers). Incumbent carriers were given substantial
new pricing flexibility and the RBOCs were given broader rights to participate
in related telecommunications markets. Cable television providers were
authorized to offer telecommunications services and internet access over their
cable networks. In addition, under the 1996 Telecommunications Act all utility
holding companies are permitted to diversify into telecommunications services.
Each of these potentially competitive services, as well as data services
delivered via wireless or satellite technologies, are subject to differing
regulatory regimes which frequently are not at parity with one another. As a
result, Jato may face competition from entities subject to more favorable or
less onerous regulation than applies to us.
Federal proceedings implementing the provisions of the 1996
Telecommunications Act have been extremely complex and are subject to continuing
revision. Jato relies substantially on rights granted to us by the 1996
Telecommunications Act, including rights to co-locate our equipment at the
incumbent carriers' locations and to use the incumbent carriers' telephone lines
and other network elements. Federal rules implementing these rights may have a
material effect on our business.
Most of the framework implementing the local competition provisions of the
1996 Telecommunications Act was established in an order adopted by the Federal
Communications Commission on August 8, 1996 in its CC Docket 96-98. In its
order, the Federal Communications Commission:
- identified certain minimum points in the network where the incumbent
carriers must permit competitors to interconnect and install their own
equipment for carrying telecommunications traffic;
- prescribed standards to ensure that interconnection could be made at other
efficient places in the network
- adopted a minimum list of network elements (i.e., those portions of the
incumbent carriers' networks that incumbents must allow competitors to use
on an unbundled basis);
- adopted rules requiring incumbents to offer those elements at quality
levels specified by competitive carriers and to combine those elements
upon request;
- adopted a methodology for the state public utility commissions to use in
establishing cost-based rates for interconnection and the use of these
network elements; and
- adopted a methodology for applying the 1996 Telecommunications Act's
avoided cost standard when setting wholesale prices for the incumbent
carrier's retail services.
Most provisions of the Federal Communications Commission's order were
appealed. Numerous appeals were consolidated for consideration by U.S. Court of
Appeals for the Eighth Circuit (captioned IOWA UTILITIES BOARD V. FCC). On
July 18, 1997, the Court of Appeals released its decision regarding
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issues raised in the consolidated appeals of the order, upholding the Federal
Communications Commission's order in part and reversing it in part; it modified
that decision on August 22, 1997.
On January 25, 1999, the U.S. Supreme Court reversed important portions of
the Eighth Circuit's holding in IOWA UTILITIES BOARD. Specifically, the Supreme
Court ruled that: (i) the Federal Communications Commission properly exercised
its authority under the 1996 Telecommunications Act in establishing pricing
rules for incumbent carriers' network elements and resale; (ii) the Federal
Communications Commission had authority to preclude incumbent carriers from
separating unbundled network elements which are already combined; and (iii) the
Federal Communications Commission was justified in promulgating rules enabling
competitors to select favorable provisions from other carriers' existing
interconnection agreements. However, the Supreme Court also held that the
Federal Communications Commission's analysis in identifying the minimum list of
network elements was inadequate. The Court ruled that the Federal Communications
Commission failed to consider sufficiently the requirement under the 1996
Telecommunications Act that those network elements be necessary, or that a lack
of access to those elements would impair the ability of competitors to offer
services. The Court vacated the relevant rule and remanded the matter to the
Federal Communications Commission either to modify the rule or justify it,
subject to further court review.
Certain other aspects of the Federal Communications Commission's order were
vacated by the Eighth Circuit and were not appealed to the Supreme Court; thus,
they remain vacated. These include Federal Communications Commission rules that
had directed incumbents to combine network elements requested by competitors
whether or not those elements had previously been combined, and a provision
requiring that interconnection arrangements be superior in quality to those
provided by the incumbent carriers to themselves, when requested to do so by
competitors. The Federal Communications Commission and several competitive local
exchange carriers have asked the Eighth Circuit to reinstate these rules based
upon the Supreme Court's reasoning, but these requests have not yet been acted
upon by the court.
On September 15, 1999, the Federal Communications Commission adopted an
order reexamining its minimum list of network elements as directed by the
Supreme Court. This order reaffirmed the most important six of the original
seven mandatory network elements that incumbents must provide, and expanded the
ability of competitors to obtain unbundled local loops, especially loops used to
provide DSL and other high capacity services. The order makes clear that the
states are free to add other unbundled network elements to the list identified
by the Federal Communications Commission. In addition, the Federal
Communications Commission affirmed the rights of competitors to obtain pre-
existing combinations of network elements, including extended loops. The 1999
order, however, scaled back competitors' abilities to use the incumbent's local
switches and generally does not require incumbents to share their data
communication networks. As of December 20, 1999, these rules have not yet become
effective, and are subject to petitions for review and/or reconsideration by
various industry parties. We are unable to predict what the outcome of any
resulting litigation will be or when these matters will be resolved.
Finally, the Federal Communications Commission is considering a proceeding
which may affect Jato's ability to gain access to multi-tenant buildings in
order to provide its services. No decision has been issued in this proceeding,
and Jato is unable to predict when, or if, the Federal Communications Commission
will act in the proceeding.
With the increasing deployment of high-speed telecommunications networks,
the Federal Communications Commission continues to review its policies and
rules for the provision of advanced communications services. Advanced
communications services are wireline, broadband telecommunications services,
such as services that rely on digital subscriber line technology (commonly
referred to as xDSL) and packet-switched technology. In an order released on
August 6, 1998, the Federal Communications Commission clarified that the
interconnection, unbundling and resale
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obligations under the 1996 Telecommunications Act applied to the incumbents'
advanced communications facilities and services, and proposed measures to
promote the deployment of advanced communications services by both incumbent
carriers and competitors. However, the Federal Communications Commission also
interpreted the 1996 Telecommunications Act as permitting (under certain
circumstances) incumbent carriers to deploy advanced communications services
through separate affiliates that would not be subject to the 1996
Telecommunication Act's unbundling and resale obligations. The Federal
Communications Commission currently is reviewing these findings to more fully
consider the proper classification of advanced telecommunications services and
the implications of that classification on the scope of the incumbents'
obligations with respect to the provision of these services. This review could
significantly affect competitor's abilities to gain access to the incumbents'
advanced service capabilities as well as the degree of regulation the
incumbents' retail advanced services may be subjected to.
On March 18, 1999, the Federal Communications Commission adopted a First
Report and Order in these proceedings further strengthening the rights of
competitors to lease space within the incumbent's facilities in order to place
the carrier's own telecommunications equipment. The Federal Communications
Commission, for example, permitted competitors to share space used by other
carriers at their option and required incumbent carriers to permit competitors
to place equipment in pre-installed racks and other cageless collocation
arrangements. The Federal Communications Commission also broadened the range of
permissible equipment that competitors may install to include equipment that
performs some switching and enhanced services functions. Finally, the Federal
Communications Commission limited the incumbents' ability to claim that
competitors' equipment posed fire or electrical hazards and proposed
rules making the standards incumbents may use more specific.
Many aspects of these rulings have been appealed to the U.S. Court of
Appeals for the D.C. Circuit. We cannot predict the final outcome of these
proceedings and associated appeals. In addition, we note that incumbent carriers
continue to seek both legislation and Federal Communications Commission action
to free them from regulation of advanced services, including the obligation to
unbundle their own DSL facilities, and we are unable to predict the outcome of
these efforts.
On November 18, 1999, the Federal Communications Commission adopted an order
in its advanced services proceeding requiring incumbents to offer access to the
high frequency portion of telephone lines they use to provide voice services to
a customer, provided that access will not degrade the voice services provided
over the same telephone lines. Access to the high frequency portion of a
telephone line-- referred to as line sharing--will enable competitors to provide
high-speed data services (such as DSL) to a customer, without requiring the
customer to obtain a second telephone line dedicated for this purpose. However,
several important elements of line sharing, including the price at which
incumbents must provide such access, were left to the state commissions to
determine using federal guidelines. In addition, the order specifically
determines that SDSL, a symmetrical digital subscriber line technology used by
Jato, is not eligible for deployment on a line sharing basis because it uses the
frequencies devoted to voice transmissions. Moreover, incumbent carriers will
have at least until June 2000 to implement these new requirements. As a result,
we are unable to predict when line sharing will become available, or the degree
to which it will reduce the costs currently associated with providing high-speed
data services.
In November 1998, the Federal Communications Commission ruled that DSL
services used to provide dedicated access to interstate services, such as
Internet access, are interstate services subject to its jurisdiction. The
Federal Communications Commission permitted incumbent carriers to include such
DSL services in their federally-filed tariffs, rather than in state tariffs. On
February 26, 1999, the Federal Communications Commission ruled that local calls
placed to ISPs (so-called ISP-bound traffic) also is predominantly interstate
traffic that is subject to federal jurisdiction. However, having found that most
ISP-bound traffic is jurisdictionally interstate, the Federal Communications
Commission went on to clarify that its ruling did not preclude parties from
treating this traffic as local traffic for purposes of
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the payments carriers make when local calls originate with one carrier and are
completed to subscribers of another carrier. On a prospective basis, the Federal
Communications Commission is considering rules for carrier to carrier payments
for ISP-bound traffic. These decisions currently are subject to reconsideration
and appeal.
In response to several carrier tariffs offering interstate DSL services, the
Federal Communications Commission has ruled that advanced services that are
provided to ISPs for use in connection with the ISP's Internet access services
are wholesale telecommunications services, not telecommunications services
offered at retail. As a result, competitors may not obtain these DSL services at
wholesale prices under the 1996 Telecommunications Act. Services which are
offered to business or residential subscribers directly, however, are retail
services and may be obtained by other carriers at the wholesale price. This
ruling may allow ISPs to obtain volume and term discounts which meet or exceed
those available to non-ISPs that purchase DSL services.
In general, the Federal Communications Commission has a policy of
encouraging the entry of new competitors, such as Jato, in the
telecommunications industry and preventing anti-competitive practices.
Therefore, the Federal Communications Commission has established different
levels of regulation for dominant carriers and nondominant carriers. Large
incumbent local exchange carriers such as GTE and the RBOCs are currently
considered dominant carriers in their territories, while competitors such as
Jato are considered nondominant carriers.
- TARIFFS: As a nondominant carrier, we may install and operate
telecommunications facilities without prior Federal Communications
Commission authorization. Services of nondominant carriers have been
subject to relatively limited regulation by the Federal Communications
Commission, primarily consisting of the filing of tariffs and periodic
reports. However, nondominant carriers like Jato must offer interstate
services on a nondiscriminatory basis, at just and reasonable rates, and
remain subject to Federal Communications Commission complaint procedures.
Nondominant carriers have the option of filing tariffs for access services
provided to carriers who originate or terminate long distance calls to a
customer. However, the Federal Communications Commission has ruled that
long distance carriers must cancel their tariffs for domestic, state to
state long distance services, except for operator assisted calls and
casual calling using a carrier's 1-800 or 101-XXXX number. The Federal
Communications Commission's order has not taken effect, pending a review
of its lawfulness before the U.S. Court of Appeals for the District of
Columbia Circuit. We have not yet filed any tariffs for interstate
services with the Federal Communications Commission.
- INTERNATIONAL SERVICES: Nondominant carriers such as Jato are required to
obtain Federal Communications Commission authorization and file tariffs
before providing international communications services. At this time, we
do not have authority from the Federal Communications Commission to
provide voice or data communications services between the United States
and foreign points. We believe that such authority likely would be granted
by the Federal Communications Commission upon request.
- CONTRIBUTIONS TO FUND UNIVERSAL SERVICE SUBSIDIES: On May 8, 1997, the
Federal Communications Commission released an order in its CC Docket No.
96-45, which reforms the current system of interstate support mechanisms
designed to make telephone service universally available. The Federal
Communications Commission established a set of policies and rules to
ensure that low-income consumers and consumers living in rural, insular
and other high cost areas receive a defined set of local
telecommunications services at affordable rates. This is to be
accomplished in part through expansion of direct consumer subsidy programs
and in part by ensuring that rural, small and high cost local exchange
carriers continue to receive universal service subsidy support. The
Federal Communications Commission also created new programs to subsidize
connection of eligible schools, libraries and rural health care providers
to
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telecommunications networks. These programs will be funded by assessment
of eligible revenues of nearly all providers of interstate
telecommunications carriers, including DSL providers such as Jato. Like
all carriers that provide interstate telecommunications services, we will
be required to contribute to the subsidy. The subsidy could also enable
the incumbent carriers to reduce prices that they charge to certain
customers, putting additional competitive pressure on Jato. We presently
are unable to predict the potential impact of these universal service
funding reforms, but they could have a significant impact on our future
operations.
- OTHER GOVERNMENT REGULATION: Government regulation in a number of other
areas may affect Jato. For example, the Communications Assistance to Law
Enforcement Act requires telecommunications carriers to modify the design
of their equipment, facilities and services to ensure that electronic
surveillance can be performed at the request of authorized law enforcement
representatives. Telecommunications carriers are currently required to
comply with the core requirements of the Communications Assistance to Law
Enforcement Act in the year 2000. The potential cost to Jato in meeting
these requirements, which may be substantial, is unknown at this time. In
addition, government regulation of the Internet may also have an indirect
effect on our business, by increasing the cost of Internet access, making
the businesses of ISP's, who are customers of ours, less viable. If these
costs are passed on to customers of ISPs it could, in turn, affect the
extent to which companies and individuals access the Internet and engage
in electronic commerce. This may ultimately have a detrimental effect on
us.
STATE REGULATION
Jato believes that most, if not all, states in which it proposes to operate
will require a certification or other authorization to offer intrastate
services. However, provisions of the 1996 Telecommunications Act bar states and
localities from imposing any requirement that may prohibit, or have the effect
of prohibiting, the ability of any entity to enter the telecommunications
market. The Federal Communications Commission has the authority to preempt state
actions that operate as entry barriers.
Jato has obtained intrastate authority in each of the states where we
provide intrastate telecommunications services. In most states, Jato is required
to file tariffs setting forth the terms, conditions and prices for services that
are classified as intrastate.
We believe that, as the degree of intrastate competition increases, some
states are likely to offer incumbent carriers increasing pricing flexibility.
This pricing flexibility may present incumbent carriers with an opportunity to
subsidize services that compete with our services with revenues generated from
less competitive services, thereby allowing incumbent carriers to offer services
competing with ours at prices below the cost of providing the service. Jato
cannot predict the extent to which this may occur or its impact on our business.
Numerous states have adopted or are considering adoption of new programs to
fund state universal programs. Jato could be required to contribute a
significant portion of its intrastate end user revenues toward the funding of
such programs, and such a development could have a significant impact on our
future operations.
LOCAL REGULATION
Should Jato in the future decide to operate its own network facilities over
public rights-of-way, it may be required to obtain various permits and
authorizations from municipalities where the facilities are located. Some
municipalities may seek to impose similar requirements on users of transmission
facilities, even though they do not own such facilities. If municipal
governments impose conditions on granting permits or other authorizations or if
they fail to act in granting such permits or other authorizations, our business
could be adversely affected.
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LOCAL INTERCONNECTION
Jato has entered into interconnection arrangements with Ameritech,
BellSouth, Pacific Bell, Southwestern Bell and US West, and we expect to execute
interconnection agreements covering substantially all of our target markets by
the end of the first quarter 2000. In most instances, we have adopted entire
agreements between the incumbent and another competitive carrier in each of
these states. We take these agreements subject to the terms and conditions
negotiated and/or arbitrated by the other carrier, and for the remaining term of
the underlying agreement. Some of our local interconnection agreements are
scheduled to expire during the year 2000, and will require extension or
renegotiation in the near future. There can be no assurance that these
negotiations and renegotiations of interconnection agreements will be
successful, that the agreements can be extended in a favorable manner, or that
arbitration of any unresolved issues by any state public regulatory commission
will be decided favorably to us.
EMPLOYEES
As of November 30, 1999, we had approximately 190 employees. We believe that
our future success will depend in part on our continued ability to attract, hire
and retain qualified personnel. Competition for such personnel is intense, and
we may be unable to identify, attract and retain such personnel in the future.
None of our employees are represented by a labor union or are the subject of a
collective bargaining agreement. We have never experienced a work stoppage and
believe that our employee relations are good.
PROPERTIES
Our headquarters are located in facilities consisting of approximately
30,000 square feet in Denver, Colorado, which we occupy under a lease that
expires in June 2004. The term of this lease may be extended. Under this lease,
we have a continuing right of first refusal covering all of the office space on
an additional floor comprising 22,000 square feet and a one time right of first
refusal covering 7,600 square feet on another floor.
We recently entered into a lease for an additional 13,000 square feet in
Denver, Colorado, which lease terminates in January 2003. These new facilities
are in the building adjacent to the building in which our headquarters are
currently located and are owned by the same landlord. We also lease space for
network equipment installations and local offices in a number of other
locations.
LEGAL PROCEEDINGS
We are not currently involved in any material legal proceedings. See Note 11
of the notes to our consolidated financial statements.
------------------------
We use market data and industry forecasts throughout this prospectus, which
we have obtained from internal surveys, market research, publicly available
information and industry publications. Industry publications generally state
that the information they provide has been obtained from sources believed to be
reliable, but that the accuracy and completeness of such information is not
guaranteed. Similarly, we believe that the surveys and market research we or
others have performed are reliable, but we have not independently verified this
information. Neither we nor any of the underwriters represents that any such
information is accurate.
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MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND OTHER OFFICERS
Our directors, executive officers and other officers and their ages as of
December 15, 1999 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------------------- ----------- ---------------------------------------------------------
<S> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS
Brian E. Gast......................... 39 Chairman of the Board
Gerald K. Dinsmore.................... 50 President, Chief Executive Officer and Director
William D. Myers...................... 41 Vice President, Finance, Chief Financial Officer,
Treasurer and Secretary
Rex A. Humston........................ 40 Vice President, Engineering and Chief Technology Officer
Leonard Allsup........................ 50 Vice President, Strategic Relationships and Director
Bruce E. Dines, Jr.................... 45 Vice President, Customer Operations
Eric A. Benhamou...................... 44 Director
Todd A. Brooks(1)(2).................. 39 Director
James J. Collis(1)(2)................. 36 Director
Donald T. Lynch(1).................... 51 Director
Gregg A. Mockenhaupt(1)(2)............ 30 Director
OTHER OFFICERS
Keith M. Bennett...................... 51 President, Direct Markets
F. Thomas Danner III.................. 39 Vice President, Applications Planning
Patrick M. Green...................... 44 Vice President, Carrier Relations
Gerard A. Maglio...................... 53 Vice President, Marketing
Robert G. Vidal....................... 50 Vice President, Human Resources
Edward P. Ziehm....................... 41 Vice President, Business Operations
</TABLE>
- ------------------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
DIRECTORS AND EXECUTIVE OFFICERS
All the officers identified above serve at the discretion of our board of
directors. There are no family relationships between any persons identified
above. The following are brief biographies of the directors, executive officers
and other officers identified above.
BRIAN E. GAST is a founder of Jato and has served as a member of the board
of directors since its inception in 1998. Mr. Gast was elected Chairman of the
Board in November 1999 and served as Chief Executive Officer from Jato's
inception to November 1999. From inception to August 1999, Mr. Gast served as
President of Jato. Prior to forming the Company, Mr. Gast co-founded Formus
Communications, Inc., a developer of wireless broadband systems, in
November 1996 and served as its President. In December 1988, Mr. Gast co-founded
American Telecasting, Inc., a national operator of wireless cable television
systems, and served as its President and Chief Executive Officer from
March 1990 to January 1996.
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GERALD K. DINSMORE joined Jato in August 1999 as its President and Chief
Operating Officer, was elected to the board of directors in September 1999 and
was appointed Chief Executive Officer in November 1999. Prior to joining Jato,
Mr. Dinsmore served as President--Business Development and Integration of GTE
from June 1997 to January 1999. As such, Mr. Dinsmore was responsible for
finance, strategic planning, business development, marketing and regulatory
affairs for all GTE business units. From 1993 to June 1997, Mr. Dinsmore served
as Senior Vice President of Finance, Strategy and Technology Planning of GTE. In
such capacity, Mr. Dinsmore was responsible for developing and implementing
long-term strategic planning, including technological initiatives and mergers
and acquisitions. Mr. Dinsmore also served as a member of the Executive
Leadership Council of GTE from 1996 to January 1999.
WILLIAM D. MYERS joined Jato in August 1999 as its Vice President, Finance,
Chief Financial Officer and Treasurer and was elected Secretary in December
1999. Prior to joining the Company, Mr. Myers was Vice President of Finance and
Treasurer of Primestar, Inc. from April 1998 to August 1999. From
September 1996 to April 1998, Mr. Myers served as Vice President of Finance and
Treasurer of TCI Satellite Entertainment, Inc. From November 1994 to
September 1996, Mr. Myers was Vice President of Capital Management for TCI Cable
Management Corporation and served as Director of Finance for
Tele-Communications, Inc. from December 1991 to November 1994.
REX A. HUMSTON joined Jato in October 1998 as its Vice President,
Engineering and Chief Technology Officer. Prior to joining the Company,
Mr. Humston was Vice President, Information Systems and Technology for Jones
International Inc., a telecommunications company, from May 1997 until
October 1998. From February 1996 to May 1997, Mr. Humston was Vice President and
Chief Information Officer of Health Decisions International, a teleservices
company. From April 1994 to February 1996, Mr. Humston served as Director,
Information Services for OneComm Corporation, a telecommunications company.
LEONARD ALLSUP is a founder of Jato and has served as a member of the board
of directors and as a Vice President since its inception in 1998. Mr. Allsup
also served as the Company's Treasurer from inception until August 1999. Prior
to joining the Company, Mr. Allsup served as Vice President, Strategic Alliances
of Formus Communications, Inc., from November 1996 to June 1998. Prior to
joining Formus in 1996, Mr. Allsup was an advisor to several privately owned
companies in the cable television and gaming industries. From February 1991 to
July 1995, Mr. Allsup was President and Chief Operating Officer of
KBL-Media, Inc., a subsidiary of KBLCOM, Inc., a diversified telecommunications
company.
BRUCE E. DINES, JR. is a founder of Jato and has served as a Vice President
since its inception. Mr. Dines also served as the Company's Secretary from
inception until December 1999. Mr. Dines was a member of the Company's board of
directors from inception to April 1999. Prior to forming the Company, Mr. Dines
was a Vice President of Formus Communications, Inc. from March 1997 to
March 1998. From April 1996 to March 1997, Mr. Dines served in a senior
operations role for Telephone Express, a long distance carrier. From
October 1991 to January 1996, Mr. Dines served in various senior-level operating
positions with American Telecasting, Inc., most recently as its Vice
President -- Eastern Region.
ERIC A. BENHAMOU has served as a member of the board of directors since
December 1999. Mr. Benhamou has served as Chief Executive Officer of 3Com
Corporation since September 1990 and as its President from April 1990 through
August 1998. Mr. Benhamou has been the Chairman of the Board of Directors of
3Com since July 1994. Mr. Benhamou served as 3Com's Chief Operating Officer from
April 1990 through September 1990. From October 1987 through April 1990,
Mr. Benhamou held various general management positions within 3Com.
Mr. Benhamou also serves as Chairman of the Board of Cypress Semiconductor,
Inc., and as a director of Legato Systems, Inc. Mr. Benhamou is a member of
President Clinton's Information Technology Advisory Council.
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TODD A. BROOKS has served as a member of the board of directors since
September 1999. Mr. Brooks joined Mayfield Fund, a Menlo Park-based venture
capital firm in February 1999, and has been a General Partner since June 1999,
where he specializes in investing in companies in the telecommunications
equipment and services sectors. From April 1995 to January 1999, Mr. Brooks
served as a Managing Principal for JAFCO America Ventures, the U.S. subsidiary
of JAFCO Co. LTD, an international venture capital investment firm. From August
1993 to April 1995, Mr. Brooks served as an equity research analyst for
telecommunications investments for Franklin-Templeton Group, an investment
corporation. From June 1987 to August 1991, Mr. Brooks held various engineering
and marketing roles at Applied Materials, Inc., a semiconductor capital
equipment company. Mr. Brooks currently serves on several private company boards
of directors.
JAMES J. COLLIS has served as a member of the board of directors since
April 1999. Mr. Collis is an Executive Vice President of CEA Management Corp., a
corporation formed to manage CEA Capital Partners USA, L.P. and CEA Capital
Partners USA CI, L.P., a New York-based venture capital firm. Mr. Collis has
served in this role since February 1997. Before joining CEA Management Corp.,
Mr. Collis was a Principal at Chase Manhattan Bank beginning in December 1996.
Before becoming a Principal, Mr. Collis was a Vice President of Chase Manhattan
Bank beginning in June 1995 and an Associate before that beginning in June 1991.
Mr. Collis specializes in investing in companies in the media and
telecommunications industry and serves on the board of directors of Acme
Communications, Inc. and for numerous private media and telecommunication
companies.
DONALD T. LYNCH has served as a member of the Board of Directors since
December 1999. In January 1999, Mr. Lynch founded Lynch Associates, LLC, a
telecommunications consulting company. Prior to that, Mr. Lynch served in
various management positions at MCI Telecommunications Corporation from November
1981 to December 1998, including Senior Vice President--Finance, Network MCI
Services from June 1994 to September 1995, Senior Vice President, Financial and
Accounting Operations from September 1995 to September 1996 and Senior Vice
President, Local Financial Operations from September 1996 to December 1998.
GREGG A. MOCKENHAUPT has served as a member of the board of directors since
April 1999. Since March 1996, Mr. Mockenhaupt has served as a member of Crest
Partners II, LLC, a private investment firm that was formed in 1996 to focus on
communications-related investments and which is the general partner of Crest
Communications Partners, L.P. Prior to joining Crest in March 1996, Mr.
Mockenhaupt was an Associate in the Mergers & Acquisitions Group of Smith
Barney Inc. from June 1994 to March 1996. Mr. Mockenhaupt currently serves on
several private company boards of directors.
OTHER OFFICERS
KEITH M. BENNETT joined Jato in July 1999 as its President, Direct Markets.
Prior to joining the Company, Mr. Bennett served as President of Compass
Management and Consulting from November 1997 to July 1999. Mr. Bennett held
senior management positions with U S WEST (Director of Sales and Customer
Service) from October 1992 to March 1996, USA.NET (Vice President of Sales) from
March 1996 to December 1996, Intergram International (Senior Vice President)
from February 1997 to November 1997, and Online Systems Services (Senior Vice
President) from April 1998 to November 1998.
F. THOMAS DANNER, III joined Jato in May 1999 as its Vice President,
Applications Planning. Prior to joining the Company, Mr. Danner served as
Executive Director of DMW Worldwide, Inc. from July 1997 to May 1999. From
August 1996 to July 1997, Mr. Danner was a principal of The McKenna Group, a
market-consulting group. From January 1994 to August 1996, Mr. Danner served as
Chief Architect of BellSouth Entertainment. From February 1985 to January 1994,
Mr. Danner served as Vice President of Development of BellSouth Advanced
Networks.
47
<PAGE>
PATRICK M. GREEN joined Jato in December 1998 as its Vice President, Carrier
Relations. Prior to joining the Company, Mr. Green was a consultant to domestic
and multinational companies in the local telephony and subscription television
industries from late 1995 to October 1998. From 1992 until forming his
consulting practice in late 1995, Mr. Green served as Vice President-Finance and
Administration of KBL-Media.
GERARD A. MAGLIO joined Jato in June 1999 as its Vice President, Marketing.
Prior to joining the Company, Mr. Maglio was the principal of Maglio &
Associates, a cable television and telecommunications firm founded in 1991.
Mr. Maglio is also a principal and partner in a number of entrepreneurial
marketing ventures both in and out of the cable telecommunications areas.
Mr. Maglio held senior management positions at American Television &
Communications (now Time Warner Cable) from July 1976 to August 1980, Rainbow
Programming Services from August 1980 to September 1982, Daniels & Associates
from September 1982 to September 1988, United Artists Cable from September 1988
to December 1991, DMX from February 1992 to April 1993 and Tele-Trend
Communications from April 1993 to July 1995.
ROBERT G. VIDAL joined Jato in July 1999 as its Vice President, Human
Resources. Prior to joining the Company, Mr. Vidal served as Vice President,
Human Resources for New Era of Networks, a global provider of packaged
solutions, from October 1998 through July 1999. From March 1998 to
October 1998, Mr. Vidal served as Vice President, Human Resources, for Customer
Insight Company, a Metromail Company. From August 1997 to March 1998, Mr. Vidal
held the position of Assistant Chief Operating Officer for Denver Public
Schools, the largest urban school district in Colorado. Beginning in 1989
through June of 1994, Mr. Vidal held the position of Senior Vice President,
Human Resources for CenterMark properties, a national retail real estate
developer.
EDWARD P. ZIEHM joined Jato in July 1999 as its Vice President, Business
Operations. Prior to joining the Company, Mr. Ziehm served in various
senior-level management positions at subsidiaries of TCI, including Executive
Vice President of Corporate Development for DMX and Vice President of TCI Music
from June 1997 to January 1998. He also served as Vice President Business
Technology & Operations for TCI from May 1993 to January 1997.
DIRECTORS' TERMS
We currently have eight directors. Members of the board of directors
currently hold office and serve until our next annual meeting of stockholders or
until their respective successors have been elected. In December 1999, our board
of directors approved, subject to stockholder approval, our restated certificate
of incorporation to provide for, among other things, a classified board of
directors. The restated certificate of incorporation states that the terms of
office of the board of directors will be divided into three classes: class I,
whose term will expire at the annual meeting of stockholders to be held in 2000,
class II, whose term will expire at the annual meeting of stockholders to be
held in 2001 and class III, whose term will expire at the annual meeting of
stockholders to be held in 2002. At each annual meeting of stockholders
beginning with the 2000 annual meeting, the successors to directors whose terms
expire will be elected to serve from the time of election and qualification
until the third annual meeting following election and until their successors
have been elected.
BOARD COMMITTEES
COMPENSATION COMMITTEE. Our compensation committee consists of
Messrs. Brooks, Collis and Mockenhaupt. The compensation committee reviews
salaries, bonuses and stock options of our executive officers, and administers
our executive compensation policies, stock option plans and the bonus program.
No member of the compensation committee has been an officer or employee of Jato
at any time. None of our executive officers serves as a member of the board of
directors or compensation committee of any other company that has one or more
executive officers serving as a member of our board of directors or compensation
committee.
48
<PAGE>
AUDIT COMMITTEE. Our audit committee consists of Messrs. Brooks, Collis,
Lynch and Mockenhaupt. The audit committee is primarily concerned with the
effectiveness of our accounting policies and practices, financial reporting and
internal controls. Specifically, the audit committee recommends to the board the
firm to be appointed as our independent public accountants; reviews and approves
the scope of the annual examination of our books and records; reviews the audit
findings and recommendations of the independent public accountants; monitors the
extent to which we have implemented changes recommended by the independent
public accountants, or the audit committee; and provides oversight with respect
to accounting principles to be employed in our financial reporting.
DIRECTOR COMPENSATION
Other than reimbursing directors for customary and reasonable expenses
incurred in attending board of directors and committee meetings, we do not
currently compensate our directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Compensation Committee of the board of directors
is an officer or employee of Jato. None of our executive officers serves as a
member of the board of directors or compensation committee of any entity that
has one or more executive officers serving on our board of directors or
Compensation Committee.
EMPLOYMENT AGREEMENTS
On April 16, 1999, we entered into an employment agreement with Brian E.
Gast. The agreement has a two-year term which automatically renews on a
month-to-month basis unless either of us give 30 days' prior written notice to
the other. The agreement provides for an annual base salary of $200,000 which
amount was recently increased to $275,000, and which amount increases annually
by the greater of (1) 5% of Mr. Gast's salary or (2) an amount determined by our
board of directors. Mr. Gast may be paid a cash bonus at the discretion of the
board. It also provides for an acceleration of Mr. Gast's stock options, if any,
and the termination of our repurchase rights on his stock if certain change in
control transactions occur or if we materially reduce his job responsibilities
or base salary. Pursuant to Mr. Gast's employment agreement we have provided
Mr. Gast a loan of $100,000 secured by a pledge of his common stock. The loan
bears interest at a rate of 5% per annum, compounded quarterly, and principal
and interest amounts will be forgiven if we terminate Mr. Gast without cause, if
a change of control transaction takes place or we materially reduce his job
responsibilities or base salary. One third of the principal and accrued interest
on the loan will be forgiven on each of the first three anniversaries of the
loan. However, if Mr. Gast voluntarily terminates his employment with us, any
principal and interest outstanding under the loan will be due and payable on
December 31, 2001. Either of us can terminate Mr. Gast's employment at any time.
However, if we terminate Mr. Gast's employment without cause, he will be
entitled to receive a lump-sum payment equal to one year's base salary, any
pro-rated bonus he is entitled to for that year, continuation of all company
benefits for a period of one year, and the vesting of all stock options and the
waiver of all repurchase rights on his stock.
In connection with Gerald K. Dinsmore's employment as our President and
Chief Operating Officer, we entered into an employment agreement with Mr.
Dinsmore on August 31, 1999. On the same date, Mr. Dinsmore purchased 500,000
shares of restricted common stock that is subject to a repurchase option on our
behalf, which is released at the rate of 25% on the first anniversary of the
purchase and the balance ratably over 24 months. The repurchase option
terminates in the event of a change of control of Jato, termination without
cause, a material reduction in responsibilities or job title. The purchase price
for the restricted common stock was $0.75 per share, or $375,000 in the
aggregate, which was paid for with $5,000 cash and by the execution of a full
recourse promissory note, secured by a pledge of the 500,000 shares of common
stock. Subject to Mr. Dinsmore not terminating his
49
<PAGE>
employment with us, the note will be forgiven in two equal installments and we
will pay Mr. Dinsmore $80,000 to cover taxes associated with note forgiveness.
We have also agreed to reimburse certain commuting and relocation expenses of
Mr. Dinsmore associated with his relocation from Dallas to Denver.
In connection with Mr. Dinsmore's appointment as our Chief Executive
Officer, we intend to enter into an amended employment agreement with Mr.
Dinsmore, which agreement will provide for a two-year term which automatically
renews on a month-to-month basis unless either of us give 30 days' prior written
notice to the other. The agreement will provide for an annual base salary of
$300,000 which will increase annually in an amount determined by our board of
directors. In the event Mr. Dinsmore is terminated without cause, we will
continue to pay his salary and benefits for 12 months as well as a pro-rated
bonus for that portion of the calendar year he was employed by us. Mr. Dinsmore
will also be granted an option to purchase 800,000 shares of our common stock,
subject to the terms and conditions set forth in the stock option agreement to
be attached to the amended employment agreement. Mr. Dinsmore will agree to
abide by the terms of his previously executed non-competition, proprietary
information and inventions agreement.
On August 16, 1999, we entered into an employment agreement with William D.
Myers, our Vice President, Finance, Chief Financial Officer and Treasurer. The
agreement has a two-year term which automatically renews on a month-to-month
basis unless either of us give 30 days' prior written notice to the other. The
agreement provides for an annual base salary of $185,000 which amount increases
annually by the greater of (1) 5% of Mr. Myers' salary or (2) an amount
determined by our board of directors. Mr. Myers may be paid a cash bonus at the
discretion of the board. It also provides for an acceleration of 50% of
Mr. Myers' stock options, if any, and the termination of our repurchase rights
on the shares of stock underlying those options if certain change in control
transactions occur or upon the closing of this offering. Either of us can
terminate Mr. Myers' employment at any time. However, if we terminate
Mr. Myers' employment without cause, he will be entitled to receive twelve
months' base salary and any pro-rated bonus he is entitled to for that year.
The employment agreements we have entered into with certain of our other
executive officers and key employees generally provide for the same types of
terms as those agreements described above. If we terminate an executive's
employment during the term of his employment agreement without cause, the
executive would generally be entitled to receive a severance package from the
Company.
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by or
paid to our Chief Executive Officer and our four other most highly compensated
executive officers whose annual salary and bonus exceeded $100,000 for services
rendered in all capacities to us during 1998 (collectively, the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE(1)(2)
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION -------------
------------------------------------------- SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL UNDERLYING ALL OTHER
POSITION(S) YEAR SALARY ($) BONUS ($) COMPENSATION ($) OPTIONS (#) COMPENSATION
- ------------------------------- --------- ----------- ----------- ----------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Brian E. Gast(3) .............. 1998 $ 66,667(4) -- -- -- --
President and Chief Executive
Officer
</TABLE>
- ------------------------
(1) In accordance with the rules of the Securities and Exchange Commission, the
compensation described in this table does not include medical, group life
insurance or other benefits received by
50
<PAGE>
the Named Executive Officers that are available generally to all salaried
employees and various perquisites and other personal benefits received by
the Named Executive Officers, which do not exceed the less of $50,000 or 10%
of any officer's salary and bonus disclosed in this table.
(2) Messrs. Allsup, Dines, Green and Humston did not serve as employees of Jato
for all of 1998. If these officers' base salaries were annualized for all of
1998, their compensation would have been required disclosure in this table.
For 1998, all of their base salaries on an annualized basis were $150,000.
If Messrs. Dinsmore, Myers and Danner, who were not hired by Jato until
August 1999 and May 1999, respectively, had been employed with Jato during
1998 pursuant to the same compensation arrangement that they have with us
during 1999, their compensation would have been required disclosure in this
table. Effective December 1999, Mr. Dinsmore's base salary is $300,000. For
1999, Mr. Myers' base salary is $185,000 and Mr. Danner's base salary is
$150,000. Mr. Dinsmore was elected President and Chief Operating Officer of
the Company in August 1999 and Chief Executive Officer in November 1999.
(3) Mr. Gast served as President from inception to August 1999 and as Chief
Executive Officer from inception to November 1999.
(4) Mr. Gast's annualized salary for year 1998 was $200,000.
No options or stock appreciation rights were granted to the Named Executive
Officers during 1998.
OPTIONS EXERCISED DURING 1998 AND OPTION VALUES
There were no exercises of options by any Named Executive Officer during
1998.
EQUITY INCENTIVE PLAN
Our 1998 equity incentive plan was adopted by the board of directors and
approved by our stockholders on August 10, 1998. The incentive plan was amended
in April 1999. There is currently an aggregate of 5,675,000 shares of common
stock authorized for issuance under the incentive plan. The incentive plan will
terminate on August 10, 2008 unless sooner terminated by the board (or
Committee).
As of September 30, 1999, we had granted options under the incentive plan to
purchase an aggregate of 2,809,750 shares of common stock at a weighted average
price of $2.27 per share, 15,000 shares of which had been exercised and 97,000
shares of which had lapsed.
The incentive plan provides for the grant of incentive stock options, as
defined under the Internal Revenue Code of 1986, as amended, to employees
(including officers and employee-directors) and nonstatutory stock options,
restricted stock purchase awards, stock bonuses and stock appreciation rights to
employees (including officers and employee-directors), directors and consultants
of Jato and its affiliates. The incentive plan is administered by the board or a
committee appointed by the board which determines recipients and types of awards
to be granted, including the exercise price, number of shares subject to the
award and the exercisability thereof.
The terms of options granted under the incentive plan may not exceed ten
years. The board or committee determines the exercise price of options granted
under the incentive plan. However, the exercise price for an incentive stock
option cannot be less than 100% of the fair market value of the common stock on
the date of the option grant, and the exercise price for a nonstatutory stock
option cannot be less than 50% of the fair market value of the common stock on
the date of the option grant. Options granted under the incentive plan vest at
the rate specified in the option agreement, which is generally four years.
Generally, the optionee may not transfer a stock option other than by will or
the laws of descent or distribution unless the optionee holds a nonstatutory
stock option that provides for transfer in the stock option agreement. However,
an optionee may designate a beneficiary who may exercise the option following
the optionee's death. An optionee whose service relationship with Jato or
51
<PAGE>
any affiliate ceases for any reason may exercise vested options for the term
provided in the option agreement, which is generally three months.
No incentive stock option may be granted to any person who, at the time of
the grant, owns (or is deemed to own) stock possessing more than 10% of the
total combined voting power of Jato or any affiliate of Jato, unless the option
exercise price is at least 110% of the fair market value of the stock subject to
the option on the date of grant and the term of the option does not exceed five
years from the date of grant. In addition, the aggregate fair market value,
determined at the time of grant, of the shares of common stock with respect to
which incentive stock options are exercisable for the first time by an optionee
during any calendar year, under the incentive plan and all other stock plans of
Jato and its affiliates, may not exceed $100,000.
Pursuant to Section 162(m) of the Internal Revenue Code (which denies a
deduction to publicly held corporations for certain compensation paid to
specified employees in a taxable year to the extent that the compensation
exceeds $1,000,000), no person may be granted options under the incentive plan
covering more than 200,000 shares of common stock in any calendar year.
Shares subject to stock awards that have expired or otherwise terminated
without having been exercised in full again become available for the grant of
awards under the incentive plan. Under its general authority to grant and to
amend options, the board (or committee) has the implicit authority to reprice
outstanding options or to offer optionees the opportunity to replace outstanding
options with new options for the same or a different number of shares. Both the
original and new options will count toward the Internal Revenue Code
Section 162(m) limitation set forth above.
Restricted stock purchase awards granted under the incentive plan may be
granted pursuant to a repurchase option in favor of Jato in accordance with a
vesting schedule determined by the board (or committee). The price of a
restricted stock purchase award under the incentive plan can not be less than
85% of the fair market value of the stock subject to the award on the date of
grant. Stock bonuses may be awarded in consideration of past services without a
purchase payment. Unless otherwise specified, rights under a stock bonus or
restricted stock bonus agreement generally may not be transferred other than by
will or the laws of descent and distribution during such period as the stock
awarded pursuant to such an agreement remains subject to the agreement. Stock
appreciation rights granted under the incentive plan allow a recipient to elect
to receive cash or stock of a value equal to the appreciation of optioned
rights. The incentive plan authorizes three types of stock appreciation rights:
a tandem stock appreciation right is granted along with a stock option and is
subject to the same terms and conditions applicable to the option. It requires
the holder to elect between exercising the option (and receiving our shares) or
surrendering, in whole or in part, the option and receiving instead cash or
stock equal to the appreciation of the shares that are surrendered. A concurrent
stock appreciation right also is granted with a stock option and is subject to
the same terms and conditions applicable to the option. However, it is exercised
automatically at the same that the recipient exercises the option. Without
surrendering any of the shares subject to the option, the recipient receives
cash or stock equal to the appreciation of the shares exercised. On the other
hand, an independent stock appreciation right is not granted with a stock
option, although it generally is subject to the same terms and conditions
applicable to nonstatutory stock options. On exercising the independent stock
appreciation right, the recipient receives cash or stock equal to the
appreciation of the share equivalents that the recipient is exercising.
If there is any sale of substantially all of our assets, any merger, reverse
merger or any consolidation in which we are not the surviving corporation, or
any acquisition by certain persons, entities or groups of 50% or more of our
stock, all outstanding awards under the Incentive Plan either will be assumed or
substituted for by any surviving entity. If the surviving entity determines not
to assume or substitute for such awards, the vesting provisions of such stock
awards will be accelerated and the awards terminated if not exercised prior to
such transaction.
52
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to beneficial
ownership of our common stock as of September 30, 1999 for:
- each person (or group of affiliated persons) known to us to own
beneficially more than 5% of the common stock,
- each of our directors and named executive officers, and
- all of our directors and executive officers as a group.
The information has been adjusted to reflect the sale of the common stock in
this offering (assuming no exercise of the underwriters' over-allotment option)
and the conversion of all outstanding shares of preferred stock into common
stock.
In accordance with the rules of the Securities and Exchange Commission, the
following table gives effect to the shares of common stock that could be issued
upon the exercise of outstanding options and warrants within 60 days of
September 30, 1999. Unless otherwise noted in the footnotes to the table and
subject to community property laws where applicable, the following individuals
have sole voting and investment control with respect to the shares beneficially
owned by them. Unless otherwise indicated, the business address for each of the
individuals or entities listed below is c/o Jato Communications Corp., 1099
18(th) Street, Suite 2200, Denver, Colorado 80202.
<TABLE>
<CAPTION>
PERCENT OF SHARES
SHARES BENEFICIALLY OWNED(1)
BENEFICIALLY ------------------------
OWNED PRIOR PRIOR TO AFTER
NAME TO OFFERING OFFERING OFFERING
- -------------------------------------------------------------------------- ------------- ----------- -----------
<S> <C> <C> <C>
Crest Communications Partners, L.P. ...................................... 4,428,571 16.95% %
320 Park Avenue, 17(th) Floor
New York, NY 10022
CEA Capital Partners USA, L.P.(2) ........................................ 4,428,571 16.95
17 State Street, 35(th) Floor
New York, NY 10004
Brian E. Gast(3).......................................................... 2,305,334 8.82
Leonard Allsup(4)......................................................... 2,164,333 8.28
Entities affiliated with
Hambrecht & Quist(5) ..................................................... 2,285,714 8.75
One Bush Street
San Francisco, CA 94104
Entities affiliated with 2,619,047 10.03
ABN AMRO Capital (USA), Inc.(6) ..........................................
208 S. LaSalle Street, 10(th) Floor
Chicago, IL 60604
Entities affiliated with 1,571,429 6.02
Mayfield X, L.P.(7) ......................................................
2800 Sand Hill Road, Suite 250
Menlo Park, CA 94025
Eric A. Benhamou.......................................................... -- *
Todd A. Brooks(8)......................................................... 1,571,429 6.02
James J. Collis(9)........................................................ 4,428,571 16.95
Gerald K. Dinsmore........................................................ 530,000 2.03
Donald T. Lynch........................................................... -- *
Gregg A. Mockenhaupt(10).................................................. 4,428,571 16.95
Bruce E. Dines, Jr.(11)................................................... 1,160,667 4.44
Rex A. Humston............................................................ 507,143 1.94
William D. Myers.......................................................... 7,143 *
All directors and executive officers as a group
(11 persons)(12)........................................................ 17,103,191 65.47% %
</TABLE>
53
<PAGE>
- ------------------------
* Indicates beneficial ownership of less than one percent.
(1) In accordance with Rule 13d-3 under the Securities and Exchange Act of 1934,
as amended (the "Exchange Act"), a person is deemed to be a "beneficial
owner" of a security if he or she has or shares the power to vote or direct
the voting of such security or the power to dispose or direct the
disposition of such security. A person is also deemed to be a beneficial
owner of any securities of which that person has the right to acquire
beneficial ownership within 60 days. More than one person may be deemed to
be a beneficial owner of the same securities. The percentage ownership of
each stockholder is calculated based on the total number of outstanding
shares of common stock, including outstanding shares of preferred stock
convertible into common stock, of as of September 30, 1999.
(2) Includes 1,043,814 shares held by its affiliate CEA Capital Partners USA CI,
L.P.
(3) Includes 1,613,734 shares subject to a repurchase option by Jato and 450,000
shares held by Gast Investment LLLP of which Mr. Gast is a general partner.
(4) Includes 26,666 shares held as custodian for his daughter and 1,515,033
shares subject to a repurchase option by Jato.
(5) Includes 156,785 shares held by H&Q Jato Communications Investors, L.P.,
209,286 shares held by Hambrecht & Quist California, 89,286 shares held by
Hambrecht & Quist Employee Venture Fund, L.P. II, 1,808,571 shares held by
Access Technology Partners, L.P. and 21,786 shares held by Access Technology
Partners Brokers Fund, L.P. of which H&Q Venture Management, L.L.C. is the
general partner.
(6) Includes 126,891 shares held by ABN AMRO Incorporated and 662,244 shares
held by I Eagle Trust. I Eagle Trust is managed by ABN AMRO Private Equity,
a department of ABN AMRO, Inc.
(7) Includes 157,143 shares held by Mayfield Principals Fund, L.L.C. and
47,143 shares held by Mayfield Associates Fund IV, L.P.
(8) Mr. Brooks is a Managing Director of Mayfield X Management, LLC, the general
partner of Mayfield X, L.P. and a Managing Director of Mayfield Principals
Fund, LLC (the "Mayfield Entities"). Mr. Brooks may be deemed to be the
indirect beneficial owner of the shares owned by the Mayfield Entities. Mr.
Brooks disclaims beneficial ownership of the shares held by the Mayfield
Entities, except to the extent of his pecuniary interest arising therein.
(9) Mr. Collis is an Executive Vice President of CEA Management Corp.
("Management Corp.") which manages CEA Capital Partners USA, L.P. and CEA
Capital Partners USA CI, L.P. and disclaims beneficial ownership of the
shares held by each of CEA Capital Partners USA, L.P. and CEA Capital
Partners USA CI, L.P.
(10) The General Partner of Crest Communications Partners, L.P. ("CCP") is Crest
Partners II, LLC. The management company of CCP is Crest Communications
Holdings LLC ("Holdings"). Holdings may be deemed to indirectly beneficially
own the shares owned by CCP. Mr. Mockenhaupt is a member of Holdings and may
be deemed to be the indirect beneficial owner of the shares owned by CCP.
Mr. Mockenhaupt disclaims beneficial ownership of the shares held by CCP,
except to the extent of his pecuniary interest arising therein.
(11) Includes 3,333 shares held by Mr. Dines' spouse, 30,000 shares held by the
Bruce E. Dines Jr. 1999 Annuity Trust, of which Mr. Dines is Trustee and
814,800 shares subject to a repurchase option.
(12) Includes 3,943,567 shares subject to a repurchase option by Jato. See Notes
2 through 11 above.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following is a description of transactions since our inception in
July 1998 to which we have been a party, in which the amount involved exceeds
$60,000 and in which any director, executive officer or holder of more than 5%
of our capital stock had or will have a direct or indirect material interest,
other than our compensation arrangements with our executive officers which are
described under "Management."
SERIES C FINANCING
On September 16, 1999, we issued an aggregate of 3,938,714 shares of
Series C preferred stock to certain principal stockholders and certain other
investors at a purchase price of $7.00 per share. We agreed to reduce the price
per share of the Series C preferred stock to $5.60 per share if specified
conditions were not satisfied by November 15, 1999. On November 16, 1999, we
issued an additional 984,666 shares of Series C preferred stock because such
conditions were not satisfied. Of the 4,923,380 shares of Series C preferred
stock issued, an aggregate of 3,749,992 shares were sold to the following
principal stockholders for an aggregate purchase price of approximately $21
million:
<TABLE>
<CAPTION>
AGGREGATE
PURCHASER NUMBER OF SHARES PURCHASE PRICE
- ---------------------------------------------------------------------------- ------------------ ----------------
<S> <C> <C>
Crest Communications Partners, L.P.......................................... 535,713 $ 2,999,997.00
Entities affiliated with CEA Capital Partners USA, L.P...................... 535,713 2,999,997.00
Entities affiliated with ABN AMRO Capital (USA), Inc........................ 357,142 1,999,998.00
Entities affiliated with Hambrecht & Quist.................................. 357,140 1,999,998.00
Entities affiliated with Mayfield X, L.P.................................... 1,964,284 11,000,003.00
------------ ----------------
Total:...................................................................... 3,749,992 $ 20,999,993.00
============ ================
</TABLE>
In addition, of the 4,923,380 shares of Series C preferred stock issued,
37,500 shares, 17,857 shares and 17,857 shares were sold to Gerald K. Dinsmore,
Gerard A. Maglio and Edward P. Ziehm, respectively, officers of Jato, for
purchase prices of $210,000, $100,002, and $100,002, respectively. An aggregate
of 1,100,176 shares were sold to other accredited investors.
SERIES B FINANCING
On April 16, 1999 and May 15, 1999, we issued an aggregate of 13,615,322
shares of Series B preferred stock to certain principal stockholders and certain
other investors at a purchase price of $1.50 per share. Of the 13,615,322 shares
of Series B preferred stock issued, an aggregate of 12,333,333 shares were sold
to the following principal stockholders for an aggregate purchase price of
approximately $18.5 million and an aggregate of 1,281,989 shares were sold to
other accredited investors.
<TABLE>
<CAPTION>
AGGREGATE
PURCHASER NUMBER OF SHARES PURCHASE PRICE
- ----------------------------------------------------------------------------- ----------------- ----------------
<S> <C> <C>
Crest Communications Partners, L.P........................................... 4,000,000 $ 6,000,000.00
Entities affiliated with CEA Capital Partners USA, L.P....................... 4,000,000 6,000,000.00
Entities affiliated with ABN AMRO Capital (USA), Inc......................... 2,333,333 3,499,999.50
Entities affiliated with Hambrecht & Quist................................... 2,000,000 3,000,000.00
------------- ----------------
Total:....................................................................... 12,333,333 $ 18,499,999.50
============= ================
</TABLE>
SERIES A FINANCING
On October 23, 1998 and October 30, 1998, we issued an aggregate of
1,143,323 and 608,662 shares, respectively, of Series A preferred stock to
certain principal stockholders and certain other
55
<PAGE>
investors at a purchase price of $0.75 per share. Of the 1,751,985 shares of
Series A preferred stock sold by us, 133,333 shares were sold to Gerard A.
Maglio, an executive officer of Jato, for an aggregate purchase price of
approximately $100,000.
REGISTRATION RIGHTS
Pursuant to the amended and restated investors' rights agreement dated as of
September 16, 1999, as amended, among Jato and certain investors, the investors
have certain registration rights for the shares of common stock held by them.
See "Description of Capital Stock -- Registration Rights" for a description of
these registration rights.
LOANS
In May 1999, Jato loaned $100,000 to Mr. Gast pursuant to his employment
agreement. See
"-- Employment Agreements." The loan is secured by a pledge of Mr. Gast's common
stock. The loan bears interest at a rate of 5% per annum, compounded quarterly,
and principal and interest amounts will be forgiven if Jato terminates Mr. Gast
without cause, if a change of control transaction takes place or if Jato
materially reduce Mr. Gast's job responsibilities or base salary. One third of
the principal and accrued interest on the loan will be forgiven on each of the
first three anniversaries of the loan. However, if Mr. Gast voluntarily
terminates his employment with Jato, any principal and interest outstanding
under the loan will be due and payable on December 31, 2001.
COMMON STOCK PURCHASES
On August 31, 1999, Mr. Dinsmore purchased 500,000 shares of the Company's
Common Stock pursuant to a Restricted Stock Purchase Agreement in consideration
of a full recourse promissory note from Jato in the principal amount of $370,000
and $5,000 cash. The note bears interest at a rate of 7% per annum over two
years. Subject to Mr. Dinsmore not terminating his employment with Jato,
principal and interest amounts under the note will be forgiven in two
installments of equal amount on the first and second anniversary of his start
date with Jato. Upon each such installment Jato will pay Mr. Dinsmore $80,000 to
cover taxes associated with the forgiveness of the note. All principal and
interest of the note will be forgiven and both tax-related payments will be paid
upon the occurrence of (i) a change of control, (ii) termination of his
employment for reasons other than cause, (iii) material reduction of
responsibilities or duties, or (iv) a material downgrading of title.
OTHER TRANSACTIONS
We intend to enter into indemnity agreements with each of our executive
officers and directors.
We believe that each of the transactions described above was carried out on
terms that were no less favorable to us than those that would have been obtained
from unaffiliated third parties. Any future transactions between us and any of
our directors, officers or principal stockholders will be on terms no less
favorable to us than could be obtained from unaffiliated third parties and will
be approved by a majority of the independent and disinterested members of the
board of directors.
For information concerning indemnification of directors and officers see
"Description of Capital Stock -- Limitation of Liability and Indemnification
Matters."
56
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock currently consists of 80,000,000 shares of
common stock, par value $.01 per share and 25,000,000 million shares of
preferred stock, par value $.01 per share.
The following description of our securities reflects changes that will be
made to our certificate of incorporation and bylaws upon the closing of this
offering. We have filed our restated certificate of incorporation and amended
and restated bylaws as exhibits to the registration statement of which this
prospectus is a part.
COMMON STOCK
As of December 21, 1999, there were 6,822,814 shares of common stock
outstanding and held of record by 16 stockholders, assuming the cash exercise of
warrants to purchase 25,000 shares of common stock, which will expire if not
exercised prior to the closing of this offering. Upon the closing of this
offering, and after giving the simultaneous conversion of all of our outstanding
shares of preferred stock, there will be shares of common stock
outstanding (assuming no exercise of the underwriters' over-allotment option).
Holders of common stock are entitled to one vote for each share on all
matters submitted to a vote of stockholders. Holders of common stock are not
entitled to cumulative voting rights in the election of directors. Accordingly,
minority stockholders will not be able to elect directors on the basis of their
votes alone. Subject to preferences that may be applicable to any
then-outstanding shares of preferred stock, holders of common stock are entitled
to receive ratably such dividends as may be declared by our board of directors.
In the event we liquidate, dissolve or wind up our affairs, holders of common
stock are entitled to share ratably in all assets remaining after payment of
liabilities and the liquidation preferences of any then-outstanding shares of
preferred stock. Holders of common stock have no preemptive, subscription,
redemption or conversion rights.
PREFERRED STOCK
Our Series A, Series B and Series C preferred stock will automatically
convert into shares of common stock upon the closing of this offering. For a
description of the terms of our preferred stock, see Note 9 of the notes to our
consolidated financial statements.
Our board of directors is authorized, without further stockholder approval,
to issue up to an aggregate of 2,000,000 shares of preferred stock in one or
more series. The board of directors may fix or alter the designations,
preferences, rights and any qualifications, limitations or restrictions of the
shares of each such series, and the dividend rights, dividend rates, conversion
rights, voting rights, terms of redemption, redemption price or prices and
liquidation preferences. The issuance of preferred stock could:
- adversely affect the voting power of holders of common stock;
- adversely affect the likelihood that the holders of common stock will
receive dividend payments and payments upon liquidation; and
- delay, defer or prevent a change in control.
We have no present plans to issue any shares of preferred stock.
WARRANTS
In June 1999 and August 1999, we issued warrants to purchase an aggregate of
25,000 shares of common stock at an exercise price of $3.00 per share to two
investors. The warrants contain anti-dilution provisions providing for
adjustments of the exercise price and the number of shares of
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<PAGE>
common stock underlying the warrants upon the occurrence of any
recapitalization, reclassification, stock dividend, stock split, stock
combination or similar transaction. Each of these warrants will expire upon the
closing of this offering, unless earlier exercised.
REGISTRATION RIGHTS
Pursuant to the amended and restated investors' rights agreement dated as of
September 16, 1999, as amended, between Jato and some of our investors, the
investors have registration rights for the 20,290,687 shares of common stock
held by them. Under the rights agreement, the investors may demand, on no more
than two occasions, by written request from holders of (a) more than 40% of the
then outstanding investors' registrable securities held by (i) those investors
who converted their shares of Series A preferred stock into shares of common
stock and (ii) Brian E. Gast, Bruce E. Dines and Leonard Allsup or (b) at least
51% of the then outstanding investors' registrable securities held by those
investors who converted their shares of Series B preferred stock into shares of
common stock, that we file a registration statement under the Securities Act
covering all or a portion of the investors' registrable securities; provided
that, in the case of a registration on a form other than a Form S-3, there is an
aggregate offering price to the public of at least $10.0 million. In addition,
the holders of more than 25% of the then outstanding investors' registrable
securities may demand, by written request, that we file a registration statement
on Form S-3, provided that there is an aggregate offering price to the public of
at least $5.0 million. These registration rights are subject to our right to
delay the filing of a registration statement for a period not to exceed
90 days, provided that we cannot delay more than once in a 12-month period after
receiving the registration demand. In the case of a registration on a form other
than Form S-3, the managing underwriter, if any, of any such offering has
certain rights to limit the number of the registrable securities proposed to be
included in such registration.
In addition, the investors under the rights agreement also have "piggyback"
registration rights. If we propose to register any of our securities under the
Securities Act (other than pursuant to the investors' demand registration rights
noted above), the investors may require us to include all or a portion of their
registrable securities in such registration. The managing underwriter, if any,
of any such offering will have the right to limit the number of the registrable
securities to no less than 25% of the total number of securities proposed to be
included in such registration.
All registration expenses incurred in connection with the above
registrations would be borne by us. Each selling investor would pay all
underwriting discounts and selling commissions applicable to the sale of his or
its registrable securities.
All registration rights described above will terminate five years after the
date of our initial public offering. Following the closing of this offering, the
registration rights of each investor will terminate 12 months following the date
when all of the registrable securities held by that investor may be sold under
Rule 144 of the Securities Act during any 90-day period. The holders of
registrable securities have waived their right to include shares in this
offering.
ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF DELAWARE LAW AND OUR CERTIFICATE
OF INCORPORATION AND BYLAWS
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law, which generally prohibits a publicly-held Delaware corporation
from engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless the interested stockholder attained
that status with the approval of the corporation's board of directors or unless
the business combination is approved in a prescribed manner. "Business
combinations" include mergers, asset sales and other transactions resulting in a
financial benefit to the interested stockholder. With certain exceptions, an
"interested
58
<PAGE>
stockholder" is a person who, together with affiliates and associates, owns, or
within three years did own, fifteen percent (15%) or more of a corporation's
voting stock. This statute could prohibit or delay the accomplishment of mergers
or other takeover or change-in-control attempts and, accordingly, may discourage
attempts to acquire us.
The following provisions of our restated certificate of incorporation and
amended and restated bylaws that will become effective upon the closing of this
offering may have an anti-takeover effect and may delay or prevent a tender
offer or takeover attempt that a stockholder might consider to be in its best
interest, including attempts that might result in a premium over the market
price for the common stock:
CLASSIFIED BOARD OF DIRECTORS. Our board of directors will be divided into
three classes. The directors in class I will hold office until the first annual
meeting of stockholders following this offering, the directors in class II will
hold office until the second annual meeting of stockholders following this
offering, and the directors in class III will hold office until the third annual
meeting of stockholders following this offering. After each such election, the
directors in that class will serve for terms of three years. The classification
system of electing directors may tend to discourage a third party from making a
tender offer or otherwise attempting to obtain control of us and may maintain
the incumbency of the board of directors, since such classification generally
increases the difficulty of replacing a majority of the directors.
BOARD OF DIRECTOR VACANCIES. The board of directors will be authorized to
fill vacant directorships and to increase the size of the board of directors.
This may deter a stockholder from removing incumbent directors and
simultaneously gaining control of the board of directors by filling the
resulting vacancies with its own nominees.
STOCKHOLDER ACTION; SPECIAL MEETINGS OF STOCKHOLDERS. Our stockholders will
not be permitted to take action by written consent, but only at duly called
annual or special meetings of stockholders. In addition, special meetings of
stockholders may be called only by the chairman of the board, the chief
executive officer or a majority of the board of directors.
ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS. Stockholders seeking to bring business before an annual meeting of
stockholders, or to nominate candidates for election as directors at an annual
meeting of stockholders, must deliver a written notice to our principal
executive offices within a prescribed time period. Our amended and restated
bylaws also set forth specific requirements as to the form and content of a
stockholder's notice. These provisions may preclude stockholders from bringing
matters before an annual meeting of stockholders or from making nominations for
the election of directors at an annual meeting of stockholders.
AUTHORIZED BUT UNISSUED SHARES. The authorized but unissued shares of
common stock and preferred stock are available for future issuance without
stockholder approval, subject to limitations imposed by the Nasdaq National
Market. We may use these additional shares for a variety of corporate purposes,
including future public offerings to raise additional capital, acquisitions and
employee benefit plans. The existence of authorized but unissued and unreserved
common stock and preferred stock could render more difficult or discourage an
attempt to obtain control of us by means of a proxy contest, tender offer,
merger or otherwise.
LIMITATIONS ON LIABILITY AND INDEMNIFICATION MATTERS
Our amended and restated bylaws that will become effective upon the closing
of this offering provide that we will indemnify our directors and executive
officers to the fullest extent permitted by Delaware law and may indemnify our
other officers, employees and other agents to the fullest extent permitted by
Delaware law.
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<PAGE>
In addition, our restated certificate of incorporation that will become
effective upon the closing of this offering provides that, to the fullest extent
permitted by Delaware law, our directors will not be personally liable to us or
our stockholders for monetary damages for any breach of fiduciary duty as
directors. This provision of the restated certificate of incorporation does not
eliminate the directors' duty of care. In appropriate circumstances, equitable
remedies such as an injunction or other forms of non-monetary relief are
available under Delaware law. This provision also does not affect the directors'
responsibilities under any other laws, such as the federal securities laws and
state and federal environmental laws.
Each director will continue to be subject to liability for:
- breach of a director's duty of loyalty to us and our stockholders;
- acts or omissions not in good faith or that involve intentional misconduct
or a knowing violation of law;
- unlawful payments of dividends or unlawful stock repurchases or
redemptions; and
- any transaction from which a director derived an improper personal
benefit.
We also intend to enter into indemnity agreements with our directors and
executive officers and to obtain directors' and officers' liability insurance.
There is no pending litigation or proceeding involving any of our directors
or officers as to which indemnification is being sought. We are not aware of any
pending or threatened litigation that may result in a claim for indemnification.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers or persons controlling our company pursuant
to the foregoing provisions, we have been informed that, in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
LISTING
We will apply for listing of the common stock on the Nasdaq National Market
under the trading symbol JATO.
TRANSFER AGENT AND REGISTRAR
We have appointed Norwest Bank Minnesota, N.A. to serve as the transfer
agent and registrar for the common stock.
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common
stock. We cannot predict what effect, if any, market sales of shares or the
availability of shares for sale will have on the market price of our common
stock prevailing from time to time. Nevertheless, sales of substantial amounts
of common stock in the public market, or the perception that such sales could
occur, could adversely affect the market price of the common stock and could
impair our future ability to raise capital through the sale of our equity
securities.
Upon the closing of this offering, we will have a total of
shares of common stock outstanding, assuming no exercise of the underwriters'
over-allotment option, the exercise of outstanding warrants to purchase
25,000 shares of common stock and no exercise of options. Of the outstanding
shares, the shares being sold in this offering will be freely
tradable, except that any shares held by our "affiliates" may only be sold in
compliance with the limitations described below. The remaining
shares of common stock will be "restricted securities" that
may be sold in the public market only if they are registered under the
Securities Act or if they qualify for an exemption from registration under
Rule 144, 144(k) or 701 promulgated under the Securities Act.
Subject to the lock-up agreements described below and the provisions of
Rules 144, 144(k) and 701, additional shares will become available for sale in
the public market as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES DATE
- ---------------------------------------------- ----------------------------------------------
<S> <C>
.................................. Upon the date of this prospectus (shares
eligible for resale under Rule 144(k) and not
subject to lock-up agreements)
.................................. 90 days following the date of this prospectus
(shares eligible for resale under Rules 144
and 701 and not subject to lock-up agreements)
.................................. 180 days following the date of this prospectus
(lock-up agreements released)
.................................. After the expiration of the lock-up period
pursuant to Rule 144
</TABLE>
In general, under Rule 144, a person (or persons whose shares are required
to be aggregated), including an affiliate, who has beneficially owned shares for
at least one year is entitled to sell, within any three-month period commencing
90 days after the date of this prospectus, a number of shares that does not
exceed the greater of (i) 1% of the then-outstanding shares of common stock
(approximately shares immediately after this offering) or (ii) the
average weekly trading volume of the common stock during the four calendar weeks
preceding the date on which notice of that sale is filed. In addition, a person
who is not considered an affiliate of ours at any time during the 90 days
preceding a sale and who has beneficially owned the shares proposed to be sold
for at least two years is entitled to sell such shares under Rule 144(k) without
regard to the volume limitations described above. Securities issued in reliance
on Rule 701 (such as shares of common stock that may be acquired pursuant to the
exercise of certain options granted prior to this offering) are also restricted
securities and may be sold by stockholders other than our affiliates 90 days
after the effective date of this offering subject only to the manner of sale
provisions of Rule 144 and by our affiliates under Rule 144 without compliance
with its one-year holding period requirement.
In addition, following the completion of this offering, we intend to file a
registration statement to register for resale the 5,675,000 shares of common
stock available for issuance under our stock plan.
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<PAGE>
Accordingly, shares issued under the plan will become eligible for resale in the
public market from time to time, subject to the lock-up agreements described
below and, in the case of affiliates of Jato, the volume limitations of
Rule 144 described above. As of the date of this prospectus, options and
purchase rights to acquire a total of 2,809,750 shares of common stock are
outstanding under our stock plans, of which 88,750 are currently exercisable.
Directors, officers and stockholders of Jato holding an aggregate of
shares of common stock have agreed that they will not sell any shares of
common stock without the prior written consent of Merrill Lynch, Pierce,
Fenner & Smith Incorporated, for a period of 180 days from the date of this
prospectus. Please refer to our discussion in "Underwriting" for further
discussion of these agreements.
We have agreed not to sell or otherwise dispose of, or file a registration
statement with respect to, any shares of common stock during the 180-day period
following the date of this prospectus, other than the grant of options and
purchase rights under our stock plan and the issuance of common stock pursuant
thereto.
Following this offering, certain of our stockholders will have rights to
have their shares of common stock registered for resale under the Securities
Act. Please refer to our discussion under "Description of Capital Stock --
Registration Rights" for further discussion of these registration rights.
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<PAGE>
UNDERWRITING
Merrill Lynch, Pierce, Fenner & Smith Incorporated and Bear, Stearns &
Co. Inc. are acting as representatives of the underwriters. Subject to the terms
and conditions contained in a purchase agreement, we have agreed to sell to each
underwriter, and each underwriter severally has agreed to purchase from us, the
numbers of shares of common stock set forth opposite its name below. The
underwriters are committed to purchase and pay for all such shares if any are
purchased.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- ------------------------------------------------------------------------------- -------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.........................................................
Bear, Stearns & Co. Inc........................................................
Total....................................................................
</TABLE>
The representatives have advised us that the underwriters propose to offer
the common stock to the public at the initial public offering price set forth on
the cover page of this prospectus and to certain dealers at such price less a
concession of not in excess of $ per share. The underwriters may allow, and
such dealers may reallow, a discount not in excess of $ per share to
certain other dealers. After the initial public offering, the public offering
price, concession and discount may be changed. No such change shall reduce the
amount of proceeds to be received by us as set forth on the cover page of this
prospectus.
We have granted to the underwriters an option, exercisable during the 30-day
period after the date of this prospectus, to purchase up to
additional shares of common stock, at the price set forth on the cover page of
this prospectus, less the underwriting discount. To the extent that the
underwriters exercise that option, each of the underwriters will have a firm
commitment to purchase approximately the same percentage of such additional
shares that the number of shares of common stock to be purchased by it shown in
the above table represents as a percentage of the shares offered
hereby. If purchased, such additional shares will be sold by the underwriters on
the same terms as those on which the initial shares are being sold.
The purchase agreement contains covenants of indemnity among the
underwriters and Jato against certain civil liabilities, including liabilities
under the Securities Act and liabilities arising from breaches of
representations and warranties contained in the purchase agreement.
The following table shows the per share and total underwriting discount we
will pay to the underwriters. The amounts are shown assuming both no exercise
and full exercise of the underwriters' option to purchase additional
shares of common stock.
<TABLE>
<CAPTION>
TOTAL
WITHOUT TOTAL WITH
PER SHARE OPTION OPTION
--------------- ------------- ---------------
<S> <C> <C> <C>
Public Offering Price........................................ $ $ $
Underwriting Discount........................................ $ $ $
Proceeds, before expenses, to Jato........................... $ $ $
</TABLE>
We expect to incur expenses of approximately $ in connection with
this offering.
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<PAGE>
The common stock is being offered by the underwriters, subject to prior
sale, when, as and if issued to and accepted by them, subject to approval of
certain conditions by counsel to the underwriters and certain other conditions.
The underwriters reserve the right to withdraw, cancel or modify such offer and
to reject orders in whole or in part.
Each of our officers and directors and substantially all of the holders of
common stock have agreed with the representatives, for a period of 180 days
after the date of this prospectus (the "Lock Up Period"), subject to certain
exceptions, not to offer to sell, contract to sell, or otherwise sell, dispose
of, loan, pledge or grant any rights with respect to any shares of common stock,
any options or warrants to purchase any shares of common stock, or any
securities convertible into or exchangeable for shares of common stock owned as
of the date of this prospectus or thereafter acquired directly by such holders
or with respect to which they have or hereafter acquire the power of
disposition, without the prior written consent of Merrill Lynch. However,
Merrill Lynch may, in its sole discretion and at any time without notice,
release all or any portion of the securities subject to lock-up agreements. We
have agreed that during the Lock-Up Period, we will not, subject to certain
exceptions, without the prior written consent of Merrill Lynch, issue, sell,
contract to sell or otherwise dispose of, any shares of common stock, any
options or warrants to purchase any shares of common stock or any securities
convertible into, exercisable for or exchangeable for shares of common stock,
other than the sale of our shares in this offering, the issuance of common stock
upon the exercise of outstanding options and warrants and our issuance of
options and stock under the Incentive Plan. See "Shares Eligible for Future
Sale."
The representatives have advised us that they do not intend to confirm sales
to any accounts over which they exercise discretionary authority.
Prior to this offering, there has been no public market for our common
stock. Consequently, the initial public offering price for the common stock
offered hereby will be determined through negotiations between us and the
representatives. Among the factors to be considered in such negotiations are
prevailing market conditions, our financial information, market valuations of
other companies that we and the representatives believe to be comparable to us,
estimates of our business potential, the present state of our development and
other factors deemed relevant.
The representatives have advised us that, pursuant to Regulation M under the
Securities Act, certain persons participating in this offering may engage in
transactions, including stabilizing bids, syndicate covering transactions or the
imposition of penalty bids, which may have the effect of stabilizing or
maintaining the market price of the common stock at a level above that which
might otherwise prevail in the open market. A "stabilizing bid" is a bid for or
the purchase of the common stock on behalf of the underwriters for the purpose
of fixing or maintaining the price of the common stock. A "syndicate covering
transaction" is the bid for or the purchase of the common stock on behalf of the
underwriters to reduce a short position incurred by the underwriters in
connection with the offering. A "penalty bid" is an arrangement permitting the
representatives to reclaim the selling concession otherwise accruing to an
underwriter or syndicate member in connection with this offering if the common
stock originally sold by such underwriter or syndicate member is purchased by
the representatives in a syndicate covering transaction and has therefor not
been effectively placed by such underwriter or syndicate member. The
representatives have advised us that such transactions may be effected on the
Nasdaq National Market or otherwise and, if commenced, may be discounted at any
time.
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<PAGE>
LEGAL MATTERS
Cooley Godward LLP, Boulder, Colorado will pass upon the validity of the
shares of common stock offered hereby. Baker & McKenzie, New York, New York will
pass upon certain legal matters in connection with the offering for the
underwriters. An investment partnership affiliated with Cooley Godward LLP owns
33,333 shares of our preferred stock which will convert into 33,333 shares of
our common stock upon the completion of this offering.
EXPERTS
The consolidated financial statements included in this prospectus and
elsewhere in the registration statement as of December 31, 1998 and from
June 12, 1998 (date of inception) to December 31, 1998 have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
reports.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 (including exhibits, schedules and amendments) under the
Securities Act with respect to the common stock to be sold in this offering.
This prospectus does not contain all of the information in the registration
statement. For further information about us and our common stock, please refer
to the registration statement. Statements contained in this prospectus as to the
contents of any contract, agreement or other document are not necessarily
complete. In each instance, please refer to the copy of that contract, agreement
or document filed as an exhibit to the registration statement.
You may read and copy all or any portion of the registration statement or
any other information the company files at the SEC's public reference room at
450 Fifth Street, N.W., Washington, D.C. 20549. You can request copies of these
documents, upon payment of a duplicating fee, by writing to the SEC. Please call
the SEC at 1-800-SEC-0330 for further information on the operation of the public
reference rooms. Our SEC filings, including the registration statement, are also
available to you on the SEC's web site (http://www.sec.gov).
As a result of this offering, we will become subject to the information and
reporting requirements of the Securities Exchange Act of 1934, as amended. In
accordance with those requirements, we will file periodic reports, proxy
statements and other information with the SEC. You may also inspect these
reports, proxy statements and other information at the offices of Nasdaq
Operations, 1735 K Street, N.W., Washington, D.C. 20006.
We intend to furnish our stockholders with annual reports containing audited
financial statements and with quarterly reports for the first three quarters of
each year containing interim financial information.
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C>
Consolidated Financial Statements:
Report of Independent Public Accountants.................................................................. F-2
Consolidated Balance Sheets as of December 31, 1998 and September 30, 1999 (unaudited).................... F-3
Consolidated Statements of Operations for the period from June 12, 1998 (date of inception) to
December 31, 1998, for the nine months ended September 30, 1999 (unaudited), and for the period from
June 12, 1998 (date of inception) to September 30, 1999 (unaudited)..................................... F-4
Consolidated Statements of Changes in Stockholders' Equity for the period from June 12, 1998 (date of
inception) to December 31, 1998, and for the nine months ended September 30, 1999 (unaudited)........... F-5
Consolidated Statements of Cash Flows for the period from June 12, 1998 (date of inception) to
December 31, 1998, for the nine months ended September 30, 1999 (unaudited) and for the period from
June 12, 1998 (date of inception) to September 30, 1999 (unaudited)..................................... F-6
Notes to Consolidated Financial Statements................................................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Jato Communications Corp.:
We have audited the accompanying consolidated balance sheet of Jato
Communications Corp. (a Delaware corporation in the development stage, the
"Company") and subsidiaries as of December 31, 1998 and the related consolidated
statements of operations, changes in stockholders' equity and cash flows for the
period from June 12, 1998 (date of inception) to December 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Jato
Communications Corp. and subsidiaries as of December 31, 1998, and the
consolidated results of their operations and cash flows for the period from
June 12, 1998 (date of inception) to December 31, 1998, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado,
June 18, 1999.
F-2
<PAGE>
JATO COMMUNICATIONS CORP.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents......................................................... $ 1,270 $ 29,517
Trade accounts receivable......................................................... -- 42
Inventory......................................................................... -- 175
Prepaid expenses and other current assets......................................... 12 164
--------- ---------
Total current assets................................................................ 1,282 29,898
Property and Equipment:
Networking equipment.............................................................. 3 9,773
Central office collocation space improvements..................................... 22 8,075
Computers and equipment........................................................... 17 946
Computer software................................................................. -- 753
Furniture and fixtures............................................................ 16 895
--------- ---------
58 20,442
Accumulated depreciation.......................................................... (1) (140)
--------- ---------
57 20,302
Restricted cash..................................................................... -- 500
Note receivable from officer........................................................ -- 81
Deferred financing costs, net....................................................... -- 1,213
Other noncurrent assets............................................................. 27 273
--------- ---------
Total assets.................................................................... $ 1,366 $ 52,267
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable.................................................................. $ 73 $ 2,224
Accrued salaries.................................................................. 204 316
Accrued expenses and other current liabilities.................................... 7 621
--------- ---------
Total current liabilities........................................................... 284 3,161
Long-term debt...................................................................... -- 9,449
--------- ---------
Total liabilities................................................................... 284 12,610
Commitments and Contingencies
Stockholders' Equity:
Preferred Stock, 25,000,000 total shares authorized
Series A Convertible preferred stock, 3,000,000 and 1,751,985 shares authorized,
respectively; 1,751,985 shares issued and outstanding, respectively........... 1,301 1,301
Series B Convertible preferred stock, none and 13,615,322 shares authorized,
respectively; none and 13,615,322 issued and outstanding, respectively........ -- 20,174
Series C Convertible preferred stock, none and 5,714,285 shares authorized,
respectively, none and 3,938,714 shares issued and outstanding,
respectively.................................................................. -- 27,560
Common Stock, $.01 par value, 40,000,000 and 80,000,000 shares authorized,
respectively; 6,250,002 and 6,792,814 shares issued and outstanding,
respectively.................................................................... 63 68
Additional paid-in capital........................................................ 114 6,559
Note receivable from TCI Satellite Entertainment, Inc............................. -- (3,000)
Deferred compensation............................................................. -- (5,905)
Deficit accumulated during the development stage.................................. (396) (7,100)
--------- ---------
Total stockholders' equity.......................................................... 1,082 39,657
--------- ---------
Total liabilities and stockholders' equity...................................... $ 1,366 $ 52,267
========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
F-3
<PAGE>
JATO COMMUNICATIONS CORP.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 12, 1998 JUNE 12, 1998
(DATE OF INCEPTION) (DATE OF INCEPTION)
TO NINE MONTHS ENDED TO
DECEMBER 31, 1998 SEPTEMBER 30, 1999 SEPTEMBER 30, 1999
------------------- ------------------ -------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Revenues........................................... $ -- $ 44 $ 44
Operating Expenses:
Network and product costs........................ -- 246 246
Marketing expenses............................... -- 1,352 1,352
Selling, general and administrative.............. 404 5,061 5,465
Amortization of deferred compensation............ -- 250 250
Depreciation and amortization.................... 1 139 140
--------- ---------- ---------
Operating loss..................................... (405) (7,004) (7,409)
Interest income.................................. 9 300 309
--------- ---------- ---------
Net loss........................................... $ (396) $ (6,704) $ (7,100)
========= ========== =========
Basic and diluted loss per common share............ $ (0.07) $ (1.06) $ (1.15)
========= ========== =========
Weighted average common shares outstanding--basic
and diluted...................................... 6,000 6,313 6,192
========= ========== =========
PRO FORMA NET LOSS PER SHARE (UNAUDITED--NOTE 2):
Basic and diluted loss per common share............ $ (0.06) $ (0.47) $ (0.62)
========= ========== =========
Weighted average common shares outstanding--basic
and diluted...................................... 6,770 14,366 11,420
========= ========== =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
F-4
<PAGE>
JATO COMMUNICATIONS CORP.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK ADDITIONAL
------------------------ ------------------------ PAID-IN DEFERRED
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION
----------- ----------- ----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Initial capitalization, including
retroactive effect of stock split.... -- $ -- 5,600 $ 56 $ 64 $ --
Issuance of common stock in
August 1998 for cash of $0.07 per
share................................ -- -- 520 5 31 --
Issuance of common stock in
October 1998 for cash of $0.15 per
share................................ -- -- 130 2 19 --
Issuance of Series A convertible
preferred stock, net of offering
costs of $13......................... 1,752 1,301 -- -- -- --
Net loss............................... -- -- -- -- -- --
--------- --------- --------- --------- --------- ---------
Balances at December 31, 1998.......... 1,752 1,301 6,250 63 114 --
Issuance of Series B convertible
preferred stock, net of offering
costs of $178 (unaudited)............ 13,615 20,245 -- -- -- --
Issuance of common stock pursuant to
exercise of stock options
(unaudited).......................... -- -- 15 -- 10 --
Issuance of warrants for common stock
pursuant to sale of Series B
convertible preferred stock, at fair
value (unaudited).................... -- (71) -- -- 71 --
Issuance of common stock options and
warrants for common stock to
consultants, at fair value
(unaudited).......................... -- -- -- -- 74 --
Issuance of common stock in
August 1999 for cash of $1.50 per
share, at fair value (unaudited)..... -- -- 8 -- 28 --
Issuance of common stock in
August 1999 for cash of $3.00 per
share, at fair value (unaudited)..... -- -- 20 -- 112 --
Issuance of restricted common stock, at
fair value (unaudited)............... -- -- 500 5 2,609 (2,614)
Issuance of Series C convertible
preferred stock, net of offering
costs of $10 (unaudited)............. 3,939 27,560 -- -- -- --
Issuance of note receivable to TCI
Satellite Entertainment, Inc
(unaudited).......................... -- (3,000) -- -- -- --
Deferred compensation (unaudited)...... -- -- -- -- 3,541 (3,541)
Amortization of deferred compensation
(unaudited).......................... -- -- -- -- -- 250
Net loss (unaudited)................... -- -- -- -- -- --
--------- --------- --------- --------- --------- ---------
Balances at September 30, 1999
(unaudited).......................... 19,306 $ 46,035 6,793 $ 68 $ 6,559 $ (5,905)
========= ========= ========= ========= ========= =========
<CAPTION>
DEFICIT
ACCUMULATED
DURING THE
DEVELOPMENT
STAGE TOTAL
--------------- ---------
<S> <C> <C>
Initial capitalization, including
retroactive effect of stock split.... $ -- $ 120
Issuance of common stock in
August 1998 for cash of $0.07 per
share................................ -- 36
Issuance of common stock in
October 1998 for cash of $0.15 per
share................................ -- 21
Issuance of Series A convertible
preferred stock, net of offering
costs of $13......................... -- 1,301
Net loss............................... (396) (396)
--------- ---------
Balances at December 31, 1998.......... (396) 1,082
Issuance of Series B convertible
preferred stock, net of offering
costs of $178 (unaudited)............ -- 20,245
Issuance of common stock pursuant to
exercise of stock options
(unaudited).......................... -- 10
Issuance of warrants for common stock
pursuant to sale of Series B
convertible preferred stock, at fair
value (unaudited).................... -- --
Issuance of common stock options and
warrants for common stock to
consultants, at fair value
(unaudited).......................... -- 74
Issuance of common stock in
August 1999 for cash of $1.50 per
share, at fair value (unaudited)..... 28
Issuance of common stock in
August 1999 for cash of $3.00 per
share, at fair value (unaudited)..... -- 112
Issuance of restricted common stock, at
fair value (unaudited)............... -- --
Issuance of Series C convertible
preferred stock, net of offering
costs of $10 (unaudited)............. -- 27,560
Issuance of note receivable to TCI
Satellite Entertainment, Inc
(unaudited).......................... -- (3,000)
Deferred compensation (unaudited)...... -- --
Amortization of deferred compensation
(unaudited).......................... -- 250
Net loss (unaudited)................... (6,704) (6,704)
--------- ---------
Balances at September 30, 1999
(unaudited).......................... $ (7,100) $ 39,657
========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
F-5
<PAGE>
JATO COMMUNICATIONS CORP.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 12, 1998 JUNE 12, 1998
(DATE OF INCEPTION) (DATE OF INCEPTION)
TO NINE MONTHS ENDED TO
DECEMBER 31, 1998 SEPTEMBER 30, 1999 SEPTEMBER 30, 1999
--------------------- ------------------ -------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................................... $ (396) $ (6,704) $ (7,100)
Adjustments to reconcile net loss to net cash flows
from operating activities:
Depreciation and amortization.................... 1 139 140
Amortization of deferred compensation............ -- 250 250
Amortization of deferred financing costs......... -- 22 22
Other non-cash expenses.......................... -- 177 177
Changes in current assets and current
liabilities:
Accounts receivable............................ -- (42) (42)
Inventory...................................... -- (175) (175)
Prepaid expenses and other current assets...... (12) (152) (164)
Accounts payable............................... 73 1,951 2,024
Accrued expenses............................... 211 726 937
--------- ---------- ---------
Net cash flows from operating activities........... (123) (3,808) (3,931)
--------- ---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment................ (58) (10,735) (10,793)
Cash and cash equivalents used to collateralize
standby letters of credit........................ -- (500) (500)
Issuance of note receivable to officer............. -- (100) (100)
Other noncurrent assets............................ (27) (113) (140)
--------- ---------- ---------
Net cash flows from investing activities........... (85) (11,448) (11,533)
--------- ---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock................. 177 72 249
Proceeds from exercise of common stock options..... -- 10 10
Proceeds from sale of Series A preferred stock..... 1,314 -- 1,314
Proceeds from sale of Series B preferred stock..... -- 20,423 20,423
Proceeds from sale of Series C preferred stock..... -- 24,570 24,570
Preferred stock offering costs..................... (13) (188) (201)
Deferred financing costs........................... -- (1,384) (1,384)
--------- ---------- ---------
Net cash flows from financing activities........... 1,478 43,503 44,981
--------- ---------- ---------
Net increase in cash and cash equivalents.......... 1,270 28,247 29,517
Cash and cash equivalents, beginning of period..... -- 1,270 --
--------- ---------- ---------
Cash and cash equivalents, end of period........... $ 1,270 $ 29,517 $ 29,517
========= ========== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Borrowings for property, plant and equipment
under credit facility.......................... $ -- $ 9,449 $ 9,449
Accrued obligation for networking equipment...... -- 200 200
Issuance of note receivable to TCI Satellite
Entertainment, Inc............................. -- 3,000 3,000
Issuance of note receivable to officer........... -- 370 370
Deferred financing costs paid by credit
facility....................................... -- 149 149
</TABLE>
See accompanying Notes to Consolidated Financial Statements
F-6
<PAGE>
JATO COMMUNICATIONS CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 IS
UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION
THE COMPANY
Jato Communications Corp. (Jato, or the Company), a Delaware corporation,
was formed in June 1998 to provide high-speed digital communications services
using digital subscriber line (DSL) technology. Through September 30, 1999, Jato
had not generated significant revenues and was therefore considered to be a
development stage company in accordance with Statement of Financial Accounting
Standards (SFAS) No. 7 "Accounting and Reporting by Development Stage
Enterprises." During December 1999, the Company emerged from the development
stage. During 1999, the Company has entered into a $50 million senior secured
credit facility and has raised additional working capital funds and believes
that its cash and cash equivalents at September 30, 1999 and its availability
under its senior secured credit facility will be adequate to sustain its current
level of operations through the first quarter of 2000. While the Company would
be able to sustain some level of operations through the end of 2000 if it were
not able to raise additional capital, it would be required to significantly
scale back its operations and delay the expansion of its network. This would
have a material adverse effect on the Company's business, financial condition
and results of operations. There can be no assurance that additional capital
will be available on terms acceptable to the Company, or at all.
The Company's operations are subject to significant risks and uncertainties
including competitive, financial, developmental, operational, technological,
regulatory and other risks associated with an emerging and growing business. The
Company expects to continue to report operating and net losses as it develops
its network and expands its customer base. Improvements in Jato's future results
of operations are largely dependent upon its ability to attract high-quality
customers in a highly competitive, relatively immature market while controlling
its overall cost structure, including costs associated with adding new
customers. There can be no assurance that Jato will be successful with regard to
these matters.
BASIS OF PRESENTATION
The Company is presently considered in the development stage and the
accompanying consolidated financial statements present the Company's activities
as those of a development stage company. Although the Company was incorporated
on June 12, 1998, principal operations did not begin until September 1998. These
principal activities included developing business plans, procuring governmental
authorizations and central office collocation space improvements, raising
capital, hiring management and other key personnel, working on the design and
development of the Company's network architecture and operations support system,
acquiring equipment and facilities and negotiating interconnection agreements.
For the period from June 12, 1998 (date of inception) through September 30,
1998, the Company had no revenue and nominal expenses, primarily general and
administrative, totaling approximately $72,000. The Company began providing
services in June 1999.
F-7
<PAGE>
JATO COMMUNICATIONS CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 IS
UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements for the periods ended December 31,
1998 and September 30, 1999 include the operations of the Company and its
wholly-owned subsidiaries for the period from June 12, 1998 (date of inception)
to December 31, 1998, the nine months ended September 30, 1999, and the period
from June 12, 1998 (date of inception) to September 30, 1999, respectively. All
significant intercompany transactions and balances have been eliminated in
consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles (GAAP) requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses for each reporting
period. Actual results could differ from those estimates.
INTERIM FINANCIAL INFORMATION (UNAUDITED)
The accompanying unaudited consolidated financial statements as of
September 30, 1999 and for the nine months and inception to date periods then
ended have been prepared in accordance with GAAP and the Securities and Exchange
Commission's rules, specifically Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by GAAP. In the
opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been included.
Operating results for the nine months ended September 30, 1999 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1999. Certain 1998 amounts have been reclassified to conform with
the current period presentation.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid monetary investments with an
original maturity of 90 days or less at the date of purchase to be cash
equivalents. Cash equivalents as of December 31, 1998 and September 30, 1999
consist principally of money market funds; such balances are stated at cost
which equates to market value.
CONCENTRATION OF CREDIT RISK
As of September 30, 1999, one customer comprised 69% of the Company's trade
receivables balance and approximately 67% of revenues for the nine months ended
September 30, 1999.
INVENTORY
Inventory consists of communications equipment that will be installed at
customer locations. Inventory is accounted for using the first-in, first-out
method at the lower of cost or market.
F-8
<PAGE>
JATO COMMUNICATIONS CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 IS
UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is provided over
the estimated useful lives of the assets (3-7 years) using the straight-line
method. Maintenance and repairs are expensed as incurred and the costs of
betterments are capitalized.
Central office collocation space improvements represent payments to
incumbent carriers for infrastructure improvements within their central offices
to allow Jato to install its equipment. These improvements allow Jato to
interconnect with the carrier's network. These payments are capitalized and are
amortized over an estimated useful life of five years.
The Company capitalizes costs associated with the design and implementation
of its network, including internally and externally developed software.
Capitalized external software costs include the actual costs to purchase
existing software from vendors. Capitalized internal costs generally include
personnel costs incurred in the enhancement and implementation of purchased
software packages.
LONG-LIVED ASSETS
Jato investigates potential impairments of its long-lived assets on an
exception basis when evidence exists that events or changes in circumstances may
have made recovery of an asset's carrying value unlikely. An impairment loss is
recognized when the sum of the expected undiscounted future net cash flows is
less than the carrying amount of the assets. No such losses have been
identified. Recoverability of long-lived assets is dependent upon successful
execution of Jato's business plan, among other factors.
REVENUE RECOGNITION
Revenue from the provision of services is recognized in the period that such
services are earned. Payments received in advance of providing services are
recorded as deferred revenue until the period such services are earned.
ADVERTISING AND SALES PROMOTION COSTS
Advertising and sales promotion costs are expensed as incurred. No such
costs were incurred during 1998. Advertising expenses totaled $1.3 million for
the nine months ended September 30, 1999.
INCOME TAXES
The Company accounts for income taxes using the liability method in
accordance with SFAS No. 109, "Accounting for Income Taxes." Under this method,
deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax bases of assets and liabilities using
enacted tax rates in effect for the year in which the differences are expected
to reverse. Valuation allowances are established as necessary to reduce net
deferred tax assets to the amounts expected to be realized.
F-9
<PAGE>
JATO COMMUNICATIONS CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 IS
UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BASIC AND DILUTED LOSS PER SHARE
Earnings per share amounts are presented below in accordance with the
requirements of SFAS No. 128, "Earnings Per Share." Basic net loss per share is
computed by dividing net loss applicable to common stockholders by the weighted
average number of shares of the Company's common stock outstanding during the
period after giving consideration to shares subject to repurchase. Diluted net
loss per share is determined in the same manner as basic net loss per share
except that the number of shares is increased assuming exercise of dilutive
stock options and warrants using the treasury stock method and conversion of the
Company's convertible preferred stock. As of December 31, 1998 and
September 30, 1999, options to purchase 50,000 and 2.8 million shares of common
stock were outstanding, respectively. Common stock equivalents (stock options
and warrants) are excluded from the calculation of diluted loss per share as
they are antidilutive. The Series A, Series B and Series C convertible preferred
stock that are convertible into shares of common stock also are excluded from
the calculation of diluted loss per share as they are antidilutive.
The following table presents the calculation of basic and diluted loss per
share (in thousands, except per share amounts):
<TABLE>
<CAPTION>
JUNE 12, 1998 JUNE 12, 1998
(DATE OF INCEPTION) (DATE OF INCEPTION)
TO DECEMBER 31, NINE MONTHS ENDED TO
1998 SEPTEMBER 30, 1999 SEPTEMBER 30, 1999
------------------- ------------------ -------------------
<S> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
Net loss................................. $ (396) $ (6,704) $ (7,100)
--------- ---------- ---------
Basic and Diluted:
Weighted-average common shares
outstanding............................ 6,000 6,313 6,192
--------- ---------- ---------
Basic and diluted loss per share......... $ (0.07) $ (1.06) $ (1.15)
========= ========== =========
Shares of common stock issuable upon
conversion of:
Series A convertible preferred stock... 1,752 1,752 1,752
Series B convertible preferred stock... -- 13,615 13,615
Series C convertible preferred stock... 3,939 3,939
Additional shares of Series C
convertible preferred stock
(Note 9)............................. -- 985 985
Warrants for common stock.............. -- 25 25
Options for common stock issued to
employees............................ 50 2,760 2,760
Options for common stock issued to
consultants.......................... -- 50 50
</TABLE>
F-10
<PAGE>
JATO COMMUNICATIONS CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 IS
UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PRO FORMA NET LOSS PER SHARE (UNAUDITED)
Pro forma net loss per share for each period presented on the preceding
statements of operations is computed using the net loss and weighted average
number of common shares outstanding, including the pro forma effects of the
assumed conversion of the Company's Series A, B and C convertible preferred
stock into shares of the Company's common stock, as those shares automatically
convert to the Company's common stock pursuant to an initial public offering.
The pro forma effects assume that each conversion occurred on January 1 of the
respective year, or at the date of original issuance, if later. The pro forma
adjustment results in an increase in the weighted average shares used to compute
basic and diluted net loss per share of approximately 770,000, 8,053,000 and
5,228,000 for the period from June 12, 1998 (date of inception) through
December 31, 1998, for the nine months ended September 30, 1999 and for the
period from June 12, 1998 (date of inception) through September 30, 1999,
respectively. The pro forma effects of each of these transactions are unaudited.
STOCK-BASED COMPENSATION
The Company accounts for stock-based employee compensation arrangements in
accordance with Accounting Principles Board Opinion (APB) No. 25, "Accounting
for Stock Issued to Employees," and related interpretations, and complies with
the disclosure provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation." The Company accounts for equity instruments issued to
non-employees in accordance with the provisions of SFAS No. 123 and Emerging
Issues Task Force Issue No. 96-18 "Accounting for Equity Investments that are
Issued to Other than Employees for Acquiring, or in Conjunction with Selling
Goods or Services."
COMPREHENSIVE LOSS
The Company has adopted SFAS No. 130, "Reporting Comprehensive Income." The
adoption of this statement had no impact on the Company's consolidated financial
statements for the periods presented, as net loss has been the same as
comprehensive loss since inception.
SEGMENT INFORMATION
The Company has adopted SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information." The "management" approach to segment
reporting required by SFAS No. 131 designates the internal organization that is
used by top management for making operating decisions and assessing performance
as the source of the Company's reportable segments. Jato presently operates in
one segment: High-speed network and data transport services.
NEW ACCOUNTING PRONOUNCEMENTS
In April 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use," which provides
guidance that requires capitalization of certain costs incurred during an
internal-use software development project. SOP 98-1 is effective for fiscal
years beginning after
F-11
<PAGE>
JATO COMMUNICATIONS CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 IS
UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
December 15, 1998. The adoption of this policy has not had a material effect on
the Company's consolidated results of operations.
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-Up Activities," which provides guidance on the financial reporting of
start-up costs and organizational costs. It requires costs of start-up
activities and organizational costs to be expensed as incurred. SOP 98-5 is
effective for fiscal years beginning after December 15, 1998. Jato has not
capitalized any such costs to date. Accordingly, the adoption of SOP 98-5 has
not had an impact on Jato's consolidated financial statements.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This statement
establishes accounting and reporting standards for derivatives and hedging
activities. Among other things, this statement requires that an entity recognize
all derivative instruments on the balance sheet as either assets or liabilities,
and to account for those instruments at fair value. The Company does not believe
adoption will have a material impact on its financial position or results of
operations.
In December 1999, the Securities and Exchange Commission staff released
Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition." SAB 101 provides
interpretive guidance on the recognition, presentation and disclosure of revenue
in financial statements. SAB 101 must be applied to financial statements no
later than the first fiscal quarter of 2000. The Company is currently evaluating
the impact, if any, to its current accounting policies and results of
operations. The Company does not believe adoption will have a material impact on
its financial position or results of operations.
3. RESTRICTED CASH AND STANDBY LETTERS OF CREDIT (UNAUDITED)
During August 1999, the Company entered into an agreement with a bank for a
$500,000 standby letter of credit. On behalf of the Company, the bank will issue
letters of credit to secure certain of the Company's payment obligations.
Pursuant to the terms of such agreement, the Company placed $500,000 in a
restricted, interest bearing bank account as collateral for the letter of
credit.
4. NOTE RECEIVABLE FROM OFFICER (UNAUDITED)
In May 1999, pursuant to an employment agreement, Jato loaned $100,000 to
one of its executive officers. This note receivable is a non-recourse loan
secured by a pledge of that executive officer's common stock. The note
receivable is due in May 2002 and bears interest at an annual rate of 5.0%,
compounded quarterly. Principal and interest are due at maturity, unless
forgiven. One-third of the principal and one-third of the accrued interest will
be forgiven on each of December 31, 1999, 2000 and 2001 provided that the
executive officer is employed with Jato. If the executive officer voluntarily
terminates his employment with Jato, principal and interest shall be due and
fully payable on December 31, 2001. The Company is amortizing this principal and
interest related to this loan to compensation expense over the term of the loan.
F-12
<PAGE>
JATO COMMUNICATIONS CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 IS
UNAUDITED)
5. CREDIT FACILITY (UNAUDITED)
CREDIT FACILITY
In July 1999, Jato Operating Corp, a wholly-owned subsidiary formed in April
1999, entered into a senior secured credit facility with a third-party vendor
that provides for up to $50 million of financing for equipment and network
services provided by the vendor. The $50 million is available to the Company in
two separate tranches. The first tranche of $30 million must be drawn down upon
by July 2001. The second tranche of $20 million becomes available upon the full
utilization or expiration of the first tranche and must be drawn down upon by
July 2002. Borrowings under the facility bear interest at the rate of LIBOR plus
4.5% per year or an alternative base rate, which is generally equal to the
greater of 3.5% over the Prime Rate or 4% over the federal funds rate per year.
The facility requires quarterly interest payments.
Principal installments are due at the end of each fiscal quarter in
accordance with the following schedule:
<TABLE>
<S> <C>
September 2002 to June 2003........................................... 2.50%
September 2003 to June 2004........................................... 5.00%
September 2004 to June 2005........................................... 8.75%
September 2005 to March 2006.......................................... 8.75%
</TABLE>
Any principal amount that is outstanding after March 2006 is due on May 31,
2006. The facility is fully and unconditionally guaranteed by Jato, and each
direct or indirect subsidiary of Jato Operating Corp. Borrowings under the
senior secured credit facility are restricted based upon the Company's leverage
ratio and capitalization. Upon closing, the Company was permitted to borrow the
entire first tranche of $30 million. The facility is secured by liens against
certain of the Company's network equipment and imposes certain financial and
other covenants. Direct costs incurred in connection with this credit facility
are capitalized and being amortized to interest expense over the term of the
facility. Amounts outstanding under the credit facility as of September 30, 1999
bore interest at 10%.
6. NOTE RECEIVABLE FROM TCI SATELLITE ENTERTAINMENT, INC. (UNAUDITED)
In connection with the September 1999 sale of the Series C preferred stock
(Note 9), Jato issued approximately 714,000 shares to TCI Satellite
Entertainment, Inc. for $7.00 per share. The purchase price for the shares was
paid with $2.0 million in cash and a note receivable of $3.0 million. The note
receivable bore interest at an annual rate of 10% and matured in November 1999.
TCI Satellite Entertainment, Inc. fully repaid this note, including interest, at
maturity.
F-13
<PAGE>
JATO COMMUNICATIONS CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 IS
UNAUDITED)
7. INCOME TAXES
The components of the provision for income taxes are as follows (in
thousands):
<TABLE>
<CAPTION>
JUNE 12, 1998
(DATE OF INCEPTION)
TO DECEMBER 31, 1998
---------------------
<S> <C>
Current tax expense:
Federal................................................................ $ --
State.................................................................. --
---------
--
---------
Deferred tax expense (benefit):
Federal................................................................ (135)
State.................................................................. (13)
Valuation allowance for deferred tax assets............................ 148
---------
--
---------
Total provision (benefit)............................................ $ --
=========
</TABLE>
The primary components of temporary differences that give rise to deferred
taxes are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
1998
-------------
<S> <C>
Deferred tax assets:
Net operating loss carryforwards.............................................. $ 57
Accrued salaries.............................................................. 76
Other......................................................................... 15
---------
Gross deferred tax asset........................................................ 148
Valuation allowance............................................................. (148)
---------
Net deferred tax asset.......................................................... $ --
=========
</TABLE>
The actual tax provision for 1998 is reconciled to the amounts computed by
applying the statutory Federal tax rate to income before taxes as follows:
<TABLE>
<CAPTION>
JUNE 12, 1998
(DATE OF INCEPTION)
TO DECEMBER 31, 1998
---------------------
<S> <C>
Statutory rate........................................................... 34.0%
State income taxes, net of Federal effect................................ 3.4
Valuation allowance...................................................... (37.4)
---------
Income tax provision................................................... --%
=========
</TABLE>
F-14
<PAGE>
JATO COMMUNICATIONS CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 IS
UNAUDITED)
7. INCOME TAXES (CONTINUED)
Due to the uncertainty surrounding the realization of the Company's deferred
tax assets through future taxable income, Jato has recorded a valuation
allowance against its net deferred tax asset as of December 31, 1998. Management
evaluates the recoverability of the deferred tax asset and the level of the
valuation allowance on an ongoing basis. At such time as it is determined that
it is more likely than not that the deferred tax asset will be realizable, the
valuation allowance will be reduced. Future adjustments to the valuation
allowance will be recognized as a separate component of Jato's provision for
income taxes. As of December 31, 1998, Jato had a net unused operating loss
carryforward of approximately $153,000, which will expire in 2018.
8. COMMITMENTS AND CONTINGENCIES
The Company leases office space under noncancelable operating leases. Rent
expense under operating leases was $15,000 and $123,000 for the period from June
12, 1998 (date of inception) to December 31, 1998 and for the nine months ended
September 30, 1999, respectively. Future minimum lease payments under
noncancelable operating leases as of December 31, 1998 are as follows (in
thousands):
<TABLE>
<S> <C>
1999................................................................ $ 250
2000................................................................ 487
2001................................................................ 487
2002................................................................ 487
2003................................................................ 487
Thereafter.......................................................... 325
---------
Total minimum lease payments...................................... $ 2,523
=========
</TABLE>
OTHER MATTERS
The Company is subject to decisions of state public utility commissions, the
Federal Communications Commission and the courts as they relate to the
interpretation and implementation of the Telecommunications Act of 1996, the
interpretation of competitive carrier interconnection agreements in general and
the Company's interconnection agreements in particular. In some cases the
Company may be bound by the results of ongoing proceedings of these bodies or
the legal outcomes of other contested interconnection agreements that are
similar to the Company's agreements. The Company cannot currently estimate the
effect, if any, of these proceedings on future financial results.
9. STOCKHOLDERS' EQUITY
CONVERTIBLE PREFERRED STOCK
The Company has authorized 25,000,000 shares of preferred stock, of which
1,751,985 shares are designated as "Series A" preferred stock, 13,615,322 are
designated as "Series B", and 5,714,285 are designated as "Series C". During
October 1998, the Company sold 1,751,985 shares of Series A convertible
preferred stock resulting in net proceeds to the Company of $1.3 million. In
April and May
F-15
<PAGE>
JATO COMMUNICATIONS CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 IS
UNAUDITED)
9. STOCKHOLDERS' EQUITY (CONTINUED)
1999, the Company sold 13,615,322 shares of Series B convertible preferred stock
resulting in net proceeds to the Company of approximately $20.2 million. In
September 1999, the Company sold 3,938,714 shares of Series C convertible
preferred stock resulting in net proceeds to the Company of approximately $27.6
million.
In connection with the issuance and sale of the Series C convertible
preferred stock, the Company agreed to reduce the purchase price of the
Series C convertible preferred stock from $7.00 per share to $5.60 per share if
certain conditions were not met. Because such conditions were not satisfied on
November 16, 1999, the Company issued 984,666 additional shares of Series C
convertible preferred stock.
DIVIDENDS
The holders of Series A, Series B and Series C preferred stock are entitled
to participate equally in the payment of all dividends with, but payable as a
priority to payment to, the holders of common stock on an as-converted basis
when and if declared by the Board of Directors. No such dividends have been
declared or paid to date.
LIQUIDATION PREFERENCE
In the event of any liquidation, dissolution, or winding up of the Company,
including a change of control, the holders of Series A, Series B and Series C
preferred stock are entitled to receive, in preference to the holders of common
stock, an amount per share equal to the greater of (a) the respective original
issue price, as adjusted for any stock splits, stock dividends or the like, plus
all declared but unpaid dividends thereon and (b) such amount as would have been
received had each share of Series A, Series B or Series C preferred stock been
converted into shares of common stock immediately prior to the occurrence of
such event.
CONVERSION RIGHTS
Each share of Series A, Series B and Series C preferred stock is
convertible, at the option of the holder, into one share of common stock,
subject to adjustment upon the occurrence of certain dilutive issuances, stock
splits or combinations.
Each share of Series A preferred stock shall automatically convert into
shares of common stock, based on the then-effective conversion price, (a) at any
time upon the affirmative election of the holders of a majority of the
outstanding Series A preferred stock or (b) immediately upon the sale of Jato's
common stock in a firm commitment public offering pursuant to which the public
offering proceeds are at least $1.88 per share and the aggregate gross cash
proceeds to Jato are at least $10 million.
Each share of Series B preferred stock shall automatically convert into
shares of common stock, based on the then-effective conversion price, (a)
immediately upon the sale of Jato's common stock in a firm commitment public
offering in which (i) the per share price is at least equal to $3.75 (if prior
to April 2002) or $5.25 (if after April 2002), (ii) the aggregate gross cash
proceeds to Jato are at least
F-16
<PAGE>
JATO COMMUNICATIONS CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 IS
UNAUDITED)
9. STOCKHOLDERS' EQUITY (CONTINUED)
$30 million and (iii) the shares of common stock are listed on any national
securities exchange or have been registered under Section 12(g) of the
Securities Exchange Act of 1934 or (b) if, during a 180 day period following the
closing of a firm commitment public offering that does not meet the criteria
specified in (a) above, the average closing price of Jato's common stock exceeds
$3.75 (if prior to April 2002) or $5.25 (if after April 2002).
Each share of Series C preferred stock shall automatically convert into
shares of common stock, based on the then-effective conversion price,
(a) immediately upon the sale of Jato's common stock in a firm commitment public
offering in which (i) the per share price is at least equal to $8.40 and
(ii) the aggregate gross cash proceeds to Jato are at least $30 million.
Each series of preferred stock carries provisions that protect the holders
of such securities from dilution caused by capital reorganizations, stock splits
or other similar occurrences.
REDEMPTION RIGHTS
No series of convertible preferred stock is redeemable.
VOTING RIGHTS
The holders of each series of preferred stock are entitled to vote on all
matters and entitled to the number of votes equal to the whole number of shares
of common stock into which the preferred stock could be converted pursuant to
the conversion rights. The holders of preferred stock shall vote together with
holders of common stock and not as a separate class at any annual or special
meeting of stockholders.
In addition to any other vote or consent required by law or otherwise, the
vote or written consent of the holders of a majority of the outstanding Series B
preferred stock is necessary for the Company to take any of the following
actions:
- Amend, alter or repeal any provision of the Company's certificate of
incorporation or its Bylaws;
- Authorize any new class or series of stock or any other securities
convertible or exchangeable for equity securities of the Company ranking
on a parity with or senior to the Series B preferred stock in right of
liquidation preference or dividends;
- Enter into an agreement regarding an acquisition or asset transfer, as
defined;
- Initiate bankruptcy or other similar proceedings or appoint a receiver,
trustee, custodian or other similar person;
- Consummate an initial public offering;
- Redeem, purchase, pay dividends or make other distributions with respect
to any of the Company's capital stock;
- Issue bonds, debentures, notes or other debt obligations convertible into,
or exchangeable for, or having rights to purchase, shares of the Company's
common stock, unless (i) otherwise approved
F-17
<PAGE>
JATO COMMUNICATIONS CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 IS
UNAUDITED)
9. STOCKHOLDERS' EQUITY (CONTINUED)
by the Company's Board of Directors, including at lease two designees of
the Series B preferred stock, (ii) the per share cash consideration
exceeds the then-applicable Series B conversion price (as defined) and
(iii) the Company's Board of Directors, including the Series B designees,
determines that the per share cash consideration is at least equal to the
then-current fair market value of the Company's common stock;
- Issue capital stock that ranks junior to the Series A and Series B
preferred stock, except (i) approved issuances (as defined); (ii) in
connection with a qualified offering, and (iii) such as may otherwise be
approved by the Company's Board of Directors;
- Issue any option, warrant put, call or other arrangement for the purchase
or acquisition of any capital stock of the Company, other than approved
issuances (as defined);
- Change the authorized number of members of the Company's Board of
Directors; or
- Issue additional shares of Series A preferred stock.
The holders of Series B preferred stock, voting as a separate class on an
as-converted basis, shall be entitled to elect two members of the Company's
Board of Directors. The holders of common stock, Series A preferred stock and
Series B preferred stock, voting together as a class, on an as-converted basis,
are entitled to elect all remaining members of the Board of Directors.
In addition to any other vote or consent required by law or otherwise, the
vote or written consent of the holders of a majority of the outstanding Series C
preferred stock is necessary for the Company to (i) amend, alter or repeal any
provision of the Company's certificate of incorporation or its Bylaws or (ii)
authorize any new class or series of stock or any other securities convertible
or exchangeable for equity securities of the Company ranking senior to the
Series C preferred stock in right of liquidation preference or dividends.
The Company has reserved shares of common stock as follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------ -------------
(UNAUDITED)
<S> <C> <C>
Conversion of Series A preferred stock.......................... 1,751,985 1,751,985
Conversion of Series B preferred stock.......................... -- 13,615,322
Conversion of Series C preferred stock.......................... -- 3,938,714
Additional shares of Series C convertible preferred stock....... -- 984,666
Warrants to purchase common stock............................... -- 25,000
1998 Equity Incentive Plan...................................... 3,175,000 5,675,000
---------- -----------
4,926,985 25,990,687
========== ===========
</TABLE>
In August 1998, the Company declared a 2:1 forward stock split, in the form
of a stock dividend, on its common stock. The accompanying consolidated
financial statements have been restated to reflect this stock split, since
inception.
F-18
<PAGE>
JATO COMMUNICATIONS CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 IS
UNAUDITED)
10. STOCK OPTIONS AND OTHER STOCK AWARDS
In August 1998, the Company adopted the 1998 Equity Incentive Plan pursuant
to which the Board of Directors may grant stock awards to employees, directors
and consultants. As of September 30, 1999, Jato has reserved 5,675,000 shares of
common stock for granting awards under the Plan. Stock awards may consist of
incentive or nonstatutory stock options, stock appreciation rights, stock
bonuses, or restricted stock awards. Generally, stock options become exercisable
at a rate of 25% at the end of the first year following the vesting commencement
date, and 1/48th of the total grant per month of employment thereafter, and
expire after a maximum term of ten years.
In August 1999, the Company entered into a restricted stock agreement
pursuant to the 1998 Equity Incentive Plan with one of its executive officers
for the purchase of 500,000 shares of restricted common stock. The restricted
stock was purchased with a $370,000 promissory note issued to the Company by the
employee. The note is due in August 2001 and is secured by a pledge of the
restricted common stock. The Company has agreed to forgive the promissory note
in two equal annual installments beginning August 31, 2000, provided the
employee is still employed with Jato as of such dates. Accordingly, the Company
has recorded the restricted stock award at the estimated fair market value on
the date of the award as deferred compensation and is amortizing the amount as a
charge to operations over the vesting period of the restricted common stock,
which is three years.
Plan activity for the period from June 12, 1998 (date of inception) to
December 31, 1998, and for the nine months ended September 30, 1999 is as
follows:
<TABLE>
<CAPTION>
1998 1999
------------------------ -----------------------
WEIGHTED- WEIGHTED-
AVERAGE AVERAGE
EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE
----------- ----------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Options outstanding, beginning of period...... -- $ -- 50,000 $ 1.50
Granted....................................... 50,000 1.50 2,871,750 2.24
Exercised..................................... -- -- (15,000) 0.67
Forfeited..................................... -- -- (97,000) 1.11
--------- --------- ---------- ---------
Options outstanding, end of period............ 50,000 $ 1.50 2,809,750 $ 2.27
========= ========= ========== =========
Exercisable at end of period.................. -- $ -- 88,750 $ 1.50
========= ========= ========== =========
</TABLE>
Exercise prices for stock awards outstanding as of December 31, 1998 are as
follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
(UNAUDITED) (UNAUDITED)
------------------------------------------------------- ----------------------------------
NUMBER WEIGHTED- AVERAGE WEIGHTED- NUMBER WEIGHTED-
RANGE OF OUTSTANDING AS OF REMAINING AVERAGE EXERCISABLE AS OF AVERAGE
EXERCISE PRICES DECEMBER 31, 1998 CONTRACTUAL LIFE EXERCISE PRICE DECEMBER 31, 1998 EXERCISE PRICE
- --------------------------- ----------------- ------------------- --------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
$1.50 50,000 9.84 $ 1.50 -- $ --
</TABLE>
F-19
<PAGE>
JATO COMMUNICATIONS CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 IS
UNAUDITED)
10. STOCK OPTIONS AND OTHER STOCK AWARDS (CONTINUED)
Exercise prices for awards outstanding as of September 30, 1999 are as
follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------------------------- ------------------------------------
NUMBER OUTSTANDING WEIGHTED- AVERAGE WEIGHTED- NUMBER EXERCISABLE WEIGHTED-
RANGE OF AS OF SEPTEMBER REMAINING AVERAGE AS OF SEPTEMBER 30, AVERAGE
EXERCISE PRICES 30, 1999 CONTRACTUAL LIFE EXERCISE PRICE 1999 EXERCISE PRICE
- -------------------------- ------------------ ------------------- --------------- ------------------- ---------------
<S> <C> <C> <C> <C> <C>
$1.50 2,261,500 9.69 $ 1.50 88,750 $ 1.50
5.00 127,500 9.96 5.00 -- --
5.60 420,750 9.96 5.60 -- --
------------ --------- --------- --------- ---------
$1.50 - $5.60 2,809,750 9.74 $ 2.27 88,750 $ 1.50
============ ========= ========= ========= =========
</TABLE>
The fair value of each employee stock option award was estimated at the date
of the grant using a Black-Scholes option pricing model with the following
weighted-average assumptions: risk-free interest rate of 5.8%, expected dividend
yield of 0%; expected life of four years, and expected volatility of 0%.
The fair value of options and warrants issued to non-employees were recorded
at the fair value of the option or warrant at the date of grant using the
Black-Scholes option pricing model with the following assumptions: risk-free
interest rate ranging from 5.3% to 5.7%, expected dividend yield of 0%; expected
life ranging from one to five years, and expected volatility of 100%. The
estimated fair values of the stock options and warrants issued to non-employees
range from $1.07 to $3.57 per share.
The Company believes that all employee stock awards granted prior to May
1999 were granted at or above fair market value on the date of grant. Subsequent
to May 1999, for financial reporting purposes, the Company has determined that
the deemed fair market value on the date of grant of certain stock awards
exceeded the exercise price of the related award. As a result, during the nine
months ended September 30, 1999, the Company recorded deferred compensation of
$6.2 million. This amount was recorded as a reduction of stockholders' equity
and is being amortized as a charge to operations over the vesting period of the
applicable awards. For the nine months ended September 30, 1999, the Company
recognized approximately $250,000 of stock compensation expense.
11. SUBSEQUENT EVENTS (UNAUDITED)
In December 1999, GTE Service Corporation and GTE Corporation (GTE) filed a
lawsuit against the Company and an executive officer of the Company who was
formerly employed by GTE. The lawsuit alleged that the Company and the executive
officer violated certain non-inducement and non-hire provisions of the
executive's separation agreement with GTE. In December 1999, the lawsuit was
settled. Under the terms of the settlement agreement, the Company, without
admitting any fault, agreed to pay GTE $100,000 in cash and issued a $200,000
note payable to GTE. The note payable is interest-free and due the earlier of
the completion of an initial public offering of the Company's stock or March 1,
2000. The Company also agreed to pay GTE an additional $300,000 in the event
that the Company violates certain non-hire provisions of the settlement
agreement.
F-20
<PAGE>
GLOSSARY OF TERMS
<TABLE>
<S> <C>
ATM................................ ASYNCHRONOUS TRANSFER MODE. High bandwidth, low-delay,
connection-oriented, packet-like switching and
multiplexing technique requiring 53-byte, fixed sized
cells.
Backbone........................... An element of the network infrastructure that provides
high-speed, high capacity connections among the
network's physical points of presence, i.e.,
connection points and Metro Service Centers. The
backbone is used to transport end user traffic across
the metropolitan area and across the United States.
Bandwidth.......................... Refers to the maximum amount of data that can be
transferred through a computer's backbone or
communication channel in a given time. It is usually
measured in Hertz, cycles per second, for analog
communications and bits per second for digital
communications.
Central Office..................... Incumbent carrier facility where subscriber lines are
joined to incumbent carrier switching equipment.
Collocation........................ A location where a competitive carrier network
interconnects with the network of an incumbent carrier
inside an incumbent carrier's central office.
Competitive Carrier................ Category of telephone service provider, or carrier,
that offers local exchange and other services similar
to and in competition with those of the incumbent
carrier, as allowed by recent changes in
telecommunications law and regulation. A competitive
carrier may also provide other types of services such
as long distance telephone, data communications,
Internet access and video.
Copper Line or Loop................ A pair of traditional copper telephone lines using
electric current to carry signals.
Digital............................ Describes a method of storing, processing and
transmitting information through the use of the
distinct electronic or optical pulses that represent
the binary digits 0 and 1. Digital transmission and
switching technologies employ a sequence of these
pulses to convey information, as opposed to the
continuously variable analog signal. The precise
digital numbers preclude distortion, such as
graininess or "snow", in the case of video
transmission, or static or other background distortion
in the case of audio transmission.
Downstream......................... Refers to the transmission speed of a connection
between our connection point and the end user.
DSL................................ DIGITAL SUBSCRIBER LINE. A transmission technology
enabling high-speed access in the local copper loop,
often referred to as the last mile between the network
service provider -- i.e., an incumbent carrier,
competitive carrier or any Internet service
provider -- and end user.
E-Commerce......................... ELECTRONIC COMMERCE. An Internet service that supports
electronic transactions between customers and vendors
to purchase goods and services.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Incumbent Carrier.................. A company providing local exchange services on the
date of enactment of the Telecommunications Act of
1996. These companies consist of the Regional Bell
Operating Companies, GTE and numerous independent
telephone companies.
Interconnection Agreement.......... A contract between an incumbent carrier and a
competitive carrier for the connection of a
competitive carrier network to the public switched
telephone network, as well as competitive carrier
access to incumbent carrier unbundled network
elements, e.g., copper loops. This agreement sets out
some of the financial agreement and operational
aspects of such interconnection and access.
Internet........................... An array of interconnected networks using a common set
of protocols defining the information coding and
processing requirements that can communicate across
hardware platforms and over many links; now operated
by a consortium of telecommunications service
providers and others.
IP................................. INTERNET PROTOCOL. A standard for software that keeps
track of the inter-network addresses for different
nodes, routes outgoing messages and recognizes
incoming messages.
ISDN............................... INTEGRATED SERVICES DIGITAL NETWORK. A transmission
method that provides circuit-switched access to the
public network at speeds of 64 or 128 Kbps for voice,
data and video transmission.
Internet Service Provider.......... A company that provides direct access to the Internet.
Interexchange Carrier.............. Usually referred to as a long-distance service
provider. There are many interexchange carriers,
including AT&T, MCI WorldCom, Sprint and Qwest.
Kbps............................... KILOBITS PER SECOND. 1,000 bits per second.
Long Distance Carrier.............. A long distance carrier providing services between
local exchanges on an intrastate or interstate basis,
also referred to in the industry as an "interexchange
carrier". A long distance carrier may also be a long
distance resale company.
Mbps............................... MEGABITS PER SECOND. Millions of bits per second.
Modem.............................. An abbreviation of Modulator-Demodulator. An
electronic signal-conversion device used to convert
digital signals from a computer to analog form for
transmission over the telephone network. At the
transmitting end, a modem working as a modulator
converts the computer's digital signals into analog
signals that can be transmitted over a telephone line.
At the receiving end, another modem working as a
demodulator converts analog signals back into digital
signals and sends them to the receiving computer.
Multiplexing....................... An electronic or optical process that combines several
lower speed transmission signals into one higher speed
signal.
Network............................ An integrated system composed of switching equipment
and transmission facilities designed to provide for
the direction, transport and recording of
telecommunications traffic.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Packets............................ Information represented as bytes grouped together
through a communication node with a common destination
address and other attribute information.
Resellers.......................... Generally used to refer to a telecommunications
provider who does not own any switching or
transmission facilities. In reality, a large number of
providers furnish services through a combination of
owned and resold facilities.
Router............................. A device that accepts the Internet Protocol from a
local area network or another wide area network device
and switches/ routes Internet Protocol packets across
a network backbone. Routers also provide protocol
conversion services to transfer Internet Protocol
packets over frame relay, Asynchronous Transfer Mode,
and other backbone network services.
T1................................. This is a Bell System term for a digital transmission
link with a capacity of 1.544 Mbps.
Upstream........................... Refers to the transmission speed of a connection
between the end user and our connection point.
</TABLE>
<PAGE>
UNTIL (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT
IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING
AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARES
[LOGO]
JATO
COMMUNICATIONS
CORP.
COMMON STOCK
--------
PROSPECTUS
-------------
MERRILL LYNCH & CO.
BEAR, STEARNS & CO. INC.
, 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses, other than the
underwriting discount and commissions, payable by the registrant in connection
with the sale of the common stock being registered hereby. All amounts shown are
estimates, except the Securities and Exchange Commission registration fee, the
NASD filing fee and the Nasdaq National Market listing fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............ $33,000.00
NASD filing fee................................................ 13,000.00
Nasdaq National Market listing application fee................. 5,000.00
Blue Sky fees and expenses.....................................
Printing and engraving expenses................................
Legal fees and expenses........................................
Accounting fees and expenses...................................
Directors' and officers' insurance.............................
Transfer agent and registrar fees..............................
Miscellaneous expenses.........................................
TOTAL.......................................................... $
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law permits indemnification
of the registrant's officers and directors under certain conditions and subject
to certain limitations. Section 145 of the Delaware General Corporation Law also
provides that a corporation has the power to purchase and maintain insurance on
behalf of its officers and directors against any liability asserted against such
person and incurred by him or her in such capacity, or arising out of his or her
status as such, whether or not the corporation would have the power to indemnify
him or her under the provisions of Section 145 of the Delaware General
Corporation Law.
The company's amended and restated bylaws that will become effective upon
the closing of this offering provide that the company will indemnify its
directors and executive officers to the fullest extent permitted by Delaware law
and may indemnify its other officers, employees and other agents to the fullest
extent permitted by Delaware law.
In addition, the company's restated certificate of incorporation that will
become effective upon the closing of this offering provides that, to the fullest
extent permitted by Delaware law, its directors will not be personally liable to
the company or its stockholders for monetary damages for any breach of fiduciary
duty as directors. This provision of the restated certificate of incorporation
does not eliminate the directors' duty of care. In appropriate circumstances,
equitable remedies such as an injunction or other forms of non-monetary relief
are available under Delaware law. This provision also does not affect the
directors' responsibilities under any other laws, such as the federal securities
laws and state and federal environmental laws.
Each director will continue to be subject to liability for:
- breach of a director's duty of loyalty to the company and its
stockholders;
- acts or omissions not in good faith or that involve intentional misconduct
or a knowing violation of law;
- unlawful payments of dividends or unlawful stock repurchases or
redemptions; and
II-1
<PAGE>
- any transaction from which a director derived an improper personal
benefit.
The company also intends to enter into indemnity agreements with its
directors and executive officers and to obtain directors' and officers'
liability insurance.
There is no pending litigation or proceeding involving any of the company's
directors or officers as to which indemnification is being sought. The company
is not aware of any pending or threatened litigation that may result in a claim
for indemnification.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The company has issued and sold the following securities since June 12, 1998
(date of inception).
On various dates between April 1999 and November 1999, the Company
authorized the grant of stock options to employees, consultants, directors and
officers to purchase an aggregate of 3,037,250 shares of its common stock at
exercise prices ranging from $1.50 to $5.60 per share. The Company relied on the
exemption provided by Rule 701 of the Securities Act.
On July 13, 1998, the Company issued an aggregate of 2,800,001 shares of its
Common Stock at a price per share of $.047 to its founders for cash and
assignment of certain proprietary rights to the Company in the aggregate amount
of $131,600.05. On October 13, 1998 the Company declared a 1:1 stock dividend
for each outstanding share of its Common Stock for the issuance of an aggregate
of 2,800,001 shares. The Company relied on the exemptions provided by
Section 4(2) and 4(6) of the Securities Act.
In August 1998, the Company issued an aggregate of 520,000 shares of its
Common Stock at a price of $.07 per share to two of its employees for cash
proceeds in the aggregate amount of $36,400. The Company relied on the exemption
provided by Rule 701 of the Securities Act.
In October 1998, the Company issued 130,000 shares of its Common Stock at a
price per share of $.15 to one of its employees for cash proceeds in the amount
of $20,000. The Company relied on the exemptions provided by Rule 701 of the
Securities Act.
In October 1998, the Company issued an aggregate of 1,751,985 shares of its
Series A Preferred Stock to certain accredited investors at a purchase price of
$0.75 per share for cash proceeds in the amount of $1,313,988.75. The Company
relied on the exemptions provided by Rule 506 of Regulation D under the
Securities Act.
In April and May 1999, the Company issued an aggregate of 13,615,322 shares
of its Series B Preferred Stock to certain accredited investors at a purchase
price of $1.50 per share for cash proceeds in the amount of $20,422,983.00. The
Company relied on the exemptions provided by Rule 506 of Regulation D under the
Securities Act.
In May 1999, the Company issued a warrant to purchase 20,000 shares of its
Common Stock at an exercise price of $3.00 per share to one accredited investor.
The Company relied on the exemption provided by Section 4(2) of the Securities
Act.
On May 13, 1999 the Company authorized the grant of a stock option to
purchase 40,000 shares of its Common Stock to one of its directors at an
exercise price of $.25 per share. On May 13, 1999 such optionee exercised his
option to purchase 10,000 shares for an aggregate consideration of $2,500. The
Company relied on the exemption provided by Rule 701 of the Securities Act.
On August 1, 1999, the Company issued a warrant to purchase 5,000 shares of
its Common Stock at an exercise price of $3.00 per share to one accredited
investor. The Company relied on the exemption provided by Section 4(2) of the
Securities Act.
II-2
<PAGE>
On August 31, 1999, the Company issued 500,000 shares of its Common stock at
a price per share of $.75 per share to Gerald K. Dinsmore. The Company relied on
the exemption provision provided by Rule 701 of the Securities Act.
On September 16, 1999, the Company issued an aggregate of 3,938,714 shares
of its Series C Preferred Stock to certain accredited investors at a purchase
price of $7.00 per share for cash proceeds in the amount of $24,570,996 and a
note in the amount of $3,000,002. The Company relied on the exemptions provided
by Rule 506 of Regulation D under the Securities Act.
In September 1999, the Company issued an aggregate of 27,812 shares of its
Common Stock at a price per share of $1.50 per share to one consultant and one
employee. The Company relied on the exemption provision provided by Rule 701 of
the Securities Act.
On November 16, 1999, the Company issued an aggregate of 984,666 additional
shares of its Series C Preferred Stock in connection with the price adjustment
from $7.00 to $5.60 per share. The Company relied on the exemptions provided by
Rule 506 of Regulation D under the Securities Act.
The recipients of the above-described securities represented their intention
to acquire the securities for investment only and not with a view for
distribution thereof. Appropriate legends were affixed to the stock certificates
issued in such transactions. All recipients had adequate access, through
employment or other relationships, to information about the Company.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<S> <C>
1.1* Form of Purchase Agreement.
3.1 Restated Certificate of Incorporation of the Company, currently in effect.
3.2 Form of Restated Certificate of Incorporation of the Company to become effective upon the closing of
the Offering.
3.3 Certificate of Correction of the Restated Certificate of Incorporation of the Company.
3.4 Certificate of Amendment of the Restated Certificate of Incorporation of the Company.
3.5 Amended Bylaws of the Company, currently in effect.
3.6 Amended and Restated Bylaws of the Company to become effective upon the closing of the Offering.
4.1 Reference is made to Exhibits 3.1 through 3.6.
4.2* Specimen stock certificate representing shares of Common Stock of the Company.
5.1* Opinion of Cooley Godward LLP regarding the legality of the securities being registered.
10.1 Employment Agreement dated April 16, 1999 between the registrant and Brian E. Gast.
10.2 Employment Agreement dated April 16, 1999 between the registrant and Leonard Allsup.
10.3 Employment Agreement dated April 16, 1999 between the registrant and Bruce E. Dines.
10.4 Employment Agreement dated April 16, 1999 between the registrant and Patrick Green.
10.5 Employment Agreement dated April 16, 1999 between the registrant and Rex A. Humston.
10.6 Employment Agreement dated May 10, 1999 between the registrant and Fred Thomas Danner, III.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<S> <C>
10.7 Employment Agreement dated August 16, 1999 between the registrant and William D. Myers.
10.8 Employment Agreement dated June 1, 1999 between the registrant and Gerard A. Maglio.
10.9 Employment Agreement dated August 31, 1999 between the registrant and Gerald K. Dinsmore.
10.10 Warrant to purchase 20,000 shares of Common Stock of the registrant issued to Daniels & Associates on
June 18, 1999.
10.11 Warrant to purchase 5,000 shares of Common Stock of the registrant issued to Teah Bennett on August
1, 1999.
10.12 Founder's Stock Purchase Agreement dated July 13, 1998 between the registrant and Brian E. Gast.
10.13 Founder's Stock Purchase Agreement dated July 13, 1998 between the registrant and Bruce E. Dines.
10.14 Founder's Stock Purchase Agreement dated July 13, 1998 between the registrant and Leonard Allsup.
10.15 Stock Purchase Agreement dated August 28, 1998 between the registrant and Rex A. Humston.
10.16 Stock Purchase Agreement dated October 14, 1998 between the registrant and Patrick M. Green.
10.17 Stock Purchase Agreement dated August 31, 1999 between the registrant and Gerald K. Dinsmore.
10.18 Series A Preferred Stock Purchase Agreement entered into as of October 23, 1998 among the registrant
and the parties named therein.
10.19 Series B Preferred Stock Purchase Agreement entered into as of April 16, 1999 among the registrant
and the parties named therein.
10.20 Series C Preferred Stock Purchase Agreement entered into as of September 16, 1999 among the
registrant and the parties named therein.
10.21 1998 Equity Incentive Plan.
10.22 Form of Grant Notice and Stock Option Agreement.
10.23 Office Lease Agreement dated January 1, 1999 between the registrant and Denver-Stellar Associates
Limited Partnership, as amended.
10.24 Amended and Restated Investors' Rights Agreement dated as of September 16, 1999 among the registrant
and the investors named therein.
10.25 Amended and Restated Stockholders' Agreement dated as of September 16, 1999 among the registrant and
the stockholders named therein.
10.26 Form of Indemnity Agreements between the registrant and each of its directors and executive officers.
10.27** Credit Agreement dated as of July 14, 1999 among the registrant, Jato Operating Corp., the Lenders
party thereto, State Street Bank and Trust Company and Lucent Technologies Inc.
10.28 Purchase Agreement dated March 18, 1999 between the Company and Hi Country Wire & Telephone, Ltd.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<S> <C>
10.29** Agreement effective February 12, 1999 between the registrant and Lucent Technologies Inc., as
amended.
21.1 Statement re: subsidiaries of the registrant.
23.1* Consent of Cooley Godward LLP (included in Exhibit 5.1).
23.2 Consent of Arthur Andersen LLP.
24.1 Powers of attorney (included on Page II-6).
27 Financial Data Schedule.
</TABLE>
- ------------------------
* To be filed by amendment.
** The Company is applying for confidential treatment with respect to portions
of these exhibits.
(B) FINANCIAL STATEMENT SCHEDULES.
Not applicable.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to provisions described in Item 14 or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes:
(1) That, for purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this registration statement
as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Denver,
County of Denver, State of Colorado, on December 23, 1999
<TABLE>
<S> <C> <C>
By: /s/ GERALD K. DINSMORE
-----------------------------------------
Gerald K. Dinsmore
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Gerald K. Dinsmore and William D. Myers and each
of them, as his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place, and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments, exhibits thereto and other documents in connection therewith) to
this Registration Statement and any subsequent registration statement filed by
the registrant pursuant to Rule 462(b) of the Securities Act of 1933, as
amended, which relates to this Registration Statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
President, Chief Executive
/s/ GERALD K. DINSMORE Officer and Director
- ------------------------------ (PRINCIPAL EXECUTIVE December 23, 1999
Gerald K. Dinsmore OFFICER)
Vice President, Finance,
/s/ WILLIAM D. MYERS Chief Financial Officer
- ------------------------------ and Treasurer (PRINCIPAL December 23, 1999
William D. Myers FINANCIAL AND ACCOUNTING
OFFICER)
/s/ BRIAN E. GAST
- ------------------------------ Chairman of the Board December 23, 1999
Brian E. Gast
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ LEONARD ALLSUP
- ------------------------------ Vice President and December 23, 1999
Leonard Allsup Director
/s/ ERIC A. BENHAMOU
- ------------------------------ Director December 23, 1999
Eric A. Benhamou
/s/ TODD A. BROOKS
- ------------------------------ Director December 23, 1999
Todd A. Brooks
/s/ JAMES J. COLLIS
- ------------------------------ Director December 23, 1999
James J. Collis
/s/ DONALD T. LYNCH
- ------------------------------ Director December 23, 1999
Donald T. Lynch
/s/ GREGG A. MOCKENHAUPT
- ------------------------------ Director December 23, 1999
Gregg A. Mockenhaupt
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<S> <C>
1.1* Form of Purchase Agreement.
3.1 Restated Certificate of Incorporation of the Company, currently in effect.
3.2 Form of Restated Certificate of Incorporation of the Company to become effective upon the closing of
the Offering.
3.3 Certificate of Correction of the Restated Certificate of Incorporation of the Company.
3.4 Certificate of Amendment of the Restated Certificate of Incorporation of the Company.
3.5 Amended Bylaws of the Company, currently in effect.
3.6 Amended and Restated Bylaws of the Company to become effective upon the closing of the Offering.
4.1 Reference is made to Exhibits 3.1 through 3.6.
4.2* Specimen stock certificate representing shares of Common Stock of the Company.
5.1* Opinion of Cooley Godward LLP regarding the legality of the securities being registered.
10.1 Employment Agreement dated April 16, 1999 between the registrant and Brian E. Gast.
10.2 Employment Agreement dated April 16, 1999 between the registrant and Leonard Allsup.
10.3 Employment Agreement dated April 16, 1999 between the registrant and Bruce E. Dines.
10.4 Employment Agreement dated April 16, 1999 between the registrant and Patrick Green.
10.5 Employment Agreement dated April 16, 1999 between the registrant and Rex A. Humston.
10.6 Employment Agreement dated May 10, 1999 between the registrant and Fred Thomas Danner, III.
10.7 Employment Agreement dated August 16, 1999 between the registrant and William D. Myers.
10.8 Employment Agreement dated June 1, 1999 between the registrant and Gerard A. Maglio.
10.9 Employment Agreement dated August 31, 1999 between the registrant and Gerald K. Dinsmore.
10.10 Warrant to purchase 20,000 shares of Common Stock of the registrant issued to Daniels & Associates on
June 18, 1999.
10.11 Warrant to purchase 5,000 shares of Common Stock of the registrant issued to Teah Bennett on August
1, 1999.
10.12 Founder's Stock Purchase Agreement dated July 13, 1998 between the registrant and Brian E. Gast.
10.13 Founder's Stock Purchase Agreement dated July 13, 1998 between the registrant and Bruce E. Dines.
10.14 Founder's Stock Purchase Agreement dated July 13, 1998 between the registrant and Leonard Allsup.
10.15 Stock Purchase Agreement dated August 28, 1998 between the registrant and Rex A. Humston.
10.16 Stock Purchase Agreement dated October 14, 1998 between the registrant and Patrick M. Green.
10.17 Stock Purchase Agreement dated August 31, 1999 between the registrant and Gerald K. Dinsmore.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<S> <C>
10.18 Series A Preferred Stock Purchase Agreement entered into as of October 23, 1998 among the registrant
and the parties named therein.
10.19 Series B Preferred Stock Purchase Agreement entered into as of April 16, 1999 among the registrant
and the parties named therein.
10.20 Series C Preferred Stock Purchase Agreement entered into as of September 16, 1999 among the
registrant and the parties named therein.
10.21 1998 Equity Incentive Plan.
10.22 Form of Grant Notice and Stock Option Agreement.
10.23 Office Lease Agreement dated January 1, 1999 between the registrant and Denver-Stellar Associates
Limited Partnership, as amended.
10.24 Office Lease Agreement dated September 29, 1999 between the registrant and Denver Place Associates
Limited Partnership.
10.25 Amended and Restated Investors' Rights Agreement dated as of September 16, 1999 among the registrant
and the investors named therein.
10.26 Amended and Restated Stockholders' Agreement dated as of September 16, 1999 among the registrant and
the stockholders named therein.
10.27 Form of Indemnity Agreement between the registrant and each of its directors and executive officers.
10.28** Credit Agreement dated as of July 14, 1999 among the registrant, Jato Operating Corp., the Lenders
party thereto, State Street Bank and Trust Company and Lucent Technologies Inc.
10.29 Purchase Agreement dated March 18, 1999 between the Company and Hi Country Wire & Telephone, Ltd.
10.30** Agreement effective February 12, 1999 between the registrant and Lucent Technologies Inc., as
amended.
21.1 Statement re: subsidiaries of the registrant.
23.1* Consent of Cooley Godward LLP (included in Exhibit 5.1).
23.2 Consent of Arthur Andersen LLP.
24.1 Powers of attorney (included on Page II-6).
27 Financial Data Schedule.
</TABLE>
- ------------------------
* To be filed by amendment.
** The Company is applying for confidential treatment with respect to portions
of these exhibits.
<PAGE>
Exhibit 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
JATO COMMUNICATIONS CORP.
Pursuant to Sections 242 & 245
Jato Communications Corp., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware, DOES
HEREBY CERTIFY:
1. The name of the corporation is Jato Communications Corp. The
corporation was originally incorporated under the name Jato Communications
Corporation. The date of filing of its original Certificate of Incorporation
with the Secretary of State of the State of Delaware was June 12, 1998.
2. This Restated Certificate of Incorporation of Jato
Communications Corp. has been duly adopted in accordance with the provisions
of Sections 228, 242 and 245 of the General Corporation Law of the State of
Delaware.
3. This Restated Certificate of Incorporation restates and further
amends the Restated Certificate of Incorporation of this corporation by
restating the text of the original Restated Certificate of Incorporation in
full to read as follows:
I.
The name of this Corporation is Jato Communications Corp. (the
"CORPORATION" or the "COMPANY").
II.
The address, including street, number, city and county, of the
registered office of the Corporation in the State of Delaware is 1209 Orange
Street, City of Wilmington, County of New Castle, and the name of the
registered agent of the Corporation in the State of Delaware at such address
is The Corporation Trust Company.
III.
The purpose of this Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General
Corporation Law of the State of Delaware.
IV.
A. This Corporation is authorized to issue two classes of stock to
be designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares which the Corporation is authorized to issue is one hundred
five million (105,000,000) shares. Eighty million (80,000,000) shares shall
be Common Stock, each having a par value of $.01. Twenty-five million
(25,000,000) shares shall be Preferred Stock, each having a par value of $.01.
1.
<PAGE>
B. The number of authorized shares of Common Stock may be
increased or decreased (but not below the number of shares of Common Stock
then outstanding) by the affirmative vote of the holders of a majority of the
stock of the Corporation (voting together on an as-if-converted basis).
C. The Preferred Stock may be issued from time to time in one or
more series. The Board of Directors is hereby authorized, within the
limitations and restrictions stated in this Certificate of Incorporation, to
fix or alter the dividend rights, dividend rate, conversion rights, voting
rights, rights and terms of redemption (including sinking fund provisions),
the redemption price or prices, the liquidation preferences of any wholly
unissued series of Preferred Stock, and the number of shares constituting any
such series and the designation thereof, or any of them; and to increase or
decrease the number of shares of any series subsequent to the issue of shares
of that series, but not below the number of shares of such series then
outstanding. In case the number of shares of any series shall be so
decreased, the shares constituting such decrease shall resume the status
which they had prior to the adoption of the resolution originally fixing the
number of shares of such series.
D. One million seven hundred fifty-one thousand nine hundred
eighty-five (1,751,985) of the authorized shares of Preferred Stock are
hereby designated "Series A Preferred Stock" (the "SERIES A STOCK").
Thirteen million six hundred fifteen thousand three hundred twenty-two
(13,615,322) of the authorized shares of Preferred Stock are hereby
designated "Series B Preferred Stock" (the "SERIES B STOCK"). Five million
seven hundred fourteen thousand two hundred eighty-five (5,714,285) of the
authorized shares of Preferred Stock are hereby designated "Series C
Preferred Stock (the "SERIES C STOCK").
E. The rights, preferences, privileges, restrictions and other
matters relating to the Series A Stock, Series B Stock and Series C Stock are
as follows:
1. DIVIDEND RIGHTS. Holders of Series A Stock, Series B
Stock and Series C Stock shall be entitled to participate equally in the
payment of dividends, whether in-kind or in cash, and if in cash, when and as
declared by the Board of Directors, out of funds that are legally available
therefor, with, but payable as a priority to payment to, the holders of
Common Stock on an as-converted basis.
2. VOTING RIGHTS.
a. Except as otherwise provided herein or as
required by law, the Series A Stock, Series B Stock and Series C Stock shall
be voted equally with the shares of the Common Stock of the Company, and not
as a separate class, at any annual or special meeting of stockholders of the
Company, and may act by written consent in the same manner as the Common
Stock, in either case upon the following basis: each holder of shares of
Series A Stock, Series B Stock and Series C Stock shall be entitled to such
number of votes as shall be equal to the whole number of shares of Common
Stock into which such holder's aggregate number of shares of Series A Stock,
Series B Stock and Series C Stock, respectively, are convertible (pursuant to
Section 4 hereof) immediately after the close of business on the record date
fixed for such meeting or the effective date of such written consent.
2.
<PAGE>
b. SEPARATE VOTE OF SERIES B STOCK. In addition to
any other vote or consent required herein or by law, the vote or written
consent of the holders of a majority of the outstanding Series B Stock shall
be necessary for the Company to effect any of the following actions:
(i) Any amendment, alteration or repeal of
any provision of this Restated Certificate of Incorporation or the Amended
Bylaws of the Company (including any filing of a Certificate of Designation);
(ii) Any authorization or any designation,
whether by reclassification or otherwise or any issuance, of any new class or
series of stock or any other securities convertible into or exchangeable for
equity securities of the Company ranking on a parity with or senior to the
Series B Stock in right of liquidation preference or dividends;
(iii) Any agreement by the Company regarding an
Acquisition or Asset Transfer (each as defined in Section 3(c) below);
(iv) File, commencement of a case, proceeding
or other action under any law relating to bankruptcy, insolvency or relief of
debtors or the appointment of a receiver, trustee, custodian or any similar
person;
(v) Consummation of an initial public
offering of the Company's Common Stock pursuant to a registration statement
filed with the Securities and Exchange Commission, other than a Qualified
Offering (as defined in Section 4(j)(ii) below);
(vi) Any redemption, repurchase, payment of
dividends or other distributions with respect to any capital stock of the
Company (except for acquisitions of stock approved by the Board of Directors
which permit the Company to repurchase such shares upon termination of
services to the Company by one or more employees thereof or in exercise of
the Company's right of first refusal);
(vii) Any issuance of bonds, debentures, notes
or other debt obligations convertible into, or exchangeable for, or having
rights to purchase, shares of Common Stock of the Company unless (A)
otherwise approved by the Company's Board of Directors, including at least
two (2) designees of the Series B Stock (the "SERIES B DIRECTORS"), (B) the
per share cash consideration received or receivable in exchange for such
Common Stock (or the Common Stock per share equivalents of securities
convertible into Common Stock) is in excess of the then-applicable Series B
Conversion Price (as defined in Section 4(c) below) and (C) the Company's
Board of Directors, including the Series B Directors, determines that the per
share cash consideration received or receivable in exchange for such Common
Stock (or securities convertible into Common Stock) is equal to or greater
than the then-current fair market value of the Company's Common Stock;
(viii) Any issuance of capital stock of the
Company ranking junior to the Series A Stock and the Series B Stock ("JUNIOR
STOCK"), except (A) shares of Common Stock and/or options, warrants or other
Common Stock purchase rights, and the Common Stock issued pursuant to such
options, warrants or other rights after the Original Issue Date (as defined
in Section 4(d)(i) below) to employees, officers or directors of, or
consultants or
3.
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advisors to the Company or any subsidiary pursuant to stock purchase or stock
option plans or other arrangements that are approved by the Board of
Directors ("APPROVED ISSUANCES"), (B) in connection with a Qualified
Offering, and (C) such as may otherwise be approved by the Company's Board of
Directors, including the Series B Directors, PROVIDED, THAT, the per share
cash consideration received or receivable upon issuance of such Junior Stock
(or its Common Stock equivalents) exceeds the then-applicable Series B
Conversion Price and the Company's Board of Directors, including two of the
Series B Directors, determines that the per share cash consideration received
or receivable upon issuance of such Junior Stock (or its Common Stock
equivalents) is equal to or greater than the then-current fair market value
of the Company's Common Stock, plus an appropriate premium;
(ix) Any issuance of any option, warrant, put,
call or other arrangement for the purchase or acquisition of any capital
stock of the Company or any subsidiary of the Company, except Approved
Issuances;
(x) Any increase or decrease in the
authorized number of members of the Company's Board of Directors from six
(6); or
(xi) Any issuance of additional shares of
Series A Stock.
c. SEPARATE VOTE OF SERIES C STOCK. In addition to
any other vote or consent required herein or by law, the vote or written
consent of the holders of at least fifty-one percent (51%) of the outstanding
Series C Stock shall be necessary for the Company to effect any of the
following actions:
(i) Any amendment, alteration or repeal of
any provision of this Restated Certificate of Incorporation or the Amended
Bylaws of the Company (including any filing of a Certificate of Designation)
that alters or changes the voting powers, preferences, or other special
rights or privileges, or restrictions of the Series C Stock so as to affect
the holders of Series C Stock adversely; or
(ii) Any authorization or any designation,
whether by reclassification or otherwise or any issuance, of any new class or
series of stock or any other securities convertible into or exchangeable for
equity securities of the Company ranking senior to the Series C Stock in
right of liquidation preference or dividends.
d. ELECTION OF BOARD OF DIRECTORS.
(i) The holders of Series B Stock, voting as
a separate class on an as-converted basis, shall be entitled to elect two (2)
members of the Company's Board of Directors at each meeting or pursuant to
each consent of the Company's stockholders for the election of directors, and
to remove from office such director and to fill any vacancy caused by the
resignation, death or removal of such director. The holders of Common Stock,
Series A Stock and Series B Stock, voting together as a class on an
as-converted basis, shall be entitled to elect all remaining members of the
Board of Directors.
(ii) In the event that the Company effects any
of the actions set forth in Section 2(b) above without first obtaining the
vote or written consent of the holders of a
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majority of the outstanding Series B Stock, the number of members on the
Board of Directors of the Company shall automatically be increased by two (2)
directors and the holders of Series B Stock, voting as a separate class on an
as-converted basis, shall be entitled to elect the members to occupy the two
(2) new vacancies on the Company's Board of Directors at each meeting or
pursuant to each consent of the Company's stockholders for the election of
directors, and to remove from office such director and to fill any vacancy
caused by the resignation, death or removal of such director.
(iii) So long as any shares of Series B Stock
are outstanding, the number of directors of the Company shall at all times be
such that the exercise, by the holders of shares of Series B Stock, of the
right to elect directors under the circumstances provided in clause (ii) of
this Section 2(d) will not contravene any provisions of the Delaware General
Corporation Law or this Restated Certificate of Incorporation.
3. LIQUIDATION RIGHTS.
a. Upon any liquidation, dissolution, or winding up of the
Company, whether voluntary or involuntary, before any distribution or payment
shall be made to the holders of any Junior Stock, (i) the holders of Series A
Stock shall be entitled to be paid out of the assets of the Company an amount
per share of Series A Stock equal to the greater of (A) the sum of the Series
A Original Issue Price (as defined in Section 4(b)) (as adjusted for any
stock splits, stock dividends or the like) plus all declared but unpaid
dividends on the Series A Stock and (B) such amount as would have been
received had each share of Series A Stock outstanding been converted into
shares of Common Stock immediately prior to such liquidation, dissolution or
winding up, (ii) the holders of Series B Stock shall be entitled to be paid
out of the assets of the Company an amount per share of Series B Stock equal
to the greater of (A) the sum of the Series B Original Issue Price (as
defined in Section 4(b)) (as adjusted for any stock splits, stock dividends
or the like) plus all declared but unpaid dividends on the Series B Stock and
(B) such amount as would have been received had each share of Series B Stock
outstanding been converted into shares of Common Stock immediately prior to
such liquidation, dissolution or winding up, and (iii) the holders of Series
C Stock shall be entitled to be paid out of the assets of the Company an
amount per share of Series C Stock equal to the greater of (A) the sum of the
Series C Original Issue Price (as defined in Section 4(b)) (as adjusted for
any stock splits, stock dividends or the like) plus all declared but unpaid
dividends on the Series C Stock and (B) such amount as would have been
received had each share of Series C Stock outstanding been converted into
shares of Common Stock immediately prior to such liquidation, dissolution or
winding up.
b. After the payment of the full liquidation preference to
the holders of Series A Stock, Series B Stock and Series C Stock of the
amounts set forth in Section 3(a) above, the remaining assets of the Company
legally available for distribution, if any, shall be distributed ratably to
the holders of the Common Stock.
5.
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c. The following events shall be considered a liquidation
under this Section 3:
(i) (A) any consolidation or merger of the Company
with or into any other corporation or other entity or person, or any other
corporate reorganization, in which the stockholders of the Company
immediately prior to such consolidation, merger or reorganization, hold less
than fifty percent (50%) of the outstanding voting power of the surviving
entity (or its parent) following the consolidation, merger or reorganization
or (B) any transaction (or series of related transactions involving a person
or entity, or group of affiliated persons or entities) in which in excess of
fifty percent (50%) of the Company's voting power is transferred (an
"ACQUISITION"); or
(ii) a sale, lease or other disposition of all or
substantially all of the assets of the Company for cash or securities or a
statutory share exchange in which the stockholders of the Company may
participate (an "ASSET TRANSFER").
d. If, upon any liquidation, distribution, or winding up,
the assets of the Company shall be insufficient to make payment in full to
all holders of Series A Stock, Series B Stock and Series C Stock of the
amounts set forth in Section 3(a) above, then such assets shall be
distributed among the holders of Series A Stock, Series B Stock and Series C
Stock at the time outstanding, ratably in proportion to the full amounts to
which they would otherwise be respectively entitled pursuant to this Section
3 based upon the Series A Original Issue Price, Series B Original Issue Price
and Series C Original Issue Price (as defined in Section 4(b) below).
4. CONVERSION RIGHTS.
The holders of Series A Stock, Series B Stock and Series
C Stock shall have the following rights with respect to the conversion of the
Series A Stock, Series B Stock and Series C Stock into shares of Common Stock:
a. OPTIONAL CONVERSION. Subject to and in compliance with
the provisions of this Section 4, any number of shares of Series A Stock,
Series B Stock and Series C Stock may, at the option of the holder, be
converted at any time into fully-paid and nonassessable shares of Common
Stock. The number of shares of Common Stock to which a holder of Series A
Stock, Series B Stock or Series C Stock shall be entitled upon conversion
shall be the product obtained by multiplying the applicable "Conversion Rate"
then in effect (determined as provided in Section 4(b)) by the number of
shares of Series A Stock, Series B Stock or Series C Stock, as applicable,
being converted.
b. CONVERSION RATE. The conversion rate in effect at any
time for conversion of the Series A Stock (the "SERIES A CONVERSION RATE")
shall be the quotient obtained by dividing the Series A Original Issue Price
by the "Series A Conversion Price," calculated as provided in Section 4(c).
The "Original Issue Price" of the Series A Stock shall be Seventy-Five Cents
($.75) (the "SERIES A ORIGINAL ISSUE PRICE"). The conversion rate in effect
at any time for conversion of the Series B Stock (the "SERIES B CONVERSION
RATE") shall be the quotient obtained by dividing the Series B Original Issue
Price by the "Series B Conversion
6.
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Price," calculated as provided in Section 4(c). The "Original Issue Price"
of the Series B Stock shall be One Dollar Fifty Cents ($1.50) (the "SERIES B
ORIGINAL ISSUE PRICE"). The conversion rate in effect at any time for
conversion of the Series C Stock (the "SERIES C CONVERSION RATE") shall be
the quotient obtained by dividing the Series C Original Issue Price by the
"Series C Conversion Price," calculated as provided in Section 4(c). The
"Original Issue Price" of the Series C Stock shall be Seven Dollars ($7.00)
(the "SERIES C ORIGINAL ISSUE PRICE").
c. CONVERSION PRICE. The conversion price for the Series A
Stock shall initially be the Series A Original Issue Price (the "SERIES A
CONVERSION PRICE"). Such Series A Conversion Price shall be adjusted from
time to time in accordance with this Section 4. All references to the Series
A Conversion Price herein shall mean the Series A Conversion Price as so
adjusted. The conversion price for the Series B Stock shall initially be the
Series B Original Issue Price (the "SERIES B CONVERSION PRICE"). Such
initial Series B Conversion Price shall be adjusted from time to time in
accordance with this Section 4. All references to the Series B Conversion
Price herein shall mean the Series B Conversion Price as so adjusted. The
conversion price for the Series C Stock shall initially be the Series C
Original Issue Price (the "SERIES C CONVERSION PRICE"). Such initial Series
C Conversion Price shall be adjusted from time to time in accordance with
this Section 4. All references to the Series C Conversion Price herein shall
mean the Series C Conversion Price as so adjusted. The Series A Conversion
Price, the Series B Conversion Price and the Series C Conversion Price shall
collectively be referred to as the "CONVERSION PRICES," and each a
"CONVERSION PRICE."
d. SALE OF SHARES BELOW SERIES B CONVERSION PRICE AND
SERIES C CONVERSION PRICE.
(i) If at any time or from time to time after the
date that the first share of Series C Stock is issued (the "ORIGINAL ISSUE
DATE"), the Company issues or sells, or is deemed by the express provisions
of this Section 4(d) to have issued or sold, Additional Shares of Common
Stock (as hereinafter defined), other than as a subdivision or combination of
shares of Common Stock as provided in Section 4(e) below, for an Effective
Price (as hereinafter defined) less than the then-effective Series B
Conversion Price or Series C Conversion Price, as applicable, then and in
each such case the then-existing Series B Conversion Price or Series C
Conversion Price, as applicable, shall be reduced, but not increased as of
the opening of business on the date of such issue or sale to a price
determined by multiplying the Series B Conversion Price or Series C
Conversion Price, as applicable, by a fraction (i) the numerator of which
shall be (A) the number of shares of Common Stock deemed outstanding (as
defined below) immediately prior to such issue or sale plus (B) the number of
shares of Common Stock which the aggregate consideration received (as defined
in subsection d(ii)) by the Company for the total number of Additional Shares
of Common Stock so issued would purchase at such Series B Conversion Price or
Series C Conversion Price, as applicable, and (ii) the denominator of which
shall be the number of shares of Common Stock deemed outstanding (as defined
below) immediately prior to such issue or sale plus the total number of
Additional Shares of Common Stock so issued. For the purposes of the
preceding sentence, the number of shares of Common Stock deemed to be
outstanding as of a given date shall be the sum of (A) the number of shares
of Common Stock actually outstanding, (B) the number of shares of Common
Stock into which the then-outstanding shares of Series A Stock, Series B
Stock and Series C Stock could be converted if fully converted on the day
immediately preceding the given date, and (C) the
7.
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number of shares of Common Stock which could be obtained through the exercise
or conversion of all other rights, options and convertible securities then
exercisable or convertible on the day immediately preceding the given date.
(ii) For the purpose of making any adjustment required
under this Section 4(d), the consideration received by the Company for any
issue or sale of securities shall (A) to the extent it consists of cash, be
computed at the net amount of cash received by the Company after deduction of
any underwriting or similar commissions, compensation or concessions paid or
allowed by the Company in connection with such issue or sale but without
deduction of any expenses payable by the Company, (B) to the extent it
consists of property other than cash, be computed at the fair value of that
property as determined in good faith by the Board of Directors (including a
majority of the Series B Directors), and (C) if Additional Shares of Common
Stock, Convertible Securities (as hereinafter defined or rights or options to
purchase either Additional Shares of Common Stock or Convertible Securities
are issued or sold together with other stock or securities or other assets of
the Company for a consideration which covers both, be computed as the portion
of the consideration so received that may be reasonably determined in good
faith by the Board of Directors (including a majority of the Series B
Directors) to be allocable to such Additional Shares of Common Stock,
Convertible Securities or rights or options.
(iii) For the purpose of the adjustment required under
this Section 4(d), if the Company issues or sells any rights or options for
the purchase of, or stock or other securities convertible into or
exchangeable for, Additional Shares of Common Stock (such convertible or
exchangeable stock or securities being herein referred to as "CONVERTIBLE
SECURITIES") whether or not such rights or options or the right to convert or
exchange any such convertible securities are immediately exercisable, and if
the Effective Price of such Additional Shares of Common Stock is less than
the Series B Conversion Price or Series C Conversion Price, as applicable, in
each case the Company shall be deemed to have issued at the time of the
issuance of such rights or options or Convertible Securities the maximum
number of Additional Shares of Common Stock issuable upon exercise or
conversion or exchange thereof and to have received as consideration for the
issuance of such shares an amount equal to the total amount of the
consideration, if any, received by the Company for the issuance of such
rights or options or Convertible Securities, plus, in the case of such rights
or options, the minimum amounts of consideration, if any, payable to the
Company upon the exercise of such rights or options, plus, in the case of
Convertible Securities, the minimum amounts of consideration, if any, payable
to the Company (other than by cancellation of liabilities or obligations
evidenced by such Convertible Securities) upon the conversion thereof;
PROVIDED, THAT, that if the minimum amount of consideration payable to the
Company upon the exercise or conversion of rights, options or Convertible
Securities is reduced over time or on the occurrence or non-occurrence of
specified events other than by reason of antidilution adjustments, the
Effective Price shall be recalculated using the figure to which such minimum
amount of consideration is reduced; PROVIDED, FURTHER, that if the minimum
amount of consideration payable to the Company upon the exercise or
conversion of such rights, options or Convertible Securities is subsequently
increased, the Effective Price shall be again recalculated using the
increased minimum amount of consideration payable to the Company upon the
exercise or conversion of such rights, options or Convertible Securities. No
further adjustment of the Series B Conversion Price or Series C Conversion
Price, as applicable, as adjusted upon the issuance of such rights, options
or Convertible Securities,
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shall be made as a result of the actual issuance of Additional Shares of
Common Stock on the exercise of any such rights or options or the conversion
of any such Convertible Securities. If any such rights or options or the
conversion privilege represented by any such Convertible Securities shall
expire without having been exercised, the Series B Conversion Price or Series
C Conversion Price, as applicable, as adjusted upon the issuance of such
rights, options or Convertible Securities shall be readjusted to the Series B
Conversion Price or Series C Conversion Price, as applicable, which would
have been in effect had an adjustment been made on the basis that the only
Additional Shares of Common Stock so issued were the Additional Shares of
Common Stock, if any, actually issued or sold on the exercise of such rights
or options or rights of conversion of such Convertible Securities, and such
Additional Shares of Common Stock, if any, were issued or sold for the
consideration actually received by the Company upon such exercise, plus the
consideration, if any, actually received by the Company for the granting of
all such rights or options, whether or not exercised, plus the consideration
received for issuing or selling the Convertible Securities actually
converted, plus the consideration, if any, actually received by the Company
(other than by cancellation of liabilities or obligations evidenced by such
Convertible Securities) on the conversion of such Convertible Securities,
PROVIDED THAT such readjustment shall not apply to prior conversions of
Series B Stock or Series C Stock.
(iv) "ADDITIONAL SHARES OF COMMON STOCK" shall mean
all shares of Common Stock issued by the Company or deemed to be issued
pursuant to this Section 4(d), whether or not subsequently reacquired or
retired by the Company other than (A) shares of Common Stock issued upon
conversion of the Series A Stock, Series B Stock, or Series C Stock; (B)
Approved Issuances; and (C) shares of Common Stock issued pursuant to the
exercise of options, warrants or convertible securities outstanding as of the
Original Issue Date. The "EFFECTIVE PRICE" of Additional Shares of Common
Stock shall mean the quotient determined by dividing the total number of
Additional Shares of Common Stock issued or sold, or deemed to have been
issued or sold by the Company under this Section 4(d), into the aggregate
consideration received, or deemed to have been received by the Company for
such issue under this Section 4(d), for such Additional Shares of Common
Stock.
e. ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the
Company shall at any time or from time to time after the Original Issue Date
effect a subdivision of the outstanding Common Stock without a corresponding
subdivision of the Preferred Stock, each Conversion Price in effect
immediately before that subdivision shall be proportionately decreased.
Conversely, if the Company shall at any time or from time to time after the
Original Issue Date combine the outstanding shares of Common Stock into a
smaller number of shares without a corresponding combination of the Preferred
Stock, each Conversion Price in effect immediately before the combination
shall be proportionately increased. Any adjustment under this Section 4(e)
shall become effective at the close of business on the date the subdivision
or combination becomes effective.
f. ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND
SUBSTITUTION. If at any time or from time to time after the Original Issue
Date, the Common Stock issuable upon the conversion of the Series A Stock,
Series B Stock and Series C Stock is changed into the same or a different
number of shares of any class or classes of stock, whether by
recapitalization, reclassification or otherwise (other than an Acquisition or
Asset Transfer as defined in Section 3(c) or a subdivision or combination of
shares or stock dividend or a reorganization,
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merger, consolidation or sale of assets provided for elsewhere in this
Section 4), in any such event each holder of Series A Stock, Series B Stock
and Series C Stock shall have the right thereafter to convert such stock into
the kind and amount of stock and other securities and property receivable
upon such recapitalization, reclassification or other change by holders of
the maximum number of shares of Common Stock into which such shares of Series
A Stock, Series B Stock, or Series C Stock, as applicable, could have been
converted immediately prior to such recapitalization, reclassification or
change, all subject to further adjustment as provided herein or with respect
to such other securities or property by the terms thereof.
g. REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF
ASSETS. If at any time or from time to time after the Original Issue Date,
there is a capital reorganization of the Common Stock (other than an
Acquisition or Asset Transfer as defined in Section 3(c) or a
recapitalization, subdivision, combination, reclassification, exchange or
substitution of shares provided for elsewhere in this Section 4, as a part of
such capital reorganization, provision shall be made so that the holders of
the Series A Stock, Series B Stock and Series C Stock shall thereafter be
entitled to receive upon conversion of the Series A Stock, Series B Stock and
Series C Stock the number of shares of stock or other securities or property
of the Company to which a holder of the number of shares of Common Stock
deliverable upon conversion would have been entitled on such capital
reorganization, subject to adjustment in respect of such stock or securities
by the terms thereof. In any such case, appropriate adjustment shall be made
in the application of the provisions of this Section 4 with respect to the
rights of the holders of Series A Stock, Series B Stock and Series C Stock
after the capital reorganization to the end that the provisions of this
Section 4 (including adjustment of the Conversion Price then in effect and
the number of shares issuable upon conversion of the Series A Stock, Series B
Stock or Series C Stock, as applicable) shall be applicable after that event
and be as nearly equivalent as practicable.
h. CERTIFICATE OF ADJUSTMENT. In each case of an
adjustment or readjustment of the Conversion Price for the number of shares
of Common Stock or other securities issuable upon conversion of the Series A
Stock, Series B Stock or Series C Stock, if the Series A Stock, Series B
Stock or Series C Stock is then convertible pursuant to this Section 4, the
Company, at its expense, shall compute such adjustment or readjustment in
accordance with the provisions hereof and prepare a certificate showing such
adjustment or readjustment, and shall mail such certificate, by first class
mail, postage prepaid, to each registered holder of such stock at the
holder's address as shown in the Company's books. The certificate shall set
forth such adjustment or readjustment, showing in detail the facts upon which
such adjustment or readjustment is based, including a statement of (i) the
consideration received or deemed to be received by the Company for any
Additional Shares of Common Stock issued or sold or deemed to have been
issued or sold, (ii) each Conversion Price at the time in effect, (iii) the
number of Additional Shares of Common Stock and (iv) the type and amount, if
any, of other property which at the time would be received upon conversion of
the Series A Stock, Series B Stock and Series C Stock.
i. NOTICES OF RECORD DATE. Upon (i) any taking by the
Company of a record of the holders of any class of securities for the purpose
of determining the holders thereof who are entitled to receive any dividend
or other distribution, or (ii) any Acquisition (as defined in Section 3(c))
or other capital reorganization of the Company, any reclassification or
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recapitalization of the capital stock of the Company, any merger or
consolidation of the Company with or into any other corporation, or any Asset
Transfer (as defined in Section 3(c)), or any voluntary or involuntary
dissolution, liquidation or winding up of the Company, the Company shall mail
to each holder of Series A Stock, Series B Stock and Series C Stock at least
twenty (20) days prior to the record date specified therein a notice
specifying (A) the date on which any such record is to be taken for the
purpose of such dividend or distribution and a description of such dividend
or distribution, (B) the date on which any such Acquisition, reorganization,
reclassification, transfer, consolidation, merger, Asset Transfer,
dissolution, liquidation or winding up is expected to become effective, and
(C) the date, if any, that is to be fixed as to when the holders of record of
Common Stock (or other securities) shall be entitled to exchange their shares
of Common Stock (or other securities) for securities or other property
deliverable upon such Acquisition, reorganization, reclassification,
transfer, consolidation, merger, Asset Transfer, dissolution, liquidation or
winding up.
j. AUTOMATIC CONVERSION.
(i) Each share of Series A Stock shall automatically
be converted into shares of Common Stock, based on the then-effective Series
A Conversion Price, (A) at any time upon the affirmative election of the
holders of a majority of the outstanding shares of Series A Stock or (B)
immediately upon the closing of a firmly underwritten public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "SECURITIES ACT"), covering the offer and sale of
Common Stock for the account of the Company in which (i) the per share price
is at least $1.88 per share (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like) and (ii) the gross cash
proceeds to the Company (before underwriting discounts, commissions and fees)
are at least $10,000,000. Upon such automatic conversion, any declared and
unpaid dividends shall be paid in accordance with the provisions of Section
4(k).
(ii) Each share of Series B Stock shall automatically
be converted into shares of Common Stock, based on the then-effective Series
B Conversion Price, (A) immediately upon the closing of a firmly underwritten
public offering pursuant to an effective registration statement under the
Securities Act covering the offer and sale of Common Stock for the account of
the Company (an "INITIAL OFFERING") in which (i) the per share price is at
least equal to the "Target Multiple" (as hereinafter defined) multiplied by
the then-effective Series B Conversion Price (the "THRESHOLD PRICE"), (ii)
the gross cash proceeds to the Company (before underwriting discounts,
commissions and fees) are at least $30,000,000 and (iii) the shares of Common
Stock are listed on any national securities exchange or have been registered
under Section 12(g) of the Securities Exchange Act of 1934 (a "QUALIFIED
OFFERING") or (B) following an Initial Offering which is not a Qualified
Offering on the business day following the end of a 180-day period during
which the average closing price of the Company's Common Stock on each such
day exceeded the Threshold Price. Upon such automatic conversion, any
declared and unpaid dividends shall be paid in accordance with the provisions
of Section 4(k). As used herein, "TARGET MULTIPLE" shall mean (A) an amount
equal to 2.5 prior to the third anniversary of the Original Issue Date and
(B) an amount equal to 3.5 on or after the third anniversary of the Original
Issue Date.
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(iii) Each share of Series C Stock shall automatically
be converted into shares of Common Stock, based on the then-effective Series
C Conversion Price, immediately upon the closing of a firmly underwritten
public offering pursuant to an effective registration statement under the
Securities Act, covering the offer and sale of Common Stock for the account
of the Company in which (i) the per share price is at least $10.50 per share
(as adjusted for any stock dividends, combinations, splits, recapitalizations
and the like) and (ii) the gross cash proceeds to the Company (before
underwriting discounts, commissions and fees) are at least $30,000,000. Upon
such automatic conversion, any declared and unpaid dividends shall be paid in
accordance with the provisions of Section 4(k).
k. MECHANICS OF CONVERSION.
(i) OPTIONAL CONVERSION. Each holder of Series A
Stock, Series B Stock or Series C Stock who desires to convert the same into
shares of Common Stock pursuant to this Section 4 shall surrender the
certificate or certificates therefor, duly endorsed, at the office of the
Company or any transfer agent for such stock, and shall give written notice
to the Company at such office that such holder elects to convert the same.
Such notice shall state the number of shares of Series A Stock, Series B
Stock or Series C Stock being converted. Thereupon, the Company shall
promptly issue and deliver at such office to such holder a certificate or
certificates for the number of shares of Common Stock to which such holder is
entitled and shall promptly pay in cash or, to the extent sufficient funds
are not then legally available therefor, in Common Stock (at the Common
Stock's fair market value determined by the Board of Directors as of the date
of such conversion), any accrued dividends on the shares of Series A Stock,
Series B Stock and Series C Stock being converted. Such conversion shall be
deemed to have been made at the close of business on the date of such
surrender of the certificates representing the shares of Series A Stock,
Series B Stock or Series C Stock, as applicable, to be converted, and the
person entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder of such
shares of Common Stock on such date.
(ii) AUTOMATIC CONVERSION. Upon the occurrence of the
event specified in paragraph 4(j) above, the outstanding shares of Series A
Stock, Series B Stock or Series C Stock, as the case may be, shall be
converted automatically without any further action by the holders of such
shares and whether or not the certificates representing such shares are
surrendered to the Company or its transfer agent; PROVIDED, HOWEVER, that the
Company shall not be obligated to issue certificates evidencing the shares of
Common Stock issuable upon such conversion unless the certificates evidencing
such shares of Series A Stock, Series B Stock and Series C Stock are either
delivered to the Company or its transfer agent as provided below, or the
holder notifies the Company or its transfer agent that such certificates have
been lost, stolen or destroyed and executes an agreement satisfactory to the
Company to indemnify the Company from any loss incurred by it in connection
with such certificates. Upon the occurrence of such automatic conversion of
the Series A Stock, Series B Stock or Series C Stock, the holders of Series A
Stock, Series B Stock or Series C Stock shall surrender the certificates
representing such shares at the office of the Company or any transfer agent
for the Series A Stock, Series B Stock and Series C Stock, as applicable.
Thereupon, there shall be issued and delivered to such holder promptly at
such office and in its name as shown on such surrendered certificate or
certificates, a certificate or certificates for the number of shares of
Common Stock into which the
12.
<PAGE>
shares of Series A Stock, Series B Stock or Series C Stock surrendered were
convertible on the date on which such automatic conversion occurred, and any
declared and unpaid dividends shall be paid in accordance with the provisions
of Section 4(k)(i) above.
l. FRACTIONAL SHARES. No fractional shares of Common Stock
shall be issued upon conversion of Series A Stock, Series B Stock or Series C
Stock. All shares of Common Stock (including fractions thereof) issuable
upon conversion of more than one share of Series A Stock, Series B Stock or
Series C Stock by a holder thereof shall be aggregated for purposes of
determining whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion
would result in the issuance of any fractional share, the Company shall, in
lieu of issuing any fractional share, pay cash equal to the product of such
fraction multiplied by the Common Stock's fair market value (as determined by
the Board of Directors) on the date of conversion.
m. RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
Company shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series A Stock, Series B Stock and Series C
Stock, such number of its shares of Common Stock as shall from time to time
be sufficient to effect the conversion of all outstanding shares of the
Series A Stock, Series B Stock and Series C Stock. If at any time the
number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares of the
Series A Stock, Series B Stock and Series C Stock, the Company will take such
corporate action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose. The Company covenants that
all shares of Common Stock which shall be so issuable shall, upon issuance,
be duly authorized, validly issued, fully paid and nonassessable, free from
preemptive or similar rights on the part of the holders of any shares of
capital stock or securities of the Company, and free from all liens and
charges with respect to the issue thereof; and without limiting the
generality of the foregoing, the Company covenants that it will from time to
time take all such action as may be requisite to assure that the par value,
if any, per share of the Common Stock is at all times equal to or less than
the then-effective Conversion Price. The Company will take all such action
as may be necessary to assure that such shares of Common Stock may be so
issued without violation by the Company of any applicable law or regulation
or agreement, or of any requirements of any domestic securities exchange upon
which the Common Stock may be listed. Without limiting the foregoing, the
Company will take all such action as may be necessary to assure that, upon
conversion of any of the Series B Stock or Series C Stock, an amount equal to
the lesser of (a) the par value of each share of Common Stock outstanding
immediately prior to such conversion or (b) the Conversion Price shall be
credited to the Company's stated capital account for each share of Common
Stock issued upon such conversion, and that, if clause (a) above is
applicable, the balance of the Conversion Price of Series B Stock or Series C
Stock converted shall be credited to the Company's capital surplus account.
n. NOTICES. Any notice required by the provisions of this
Section 4 shall be in writing and shall be deemed effectively given: (i)
upon personal delivery to the party to be notified, (ii) when sent by
confirmed telex or facsimile if sent during normal business hours of the
recipient; if not, then on the next business day, (iii) upon receipt after
having been sent by registered or certified mail, return receipt requested,
postage prepaid, or (iv) one (1) day after
13.
<PAGE>
deposit with a nationally recognized overnight courier, specifying next day
delivery, with written verification of receipt. All notices shall be
addressed to each holder of record at the address of such holder appearing on
the books of the Company.
o. PAYMENT OF TAXES. The Company will pay all taxes (other
than taxes based upon income) and other governmental charges that may be
imposed with respect to the issue or delivery of shares of Common Stock upon
conversion of shares of Series A Stock, Series B Stock and Series C Stock,
excluding any tax or other charge imposed in connection with any transfer
involved in the issue and delivery of shares of Common Stock in a name other
than that in which the shares of Series A Stock Series B Stock or Series C
Stock, as applicable, so converted were registered.
p. REGISTRATION AND LISTING OF COMMON STOCK. If any shares
of Common Stock required to be reserved for purposes of conversion of the
Series B Stock or Series C Stock hereunder require registration with or
approval of any governmental authority under any Federal or state law (other
than the Securities Act) before any such shares may be issued upon
conversion, the Company will, at its expense and as expeditiously as
possible, use its best efforts to cause such shares to be duly registered or
approved, as the case may be. Shares of Common Stock issuable upon
conversion of the Series B Stock or Series C Stock shall be registered in
accordance with any such law then in force if required before such shares may
be issued upon conversion. If and so long as the Common Stock is listed on
any national securities exchange, the Company will, at its expense, obtain
promptly and maintain the approval for listing on each such exchange upon
official notice of issuance, such shares of Common Stock issuable upon
conversion of then-outstanding Series B Stock and Series C Stock and maintain
the listing of such shares after their issuance; and the Company will also
list on such national securities exchange, will register under the Securities
Exchange Act of 1934 and will maintain such listing of, any other securities
that at any time are issuable upon conversion of the Series B Stock or Series
C Stock, if and at the time that any securities of the same class shall be
listed on such national securities exchange by the Company.
q. CLOSING OF BOOKS. The Company will at no time close its
transfer books against the transfer of any Series B Stock or Series C Stock
or of any shares of Common Stock issued or issuable upon the conversion of
any Series B Stock or Series C Stock in any manner which interferes with the
timely conversion of such Series B Stock or Series C Stock; PROVIDED, THAT,
any such transfer is not made in violation of any applicable law or contract.
r. CERTAIN COVENANTS. Any registered holder of Series B
Stock or Series C Stock may proceed to protect and enforce its rights and the
rights of such holders by any available remedy by proceeding at law or in
equity to protect and enforce any such rights, whether for the specific
enforcement of any provision in this Restated Certificate of Incorporation or
in aid of the exercise of any power granted herein, or to enforce any other
proper remedy.
5. NO REISSUANCE OF PREFERRED STOCK. No share or shares of Series
A Stock, Series B Stock or Series C Stock acquired by the Company by reason
of redemption, purchase, conversion or otherwise shall be reissued.
14.
<PAGE>
V.
For the management of the business and for the conduct of the affairs
of the Corporation, and in further definition, limitation and regulation of
the powers of the Corporation, of its directors and of its stockholders or
any class thereof, as the case may be, it is further provided that:
A. The management of the business and the conduct of the affairs
of the Corporation shall be vested in its Board of Directors. Except as
otherwise provided in Article IV, Section E.2 hereof, the number of directors
which shall constitute the whole Board of Directors shall be fixed by the
Board of Directors in the manner provided in the Amended Bylaws.
B. The Board of Directors is expressly authorized to make, amend,
supplement or repeal the Amended Bylaws; PROVIDED, HOWEVER, that the
stockholders may change or repeal any Bylaw adopted by the Board of Directors
by the affirmative vote of the holders of a majority of the voting power of
all of the then outstanding shares of the capital stock of the Corporation;
and, PROVIDED FURTHER, that no amendment or supplement to the Amended Bylaws
adopted by the Board of Directors shall vary or conflict with any amendment
or supplement thus adopted by the stockholders.
C. The directors of the Corporation need not be elected by written
ballot unless the Amended Bylaws so provide.
VI.
A. A director of the corporation shall not be personally liable to
the corporation or its stockholders for monetary damages for any breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived
an improper personal benefit. If the Delaware General Corporation Law is
amended after approval by the stockholders of this Article to authorize
corporate action further eliminating or limiting the personal liability of
directors, then the liability of a director shall be eliminated or limited to
the fullest extent permitted by the Delaware General Corporation Law, as so
amended.
B. Any repeal or modification of this Article VI shall be
prospective and shall not affect the rights under this Article VI in effect
at the time of the alleged occurrence of any act or omission to act giving
rise to liability or indemnification.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
15.
<PAGE>
IN WITNESS WHEREOF, this Restated Certificate has been subscribed this
14th day of September, 1999 by the undersigned who affirms that the
statements made herein are true and correct.
JATO COMMUNICATIONS CORP.
/s/ Brian E. Gast
-------------------------------------------
Brian E. Gast
President
16.
<PAGE>
Exhibit 3.2
RESTATED CERTIFICATE OF INCORPORATION
OF
JATO COMMUNICATIONS CORP.
Jato Communications Corp., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware, DOES
HEREBY CERTIFY:
1. The name of the corporation is Jato Communications Corp. The corporation was
originally incorporated under the name Jato Communications Corporation. The date
of filing of its original Certificate of Incorporation with the Secretary of
State of the State of Delaware was June 12, 1998.
2. This Restated Certificate of Incorporation of Jato Communications Corp. has
been duly adopted in accordance with the provisions of Sections 228, 242 and 245
of the General Corporation Law of the State of Delaware.
3. This Restated Certificate of Incorporation restates and further amends the
Restated Certificate of Incorporation of this corporation by restating the text
of the original Restated Certificate of Incorporation in full to read as
follows:
I.
The name of this Corporation is Jato Communications Corp. (the
"CORPORATION" or the "COMPANY").
II.
The address, including street, number, city and county, of the
registered office of the Corporation in the State of Delaware is 1209 Orange
Street, City of Wilmington, County of New Castle, and the name of the registered
agent of the Corporation in the State of Delaware at such address is The
Corporation Trust Company.
III.
The purpose of this Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.
IV.
A. This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the Corporation is authorized to issue is [EIGHTY-TWO MILLION
(82,000,000)] shares. [EIGHTY MILLION
1.
<PAGE>
(80,000,000)] shares shall be Common Stock, each having a par value of $.01.
[TWO MILLION (2,000,000)] shares shall be Preferred Stock, each having a par
value of $.01.
B. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, by filing a certificate (a
"Preferred Stock Designation") pursuant to the Delaware General Corporation Law
("DGCL"), to fix or alter from time to time the designation, powers, preferences
and rights of the shares of each such series and the qualifications, limitations
or restrictions of any wholly unissued series of Preferred Stock, and to
establish from time to time the number of shares constituting any such series or
any of them; and to increase or decrease the number of shares of any series
subsequent to the issuance of shares of that series, but not below the number of
shares of such series then outstanding. In case the number of shares of any
series shall be decreased in accordance with the foregoing sentence, the shares
constituting such decrease shall resume the status that they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.
V.
For the management of the business and for the conduct of the affairs
of the corporation, and in further definition, limitation and regulation of the
powers of the corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
A.
1. The management of the business and the conduct of the affairs
of the corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be fixed
exclusively by one or more resolutions adopted by the Board of Directors.
2. BOARD OF DIRECTORS
Subject to the rights of the holders of any series of
Preferred Stock to elect additional directors under specified circumstances, the
directors shall be divided into three classes designated as Class I, Class II
and Class III, respectively. Directors shall be assigned to each class in
accordance with a resolution or resolutions adopted by the Board of Directors.
At the first annual meeting of stockholders following the adoption and filing of
this Certificate of Incorporation, the term of office of the Class I directors
shall expire and Class I directors shall be elected for a full term of three
years. At the second annual meeting of stockholders following the adoption and
filing of this Certificate of Incorporation, the term of office of the Class II
directors shall expire and Class II directors shall be elected for a full term
of three years. At the third annual meeting of stockholders following the
adoption and filing of this Certificate of Incorporation, the term of office of
the Class III directors shall expire and Class III directors shall be elected
for a full term of three years. At each succeeding annual meeting of
stockholders, directors shall be elected for a full term of three years to
succeed the directors of the class whose terms expire at such annual meeting.
2.
<PAGE>
Notwithstanding the foregoing provisions of this section, each director shall
serve until his successor is duly elected and qualified or until his death,
resignation or removal. No decrease in the number of directors constituting the
Board of Directors shall shorten the term of any incumbent director.
3. REMOVAL OF DIRECTORS
A. Neither the Board of Directors nor any individual director
may be removed without cause.
B. Subject to any limitation imposed by law, any individual
director or directors may be removed with cause by the holders of a majority of
the voting power of the corporation entitled to vote at an election of
directors.
4. VACANCIES
A. Subject to the rights of the holders of any series of
Preferred Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by the stockholders, except as
otherwise provided by law, be filled only by the affirmative vote of a majority
of the directors then in office, even though less than a quorum of the Board of
Directors, and not by the stockholders. Any director elected in accordance with
the preceding sentence shall hold office for the remainder of the full term of
the director for which the vacancy was created or occurred and until such
director's successor shall have been elected and qualified.
B. If at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Delaware Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent (10%) of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in offices as aforesaid, which election shall be governed by Section 211 of the
DGCL.
B.
1. BYLAW AMENDMENTS
Subject to paragraph (h) of Section 43 of the Bylaws, the
Bylaws may be altered or amended or new Bylaws adopted by the affirmative vote
of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of
all of the then-outstanding shares of the voting stock of the corporation
entitled to vote. The Board of Directors shall also have the power to adopt,
amend, or repeal Bylaws.
3.
<PAGE>
2. The directors of the corporation need not be elected by written
ballot unless the Bylaws so provide.
3. No action shall be taken by the stockholders of the corporation
except at an annual or special meeting of stockholders called in accordance with
the Bylaws.
4. Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the corporation shall be given in the manner provided in the
Bylaws of the corporation.
VI.
A. The liability of the directors for monetary damages shall be
eliminated to the fullest extent under applicable law.
B. Any repeal or modification of this Article VI shall be prospective
and shall not affect the rights under this Article VI in effect at the time of
the alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
VII.
A. The corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, except as provided in paragraph B. of this
Article VII, and all rights conferred upon the stockholders herein are granted
subject to this reservation.
B. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Voting Stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all of the then-outstanding shares of the voting stock, voting together
as a single class, shall be required to alter, amend or repeal Articles V, VI,
and VII.
IN WITNESS WHEREOF, this Certificate has been subscribed this ____ day
of __________, ____ by the undersigned who affirms that the statements made
herein are true and correct.
-----------------------------
Gerald K. Dinsmore
4.
<PAGE>
CERTIFICATE OF CORRECTION
OF THE RESTATED CERTIFICATE OF INCORPORATION OF
JATO COMMUNICATIONS CORP.
Jato Communications Corp., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Company"), hereby
certifies as follows:
FIRST: The name of the corporation is Jato Communications Corp. The
corporation was originally incorporated under the name Jato Communications
Corporation.
SECOND: A Restated Certificate of Incorporation of the Company was filed
with the Delaware Secretary of State on September 14, 1999, and requires
correction as permitted by Section 103(f) of the General Corporation Law of
the State of Delaware.
THIRD: The inaccuracy or defect of the Restated Certificate of
Incorporation to be corrected is as follows: the words ", Series B Stock and
Series C Stock" should replace the words "and Series B Stock" immediately
after the words "Series A Stock" in the second sentence of Section E.2.d.(i)
of Article IV of the Restated Certificate of Incorporation.
FOURTH: Section E.2.d. (i) of Article IV of the Restated Certificate of
Incorporation, as so corrected, shall read in its entirety as follows:
(i) The holders of Series B Stock, voting as a separate class on
an as-converted basis, shall be entitled to elect two (2) members of the
Company's Board of Directors at each meeting or pursuant to each consent of
the Company's stockholders for the election of directors, and to remove from
office such director and to fill any vacancy caused by the resignation,
death or removal of such director. The holders of Common Stock, Series A
Stock, Series B Stock and Series C Stock, voting together as a class on an
as-converted basis, shall be entitled to elect all remaining members of the
Board of Directors.
IN WITNESS WHEREOF, the Company has executed this Certificate of
Correction on the 22D day of December, 1999.
JATO COMMUNICATIONS CORP.
By: /s/ William D. Myers
--------------------------------
William D. Myers, Chief Financial
Officer
<PAGE>
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
JATO COMMUNICATIONS CORP.
JATO COMMUNICATIONS CORP., a corporation organized and existing under the
General Corporation Law of the State of Delaware ("DGCL"), does hereby
certify that:
FIRST: The name of the corporation is Jato Communications Corp. The
corporation was originally incorporated under the name Jato Communications
Corporation.
SECOND: The date on which the original Certificate of Incorporation of
the corporation was filed with the Secretary of State of the State of
Delaware is June 12, 1998.
THIRD: The Board of Directors of the corporation, acting in accordance
with the provisions of Sections 141(f) and 242 of the DGCL, adopted a
resolution to amend Article Four, Section D. to read in its entirety as
follows:
D. One million seven hundred fifty-one thousand nine hundred eighty-five
(1,751,985) of the authorized shares of Preferred Stock are hereby designated
"Series A Preferred Stock" (the "SERIES A STOCK"). Thirteen million six
hundred fifteen thousand three hundred twenty-two (13,615,322) of the
authorized shares of Preferred Stock are hereby designated "Series B
Preferred Stock" (the "SERIES B STOCK"). Eight million five hundred fifty
thousand (8,550,000) of the authorized shares of Preferred Stock are hereby
designated "Series C Preferred Stock (the "SERIES C STOCK").
FOURTH: The Board of Directors of the corporation, acting in accordance
with the provisions of Sections 141(f) and 242 of the DGCL, adopted a
resolution to amend Article Four, Section E.4.b. to read in its entirety as
follows:
b. CONVERSION RATE. The conversion rate in effect at any time for
conversion of the Series A Stock (the "Series A Conversion Rate") shall be
the quotient obtained by dividing the Series A Original Issue Price by the
"Series A Conversion Price," calculated as provided in Section 4(c). The
"Original Issue Price" of the Series A Stock shall be Seventy-Five Cents
($.75) (the "Series A Original Issue Price"). The conversion rate in effect
at any time for conversion of the Series B Stock (the "Series B Conversion
Rate") shall be the quotient obtained by dividing the Series B Original Issue
Price by the "Series B Conversion Price," calculated as provided in Section
4(c). The "Original Issue Price" of the Series B Stock shall be One Dollar
Fifty Cents ($1.50) (the "Series B Original Issue Price"). The conversion
rate in effect at any time for conversion of the Series C Stock (the "Series
C Conversion Rate") shall be the quotient obtained by dividing the Series C
Original Issue Price by the "Series C Conversion Price," calculated as
provided in Section 4(c). The "Original Issue Price" of the Series C Stock
shall be Five Dollars Sixty Cents ($5.60) (the "Series C Original Issue
Price").
<PAGE>
FIFTH: The Board of Directors of the corporation, acting in accordance
with the provisions of Sections 141(f) and 242 of the DGCL, adopted a
resolution to amend Article Four, Section E.4.j.(iii) to read in its entirety
as follows:
(iii) Each share of Series C Stock shall automatically be converted into
shares of Common Stock, based on the then-effective Series C Conversion
Price, immediately upon the closing of a firmly underwritten public offering
pursuant to an effective registration statement under the Securities Act,
covering the offer and sale of Common Stock for the account of the Company in
which (i) the per share price is at least $8.40 per share (as adjusted for
any stock dividends, combinations, splits, recapitalizations and the like)
and (ii) the gross cash proceeds to the Company (before underwriting
discounts, commissions and fees) are at least $30,000,000. Upon such
automatic conversion, any declared and unpaid dividends shall be paid in
accordance with the provisions of Section 4(k).
SIXTH: Thereafter, pursuant to a resolution by the Board of Directors,
this Certificate of Amendment was submitted to the stockholders of the
corporation for their approval in accordance with the provisions of Sections
228 and 242 of the DGCL. Accordingly, said proposed amendment has been duly
adopted in accordance with Section 242 of the DGCL.
IN WITNESS WHEREOF, JATO COMMUNICATIONS CORP. has caused this Certificate
to be signed by its President and Chief Executive Officer this 23d day of
December, 1999.
JATO COMMUNICATIONS CORP.
By: /s/ William D. Myers
---------------------------
William D. Myers
Chief Financial Officer
<PAGE>
AMENDED BYLAWS
OF
JATO COMMUNICATIONS CORP.
(A DELAWARE CORPORATION)
<PAGE>
AMENDED BYLAWS
OF
JATO COMMUNCIATIONS CORP.
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the corporation
in the State of Delaware shall be in the City of Wilmington, County of New
Castle.
SECTION 2. OTHER OFFICES. The corporation shall also have and maintain
an office or principal place of business at such place as may be fixed by the
Board of Directors, and may also have offices at such other places, both within
and without the State of Delaware, as the Board of Directors may from time to
time determine or the business of the corporation may require.
ARTICLE II
CORPORATE SEAL
SECTION 3. CORPORATE SEAL. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate
Seal-Delaware." Said seal may be used by causing it or a facsimile thereof to
be impressed or affixed or reproduced or otherwise.
ARTICLE III
STOCKHOLDERS' MEETINGS
SECTION 4. PLACE OF MEETINGS. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the principal office of the corporation required
to be maintained pursuant to Section 2 hereof.
1.
<PAGE>
SECTION 5. ANNUAL MEETING.
(a) The annual meeting of the stockholders of the corporation, for
the purpose of election of directors and for such other business as may lawfully
come before it, shall be held on such date and at such time as may be designated
from time to time by the Board of Directors.
(b) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting.
To be properly brought before an annual meeting, business must be: (A)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors, (B) otherwise properly brought
before the meeting by or at the direction of the Board of Directors, or (C)
otherwise properly brought before the meeting by a stockholder. For business
to be properly brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the Secretary
of the corporation. To be timely, a stockholder's notice must be delivered to
or mailed and received at the principal executive offices of the corporation
not later than the close of business on the sixtieth (60th) day nor earlier
than the close of business on the ninetieth (90th) day prior to the first
anniversary of the preceding year's annual meeting; PROVIDED, HOWEVER, that
in the event that no annual meeting was held in the previous year or the date
of the annual meeting has been changed by more than thirty (30) days from the
date contemplated at the time of the previous year's proxy statement, notice
by the stockholder to be timely must be so received not earlier than the
close of business on the ninetieth (90th) day prior to such annual meeting
and not later than the close of business on the later of the sixtieth (60th)
day prior to such annual meeting or, in the event public announcement of the
date of such annual meeting is first made by the corporation fewer than
seventy (70) days prior to the date of such annual meeting, the close of
business on the tenth (10th) day following the day on which public
announcement of the date of such meeting is first made by the corporation. A
stockholder's notice to the Secretary shall set forth as to each matter the
stockholder proposes to bring before the annual meeting: (i) a brief
description of the business desired to be brought before the annual meeting
and the reasons for conducting such business at the annual meeting, (ii) the
name and address, as they appear on the corporation's books, of the
stockholder proposing such business, (iii) the class and number of shares of
the corporation which are beneficially owned by the stockholder, (iv) any
material interest of the stockholder in such business and (v) any other
information that is required to be provided by the stockholder pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the
"1934 Act"), in his capacity as a proponent to a stockholder proposal.
Notwithstanding the foregoing, in order to include information with respect
to a stockholder proposal in the proxy statement and form of proxy for a
stockholders' meeting, stockholders must provide notice as required by the
regulations promulgated under the 1934 Act. Notwithstanding anything in these
Bylaws to the contrary, no business shall be conducted at any annual meeting
except in accordance with the procedures set forth in this paragraph (b).
The chairman of the annual meeting shall, if the facts warrant, determine and
declare at the meeting that business was not properly brought before the
meeting and in accordance with the provisions of this paragraph (b), and, if
he should so determine, he shall so declare at the meeting that any such
business not properly brought before the meeting shall not be transacted.
(c) For purposes of this Section 5, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or
2.
<PAGE>
comparable national news service or in a document publicly filed by the
corporation with the Securities and Exchange Commission pursuant to Section
13, 14 or 15(d) of the 1934 Act.
SECTION 6. SPECIAL MEETINGS.
(a) Special meetings of the stockholders of the corporation may be
called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, (iii) the Secretary or (iv) the
Board of Directors pursuant to a resolution adopted by a majority of the total
number of authorized directors (whether or not there exist any vacancies in
previously authorized directorships at the time any such resolution is presented
to the Board of Directors for adoption) or (iv) by the holders of shares
entitled to cast not less than thirty percent (30%) of the votes at the meeting,
and shall be held at such place, on such date, and at such time as the Board of
Directors shall fix.
(b) If a special meeting is called by any person or persons other
than the Chairman of the Board of Directors, the Chief Executive Officer, the
Secretary or the Board of Directors, the request shall be in writing, specifying
the general nature of the business proposed to be transacted, and shall be
delivered personally or sent by registered mail or by telegraphic or other
facsimile transmission to the Chairman of the Board of Directors, the Chief
Executive Officer or the Secretary of the corporation. No business may be
transacted at such special meeting otherwise than specified in such notice. The
Board of Directors shall determine the time and place of such special meeting,
which shall be held not less than thirty-five (35) nor more than one hundred
twenty (120) days after the date of the receipt of the request. Upon
determination of the time and place of the meeting, the officer receiving the
request shall cause notice to be given to the stockholders entitled to vote, in
accordance with the provisions of Section 7 of these Bylaws. If the notice is
not given within sixty (60) days after the receipt of the request, the person or
persons requesting the meeting may set the time and place of the meeting and
give the notice. Nothing contained in this paragraph (b) shall be construed as
limiting, fixing, or affecting the time when a meeting of stockholders called by
action of the Board of Directors may be held.
SECTION 7. NOTICE OF MEETINGS. Except as otherwise provided by law or
the Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, such
notice to specify the place, date and hour and purpose or purposes of the
meeting. Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice thereof,
either before or after such meeting, and will be waived by any stockholder by
his attendance thereat in person or by proxy, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Any stockholder so waiving notice of such meeting shall be
bound by the proceedings of any such meeting in all respects as if due notice
thereof had been given.
SECTION 8. QUORUM. At all meetings of stockholders, except where
otherwise provided by statute or by the Certificate of Incorporation, or by
these Bylaws, the presence, in person or by proxy duly authorized, of the
holders of a majority of the outstanding shares of stock entitled to vote shall
constitute a quorum for the transaction of business. In the absence of
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a quorum, any meeting of stockholders may be adjourned, from time to time,
either by the chairman of the meeting or by vote of the holders of a majority
of the shares represented thereat, but no other business shall be transacted
at such meeting. The stockholders present at a duly called or convened
meeting, at which a quorum is present, may continue to transact business
until adjournment, notwithstanding the withdrawal of enough stockholders to
leave less than a quorum. Except as otherwise provided by law, the
Certificate of Incorporation or these Bylaws, all action taken by the holders
of a majority of the vote cast, including abstentions, at any meeting at
which a quorum is present shall be valid and binding upon the corporation;
PROVIDED, HOWEVER, that directors shall be elected by a plurality of the
votes of the shares present in person or represented by proxy at the meeting
and entitled to vote on the election of directors. Where a separate vote by
a class or classes or series is required, except where otherwise provided by
the statute or by the Certificate of Incorporation or these Bylaws, a
majority of the outstanding shares of such class or classes or series,
present in person or represented by proxy, shall constitute a quorum entitled
to take action with respect to that vote on that matter and, except where
otherwise provided by statute or by the Certificate of Incorporation or these
Bylaws, the affirmative vote of the majority (plurality, in the case of the
election of directors) of the votes cast, including abstentions, by the
holders of shares of such class or classes or series shall be the act of such
class or classes or series.
SECTION 9. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes, excluding abstentions. When a meeting is adjourned to another
time or place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken.
At the adjourned meeting, the corporation may transact any business which might
have been transacted at the original meeting. If the adjournment is for more
than thirty (30) days or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
SECTION 10. VOTING RIGHTS. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 12 of
these Bylaws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote or execute consents shall have the right to do so either
in person or by an agent or agents authorized by a proxy granted in accordance
with Delaware law. An agent so appointed need not be a stockholder. No proxy
shall be voted after three (3) years from its date of creation unless the proxy
provides for a longer period.
SECTION 11. JOINT OWNERS OF STOCK. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (a) if only
one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the
majority so voting binds all; (c) if more than one (1) votes, but the vote is
evenly split on any particular matter, each faction may vote the securities in
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question proportionally, or may apply to the Delaware Court of Chancery for
relief as provided in the General Corporation Law of Delaware, Section
217(b). If the instrument filed with the Secretary shows that any such
tenancy is held in unequal interests, a majority or even-split for the
purpose of subsection (c) shall be a majority or even-split in interest.
SECTION 12. LIST OF STOCKHOLDERS. The Secretary shall prepare and make,
at least ten (10) days before every meeting of stockholders, a complete list
of the stockholders entitled to vote at said meeting, arranged in
alphabetical order, showing the address of each stockholder and the number of
shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten (10)
days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not specified, at the place where the meeting is to be held.
The list shall be produced and kept at the time and place of meeting during
the whole time thereof and may be inspected by any stockholder who is
present.
SECTION 13. ACTION WITHOUT MEETING.
(a) Unless otherwise provided in the Certificate of
Incorporation, any action required by statute to be taken at any annual or
special meeting of the stockholders, or any action which may be taken at any
annual or special meeting of the stockholders, may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all
shares entitled to vote thereon were present and voted.
(b) Every written consent shall bear the date of signature of
each stockholder who signs the consent, and no written consent shall be
effective to take the corporate action referred to therein unless, within
sixty (60) days of the earliest dated consent delivered to the corporation in
the manner herein required, written consents signed by a sufficient number of
stockholders to take action are delivered to the corporation by delivery to
its registered office in the State of Delaware, its principal place of
business or an officer or agent of the corporation having custody of the book
in which proceedings of meetings of stockholders are recorded. Delivery made
to a corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested.
(c) Prompt notice of the taking of the corporate action without
a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing. If the action which is
consented to is such as would have required the filing of a certificate under
any section of the General Corporation Law of the State of Delaware if such
action had been voted on by stockholders at a meeting thereof, then the
certificate filed under such section shall state, in lieu of any statement
required by such section concerning any vote of stockholders, that written
consent has been given in accordance with Section 228 of the General
Corporation Law of Delaware.
SECTION 14. ORGANIZATION.
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(a) At every meeting of stockholders, the Chairman of the Board
of Directors, or, if a Chairman has not been appointed or is absent, the
Chief Executive Officer, or, if the Chief Executive Officer is absent, a
chairman of the meeting chosen by a majority in interest of the stockholders
entitled to vote, present in person or by proxy, shall act as chairman. The
Secretary, or, in his absence, an Assistant Secretary directed to do so by
the Chief Executive Officer, shall act as secretary of the meeting.
(b) The Board of Directors of the corporation shall be entitled to
make such rules or regulations for the conduct of meetings of stockholders as it
shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to stockholders of
record of the corporation and their duly authorized and constituted proxies and
such other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the
time allotted to questions or comments by participants and regulation of the
opening and closing of the polls for balloting on matters which are to be voted
on by ballot. Unless and to the extent determined by the Board of Directors or
the chairman of the meeting, meetings of stockholders shall not be required to
be held in accordance with rules of parliamentary procedure.
ARTICLE IV
DIRECTORS
SECTION 15. NUMBER AND TERM OF OFFICE. The Board of Directors shall
consist of one or more members, the number thereof to be determined from time
to time by resolution of the Board of Directors. The number of authorized
Directors may be modified from time to time by amendment of this Section 15
in accordance with the provisions of Section 45 hereof. Except as provided
in Section 18, the Directors shall be elected by the stockholders at their
annual meeting in each year and shall hold office until the next annual
meeting and until their successors shall be duly elected and qualified.
Directors need not be stockholders unless so required by the Certificate of
Incorporation. If for any cause, the Directors shall not have been elected
at an annual meeting, they may be elected as soon thereafter as convenient at
a special meeting of the stockholders called for that purpose in the manner
provided in these Bylaws.
SECTION 16. POWERS. The powers of the corporation shall be exercised,
its business conducted and its property controlled by the Board of Directors,
except as may be otherwise provided by statute or by the Certificate of
Incorporation.
SECTION 17. TERM OF DIRECTORS. Subject to the rights of the holders of
any series of Preferred Stock to elect additional directors under specified
circumstances, directors shall be elected at each annual meeting of
stockholders for a term of one year. Each director shall serve until his
successor is duly elected and qualified or until his death, resignation or
removal. No
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decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.
SECTION 18. VACANCIES. Unless otherwise provided in the Certificate of
Incorporation, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors shall be
filled by vote of the stockholders at a meeting called for this purpose. Any
director elected in accordance with the preceding sentence shall hold office
for the remainder of the full term of the director for which the vacancy was
created or occurred and until such director's successor shall have been
elected and qualified. A vacancy in the Board of Directors shall be deemed
to exist under this Bylaw in the case of the death, removal or resignation of
any director.
SECTION 19. RESIGNATION. Any director may resign at any time by
delivering his written resignation to either the Board of Directors or the
Secretary, such resignation to specify whether it will be effective at a
particular time, upon receipt by the Board of Directors or Secretary or at
the pleasure of the Board of Directors. If no such specification is made, it
shall be deemed effective at the pleasure of the Board of Directors. When
one or more directors shall resign from the Board of Directors, effective at
a future date, a majority of the directors then in office, including those
who have so resigned, shall have power to fill such vacancy or vacancies, the
vote thereon to take effect when such resignation or resignations shall
become effective, and each Director so chosen shall hold office for the
unexpired portion of the term of the Director whose place shall be vacated
and until his successor shall have been duly elected and qualified.
SECTION 20. REMOVAL. Subject to the rights of the holders of any series
of Preferred Stock, the Board of Directors or any individual director may be
removed from office at any time (i) with cause by the affirmative vote of the
holders of a majority of the voting power of all the then-outstanding shares
of voting stock of the corporation entitled to vote at an election of
directors (the "Voting Stock") or (ii) without cause by the affirmative vote
of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the
voting power of all the then-outstanding shares of the Voting Stock.
SECTION 21. MEETINGS.
(a) ANNUAL MEETINGS. The annual meeting of the Board of
Directors shall be held immediately before or after the annual meeting of
stockholders and at the place where such meeting is held. No notice of an
annual meeting of the Board of Directors shall be necessary and such meeting
shall be held for the purpose of electing officers and transacting such other
business as may lawfully come before it.
(b) REGULAR MEETINGS. Except as hereinafter otherwise provided,
regular meetings of the Board of Directors shall be held in the office of the
corporation required to be maintained pursuant to Section 2 hereof. Unless
otherwise restricted by the Certificate of Incorporation, regular meetings of
the Board of Directors may also be held at any place within or without the
State of Delaware which has been designated by resolution of the Board of
Directors or the written consent of all directors.
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(c) SPECIAL MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation, special meetings of the Board of Directors may
be held at any time and place within or without the State of Delaware
whenever called by the Chairman of the Board, the Chief Executive Officer or
any two of the directors.
(d) TELEPHONE MEETINGS. Any member of the Board of Directors,
or of any committee thereof, may participate in a meeting by means of
conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and
participation in a meeting by such means shall constitute presence in person
at such meeting.
(e) NOTICE OF MEETINGS. Notice of the time and place of all
special meetings of the Board of Directors shall be orally or in writing, by
telephone, including a voice messaging system or other system or technology
designed to record and communicate messages, facsimile, telegraph or telex,
or by electronic mail or other electronic means, during normal business
hours, at least twenty-four (24) hours before the date and time of the
meeting, or sent in writing to each director by first class mail, postage
prepaid, at least three (3) days before the date of the meeting. Notice of
any meeting may be waived in writing at any time before or after the meeting
and will be waived by any director by attendance thereat, except when the
director attends the meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
(f) WAIVER OF NOTICE. The transaction of all business at any
meeting of the Board of Directors, or any committee thereof, however called
or noticed, or wherever held, shall be as valid as though had at a meeting
duly held after regular call and notice, if a quorum be present and if,
either before or after the meeting, each of the directors not present shall
sign a written waiver of notice. All such waivers shall be filed with the
corporate records or made a part of the minutes of the meeting.
SECTION 22. QUORUM AND VOTING.
(a) Unless the Certificate of Incorporation requires a greater
number and except with respect to indemnification questions arising under
Section 43 hereof, for which a quorum shall be one-third of the exact number
of directors fixed from time to time, a quorum of the Board of Directors
shall consist of a majority of the exact number of directors fixed from time
to time in accordance with Section 15 of these Bylaws; PROVIDED, HOWEVER, at
any meeting, whether a quorum be present or otherwise, a majority of the
directors present may adjourn from time to time until the time fixed for the
next regular meeting of the Board of Directors, without notice other than by
announcement at the meeting.
(b) At each meeting of the Board of Directors at which a quorum
is present, all questions and business shall be determined by the affirmative
vote of a majority of the directors present, unless a different vote be
required by law, the Certificate of Incorporation or these Bylaws.
SECTION 23. ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all
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members of the Board of Directors or committee, as the case may be, consent
thereto in writing, and such writing or writings are filed with the minutes
of proceedings of the Board of Directors or committee.
SECTION 24. FEES AND COMPENSATION. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed
sum and expenses of attendance, if any, for attendance at each regular or
special meeting of the Board of Directors and at any meeting of a committee
of the Board of Directors. Nothing herein contained shall be construed to
preclude any director from serving the corporation in any other capacity as
an officer, agent, employee, or otherwise and receiving compensation
therefor.
SECTION 25. COMMITTEES.
(a) EXECUTIVE COMMITTEE. The Board of Directors by resolution
passed by a majority of the whole board of Directors may appoint an Executive
Committee to consist of one (1) or more members of the Board of Directors. The
Executive Committee, to the extent permitted by law and provided in the
resolution of the Board of Directors shall have and may exercise, when the Board
is not in session, all the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation, and may authorize the
seal of the corporation to be affixed to all papers which may require it; but no
such committee shall have the power or authority in reference to (i) approving
or adopting, or recommending to the stockholders, any action or matter expressly
required by the Delaware General Corporation Law to be submitted to stockholders
for approval, or (ii) adopting, amending or repealing any bylaw of the
corporation.
(b) OTHER COMMITTEES. The Board of Directors, by resolution
passed by a majority of the whole Board of Directors, may, from time to time,
appoint such other committees as may be permitted by law. Such other committees
appointed by the Board of Directors shall consist of one (1) or more members of
the Board of Directors and shall have such powers and perform such duties as may
be prescribed by the resolution or resolutions creating such committees, but in
no event shall any such committee have the powers denied to the Executive
Committee in these Bylaws.
(c) TERM. Each member of a committee of the Board of Directors
shall serve a term on the committee coexistent with such member's term on the
Board of Directors. The Board of Directors, subject to the provisions of
subsections (a) or (b) of this Bylaw may at any time increase or decrease the
number of members of a committee or terminate the existence of a committee. The
membership of a committee member shall terminate on the date of his death or
voluntary resignation from the committee or from the Board of Directors. The
Board of Directors may at any time for any reason remove any individual
committee member and the Board of Directors may fill any committee vacancy
created by death, resignation, removal or increase in the number of members of
the committee. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee, and, in addition, in the absence or
disqualification of any member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may
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unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.
(d) MEETINGS. Unless the Board of Directors shall otherwise
provide, regular meetings of the Executive Committee or any other committee
appointed pursuant to this Section 25 shall be held at such times and places
as are determined by the Board of Directors, or by any such committee, and
when notice thereof has been given to each member of such committee, no
further notice of such regular meetings need be given thereafter. Special
meetings of any such committee may be held at any place which has been
determined from time to time by such committee, and may be called by any
director who is a member of such committee, upon written notice to the
members of such committee of the time and place of such special meeting given
in the manner provided for the giving of written notice to members of the
Board of Directors of the time and place of special meetings of the Board of
Directors. Notice of any special meeting of any committee may be waived in
writing at any time before or after the meeting and will be waived by any
director by attendance thereat, except when the director attends such special
meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not
lawfully called or convened. A majority of the authorized number of members
of any such committee shall constitute a quorum for the transaction of
business, and the act of a majority of those present at any meeting at which
a quorum is present shall be the act of such committee.
SECTION 26. ORGANIZATION. At every meeting of the directors, the Chairman
of the Board of Directors, or, if a Chairman has not been appointed or is
absent, the Chief Executive Officer, or in the absence of such officer, a
chairman of the meeting chosen by a majority of the directors present, shall
preside over the meeting. The Secretary, or in his absence, an Assistant
Secretary directed to do so by the Chief Executive Officer, shall act as
secretary of the meeting.
ARTICLE V
OFFICERS
SECTION 27. OFFICERS DESIGNATED. The officers of the corporation shall
include, if and when designated by the Board of Directors, the Chairman of
the Board of Directors, the Chief Executive Officer, the President, one or
more Vice Presidents, the Secretary, the Chief Financial Officer, the
Treasurer and the Controller, all of whom shall be elected at the annual
organizational meeting of the Board of Directors. The Board of Directors may
also appoint one or more Assistant Secretaries, Assistant Treasurers,
Assistant Controllers and such other officers and agents with such powers and
duties as it shall deem necessary. The Board of Directors may assign such
additional titles to one or more of the officers as it shall deem
appropriate. Any one person may hold any number of offices of the
corporation at any one time unless specifically prohibited therefrom by law.
The salaries and other compensation of the officers of the corporation shall
be fixed by or in the manner designated by the Board of Directors.
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SECTION 28. TENURE AND DUTIES OF OFFICERS.
(a) GENERAL. All officers shall hold office at the pleasure of
the Board of Directors and until their successors shall have been duly
elected and qualified, unless sooner removed. Any officer elected or
appointed by the Board of Directors may be removed at any time by the Board
of Directors. If the office of any officer becomes vacant for any reason,
the vacancy may be filled by the Board of Directors.
(b) DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman
of the Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of
Directors shall perform other duties commonly incident to his office and
shall also perform such other duties and have such other powers as the Board
of Directors shall designate from time to time.
(c) DUTIES OF CHIEF EXECUTIVE OFFICER. The Chief Executive
Officer shall preside at all meetings of the stockholders and at all meetings
of the Board of Directors, unless the Chairman of the Board of Directors has
been appointed and is present. The Chief Executive Officer of the
corporation shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of
the corporation. The Chief Executive Officer shall perform other duties
commonly incident to his office and shall also perform such other duties and
have such other powers as the Board of Directors shall designate from time to
time.
(d) DUTIES OF PRESIDENT. The President shall perform such
duties commonly incident to his office and shall also perform such other
duties and have such other powers as the Board of Directors or the Chief
Executive Officer shall designate from time to time.
(e) DUTIES OF VICE PRESIDENTS. Upon the approval of the Board
of Directors, the Vice Presidents may assume and perform the duties of the
President: (i) in the absence or disability of the President or (ii) whenever
the office of President is vacant. The Vice Presidents shall perform other
duties commonly incident to their office and shall also perform such other
duties and have such other powers as the Board of Directors or the Chief
Executive Officer shall designate from time to time.
(f) DUTIES OF SECRETARY. The Secretary shall attend all
meetings of the stockholders and of the Board of Directors and shall record
all acts and proceedings thereof in the minute book of the corporation. The
Secretary shall give notice in conformity with these Bylaws of all meetings
of the stockholders and of all meetings of the Board of Directors and any
committee thereof requiring notice. The Secretary shall perform all other
duties given him in these Bylaws and other duties commonly incident to his
office and shall also perform such other duties and have such other powers as
the Board of Directors shall designate from time to time. The Chairman of
the Board of Directors or the Chief Executive Officer may direct any
Assistant Secretary to assume and perform the duties of the Secretary in the
absence or disability of the Secretary, and each Assistant Secretary shall
perform other duties commonly incident to his office and shall also perform
such other duties and have such other powers as the Board of Directors or the
Chief Executive Officer shall designate from time to time.
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(g) DUTIES OF CHIEF FINANCIAL OFFICER. The Chief Financial
Officer shall keep or cause to be kept the books of account of the
corporation in a thorough and proper manner and shall render statements of
the financial affairs of the corporation in such form and as often as
required by the Board of Directors or the Chief Executive Officer. The Chief
Financial Officer, subject to the order of the Board of Directors, shall have
the custody of all funds and securities of the corporation. The Chief
Financial Officer shall perform other duties commonly incident to his office
and shall also perform such other duties and have such other powers as the
Board of Directors or the Chief Executive Officer shall designate from time
to time. The Chief Executive Officer may direct the Treasurer or any
Assistant Treasurer, or the Controller or any Assistant Controller to assume
and perform the duties of the Chief Financial Officer in the absence or
disability of the Chief Financial Officer, and each Treasurer and Assistant
Treasurer and each Controller and Assistant Controller shall perform other
duties commonly incident to his office and shall also perform such other
duties and have such other powers as the Board of Directors or the Chief
Executive Officer shall designate from time to time.
SECTION 29. DELEGATION OF AUTHORITY. The Board of Directors may from
time to time delegate the powers or duties of any officer to any other
officer or agent, notwithstanding any provision hereof.
SECTION 30. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors or to the Chief Executive Officer or
to the Secretary. Any such resignation shall be effective when received by
the person or persons to whom such notice is given, unless a later time is
specified therein, in which event the resignation shall become effective at
such later time. Unless otherwise specified in such notice, the acceptance
of any such resignation shall not be necessary to make it effective. Any
resignation shall be without prejudice to the rights, if any, of the
corporation under any contract with the resigning officer.
SECTION 31. REMOVAL. Any officer may be removed from office at any time,
either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.
ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING
OF SECURITIES OWNED BY THE CORPORATION
SECTION 32. EXECUTION OF CORPORATE INSTRUMENTS. The Board of Directors
may, in its discretion, determine the method and designate the signatory officer
or officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation.
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Unless otherwise specifically determined by the Board of Directors or
otherwise required by law, promissory notes, deeds of trust, mortgages and
other evidences of indebtedness of the corporation, and other corporate
instruments or documents requiring the corporate seal, and certificates of
shares of stock of the corporation, shall be executed, signed or endorsed by
the Chairman of the Board of Directors, the Chief Executive Officer or any
Vice President, and by the Secretary or Treasurer or any Assistant Secretary
or Assistant Treasurer. All other instruments and documents requiring the
corporate signature, but not requiring the corporate seal, may be executed as
aforesaid or in such other manner as may be directed by the Board of
Directors.
All checks and drafts drawn on banks or other depositaries on funds to
the credit of the corporation or in special accounts of the corporation shall
be signed by such person or persons as the Board of Directors shall authorize
so to do.
Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any
power or authority to bind the corporation by any contract or engagement or
to pledge its credit or to render it liable for any purpose or for any
amount.
SECTION 33. VOTING OF SECURITIES OWNED BY THE CORPORATION. All stock
and other securities of other corporations owned or held by the corporation
for itself, or for other parties in any capacity, shall be voted, and all
proxies with respect thereto shall be executed, by the person authorized so
to do by resolution of the Board of Directors, or, in the absence of such
authorization, by the Chairman of the Board of Directors or the Chief
Executive Officer.
ARTICLE VII
SHARES OF STOCK
SECTION 34. FORM AND EXECUTION OF CERTIFICATES. Certificates for the
shares of stock of the corporation shall be in such form as is consistent
with the Certificate of Incorporation and applicable law. Every holder of
stock in the corporation shall be entitled to have a certificate signed by or
in the name of the corporation by the Chairman of the Board of Directors, or
the Chief Executive Officer and by the Treasurer or Assistant Treasurer or
the Secretary or Assistant Secretary, certifying the number of shares owned
by him in the corporation. Any or all of the signatures on the certificate
may be facsimiles. In case any officer, transfer agent, or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent, or registrar before such
certificate is issued, it may be issued with the same effect as if he were
such officer, transfer agent, or registrar at the date of issue. Each
certificate shall state upon the face or back thereof, in full or in summary,
all of the powers, designations, preferences, and rights, and the limitations
or restrictions of the shares authorized to be issued or shall, except as
otherwise required by law, set forth on the face or back a statement that the
corporation will furnish without charge to each stockholder who so requests
the powers, designations, preferences and relative, participating, optional,
or other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or
rights. Within a reasonable time after the issuance or transfer of
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uncertificated stock, the corporation shall send to the registered owner
thereof a written notice containing the information required to be set forth
or stated on certificates pursuant to this section or otherwise required by
law or with respect to this section a statement that the corporation will
furnish without charge to each stockholder who so requests the powers,
designations, preferences and relative participating, optional or other
specal rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or
rights. Except as otherwise expressly provided by law, the rights and
obligations of the holders of certificates representing stock of the same
class and series shall be identical.
SECTION 35. LOST CERTIFICATES. A new certificate or certificates shall
be issued in place of any certificate or certificates theretofore issued by
the corporation alleged to have been lost, stolen, or destroyed, upon the
making of an affidavit of that fact by the person claiming the certificate of
stock to be lost, stolen, or destroyed. The corporation may require, as a
condition precedent to the issuance of a new certificate or certificates, the
owner of such lost, stolen, or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall
require or to give the corporation a surety bond in such form and amount as
it may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost,
stolen, or destroyed.
SECTION 36. TRANSFERS.
(a) Transfers of record of shares of stock of the corporation
shall be made only upon its books by the holders thereof, in person or by
attorney duly authorized, and upon the surrender of a properly endorsed
certificate or certificates for a like number of shares.
(b) The corporation shall have power to enter into and perform
any agreement with any number of stockholders of any one or more classes of
stock of the corporation to restrict the transfer of shares of stock of the
corporation of any one or more classes owned by such stockholders in any
manner not prohibited by the General Corporation Law of Delaware.
SECTION 37. FIXING RECORD DATES.
(a) In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which record
date shall not be more than sixty (60) nor less than ten (10) days before the
date of such meeting. If no record date is fixed by the Board of Directors,
the record date for determining stockholders entitled to notice of or to vote
at a meeting of stockholders shall be at the close of business on the day
next preceding the day on which notice is given, or if notice is waived, at
the close of business on the day next preceding the day on which the meeting
is held. A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; PROVIDED, HOWEVER, that the Board of Directors may fix a new record
date for the adjourned meeting.
(b) In order that the corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the
Board of Directors may fix a record date, which record date shall not precede
the date upon which the resolution fixing the record
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date is adopted by the Board of Directors, and which date shall not be more
than ten (10) days after the date upon which the resolution fixing the record
date is adopted by the Board of Directors. Any stockholder of record seeking
to have the stockholders authorize or take corporate action by written
consent shall, by written notice to the Secretary, request the Board of
Directors to fix a record date. The Board of Directors shall promptly, but
in all events within ten (10) days after the date on which such a request is
received, adopt a resolution fixing the record date. If no record date has
been fixed by the Board of Directors within ten (10) days of the date on
which such a request is received, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting, when no prior action by the Board of Directors is required by
applicable law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
corporation by delivery to its registered office in the State of Delaware,
its principal place of business or an officer or agent of the corporation
having custody of the book in which proceedings of meetings of stockholders
are recorded. Delivery made to the corporation's registered office shall be
by hand or by certified or registered mail, return receipt requested. If no
record date has been fixed by the Board of Directors and prior action by the
Board of Directors is required by law, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action.
(c) In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or
allotment of any rights or the stockholders entitled to exercise any rights
in respect of any change, conversion or exchange of stock, or for the purpose
of any other lawful action, the Board of Directors may fix, in advance, a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted, and which record date shall be
not more than sixty (60) days prior to such action. If no record date is
fixed, the record date for determining stockholders for any such purpose
shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto.
SECTION 38. REGISTERED STOCKHOLDERS. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
SECTION 39. EXECUTION OF OTHER SECURITIES. All bonds, debentures and
other corporate securities of the corporation, other than stock certificates
(covered in Section 34), may be signed by the Chairman of the Board of
Directors, the Chief Executive Officer or any Vice President, or such other
person as may be authorized by the Board of Directors, and the corporate seal
impressed thereon or a facsimile of such seal imprinted thereon and attested
by the signature of the Secretary or an Assistant Secretary, or the Chief
Financial Officer or Treasurer or an
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Assistant Treasurer; PROVIDED, HOWEVER, that where any such bond, debenture
or other corporate security shall be authenticated by the manual signature,
or where permissible facsimile signature, of a trustee under an indenture
pursuant to which such bond, debenture or other corporate security shall be
issued, the signatures of the persons signing and attesting the corporate
seal on such bond, debenture or other corporate security may be the imprinted
facsimile of the signatures of such persons. Interest coupons appertaining
to any such bond, debenture or other corporate security, authenticated by a
trustee as aforesaid, shall be signed by the Treasurer or an Assistant
Treasurer of the corporation or such other person as may be authorized by the
Board of Directors, or bear imprinted thereon the facsimile signature of such
person. In case any officer who shall have signed or attested any bond,
debenture or other corporate security, or whose facsimile signature shall
appear thereon or on any such interest coupon, shall have ceased to be such
officer before the bond, debenture or other corporate security so signed or
attested shall have been delivered, such bond, debenture or other corporate
security nevertheless may be adopted by the corporation and issued and
delivered as though the person who signed the same or whose facsimile
signature shall have been used thereon had not ceased to be such officer of
the corporation.
ARTICLE IX
DIVIDENDS
SECTION 40. DECLARATION OF DIVIDENDS. Dividends upon the capital stock of
the corporation, subject to the provisions of the Certificate of Incorporation,
if any, may be declared by the Board of Directors pursuant to law at any regular
or special meeting. Dividends may be paid in cash, in property, or in shares of
the capital stock, subject to the provisions of the Certificate of
Incorporation.
SECTION 41. DIVIDEND RESERVE. Before payment of any dividend, there may
be set aside out of any funds of the corporation available for dividends such
sum or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
ARTICLE X
FISCAL YEAR
SECTION 42. FISCAL YEAR. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.
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ARTICLE XI
INDEMNIFICATION
SECTION 43. INDEMNIFICATION OF DIRECTORS, EXECUTIVE OFFICERS, OTHER
OFFICERS, EMPLOYEES AND OTHER AGENTS.
(a) DIRECTORS. The corporation shall indemnify its Directors to
the fullest extent not prohibited by the Delaware General Corporation Law;
provided, however, that the corporation shall not be required to indemnify
any Director in connection with any proceeding (or part thereof) initiated by
such person or any proceeding by such person against the corporation or its
Directors, officers, employees or other agents unless (i) such
indemnification is expressly required to be made by law, (ii) the proceeding
was authorized by the Board of Directors of the corporation, (iii) such
indemnification is provided by the corporation, in its sole discretion,
pursuant to the powers vested in the corporation under the Delaware General
Corporation Law.
(b) OFFICERS, EMPLOYEES AND OTHER AGENTS. The corporation shall
have power to indemnify its officers, employees and other agents as set forth
in the Delaware General Corporation Law.
(c) EXPENSES. The corporation shall advance to any person who
was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he is or was a
Director or executive officer, of the corporation, or is or was serving at
the request of the corporation as a Director or executive officer of another
corporation, partnership, joint venture, trust or other enterprise, prior to
the final disposition of the proceeding, promptly following request therefor,
all expenses incurred by any Director or executive officer in connection with
such proceeding upon receipt of an undertaking by or on behalf of such person
to repay said amounts if it should be determined ultimately that such person
is not entitled to be indemnified under this Bylaw or otherwise.
(d) ENFORCEMENT. Without the necessity of entering into an
express contract, all rights to indemnification and advances to Directors and
executive officers under this Bylaw shall be deemed to be contractual rights
and be effective to the same extent and as if provided for in a contract
between the corporation and the Director or executive officer. Any right to
indemnification or advances granted by this Bylaw to a Director or executive
officer shall be enforceable by or on behalf of the person holding such right
in any court of competent jurisdiction if (i) the claim for indemnification
or advances is denied, in whole or in part, or (ii) no disposition of such
claim is made within ninety (90) days of request therefor. The claimant in
such enforcement action, if successful in whole or in part, shall be entitled
to be paid also the expense of prosecuting his claim. In connection with any
claim for indemnification, the corporation shall be entitled to raise as a
defense to any such action that the claimant has not met the standards of
conduct that make it permissible under the Delaware General Corporation Law
for the corporation to indemnify the claimant for the amount claimed.
Neither the failure of the corporation (including its Board of Directors,
independent legal counsel or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant
is proper in the circumstances because he has met the applicable standard of
conduct set
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forth in the Delaware General Corporation Law, nor an actual determination by
the corporation (including its Board of Directors, independent legal counsel
or its stockholders) that the claimant has not met such applicable standard
of conduct, shall be a defense to the action or create a presumption that
claimant has not met the applicable standard of conduct.
(e) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any
person by this Bylaw shall not be exclusive of any other right which such
person may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, Bylaws, agreement, vote of stockholders or
disinterested Directors or otherwise, both as to action in his official
capacity and as to action in another capacity while holding office. The
corporation is specifically authorized to enter into individual contracts
with any or all of its Directors, officers, employees or agents respecting
indemnification and advances, to the fullest extent not prohibited by the
Delaware General Corporation Law.
(f) SURVIVAL OF RIGHTS. The rights conferred on any person by
this Bylaw shall continue as to a person who has ceased to be a director,
officer, employee or other agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(g) INSURANCE. To the fullest extent permitted by the Delaware
General Corporation Law, the corporation, upon approval by the Board of
Directors, may purchase insurance on behalf of any person required or
permitted to be indemnified pursuant to this Bylaw.
(h) AMENDMENTS. Any repeal or modification of this Bylaw shall
only be prospective and shall not affect the rights under this Bylaw in
effect at the time of the alleged occurrence of any action or omission to act
that is the cause of any proceeding against any agent of the corporation.
(i) SAVING CLAUSE. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and executive officer
to the full extent not prohibited by any applicable portion of this Bylaw
that shall not have been invalidated, or by any other applicable law.
(j) CERTAIN DEFINITIONS. For the purposes of this Bylaw, the
following definitions shall apply:
(1) The term "proceeding" shall be broadly construed and
shall include, without limitation, the investigation, preparation,
prosecution, defense, settlement, arbitration and appeal of, and the giving
of testimony in, any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative.
(2) The term "expenses" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness fees,
fines, amounts paid in settlement or judgment and any other costs and
expenses of any nature or kind incurred in connection with any proceeding.
(3) The term the "corporation" shall include, in addition to
the resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which, if
its separate existence had continued, would have
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had power and authority to indemnify its directors, officers, and employees
or agents, so that any person who is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Bylaw with
respect to the resulting or surviving corporation as he would have with
respect to such constituent corporation if its separate existence had
continued.
(4) References to a "director," "executive officer,"
"officer," "employee," or "agent" of the corporation shall include, without
limitation, situations where such person is serving at the request of the
corporation as, respectively, a director, executive officer, officer,
employee, trustee or agent of another corporation, partnership, joint
venture, trust or other enterprise.
(5) References to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes assessed
on a person with respect to an employee benefit plan; and references to
"serving at the request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation which imposes duties
on, or involves services by, such director, officer, employee, or agent with
respect to an employee benefit plan, its participants, or beneficiaries; and
a person who acted in good faith and in a manner he reasonably believed to be
in the interest of the participants and beneficiaries of an employee benefit
plan shall be deemed to have acted in a manner "not opposed to the best
interests of the corporation" as referred to in this Bylaw.
ARTICLE XII
NOTICES
SECTION 44. NOTICES.
(a) NOTICE TO STOCKHOLDERS. Whenever, under any provisions of
these Bylaws, notice is required to be given to any stockholder, it shall be
given in writing, timely and duly deposited in the United States mail,
postage prepaid, and addressed to his last known post office address as shown
by the stock record of the corporation or its transfer agent.
(b) NOTICE TO DIRECTORS. Any notice required to be given to any
director may be given by the method stated in subsection (a), or by
facsimile, telex or telegram, except that such notice other than one which is
delivered personally shall be sent to such address as such director shall
have filed in writing with the Secretary, or, in the absence of such filing,
to the last known post office address of such director.
(c) AFFIDAVIT OF MAILING. An affidavit of mailing, executed by
a duly authorized and competent employee of the corporation or its transfer
agent appointed with respect to the class of stock affected, specifying the
name and address or the names and addresses of the stockholder or
stockholders, or director or directors, to whom any such notice or notices
was or were given, and the time and method of giving the same, shall in the
absence of fraud, be prima facie evidence of the facts therein contained.
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(d) TIME NOTICES DEEMED GIVEN. All notices given by mail, as
above provided, shall be deemed to have been given as at the time of mailing,
and all notices given by facsimile, telex or telegram shall be deemed to have
been given as of the sending time recorded at time of transmission.
(e) METHODS OF NOTICE. It shall not be necessary that the same
method of giving notice be employed in respect of all directors, but one
permissible method may be employed in respect of any one or more, and any
other permissible method or methods may be employed in respect of any other
or others.
(f) FAILURE TO RECEIVE NOTICE. The period or limitation of time
within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any director may
exercise any power or right, or enjoy any privilege, pursuant to any notice
sent him in the manner above provided, shall not be affected or extended in
any manner by the failure of such stockholder or such director to receive
such notice.
(g) NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL.
Whenever notice is required to be given, under any provision of law or of the
Certificate of Incorporation or Bylaws of the corporation, to any person with
whom communication is unlawful, the giving of such notice to such person
shall not be required and there shall be no duty to apply to any governmental
authority or agency for a license or permit to give such notice to such
person. Any action or meeting which shall be taken or held without notice to
any such person with whom communication is unlawful shall have the same force
and effect as if such notice had been duly given. In the event that the
action taken by the corporation is such as to require the filing of a
certificate under any provision of the Delaware General Corporation Law, the
certificate shall state, if such is the fact and if notice is required, that
notice was given to all persons entitled to receive notice except such
persons with whom communication is unlawful.
(h) NOTICE TO PERSON WITH UNDELIVERABLE ADDRESS. Whenever
notice is required to be given, under any provision of law or the Certificate
of Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of
the taking of action by written consent without a meeting to such person
during the period between such two consecutive annual meetings, or (ii) all,
and at least two, payments (if sent by first class mail) of dividends or
interest on securities during a twelve-month period, have been mailed
addressed to such person at his address as shown on the records of the
corporation and have been returned undeliverable, the giving of such notice
to such person shall not be required. Any action or meeting which shall be
taken or held without notice to such person shall have the same force and
effect as if such notice had been duly given. If any such person shall
deliver to the corporation a written notice setting forth his then current
address, the requirement that notice be given to such person shall be
reinstated. In the event that the action taken by the corporation is such as
to require the filing of a certificate under any provision of the Delaware
General Corporation Law, the certificate need not state that notice was not
given to persons to whom notice was not required to be given pursuant to this
paragraph.
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ARTICLE XIII
AMENDMENTS
SECTION 45. AMENDMENTS. Subject to paragraph (h) of Section 43 of the
Bylaws, these Bylaws may be amended or repealed and new Bylaws adopted by the
stockholders entitled to vote. The Board of Directors shall also have the
power, if such power is conferred upon the Board of Directors by the Certificate
of Incorporation, to adopt, amend, or repeal Bylaws (including, without
limitation, the amendment of any Bylaw setting forth the number of Directors who
shall constitute the whole Board of Directors).
ARTICLE XIV
LOANS TO OFFICERS
SECTION 46. LOANS TO OFFICERS. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other
employee of the corporation or of its subsidiaries, including any officer or
employee who is a Director of the corporation or its subsidiaries, whenever,
in the judgment of the Board of Directors, such loan, guarantee or assistance
may reasonably be expected to benefit the corporation. The loan, guarantee
or other assistance may be with or without interest and may be unsecured, or
secured in such manner as the Board of Directors shall approve, including,
without limitation, a pledge of shares of stock of the corporation. Nothing
in these Bylaws shall be deemed to deny, limit or restrict the powers of
guaranty or warranty of the corporation at common law or under any statute.
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TABLE OF CONTENTS
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ARTICLE I OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . .1
Section 1. Registered Office . . . . . . . . . . . . . . . . . . . . .1
Section 2. Other Offices . . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE II CORPORATE SEAL. . . . . . . . . . . . . . . . . . . . . . .1
Section 3. Corporate Seal. . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE III STOCKHOLDERS' MEETINGS. . . . . . . . . . . . . . . . . . .1
Section 4. Place of Meetings . . . . . . . . . . . . . . . . . . . . .1
Section 5. Annual Meeting. . . . . . . . . . . . . . . . . . . . . . .2
Section 6. Special Meetings. . . . . . . . . . . . . . . . . . . . . .3
Section 7. Notice of Meetings. . . . . . . . . . . . . . . . . . . . .3
Section 8. Quorum. . . . . . . . . . . . . . . . . . . . . . . . . . .3
Section 9. Adjournment and Notice of Adjourned Meetings. . . . . . . .4
Section 10. Voting Rights . . . . . . . . . . . . . . . . . . . . . . .4
Section 11. Joint Owners of Stock . . . . . . . . . . . . . . . . . . .4
Section 12. List of Stockholders. . . . . . . . . . . . . . . . . . . .5
Section 13. Action Without Meeting. . . . . . . . . . . . . . . . . . .5
Section 14. Organization. . . . . . . . . . . . . . . . . . . . . . . .5
ARTICLE IV DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . .6
Section 15. Number and Term of Office . . . . . . . . . . . . . . . . .6
Section 16. Powers. . . . . . . . . . . . . . . . . . . . . . . . . . .6
Section 17. Term of Directors.. . . . . . . . . . . . . . . . . . . . .6
Section 18. Vacancies . . . . . . . . . . . . . . . . . . . . . . . . .7
Section 19. Resignation . . . . . . . . . . . . . . . . . . . . . . . .7
Section 20. Removal . . . . . . . . . . . . . . . . . . . . . . . . . .7
Section 21. Meetings. . . . . . . . . . . . . . . . . . . . . . . . . .7
(a) Annual Meetings . . . . . . . . . . . . . . . . . . . . . .7
(b) Regular Meetings. . . . . . . . . . . . . . . . . . . . . .7
(c) Special Meetings. . . . . . . . . . . . . . . . . . . . . .8
(d) Telephone Meetings. . . . . . . . . . . . . . . . . . . . .8
(e) Notice of Meetings. . . . . . . . . . . . . . . . . . . . .8
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TABLE OF CONTENTS
(CONTINUED)
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(f) Waiver of Notice. . . . . . . . . . . . . . . . . . . . . .8
Section 22. Quorum and Voting . . . . . . . . . . . . . . . . . . . . .8
Section 23. Action Without Meeting. . . . . . . . . . . . . . . . . . .8
Section 24. Fees and Compensation . . . . . . . . . . . . . . . . . . .9
Section 25. Committees. . . . . . . . . . . . . . . . . . . . . . . . .9
(a) Executive Committee . . . . . . . . . . . . . . . . . . . .9
(b) Other Committees. . . . . . . . . . . . . . . . . . . . . .9
(c) Term. . . . . . . . . . . . . . . . . . . . . . . . . . . .9
(d) Meetings. . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 26. Organization. . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE V OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 27. Officers Designated . . . . . . . . . . . . . . . . . . . 10
Section 28. Tenure and Duties of Officers . . . . . . . . . . . . . . 11
(a) General . . . . . . . . . . . . . . . . . . . . . . . . . 11
(b) Duties of Chairman of the Board of Directors. . . . . . . 11
(c) Duties of Chief Executive Officer . . . . . . . . . . . . 11
(d) Duties of President.. . . . . . . . . . . . . . . . . . . 11
(e) Duties of Vice Presidents . . . . . . . . . . . . . . . . 11
(f) Duties of Secretary . . . . . . . . . . . . . . . . . . . 11
(g) Duties of Chief Financial Officer . . . . . . . . . . . . 12
Section 29. Delegation of Authority . . . . . . . . . . . . . . . . . 12
Section 30. Resignations. . . . . . . . . . . . . . . . . . . . . . . 12
Section 31. Removal . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE VI EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES
OWNED BY THE CORPORATION. . . . . . . . . . . . . . . . . 12
Section 32. Execution of Corporate Instruments. . . . . . . . . . . . 12
Section 33. Voting of Securities Owned by the Corporation . . . . . . 13
ARTICLE VII SHARES OF STOCK . . . . . . . . . . . . . . . . . . . . . 13
Section 34. Form and Execution of Certificates. . . . . . . . . . . . 13
Section 35. Lost Certificates . . . . . . . . . . . . . . . . . . . . 14
ii.
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<CAPTION>
PAGE
<S> <C>
Section 36. Transfers . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 37. Fixing Record Dates . . . . . . . . . . . . . . . . . . . 14
Section 38. Registered Stockholders . . . . . . . . . . . . . . . . . 15
ARTICLE VIII OTHER SECURITIES OF THE CORPORATION . . . . . . . . . . . 15
Section 39. Execution of Other Securities . . . . . . . . . . . . . . 15
ARTICLE IX DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 40. Declaration of Dividends. . . . . . . . . . . . . . . . . 16
Section 41. Dividend Reserve. . . . . . . . . . . . . . . . . . . . . 16
ARTICLE X FISCAL YEAR . . . . . . . . . . . . . . . . . . . . . . . 16
Section 42. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE XI INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . 17
Section 43. Indemnification of Directors, Executive Officers, Other
Officers, Employees and Other Agents. . . . . . . . . . . 17
(a) Directors.. . . . . . . . . . . . . . . . . . . . . . . . 17
(b) Officers, Employees and Other Agents. . . . . . . . . . . 17
(c) Expenses. . . . . . . . . . . . . . . . . . . . . . . . . 17
(d) Enforcement . . . . . . . . . . . . . . . . . . . . . . . 17
(e) Non-Exclusivity of Rights . . . . . . . . . . . . . . . . 18
(f) Survival of Rights. . . . . . . . . . . . . . . . . . . . 18
(g) Insurance . . . . . . . . . . . . . . . . . . . . . . . . 18
(h) Amendments. . . . . . . . . . . . . . . . . . . . . . . . 18
(i) Saving Clause . . . . . . . . . . . . . . . . . . . . . . 18
(j) Certain Definitions . . . . . . . . . . . . . . . . . . . 18
ARTICLE XII NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 44. Notices . . . . . . . . . . . . . . . . . . . . . . . . . 19
(a) Notice to Stockholders. . . . . . . . . . . . . . . . . . 19
(b) Notice to Directors . . . . . . . . . . . . . . . . . . . 19
(c) Affidavit of Mailing. . . . . . . . . . . . . . . . . . . 19
(d) Time Notices Deemed Given . . . . . . . . . . . . . . . . 20
(e) Methods of Notice . . . . . . . . . . . . . . . . . . . . 20
iii.
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TABLE OF CONTENTS
(CONTINUED)
<CAPTION>
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<S> <C>
(f) Failure to Receive Notice . . . . . . . . . . . . . . . . 20
(g) Notice to Person with Whom Communication Is Unlawful. . . 20
(h) Notice to Person with Undeliverable Address . . . . . . . 20
ARTICLE XIII AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . 21
Section 45. Amendments. . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE XIV LOANS TO OFFICERS . . . . . . . . . . . . . . . . . . . . 21
Section 46. Loans to Officers . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
iv.
<PAGE>
Exhibit 3.6
AMENDED AND RESTATED BYLAWS
OF
JATO COMMUNICATIONS CORP.
(A DELAWARE CORPORATION)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I OFFICES........................................................................................1
Section 1. Registered Office......................................................................1
Section 2. Other Offices..........................................................................1
ARTICLE II CORPORATE SEAL.................................................................................1
Section 3. Corporate Seal.........................................................................1
ARTICLE III STOCKHOLDERS' MEETINGS.........................................................................1
Section 4. Place Of Meetings......................................................................1
Section 5. Annual Meetings........................................................................2
Section 6. Special Meetings.......................................................................4
Section 7. Notice Of Meetings.....................................................................5
Section 8. Quorum.................................................................................5
Section 9. Adjournment And Notice Of Adjourned Meetings...........................................6
Section 10. Voting Rights..........................................................................6
Section 11. Joint Owners Of Stock..................................................................6
Section 12. List Of Stockholders...................................................................6
Section 13. Action Without Meeting.................................................................7
Section 14. Organization...........................................................................8
ARTICLE IV DIRECTORS......................................................................................8
Section 15. Number And Term Of Office..............................................................8
Section 16. Powers.................................................................................8
SECTION 17. CLASSES OF DIRECTORS...........................................................................8
SECTION 17. CLASSES OF DIRECTORS...........................................................................9
SECTION 17. CLASSES OF DIRECTORS..........................................................................10
SECTION 17. BOARD OF DIRECTORS............................................................................11
Section 17. Board of Directors....................................................................11
Section 18. Vacancies.............................................................................12
Section 19. Resignation...........................................................................12
SECTION 20. REMOVAL.......................................................................................13
SECTION 20. REMOVAL.......................................................................................13
</TABLE>
i.
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
SECTION 20. REMOVAL.......................................................................................13
SECTION 20. REMOVAL.......................................................................................14
Section 20. Removal...............................................................................14
Section 21. Meetings..............................................................................15
Section 22. Quorum And Voting.....................................................................16
Section 23. Action Without Meeting................................................................16
Section 24. Fees And Compensation.................................................................16
Section 25. Committees............................................................................16
Section 26. Organization..........................................................................18
ARTICLE V OFFICERS......................................................................................18
Section 27. Officers Designated...................................................................18
Section 28. Tenure And Duties Of Officers.........................................................18
Section 29. Delegation Of Authority...............................................................19
Section 30. Resignations..........................................................................19
Section 31. Removal...............................................................................20
ARTICLE VI EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED BY THE CORPORATION..........20
Section 32. Execution Of Corporate Instruments....................................................20
Section 33. Voting Of Securities Owned By The Corporation.........................................20
ARTICLE VII SHARES OF STOCK...............................................................................21
Section 34. Form And Execution Of Certificates....................................................21
Section 35. Lost Certificates.....................................................................21
Section 36. Transfers.............................................................................22
Section 37. Fixing Record Dates...................................................................22
Section 38. Registered Stockholders...............................................................23
ARTICLE VIII OTHER SECURITIES OF THE CORPORATION...........................................................23
Section 39. Execution Of Other Securities.........................................................23
ARTICLE IX DIVIDENDS.....................................................................................24
Section 40. Declaration Of Dividends..............................................................24
</TABLE>
ii.
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 41. Dividend Reserve......................................................................24
ARTICLE X FISCAL YEAR...................................................................................24
Section 42. Fiscal Year...........................................................................24
ARTICLE XI INDEMNIFICATION...............................................................................24
Section 43. Indemnification Of Directors, Executive Officers, Other Officers, Employees
And Other Agents......................................................................25
ARTICLE XII NOTICES.........................................................................................28
Section 44. Notices...............................................................................28
ARTICLE XIII AMENDMENTS....................................................................................29
Section 45. Amendments............................................................................30
Section 45. Amendments............................................................................30
ARTICLE XIV LOANS TO OFFICERS.............................................................................30
Section 46. Loans To Officers.....................................................................30
</TABLE>
iii.
<PAGE>
AMENDED AND RESTATED BYLAWS
OF
JATO COMMUNICATIONS CORP.
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the corporation
in the State of Delaware shall be in the City of Wilmington, County of New
Castle.
SECTION 2. OTHER OFFICES. The corporation shall also have and maintain
an office or principal place of business at such place as may be fixed by the
Board of Directors, and may also have offices at such other places, both within
and without the State of Delaware as the Board of Directors may from time to
time determine or the business of the corporation may require.
ARTICLE II
CORPORATE SEAL
SECTION 3. CORPORATE SEAL. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate
Seal-Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE III
STOCKHOLDERS' MEETINGS
SECTION 4. PLACE OF MEETINGS. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof.
SECTION 5. ANNUAL MEETINGS.
(A) The annual meeting of the stockholders of the corporation,
for the purpose of election of directors and for such other business as may
lawfully come before it, shall be held on such date and at such time as may be
designated from time to time by the Board of Directors. Nominations of persons
for election to the Board of Directors of the corporation and the proposal of
business to be considered by the stockholders may be made at an annual meeting
of stockholders: (i) pursuant to the corporation's notice of meeting of
stockholders; (ii) by or at the
1.
<PAGE>
direction of the Board of Directors; or (iii) by any stockholder of the
corporation who was a stockholder of record at the time of giving of notice
provided for in the following paragraph, who is entitled to vote at the meeting
and who complied with the notice procedures set forth in Section 5.
(B) At an annual meeting of the stockholders, only such
business shall be conducted as shall have been properly brought before the
meeting. For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (c) of Section 5(a) of these
Bylaws, (i) the stockholder must have given timely notice thereof in writing to
the Secretary of the corporation, (ii) such other business must be a proper
matter for stockholder action under the Delaware General Corporation Law
("DGCL"), (iii) if the stockholder, or the beneficial owner on whose behalf any
such proposal or nomination is made, has provided the corporation with a
Solicitation Notice (as defined in this Section 5(b)), such stockholder or
beneficial owner must, in the case of a proposal, have delivered a proxy
statement and form of proxy to holders of at least the percentage of the
corporation's voting shares required under applicable law to carry any such
proposal, or, in the case of a nomination or nominations, have delivered a proxy
statement and form of proxy to holders of a percentage of the corporation's
voting shares reasonably believed by such stockholder or beneficial owner to be
sufficient to elect the nominee or nominees proposed to be nominated by such
stockholder, and must, in either case, have included in such materials the
Solicitation Notice, and (iv) if no Solicitation Notice relating thereto has
been timely provided pursuant to this section, the stockholder or beneficial
owner proposing such business or nomination must not have solicited a number of
proxies sufficient to have required the delivery of such a Solicitation Notice
under this Section 5. To be timely, a stockholder's notice shall be delivered to
the Secretary at the principal executive offices of the Corporation not later
than the close of business on the ninetieth (90th) day nor earlier than the
close of business on the one hundred twentieth (120th) day prior to the first
anniversary of the preceding year's annual meeting; provided, however, that in
the event that the date of the annual meeting is advanced more than thirty (30)
days prior to or delayed by more than thirty (30) days after the anniversary of
the preceding year's annual meeting, notice by the stockholder to be timely must
be so delivered not earlier than the close of business on the one hundred
twentieth (120th) day prior to such annual meeting and not later than the close
of business on the later of the ninetieth (90th) day prior to such annual
meeting or the tenth (10th) day following the day on which public announcement
of the date of such meeting is first made. In no event shall the public
announcement of an adjournment of an annual meeting commence a new time period
for the giving of a stockholder's notice as described above. Such stockholder's
notice shall set forth: (A) as to each person whom the stockholder proposed to
nominate for election or reelection as a director all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors in an election contest, or is otherwise required, in each
case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended (the "1934 Act") and Rule 14a-11 thereunder (including such person's
written consent to being named in the proxy statement as a nominee and to
serving as a director if elected); (B) as to any other business that the
stockholder proposes to bring before the meeting, a brief description of the
business desired to be brought before the meeting, the reasons for conducting
such business at the meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the proposal is
made; and (C) as to the stockholder
2.
<PAGE>
giving the notice and the beneficial owner, if any, on whose behalf the
nomination or proposal is made (i) the name and address of such stockholder, as
they appear on the corporation's books, and of such beneficial owner, (ii) the
class and number of shares of the corporation which are owned beneficially and
of record by such stockholder and such beneficial owner, and (iii) whether
either such stockholder or beneficial owner intends to deliver a proxy statement
and form of proxy to holders of, in the case of the proposal, at least the
percentage of the corporation's voting shares required under applicable law to
carry the proposal or, in the case of a nomination or nominations, a sufficient
number of holders of the corporation's voting shares to elect such nominee or
nominees (an affirmative statement of such intent, a "Solicitation Notice").
(C) Notwithstanding anything in the second sentence of Section
5(b) of these Bylaws to the contrary, in the event that the number of directors
to be elected to the Board of Directors of the Corporation is increased and
there is no public announcement naming all of the nominees for director or
specifying the size of the increased Board of Directors made by the corporation
at least one hundred (100) days prior to the first anniversary of the preceding
year's annual meeting, a stockholder's notice required by this Section 5 shall
also be considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered to the Secretary at
the principal executive offices of the corporation not later than the close of
business on the tenth (10th) day following the day on which such public
announcement is first made by the corporation.
(D) Only such persons who are nominated in accordance with the
procedures set forth in this Section 5 shall be eligible to serve as directors
and only such business shall be conducted at a meeting of stockholders as shall
have been brought before the meeting in accordance with the procedures set forth
in this Section 5. Except as otherwise provided by law, the Chairman of the
meeting shall have the power and duty to determine whether a nomination or any
business proposed to be brought before the meeting was made, or proposed, as the
case may be, in accordance with the procedures set forth in these Bylaws and, if
any proposed nomination or business is not in compliance with these Bylaws, to
declare that such defective proposal or nomination shall not be presented for
stockholder action at the meeting and shall be disregarded.
(E) Notwithstanding the foregoing provisions of this Section
5, in order to include information with respect to a stockholder proposal in the
proxy statement and form of proxy for a stockholder's meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Nothing in these Bylaws shall be deemed to affect any rights of stockholders to
request inclusion of proposals in the corporation proxy statement pursuant to
Rule 14a-8 under the 1934 Act.
(F) For purposes of this Section 5, "public announcement"
shall mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the 1934 Act.
3.
<PAGE>
SECTION 6. SPECIAL MEETINGS.
(A) Special meetings of the stockholders of the corporation
may be called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, or (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the Board of
Directors for adoption)
(B) If a special meeting is properly called by any person or
persons other than the Board of Directors, the request shall be in writing,
specifying the general nature of the business proposed to be transacted, and
shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the Chairman of the Board of Directors, the
Chief Executive Officer, or the Secretary of the corporation. No business may be
transacted at such special meeting otherwise than specified in such notice. The
Board of Directors shall determine the time and place of such special meeting,
which shall be held not less than thirty-five (35) nor more than one hundred
twenty (120) days after the date of the receipt of the request. Upon
determination of the time and place of the meeting, the officer receiving the
request shall cause notice to be given to the stockholders entitled to vote, in
accordance with the provisions of Section 7 of these Bylaws. If the notice is
not given within one hundred (100) days after the receipt of the request, the
person or persons properly requesting the meeting may set the time and place of
the meeting and give the notice. Nothing contained in this paragraph (b) shall
be construed as limiting, fixing, or affecting the time when a meeting of
stockholders called by action of the Board of Directors may be held.
(C) Nominations of persons for election to the Board of
Directors may be made at a special meeting of stockholders at which directors
are to be elected pursuant to the corporation's notice of meeting (i) by or at
the direction of the Board of Directors or (ii) by any stockholder of the
corporation who is a stockholder of record at the time of giving notice provided
for in these Bylaws who shall be entitled to vote at the meeting and who
complies with the notice procedures set forth in this Section 6(c). In the event
the corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such stockholder
may nominate a person or persons (as the case may be), for election to such
position(s) as specified in the corporation's notice of meeting, if the
stockholder's notice required by Section 5(b) of these Bylaws shall be delivered
to the Secretary at the principal executive offices of the corporation not
earlier than the close of business on the one hundred twentieth (120th) day
prior to such special meeting and not later than the close of business on the
later of the ninetieth (90th) day prior to such meeting or the tenth (10th) day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting. In no event shall the public announcement of an
adjournment of a special meeting commence a new time period for the giving of a
stockholder's notice as described above.
SECTION 7. NOTICE OF MEETINGS. Except as otherwise provided by law or
the Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not
4.
<PAGE>
less than ten (10) nor more than sixty (60) days before the date of the meeting
to each stockholder entitled to vote at such meeting, such notice to specify the
place, date and hour and purpose or purposes of the meeting. Notice of the time,
place and purpose of any meeting of stockholders may be waived in writing,
signed by the person entitled to notice thereof, either before or after such
meeting, and will be waived by any stockholder by his attendance thereat in
person or by proxy, except when the stockholder attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Any stockholder so waiving notice of such meeting shall be bound by
the proceedings of any such meeting in all respects as if due notice thereof had
been given.
SECTION 8. QUORUM. At all meetings of stockholders, except where
otherwise provided by statute or by the Certificate of Incorporation, or by
these Bylaws, the presence, in person or by proxy duly authorized, of the
holders of a majority of the outstanding shares of stock entitled to vote shall
constitute a quorum for the transaction of business. In the absence of a quorum,
any meeting of stockholders may be adjourned, from time to time, either by the
chairman of the meeting or by vote of the holders of a majority of the shares
represented thereat, but no other business shall be transacted at such meeting.
The stockholders present at a duly called or convened meeting, at which a quorum
is present, may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. Except as
otherwise provided by statute, the Certificate of Incorporation or these Bylaws,
in all matters other than the election of directors, the affirmative vote of the
majority of shares present in person or represented by proxy at the meeting and
entitled to vote on the subject matter shall be the act of the stockholders.
Except as otherwise provided by statute, the Certificate of Incorporation or
these Bylaws, directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of directors. Where a separate vote by a class or classes
or series is required, except where otherwise provided by the statute or by the
Certificate of Incorporation or these Bylaws, a majority of the outstanding
shares of such class or classes or series, present in person or represented by
proxy, shall constitute a quorum entitled to take action with respect to that
vote on that matter and, except where otherwise provided by the statute or by
the Certificate of Incorporation or these Bylaws, the affirmative vote of the
majority (plurality, in the case of the election of directors) of the votes cast
by the holders of shares of such class or classes or series shall be the act of
such class or classes or series.
SECTION 9. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes. When a meeting is adjourned to another time or place, notice need
not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting, the corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than thirty
(30) days or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
5.
<PAGE>
SECTION 10. VOTING RIGHTS. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 12 of
these Bylaws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote shall have the right to do so either in person or by an
agent or agents authorized by a proxy granted in accordance with Delaware law.
An agent so appointed need not be a stockholder. No proxy shall be voted after
three (3) years from its date of creation unless the proxy provides for a longer
period.
SECTION 11. JOINT OWNERS OF STOCK. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (a) if only
one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the
majority so voting binds all; (c) if more than one (1) votes, but the vote is
evenly split on any particular matter, each faction may vote the securities in
question proportionally, or may apply to the Delaware Court of Chancery for
relief as provided in the DGCL, Section 217(b). If the instrument filed with the
Secretary shows that any such tenancy is held in unequal interests, a majority
or even-split for the purpose of subsection (c) shall be a majority or
even-split in interest.
SECTION 12. LIST OF STOCKHOLDERS. The Secretary shall prepare and make,
at least ten (10) days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at said meeting, arranged in alphabetical
order, showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not
specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of meeting during the whole time thereof
and may be inspected by any stockholder who is present.
SECTION 13. ACTION WITHOUT MEETING.
(A) No action shall be taken by the stockholders except at an
annual or special meeting of stockholders called in accordance with these
Bylaws, and no action shall be taken by the stockholders by written consent.
SECTION 14. ORGANIZATION.
(A) At every meeting of stockholders, the Chairman of the
Board of Directors, or, if a Chairman has not been appointed or is absent, the
President, or, if the President is absent, a chairman of the meeting chosen by a
majority in interest of the stockholders entitled to vote,
6.
<PAGE>
present in person or by proxy, shall act as chairman. The Secretary, or, in his
absence, an Assistant Secretary directed to do so by the President, shall act as
secretary of the meeting.
(B) The Board of Directors of the corporation shall be
entitled to make such rules or regulations for the conduct of meetings of
stockholders as it shall deem necessary, appropriate or convenient. Subject to
such rules and regulations of the Board of Directors, if any, the chairman of
the meeting shall have the right and authority to prescribe such rules,
regulations and procedures and to do all such acts as, in the judgment of such
chairman, are necessary, appropriate or convenient for the proper conduct of the
meeting, including, without limitation, establishing an agenda or order of
business for the meeting, rules and procedures for maintaining order at the
meeting and the safety of those present, limitations on participation in such
meeting to stockholders of record of the corporation and their duly authorized
and constituted proxies and such other persons as the chairman shall permit,
restrictions on entry to the meeting after the time fixed for the commencement
thereof, limitations on the time allotted to questions or comments by
participants and regulation of the opening and closing of the polls for
balloting on matters which are to be voted on by ballot. Unless and to the
extent determined by the Board of Directors or the chairman of the meeting,
meetings of stockholders shall not be required to be held in accordance with
rules of parliamentary procedure.
ARTICLE IV
DIRECTORS
SECTION 15. NUMBER AND TERM OF OFFICE. The authorized number of
directors of the corporation shall be fixed in accordance with the Certificate
of Incorporation. Directors need not be stockholders unless so required by the
Certificate of Incorporation. If for any cause, the directors shall not have
been elected at an annual meeting, they may be elected as soon thereafter as
convenient at a special meeting of the stockholders called for that purpose in
the manner provided in these Bylaws.
SECTION 16. POWERS. The powers of the corporation shall be exercised,
its business conducted and its property controlled by the Board of Directors,
except as may be otherwise provided by statute or by the Certificate of
Incorporation.
SECTION 17. CLASSES OF DIRECTORS. Subject to the rights of the holders
of any series of Preferred Stock to elect additional directors under specified
circumstances, the directors shall be divided into three classes designated as
Class I, Class II and Class III, respectively. Directors shall be assigned to
each class in accordance with a resolution or resolutions adopted by the Board
of Directors. At the first annual meeting of stockholders following the adoption
and filing of the Certificate of Incorporation providing for a classified Board
of Directors, the term of office of the Class I directors shall expire and Class
I directors shall be elected for a full term of three years. At the second
annual meeting of stockholders following the adoption and filing of the
Certificate of Incorporation providing for a classified Board of Directors, the
term of office of the Class II directors shall expire and Class II directors
shall be elected for a full term of three years. At the third annual meeting of
stockholders following the adoption and filing of the Certificate of
Incorporation
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providing for a classified Board of Directors, the term of office of the Class
III directors shall expire and Class III directors shall be elected for a full
term of three years. At each succeeding annual meeting of stockholders,
directors shall be elected for a full term of three years to succeed the
directors of the class whose terms expire at such annual meeting.
Notwithstanding the foregoing provisions of this section, each director shall
serve until his successor is duly elected and qualified or until his death,
resignation or removal. No decrease in the number of directors constituting the
Board of Directors shall shorten the term of any incumbent director.
SECTION 18. VACANCIES.
(A) Unless otherwise provided in the Certificate of
Incorporation, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by stockholders, be filled only
by the affirmative vote of a majority of the directors then in office, even
though less than a quorum of the Board of Directors. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the director for which the vacancy was created or occurred and
until such director's successor shall have been elected and qualified. A vacancy
in the Board of Directors shall be deemed to exist under this Section 18 in the
case of the death, removal or resignation of any director.
(B) If at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Delaware Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent (10%) of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in offices as aforesaid, which election shall be governed by Section 211 of the
DGCL.
SECTION 19. RESIGNATION. Any director may resign at any time by
delivering his written resignation to the Secretary, such resignation to specify
whether it will be effective at a particular time, upon receipt by the Secretary
or at the pleasure of the Board of Directors. If no such specification is made,
it shall be deemed effective at the pleasure of the Board of Directors. When one
or more directors shall resign from the Board of Directors, effective at a
future date, a majority of the directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each Director so chosen shall hold office for the unexpired
portion of the term of the Director whose place shall be vacated and until his
successor shall have been duly elected and qualified.
SECTION 20. REMOVAL.
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(A) Neither the Board of Directors nor any individual director
may be removed without cause.
(B) Subject to any limitation imposed by law, any individual
director or directors may be removed with cause by the affirmative vote of a
majority of the voting power of the corporation entitled to vote at an election
of directors.
SECTION 21. MEETINGS.
(A) ANNUAL MEETINGS. The annual meeting of the Board of
Directors shall be held immediately before or after the annual meeting of
stockholders and at the place where such meeting is held. No notice of an annual
meeting of the Board of Directors shall be necessary and such meeting shall be
held for the purpose of electing officers and transacting such other business as
may lawfully come before it.
(B) REGULAR MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation, regular meetings of the Board of Directors may be
held at any time or date and at any place within or without the State of
Delaware which has been designated by the Board of Directors and publicized
among all directors. No formal notice shall be required for regular meetings of
the Board of Directors.
(C) SPECIAL MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation, special meetings of the Board of Directors may be
held at any time and place within or without the State of Delaware whenever
called by the Chairman of the Board, the President or any two of the directors
(D) TELEPHONE MEETINGS. Any member of the Board of Directors,
or of any committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by such means shall constitute presence in person at such meeting.
(E) NOTICE OF MEETINGS. Notice of the time and place of all
special meetings of the Board of Directors shall be orally or in writing, by
telephone, including a voice messaging system or other system or technology
designed to record and communicate messages, facsimile, telegraph or telex, or
by electronic mail or other electronic means, during normal business hours, at
least twenty-four (24) hours before the date and time of the meeting, or sent in
writing to each director by first class mail, charges prepaid, at least three
(3) days before the date of the meeting. Notice of any meeting may be waived in
writing at any time before or after the meeting and will be waived by any
director by attendance thereat, except when the director attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
(F) WAIVER OF NOTICE. The transaction of all business at any
meeting of the Board of Directors, or any committee thereof, however called or
noticed, or wherever held, shall be as valid as though had at a meeting duly
held after regular call and notice, if a quorum be
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present and if, either before or after the meeting, each of the directors not
present shall sign a written waiver of notice. All such waivers shall be filed
with the corporate records or made a part of the minutes of the meeting.
SECTION 22. QUORUM AND VOTING.
(A) Unless the Certificate of Incorporation requires a greater
number and except with respect to indemnification questions arising under
Section 43 hereof, for which a quorum shall be one-third of the exact number of
directors fixed from time to time in accordance with the Certificate of
Incorporation, a quorum of the Board of Directors shall consist of a majority of
the exact number of directors fixed from time to time by the Board of Directors
in accordance with the Certificate of Incorporation; PROVIDED, HOWEVER, at any
meeting whether a quorum be present or otherwise, a majority of the directors
present may adjourn from time to time until the time fixed for the next regular
meeting of the Board of Directors, without notice other than by announcement at
the meeting.
(B) At each meeting of the Board of Directors at which a
quorum is present, all questions and business shall be determined by the
affirmative vote of a majority of the directors present, unless a different vote
be required by law, the Certificate of Incorporation or these Bylaws.
SECTION 23. ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
SECTION 24. FEES AND COMPENSATION. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.
SECTION 25. COMMITTEES.
(A) EXECUTIVE COMMITTEE. The Board of Directors may appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and provided
in the resolution of the Board of Directors shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the corporation, and may authorize the seal of the corporation to
be affixed to all papers which may require it; but no such committee shall have
the power or authority in reference to (i) approving or adopting, or
recommending to the
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stockholders, any action or matter expressly required by the DGCL to be
submitted to stockholders for approval, or (ii) adopting, amending or repealing
any bylaw of the corporation.
(B) OTHER COMMITTEES. The Board of Directors may, from time to
time, appoint such other committees as may be permitted by law. Such other
committees appointed by the Board of Directors shall consist of one (1) or more
members of the Board of Directors and shall have such powers and perform such
duties as may be prescribed by the resolution or resolutions creating such
committees, but in no event shall any such committee have the powers denied to
the Executive Committee in these Bylaws.
(C) TERM. Each member of a committee of the Board of Directors
shall serve a term on the committee coexistent with such member's term on the
Board of Directors. The Board of Directors, subject to any requirements of any
outstanding series of preferred Stock and the provisions of subsections (a) or
(b) of this Bylaw, may at any time increase or decrease the number of members of
a committee or terminate the existence of a committee. The membership of a
committee member shall terminate on the date of his death or voluntary
resignation from the committee or from the Board of Directors. The Board of
Directors may at any time for any reason remove any individual committee member
and the Board of Directors may fill any committee vacancy created by death,
resignation, removal or increase in the number of members of the committee. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee, and, in addition, in the absence or disqualification of any
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.
(D) MEETINGS. Unless the Board of Directors shall otherwise
provide, regular meetings of the Executive Committee or any other committee
appointed pursuant to this Section 25 shall be held at such times and places as
are determined by the Board of Directors, or by any such committee, and when
notice thereof has been given to each member of such committee, no further
notice of such regular meetings need be given thereafter. Special meetings of
any such committee may be held at any place which has been determined from time
to time by such committee, and may be called by any director who is a member of
such committee, upon written notice to the members of such committee of the time
and place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of any
committee may be waived in writing at any time before or after the meeting and
will be waived by any director by attendance thereat, except when the director
attends such special meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. A majority of the authorized number of
members of any such committee shall constitute a quorum for the transaction of
business, and the act of a majority of those present at any meeting at which a
quorum is present shall be the act of such committee.
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SECTION 26. ORGANIZATION. At every meeting of the directors, the
Chairman of the Board of Directors, or, if a Chairman has not been appointed or
is absent, the President (if a director), or if the President is absent, the
most senior Vice President (if a director), or, in the absence of any such
person, a chairman of the meeting chosen by a majority of the directors present,
shall preside over the meeting. The Secretary, or in his absence, any Assistant
Secretary directed to do so by the President, shall act as secretary of the
meeting.
ARTICLE V
OFFICERS
SECTION 27. OFFICERS DESIGNATED. The officers of the corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, one or more Vice
Presidents, the Secretary, the Chief Financial Officer, the Treasurer and the
Controller, all of whom shall be elected at the annual organizational meeting of
the Board of Directors. The Board of Directors may also appoint one or more
Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such
other officers and agents with such powers and duties as it shall deem
necessary. The Board of Directors may assign such additional titles to one or
more of the officers as it shall deem appropriate. Any one person may hold any
number of offices of the corporation at any one time unless specifically
prohibited therefrom by law. The salaries and other compensation of the officers
of the corporation shall be fixed by or in the manner designated by the Board of
Directors.
SECTION 28. TENURE AND DUTIES OF OFFICERS.
(A) GENERAL. All officers shall hold office at the pleasure of
the Board of Directors and until their successors shall have been duly elected
and qualified, unless sooner removed. Any officer elected or appointed by the
Board of Directors may be removed at any time by the Board of Directors. If the
office of any officer becomes vacant for any reason, the vacancy may be filled
by the Board of Directors.
(B) DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman
of the Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of Directors
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers, as the Board of Directors
shall designate from time to time. If there is no President, then the Chairman
of the Board of Directors shall also serve as the Chief Executive Officer of the
corporation and shall have the powers and duties prescribed in paragraph (c) of
this Section 28.
(C) DUTIES OF PRESIDENT. The President shall preside at all
meetings of the stockholders and at all meetings of the Board of Directors,
unless the Chairman of the Board of Directors has been appointed and is present.
Unless some other officer has been elected Chief Executive Officer of the
corporation, the President shall be the chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. The President shall perform
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other duties commonly incident to his office and shall also perform such other
duties and have such other powers, as the Board of Directors shall designate
from time to time.
(D) DUTIES OF VICE PRESIDENTS. The Vice Presidents may assume
and perform the duties of the President in the absence or disability of the
President or whenever the office of President is vacant. The Vice Presidents
shall perform other duties commonly incident to their office and shall also
perform such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time.
(E) DUTIES OF SECRETARY. The Secretary shall attend all
meetings of the stockholders and of the Board of Directors and shall record all
acts and proceedings thereof in the minute book of the corporation. The
Secretary shall give notice in conformity with these Bylaws of all meetings of
the stockholders and of all meetings of the Board of Directors and any committee
thereof requiring notice. The Secretary shall perform all other duties given him
in these Bylaws and other duties commonly incident to his office and shall also
perform such other duties and have such other powers, as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.
(F) DUTIES OF CHIEF FINANCIAL OFFICER. The Chief Financial
Officer shall keep or cause to be kept the books of account of the corporation
in a thorough and proper manner and shall render statements of the financial
affairs of the corporation in such form and as often as required by the Board of
Directors or the President. The Chief Financial Officer, subject to the order of
the Board of Directors, shall have the custody of all funds and securities of
the corporation. The Chief Financial Officer shall perform other duties commonly
incident to his office and shall also perform such other duties and have such
other powers as the Board of Directors or the President shall designate from
time to time. The President may direct the Treasurer or any Assistant Treasurer,
or the Controller or any Assistant Controller to assume and perform the duties
of the Chief Financial Officer in the absence or disability of the Chief
Financial Officer, and each Treasurer and Assistant Treasurer and each
Controller and Assistant Controller shall perform other duties commonly incident
to his office and shall also perform such other duties and have such other
powers as the Board of Directors or the President shall designate from time to
time.
SECTION 29. DELEGATION OF AUTHORITY. The Board of Directors may from
time to time delegate the powers or duties of any officer to any other officer
or agent, notwithstanding any provision hereof.
SECTION 30. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be
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necessary to make it effective. Any resignation shall be without prejudice to
the rights, if any, of the corporation under any contract with the resigning
officer.
SECTION 31. REMOVAL. Any officer may be removed from office at any
time, either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.
ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED BY THE
CORPORATION
SECTION 32. EXECUTION OF CORPORATE INSTRUMENTS. The Board of Directors
may, in its discretion, determine the method and designate the signatory officer
or officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation.
All checks and drafts drawn on banks or other depositaries on funds to
the credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.
SECTION 33. VOTING OF SECURITIES OWNED BY THE CORPORATION. All stock
and other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the Chief Executive Officer, the
President, or any Vice President.
ARTICLE VII
SHARES OF STOCK
SECTION 34. FORM AND EXECUTION OF CERTIFICATES. Certificates for the
shares of stock of the corporation shall be in such form as is consistent with
the Certificate of Incorporation and applicable law. Every holder of stock in
the corporation shall be entitled to have a certificate signed by or in the name
of the corporation by the Chairman of the Board of Directors, or the President
or any Vice President and by the Treasurer or Assistant Treasurer or the
Secretary or
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Assistant Secretary, certifying the number of shares owned by him in the
corporation. Any or all of the signatures on the certificate may be facsimiles.
In case any officer, transfer agent, or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent, or registrar before such certificate is issued, it
may be issued with the same effect as if he were such officer, transfer agent,
or registrar at the date of issue. Each certificate shall state upon the face or
back thereof, in full or in summary, all of the powers, designations,
preferences, and rights, and the limitations or restrictions of the shares
authorized to be issued or shall, except as otherwise required by law, set forth
on the face or back a statement that the corporation will furnish without charge
to each stockholder who so requests the powers, designations, preferences and
relative, participating, optional, or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights. Within a reasonable time after the issuance or
transfer of uncertificated stock, the corporation shall send to the registered
owner thereof a written notice containing the information required to be set
forth or stated on certificates pursuant to this section or otherwise required
by law or with respect to this section a statement that the corporation will
furnish without charge to each stockholder who so requests the powers,
designations, preferences and relative participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights. Except as
otherwise expressly provided by law, the rights and obligations of the holders
of certificates representing stock of the same class and series shall be
identical.
SECTION 35. LOST CERTIFICATES. A new certificate or certificates shall
be issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to agree to indemnify the corporation in such manner as it shall
require or to give the corporation a surety bond in such form and amount as it
may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost, stolen,
or destroyed.
SECTION 36. TRANSFERS.
(A) Transfers of record of shares of stock of the corporation
shall be made only upon its books by the holders thereof, in person or by
attorney duly authorized, and upon the surrender of a properly endorsed
certificate or certificates for a like number of shares.
(B) The corporation shall have power to enter into and perform
any agreement with any number of stockholders of any one or more classes of
stock of the corporation to restrict the transfer of shares of stock of the
corporation of any one or more classes owned by such stockholders in any manner
not prohibited by the DGCL.
SECTION 37. FIXING RECORD DATES.
(A) In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, the Board of
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Directors may fix, in advance, a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted by
the Board of Directors, and which record date shall, subject to applicable law,
not be more than sixty (60) nor less than ten (10) days before the date of such
meeting. If no record date is fixed by the Board of Directors, the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; PROVIDED, HOWEVER,
that the Board of Directors may fix a new record date for the adjourned meeting.
(B) In order that the corporation may determine the
stockholders entitled to receive payment of any dividend or other distribution
or allotment of any rights or the stockholders entitled to exercise any rights
in respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action, the Board of Directors may fix, in advance, a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted, and which record date shall be not more than
sixty (60) days prior to such action. If no record date is fixed, the record
date for determining stockholders for any such purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto.
SECTION 38. REGISTERED STOCKHOLDERS. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall not
be bound to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
SECTION 39. EXECUTION OF OTHER SECURITIES. All bonds, debentures and
other corporate securities of the corporation, other than stock certificates
(covered in Section 34), may be signed by the Chairman of the Board of
Directors, the President or any Vice President, or such other person as may be
authorized by the Board of Directors, and the corporate seal impressed thereon
or a facsimile of such seal imprinted thereon and attested by the signature of
the Secretary or an Assistant Secretary, or the Chief Financial Officer or
Treasurer or an Assistant Treasurer; PROVIDED, HOWEVER, that where any such
bond, debenture or other corporate security shall be authenticated by the manual
signature, or where permissible facsimile signature, of a trustee under an
indenture pursuant to which such bond, debenture or other corporate security
shall be issued, the signatures of the persons signing and attesting the
corporate seal on such bond, debenture or other corporate security may be the
imprinted facsimile of the signatures of such persons. Interest coupons
appertaining to any such bond, debenture or other corporate security,
authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an
Assistant Treasurer of the corporation or such other person as may be authorized
by the Board of Directors,
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or bear imprinted thereon the facsimile signature of such person. In case any
officer who shall have signed or attested any bond, debenture or other corporate
security, or whose facsimile signature shall appear thereon or on any such
interest coupon, shall have ceased to be such officer before the bond, debenture
or other corporate security so signed or attested shall have been delivered,
such bond, debenture or other corporate security nevertheless may be adopted by
the corporation and issued and delivered as though the person who signed the
same or whose facsimile signature shall have been used thereon had not ceased to
be such officer of the corporation.
ARTICLE IX
DIVIDENDS
SECTION 40. DECLARATION OF DIVIDENDS. Dividends upon the capital stock
of the corporation, subject to the provisions of the Certificate of
Incorporation and applicable law, if any, may be declared by the Board of
Directors pursuant to law at any regular or special meeting. Dividends may be
paid in cash, in property, or in shares of the capital stock, subject to the
provisions of the Certificate of Incorporation and applicable law.
SECTION 41. DIVIDEND RESERVE. Before payment of any dividend, there may
be set aside out of any funds of the corporation available for dividends such
sum or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
ARTICLE X
FISCAL YEAR
SECTION 42. FISCAL YEAR. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.
ARTICLE XI
INDEMNIFICATION
SECTION 43. INDEMNIFICATION OF DIRECTORS, EXECUTIVE OFFICERS, OTHER
OFFICERS, EMPLOYEES AND OTHER AGENTS.
(A) DIRECTORS AND EXECUTIVE OFFICERS. The corporation shall
indemnify its directors and executive officers (for the purposes of this Article
XI, "executive officers" shall have the meaning defined in Rule 3b-7 promulgated
under the 1934 Act) to the fullest extent not prohibited by the DGCL or any
other applicable law; PROVIDED, HOWEVER, that the corporation may modify the
extent of such indemnification by individual contracts with its directors and
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executive officers; and, PROVIDED, FURTHER, that the corporation shall not be
required to indemnify any director or executive officer in connection with any
proceeding (or part thereof) initiated by such person unless (i) such
indemnification is expressly required to be made by law, (ii) the proceeding was
authorized by the Board of Directors of the corporation, (iii) such
indemnification is provided by the corporation, in its sole discretion, pursuant
to the powers vested in the corporation under the DGCL or any other applicable
law or (iv) such indemnification is required to be made under subsection (d).
(B) OTHER OFFICERS, EMPLOYEES AND OTHER AGENTS. The
corporation shall have power to indemnify its other officers, employees and
other agents as set forth in the DGCL or any other applicable law. The Board of
Directors shall have the power to delegate the determination of whether
indemnification shall be given to any such person except executive officers to
such officers or other persons as the Board of Directors shall determine.
(C) EXPENSES. The corporation shall advance to any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that he is or was a director or
executive officer, of the corporation, or is or was serving at the request of
the corporation as a director or executive officer of another corporation,
partnership, joint venture, trust or other enterprise, prior to the final
disposition of the proceeding, promptly following request therefor, all expenses
incurred by any director or executive officer in connection with such proceeding
upon receipt of an undertaking by or on behalf of such person to repay said
amounts if it should be determined ultimately that such person is not entitled
to be indemnified under this Section 43 or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (e) of this Section 43, no advance shall be made by the corporation to
an executive officer of the corporation (except by reason of the fact that such
executive officer is or was a director of the corporation in which event this
paragraph shall not apply) in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, if a determination is reasonably and
promptly made (i) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to the proceeding, or (ii) if such
quorum is not obtainable, or, even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, that
the facts known to the decision-making party at the time such determination is
made demonstrate clearly and convincingly that such person acted in bad faith or
in a manner that such person did not believe to be in or not opposed to the best
interests of the corporation.
(D) ENFORCEMENT. Without the necessity of entering into an
express contract, all rights to indemnification and advances to directors and
executive officers under this Bylaw shall be deemed to be contractual rights and
be effective to the same extent and as if provided for in a contract between the
corporation and the director or executive officer. Any right to indemnification
or advances granted by this Section 43 to a director or executive officer shall
be enforceable by or on behalf of the person holding such right in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. The
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claimant in such enforcement action, if successful in whole or in part, shall be
entitled to be paid also the expense of prosecuting his claim. In connection
with any claim for indemnification, the corporation shall be entitled to raise
as a defense to any such action that the claimant has not met the standards of
conduct that make it permissible under the DGCL or any other applicable law for
the corporation to indemnify the claimant for the amount claimed. In connection
with any claim by an executive officer of the corporation (except in any action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that such executive officer is or was a director of the
corporation) for advances, the corporation shall be entitled to raise a defense
as to any such action clear and convincing evidence that such person acted in
bad faith or in a manner that such person did not believe to be in or not
opposed to the best interests of the corporation, or with respect to any
criminal action or proceeding that such person acted without reasonable cause to
believe that his conduct was lawful. Neither the failure of the corporation
(including its Board of Directors, independent legal counsel or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he has met the applicable standard of conduct set forth in the DGCL or
any other applicable law, nor an actual determination by the corporation
(including its Board of Directors, independent legal counsel or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that claimant has not
met the applicable standard of conduct. In any suit brought by a director or
executive officer to enforce a right to indemnification or to an advancement of
expenses hereunder, the burden of proving that the director or executive officer
is not entitled to be indemnified, or to such advancement of expenses, under
this Section 43 or otherwise shall be on the corporation.
(E) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any
person by this Bylaw shall not be exclusive of any other right which such person
may have or hereafter acquire under any applicable statute, provision of the
Certificate of Incorporation, Bylaws, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding office. The corporation is
specifically authorized to enter into individual contracts with any or all of
its directors, officers, employees or agents respecting indemnification and
advances, to the fullest extent not prohibited by the Delaware General
Corporation Law, or by any other applicable law.
(F) SURVIVAL OF RIGHTS. The rights conferred on any person by
this Bylaw shall continue as to a person who has ceased to be a director,
officer, employee or other agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(G) INSURANCE. To the fullest extent permitted by the DGCL or
any other applicable law, the corporation, upon approval by the Board of
Directors, may purchase insurance on behalf of any person required or permitted
to be indemnified pursuant to this Section 43.
(H) AMENDMENTS. Any repeal or modification of this Section 43
shall only be prospective and shall not affect the rights under this Bylaw in
effect at the time of the alleged
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occurrence of any action or omission to act that is the cause of any proceeding
against any agent of the corporation.
(I) SAVING CLAUSE. If this Bylaw or any portion hereof shall
be invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and executive officer to
the full extent not prohibited by any applicable portion of this Section 43 that
shall not have been invalidated, or by any other applicable law. If this Section
43 shall be invalid due to the application of the indemnification provisions of
another jurisdiction, then the corporation shall indemnify each director and
executive officer to the full extent under any other applicable law.
(J) CERTAIN DEFINITIONS. For the purposes of this Bylaw, the
following definitions shall apply:
(1) The term "proceeding" shall be broadly construed
and shall include, without limitation, the investigation, preparation,
prosecution, defense, settlement, arbitration and appeal of, and the giving of
testimony in, any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative.
(2) The term "expenses" shall be broadly construed
and shall include, without limitation, court costs, attorneys' fees, witness
fees, fines, amounts paid in settlement or judgment and any other costs and
expenses of any nature or kind incurred in connection with any proceeding.
(3) The term the "corporation" shall include, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this Section 43 with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
(4) References to a "director," "executive officer,"
"officer," "employee," or "agent" of the corporation shall include, without
limitation, situations where such person is serving at the request of the
corporation as, respectively, a director, executive officer, officer, employee,
trustee or agent of another corporation, partnership, joint venture, trust or
other enterprise.
(5) References to "other enterprises" shall include
employee benefit plans; references to "fines" shall include any excise taxes
assessed on a person with respect to an employee benefit plan; and references to
"serving at the request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation which imposes duties on,
or involves services by, such director, officer, employee, or agent with respect
to an employee
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benefit plan, its participants, or beneficiaries; and a person who acted in good
faith and in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed to
have acted in a manner "not opposed to the best interests of the corporation" as
referred to in this Section 43.
ARTICLE XII
NOTICES
SECTION 44. NOTICES.
(A) NOTICE TO STOCKHOLDERS. Whenever, under any provisions of
these Bylaws, notice is required to be given to any stockholder, it shall be
given in writing, timely and duly deposited in the United States mail, postage
prepaid, and addressed to his last known post office address as shown by the
stock record of the corporation or its transfer agent.
(B) NOTICE TO DIRECTORS. Any notice required to be given to
any director may be given by the method stated in subsection (a), or by
overnight delivery service, facsimile, telex or telegram, except that such
notice other than one which is delivered personally shall be sent to such
address as such director shall have filed in writing with the Secretary, or, in
the absence of such filing, to the last known post office address of such
director.
(C) AFFIDAVIT OF MAILING. An affidavit of mailing, executed by
a duly authorized and competent employee of the corporation or its transfer
agent appointed with respect to the class of stock affected, specifying the name
and address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall in the absence of fraud, be prima
facie evidence of the facts therein contained.
(D) TIME NOTICES DEEMED GIVEN. All notices given by mail or by
overnight delivery service, as above provided, shall be deemed to have been
given as at the time of mailing, and all notices given by facsimile, telex or
telegram shall be deemed to have been given as of the sending time recorded at
time of transmission.
(E) METHODS OF NOTICE. It shall not be necessary that the same
method of giving notice be employed in respect of all directors, but one
permissible method may be employed in respect of any one or more, and any other
permissible method or methods may be employed in respect of any other or others.
(F) FAILURE TO RECEIVE NOTICE. The period or limitation of
time within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any director may
exercise any power or right, or enjoy any privilege, pursuant to any notice sent
him in the manner above provided, shall not be affected or extended in any
manner by the failure of such stockholder or such director to receive such
notice.
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(G) NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL.
Whenever notice is required to be given, under any provision of law or of the
Certificate of Incorporation or Bylaws of the corporation, to any person with
whom communication is unlawful, the giving of such notice to such person shall
not be required and there shall be no duty to apply to any governmental
authority or agency for a license or permit to give such notice to such person.
Any action or meeting which shall be taken or held without notice to any such
person with whom communication is unlawful shall have the same force and effect
as if such notice had been duly given. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the DGCL, the certificate shall state, if such is the fact and if
notice is required, that notice was given to all persons entitled to receive
notice except such persons with whom communication is unlawful.
(H) NOTICE TO PERSON WITH UNDELIVERABLE ADDRESS. Whenever
notice is required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the DGCL, the certificate need not state that notice was not given
to persons to whom notice was not required to be given pursuant to this
paragraph.
ARTICLE XIII
AMENDMENTS
SECTION 45. AMENDMENTS. Subject to paragraph (h) of Section 43
of the Bylaws, the Bylaws may be altered or amended or new Bylaws adopted by the
affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the
voting power of all of the then-outstanding shares of the voting stock of the
corporation entitled to vote. The Board of Directors shall also have the power
to adopt, amend, or repeal Bylaws.
ARTICLE XIV
LOANS TO OFFICERS
SECTION 46. LOANS TO OFFICERS. The corporation may lend money
to, or guarantee any obligation of, or otherwise assist any officer or other
employee of the corporation or of its subsidiaries, including any officer or
employee who is a Director of the corporation or its
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subsidiaries, whenever, in the judgment of the Board of Directors, such loan,
guarantee or assistance may reasonably be expected to benefit the corporation.
The loan, guarantee or other assistance may be with or without interest and may
be unsecured, or secured in such manner as the Board of Directors shall approve,
including, without limitation, a pledge of shares of stock of the corporation.
Nothing in these Bylaws shall be deemed to deny, limit or restrict the powers of
guaranty or warranty of the corporation at common law or under any statute.
23.
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JATO COMMUNICATIONS CORP.
EMPLOYMENT AGREEMENT
FOR
BRIAN E. GAST
THIS EMPLOYMENT AGREEMENT ("AGREEMENT") is entered into as of the 16th
day of April, 1999, by and between BRIAN E. GAST ("EXECUTIVE") and JATO
COMMUNICATIONS CORP., a Delaware corporation (the "COMPANY").
WHEREAS, the Company desires to employ Executive to provide personal
services to the Company, and wishes to provide Executive with certain
compensation and benefits in return for his services; and
WHEREAS, Executive wishes to be employed by the Company and provide
personal services to the Company in return for certain compensation and
benefits;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, it is hereby agreed by and between the parties hereto as
follows:
1. EMPLOYMENT BY THE COMPANY.
1.1 TERM. Subject to terms set forth herein, for a period of two (2)
years the Company agrees to employ Executive in the position of President and
Chief Executive Officer and Executive hereby accepts such employment effective
as of the date first written above. This Agreement shall automatically renew on
a month-to-month basis unless either party gives thirty (30) days' prior written
notice to the other party. During the term of his employment with the Company,
Executive will devote his best efforts and substantially all of his business
time and attention (except for vacation periods and reasonable periods of
illness or other incapacities permitted by the Company's general employment
policies) to the business of the Company.
1.2 DUTIES. Executive shall serve in an executive capacity and shall
perform such duties as are customarily associated with his then existing
title(s), consistent with the Bylaws of the Company and as required by the
Company's Board of Directors or the Executive's supervisor (the "BOARD").
1.3 EMPLOYMENT RELATIONSHIP. The employment relationship between the
parties shall also be governed by the general employment policies and practices
of the Company, including those relating to protection of confidential
information and assignment of inventions, except that when the terms of this
Agreement differ from or are in conflict with the Company's general employment
policies or practices, this Agreement shall control.
1.
<PAGE>
2. COMPENSATION.
2.1 SALARY. Executive shall receive for services to be rendered
hereunder an annualized base salary of $200,000, payable on a semi-monthly
basis, which will be reviewed annually at the discretion of the Compensation
Committee of the Board of Directors. Executive's base salary shall be increased
annually by an amount equal to the greater of (i) 5% of Executive's base salary
and (ii) an amount determined by the Board of Directors.
2.2 DISCRETIONARY BONUS. Executive will be eligible for a
discretionary bonus, in an amount to be determined solely by the Compensation
Committee in its discretion, subject to the terms and conditions outlined in a
Company bonus plan, which may be established and in effect from time to time.
2.3 STANDARD COMPANY BENEFITS. Executive shall be entitled to all
rights and benefits for which he is eligible under the terms and conditions of
the standard Company benefits and compensation practices which may be in effect
from time to time and provided by the Company to its employees in comparable
positions (the "COMPANY BENEFITS").
2.4 ACCELERATION OF STOCK RIGHTS. In the event that the Company (i)
consummates an Acquisition or Asset Transfer, as those terms are defined in the
Company's Restated Certificate of Incorporation (a "CHANGE OF CONTROL") or (ii)
materially reduces the job responsibilities or base salary of the Executive (a
"DOWNGRADING"), then the vesting of all stock options held by Executive shall
accelerate and all repurchase rights on any stock of the Company held by
Executive will be waived; PROVIDED, THAT, Executive shall remain a party to, and
subject to the provisions of, the Investors' Rights Agreement, of even date
herewith (the "INVESTORS' RIGHTS AGREEMENT").
2.5 NON-RECOURSE LOAN. The Company agrees that at any time up to and
including December 31, 1999, Executive may request that the Company loan him up
to $100,000 and the Company will promptly make such a loan on substantially the
following terms: non-recourse loan secured only by a pledge of Common Stock of
the Company owned by Executive; term of the loan, 3 years; interest rate to be
5.0%, compounding quarterly; principal and accrued interest due at maturity,
unless forgiven; 1/3 of the principal and 1/3 of the accrued interest will be
forgiven on December 31, 1999; 1/3 of principal and interest will be forgiven on
December 31, 2000; any remainder of principal and interest will be forgiven on
December 31, 2001. Notwithstanding the foregoing, the entire amount of
principal and accrued interest will be forgiven in the event: (i) Executive is
terminated for any reason other than Cause (as defined in Section 5 below), (ii)
a Change of Control or (iii) a Downgrading. In the event that Executive
voluntarily terminates his employment with the Company, any principal and
interest outstanding under the loan shall be fully due and payable on December
31, 2001.
3. PROPRIETARY INFORMATION OBLIGATIONS.
3.1 AGREEMENT. Executive agrees to continue to abide by Executive's
previously executed Non-competition, Proprietary Information and Inventions
Agreement attached hereto as EXHIBIT A.
2.
<PAGE>
3.2 REMEDIES. Executive's duties under the Proprietary Information
and Inventions Agreement shall survive termination of his employment with the
Company. Executive acknowledges that a remedy at law for any breach or
threatened breach by him of the provisions of the Proprietary Information and
Inventions Agreement would be inadequate, and he therefore agrees that the
Company shall be entitled to injunctive relief in case of any such breach or
threatened breach.
4. OUTSIDE ACTIVITIES. Except with the prior written consent of the
Company's Board, Executive will not, during the term of this Agreement,
undertake or engage in any other employment, occupation or business enterprise,
other than those in which Executive is a passive investor. Executive may engage
in civic and not-for-profit activities so long as such activities do not
materially interfere with the performance of his duties hereunder.
5. TERMINATION OF EMPLOYMENT.
(a) TERMINATION. Either the Executive or the Company may terminate
the employment relationship at any time for any reason whatsoever, with thirty
(30) days' prior written notice by the Company and with thirty (30) days' prior
written notice by the Executive with or without Cause or advance notice. This
at-will employment relationship cannot be changed except in a writing approved
by the Board. If the Company terminates Executive's employment without Cause at
any time, Executive will receive as severance: (i) a lump sum payment equal to
one (1) year of base salary, less payroll deductions and required withholdings,
(ii) a lump sum payment of that portion of the bonus Executive is entitled to
for the calendar year pro-rated based upon the number of full months Executive
was employed in such year, (iii) continuation of all Company Benefits for a
period of one (1) year and (iv) vesting of all stock options and waiver of all
repurchase rights on Executive stock, in exchange for the execution of a release
of all claims against the Company; PROVIDED, THAT, in the event of termination
due to Disability, this subsection (iv) shall apply only with respect to 50% of
any unvested stock options held by Executive on the date of termination and with
respect to the waiver of repurchase rights of 50% of any unvested shares held by
Executive on the date of termination; PROVIDED, FURTHER, that Executive shall
remain a party to, and subject to the provisions of, the Investors' Rights
Agreement. If Executive resigns or if Executive's employment is terminated for
Cause, all compensation and benefits will cease immediately, and Executive will
receive no severance benefits.
For purposes of this Agreement, "CAUSE" shall mean misconduct, including: (i)
conviction of any felony or any crime involving moral turpitude or dishonesty;
(ii) participation in a fraud or act of dishonesty against the Company; (iii)
willful breach of the Company's policies; (iv) intentional damage to the
Company's property; (v) material breach of this Agreement or Executive's
Proprietary Information and Inventions Agreement; (vi) a failure or refusal in a
material respect of Executive to follow the reasonable policies or directions of
the Company as specified by the Board of Directors after being provided with
notice of such failure and an opportunity to cure within seven (7) days of
receipt of such notice; or (vii) failure to carry out the duties of the
Executive's position after being provided with notice of such failure and an
opportunity to cure. Disability shall not constitute "Cause."
3.
<PAGE>
For purposes of this Agreement, "DISABILITY" shall mean a disability which
prevents Executive from substantially performing his duties under this Agreement
for a period of at least 90 consecutive days or 180 non-consecutive days within
any 365-day period.
(b) In the event of death, the Company shall pay to Executive any
earned but unpaid salary at the time of death and, at the time such amount would
otherwise have been due, a pro rata portion of a discretionary bonus, if any,
which may otherwise have been paid to Executive pursuant to Section 2.2 hereof
with respect to the annual period in which the death occurs. Furthermore,
Executive shall vest in 50% of any unvested stock options as of the date of
death and the Company shall waive its repurchase rights with respect to 50% of
any unvested shares as of the date of death; PROVIDED, HOWEVER, that Executive's
estate, administrator or distributor shall become a party to, and be subject to
the provisions of, the Investors' Rights Agreement.
6. CONTINUATION OF EMPLOYMENT/RESTRICTIVE COVENANT. During the term of
Executive's employment and for a period of twelve (12) months immediately
following Executive's termination, Executive shall not without first obtaining
the prior written approval of the Company, directly or indirectly engage or
prepare to engage, in any activities in competition with the Company, or accept
employment or establish a business relationship with a business that directly
competes with the Company in providing high speed data transmission services in
a market in which the Company has at least one (1) operational DSLAM or at least
one (1) central office colocation under construction.
7. NONSOLICITATION. While employed by the Company, and for twelve (12)
months immediately following the Executive's termination of employment,
Executive agrees not to interfere with the business of the Company by
soliciting, attempting to solicit, inducing, or otherwise causing any employee
of the Company to terminate his or her employment in order to become an
employee, consultant or independent contractor to or for any competitor of the
Company.
8. GENERAL PROVISIONS.
8.1 NOTICES. Any notices provided hereunder must be in writing and
shall be deemed effective upon the earlier of personal delivery (including
personal delivery by telex) or the third day after mailing by first class mail,
to the Company at its primary office location and to Executive at his address as
listed on the Company's then current payroll records.
8.2 SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provisions had never been contained herein.
8.3 WAIVER. If either party should waive any breach of any provisions
of this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
4.
<PAGE>
8.4 COMPLETE AGREEMENT. This Agreement and EXHIBIT A hereto,
constitute the entire agreement between Executive and the Company and it is the
complete, final, and exclusive embodiment of their agreement with regard to this
subject matter. It is entered into without reliance on any promise or
representation other than those expressly contained herein, and it cannot be
modified or amended except in a writing signed by an officer of the Company.
8.5 COUNTERPARTS. This Agreement may be executed in separate
counterparts, any one of which need not contain signatures of more than one
party, but all of which taken together will constitute one and the same
Agreement.
8.6 HEADINGS. The headings of the sections hereof are inserted for
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
8.7 SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and
inure to the benefit of and be enforceable by Executive and the Company, and
their respective successors, assigns, heirs, executors and administrators,
except that Executive may not assign any of his duties hereunder and he may not
assign any of his rights hereunder without the written consent of the Company,
which shall not be withheld unreasonably.
8.8 ATTORNEY FEES. If either party hereto brings any action to
enforce his or its rights hereunder, the prevailing party in any such action
shall be entitled to recover his or its reasonable attorneys' fees and costs
incurred in connection with such action.
8.9 CHOICE OF LAW. All questions concerning the construction,
validity and interpretation of this Agreement will be governed by the law of the
State of Colorado.
8.10 SURVIVAL. The following provisions of this Agreement shall
survive the termination of Executive's employment and the assignment of this
Agreement by the Company to any successor in interest or other assignee:
Section 2; Section 3; Section 6; Section 7; and Section 8.
8.11 INJUNCTIVE RELIEF. Executive acknowledges that the restrictions
set forth in Sections 3, 4, 6 and 7 above are necessary to protect the Company's
confidential proprietary information and other legitimate business interests and
are reasonable in all respects, including duration, territory and scope of
activity restricted. Executive further acknowledges that the provisions of
Sections 3, 4, 6 and 7 hereof are essential to the Company, that the Company
would not enter into this Agreement if it did not include these provisions and
that damages sustained by the Company as a result of a breach of these
provisions cannot be adequately remedied by damages, and Executive agrees that
the Company, in addition to any other remedy it may have under this Agreement or
at law, shall be entitled to injunctive and other equitable relief to prevent or
curtail any breach of Sections 3, 4, 6 and 7 of this Agreement. Executive
agrees that the existence of any claim or cause of action by Executive against
the Company or its affiliates, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Company of
any of the provisions of Sections 3, 4, 6 and 7 hereof. Executive shall have no
right to enforce any of his rights under this Agreement by seeking or obtaining
injunctive or other equitable relief and acknowledges that damages are an
adequate remedy for any breach by the Company of this Agreement.
5.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
JATO COMMUNICATIONS CORP.
By: /s/ Leonard Allsup
---------------------------
Leonard Allsup
Vice President, Sales
By: /s/ Brian E. Gast
---------------------------
Brian E. Gast
6.
<PAGE>
EXHIBIT A
JATO COMMUNICATIONS CORP.
NON-COMPETITION PROPRIETARY INFORMATION
AND INVENTIONS AGREEMENT
<PAGE>
NON-COMPETITION, PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
As an employee of JATO Communications Corp., a Delaware corporation, its
subsidiaries or its affiliates (together, the "Company"), and as a condition
of my employment by the Company and in consideration of the compensation now
and hereafter paid to me, I agree to the following (the "Agreement"):
1. MAINTAINING CONFIDENTIAL INFORMATION
(a) COMPANY INFORMATION. I agree at all times during the term of
my employment and thereafter to hold in strictest confidence, and not to use,
except for the benefit of the Company, or to disclose to any person, firm or
corporation, without the written authorization of the Board of Directors of
the Company, any trade secrets, confidential knowledge, data or other
proprietary information of the Company. By way of illustration and not
limitation, this shall include information relating to products, processes,
know-how, methods, software, developmental work, improvements, discoveries,
plans for marketing and selling, business plans, budgets and unpublished
financial statements, licenses, prices and costs, suppliers and customers,
and information regarding the skills and compensation of other employees of
the Company. Notwithstanding the foregoing, confidential information shall
not include any information which:
(i) at the time of disclosure, or thereafter, is generally available to
and known by the public;
(ii) was or is available to me on a non-confidential basis from a source
other than the Company; or
(iii) has been independently acquired or developed by me without
violating any of my obligations under this Agreement, as shown by my
competent written records.
(b) THIRD PARTY INFORMATION. I recognize that the Company has
received and in the future will receive confidential or proprietary
information from third parties subject to a duty on the Company's part to
maintain the confidentiality of such information and, in some cases, to use
it only for certain limited purposes. I agree that I owe the Company and
such third parties, both during the term of my employment and thereafter, a
duty to hold all such confidential or proprietary information in the
strictest confidence and not to, except as is consistent with the Company's
agreement with the third party, disclose it to any person, firm or
corporation or use it for the benefit of anyone other than the Company or
such third party, unless expressly authorized to act otherwise by an officer
of the Company.
2. ASSIGNMENT OF INVENTIONS AND ORIGINAL WORKS.
I agree that I will make prompt written disclosure to the Company, will
hold in trust for the sole right and benefit of the Company, and hereby
assign to the Company all my right, title and interest in and to any ideas,
inventions, original works of authorship, developments, improvements or trade
secrets which I may solely or jointly conceive or reduce to practice, or
cause to be conceived or reduced to practice, during the period of my
employment with the Company and for one (1) year after my employment. This
Agreement will not be deemed to require assignment of any invention developed
entirely on my own time without using the Company's equipment, supplies,
facilities or trade secrets and neither related to the Company's actual or
anticipated business, research or development, nor resulted from work
performed by me for the Company.
3. NO CONFLICTS OR SOLICITATION
For the period of my employment by the Company and for one (1) year
following my termination, I will not interfere with the business of the
Company by (i) soliciting, attempting to solicit, inducing, or otherwise
causing any employee of the Company to terminate his or her employment in
order to become an employee, consultant or independent contractor to or for
any other entity engaged in marketing or selling the type of products and
services offered by the Company or (ii) directly soliciting the business of
any customer or client of the Company (other than on behalf of the Company)
for the type of products and services offered by the Company.
4. COVENANT NOT TO COMPETE.
(a) I agree that during my employment with the Company, I will not
directly or indirectly engage in (whether as an employee, consultant,
proprietor, partner, director or otherwise), or have any ownership interest
1
<PAGE>
in, or participate in the financing, operation, management or control of, any
person, firm, corporation or business that engages in a "Restricted Business"
in a "Restricted Territory" (as defined below). It is agreed that ownership
of (i) no more than ten percent (10%) of the outstanding voting stock of a
publicly traded corporation or (ii) any stock I presently own or (iii) any
options or other rights to acquire shares of a company's capital stock I
presently own shall not constitute a violation of this provision.
(b) As used herein, the terms:
(i) "Restricted Business" shall mean any competitive local exchange
carrier, high speed data communication services provider or any business
which otherwise engages in any other manner in any business which is
competitive with the Company.
(ii) "Restricted Territory" shall mean all regions within a fifty mile
radius of those cities in which the Company operates, or has disclosed to
you that it intends to operate, a business.
5. RETURN OF COMPANY DOCUMENTS
When I leave the employ of the Company, I will deliver to the Company
(and will not keep in my possession, recreate or deliver to anyone else) any
and all documents and other property, together with all copies thereof (in
whatever medium recorded) belonging to the Company, its successors or assigns
whether kept at the Company, home or elsewhere. I further agree that any
property situated on the Company's premises and owned by the Company,
including disks and other storage media, filing cabinets or other work areas,
is subject to inspection by Company personnel at any time with or without
notice.
6. LEGAL AND EQUITABLE REMEDIES
Because my services are personal and unique and because I may have access
to and become acquainted with the proprietary information of the Company, the
Company shall have the right to enforce this Agreement and any of its
provisions by injunction, specific performance or other equitable relief,
without bond and without prejudice to any other rights and remedies that the
Company may have for a breach of this Agreement.
7. NOT AN EMPLOYMENT CONTRACT. I agree and understand that nothing in
this Agreement shall confer any right with respect to continuation of my
employment by the Company, nor shall it interfere in any way with my right or
the Company's right to terminate my employment at a ny time, with or without
cause.
8. GENERAL PROVISIONS.
(a) GOVERNING LAW. This Agreement will be governed by and
construed according to the laws of the State of Colorado, excluding conflicts
of laws principles. I hereby expressly consent to the personal jurisdiction
of the state and federal courts located in Colorado for any lawsuit filed
there against me by the Company arising from or relating to this Agreement,
or such other location as the Company's principal executive office may then
be located.
(b) SEVERABILITY. If one or more of the provisions in this
Agreement are deemed unenforceable by law, then the remaining provisions will
continue in full force and effect. Moreover, if any restriction set forth in
Sections 3 or 4 hereof is found by any court of competent jurisdiction to be
unenforceable because it extends for too long a period of time or over too
great a range of activities or in too broad a geographic area, it shall be
interpreted to extend only over the maximum period of time, range of
activities or geographic area as to which it may be enforceable.
(c) BENEFIT; BINDING EFFECT. This Agreement will be binding upon
my heirs, executors, administrators and other legal representatives and will
be for the benefit of the Company, its successors and its assigns.
(d) SURVIVAL. The provisions of this Agreement shall survive the
termination of my employment and the assignment of this Agreement by the
Company to any successor in interest or other assignee.
2
<PAGE>
I UNDERSTAND THAT THIS AGREEMENT AFFECTS MY RIGHTS TO INVENTIONS I MAKE
DURING MY EMPLOYMENT, AND RESTRICTS MY RIGHT TO DISCLOSE OR USE THE COMPANY'S
PROPRIETARY INFORMATION DURING OR SUBSEQUENT TO MY EMPLOYMENT.
I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS.
Dated:
----------------------- ------------------------------
Name
Address
-----------------------
------------------------------
------------------------------
ACCEPTED AND AGREED TO:
JATO COMMUNICATIONS CORP.
By:
--------------------------
Name:
------------------------
Title:
-----------------------
3
<PAGE>
JATO COMMUNICATIONS CORP.
EMPLOYMENT AGREEMENT
FOR
LEONARD ALLSUP
THIS EMPLOYMENT AGREEMENT ("AGREEMENT") is entered into as of the 16th
day of April, 1999, by and between LEONARD ALLSUP ("EXECUTIVE") and JATO
COMMUNICATIONS CORP., a Delaware corporation (the "COMPANY").
WHEREAS, the Company desires to employ Executive to provide personal
services to the Company, and wishes to provide Executive with certain
compensation and benefits in return for his services; and
WHEREAS, Executive wishes to be employed by the Company and provide
personal services to the Company in return for certain compensation and
benefits;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, it is hereby agreed by and between the parties hereto as
follows:
1. EMPLOYMENT BY THE COMPANY.
1.1 TERM. Subject to terms set forth herein, for a period of two (2)
years the Company agrees to employ Executive in the position of Vice President,
Sales and Executive hereby accepts such employment effective as of the date
first written above. This Agreement shall automatically renew on a
month-to-month basis unless either party gives thirty (30) days' prior written
notice to the other party. During the term of his employment with the Company,
Executive will devote his best efforts and substantially all of his business
time and attention (except for vacation periods and reasonable periods of
illness or other incapacities permitted by the Company's general employment
policies) to the business of the Company.
1.2 DUTIES. Executive shall serve in an executive capacity and shall
perform such duties as are customarily associated with his then existing
title(s), consistent with the Bylaws of the Company and as required by the
Company's Board of Directors or the Executive's supervisor (the "BOARD").
1.3 EMPLOYMENT RELATIONSHIP. The employment relationship between the
parties shall also be governed by the general employment policies and practices
of the Company, including those relating to protection of confidential
information and assignment of inventions, except that when the terms of this
Agreement differ from or are in conflict with the Company's general employment
policies or practices, this Agreement shall control.
1.
<PAGE>
2. COMPENSATION.
2.1 SALARY. Executive shall receive for services to be rendered
hereunder an annualized base salary of $150,000, payable on a semi-monthly
basis, which will be reviewed annually at the discretion of the Compensation
Committee of the Board of Directors. Executive's base salary shall be increased
annually by an amount equal to the greater of (i) 5% of Executive's base salary
and (ii) an amount determined by the Board of Directors.
2.2 DISCRETIONARY BONUS. Executive will be eligible for a
discretionary bonus, in an amount to be determined solely by the Compensation
Committee in its discretion, subject to the terms and conditions outlined in a
Company bonus plan, which may be established and in effect from time to time.
2.3 STANDARD COMPANY BENEFITS. Executive shall be entitled to all
rights and benefits for which he is eligible under the terms and conditions of
the standard Company benefits and compensation practices which may be in effect
from time to time and provided by the Company to its employees in comparable
positions (the "COMPANY BENEFITS").
2.4 ACCELERATION OF STOCK RIGHTS. In the event that the Company (i)
consummates an Acquisition or Asset Transfer, as those terms are defined in the
Company's Restated Certificate of Incorporation or (ii) materially reduces the
job responsibilities or base salary of the Executive, then the vesting of all
stock options held by Executive shall accelerate and all repurchase rights on
any stock of the Company held by Executive will be waived PROVIDED, THAT,
Executive shall remain a party to, and subject to the provisions of, the
Investors' Rights Agreement, of even date herewith (the "INVESTORS' RIGHTS
AGREEMENT").
3. PROPRIETARY INFORMATION OBLIGATIONS.
3.1 AGREEMENT. Executive agrees to continue to abide by Executive's
previously executed Non-competition, Proprietary Information and Inventions
Agreement attached hereto as EXHIBIT A.
3.2 REMEDIES. Executive's duties under the Proprietary Information
and Inventions Agreement shall survive termination of his employment with the
Company. Executive acknowledges that a remedy at law for any breach or
threatened breach by him of the provisions of the Proprietary Information and
Inventions Agreement would be inadequate, and he therefore agrees that the
Company shall be entitled to injunctive relief in case of any such breach or
threatened breach.
4. OUTSIDE ACTIVITIES. Except with the prior written consent of the
Company's Board, Executive will not, during the term of this Agreement,
undertake or engage in any other employment, occupation or business enterprise,
other than those in which Executive is a passive investor. Executive may engage
in civic and not-for-profit activities so long as such activities do not
materially interfere with the performance of his duties hereunder.
2.
<PAGE>
5. TERMINATION OF EMPLOYMENT.
(a) Either the Executive or the Company may terminate the employment
relationship at any time for any reason whatsoever, with thirty (30) days' prior
written notice by the Company and with thirty (30) days' prior written notice by
the Executive with or without Cause (as defined below) or advance notice. This
at-will employment relationship cannot be changed except in a writing approved
by the Board. If the Company terminates Executive's employment without Cause at
any time, Executive will receive as severance: (i) a lump sum payment equal to
one (1) year of base salary, less payroll deductions and required withholdings,
(ii) a lump sum payment of that portion of the bonus Executive is entitled to
for the calendar pro-rated based upon the number of full months Executive was
employed during such year, (iii) continuation of all Company Benefits for a
period of one (1) year and (iv) vesting of all stock options and waiver of all
repurchase rights on Executive stock, in exchange for the execution of a release
of all claims against the Company; PROVIDED, THAT, in the event of termination
due to Disability, this subsection (iv) shall apply only with respect to 50% of
any unvested stock options held by Executive on the date of termination and with
respect to the waiver of repurchase rights of 50% of any unvested shares held by
Executive on the date of termination; PROVIDED, FURTHER, that Executive shall
remain a party to, and subject to the provisions of, the Investors' Rights
Agreement. If Executive resigns or if Executive's employment is terminated for
Cause, all compensation and benefits will cease immediately, and Executive will
receive no severance benefits.
For purposes of this Agreement, "CAUSE" shall mean misconduct, including: (i)
conviction of any felony or any crime involving moral turpitude or dishonesty;
(ii) participation in a fraud or act of dishonesty against the Company; (iii)
willful breach of the Company's policies; (iv) intentional damage to the
Company's property; (v) material breach of this Agreement or Executive's
Proprietary Information and Inventions Agreement; (vi) a failure or refusal in a
material respect of Executive to follow the reasonable policies or directions of
the Company as specified by the Board of Directors after being provided with
notice of such failure and an opportunity to cure within seven (7) days of
receipt of such notice; or (vii) failure to carry out the duties of the
Executive's position after being provided with notice of such failure and an
opportunity to cure. Disability shall not constitute "Cause."
For purposes of this Agreement, "DISABILITY" shall mean a disability which
prevents Executive from substantially performing his duties under this Agreement
for a period of at least 90 consecutive days or 180 non-consecutive days within
any 365-day period.
(b) In the event of death, the Company shall pay to Executive any
earned but unpaid salary at the time of death and, at the time such amount would
otherwise have been due, a pro rata portion of a discretionary bonus, if any,
which may otherwise have been paid to Executive pursuant to Section 2.2 hereof
with respect to the annual period in which the death occurs. Furthermore,
Executive shall vest in 50% of any unvested stock options as of the date of
death and the Company shall waive its repurchase rights with respect to 50% of
any unvested shares as of the date of death; PROVIDED, HOWEVER, that Executive's
estate, administrator or distributor shall become a party to, and be subject to
the provisions of, the Investors' Rights Agreement.
3.
<PAGE>
6. CONTINUATION OF EMPLOYMENT/RESTRICTIVE COVENANT. During the term of
Executive's employment and for a period of twelve (12) months immediately
following Executive's termination, Executive shall not without first obtaining
the prior written approval of the Company, directly or indirectly engage or
prepare to engage, in any activities in competition with the Company, or accept
employment or establish a business relationship with a business that directly
competes with the Company in providing high speed data transmission services in
a market in which the Company has at least one (1) operational DSLAM or at least
one (1) central office colocation under construction.
7. NONSOLICITATION. While employed by the Company, and for twelve (12)
months immediately following the Executive's termination of employment,
Executive agrees not to interfere with the business of the Company by
soliciting, attempting to solicit, inducing, or otherwise causing any employee
of the Company to terminate his or her employment in order to become an
employee, consultant or independent contractor to or for any competitor of the
Company.
8. GENERAL PROVISIONS.
8.1 NOTICES. Any notices provided hereunder must be in writing and
shall be deemed effective upon the earlier of personal delivery (including
personal delivery by telex) or the third day after mailing by first class mail,
to the Company at its primary office location and to Executive at his address as
listed on the Company's then current payroll records.
8.2 SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provisions had never been contained herein.
8.3 WAIVER. If either party should waive any breach of any provisions
of this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
8.4 COMPLETE AGREEMENT. This Agreement and EXHIBIT A hereto,
constitute the entire agreement between Executive and the Company and it is the
complete, final, and exclusive embodiment of their agreement with regard to this
subject matter. It is entered into without reliance on any promise or
representation other than those expressly contained herein, and it cannot be
modified or amended except in a writing signed by an officer of the Company.
8.5 COUNTERPARTS. This Agreement may be executed in separate
counterparts, any one of which need not contain signatures of more than one
party, but all of which taken together will constitute one and the same
Agreement.
8.6 HEADINGS. The headings of the sections hereof are inserted for
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
4.
<PAGE>
8.7 SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and
inure to the benefit of and be enforceable by Executive and the Company, and
their respective successors, assigns, heirs, executors and administrators,
except that Executive may not assign any of his duties hereunder and he may not
assign any of his rights hereunder without the written consent of the Company,
which shall not be withheld unreasonably.
8.8 ATTORNEY FEES. If either party hereto brings any action to
enforce his or its rights hereunder, the prevailing party in any such action
shall be entitled to recover his or its reasonable attorneys' fees and costs
incurred in connection with such action.
8.9 CHOICE OF LAW. All questions concerning the construction,
validity and interpretation of this Agreement will be governed by the law of the
State of Delaware.
8.10 SURVIVAL. The following provisions of this Agreement shall
survive the termination of Executive's employment and the assignment of this
Agreement by the Company to any successor in interest or other assignee:
Section 2; Section 3; Section 6; Section 7; and Section 8.
8.11 INJUNCTIVE RELIEF. Executive acknowledges that the restrictions
set forth in Sections 3, 4, 6 and 7 above are necessary to protect the Company's
confidential proprietary information and other legitimate business interests and
are reasonable in all respects, including duration, territory and scope of
activity restricted. Executive further acknowledges that the provisions of
Sections 3, 4, 6 and 7 hereof are essential to the Company, that the Company
would not enter into this Agreement if it did not include these provisions and
that damages sustained by the Company as a result of a breach of these
provisions cannot be adequately remedied by damages, and Executive agrees that
the Company, in addition to any other remedy it may have under this Agreement or
at law, shall be entitled to injunctive and other equitable relief to prevent or
curtail any breach of Sections 3, 4, 6 and 7 of this Agreement. Executive
agrees that the existence of any claim or cause of action by Executive against
the Company or its affiliates, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Company of
any of the provisions of Sections 3, 4, 6 and 7 hereof. Executive shall have no
right to enforce any of his rights under this Agreement by seeking or obtaining
injunctive or other equitable relief and acknowledges that damages are an
adequate remedy for any breach by the Company of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
5.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
JATO COMMUNICATIONS CORP.
By: /s/ Brian E. Gast
-------------------------------------
Brian E. Gast
President and Chief Executive Officer
By: /s/ Leonard Allsup
-------------------------------------
Leonard Allsup
6.
<PAGE>
EXHIBIT A
JATO COMMUNICATIONS CORP.
NON-COMPETITION PROPRIETARY INFORMATION
AND INVENTIONS AGREEMENT
<PAGE>
NON-COMPETITION, PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
As an employee of JATO Communications Corp., a Delaware corporation, its
subsidiaries or its affiliates (together, the "Company"), and as a condition
of my employment by the Company and in consideration of the compensation now
and hereafter paid to me, I agree to the following (the "Agreement"):
1. MAINTAINING CONFIDENTIAL INFORMATION
(a) COMPANY INFORMATION. I agree at all times during the term of
my employment and thereafter to hold in strictest confidence, and not to use,
except for the benefit of the Company, or to disclose to any person, firm or
corporation, without the written authorization of the Board of Directors of
the Company, any trade secrets, confidential knowledge, data or other
proprietary information of the Company. By way of illustration and not
limitation, this shall include information relating to products, processes,
know-how, methods, software, developmental work, improvements, discoveries,
plans for marketing and selling, business plans, budgets and unpublished
financial statements, licenses, prices and costs, suppliers and customers,
and information regarding the skills and compensation of other employees of
the Company. Notwithstanding the foregoing, confidential information shall
not include any information which:
(i) at the time of disclosure, or thereafter, is generally available to
and known by the public;
(ii) was or is available to me on a non-confidential basis from a source
other than the Company; or
(iii) has been independently acquired or developed by me without
violating any of my obligations under this Agreement, as shown by my
competent written records.
(b) THIRD PARTY INFORMATION. I recognize that the Company has
received and in the future will receive confidential or proprietary
information from third parties subject to a duty on the Company's part to
maintain the confidentiality of such information and, in some cases, to use
it only for certain limited purposes. I agree that I owe the Company and
such third parties, both during the term of my employment and thereafter, a
duty to hold all such confidential or proprietary information in the
strictest confidence and not to, except as is consistent with the Company's
agreement with the third party, disclose it to any person, firm or
corporation or use it for the benefit of anyone other than the Company or
such third party, unless expressly authorized to act otherwise by an officer
of the Company.
2. ASSIGNMENT OF INVENTIONS AND ORIGINAL WORKS.
I agree that I will make prompt written disclosure to the Company, will
hold in trust for the sole right and benefit of the Company, and hereby
assign to the Company all my right, title and interest in and to any ideas,
inventions, original works of authorship, developments, improvements or trade
secrets which I may solely or jointly conceive or reduce to practice, or
cause to be conceived or reduced to practice, during the period of my
employment with the Company and for one (1) year after my employment. This
Agreement will not be deemed to require assignment of any invention developed
entirely on my own time without using the Company's equipment, supplies,
facilities or trade secrets and neither related to the Company's actual or
anticipated business, research or development, nor resulted from work
performed by me for the Company.
3. NO CONFLICTS OR SOLICITATION
For the period of my employment by the Company and for one (1) year
following my termination, I will not interfere with the business of the
Company by (i) soliciting, attempting to solicit, inducing, or otherwise
causing any employee of the Company to terminate his or her employment in
order to become an employee, consultant or independent contractor to or for
any other entity engaged in marketing or selling the type of products and
services offered by the Company or (ii) directly soliciting the business of
any customer or client of the Company (other than on behalf of the Company)
for the type of products and services offered by the Company.
4. COVENANT NOT TO COMPETE.
(a) I agree that during my employment with the Company, I will not
directly or indirectly engage in (whether as an employee, consultant,
proprietor, partner, director or otherwise), or have any ownership interest
1
<PAGE>
in, or participate in the financing, operation, management or control of, any
person, firm, corporation or business that engages in a "Restricted Business"
in a "Restricted Territory" (as defined below). It is agreed that ownership
of (i) no more than ten percent (10%) of the outstanding voting stock of a
publicly traded corporation or (ii) any stock I presently own or (iii) any
options or other rights to acquire shares of a company's capital stock I
presently own shall not constitute a violation of this provision.
(b) As used herein, the terms:
(i) "Restricted Business" shall mean any competitive local exchange
carrier, high speed data communication services provider or any business
which otherwise engages in any other manner in any business which is
competitive with the Company.
(ii) "Restricted Territory" shall mean all regions within a fifty mile
radius of those cities in which the Company operates, or has disclosed to
you that it intends to operate, a business.
5. RETURN OF COMPANY DOCUMENTS
When I leave the employ of the Company, I will deliver to the Company
(and will not keep in my possession, recreate or deliver to anyone else) any
and all documents and other property, together with all copies thereof (in
whatever medium recorded) belonging to the Company, its successors or assigns
whether kept at the Company, home or elsewhere. I further agree that any
property situated on the Company's premises and owned by the Company,
including disks and other storage media, filing cabinets or other work areas,
is subject to inspection by Company personnel at any time with or without
notice.
6. LEGAL AND EQUITABLE REMEDIES
Because my services are personal and unique and because I may have access
to and become acquainted with the proprietary information of the Company, the
Company shall have the right to enforce this Agreement and any of its
provisions by injunction, specific performance or other equitable relief,
without bond and without prejudice to any other rights and remedies that the
Company may have for a breach of this Agreement.
7. NOT AN EMPLOYMENT CONTRACT. I agree and understand that nothing in
this Agreement shall confer any right with respect to continuation of my
employment by the Company, nor shall it interfere in any way with my right or
the Company's right to terminate my employment at a ny time, with or without
cause.
8. GENERAL PROVISIONS.
(a) GOVERNING LAW. This Agreement will be governed by and
construed according to the laws of the State of Colorado, excluding conflicts
of laws principles. I hereby expressly consent to the personal jurisdiction
of the state and federal courts located in Colorado for any lawsuit filed
there against me by the Company arising from or relating to this Agreement,
or such other location as the Company's principal executive office may then
be located.
(b) SEVERABILITY. If one or more of the provisions in this
Agreement are deemed unenforceable by law, then the remaining provisions will
continue in full force and effect. Moreover, if any restriction set forth in
Sections 3 or 4 hereof is found by any court of competent jurisdiction to be
unenforceable because it extends for too long a period of time or over too
great a range of activities or in too broad a geographic area, it shall be
interpreted to extend only over the maximum period of time, range of
activities or geographic area as to which it may be enforceable.
(c) BENEFIT; BINDING EFFECT. This Agreement will be binding upon
my heirs, executors, administrators and other legal representatives and will
be for the benefit of the Company, its successors and its assigns.
(d) SURVIVAL. The provisions of this Agreement shall survive the
termination of my employment and the assignment of this Agreement by the
Company to any successor in interest or other assignee.
2
<PAGE>
I UNDERSTAND THAT THIS AGREEMENT AFFECTS MY RIGHTS TO INVENTIONS I MAKE
DURING MY EMPLOYMENT, AND RESTRICTS MY RIGHT TO DISCLOSE OR USE THE COMPANY'S
PROPRIETARY INFORMATION DURING OR SUBSEQUENT TO MY EMPLOYMENT.
I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS.
Dated:
----------------------- ------------------------------
Name
Address
-----------------------
------------------------------
------------------------------
ACCEPTED AND AGREED TO:
JATO COMMUNICATIONS CORP.
By:
--------------------------
Name:
------------------------
Title:
-----------------------
3
<PAGE>
JATO COMMUNICATIONS CORP.
EMPLOYMENT AGREEMENT
FOR
BRUCE E. DINES
THIS EMPLOYMENT AGREEMENT ("AGREEMENT") is entered into as of the 16th
day of April, 1999, by and between BRUCE E. DINES ("EXECUTIVE") and JATO
COMMUNICATIONS CORP., a Delaware corporation (the "COMPANY").
WHEREAS, the Company desires to employ Executive to provide personal
services to the Company, and wishes to provide Executive with certain
compensation and benefits in return for his services; and
WHEREAS, Executive wishes to be employed by the Company and provide
personal services to the Company in return for certain compensation and
benefits;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, it is hereby agreed by and between the parties hereto as
follows:
1. EMPLOYMENT BY THE COMPANY.
1.1 TERM. Subject to terms set forth herein, for a period of two (2)
years the Company agrees to employ Executive in the position of Vice President,
Customer Operations and Executive hereby accepts such employment effective as of
the date first written above. This Agreement shall automatically renew on a
month-to-month basis unless either party gives thirty (30) days' prior written
notice to the other party. During the term of his employment with the Company,
Executive will devote his best efforts and substantially all of his business
time and attention (except for vacation periods and reasonable periods of
illness or other incapacities permitted by the Company's general employment
policies) to the business of the Company.
1.2 DUTIES. Executive shall serve in an executive capacity and shall
perform such duties as are customarily associated with his then existing
title(s), consistent with the Bylaws of the Company and as required by the
Company's Board of Directors or the Executive's supervisor (the "Board").
1.3 EMPLOYMENT RELATIONSHIP. The employment relationship between the
parties shall also be governed by the general employment policies and practices
of the Company, including those relating to protection of confidential
information and assignment of inventions, except that when the terms of this
Agreement differ from or are in conflict with the Company's general employment
policies or practices, this Agreement shall control.
1.
<PAGE>
2. COMPENSATION.
2.1 SALARY. Executive shall receive for services to be rendered
hereunder an annualized base salary of $150,000, payable on a semi-monthly
basis, which will be reviewed annually at the discretion of the Compensation
Committee of the Board of Directors. Executive's base salary shall be increased
annually by an amount equal to the greater of (i) 5% of Executive's base salary
and (ii) an amount determined by the Board of Directors.
2.2 DISCRETIONARY BONUS. Executive will be eligible for a
discretionary bonus, in an amount to be determined solely by the Compensation
Committee in its discretion, subject to the terms and conditions outlined in a
Company bonus plan, which may be established and in effect from time to time.
2.3 STANDARD COMPANY BENEFITS. Executive shall be entitled to all
rights and benefits for which he is eligible under the terms and conditions of
the standard Company benefits and compensation practices which may be in effect
from time to time and provided by the Company to its employees in comparable
positions (the "COMPANY BENEFITS").
2.4 ACCELERATION OF STOCK RIGHTS. In the event that the Company (i)
consummates an Acquisition or Asset Transfer, as those terms are defined in the
Company's Restated Certificate of Incorporation or (ii) materially reduces the
job responsibilities or base salary of the Executive, then the vesting of all
stock options held by Executive shall accelerate and all repurchase rights on
any stock of the Company held by Executive will be waived; PROVIDED, THAT,
Executive shall remain a party to, and subject to the provisions of, the
Investors' Rights Agreement, of even date herewith (the "INVESTORS' RIGHTS
AGREEMENT").
2.5 RELOCATION EXPENSES. The Company shall reimburse the following
expenses of Executive: (a) the amount of sales commission incurred as a result
of the sale of Executive's principal residence in Colorado Springs, Colorado in
an amount not to exceed six percent (6%) of the sales price on such residence,
plus a gross-up of forty percent (40%) to cover the taxes associated with such
payment and (b) moving costs in an amount not to exceed $6,000 in connection
with Executive's relocation from Colorado Springs, Colorado to the Denver metro
area.
3. PROPRIETARY INFORMATION OBLIGATIONS.
3.1 AGREEMENT. Executive agrees to continue to abide by Executive's
previously executed Non-competition, Proprietary Information and Inventions
Agreement attached hereto as EXHIBIT A.
3.2 REMEDIES. Executive's duties under the Proprietary Information
and Inventions Agreement shall survive termination of his employment with the
Company. Executive acknowledges that a remedy at law for any breach or
threatened breach by him of the provisions of the Proprietary Information and
Inventions Agreement would be inadequate, and he therefore agrees that the
Company shall be entitled to injunctive relief in case of any such breach or
threatened breach.
2.
<PAGE>
4. OUTSIDE ACTIVITIES. Except with the prior written consent of the
Company's Board, Executive will not, during the term of this Agreement,
undertake or engage in any other employment, occupation or business enterprise,
other than those in which Executive is a passive investor. Executive may engage
in civic and not-for-profit activities so long as such activities do not
materially interfere with the performance of his duties hereunder.
5. TERMINATION OF EMPLOYMENT.
(a) Either the Executive or the Company may terminate the employment
relationship at any time for any reason whatsoever, with thirty (30) days' prior
written notice by the Company and with thirty (30) days' prior written notice by
the Executive with or without Cause (as defined below) or advance notice. This
at-will employment relationship cannot be changed except in a writing approved
by the Board. If the Company terminates Executive's employment without Cause at
any time, Executive will receive as severance: (i) a lump sum payment equal to
one (1) year of base salary, less payroll deductions and required withholdings,
(ii) a lump sum payment of that portion of the bonus Executive is entitled to
for the calendar year pro-rated based upon the number of full months Executive
was employed during such year (iii) continuation of all Company Benefits for a
period of one (1) year and (iv) vesting of all stock options and waiver of all
repurchase rights on Executive stock in exchange for the execution of a release
of all claims against the Company; PROVIDED, THAT, in the event of termination
due to Disability, this subsection (iv) shall apply only with respect to 50% of
any unvested stock options held by Executive on the date of termination and with
respect to the waiver of repurchase rights of 50% of any unvested shares held by
Executive on the date of termination; PROVIDED, FURTHER, that Executive shall
remain a party to, and subject to the provisions of, the Investors' Rights
Agreement. If Executive resigns or if Executive's employment is terminated for
cause, all compensation and benefits will cease immediately, and Executive will
receive no severance benefits.
For purposes of this Agreement, "CAUSE" shall mean misconduct, including: (i)
conviction of any felony or any crime involving moral turpitude or dishonesty;
(ii) participation in a fraud or act of dishonesty against the Company; (iii)
willful breach of the Company's policies; (iv) intentional damage to the
Company's property; (v) material breach of this Agreement or Executive's
Proprietary Information and Inventions Agreement; (vi) a failure or refusal in a
material respect of Executive to follow the reasonable policies or directions of
the Company as specified by the Board of Directors after being provided with
notice of such failure and an opportunity to cure within seven (7) days of
receipt of such notice; or (vii) failure to carry out the duties of the
Executive's position after being provided with notice of such failure and an
opportunity to cure. Disability shall not constitute "Cause."
For purposes of this Agreement, "DISABILITY" shall mean a disability which
prevents Executive from substantially performing his duties under this Agreement
for a period of at least 90 consecutive days or 180 non-consecutive days within
any 365-day period.
(b) In the event of death, the Company shall pay to Executive any
earned but unpaid salary at the time of death and, at the time such amount would
otherwise have been due, a pro rata portion of a discretionary bonus, if any,
which may otherwise have been paid to Executive pursuant to Section 2.2 hereof
with respect to the annual period in which the death occurs.
3.
<PAGE>
Furthermore, Executive shall vest in 50% of any unvested stock options as of the
date of death and the Company shall waive its repurchase rights with respect to
50% of any unvested shares as of the date of death; PROVIDED, HOWEVER, that
Executive's estate, administrator or distributor shall become a party to, and be
subject to the provisions of, the Investors' Rights Agreement.
6. CONTINUATION OF EMPLOYMENT/RESTRICTIVE COVENANT. During the term of
Executive's employment and for a period of twelve (12) months immediately
following Executive's termination, Executive shall not without first obtaining
the prior written approval of the Company, directly or indirectly engage or
prepare to engage, in any activities in competition with the Company, or accept
employment or establish a business relationship with a business that directly
competes with the Company in providing high speed data transmission services in
a market in which the Company has at least one (1) operational DSLAM or at least
one (1) central office colocation under construction.
7. NONSOLICITATION. While employed by the Company, and for twelve (12)
months immediately following the Executive's termination of employment,
Executive agrees not to interfere with the business of the Company by
soliciting, attempting to solicit, inducing, or otherwise causing any employee
of the Company to terminate his or her employment in order to become an
employee, consultant or independent contractor to or for any competitor of the
Company.
8. GENERAL PROVISIONS.
8.1 NOTICES. Any notices provided hereunder must be in writing and
shall be deemed effective upon the earlier of personal delivery (including
personal delivery by telex) or the third day after mailing by first class mail,
to the Company at its primary office location and to Executive at his address as
listed on the Company's then current payroll records.
8.2 SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provisions had never been contained herein.
8.3 WAIVER. If either party should waive any breach of any provisions
of this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
8.4 COMPLETE AGREEMENT. This Agreement and EXHIBIT A hereto,
constitute the entire agreement between Executive and the Company and it is the
complete, final, and exclusive embodiment of their agreement with regard to this
subject matter. It is entered into without reliance on any promise or
representation other than those expressly contained herein, and it cannot be
modified or amended except in a writing signed by an officer of the Company.
4.
<PAGE>
8.5 COUNTERPARTS. This Agreement may be executed in separate
counterparts, any one of which need not contain signatures of more than one
party, but all of which taken together will constitute one and the same
Agreement.
8.6 HEADINGS. The headings of the sections hereof are inserted for
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
8.7 SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and
inure to the benefit of and be enforceable by Executive and the Company, and
their respective successors, assigns, heirs, executors and administrators,
except that Executive may not assign any of his duties hereunder and he may not
assign any of his rights hereunder without the written consent of the Company,
which shall not be withheld unreasonably.
8.8 ATTORNEY FEES. If either party hereto brings any action to
enforce his or its rights hereunder, the prevailing party in any such action
shall be entitled to recover his or its reasonable attorneys' fees and costs
incurred in connection with such action.
8.9 CHOICE OF LAW. All questions concerning the construction,
validity and interpretation of this Agreement will be governed by the law of the
State of Delaware.
8.10 SURVIVAL. The following provisions of this Agreement shall
survive the termination of Executive's employment and the assignment of this
Agreement by the Company to any successor in interest or other assignee:
Section 2; Section 3; Section 6; Section 7; and Section 8.
8.11 INJUNCTIVE RELIEF. Executive acknowledges that the restrictions
set forth in Sections 3, 4, 6 and 7 above are necessary to protect the Company's
confidential proprietary information and other legitimate business interests and
are reasonable in all respects, including duration, territory and scope of
activity restricted. Executive further acknowledges that the provisions of
Sections 3, 4, 6 and 7 hereof are essential to the Company, that the Company
would not enter into this Agreement if it did not include these provisions and
that damages sustained by the Company as a result of a breach of these
provisions cannot be adequately remedied by damages, and Executive agrees that
the Company, in addition to any other remedy it may have under this Agreement or
at law, shall be entitled to injunctive and other equitable relief to prevent or
curtail any breach of Sections 3, 4, 6 and 7 of this Agreement. Executive
agrees that the existence of any claim or cause of action by Executive against
the Company or its affiliates, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Company of
any of the provisions of Sections 3, 4, 6 and 7 hereof. Executive shall have no
right to enforce any of his rights under this Agreement by seeking or obtaining
injunctive or other equitable relief and acknowledges that damages are an
adequate remedy for any breach by the Company of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
5.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
JATO COMMUNICATIONS CORP.
By: /s/ Brian E. Gast
----------------------------------
Brian E. Gast
President and Chief Executive Officer
By: /s/ Bruce E. Dines
----------------------------------
Bruce E. Dines
6.
<PAGE>
EXHIBIT A
JATO COMMUNICATIONS CORP.
NON-COMPETITION PROPRIETARY INFORMATION
AND INVENTIONS AGREEMENT
<PAGE>
NON-COMPETITION, PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
As an employee of JATO Communications Corp., a Delaware corporation, its
subsidiaries or its affiliates (together, the "Company"), and as a condition
of my employment by the Company and in consideration of the compensation now
and hereafter paid to me, I agree to the following (the "Agreement"):
1. MAINTAINING CONFIDENTIAL INFORMATION
(a) COMPANY INFORMATION. I agree at all times during the term of
my employment and thereafter to hold in strictest confidence, and not to use,
except for the benefit of the Company, or to disclose to any person, firm or
corporation, without the written authorization of the Board of Directors of
the Company, any trade secrets, confidential knowledge, data or other
proprietary information of the Company. By way of illustration and not
limitation, this shall include information relating to products, processes,
know-how, methods, software, developmental work, improvements, discoveries,
plans for marketing and selling, business plans, budgets and unpublished
financial statements, licenses, prices and costs, suppliers and customers,
and information regarding the skills and compensation of other employees of
the Company. Notwithstanding the foregoing, confidential information shall
not include any information which:
(i) at the time of disclosure, or thereafter, is generally available to
and known by the public;
(ii) was or is available to me on a non-confidential basis from a source
other than the Company; or
(iii) has been independently acquired or developed by me without
violating any of my obligations under this Agreement, as shown by my
competent written records.
(b) THIRD PARTY INFORMATION. I recognize that the Company has
received and in the future will receive confidential or proprietary
information from third parties subject to a duty on the Company's part to
maintain the confidentiality of such information and, in some cases, to use
it only for certain limited purposes. I agree that I owe the Company and
such third parties, both during the term of my employment and thereafter, a
duty to hold all such confidential or proprietary information in the
strictest confidence and not to, except as is consistent with the Company's
agreement with the third party, disclose it to any person, firm or
corporation or use it for the benefit of anyone other than the Company or
such third party, unless expressly authorized to act otherwise by an officer
of the Company.
2. ASSIGNMENT OF INVENTIONS AND ORIGINAL WORKS.
I agree that I will make prompt written disclosure to the Company, will
hold in trust for the sole right and benefit of the Company, and hereby
assign to the Company all my right, title and interest in and to any ideas,
inventions, original works of authorship, developments, improvements or trade
secrets which I may solely or jointly conceive or reduce to practice, or
cause to be conceived or reduced to practice, during the period of my
employment with the Company and for one (1) year after my employment. This
Agreement will not be deemed to require assignment of any invention developed
entirely on my own time without using the Company's equipment, supplies,
facilities or trade secrets and neither related to the Company's actual or
anticipated business, research or development, nor resulted from work
performed by me for the Company.
3. NO CONFLICTS OR SOLICITATION
For the period of my employment by the Company and for one (1) year
following my termination, I will not interfere with the business of the
Company by (i) soliciting, attempting to solicit, inducing, or otherwise
causing any employee of the Company to terminate his or her employment in
order to become an employee, consultant or independent contractor to or for
any other entity engaged in marketing or selling the type of products and
services offered by the Company or (ii) directly soliciting the business of
any customer or client of the Company (other than on behalf of the Company)
for the type of products and services offered by the Company.
4. COVENANT NOT TO COMPETE.
(a) I agree that during my employment with the Company, I will not
directly or indirectly engage in (whether as an employee, consultant,
proprietor, partner, director or otherwise), or have any ownership interest
1
<PAGE>
in, or participate in the financing, operation, management or control of, any
person, firm, corporation or business that engages in a "Restricted Business"
in a "Restricted Territory" (as defined below). It is agreed that ownership
of (i) no more than ten percent (10%) of the outstanding voting stock of a
publicly traded corporation or (ii) any stock I presently own or (iii) any
options or other rights to acquire shares of a company's capital stock I
presently own shall not constitute a violation of this provision.
(b) As used herein, the terms:
(i) "Restricted Business" shall mean any competitive local exchange
carrier, high speed data communication services provider or any business
which otherwise engages in any other manner in any business which is
competitive with the Company.
(ii) "Restricted Territory" shall mean all regions within a fifty mile
radius of those cities in which the Company operates, or has disclosed to
you that it intends to operate, a business.
5. RETURN OF COMPANY DOCUMENTS
When I leave the employ of the Company, I will deliver to the Company
(and will not keep in my possession, recreate or deliver to anyone else) any
and all documents and other property, together with all copies thereof (in
whatever medium recorded) belonging to the Company, its successors or assigns
whether kept at the Company, home or elsewhere. I further agree that any
property situated on the Company's premises and owned by the Company,
including disks and other storage media, filing cabinets or other work areas,
is subject to inspection by Company personnel at any time with or without
notice.
6. LEGAL AND EQUITABLE REMEDIES
Because my services are personal and unique and because I may have access
to and become acquainted with the proprietary information of the Company, the
Company shall have the right to enforce this Agreement and any of its
provisions by injunction, specific performance or other equitable relief,
without bond and without prejudice to any other rights and remedies that the
Company may have for a breach of this Agreement.
7. NOT AN EMPLOYMENT CONTRACT. I agree and understand that nothing in
this Agreement shall confer any right with respect to continuation of my
employment by the Company, nor shall it interfere in any way with my right or
the Company's right to terminate my employment at a ny time, with or without
cause.
8. GENERAL PROVISIONS.
(a) GOVERNING LAW. This Agreement will be governed by and
construed according to the laws of the State of Colorado, excluding conflicts
of laws principles. I hereby expressly consent to the personal jurisdiction
of the state and federal courts located in Colorado for any lawsuit filed
there against me by the Company arising from or relating to this Agreement,
or such other location as the Company's principal executive office may then
be located.
(b) SEVERABILITY. If one or more of the provisions in this
Agreement are deemed unenforceable by law, then the remaining provisions will
continue in full force and effect. Moreover, if any restriction set forth in
Sections 3 or 4 hereof is found by any court of competent jurisdiction to be
unenforceable because it extends for too long a period of time or over too
great a range of activities or in too broad a geographic area, it shall be
interpreted to extend only over the maximum period of time, range of
activities or geographic area as to which it may be enforceable.
(c) BENEFIT; BINDING EFFECT. This Agreement will be binding upon
my heirs, executors, administrators and other legal representatives and will
be for the benefit of the Company, its successors and its assigns.
(d) SURVIVAL. The provisions of this Agreement shall survive the
termination of my employment and the assignment of this Agreement by the
Company to any successor in interest or other assignee.
2
<PAGE>
I UNDERSTAND THAT THIS AGREEMENT AFFECTS MY RIGHTS TO INVENTIONS I MAKE
DURING MY EMPLOYMENT, AND RESTRICTS MY RIGHT TO DISCLOSE OR USE THE COMPANY'S
PROPRIETARY INFORMATION DURING OR SUBSEQUENT TO MY EMPLOYMENT.
I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS.
Dated:
----------------------- ------------------------------
Name
Address
-----------------------
------------------------------
------------------------------
ACCEPTED AND AGREED TO:
JATO COMMUNICATIONS CORP.
By:
--------------------------
Name:
------------------------
Title:
-----------------------
3
<PAGE>
JATO COMMUNICATIONS CORP.
EMPLOYMENT AGREEMENT
FOR
PATRICK GREEN
THIS EMPLOYMENT AGREEMENT ("AGREEMENT") is entered into as of the 16th
day of April, 1999, by and between PATRICK GREEN ("EXECUTIVE") and JATO
COMMUNICATIONS CORP., a Delaware corporation (the "COMPANY").
WHEREAS, the Company desires to employ Executive to provide personal
services to the Company, and wishes to provide Executive with certain
compensation and benefits in return for his services; and
WHEREAS, Executive wishes to be employed by the Company and provide
personal services to the Company in return for certain compensation and
benefits;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, it is hereby agreed by and between the parties hereto as
follows:
1. EMPLOYMENT BY THE COMPANY.
1.1 TERM. Subject to terms set forth herein, for a period of one (1)
year the Company agrees to employ Executive in the position of Vice President,
Carrier Relations and Executive hereby accepts such employment effective as of
the date first written above. This Agreement shall automatically renew on a
month-to-month basis unless either party gives thirty (30) days' prior written
notice to the other party. During the term of his employment with the Company,
Executive will devote his best efforts and substantially all of his business
time and attention (except for vacation periods and reasonable periods of
illness or other incapacities permitted by the Company's general employment
policies) to the business of the Company.
1.2 DUTIES. Executive shall serve in an executive capacity and shall
perform such duties as are customarily associated with his then existing
title(s), consistent with the Bylaws of the Company and as required by the
Company's Board of Directors or the Executive's supervisor (the "BOARD").
1.3 EMPLOYMENT RELATIONSHIP. The employment relationship between the
parties shall also be governed by the general employment policies and practices
of the Company, including those relating to protection of confidential
information and assignment of inventions, except that when the terms of this
Agreement differ from or are in conflict with the Company's general employment
policies or practices, this Agreement shall control.
2. COMPENSATION.
2.1 SALARY. Executive shall receive for services to be rendered
hereunder an annualized base salary of $150,000, payable on a semi-monthly
basis, which will be reviewed
1.
<PAGE>
annually at the discretion of the Compensation Committee of the Board of
Directors. Executive's base salary shall be increased annually by an amount
equal to the greater of (i) 5% of Executive's base salary and (ii) an amount
determined by the Board of Directors.
2.2 DISCRETIONARY BONUS. Executive will be eligible for a
discretionary bonus, in an amount to be determined solely by the Compensation
Committee in its discretion, subject to the terms and conditions outlined in a
Company bonus plan, which may be established and in effect from time to time.
2.3 STANDARD COMPANY BENEFITS. Executive shall be entitled to all
rights and benefits for which he is eligible under the terms and conditions of
the standard Company benefits and compensation practices which may be in effect
from time to time and provided by the Company to its employees in comparable
positions.
2.4 ACCELERATION OF STOCK RIGHTS. In the event that the Company
consummates an Acquisition or Asset Transfer, as those terms are defined in the
Company's Restated Certificate of Incorporation, then the vesting of all stock
options held by Executive shall accelerate and all repurchase rights on any
stock of the Company held by Executive will be waived; PROVIDED, THAT, Executive
shall remain a party to, and subject to the provisions of, the Stockholders'
Agreement, of even date herewith (the "STOCKHOLDERS' AGREEMENT").
3. PROPRIETARY INFORMATION OBLIGATIONS.
3.1 AGREEMENT. Executive agrees to continue to abide by Executive's
previously executed Non-competition, Proprietary Information and Inventions
Agreement attached hereto as EXHIBIT A.
3.2 REMEDIES. Executive's duties under the Proprietary Information
and Inventions Agreement shall survive termination of his employment with the
Company. Executive acknowledges that a remedy at law for any breach or
threatened breach by him of the provisions of the Non-competition Proprietary
Information and Inventions Agreement would be inadequate, and he therefore
agrees that the Company shall be entitled to injunctive relief in case of any
such breach or threatened breach.
4. OUTSIDE ACTIVITIES. Except with the prior written consent of the
Company's Board, Executive will not, during the term of this Agreement,
undertake or engage in any other employment, occupation or business enterprise,
other than those in which Executive is a passive investor. Executive may engage
in civic and not-for-profit activities so long as such activities do not
materially interfere with the performance of his duties hereunder.
5. TERMINATION OF EMPLOYMENT.
(a) Either the Executive or the Company may terminate the employment
relationship at any time for any reason whatsoever, with thirty (30) days' prior
written notice by the Company and with thirty (30) days' prior written notice by
the Executive with or without Cause (as defined below) or advance notice. This
at-will employment relationship cannot be changed except in a writing approved
by the Board. If the Company terminates Executive's employment without Cause at
any time, Executive will receive as severance: (i) twelve (12) months of base
2.
<PAGE>
salary, less payroll deductions and required withholdings, payable in accordance
with the standard pay schedule of the Company, and (ii) a lump sum payment of
that portion of the bonus Executive is entitled to for the calendar year
pro-rated based upon the number of full months Executive was employed during
such year in exchange for the execution of a release of all claims against the
Company. If Executive resigns or if Executive's employment is terminated for
cause, all compensation and benefits will cease immediately, and Executive will
receive no severance benefits.
For purpose of this Agreement, "CAUSE" shall mean misconduct, including: (i)
conviction of any felony or any crime involving moral turpitude or dishonesty;
(ii) participation in a fraud or act of dishonesty against the Company; (iii)
willful breach of the Company's policies; (iv) intentional damage to the
Company's property; (v) material breach of this Agreement or Executive's
Proprietary Information and Inventions Agreement; (vi) a failure or refusal in a
material respect of Executive to follow the reasonable policies or directions of
the Company as specified by the Board of Directors after being provided with
notice of such failure and an opportunity to cure; or (vii) failure to carry out
the duties of the Executive's position after being provided with notice of such
failure and an opportunity to cure within seven (7) days of receipt of such
notice. Physical or mental disability shall not constitute "Cause."
(b) In the event of death, the Company shall pay to Executive any
earned but unpaid salary at the time of death and, at the time such amount would
otherwise have been due, a pro rata portion of a discretionary bonus, if any,
which may otherwise have been paid to Executive pursuant to Section 2.2 hereof
with respect to the annual period in which the death occurs. Furthermore,
Executive shall vest in 50% of any unvested stock options as of the date of
death and the Company shall waive its repurchase rights with respect to 50% of
any unvested shares as of the date of death; PROVIDED, HOWEVER, that Executive's
estate, administrator or distributor shall become a party to, and be subject to
the provisions of, the Stockholders' Agreement.
6. CONTINUATION OF EMPLOYMENT/RESTRICTIVE COVENANT. During the term of
Executive's employment and for a period of twelve (12) months immediately
following Executive's termination, Executive shall not without first obtaining
the prior written approval of the Company, directly or indirectly engage or
prepare to engage, in any activities in competition with the Company, or accept
employment or establish a business relationship with a business that directly
competes with the Company in providing high speed data transmission services in
a market in which the Company has at least one (1) operational DSLAM or at least
one (1) central office colocation under construction.
7. NONSOLICITATION. While employed by the Company, and for twelve (12)
months immediately following the Executive's termination of employment,
Executive agrees not to interfere with the business of the Company by
soliciting, attempting to solicit, inducing, or otherwise causing any employee
of the Company to terminate his or her employment in order to become an
employee, consultant or independent contractor to or for any competitor of the
Company.
3.
<PAGE>
8. GENERAL PROVISIONS.
8.1 NOTICES. Any notices provided hereunder must be in writing and
shall be deemed effective upon the earlier of personal delivery (including
personal delivery by telex) or the third day after mailing by first class mail,
to the Company at its primary office location and to Executive at his address as
listed on the Company's then current payroll records.
8.2 SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provisions had never been contained herein.
8.3 WAIVER. If either party should waive any breach of any provisions
of this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
8.4 COMPLETE AGREEMENT. This Agreement and EXHIBIT A hereto,
constitute the entire agreement between Executive and the Company and it is the
complete, final, and exclusive embodiment of their agreement with regard to this
subject matter. It is entered into without reliance on any promise or
representation other than those expressly contained herein, and it cannot be
modified or amended except in a writing signed by an officer of the Company.
8.5 COUNTERPARTS. This Agreement may be executed in separate
counterparts, any one of which need not contain signatures of more than one
party, but all of which taken together will constitute one and the same
Agreement.
8.6 HEADINGS. The headings of the sections hereof are inserted for
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
8.7 SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and
inure to the benefit of and be enforceable by Executive and the Company, and
their respective successors, assigns, heirs, executors and administrators,
except that Executive may not assign any of his duties hereunder and he may not
assign any of his rights hereunder without the written consent of the Company,
which shall not be withheld unreasonably.
8.8 ATTORNEY FEES. If either party hereto brings any action to
enforce his or its rights hereunder, the prevailing party in any such action
shall be entitled to recover his or its reasonable attorneys' fees and costs
incurred in connection with such action.
8.9 CHOICE OF LAW. All questions concerning the construction,
validity and interpretation of this Agreement will be governed by the law of the
State of Delaware.
8.10 SURVIVAL. The following provisions of this Agreement shall
survive the termination of Executive's employment and the assignment of this
Agreement by the Company
4.
<PAGE>
to any successor in interest or other assignee: Section 2; Section 3; Section 6;
Section 7; and Section 8.
8.11 INJUNCTIVE RELIEF. Executive acknowledges that the restrictions
set forth in Sections 3, 4, 6 and 7 above are necessary to protect the Company's
confidential proprietary information and other legitimate business interests and
are reasonable in all respects, including duration, territory and scope of
activity restricted. Executive further acknowledges that the provisions of
Sections 3, 4, 6 and 7 hereof are essential to the Company, that the Company
would not enter into this Agreement if it did not include these provisions and
that damages sustained by the Company as a result of a breach of these
provisions cannot be adequately remedied by damages, and Executive agrees that
the Company, in addition to any other remedy it may have under this Agreement or
at law, shall be entitled to injunctive and other equitable relief to prevent or
curtail any breach of Sections 3, 4, 6 and 7 of this Agreement. Executive
agrees that the existence of any claim or cause of action by Executive against
the Company or its affiliates, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Company of
any of the provisions of Sections 3, 4, 6 and 7 hereof. Executive shall have no
right to enforce any of his rights under this Agreement by seeking or obtaining
injunctive or other equitable relief and acknowledges that damages are an
adequate remedy for any breach by the Company of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
5.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
JATO COMMUNICATIONS CORP.
By: /s/ Brian E. Gast
-------------------------------------
Brian E. Gast
President and Chief Executive Officer
By: /s/ Patrick Green
-------------------------------------
Patrick Green
6.
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EXHIBIT A
JATO COMMUNICATIONS CORP.
NON-COMPETITION PROPRIETARY INFORMATION
AND INVENTIONS AGREEMENT
<PAGE>
NON-COMPETITION, PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
As an employee of JATO Communications Corp., a Delaware corporation, its
subsidiaries or its affiliates (together, the "Company"), and as a condition
of my employment by the Company and in consideration of the compensation now
and hereafter paid to me, I agree to the following (the "Agreement"):
1. MAINTAINING CONFIDENTIAL INFORMATION
(a) COMPANY INFORMATION. I agree at all times during the term of
my employment and thereafter to hold in strictest confidence, and not to use,
except for the benefit of the Company, or to disclose to any person, firm or
corporation, without the written authorization of the Board of Directors of
the Company, any trade secrets, confidential knowledge, data or other
proprietary information of the Company. By way of illustration and not
limitation, this shall include information relating to products, processes,
know-how, methods, software, developmental work, improvements, discoveries,
plans for marketing and selling, business plans, budgets and unpublished
financial statements, licenses, prices and costs, suppliers and customers,
and information regarding the skills and compensation of other employees of
the Company. Notwithstanding the foregoing, confidential information shall
not include any information which:
(i) at the time of disclosure, or thereafter, is generally available to
and known by the public;
(ii) was or is available to me on a non-confidential basis from a source
other than the Company; or
(iii) has been independently acquired or developed by me without
violating any of my obligations under this Agreement, as shown by my
competent written records.
(b) THIRD PARTY INFORMATION. I recognize that the Company has
received and in the future will receive confidential or proprietary
information from third parties subject to a duty on the Company's part to
maintain the confidentiality of such information and, in some cases, to use
it only for certain limited purposes. I agree that I owe the Company and
such third parties, both during the term of my employment and thereafter, a
duty to hold all such confidential or proprietary information in the
strictest confidence and not to, except as is consistent with the Company's
agreement with the third party, disclose it to any person, firm or
corporation or use it for the benefit of anyone other than the Company or
such third party, unless expressly authorized to act otherwise by an officer
of the Company.
2. ASSIGNMENT OF INVENTIONS AND ORIGINAL WORKS.
I agree that I will make prompt written disclosure to the Company, will
hold in trust for the sole right and benefit of the Company, and hereby
assign to the Company all my right, title and interest in and to any ideas,
inventions, original works of authorship, developments, improvements or trade
secrets which I may solely or jointly conceive or reduce to practice, or
cause to be conceived or reduced to practice, during the period of my
employment with the Company and for one (1) year after my employment. This
Agreement will not be deemed to require assignment of any invention developed
entirely on my own time without using the Company's equipment, supplies,
facilities or trade secrets and neither related to the Company's actual or
anticipated business, research or development, nor resulted from work
performed by me for the Company.
3. NO CONFLICTS OR SOLICITATION
For the period of my employment by the Company and for one (1) year
following my termination, I will not interfere with the business of the
Company by (i) soliciting, attempting to solicit, inducing, or otherwise
causing any employee of the Company to terminate his or her employment in
order to become an employee, consultant or independent contractor to or for
any other entity engaged in marketing or selling the type of products and
services offered by the Company or (ii) directly soliciting the business of
any customer or client of the Company (other than on behalf of the Company)
for the type of products and services offered by the Company.
4. COVENANT NOT TO COMPETE.
(a) I agree that during my employment with the Company, I will not
directly or indirectly engage in (whether as an employee, consultant,
proprietor, partner, director or otherwise), or have any ownership interest
1
<PAGE>
in, or participate in the financing, operation, management or control of, any
person, firm, corporation or business that engages in a "Restricted Business"
in a "Restricted Territory" (as defined below). It is agreed that ownership
of (i) no more than ten percent (10%) of the outstanding voting stock of a
publicly traded corporation or (ii) any stock I presently own or (iii) any
options or other rights to acquire shares of a company's capital stock I
presently own shall not constitute a violation of this provision.
(b) As used herein, the terms:
(i) "Restricted Business" shall mean any competitive local exchange
carrier, high speed data communication services provider or any business
which otherwise engages in any other manner in any business which is
competitive with the Company.
(ii) "Restricted Territory" shall mean all regions within a fifty mile
radius of those cities in which the Company operates, or has disclosed to
you that it intends to operate, a business.
5. RETURN OF COMPANY DOCUMENTS
When I leave the employ of the Company, I will deliver to the Company
(and will not keep in my possession, recreate or deliver to anyone else) any
and all documents and other property, together with all copies thereof (in
whatever medium recorded) belonging to the Company, its successors or assigns
whether kept at the Company, home or elsewhere. I further agree that any
property situated on the Company's premises and owned by the Company,
including disks and other storage media, filing cabinets or other work areas,
is subject to inspection by Company personnel at any time with or without
notice.
6. LEGAL AND EQUITABLE REMEDIES
Because my services are personal and unique and because I may have access
to and become acquainted with the proprietary information of the Company, the
Company shall have the right to enforce this Agreement and any of its
provisions by injunction, specific performance or other equitable relief,
without bond and without prejudice to any other rights and remedies that the
Company may have for a breach of this Agreement.
7. NOT AN EMPLOYMENT CONTRACT. I agree and understand that nothing in
this Agreement shall confer any right with respect to continuation of my
employment by the Company, nor shall it interfere in any way with my right or
the Company's right to terminate my employment at a ny time, with or without
cause.
8. GENERAL PROVISIONS.
(a) GOVERNING LAW. This Agreement will be governed by and
construed according to the laws of the State of Colorado, excluding conflicts
of laws principles. I hereby expressly consent to the personal jurisdiction
of the state and federal courts located in Colorado for any lawsuit filed
there against me by the Company arising from or relating to this Agreement,
or such other location as the Company's principal executive office may then
be located.
(b) SEVERABILITY. If one or more of the provisions in this
Agreement are deemed unenforceable by law, then the remaining provisions will
continue in full force and effect. Moreover, if any restriction set forth in
Sections 3 or 4 hereof is found by any court of competent jurisdiction to be
unenforceable because it extends for too long a period of time or over too
great a range of activities or in too broad a geographic area, it shall be
interpreted to extend only over the maximum period of time, range of
activities or geographic area as to which it may be enforceable.
(c) BENEFIT; BINDING EFFECT. This Agreement will be binding upon
my heirs, executors, administrators and other legal representatives and will
be for the benefit of the Company, its successors and its assigns.
(d) SURVIVAL. The provisions of this Agreement shall survive the
termination of my employment and the assignment of this Agreement by the
Company to any successor in interest or other assignee.
2
<PAGE>
I UNDERSTAND THAT THIS AGREEMENT AFFECTS MY RIGHTS TO INVENTIONS I MAKE
DURING MY EMPLOYMENT, AND RESTRICTS MY RIGHT TO DISCLOSE OR USE THE COMPANY'S
PROPRIETARY INFORMATION DURING OR SUBSEQUENT TO MY EMPLOYMENT.
I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS.
Dated:
----------------------- ------------------------------
Name
Address
-----------------------
------------------------------
------------------------------
ACCEPTED AND AGREED TO:
JATO COMMUNICATIONS CORP.
By:
--------------------------
Name:
------------------------
Title:
-----------------------
3
<PAGE>
JATO COMMUNICATIONS CORP.
EMPLOYMENT AGREEMENT
FOR
REX A. HUMSTON
THIS EMPLOYMENT AGREEMENT ("AGREEMENT") is entered into as of the 16th
day of April, 1999, by and between REX A. HUMSTON ("EXECUTIVE") and JATO
COMMUNICATIONS CORP., a Delaware corporation (the "COMPANY").
WHEREAS, the Company desires to employ Executive to provide personal
services to the Company, and wishes to provide Executive with certain
compensation and benefits in return for his services; and
WHEREAS, Executive wishes to be employed by the Company and provide
personal services to the Company in return for certain compensation and
benefits;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, it is hereby agreed by and between the parties hereto as
follows:
1. EMPLOYMENT BY THE COMPANY.
1.1 TERM. Subject to terms set forth herein, for a period of one (1)
year the Company agrees to employ Executive in the position of Vice President
and Chief Technology Officer and Executive hereby accepts such employment
effective as of the date first written above. This Agreement shall
automatically renew on a month-to-month basis unless either party gives thirty
(30) days' prior written notice to the other party. During the term of his
employment with the Company, Executive will devote his best efforts and
substantially all of his business time and attention (except for vacation
periods and reasonable periods of illness or other incapacities permitted by the
Company's general employment policies) to the business of the Company.
1.2 DUTIES. Executive shall serve in an executive capacity and shall
perform such duties as are customarily associated with his then existing
title(s), consistent with the Bylaws of the Company and as required by the
Company's Board of Directors or the Executive's supervisor (the "BOARD").
1.3 EMPLOYMENT RELATIONSHIP. The employment relationship between the
parties shall also be governed by the general employment policies and practices
of the Company, including those relating to protection of confidential
information and assignment of inventions, except that when the terms of this
Agreement differ from or are in conflict with the Company's general employment
policies or practices, this Agreement shall control.
2. COMPENSATION.
2.1 SALARY. Executive shall receive for services to be rendered
hereunder an annualized base salary of $150,000, payable on a semi-monthly
basis, which will be reviewed
1.
<PAGE>
annually at the discretion of the Compensation Committee of the Board of
Directors. Executive's base salary shall be increased annually by an amount
equal to the greater of (i) 5% of Executive's base salary and (ii) an amount
determined by the Board of Directors.
2.2 DISCRETIONARY BONUS. Executive will be eligible for a
discretionary bonus, in an amount to be determined solely by the Compensation
Committee in its discretion, subject to the terms and conditions outlined in a
Company bonus plan, which may be established and in effect from time to time.
2.3 STANDARD COMPANY BENEFITS. Executive shall be entitled to all
rights and benefits for which he is eligible under the terms and conditions of
the standard Company benefits and compensation practices which may be in effect
from time to time and provided by the Company to its employees in comparable
positions.
2.4 ACCELERATION OF STOCK RIGHTS. In the event that the Company
consummates an Acquisition or Asset Transfer, as those terms are defined in the
Company's Restated Certificate of Incorporation, then the vesting of all stock
options held by Executive shall accelerate and all repurchase rights on any
stock of the Company held by Executive will be waived; PROVIDED, THAT, Executive
shall remain a party to, and subject to the provisions of, the Stockholders'
Agreement, of even date herewith (the "STOCKHOLDERS' AGREEMENT").
3. PROPRIETARY INFORMATION OBLIGATIONS.
3.1 AGREEMENT. Executive agrees to continue to abide by Executive's
previously executed Non-competition, Proprietary Information and Inventions
Agreement attached hereto as EXHIBIT A.
3.2 REMEDIES. Executive's duties under the Proprietary Information
and Inventions Agreement shall survive termination of his employment with the
Company. Executive acknowledges that a remedy at law for any breach or
threatened breach by him of the provisions of the Non-competition Proprietary
Information and Inventions Agreement would be inadequate, and he therefore
agrees that the Company shall be entitled to injunctive relief in case of any
such breach or threatened breach.
4. OUTSIDE ACTIVITIES. Except with the prior written consent of the
Company's Board, Executive will not, during the term of this Agreement,
undertake or engage in any other employment, occupation or business enterprise,
other than those in which Executive is a passive investor. Executive may engage
in civic and not-for-profit activities so long as such activities do not
materially interfere with the performance of his duties hereunder.
5. TERMINATION OF EMPLOYMENT.
(a) Either the Executive or the Company may terminate the employment
relationship at any time for any reason whatsoever, with thirty (30) days' prior
written notice by the Company and with thirty (30) days' prior written notice by
the Executive with or without Cause (as defined below) or advance notice. This
at-will employment relationship cannot be changed except in a writing approved
by the Board. If the Company terminates Executive's employment without Cause at
any time, Executive will receive as severance: (i) twelve (12) months of base
2.
<PAGE>
salary, less payroll deductions and required withholdings, payable in accordance
with the standard pay schedule of the Company, and (ii) a lump sum payment of
that portion of the bonus Executive is entitled to for the calendar year
pro-rated based upon the number of full months Executive was employed during
such year in exchange for the execution of a release of all claims against the
Company. If Executive resigns or if Executive's employment is terminated for
cause, all compensation and benefits will cease immediately, and Executive will
receive no severance benefits.
For purpose of this Agreement, "CAUSE" shall mean misconduct, including: (i)
conviction of any felony or any crime involving moral turpitude or dishonesty;
(ii) participation in a fraud or act of dishonesty against the Company; (iii)
willful breach of the Company's policies; (iv) intentional damage to the
Company's property; (v) material breach of this Agreement or Executive's
Proprietary Information and Inventions Agreement; (vi) a failure or refusal in a
material respect of Executive to follow the reasonable policies or directions of
the Company as specified by the Board of Directors after being provided with
notice of such failure and an opportunity to cure within seven (7) days of
receipt of such notice; or (vii) failure to carry out the duties of the
Executive's position after being provided with notice of such failure and an
opportunity to cure. Physical or mental disability shall not constitute
"Cause."
(b) In the event of death, the Company shall pay to Executive any
earned but unpaid salary at the time of death and, at the time such amount would
otherwise have been due, a pro rata portion of a discretionary bonus, if any,
which may otherwise have been paid to Executive pursuant to Section 2.2 hereof
with respect to the annual period in which the death occurs. Furthermore,
Executive shall vest in 50% of any unvested stock options as of the date of
death and the Company shall waive its repurchase rights with respect to 50% of
any unvested shares as of the date of death; PROVIDED, HOWEVER, that Executive's
estate, administrator or distributor shall become a party to, and be subject to
the provisions of, the Stockholders' Agreement.
6. CONTINUATION OF EMPLOYMENT/RESTRICTIVE COVENANT. During the term of
Executive's employment and for a period of twelve (12) months immediately
following Executive's termination, Executive shall not without first obtaining
the prior written approval of the Company, directly or indirectly engage or
prepare to engage, in any activities in competition with the Company, or accept
employment or establish a business relationship with a business that directly
competes with the Company in providing high speed data transmission services in
a market in which the Company has at least one (1) operational DSLAM or at least
one (1) central office colocation under construction.
7. NONSOLICITATION. While employed by the Company, and for twelve (12)
months immediately following the Executive's termination of employment,
Executive agrees not to interfere with the business of the Company by
soliciting, attempting to solicit, inducing, or otherwise causing any employee
of the Company to terminate his or her employment in order to become an
employee, consultant or independent contractor to or for any competitor of the
Company.
3.
<PAGE>
8. GENERAL PROVISIONS.
8.1 NOTICES. Any notices provided hereunder must be in writing and
shall be deemed effective upon the earlier of personal delivery (including
personal delivery by telex) or the third day after mailing by first class mail,
to the Company at its primary office location and to Executive at his address as
listed on the Company's then current payroll records.
8.2 SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provisions had never been contained herein.
8.3 WAIVER. If either party should waive any breach of any provisions
of this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
8.4 COMPLETE AGREEMENT. This Agreement and EXHIBIT A hereto,
constitute the entire agreement between Executive and the Company and it is the
complete, final, and exclusive embodiment of their agreement with regard to this
subject matter. It is entered into without reliance on any promise or
representation other than those expressly contained herein, and it cannot be
modified or amended except in a writing signed by an officer of the Company.
8.5 COUNTERPARTS. This Agreement may be executed in separate
counterparts, any one of which need not contain signatures of more than one
party, but all of which taken together will constitute one and the same
Agreement.
8.6 HEADINGS. The headings of the sections hereof are inserted for
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
8.7 SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and
inure to the benefit of and be enforceable by Executive and the Company, and
their respective successors, assigns, heirs, executors and administrators,
except that Executive may not assign any of his duties hereunder and he may not
assign any of his rights hereunder without the written consent of the Company,
which shall not be withheld unreasonably.
8.8 ATTORNEY FEES. If either party hereto brings any action to
enforce his or its rights hereunder, the prevailing party in any such action
shall be entitled to recover his or its reasonable attorneys' fees and costs
incurred in connection with such action.
8.9 CHOICE OF LAW. All questions concerning the construction,
validity and interpretation of this Agreement will be governed by the law of the
State of Delaware.
8.10 SURVIVAL. The following provisions of this Agreement shall
survive the termination of Executive's employment and the assignment of this
Agreement by the Company
4.
<PAGE>
to any successor in interest or other assignee: Section 2; Section 3; Section 6;
Section 7; and Section 8.
8.11 INJUNCTIVE RELIEF. Executive acknowledges that the restrictions
set forth in Sections 3, 4, 6 and 7 above are necessary to protect the Company's
confidential proprietary information and other legitimate business interests and
are reasonable in all respects, including duration, territory and scope of
activity restricted. Executive further acknowledges that the provisions of
Sections 3, 4, 6 and 7 hereof are essential to the Company, that the Company
would not enter into this Agreement if it did not include these provisions and
that damages sustained by the Company as a result of a breach of these
provisions cannot be adequately remedied by damages, and Executive agrees that
the Company, in addition to any other remedy it may have under this Agreement or
at law, shall be entitled to injunctive and other equitable relief to prevent or
curtail any breach of Sections 3, 4, 6 and 7 of this Agreement. Executive
agrees that the existence of any claim or cause of action by Executive against
the Company or its affiliates, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Company of
any of the provisions of Sections 3, 4, 6 and 7 hereof. Executive shall have no
right to enforce any of his rights under this Agreement by seeking or obtaining
injunctive or other equitable relief and acknowledges that damages are an
adequate remedy for any breach by the Company of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
5.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
JATO COMMUNICATIONS CORP.
By: /s/ Brian E. Gast
-------------------------------------
Brian E. Gast
President and Chief Executive Officer
By: /s/ Rex A. Humston
-------------------------------------
Rex A. Humston
6.
<PAGE>
EXHIBIT A
JATO COMMUNICATIONS CORP.
NON-COMPETITION PROPRIETARY INFORMATION
AND INVENTIONS AGREEMENT
<PAGE>
NON-COMPETITION, PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
As an employee of JATO Communications Corp., a Delaware corporation, its
subsidiaries or its affiliates (together, the "Company"), and as a condition
of my employment by the Company and in consideration of the compensation now
and hereafter paid to me, I agree to the following (the "Agreement"):
1. MAINTAINING CONFIDENTIAL INFORMATION
(a) COMPANY INFORMATION. I agree at all times during the term of
my employment and thereafter to hold in strictest confidence, and not to use,
except for the benefit of the Company, or to disclose to any person, firm or
corporation, without the written authorization of the Board of Directors of
the Company, any trade secrets, confidential knowledge, data or other
proprietary information of the Company. By way of illustration and not
limitation, this shall include information relating to products, processes,
know-how, methods, software, developmental work, improvements, discoveries,
plans for marketing and selling, business plans, budgets and unpublished
financial statements, licenses, prices and costs, suppliers and customers,
and information regarding the skills and compensation of other employees of
the Company. Notwithstanding the foregoing, confidential information shall
not include any information which:
(i) at the time of disclosure, or thereafter, is generally available to
and known by the public;
(ii) was or is available to me on a non-confidential basis from a source
other than the Company; or
(iii) has been independently acquired or developed by me without
violating any of my obligations under this Agreement, as shown by my
competent written records.
(b) THIRD PARTY INFORMATION. I recognize that the Company has
received and in the future will receive confidential or proprietary
information from third parties subject to a duty on the Company's part to
maintain the confidentiality of such information and, in some cases, to use
it only for certain limited purposes. I agree that I owe the Company and
such third parties, both during the term of my employment and thereafter, a
duty to hold all such confidential or proprietary information in the
strictest confidence and not to, except as is consistent with the Company's
agreement with the third party, disclose it to any person, firm or
corporation or use it for the benefit of anyone other than the Company or
such third party, unless expressly authorized to act otherwise by an officer
of the Company.
2. ASSIGNMENT OF INVENTIONS AND ORIGINAL WORKS.
I agree that I will make prompt written disclosure to the Company, will
hold in trust for the sole right and benefit of the Company, and hereby
assign to the Company all my right, title and interest in and to any ideas,
inventions, original works of authorship, developments, improvements or trade
secrets which I may solely or jointly conceive or reduce to practice, or
cause to be conceived or reduced to practice, during the period of my
employment with the Company and for one (1) year after my employment. This
Agreement will not be deemed to require assignment of any invention developed
entirely on my own time without using the Company's equipment, supplies,
facilities or trade secrets and neither related to the Company's actual or
anticipated business, research or development, nor resulted from work
performed by me for the Company.
3. NO CONFLICTS OR SOLICITATION
For the period of my employment by the Company and for one (1) year
following my termination, I will not interfere with the business of the
Company by (i) soliciting, attempting to solicit, inducing, or otherwise
causing any employee of the Company to terminate his or her employment in
order to become an employee, consultant or independent contractor to or for
any other entity engaged in marketing or selling the type of products and
services offered by the Company or (ii) directly soliciting the business of
any customer or client of the Company (other than on behalf of the Company)
for the type of products and services offered by the Company.
4. COVENANT NOT TO COMPETE.
(a) I agree that during my employment with the Company, I will not
directly or indirectly engage in (whether as an employee, consultant,
proprietor, partner, director or otherwise), or have any ownership interest
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<PAGE>
in, or participate in the financing, operation, management or control of, any
person, firm, corporation or business that engages in a "Restricted Business"
in a "Restricted Territory" (as defined below). It is agreed that ownership
of (i) no more than ten percent (10%) of the outstanding voting stock of a
publicly traded corporation or (ii) any stock I presently own or (iii) any
options or other rights to acquire shares of a company's capital stock I
presently own shall not constitute a violation of this provision.
(b) As used herein, the terms:
(i) "Restricted Business" shall mean any competitive local exchange
carrier, high speed data communication services provider or any business
which otherwise engages in any other manner in any business which is
competitive with the Company.
(ii) "Restricted Territory" shall mean all regions within a fifty mile
radius of those cities in which the Company operates, or has disclosed to
you that it intends to operate, a business.
5. RETURN OF COMPANY DOCUMENTS
When I leave the employ of the Company, I will deliver to the Company
(and will not keep in my possession, recreate or deliver to anyone else) any
and all documents and other property, together with all copies thereof (in
whatever medium recorded) belonging to the Company, its successors or assigns
whether kept at the Company, home or elsewhere. I further agree that any
property situated on the Company's premises and owned by the Company,
including disks and other storage media, filing cabinets or other work areas,
is subject to inspection by Company personnel at any time with or without
notice.
6. LEGAL AND EQUITABLE REMEDIES
Because my services are personal and unique and because I may have access
to and become acquainted with the proprietary information of the Company, the
Company shall have the right to enforce this Agreement and any of its
provisions by injunction, specific performance or other equitable relief,
without bond and without prejudice to any other rights and remedies that the
Company may have for a breach of this Agreement.
7. NOT AN EMPLOYMENT CONTRACT. I agree and understand that nothing in
this Agreement shall confer any right with respect to continuation of my
employment by the Company, nor shall it interfere in any way with my right or
the Company's right to terminate my employment at a ny time, with or without
cause.
8. GENERAL PROVISIONS.
(a) GOVERNING LAW. This Agreement will be governed by and
construed according to the laws of the State of Colorado, excluding conflicts
of laws principles. I hereby expressly consent to the personal jurisdiction
of the state and federal courts located in Colorado for any lawsuit filed
there against me by the Company arising from or relating to this Agreement,
or such other location as the Company's principal executive office may then
be located.
(b) SEVERABILITY. If one or more of the provisions in this
Agreement are deemed unenforceable by law, then the remaining provisions will
continue in full force and effect. Moreover, if any restriction set forth in
Sections 3 or 4 hereof is found by any court of competent jurisdiction to be
unenforceable because it extends for too long a period of time or over too
great a range of activities or in too broad a geographic area, it shall be
interpreted to extend only over the maximum period of time, range of
activities or geographic area as to which it may be enforceable.
(c) BENEFIT; BINDING EFFECT. This Agreement will be binding upon
my heirs, executors, administrators and other legal representatives and will
be for the benefit of the Company, its successors and its assigns.
(d) SURVIVAL. The provisions of this Agreement shall survive the
termination of my employment and the assignment of this Agreement by the
Company to any successor in interest or other assignee.
2
<PAGE>
I UNDERSTAND THAT THIS AGREEMENT AFFECTS MY RIGHTS TO INVENTIONS I MAKE
DURING MY EMPLOYMENT, AND RESTRICTS MY RIGHT TO DISCLOSE OR USE THE COMPANY'S
PROPRIETARY INFORMATION DURING OR SUBSEQUENT TO MY EMPLOYMENT.
I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS.
Dated:
----------------------- ------------------------------
Name
Address
-----------------------
------------------------------
------------------------------
ACCEPTED AND AGREED TO:
JATO COMMUNICATIONS CORP.
By:
--------------------------
Name:
------------------------
Title:
-----------------------
3
<PAGE>
JATO COMMUNICATIONS CORP.
EMPLOYMENT AGREEMENT
FOR
FRED THOMAS DANNER, III
THIS EMPLOYMENT AGREEMENT ("AGREEMENT") is entered into as of the 10th
day of May, 1999, by and between FRED THOMAS DANNER, III ("EXECUTIVE") and JATO
COMMUNICATIONS CORP., a Delaware corporation (the "COMPANY").
WHEREAS, the Company desires to employ Executive to provide personal
services to the Company, and wishes to provide Executive with certain
compensation and benefits in return for his services; and
WHEREAS, Executive wishes to be employed by the Company and provide
personal services to the Company in return for certain compensation and
benefits;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, it is hereby agreed by and between the parties hereto as
follows:
1. EMPLOYMENT BY THE COMPANY.
1.1 TERM. Subject to terms set forth herein, for a period of one (1)
year the Company agrees to employ Executive in the position of Vice President -
Information and New Technologies and Executive hereby accepts such employment
effective as of the date first written above. This Agreement shall
automatically renew on a month-to-month basis unless either party gives thirty
(30) days' prior written notice to the other party. During the term of his
employment with the Company, Executive will devote his best efforts and
substantially all of his business time and attention (except for vacation
periods and reasonable periods of illness or other incapacities permitted by the
Company's general employment policies) to the business of the Company.
1.2 DUTIES. Executive shall serve in an executive capacity and shall
perform such duties as are customarily associated with his then existing
title(s), consistent with the Bylaws of the Company and as required by the
Company's Board of Directors or the Executive's supervisor (the "BOARD").
1.3 EMPLOYMENT RELATIONSHIP. The employment relationship between the
parties shall also be governed by the general employment policies and practices
of the Company, including those relating to protection of confidential
information and assignment of inventions, except that when the terms of this
Agreement differ from or are in conflict with the Company's general employment
policies or practices, this Agreement shall control.
1.
<PAGE>
2. COMPENSATION.
2.1 SALARY. Executive shall receive for services to be rendered
hereunder an annualized base salary of $150,000, payable on a semi-monthly
basis, which will be reviewed annually at the discretion of the Compensation
Committee of the Board of Directors. Executive's base salary shall be increased
annually by an amount equal to the greater of (i) 5% of Executive's base salary
and (ii) an amount determined by the Board of Directors.
2.2 DISCRETIONARY BONUS. Executive will be eligible for a
discretionary bonus, in an amount to be determined solely by the Compensation
Committee in its discretion, subject to the terms and conditions outlined in a
Company bonus plan, which may be established and in effect from time to time.
2.3 COMPANY BENEFITS. Executive shall be entitled to all rights and
benefits for which he is eligible under the terms and conditions of the standard
Company benefits and compensation practices which may be in effect from time to
time and provided by the Company to its employees in comparable positions. In
addition to these standard benefits the Company will provide Executive with a
monthly commuting allowance of $400 until such time as Executive relocates from
his current residence.
2.4 ACCELERATION OF STOCK RIGHTS. In the event that the Company
consummates an Acquisition or Asset Transfer, as those terms are defined in the
Company's Restated Certificate of Incorporation, then the vesting of 50% of all
stock options unvested at the time of such Acquisition or Asset Transfer held by
Executive shall accelerate.
3. PROPRIETARY INFORMATION OBLIGATIONS.
3.1 AGREEMENT. Executive agrees to enter into a Non-competition,
Proprietary Information and Inventions Agreement attached hereto as EXHIBIT A.
3.2 REMEDIES. Executive's duties under the Proprietary Information
and Inventions Agreement shall survive termination of his employment with the
Company. Executive acknowledges that a remedy at law for any breach or
threatened breach by him of the provisions of the Non-competition Proprietary
Information and Inventions Agreement would be inadequate, and he therefore
agrees that the Company shall be entitled to injunctive relief in case of any
such breach or threatened breach.
4. OUTSIDE ACTIVITIES. Except with the prior written consent of the
Company's Board, Executive will not, during the term of this Agreement,
undertake or engage in any other employment, occupation or business enterprise,
other than those in which Executive is a passive investor. Executive may engage
in civic and not-for-profit activities so long as such activities do not
materially interfere with the performance of his duties hereunder.
5. TERMINATION OF EMPLOYMENT.
(a) Either the Executive or the Company may terminate the employment
relationship at any time for any reason whatsoever, with thirty (30) days' prior
written notice by the Company and with thirty (30) days' prior written notice by
the Executive with or without Cause
2.
<PAGE>
(as defined below) or advance notice. This at-will employment relationship
cannot be changed except in a writing approved by the Board. If the Company
terminates Executive's employment without Cause at any time, Executive will
receive as severance: (i) six (6) months of base salary, less payroll
deductions and required withholdings, payable in accordance with the standard
pay schedule of the Company, and (ii) a lump sum payment of that portion of
the bonus Executive is entitled to for the calendar year pro-rated based upon
the number of full months Executive was employed during such year in exchange
for the execution of a release of all claims against the Company. If
Executive resigns or if Executive's employment is terminated for cause, all
compensation and benefits will cease immediately, and Executive will receive
no severance benefits.
For purpose of this Agreement, "CAUSE" shall mean misconduct, including: (i)
conviction of any felony or any crime involving moral turpitude or dishonesty;
(ii) participation in a fraud or act of dishonesty against the Company; (iii)
willful breach of the Company's policies; (iv) intentional damage to the
Company's property; (v) material breach of this Agreement or Executive's
Proprietary Information and Inventions Agreement; (vi) a failure or refusal in a
material respect of Executive to follow the reasonable policies or directions of
the Company as specified by the Board of Directors after being provided with
notice of such failure and an opportunity to cure within seven (7) days of
receipt of such notice; or (vii) failure to carry out the duties of the
Executive's position after being provided with notice of such failure and an
opportunity to cure. Physical or mental disability shall not constitute
"Cause."
(b) In the event of death, the Company shall pay to Executive any
earned but unpaid salary at the time of death and, at the time such amount would
otherwise have been due, a pro rata portion of a discretionary bonus, if any,
which may otherwise have been paid to Executive pursuant to Section 2.2 hereof
with respect to the annual period in which the death occurs. Furthermore,
Executive shall vest in 50% of any unvested stock options as of the date of
death and the Company shall waive its repurchase rights with respect to 50% of
any unvested shares as of the date of death; PROVIDED, HOWEVER, that Executive's
estate, administrator or distributor shall become a party to, and be subject to
the provisions of, the Stockholders' Agreement.
6. CONTINUATION OF EMPLOYMENT/RESTRICTIVE COVENANT. During the term of
Executive's employment and for a period of six (6) months immediately following
Executive's termination, Executive shall not without first obtaining the prior
written approval of the Company, directly or indirectly engage or prepare to
engage, in any activities in competition with the Company, or accept employment
or establish a business relationship with a business that directly competes with
the Company in providing high speed data transmission services in a market in
which the Company has at least one (1) operational DSLAM or at least one (1)
central office colocation under construction.
7. NONSOLICITATION. While employed by the Company, and for twelve (12)
months immediately following the Executive's termination of employment,
Executive agrees not to interfere with the business of the Company by
soliciting, attempting to solicit, inducing, or otherwise causing any employee
of the Company to terminate his or her employment in order to become an
employee, consultant or independent contractor to or for any competitor of the
Company.
3.
<PAGE>
8. GENERAL PROVISIONS.
8.1 NOTICES. Any notices provided hereunder must be in writing and
shall be deemed effective upon the earlier of personal delivery (including
personal delivery by telex) or the third day after mailing by first class mail,
to the Company at its primary office location and to Executive at his address as
listed on the Company's then current payroll records.
8.2 SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provisions had never been contained herein.
8.3 WAIVER. If either party should waive any breach of any provisions
of this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
8.4 COMPLETE AGREEMENT. This Agreement and EXHIBIT A hereto,
constitute the entire agreement between Executive and the Company and it is the
complete, final, and exclusive embodiment of their agreement with regard to this
subject matter. It is entered into without reliance on any promise or
representation other than those expressly contained herein, and it cannot be
modified or amended except in a writing signed by an officer of the Company.
8.5 COUNTERPARTS. This Agreement may be executed in separate
counterparts, any one of which need not contain signatures of more than one
party, but all of which taken together will constitute one and the same
Agreement.
8.6 HEADINGS. The headings of the sections hereof are inserted for
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
8.7 SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and
inure to the benefit of and be enforceable by Executive and the Company, and
their respective successors, assigns, heirs, executors and administrators,
except that Executive may not assign any of his duties hereunder and he may not
assign any of his rights hereunder without the written consent of the Company,
which shall not be withheld unreasonably.
8.8 ATTORNEY FEES. If either party hereto brings any action to
enforce his or its rights hereunder, the prevailing party in any such action
shall be entitled to recover his or its reasonable attorneys' fees and costs
incurred in connection with such action.
8.9 CHOICE OF LAW. All questions concerning the construction,
validity and interpretation of this Agreement will be governed by the law of the
State of Delaware.
8.10 SURVIVAL. The following provisions of this Agreement shall
survive the termination of Executive's employment and the assignment of this
Agreement by the Company
4.
<PAGE>
to any successor in interest or other assignee: Section 2; Section 3; Section
6; Section 7; and Section 8.
8.11 INJUNCTIVE RELIEF. Executive acknowledges that the restrictions
set forth in Sections 3, 4, 6 and 7 above are necessary to protect the Company's
confidential proprietary information and other legitimate business interests and
are reasonable in all respects, including duration, territory and scope of
activity restricted. Executive further acknowledges that the provisions of
Sections 3, 4, 6 and 7 hereof are essential to the Company, that the Company
would not enter into this Agreement if it did not include these provisions and
that damages sustained by the Company as a result of a breach of these
provisions cannot be adequately remedied by damages, and Executive agrees that
the Company, in addition to any other remedy it may have under this Agreement or
at law, shall be entitled to injunctive and other equitable relief to prevent or
curtail any breach of Sections 3, 4, 6 and 7 of this Agreement. Executive
agrees that the existence of any claim or cause of action by Executive against
the Company or its affiliates, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Company of
any of the provisions of Sections 3, 4, 6 and 7 hereof. Executive shall have no
right to enforce any of his rights under this Agreement by seeking or obtaining
injunctive or other equitable relief and acknowledges that damages are an
adequate remedy for any breach by the Company of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
5.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
JATO COMMUNICATIONS CORP.
By: /s/ Brian E. Gast
Brian E. Gast
President and Chief Executive Officer
By: /s/ Fred Thomas Danner III
Thomas Danner
6.
<PAGE>
EXHIBIT A
JATO COMMUNICATIONS CORP.
NON-COMPETITION PROPRIETARY INFORMATION
AND INVENTIONS AGREEMENT
<PAGE>
NON-COMPETITION, PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
As an employee of JATO Communications Corp., a Delaware corporation, its
subsidiaries or its affiliates (together, the "Company"), and as a condition
of my employment by the Company and in consideration of the compensation now
and hereafter paid to me, I agree to the following (the "Agreement"):
1. MAINTAINING CONFIDENTIAL INFORMATION
(a) COMPANY INFORMATION. I agree at all times during the term of
my employment and thereafter to hold in strictest confidence, and not to use,
except for the benefit of the Company, or to disclose to any person, firm or
corporation, without the written authorization of the Board of Directors of
the Company, any trade secrets, confidential knowledge, data or other
proprietary information of the Company. By way of illustration and not
limitation, this shall include information relating to products, processes,
know-how, methods, software, developmental work, improvements, discoveries,
plans for marketing and selling, business plans, budgets and unpublished
financial statements, licenses, prices and costs, suppliers and customers,
and information regarding the skills and compensation of other employees of
the Company. Notwithstanding the foregoing, confidential information shall
not include any information which:
(i) at the time of disclosure, or thereafter, is generally available to
and known by the public;
(ii) was or is available to me on a non-confidential basis from a source
other than the Company; or
(iii) has been independently acquired or developed by me without
violating any of my obligations under this Agreement, as shown by my
competent written records.
(b) THIRD PARTY INFORMATION. I recognize that the Company has
received and in the future will receive confidential or proprietary
information from third parties subject to a duty on the Company's part to
maintain the confidentiality of such information and, in some cases, to use
it only for certain limited purposes. I agree that I owe the Company and
such third parties, both during the term of my employment and thereafter, a
duty to hold all such confidential or proprietary information in the
strictest confidence and not to, except as is consistent with the Company's
agreement with the third party, disclose it to any person, firm or
corporation or use it for the benefit of anyone other than the Company or
such third party, unless expressly authorized to act otherwise by an officer
of the Company.
2. ASSIGNMENT OF INVENTIONS AND ORIGINAL WORKS.
I agree that I will make prompt written disclosure to the Company, will
hold in trust for the sole right and benefit of the Company, and hereby
assign to the Company all my right, title and interest in and to any ideas,
inventions, original works of authorship, developments, improvements or trade
secrets which I may solely or jointly conceive or reduce to practice, or
cause to be conceived or reduced to practice, during the period of my
employment with the Company and for one (1) year after my employment. This
Agreement will not be deemed to require assignment of any invention developed
entirely on my own time without using the Company's equipment, supplies,
facilities or trade secrets and neither related to the Company's actual or
anticipated business, research or development, nor resulted from work
performed by me for the Company.
3. NO CONFLICTS OR SOLICITATION
For the period of my employment by the Company and for one (1) year
following my termination, I will not interfere with the business of the
Company by (i) soliciting, attempting to solicit, inducing, or otherwise
causing any employee of the Company to terminate his or her employment in
order to become an employee, consultant or independent contractor to or for
any other entity engaged in marketing or selling the type of products and
services offered by the Company or (ii) directly soliciting the business of
any customer or client of the Company (other than on behalf of the Company)
for the type of products and services offered by the Company.
4. COVENANT NOT TO COMPETE.
(a) I agree that during my employment with the Company, I will not
directly or indirectly engage in (whether as an employee, consultant,
proprietor, partner, director or otherwise), or have any ownership interest
1
<PAGE>
in, or participate in the financing, operation, management or control of, any
person, firm, corporation or business that engages in a "Restricted Business"
in a "Restricted Territory" (as defined below). It is agreed that ownership
of (i) no more than ten percent (10%) of the outstanding voting stock of a
publicly traded corporation or (ii) any stock I presently own or (iii) any
options or other rights to acquire shares of a company's capital stock I
presently own shall not constitute a violation of this provision.
(b) As used herein, the terms:
(i) "Restricted Business" shall mean any competitive local exchange
carrier, high speed data communication services provider or any business
which otherwise engages in any other manner in any business which is
competitive with the Company.
(ii) "Restricted Territory" shall mean all regions within a fifty mile
radius of those cities in which the Company operates, or has disclosed to
you that it intends to operate, a business.
5. RETURN OF COMPANY DOCUMENTS
When I leave the employ of the Company, I will deliver to the Company
(and will not keep in my possession, recreate or deliver to anyone else) any
and all documents and other property, together with all copies thereof (in
whatever medium recorded) belonging to the Company, its successors or assigns
whether kept at the Company, home or elsewhere. I further agree that any
property situated on the Company's premises and owned by the Company,
including disks and other storage media, filing cabinets or other work areas,
is subject to inspection by Company personnel at any time with or without
notice.
6. LEGAL AND EQUITABLE REMEDIES
Because my services are personal and unique and because I may have access
to and become acquainted with the proprietary information of the Company, the
Company shall have the right to enforce this Agreement and any of its
provisions by injunction, specific performance or other equitable relief,
without bond and without prejudice to any other rights and remedies that the
Company may have for a breach of this Agreement.
7. NOT AN EMPLOYMENT CONTRACT. I agree and understand that nothing in
this Agreement shall confer any right with respect to continuation of my
employment by the Company, nor shall it interfere in any way with my right or
the Company's right to terminate my employment at a ny time, with or without
cause.
8. GENERAL PROVISIONS.
(a) GOVERNING LAW. This Agreement will be governed by and
construed according to the laws of the State of Colorado, excluding conflicts
of laws principles. I hereby expressly consent to the personal jurisdiction
of the state and federal courts located in Colorado for any lawsuit filed
there against me by the Company arising from or relating to this Agreement,
or such other location as the Company's principal executive office may then
be located.
(b) SEVERABILITY. If one or more of the provisions in this
Agreement are deemed unenforceable by law, then the remaining provisions will
continue in full force and effect. Moreover, if any restriction set forth in
Sections 3 or 4 hereof is found by any court of competent jurisdiction to be
unenforceable because it extends for too long a period of time or over too
great a range of activities or in too broad a geographic area, it shall be
interpreted to extend only over the maximum period of time, range of
activities or geographic area as to which it may be enforceable.
(c) BENEFIT; BINDING EFFECT. This Agreement will be binding upon
my heirs, executors, administrators and other legal representatives and will
be for the benefit of the Company, its successors and its assigns.
(d) SURVIVAL. The provisions of this Agreement shall survive the
termination of my employment and the assignment of this Agreement by the
Company to any successor in interest or other assignee.
2
<PAGE>
I UNDERSTAND THAT THIS AGREEMENT AFFECTS MY RIGHTS TO INVENTIONS I MAKE
DURING MY EMPLOYMENT, AND RESTRICTS MY RIGHT TO DISCLOSE OR USE THE COMPANY'S
PROPRIETARY INFORMATION DURING OR SUBSEQUENT TO MY EMPLOYMENT.
I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS.
Dated:
----------------------- ------------------------------
Name
Address
-----------------------
------------------------------
------------------------------
ACCEPTED AND AGREED TO:
JATO COMMUNICATIONS CORP.
By:
--------------------------
Name:
------------------------
Title:
-----------------------
3
<PAGE>
JATO COMMUNICATIONS CORP.
EMPLOYMENT AGREEMENT
FOR
WILLIAM D. MYERS
THIS EMPLOYMENT AGREEMENT ("AGREEMENT") is entered into as of the 16th
day of August, 1999, by and between WILLIAM D. MYERS ("EXECUTIVE") and JATO
COMMUNICATIONS CORP., a Delaware corporation (the "COMPANY").
WHEREAS, the Company desires to employ Executive to provide personal
services to the Company, and wishes to provide Executive with certain
compensation and benefits in return for his services; and
WHEREAS, Executive wishes to be employed by the Company and provide
personal services to the Company in return for certain compensation and
benefits;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, it is hereby agreed by and between the parties hereto as
follows:
1. EMPLOYMENT BY THE COMPANY.
1.1 TERM. Subject to terms set forth herein, for a period of two (2)
years the Company agrees to employ Executive in the position of Vice
President-Finance, Chief Financial Officer and Treasurer and Executive hereby
accepts such employment effective as of the date first written above. This
Agreement shall automatically renew on a month-to-month basis unless either
party gives thirty (30) days' prior written notice to the other party. During
the term of his employment with the Company, Executive will devote his best
efforts and substantially all of his business time and attention (except for
vacation periods and reasonable periods of illness or other incapacities
permitted by the Company's general employment policies) to the business of the
Company.
1.2 DUTIES. Executive shall serve in an executive capacity and shall
perform such duties as are customarily associated with his then existing
title(s), consistent with the Bylaws of the Company and as required by the
Company's Board of Directors or the Executive's supervisor (the "BOARD").
1.3 EMPLOYMENT RELATIONSHIP. The employment relationship between the
parties shall also be governed by the general employment policies and practices
of the Company, including those relating to protection of confidential
information and assignment of inventions, except that when the terms of this
Agreement differ from or are in conflict with the Company's general employment
policies or practices, this Agreement shall control.
1.
<PAGE>
2. COMPENSATION.
2.1 SALARY. Executive shall receive for services to be rendered
hereunder an annualized base salary of $185,000, payable on a semi-monthly
basis, which will be reviewed annually at the discretion of the Compensation
Committee of the Board of Directors. Executive's base salary shall be increased
annually by an amount equal to the greater of (i) 5% of Executive's base salary
and (ii) an amount determined by the Board of Directors.
2.2 DISCRETIONARY BONUS. Executive will be eligible for a
discretionary bonus, in an amount to be determined solely by the Compensation
Committee in its discretion, subject to the terms and conditions outlined in a
Company bonus plan, which may be established and in effect from time to time.
2.3 STANDARD COMPANY BENEFITS. Executive shall be entitled to
all rights and benefits for which he is eligible under the terms and conditions
of the standard Company benefits and compensation practices which may be in
effect from time to time and provided by the Company to its employees in
comparable positions.
2.4 ACCELERATION OF STOCK RIGHTS. Following the earlier to occur of
(a) the one year anniversary of the date hereof and (b) the closing of an
underwritten initial public offering of the Company's Common Stock, in the event
that the Company consummates an Acquisition or Asset Transfer, as those terms
are defined in the Company's Restated Certificate of Incorporation, then
Executive shall vest in 50% of any unvested stock option as of the date of such
Acquisition or Asset Transfer and the Company shall waive its repurchase rights
with respect to 50% of any unvested shares as of the date of such Acquisition or
Asset Transfer; PROVIDED, THAT, Executive shall remain a party to, and subject
to the provisions of, the Stockholders' Agreement, by and among the Company and
the parties named therein, dated as of April 16, 1999 (the "STOCKHOLDERS'
AGREEMENT").
In the event of death, the Company shall pay to Executive any earned but
unpaid salary at the time of death and, at the time such amount would otherwise
have been due, a pro rata portion of a discretionary bonus, if any, which may
otherwise have been paid to Executive pursuant to Section 2.2 hereof with
respect to the annual period in which the death occurs. Furthermore, Executive
shall vest in 50% of any unvested stock options as of the date of death and the
Company shall waive its repurchase rights with respect to 50% of any unvested
shares as of the date of death; PROVIDED, HOWEVER, that Executive's estate,
administrator or distributor shall become a party to, and be subject to the
provisions of, the Stockholders' Agreement, by and among the Company and the
parties named therein, dated as of April 16. 1999
3. PROPRIETARY INFORMATION OBLIGATIONS.
3.1 AGREEMENT. Executive agrees to continue to abide by Executive's
previously executed Non-competition, Proprietary Information and Inventions
Agreement attached hereto as EXHIBIT A.
3.2 REMEDIES. Executive's duties under the Proprietary Information
and Inventions Agreement shall survive termination of his employment with the
Company. Executive acknowledges that a remedy at law for any breach or
threatened breach by him of the provisions
2.
<PAGE>
of the Non-competition Proprietary Information and Inventions Agreement would be
inadequate, and he therefore agrees that the Company shall be entitled to
injunctive relief in case of any such breach or threatened breach.
4. OUTSIDE ACTIVITIES. Except with the prior written consent of the
Company's Board, Executive will not, during the term of this Agreement,
undertake or engage in any other employment, occupation or business enterprise,
other than those in which Executive is a passive investor. Executive may engage
in civic and not-for-profit activities so long as such activities do not
materially interfere with the performance of his duties hereunder.
5. TERMINATION OF EMPLOYMENT.
(a) Either the Executive or the Company may terminate the employment
relationship at any time for any reason whatsoever, with thirty (30) days' prior
written notice by the Company and with thirty (30) days' prior written notice by
the Executive with or without Cause (as defined below) or advance notice. This
at-will employment relationship cannot be changed except in a writing approved
by the Board. If the Company terminates Executive's employment without Cause at
any time, Executive will receive as severance: (i) twelve (12) months of base
salary, less payroll deductions and required withholdings, payable in accordance
with the standard pay schedule of the Company, and (ii) a lump sum payment of
that portion of the bonus Executive is entitled to for the calendar year
pro-rated based upon the number of full months Executive was employed during
such year in exchange for the execution of a release of all claims against the
Company. If Executive resigns or if Executive's employment is terminated for
cause, all compensation and benefits will cease immediately, and Executive will
receive no severance benefits.
For purpose of this Agreement, "CAUSE" shall mean misconduct, including: (i)
conviction of any felony or any crime involving moral turpitude or dishonesty;
(ii) participation in a fraud or act of dishonesty against the Company; (iii)
willful breach of the Company's policies; (iv) intentional damage to the
Company's property; (v) material breach of this Agreement or Executive's
Proprietary Information and Inventions Agreement; (vi) a failure or refusal in a
material respect of Executive to follow the reasonable policies or directions of
the Company as specified by the Board of Directors after being provided with
notice of such failure and an opportunity to cure; or (vii) failure to carry out
the duties of the Executive's position after being provided with notice of such
failure and an opportunity to cure within seven (7) days of receipt of such
notice. Physical or mental disability shall not constitute "Cause."
(b) In the event of death, the Company shall pay to Executive any
earned but unpaid salary at the time of death and, at the time such amount would
otherwise have been due, a pro rata portion of a discretionary bonus, if any,
which may otherwise have been paid to Executive pursuant to Section 2.3 hereof
with respect to the annual period in which the death occurs. Furthermore,
Executive shall vest in 50% of any unvested stock options as of the date of
death and the Company shall waive its repurchase rights with respect to 50% of
any unvested shares as of the date of death; PROVIDED, HOWEVER, that Executive's
estate, administrator or distributor shall become a party to, and be subject to
the provisions of, the Stockholders' Agreement.
3.
<PAGE>
6. CONTINUATION OF EMPLOYMENT/RESTRICTIVE COVENANT. During the term of
Executive's employment and for a period of twelve (12) months immediately
following Executive's termination, Executive shall not without first obtaining
the prior written approval of the Company, directly or indirectly engage or
prepare to engage, in any activities in competition with the Company, or accept
employment or establish a business relationship with a business that directly
competes with the Company in providing high speed data transmission services in
a market in which the Company has at least one (1) operational DSLAM or at least
one (1) central office colocation under construction.
7. NONSOLICITATION. While employed by the Company, and for twelve (12)
months immediately following the Executive's termination of employment,
Executive agrees not to interfere with the business of the Company by
soliciting, attempting to solicit, inducing, or otherwise causing any employee
of the Company to terminate his or her employment in order to become an
employee, consultant or independent contractor to or for any competitor of the
Company.
8. GENERAL PROVISIONS.
8.1 NOTICES. Any notices provided hereunder must be in writing and
shall be deemed effective upon the earlier of personal delivery (including
personal delivery by telex) or the third day after mailing by first class mail,
to the Company at its primary office location and to Executive at his address as
listed on the Company's then current payroll records.
8.2 SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provisions had never been contained herein.
8.3 WAIVER. If either party should waive any breach of any provisions
of this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
8.4 COMPLETE AGREEMENT. This Agreement and EXHIBIT A hereto,
constitute the entire agreement between Executive and the Company and it is the
complete, final, and exclusive embodiment of their agreement with regard to this
subject matter. It is entered into without reliance on any promise or
representation other than those expressly contained herein, and it cannot be
modified or amended except in a writing signed by an officer of the Company.
8.5 COUNTERPARTS. This Agreement may be executed in separate
counterparts, any one of which need not contain signatures of more than one
party, but all of which taken together will constitute one and the same
Agreement.
8.6 HEADINGS. The headings of the sections hereof are inserted for
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
4.
<PAGE>
8.7 SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and
inure to the benefit of and be enforceable by Executive and the Company, and
their respective successors, assigns, heirs, executors and administrators,
except that Executive may not assign any of his duties hereunder and he may not
assign any of his rights hereunder without the written consent of the Company,
which shall not be withheld unreasonably.
8.8 ATTORNEY FEES. If either party hereto brings any action to
enforce his or its rights hereunder, the prevailing party in any such action
shall be entitled to recover his or its reasonable attorneys' fees and costs
incurred in connection with such action.
8.9 CHOICE OF LAW. All questions concerning the construction,
validity and interpretation of this Agreement will be governed by the law of the
State of Delaware.
8.10 SURVIVAL. The following provisions of this Agreement shall
survive the termination of Executive's employment and the assignment of this
Agreement by the Company to any successor in interest or other assignee:
Section 2; Section 3; Section 6; Section 7; and Section 8.
8.11 INJUNCTIVE RELIEF. Executive acknowledges that the restrictions
set forth in Sections 3, 4, 6 and 7 above are necessary to protect the Company's
confidential proprietary information and other legitimate business interests and
are reasonable in all respects, including duration, territory and scope of
activity restricted. Executive further acknowledges that the provisions of
Sections 3, 4, 6 and 7 hereof are essential to the Company, that the Company
would not enter into this Agreement if it did not include these provisions and
that damages sustained by the Company as a result of a breach of these
provisions cannot be adequately remedied by damages, and Executive agrees that
the Company, in addition to any other remedy it may have under this Agreement or
at law, shall be entitled to injunctive and other equitable relief to prevent or
curtail any breach of Sections 3, 4, 6 and 7 of this Agreement. Executive
agrees that the existence of any claim or cause of action by Executive against
the Company or its affiliates, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Company of
any of the provisions of Sections 3, 4, 6 and 7 hereof. Executive shall have no
right to enforce any of his rights under this Agreement by seeking or obtaining
injunctive or other equitable relief and acknowledges that damages are an
adequate remedy for any breach by the Company of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
5.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
JATO COMMUNICATIONS CORP.
By: /s/ Brian E. Gast
-------------------------------------
Brian E. Gast
President and Chief Executive Officer
By: /s/ William D. Myers
-------------------------------------
William D. Myers
6.
<PAGE>
EXHIBIT A
JATO COMMUNICATIONS CORP.
NON-COMPETITION PROPRIETARY INFORMATION
AND INVENTIONS AGREEMENT
<PAGE>
NON-COMPETITION, PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
As an employee of JATO Communications Corp., a Delaware corporation, its
subsidiaries or its affiliates (together, the "Company"), and as a condition
of my employment by the Company and in consideration of the compensation now
and hereafter paid to me, I agree to the following (the "Agreement"):
1. MAINTAINING CONFIDENTIAL INFORMATION
(a) COMPANY INFORMATION. I agree at all times during the term of
my employment and thereafter to hold in strictest confidence, and not to use,
except for the benefit of the Company, or to disclose to any person, firm or
corporation, without the written authorization of the Board of Directors of
the Company, any trade secrets, confidential knowledge, data or other
proprietary information of the Company. By way of illustration and not
limitation, this shall include information relating to products, processes,
know-how, methods, software, developmental work, improvements, discoveries,
plans for marketing and selling, business plans, budgets and unpublished
financial statements, licenses, prices and costs, suppliers and customers,
and information regarding the skills and compensation of other employees of
the Company. Notwithstanding the foregoing, confidential information shall
not include any information which:
(i) at the time of disclosure, or thereafter, is generally available to
and known by the public;
(ii) was or is available to me on a non-confidential basis from a source
other than the Company; or
(iii) has been independently acquired or developed by me without
violating any of my obligations under this Agreement, as shown by my
competent written records.
(b) THIRD PARTY INFORMATION. I recognize that the Company has
received and in the future will receive confidential or proprietary
information from third parties subject to a duty on the Company's part to
maintain the confidentiality of such information and, in some cases, to use
it only for certain limited purposes. I agree that I owe the Company and
such third parties, both during the term of my employment and thereafter, a
duty to hold all such confidential or proprietary information in the
strictest confidence and not to, except as is consistent with the Company's
agreement with the third party, disclose it to any person, firm or
corporation or use it for the benefit of anyone other than the Company or
such third party, unless expressly authorized to act otherwise by an officer
of the Company.
2. ASSIGNMENT OF INVENTIONS AND ORIGINAL WORKS.
I agree that I will make prompt written disclosure to the Company, will
hold in trust for the sole right and benefit of the Company, and hereby
assign to the Company all my right, title and interest in and to any ideas,
inventions, original works of authorship, developments, improvements or trade
secrets which I may solely or jointly conceive or reduce to practice, or
cause to be conceived or reduced to practice, during the period of my
employment with the Company and for one (1) year after my employment. This
Agreement will not be deemed to require assignment of any invention developed
entirely on my own time without using the Company's equipment, supplies,
facilities or trade secrets and neither related to the Company's actual or
anticipated business, research or development, nor resulted from work
performed by me for the Company.
3. NO CONFLICTS OR SOLICITATION
For the period of my employment by the Company and for one (1) year
following my termination, I will not interfere with the business of the
Company by (i) soliciting, attempting to solicit, inducing, or otherwise
causing any employee of the Company to terminate his or her employment in
order to become an employee, consultant or independent contractor to or for
any other entity engaged in marketing or selling the type of products and
services offered by the Company or (ii) directly soliciting the business of
any customer or client of the Company (other than on behalf of the Company)
for the type of products and services offered by the Company.
4. COVENANT NOT TO COMPETE.
(a) I agree that during my employment with the Company, I will not
directly or indirectly engage in (whether as an employee, consultant,
proprietor, partner, director or otherwise), or have any ownership interest
1
<PAGE>
in, or participate in the financing, operation, management or control of, any
person, firm, corporation or business that engages in a "Restricted Business"
in a "Restricted Territory" (as defined below). It is agreed that ownership
of (i) no more than ten percent (10%) of the outstanding voting stock of a
publicly traded corporation or (ii) any stock I presently own or (iii) any
options or other rights to acquire shares of a company's capital stock I
presently own shall not constitute a violation of this provision.
(b) As used herein, the terms:
(i) "Restricted Business" shall mean any competitive local exchange
carrier, high speed data communication services provider or any business
which otherwise engages in any other manner in any business which is
competitive with the Company.
(ii) "Restricted Territory" shall mean all regions within a fifty mile
radius of those cities in which the Company operates, or has disclosed to
you that it intends to operate, a business.
5. RETURN OF COMPANY DOCUMENTS
When I leave the employ of the Company, I will deliver to the Company
(and will not keep in my possession, recreate or deliver to anyone else) any
and all documents and other property, together with all copies thereof (in
whatever medium recorded) belonging to the Company, its successors or assigns
whether kept at the Company, home or elsewhere. I further agree that any
property situated on the Company's premises and owned by the Company,
including disks and other storage media, filing cabinets or other work areas,
is subject to inspection by Company personnel at any time with or without
notice.
6. LEGAL AND EQUITABLE REMEDIES
Because my services are personal and unique and because I may have access
to and become acquainted with the proprietary information of the Company, the
Company shall have the right to enforce this Agreement and any of its
provisions by injunction, specific performance or other equitable relief,
without bond and without prejudice to any other rights and remedies that the
Company may have for a breach of this Agreement.
7. NOT AN EMPLOYMENT CONTRACT. I agree and understand that nothing in
this Agreement shall confer any right with respect to continuation of my
employment by the Company, nor shall it interfere in any way with my right or
the Company's right to terminate my employment at a ny time, with or without
cause.
8. GENERAL PROVISIONS.
(a) GOVERNING LAW. This Agreement will be governed by and
construed according to the laws of the State of Colorado, excluding conflicts
of laws principles. I hereby expressly consent to the personal jurisdiction
of the state and federal courts located in Colorado for any lawsuit filed
there against me by the Company arising from or relating to this Agreement,
or such other location as the Company's principal executive office may then
be located.
(b) SEVERABILITY. If one or more of the provisions in this
Agreement are deemed unenforceable by law, then the remaining provisions will
continue in full force and effect. Moreover, if any restriction set forth in
Sections 3 or 4 hereof is found by any court of competent jurisdiction to be
unenforceable because it extends for too long a period of time or over too
great a range of activities or in too broad a geographic area, it shall be
interpreted to extend only over the maximum period of time, range of
activities or geographic area as to which it may be enforceable.
(c) BENEFIT; BINDING EFFECT. This Agreement will be binding upon
my heirs, executors, administrators and other legal representatives and will
be for the benefit of the Company, its successors and its assigns.
(d) SURVIVAL. The provisions of this Agreement shall survive the
termination of my employment and the assignment of this Agreement by the
Company to any successor in interest or other assignee.
2
<PAGE>
I UNDERSTAND THAT THIS AGREEMENT AFFECTS MY RIGHTS TO INVENTIONS I MAKE
DURING MY EMPLOYMENT, AND RESTRICTS MY RIGHT TO DISCLOSE OR USE THE COMPANY'S
PROPRIETARY INFORMATION DURING OR SUBSEQUENT TO MY EMPLOYMENT.
I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS.
Dated:
----------------------- ------------------------------
Name
Address
-----------------------
------------------------------
------------------------------
ACCEPTED AND AGREED TO:
JATO COMMUNICATIONS CORP.
By:
--------------------------
Name:
------------------------
Title:
-----------------------
3
<PAGE>
JATO COMMUNICATIONS CORP.
EMPLOYMENT AGREEMENT
FOR
GERARD A. MAGLIO
THIS EMPLOYMENT AGREEMENT ("AGREEMENT") is entered into as of the
1st day of June, 1999, by and between GERARD A. MAGLIO ("EXECUTIVE") and JATO
COMMUNICATIONS CORP., a Delaware corporation (the "COMPANY").
WHEREAS, the Company desires to employ Executive to provide personal
services to the Company, and wishes to provide Executive with certain
compensation and benefits in return for his services; and
WHEREAS, Executive wishes to be employed by the Company and provide
personal services to the Company in return for certain compensation and
benefits;
NOW, THEREFORE, in consideration of the mutual promises and
covenants contained herein, it is hereby agreed by and between the parties
hereto as follows:
1. EMPLOYMENT BY THE COMPANY.
1.1 TERM. Subject to terms set forth herein, for a period of one
(1) year the Company agrees to employ Executive in the position of Vice
President - Marketing and Executive hereby accepts such employment effective
as of the date first written above. This Agreement shall automatically renew
on a month-to-month basis unless either party gives thirty (30) days' prior
written notice to the other party. During the term of his employment with the
Company, Executive will devote his best efforts and substantially all of his
business time and attention (except for vacation periods and reasonable
periods of illness or other incapacities permitted by the Company's general
employment policies) to the business of the Company.
1.2 DUTIES. Executive shall serve in an executive capacity and
shall perform such duties as are customarily associated with his then
existing title(s), consistent with the Bylaws of the Company and as required
by the Company's Board of Directors or the Executive's supervisor (the
"BOARD").
1.3 EMPLOYMENT RELATIONSHIP. The employment relationship between
the parties shall also be governed by the general employment policies and
practices of the Company, including those relating to protection of
confidential information and assignment of inventions, except that when the
terms of this Agreement differ from or are in conflict with the Company's
general employment policies or practices, this Agreement shall control.
2. COMPENSATION.
2.1 SALARY. Executive shall receive for services to be rendered
hereunder an annualized base salary of $150,000, payable on a semi-monthly
basis, which will be reviewed
1.
<PAGE>
annually at the discretion of the Compensation Committee of the Board of
Directors. Executive's base salary shall be increased annually by an amount
equal to the greater of (i) 5% of Executive's base salary and (ii) an amount
determined by the Board of Directors.
2.2 DISCRETIONARY BONUS. Executive will be eligible for a
discretionary bonus, in an amount to be determined solely by the Compensation
Committee in its discretion, subject to the terms and conditions outlined in
a Company bonus plan, which may be established and in effect from time to
time.
2.3 STANDARD COMPANY BENEFITS. Executive shall be entitled to all
rights and benefits for which he is eligible under the terms and conditions
of the standard Company benefits and compensation practices which may be in
effect from time to time and provided by the Company to its employees in
comparable positions.
2.4 ACCELERATION OF STOCK RIGHTS. In the event that the Company
consummates an Acquisition or Asset Transfer, as those terms are defined in
the Company's Restated Certificate of Incorporation, then the vesting of 10%
of all stock options unvested at the time of such Acquisition or Asset
Transfer held by Executive shall accelerate.
3. PROPRIETARY INFORMATION OBLIGATIONS.
3.1 AGREEMENT. Executive agrees to enter into a Non-competition,
Proprietary Information and Inventions Agreement attached hereto as EXHIBIT A.
3.2 REMEDIES. Executive's duties under the Proprietary Information
and Inventions Agreement shall survive termination of his employment with the
Company. Executive acknowledges that a remedy at law for any breach or
threatened breach by him of the provisions of the Non-competition Proprietary
Information and Inventions Agreement would be inadequate, and he therefore
agrees that the Company shall be entitled to injunctive relief in case of any
such breach or threatened breach.
4. OUTSIDE ACTIVITIES. Except with the prior written consent of the
Company's Board, Executive will not, during the term of this Agreement,
undertake or engage in any other employment, occupation or business
enterprise, other than those in which Executive is a passive investor and
except for those activities specifically described in EXHIBIT B. Executive
may engage in civic and not-for-profit activities so long as such activities
do not materially interfere with the performance of his duties hereunder.
5. TERMINATION OF EMPLOYMENT.
(a) Either the Executive or the Company may terminate the
employment relationship at any time for any reason whatsoever, with thirty
(30) days' prior written notice by the Company and with thirty (30) days'
prior written notice by the Executive with or without Cause (as defined
below) or advance notice. This at-will employment relationship cannot be
changed except in a writing approved by the Board. If the Company terminates
Executive's employment without Cause at any time, Executive will receive as
severance: (i) twelve (12) months of base salary, less payroll deductions and
required withholdings, payable in accordance with the standard pay schedule
of the Company, and (ii) a lump sum payment of that portion of the bonus
<PAGE>
Executive is entitled to for the calendar year pro-rated based upon the
number of full months Executive was employed during such year in exchange for
the execution of a release of all claims against the Company. If Executive
resigns or if Executive's employment is terminated for cause, all
compensation and benefits will cease immediately, and Executive will receive
no severance benefits.
For purpose of this Agreement, "CAUSE" shall mean misconduct, including:
(i) conviction of any felony or any crime involving moral turpitude or
dishonesty; (ii) participation in a fraud or act of dishonesty against the
Company; (iii) willful breach of the Company's policies; (iv) intentional
damage to the Company's property; (v) material breach of this Agreement or
Executive's Proprietary Information and Inventions Agreement; (vi) a failure
or refusal in a material respect of Executive to follow the reasonable
policies or directions of the Company as specified by the Board of Directors
after being provided with notice of such failure and an opportunity to cure
within seven (7) days of receipt of such notice; or (vii) failure to carry
out the duties of the Executive's position after being provided with notice
of such failure and an opportunity to cure. Physical or mental disability
shall not constitute "Cause."
(b) In the event of death, the Company shall pay to Executive any
earned but unpaid salary at the time of death and, at the time such amount
would otherwise have been due, a pro rata portion of a discretionary bonus,
if any, which may otherwise have been paid to Executive pursuant to Section 2.2
hereof with respect to the annual period in which the death occurs.
Furthermore, Executive shall vest in 50% of any unvested stock options as of
the date of death and the Company shall waive its repurchase rights with
respect to 50% of any unvested shares as of the date of death; PROVIDED,
HOWEVER, that Executive's estate, administrator or distributor shall become a
party to, and be subject to the provisions of, the Stockholders' Agreement.
6. CONTINUATION OF EMPLOYMENT/RESTRICTIVE COVENANT. During the term of
Executive's employment and for a period of twelve (12) months immediately
following Executive's termination, Executive shall not without first
obtaining the prior written approval of the Company, directly or indirectly
engage or prepare to engage, in any activities in competition with the
Company, or accept employment or establish a business relationship with a
business that directly competes with the Company in providing high speed data
transmission services in a market in which the Company has at least one
(1) operational DSLAM or at least one (1) central office colocation under
construction.
7. NONSOLICITATION. While employed by the Company, and for twelve
(12) months immediately following the Executive's termination of employment,
Executive agrees not to interfere with the business of the Company by
soliciting, attempting to solicit, inducing, or otherwise causing any
employee of the Company to terminate his or her employment in order to become
an employee, consultant or independent contractor to or for any competitor of
the Company.
<PAGE>
8. GENERAL PROVISIONS.
8.1 NOTICES. Any notices provided hereunder must be in writing
and shall be deemed effective upon the earlier of personal delivery
(including personal delivery by telex) or the third day after mailing by
first class mail, to the Company at its primary office location and to
Executive at his address as listed on the Company's then current payroll
records.
8.2 SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable law or
rule in any jurisdiction, such invalidity, illegality or unenforceability
will not affect any other provision or any other jurisdiction, but this
Agreement will be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provisions had never been contained
herein.
8.3 WAIVER. If either party should waive any breach of any
provisions of this Agreement, he or it shall not thereby be deemed to have
waived any preceding or succeeding breach of the same or any other provision
of this Agreement.
8.4 COMPLETE AGREEMENT. This Agreement and EXHIBIT A hereto,
constitute the entire agreement between Executive and the Company and it is
the complete, final, and exclusive embodiment of their agreement with regard
to this subject matter. It is entered into without reliance on any promise or
representation other than those expressly contained herein, and it cannot be
modified or amended except in a writing signed by an officer of the Company.
8.5 COUNTERPARTS. This Agreement may be executed in separate
counterparts, any one of which need not contain signatures of more than one
party, but all of which taken together will constitute one and the same
Agreement.
8.6 HEADINGS. The headings of the sections hereof are inserted
for convenience only and shall not be deemed to constitute a part hereof nor
to affect the meaning thereof.
8.7 SUCCESSORS AND ASSIGNS. This Agreement is intended to bind
and inure to the benefit of and be enforceable by Executive and the Company,
and their respective successors, assigns, heirs, executors and
administrators, except that Executive may not assign any of his duties
hereunder and he may not assign any of his rights hereunder without the
written consent of the Company, which shall not be withheld unreasonably.
8.8 ATTORNEY FEES. If either party hereto brings any action to
enforce his or its rights hereunder, the prevailing party in any such action
shall be entitled to recover his or its reasonable attorneys' fees and costs
incurred in connection with such action.
8.9 CHOICE OF LAW. All questions concerning the construction,
validity and interpretation of this Agreement will be governed by the law of
the State of Delaware.
8.10 SURVIVAL. The following provisions of this Agreement shall
survive the termination of Executive's employment and the assignment of this
Agreement by the Company
<PAGE>
to any successor in interest or other assignee: Section 2; Section 3;
Section 6; Section 7; and Section 8.
8.11 INJUNCTIVE RELIEF. Executive acknowledges that the
restrictions set forth in Sections 3, 4, 6 and 7 above are necessary to
protect the Company's confidential proprietary information and other
legitimate business interests and are reasonable in all respects, including
duration, territory and scope of activity restricted. Executive further
acknowledges that the provisions of Sections 3, 4, 6 and 7 hereof are
essential to the Company, that the Company would not enter into this
Agreement if it did not include these provisions and that damages sustained
by the Company as a result of a breach of these provisions cannot be
adequately remedied by damages, and Executive agrees that the Company, in
addition to any other remedy it may have under this Agreement or at law,
shall be entitled to injunctive and other equitable relief to prevent or
curtail any breach of Sections 3, 4, 6 and 7 of this Agreement. Executive
agrees that the existence of any claim or cause of action by Executive
against the Company or its affiliates, whether predicated on this Agreement
or otherwise, shall not constitute a defense to the enforcement by the
Company of any of the provisions of Sections 3, 4, 6 and 7 hereof. Executive
shall have no right to enforce any of his rights under this Agreement by
seeking or obtaining injunctive or other equitable relief and acknowledges
that damages are an adequate remedy for any breach by the Company of this
Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first above written.
JATO COMMUNICATIONS CORP.
By: /s/ Brian E. Gast
------------------------------------
Brian E. Gast
President and Chief Executive Officer
By: /s/ Gerard Maglio
------------------------------------
Gerard Maglio
<PAGE>
EXHIBIT A
JATO COMMUNICATIONS CORP.
NON-COMPETITION PROPRIETARY INFORMATION
AND INVENTIONS AGREEMENT
<PAGE>
NON-COMPETITION, PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
As an employee of JATO Communications Corp., a Delaware corporation, its
subsidiaries or its affiliates (together, the "Company"), and as a condition
of my employment by the Company and in consideration of the compensation now
and hereafter paid to me, I agree to the following (the "Agreement"):
1. MAINTAINING CONFIDENTIAL INFORMATION
(a) COMPANY INFORMATION. I agree at all times during the term of
my employment and thereafter to hold in strictest confidence, and not to use,
except for the benefit of the Company, or to disclose to any person, firm or
corporation, without the written authorization of the Board of Directors of
the Company, any trade secrets, confidential knowledge, data or other
proprietary information of the Company. By way of illustration and not
limitation, this shall include information relating to products, processes,
know-how, methods, software, developmental work, improvements, discoveries,
plans for marketing and selling, business plans, budgets and unpublished
financial statements, licenses, prices and costs, suppliers and customers,
and information regarding the skills and compensation of other employees of
the Company. Notwithstanding the foregoing, confidential information shall
not include any information which:
(i) at the time of disclosure, or thereafter, is generally available to
and known by the public;
(ii) was or is available to me on a non-confidential basis from a source
other than the Company; or
(iii) has been independently acquired or developed by me without
violating any of my obligations under this Agreement, as shown by my
competent written records.
(b) THIRD PARTY INFORMATION. I recognize that the Company has
received and in the future will receive confidential or proprietary
information from third parties subject to a duty on the Company's part to
maintain the confidentiality of such information and, in some cases, to use
it only for certain limited purposes. I agree that I owe the Company and
such third parties, both during the term of my employment and thereafter, a
duty to hold all such confidential or proprietary information in the
strictest confidence and not to, except as is consistent with the Company's
agreement with the third party, disclose it to any person, firm or
corporation or use it for the benefit of anyone other than the Company or
such third party, unless expressly authorized to act otherwise by an officer
of the Company.
2. ASSIGNMENT OF INVENTIONS AND ORIGINAL WORKS.
I agree that I will make prompt written disclosure to the Company, will
hold in trust for the sole right and benefit of the Company, and hereby
assign to the Company all my right, title and interest in and to any ideas,
inventions, original works of authorship, developments, improvements or trade
secrets which I may solely or jointly conceive or reduce to practice, or
cause to be conceived or reduced to practice, during the period of my
employment with the Company and for one (1) year after my employment. This
Agreement will not be deemed to require assignment of any invention developed
entirely on my own time without using the Company's equipment, supplies,
facilities or trade secrets and neither related to the Company's actual or
anticipated business, research or development, nor resulted from work
performed by me for the Company.
3. NO CONFLICTS OR SOLICITATION
For the period of my employment by the Company and for one (1) year
following my termination, I will not interfere with the business of the
Company by (i) soliciting, attempting to solicit, inducing, or otherwise
causing any employee of the Company to terminate his or her employment in
order to become an employee, consultant or independent contractor to or for
any other entity engaged in marketing or selling the type of products and
services offered by the Company or (ii) directly soliciting the business of
any customer or client of the Company (other than on behalf of the Company)
for the type of products and services offered by the Company.
4. COVENANT NOT TO COMPETE.
(a) I agree that during my employment with the Company, I will not
directly or indirectly engage in (whether as an employee, consultant,
proprietor, partner, director or otherwise), or have any ownership interest
1
<PAGE>
in, or participate in the financing, operation, management or control of, any
person, firm, corporation or business that engages in a "Restricted Business"
in a "Restricted Territory" (as defined below). It is agreed that ownership
of (i) no more than ten percent (10%) of the outstanding voting stock of a
publicly traded corporation or (ii) any stock I presently own or (iii) any
options or other rights to acquire shares of a company's capital stock I
presently own shall not constitute a violation of this provision.
(b) As used herein, the terms:
(i) "Restricted Business" shall mean any competitive local exchange
carrier, high speed data communication services provider or any business
which otherwise engages in any other manner in any business which is
competitive with the Company.
(ii) "Restricted Territory" shall mean all regions within a fifty mile
radius of those cities in which the Company operates, or has disclosed to
you that it intends to operate, a business.
5. RETURN OF COMPANY DOCUMENTS
When I leave the employ of the Company, I will deliver to the Company
(and will not keep in my possession, recreate or deliver to anyone else) any
and all documents and other property, together with all copies thereof (in
whatever medium recorded) belonging to the Company, its successors or assigns
whether kept at the Company, home or elsewhere. I further agree that any
property situated on the Company's premises and owned by the Company,
including disks and other storage media, filing cabinets or other work areas,
is subject to inspection by Company personnel at any time with or without
notice.
6. LEGAL AND EQUITABLE REMEDIES
Because my services are personal and unique and because I may have access
to and become acquainted with the proprietary information of the Company, the
Company shall have the right to enforce this Agreement and any of its
provisions by injunction, specific performance or other equitable relief,
without bond and without prejudice to any other rights and remedies that the
Company may have for a breach of this Agreement.
7. NOT AN EMPLOYMENT CONTRACT. I agree and understand that nothing in
this Agreement shall confer any right with respect to continuation of my
employment by the Company, nor shall it interfere in any way with my right or
the Company's right to terminate my employment at a ny time, with or without
cause.
8. GENERAL PROVISIONS.
(a) GOVERNING LAW. This Agreement will be governed by and
construed according to the laws of the State of Colorado, excluding conflicts
of laws principles. I hereby expressly consent to the personal jurisdiction
of the state and federal courts located in Colorado for any lawsuit filed
there against me by the Company arising from or relating to this Agreement,
or such other location as the Company's principal executive office may then
be located.
(b) SEVERABILITY. If one or more of the provisions in this
Agreement are deemed unenforceable by law, then the remaining provisions will
continue in full force and effect. Moreover, if any restriction set forth in
Sections 3 or 4 hereof is found by any court of competent jurisdiction to be
unenforceable because it extends for too long a period of time or over too
great a range of activities or in too broad a geographic area, it shall be
interpreted to extend only over the maximum period of time, range of
activities or geographic area as to which it may be enforceable.
(c) BENEFIT; BINDING EFFECT. This Agreement will be binding upon
my heirs, executors, administrators and other legal representatives and will
be for the benefit of the Company, its successors and its assigns.
(d) SURVIVAL. The provisions of this Agreement shall survive the
termination of my employment and the assignment of this Agreement by the
Company to any successor in interest or other assignee.
2
<PAGE>
I UNDERSTAND THAT THIS AGREEMENT AFFECTS MY RIGHTS TO INVENTIONS I MAKE
DURING MY EMPLOYMENT, AND RESTRICTS MY RIGHT TO DISCLOSE OR USE THE COMPANY'S
PROPRIETARY INFORMATION DURING OR SUBSEQUENT TO MY EMPLOYMENT.
I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS.
Dated:
----------------------- ------------------------------
Name
Address
-----------------------
------------------------------
------------------------------
ACCEPTED AND AGREED TO:
JATO COMMUNICATIONS CORP.
By:
--------------------------
Name:
------------------------
Title:
-----------------------
3
<PAGE>
EXHIBIT B
PERMITTED OUTSIDE ACTIVITIES
1. Continuation of pre-existing consulting arrangement with Vulcan
Ventures, Vulcan Northwest, or any other subsidiary, company, or
partnership controlled by, or affiliated with, Paul Allen or any of his
Vulcan companies. Executive has already given notice of his intent to
withdraw from this assignment on the latter of two occurrences,
July 20, 1999, or the presentation of the project team's findings to
owner Paul Allen.
2. Strategic Advisory Board participation in MCSI, a LaJolla,
California-based technology development company. Anticipated time
required is one (1) business day per calendar quarter. Executive agrees
to resign from this assignment as soon as it can be done without loss
of the equity portion of his compensation.
3. Executive may continue to offer his existing syndicated marketing
programs to the cable television industry as long as he is passive in
his participation. In this regard, passive is defined to mean not
taking a lead or active role in the continuing sales and marketing of
the programs, other than that amount of time necessary to employ
someone to discharge these responsibilities. The programs include DISH
HELP, Ctv Updates, Contact, and DATA SPEED. Executive is obligated to
delegate day-to-day responsibilities to existing business partners,
and/or employees of those ventures, and may participate at the board
level, or equivalent, in such a way as to not interfere with his
Company responsibilities.
4. Executive is involved with a partnership anticipating the purchase of
two operating cable television systems in Battlement Mesa and
Parachute, Colorado, and will act as a passive partner and strategic
advisor with no operating responsibilities. This partnership, or an
additional one involving Interface Communications Group, may purchase
or develop other cable television assets in the future but Executive's
role will remain unchanged.
5. Executive is a participant with an effort to provide video, high-speed
Internet access, and potentially other telecommunications services to
multiple dwelling units (MDUs) in the Denver metropolitan area in
association with Interface Communications Group, and another entity
that owns fifty (50) percent of the equity in this venture and is
responsible for the day-to-day operation of the business. Executive
participates as an investor and strategic advisor.
A-1
<PAGE>
Exhibit 10.9
JATO COMMUNICATIONS CORP.
EMPLOYMENT AGREEMENT
FOR
GERALD K. DINSMORE
THIS EMPLOYMENT AGREEMENT ("AGREEMENT") is entered into as of the 31st
day of August, 1999, by and between GERALD K. DINSMORE ("EXECUTIVE") and JATO
COMMUNICATIONS CORP., a Delaware corporation (the "COMPANY").
WHEREAS, the Company desires to employ Executive to provide personal
services to the Company, and wishes to provide Executive with certain
compensation and benefits in return for his services; and
WHEREAS, Executive wishes to be employed by the Company and provide
personal services to the Company in return for certain compensation and
benefits;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, it is hereby agreed by and between the parties hereto as
follows:
1. EMPLOYMENT BY THE COMPANY.
1.1 TERM. Executive will commence employment on August 31, 1999.
Subject to terms set forth herein, for a period of two (2) years the Company
agrees to employ Executive in the position of President and Chief Operating
Officer and Executive hereby accepts such employment effective as of the date
first written above. The Board of Directors will elect Executive to fill a
vacancy on the Board at its next scheduled meeting. This Agreement shall
automatically renew on a month-to-month basis unless either party gives
thirty (30) days' prior written notice to the other party. During the term
of his employment with the Company, Executive will devote his best efforts
and substantially all of his business time and attention (except for vacation
periods and reasonable periods of illness or other incapacities permitted by
the Company's general employment policies) to the business of the Company.
1.2 DUTIES. Executive shall serve in an executive capacity and
shall perform such duties as are customarily associated with his then
existing title(s), consistent with the Bylaws of the Company and as required
by the Company's Board of Directors (the "BOARD").
1.3 EMPLOYMENT RELATIONSHIP. The employment relationship between
the parties shall also be governed by the general employment policies and
practices of the Company, including those relating to protection of
confidential information and assignment of inventions, except that when the
terms of this Agreement differ from or are in conflict with the Company's
general employment policies or practices, this Agreement shall control.
1.
<PAGE>
2. COMPENSATION.
2.1 SALARY. Executive shall receive for services to be rendered
hereunder an annualized base salary of $225,000, payable on a semi-monthly
basis, which will be reviewed annually at the discretion of the Compensation
Committee of the Board of Directors. Executive's base salary shall be
increased annually by an amount determined by the Board of Directors.
2.2 BONUS. Executive will be eligible for a discretionary bonus of
up to 100% of his base salary, in an amount to be determined solely by the
Compensation Committee in its discretion, upon achieving targets established
by the Board subject to the terms and conditions outlined in a Company bonus
plan, which may be established and in effect from time to time. In addition,
subject to Executive not terminating his employment with Jato, principal and
interest on the Promissory Note dated this date will be forgiven in two
installments of equal amount; the first installment upon the first
anniversary of Executive's start date. Upon each such installment Jato will
pay Executive a payment of $80,000 to cover taxes associated with note
forgiveness. All principal and interest related to the Promissory Note will
be forgiven and both tax-related payment will be paid upon the occurrence of
an Acceleration Event as defined above.
2.3 STOCK RIGHTS. Simultaneous with the execution of this
Agreement, Executive will purchase 500,000 shares of Common Stock of the
Company on the terms set forth in the Restricted Stock Purchase Agreement
attached hereto as EXHIBIT A (the "PURCHASE AGREEMENT"). In connection with
this purchase Executive agrees to be bound by the terms of the Stockholders'
Agreement dated April 16, 1999, attached hereto as EXHIBIT B. In addition,
should the Company complete a Series C Preferred Stock financing, Executive
will be given an opportunity to purchase 75,000 shares of such Series C
Preferred Stock on the terms set forth in the documentation for such
financing.
2.4 RELOCATION/COMMUTING EXPENSES. Jato will provide the
following to support the expenses of Executive's relocation/commuting to
Denver from Dallas (i) reimbursement of all out-of-pocket expenses associated
with travel between Denver and Dallas for up to six months including up to 3
trips for family members; (ii) reimbursement of temporary housing expense for
up to six months; (iii) reimbursement of closing costs, moving expenses,
furnishings, and related expenses up to an aggregate maximum of $100,000; and
(iv) reimbursement of travel expenses for up to two trips to and from Dallas
each month.
2.5 FUTURE OPTION GRANTS. Executive will be eligible to be
granted options to purchase Common Stock of the Company commencing on the
first anniversary of his employment, at times and in amounts to be determined
in the sole discretion of the Compensation Committee of the Board.
2.6 STANDARD COMPANY BENEFITS. Executive shall be entitled
to all rights and benefits for which he is eligible under the terms and
conditions of the standard Company benefits and compensation practices which
may be in effect from time to time and provided by the Company to its
employees in comparable positions.
<PAGE>
3. PROPRIETARY INFORMATION OBLIGATIONS.
3.1 AGREEMENT. Executive agrees to be bound by the terms of the
executed Non-competition, Proprietary Information and Inventions Agreement
attached hereto as EXHIBIT C.
3.2 REMEDIES. Executive's duties under the Proprietary Information
and Inventions Agreement shall survive termination of his employment with the
Company. Executive acknowledges that a remedy at law for any breach or
threatened breach by him of the provisions of the Non-competition Proprietary
Information and Inventions Agreement would be inadequate, and he therefore
agrees that the Company shall be entitled to injunctive relief in case of any
such breach or threatened breach.
4. OUTSIDE ACTIVITIES. Except with the prior written consent of the
Company's Board, Executive will not, during the term of this Agreement,
undertake or engage in any other employment, occupation or business
enterprise, other than those in which Executive is a passive investor.
Executive may engage in civic and not-for-profit activities so long as such
activities do not materially interfere with the performance of his duties
hereunder.
5. TERMINATION OF EMPLOYMENT.
(a) Either the Executive or the Company may terminate the
employment relationship at any time for any reason whatsoever, with thirty
(30) days' prior written notice by the Company and with thirty (30) days'
prior written notice by the Executive with or without Cause (as defined
below) or advance notice. This at-will employment relationship cannot be
changed except in a writing approved by the Board. If the Company terminates
Executive's employment without Cause at any time, Executive will receive as
severance: (i) twelve (12) months of base salary, less payroll deductions
and required withholdings, payable in accordance with the standard pay
schedule of the Company, and (ii) a lump sum payment of that portion of the
bonus Executive is entitled to for the calendar year pro-rated based upon the
number of full months Executive was employed during such year in exchange for
the execution of a release of all claims against the Company. If Executive
resigns or if Executive's employment is terminated for cause, all
compensation and benefits will cease immediately, and Executive will receive
no severance benefits.
For purpose of this Agreement, "CAUSE" shall mean misconduct, including: (i)
conviction of any felony or any crime involving moral turpitude or
dishonesty; (ii) participation in a fraud or act of dishonesty against the
Company; (iii) willful breach of the Company's policies; (iv) intentional
damage to the Company's property; (v) material breach of this Agreement or
Executive's Proprietary Information and Inventions Agreement; (vi) a failure
or refusal in a material respect of Executive to follow the reasonable
policies or directions of the Company as specified by the Board of Directors
after being provided with notice of such failure and an opportunity to cure;
or (vii) failure to carry out the duties of the Executive's position after
being provided with notice of such failure and an opportunity to cure within
seven (7) days of receipt of such notice. Physical or mental disability
shall not constitute "Cause."
<PAGE>
(b) In the event of death, the Company shall pay to Executive any
earned but unpaid salary at the time of death and, at the time such amount
would otherwise have been due, a pro rata portion of a discretionary bonus,
if any, which may otherwise have been paid to Executive pursuant to Section
2.3 hereof with respect to the annual period in which the death occurs.
Furthermore, Executive shall vest in 50% of any unvested stock options as of
the date of death and the Company shall waive its repurchase rights with
respect to 50% of any unvested shares as of the date of death; PROVIDED,
HOWEVER, that Executive's estate, administrator or distributor shall become a
party to, and be subject to the provisions of, the Stockholders' Agreement.
6. GENERAL PROVISIONS.
6.1 NOTICES. Any notices provided hereunder must be in writing and
shall be deemed effective upon the earlier of personal delivery (including
personal delivery by telex) or the third day after mailing by first class
mail, to the Company at its primary office location and to Executive at his
address as listed on the Company's then current payroll records.
6.2 SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable law or
rule in any jurisdiction, such invalidity, illegality or unenforceability
will not affect any other provision or any other jurisdiction, but this
Agreement will be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provisions had never been contained
herein.
6.3 WAIVER. If either party should waive any breach of any
provisions of this Agreement, he or it shall not thereby be deemed to have
waived any preceding or succeeding breach of the same or any other provision
of this Agreement.
6.4 COMPLETE AGREEMENT. This Agreement and exhibits hereto
constitute the entire agreement between Executive and the Company and it is
the complete, final, and exclusive embodiment of their agreement with regard
to this subject matter. It is entered into without reliance on any promise
or representation other than those expressly contained herein, and it cannot
be modified or amended except in a writing signed by an officer of the
Company.
6.5 COUNTERPARTS. This Agreement may be executed in separate
counterparts, any one of which need not contain signatures of more than one
party, but all of which taken together will constitute one and the same
Agreement.
6.6 HEADINGS. The headings of the sections hereof are inserted for
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
6.7 SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and
inure to the benefit of and be enforceable by Executive and the Company, and
their respective successors, assigns, heirs, executors and administrators,
except that Executive may not assign any of his duties hereunder and he may
not assign any of his rights hereunder without the written consent of the
Company, which shall not be withheld unreasonably.
<PAGE>
6.8 ATTORNEY FEES. If either party hereto brings any action to
enforce his or its rights hereunder, the prevailing party in any such action
shall be entitled to recover his or its reasonable attorneys' fees and costs
incurred in connection with such action.
6.9 CHOICE OF LAW. All questions concerning the construction,
validity and interpretation of this Agreement will be governed by the law of
the State of Colorado.
6.10 SURVIVAL. The following provisions of this Agreement shall
survive the termination of Executive's employment and the assignment of this
Agreement by the Company to any successor in interest or other assignee:
Section 2 and Section 5.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first above written.
JATO COMMUNICATIONS CORP.
By: /s/ Brian E. Gast
-------------------------------------
Brian E. Gast
President and Chief Executive Officer
By: /s/ Gerald K. Dinsmore
-------------------------------------
Gerald K. Dinsmore
<PAGE>
EXHIBIT A
STOCK PURCHASE AGREEMENT
A-1
<PAGE>
EXHIBIT B
STOCKHOLDERS' AGREEMENT
B-1
<PAGE>
EXHIBIT C
NON-COMPETITION PROPRIETARY INFORMATION
AND INVENTIONS AGREEMENT
<PAGE>
NON-COMPETITION, PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
As an employee of JATO Communications Corp., a Delaware corporation, its
subsidiaries or its affiliates (together, the "Company"), and as a condition
of my employment by the Company and in consideration of the compensation now
and hereafter paid to me, I agree to the following (the "Agreement"):
1. MAINTAINING CONFIDENTIAL INFORMATION
(a) COMPANY INFORMATION. I agree at all times during the term of
my employment and thereafter to hold in strictest confidence, and not to use,
except for the benefit of the Company, or to disclose to any person, firm or
corporation, without the written authorization of the Board of Directors of
the Company, any trade secrets, confidential knowledge, data or other
proprietary information of the Company. By way of illustration and not
limitation, this shall include information relating to products, processes,
know-how, methods, software, developmental work, improvements, discoveries,
plans for marketing and selling, business plans, budgets and unpublished
financial statements, licenses, prices and costs, suppliers and customers,
and information regarding the skills and compensation of other employees of
the Company. Notwithstanding the foregoing, confidential information shall
not include any information which:
(i) at the time of disclosure, or thereafter, is generally available to
and known by the public;
(ii) was or is available to me on a non-confidential basis from a source
other than the Company; or
(iii) has been independently acquired or developed by me without
violating any of my obligations under this Agreement, as shown by my
competent written records.
(b) THIRD PARTY INFORMATION. I recognize that the Company has
received and in the future will receive confidential or proprietary
information from third parties subject to a duty on the Company's part to
maintain the confidentiality of such information and, in some cases, to use
it only for certain limited purposes. I agree that I owe the Company and
such third parties, both during the term of my employment and thereafter, a
duty to hold all such confidential or proprietary information in the
strictest confidence and not to, except as is consistent with the Company's
agreement with the third party, disclose it to any person, firm or
corporation or use it for the benefit of anyone other than the Company or
such third party, unless expressly authorized to act otherwise by an officer
of the Company.
2. ASSIGNMENT OF INVENTIONS AND ORIGINAL WORKS.
I agree that I will make prompt written disclosure to the Company, will
hold in trust for the sole right and benefit of the Company, and hereby
assign to the Company all my right, title and interest in and to any ideas,
inventions, original works of authorship, developments, improvements or trade
secrets which I may solely or jointly conceive or reduce to practice, or
cause to be conceived or reduced to practice, during the period of my
employment with the Company and for one (1) year after my employment. This
Agreement will not be deemed to require assignment of any invention developed
entirely on my own time without using the Company's equipment, supplies,
facilities or trade secrets and neither related to the Company's actual or
anticipated business, research or development, nor resulted from work
performed by me for the Company.
3. NO CONFLICTS OR SOLICITATION
For the period of my employment by the Company and for one (1) year
following my termination, I will not interfere with the business of the
Company by (i) soliciting, attempting to solicit, inducing, or otherwise
causing any employee of the Company to terminate his or her employment in
order to become an employee, consultant or independent contractor to or for
any other entity engaged in marketing or selling the type of products and
services offered by the Company or (ii) directly soliciting the business of
any customer or client of the Company (other than on behalf of the Company)
for the type of products and services offered by the Company.
4. COVENANT NOT TO COMPETE.
(a) I agree that during my employment with the Company, I will not
directly or indirectly engage in (whether as an employee, consultant,
proprietor, partner, director or otherwise), or have any ownership interest
1
<PAGE>
in, or participate in the financing, operation, management or control of, any
person, firm, corporation or business that engages in a "Restricted Business"
in a "Restricted Territory" (as defined below). It is agreed that ownership
of (i) no more than ten percent (10%) of the outstanding voting stock of a
publicly traded corporation or (ii) any stock I presently own or (iii) any
options or other rights to acquire shares of a company's capital stock I
presently own shall not constitute a violation of this provision.
(b) As used herein, the terms:
(i) "Restricted Business" shall mean any competitive local exchange
carrier, high speed data communication services provider or any business
which otherwise engages in any other manner in any business which is
competitive with the Company.
(ii) "Restricted Territory" shall mean all regions within a fifty mile
radius of those cities in which the Company operates, or has disclosed to
you that it intends to operate, a business.
5. RETURN OF COMPANY DOCUMENTS
When I leave the employ of the Company, I will deliver to the Company
(and will not keep in my possession, recreate or deliver to anyone else) any
and all documents and other property, together with all copies thereof (in
whatever medium recorded) belonging to the Company, its successors or assigns
whether kept at the Company, home or elsewhere. I further agree that any
property situated on the Company's premises and owned by the Company,
including disks and other storage media, filing cabinets or other work areas,
is subject to inspection by Company personnel at any time with or without
notice.
6. LEGAL AND EQUITABLE REMEDIES
Because my services are personal and unique and because I may have access
to and become acquainted with the proprietary information of the Company, the
Company shall have the right to enforce this Agreement and any of its
provisions by injunction, specific performance or other equitable relief,
without bond and without prejudice to any other rights and remedies that the
Company may have for a breach of this Agreement.
7. NOT AN EMPLOYMENT CONTRACT. I agree and understand that nothing in
this Agreement shall confer any right with respect to continuation of my
employment by the Company, nor shall it interfere in any way with my right or
the Company's right to terminate my employment at a ny time, with or without
cause.
8. GENERAL PROVISIONS.
(a) GOVERNING LAW. This Agreement will be governed by and
construed according to the laws of the State of Colorado, excluding conflicts
of laws principles. I hereby expressly consent to the personal jurisdiction
of the state and federal courts located in Colorado for any lawsuit filed
there against me by the Company arising from or relating to this Agreement,
or such other location as the Company's principal executive office may then
be located.
(b) SEVERABILITY. If one or more of the provisions in this
Agreement are deemed unenforceable by law, then the remaining provisions will
continue in full force and effect. Moreover, if any restriction set forth in
Sections 3 or 4 hereof is found by any court of competent jurisdiction to be
unenforceable because it extends for too long a period of time or over too
great a range of activities or in too broad a geographic area, it shall be
interpreted to extend only over the maximum period of time, range of
activities or geographic area as to which it may be enforceable.
(c) BENEFIT; BINDING EFFECT. This Agreement will be binding upon
my heirs, executors, administrators and other legal representatives and will
be for the benefit of the Company, its successors and its assigns.
(d) SURVIVAL. The provisions of this Agreement shall survive the
termination of my employment and the assignment of this Agreement by the
Company to any successor in interest or other assignee.
2
<PAGE>
I UNDERSTAND THAT THIS AGREEMENT AFFECTS MY RIGHTS TO INVENTIONS I MAKE
DURING MY EMPLOYMENT, AND RESTRICTS MY RIGHT TO DISCLOSE OR USE THE COMPANY'S
PROPRIETARY INFORMATION DURING OR SUBSEQUENT TO MY EMPLOYMENT.
I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS.
Dated:
----------------------- ------------------------------
Name
Address
-----------------------
------------------------------
------------------------------
ACCEPTED AND AGREED TO:
JATO COMMUNICATIONS CORP.
By:
--------------------------
Name:
------------------------
Title:
-----------------------
3
<PAGE>
No. WCS-1 June 18, 1999
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
OF JATO COMMUNICATIONS CORP.
(VOID AFTER JUNE 18, 2004)
THIS CERTIFIES that DANIELS & ASSOCIATES (the "HOLDER"), for value
received, are entitled to purchase from JATO COMMUNICATIONS CORP., a Delaware
corporation (the "COMPANY"), having a place of business at 1099 18th St., Suite
700, Denver, Colorado 80202, twenty thousand (20,000) shares of fully paid and
nonassessable shares of Company's Common Stock (the "COMMON STOCK") at a price
of $3.00 per share (the "STOCK PURCHASE PRICE"), at any time or from time to
time beginning on the date hereof and ending on the earlier to occur of (i) up
to and including 5:00 p.m. (Colorado time) June 18, 2004, (ii) the closing of
the initial underwritten public offering of the Company's Common Stock pursuant
to a registration statement under the Securities Act of 1933, as amended or
(iii) the Acquisition (as defined below) of the Company (collectively, the
"EXPIRATION DATE") upon surrender to the Company at its principal office (or at
such other location as the Company may advise the Holder in writing) of this
Warrant properly endorsed with the Notice of Exercise and Investment
Representation Statement attached hereto duly filled in and executed and, if
applicable, upon payment in cash or by check of the aggregate Stock Purchase
Price for the number of shares for which this Warrant is being exercised
determined in accordance with the provisions hereof. The Stock Purchase Price
and the number of shares purchasable hereunder are subject to adjustment as
provided in Section 3 of this Warrant. For purposes hereof, an "Acquisition"
shall mean any: (1) a sale of all or substantially all of the assets of the
Company; (2) a merger, reorganization or consolidation pursuant to which the
stockholders of the Company or its successor immediately prior to such merger,
reorganization or consolidation: (A) hold less than 50% of the voting power of
the surviving company following the merger, reorganization or consolidation, or
(B) in the event that the securities of an affiliated entity are issued to the
stockholders of the Company in the transaction in exchange for their shares in
the Company, hold less than 50% of the voting power of such affiliated entity.
1. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
(a) GENERAL. This Warrant is exercisable at the option of the
Holder of record hereof, at any time or from time to time, up to the Expiration
Date for all or any part of the shares of Common Stock (but not for a fraction
of a share) which may be purchased hereunder.
(b) ISSUANCE OF CERTIFICATES. The Company agrees that the
shares of Common Stock purchased under this Warrant shall be and are deemed to
be issued to the Holder hereof as the record owner of such shares as of the
close of business on the date on which this Warrant shall have been surrendered,
properly endorsed and payment (if any) made for such shares. Certificates for
the
1.
<PAGE>
shares of Common Stock so purchased, together with any other securities or
property to which the Holder hereof are entitled upon such exercise, shall be
delivered to the Holder hereof by the Company at the Company's expense within a
reasonable time after the rights represented by this Warrant have been so
exercised. In case of a purchase of less than all the shares which may be
purchased under this Warrant, the Company shall cancel this Warrant and execute
and deliver a new Warrant or Warrants of like tenor for the balance of the
shares purchasable under the Warrant surrendered upon such purchase to the
Holder hereof within a reasonable time. Each stock certificate so delivered
shall be in such denominations of Common Stock as may be requested by the Holder
hereof and shall be registered in the name of such Holder or as directed by such
Holder.
2. SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company
covenants and agrees that all shares of Common Stock which may be issued upon
the exercise of the rights represented by this Warrant will, upon issuance, be
duly authorized, validly issued, fully paid and nonassessable and free from all
preemptive rights of any stockholders and free of all taxes, liens and charges
with respect to the issue thereof. The Company further covenants and agrees
that during the period within which the rights represented by this Warrant may
be exercised, the Company will at all times have authorized and reserved, for
the purpose of issue or transfer upon exercise of the subscription rights
evidenced by this Warrant, a sufficient number of shares of authorized but
unissued Common Stock, or other securities and property, when and as required to
provide for the exercise of the rights represented by this Warrant. The Company
will take all such action as may be necessary to assure that such shares of
Common Stock may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of any domestic securities
exchange upon which the Common Stock may be listed.
3. ADJUSTMENT OF STOCK PURCHASE PRICE AND NUMBER OF SHARES. The
Stock Purchase Price and the number of shares purchasable upon the exercise of
this Warrant shall be subject to adjustment from time to time upon the
occurrence of certain events described in this Section 3. Upon each adjustment
of the Stock Purchase Price, the Holder of this Warrant shall thereafter be
entitled to purchase, at the Stock Purchase Price resulting from such
adjustment, the number of shares obtained by multiplying the Stock Purchase
Price in effect immediately prior to such adjustment by the number of shares
purchasable pursuant hereto immediately prior to such adjustment, and dividing
the product thereof by the Stock Purchase Price resulting from such adjustment.
(a) SUBDIVISION OR COMBINATION OF STOCK. In case the Company
shall at any time subdivide its outstanding shares of Common Stock into a
greater number of shares, the Stock Purchase Price in effect immediately prior
to such subdivision shall be proportionately reduced, and conversely, in case
the outstanding shares of Common Stock of the Company shall be combined into a
smaller number of shares, the Stock Purchase Price in effect immediately prior
to such combination shall be proportionately increased.
(b) DIVIDENDS IN COMMON STOCK, OTHER STOCK, PROPERTY,
RECLASSIFICATION. If at any time or from time to time any holder of Common
Stock (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received or become entitled to receive,
without payment therefor,
(i) Common Stock or any shares of stock or other
securities which are at any time directly or indirectly convertible into or
exchangeable for Common Stock, or any rights or
2.
<PAGE>
options to subscribe for, purchase or otherwise acquire any of the foregoing by
way of dividend or other distribution;
(ii) Any cash paid or payable otherwise than as a cash
dividend; or
(iii) Common Stock or additional stock or other securities
or property (including cash) by way of spin-off, split-up, reclassification,
combination of shares or similar corporate rearrangement (other than (a) shares
of Common Stock issued as a stock split, adjustments in respect of which shall
be covered by the terms of Section 3(a) above or (b) an event for which
adjustment is otherwise made pursuant to Section 3(c) below);
then and in each such case, the Holder hereof shall, upon
the exercise of this Warrant, be entitled to receive, in addition to the number
of shares of Common Stock receivable thereupon, and without payment of any
additional consideration therefor, the amount of stock and other securities and
property (including cash in the case referred to in clause 3(b)(ii) above) which
such Holder would hold on the date of such exercise had they been the holder of
record of such Common Stock as of the date on which Holder of Common Stock
received or became entitled to receive such shares or all other additional stock
and other securities and property.
(c) REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR
SALE. If any capital reorganization of the capital stock of the Company, or any
consolidation or merger of the Company with another corporation, or the sale of
all or substantially all of its assets to another corporation shall be effected
in such a way that a holder of Common Stock shall be entitled to receive stock,
securities, or other assets or property, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provisions shall be made whereby the Holder hereof shall thereafter
have the right to purchase and receive (in lieu of the shares of the Common
Stock of the Company immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby) such shares of stock, securities or
other assets or property as may be issued or payable with respect to or in
exchange for a number of outstanding shares of such Common Stock equal to the
number of shares of such stock immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby PROVIDED, HOWEVER,
that in the event the value of the stock, securities or other assets or property
(determined in good faith by the Board of Directors of the Company) issuable or
payable with respect to one share of the Common Stock of the Company immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby is in excess of the Stock Purchase Price hereof effective at
the time of a merger and securities received in such reorganization, if any, are
publicly traded, then this Warrant shall expire unless exercised prior to such
reorganization, consolidation, merger or sale of assets. The Company will not
effect any such reorganization, consolidation, merger or sale unless, prior to
the consummation thereof, the successor corporation (if other than the Company)
or such corporation's parent resulting from such consolidation or the
corporation purchasing such assets shall assume by written instrument, executed
and mailed or delivered to the registered Holder hereof at the last address of
such Holder appearing on the books of the Company, the obligation to deliver to
such Holder such shares of stock, securities or assets as, in accordance with
the foregoing provisions, such Holder may be entitled to purchase.
(d) NOTICE OF ADJUSTMENT. Upon any adjustment of the Stock
Purchase Price or any increase or decrease in the number of shares purchasable
upon the exercise of this, the Company shall give written notice thereof, by
first class mail, postage prepaid, addressed to the
3.
<PAGE>
registered Holder of this Warrant at the address of such Holder as shown on the
books of the Company. The notice shall be signed by the Company's chief
financial officer and shall state the Stock Purchase Price resulting from such
adjustment and the increase or decrease, if any, in the number of shares
purchasable at such price upon the exercise of this Warrant, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.
(e) CERTAIN EVENTS. If any change in the outstanding Common
Stock of the Company or any other event occurs as to which the other provisions
of this Section 3 are not strictly applicable or if strictly applicable would
not fairly protect the purchase rights of the Holder of the Warrant in
accordance with such provisions, the Board of Directors of the Company shall
make an adjustment in the number and class of shares available under the
Warrant, the Stock Purchase Price or the application of such provisions, so as
to protect such purchase rights as aforesaid. The adjustment shall be such as
will give the Holder of the Warrant upon exercise for the same aggregate Stock
Purchase Price the total number, class and kind of shares as they would have
owned had the Warrant been exercised prior to the event and had they continued
to hold such shares until after the event requiring adjustment.
4. ISSUE TAX. The issuance of certificates for shares of Common
Stock upon the exercise of the Warrant shall be made without charge to the
Holder of the Warrant for any issue tax (other than any applicable income taxes)
in respect thereof; PROVIDED, HOWEVER, that the Company shall not be required to
pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of the then
Holder of the Warrant being exercised.
5. CLOSING OF BOOKS. The Company will at no time close its transfer
books against the transfer of any warrant or of any shares of Common Stock
issued or issuable upon the exercise of any warrant in any manner which
interferes with the timely exercise of this Warrant.
6. NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY. Nothing
contained in this Warrant shall be construed as conferring upon the Holder
hereof the right to vote or to consent or to receive notice as a stockholders of
the Company or any other matters or any rights whatsoever as a stockholders of
the Company. Except as otherwise provided herein, no dividends or interest
shall be payable or accrued in respect of this Warrant or the interest
represented hereby or the shares purchasable hereunder until, and only to the
extent that, this Warrant shall have been exercised. No provision hereof in the
absence of affirmative action by the Holder to purchase shares of Common Stock,
and no mere enumeration herein of the rights or privileges of the Holder hereof,
shall give rise to any liability of such Holder for the Stock Purchase Price or
as a stockholders of the Company, whether such liability is asserted by the
Company or by its creditors.
7. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The rights
and obligations of the Company, of the Holder of this Warrant and of the Holder
of shares of Common Stock issued upon exercise of this Warrant, referred to in
Section 7 shall survive the exercise of this Warrant.
8. NOTICES. Any notice, request or other document required or
permitted to be given or delivered to the Holder hereof or the Company shall be
delivered or shall be sent by certified mail, postage prepaid, to each such
holder at its address as shown on the books of the Company or to the Company at
the address indicated therefor in the first paragraph of this Warrant or such
other address as either may from time to time provide to the other and shall be
deemed to be received four
4.
<PAGE>
days after deposit in the U.S. Mail or two days after deposit with a nationally
recognized overnight courier.
9. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon
any corporation succeeding the Company by merger, consolidation or acquisition
of all or substantially all of the Company's assets. All of the obligations of
the Company relating to the Common Stock issuable upon the exercise of this
Warrant shall survive the exercise and termination of this Warrant. All of the
covenants and agreements of the Company shall inure to the benefit of the
successors and assigns of the Holder hereof.
10. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description headings
of the several sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. This Warrant
shall be construed and enforced in accordance with, and the rights of the
parties shall be governed by, the laws of the State of Colorado.
11. LOST WARRANTS. The Company represents and warrants to the Holder
hereof that upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction, or mutilation of this Warrant and, in the case of
any such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of such Warrant, the Company, at its expense, will
make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant.
12. FRACTIONAL SHARES. No fractional shares shall be issued upon
exercise of this Warrant. The Company shall, in lieu of issuing any fractional
share, pay the holder entitled to such fraction a sum in cash equal to such
fraction multiplied by the then effective Stock Purchase Price.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
5.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its officers, thereunto duly authorized this 18th day of June, 1999.
JATO COMMUNICATIONS CORP.
a Delaware Corporation
By: /s/ Brian E. Gast
-------------------------------------
Brian E. Gast
President and Chief Executive Officer
6.
<PAGE>
NOTICE OF EXERCISE
Date: ___________________
JATO Communications Corp.
Attention: Chief Executive Officer
Ladies and Gentlemen:
/ / The undersigned hereby elects to exercise the warrant issued to it by
JATO Communications Corp. (the "COMPANY") and dated June 18, 1999 Warrant
No. WCS-1 (the "WARRANT") and to purchase thereunder ____________________
______________ shares of Common Stock of the Company (the "SHARES") at a
purchase price of _________________________________ Dollars ($__________)
per Share or an aggregate purchase price of ____________________ Dollars
($__________) (the "PURCHASE PRICE").
/ / The undersigned hereby elects to convert _______________________ percent
(____%) of the value of the Warrant pursuant to the provisions of Section
1(c) of the Warrant.
Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
___________________________________
(name)
___________________________________
___________________________________
(address)
Pursuant to the terms of the Warrant the undersigned has delivered the
Purchase Price, if any, herewith in full in cash or by certified check or wire
transfer. The undersigned also makes the representations set forth on the
attached Investment Representation Letter.
Very truly yours,
-------------------------------------
By:
----------------------------------
Title:
-------------------------------
<PAGE>
INVESTMENT REPRESENTATION STATEMENT
TO: JATO Communications Corp.
With respect to the __________ shares of Common Stock ("SHARES") of JATO
COMMUNICATIONS CORP. ("COMPANY") which the undersigned ("PURCHASER") has
purchased from the Company today, the Purchaser hereby represents and warrants
as follows:
1. The Purchaser acknowledges that it has received no formal
prospectus or offering memorandum describing the business and operations of the
Company. It has, however, by virtue of his relationship with the Company, been
given access to all information that it believes is material to his decision to
purchase the Shares. The Purchaser has had the opportunity to ask questions of,
and receive answers from, representatives of the Company concerning its business
operations. Any questions raised by the Purchaser have been answered to his
satisfaction.
2. The Shares are being acquired by the Purchaser for its account,
for investment purposes only, and not with a view to the distribution or resale
thereof.
3. No representations or promises have been made concerning the
marketability or value of the Shares. The Purchaser understands that there is
currently no market for the transfer of the Shares. The Purchaser further
acknowledges that, because the Shares have not been registered under the
Securities Act of 1933, as amended (the "ACT"), or applicable state securities
laws, they cannot be resold unless they are subsequently registered under the
Act or applicable state securities laws, or an exemption from registration is
available, and the Purchaser must continue to bear the economic risk of his
investment in the Shares for an indefinite period of time. Specifically, the
Purchaser agrees that the Shares may not be transferred until the Company has
received an opinion of counsel reasonably satisfactory to it that the proposed
transfer will not violate federal or state securities laws. The Company has not
agreed or represented to the Purchaser that the Shares will be purchased or
redeemed from the Purchaser at any time in the future. The Purchaser further
understands that a notation will be made on the appropriate records of the
Company and on the stock certificate representing the Shares so that the
transfers of Shares will not be effected on those records without compliance
with the restrictions referred to above.
Date: By:
---------------------- ---------------------------
Name:
-------------------------
Title:
------------------------
<PAGE>
No. WCS-2 August 1, 1999
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
OF JATO COMMUNICATIONS CORP.
(VOID AFTER AUGUST 1, 2003)
THIS CERTIFIES that TEAH BENNETT (the "HOLDER"), for value received, are
entitled to purchase from JATO COMMUNICATIONS CORP., a Delaware corporation (the
"COMPANY"), having a place of business at 1099 18th St., Suite 700, Denver,
Colorado 80202, five thousand (5,000) shares of fully paid and nonassessable
shares of Company's Common Stock (the "COMMON STOCK") at a price of $3.00 per
share (the "STOCK PURCHASE PRICE"), at any time or from time to time beginning
on the date hereof and ending on the earlier to occur of (i) up to and including
5:00 p.m. (Colorado time) August 1, 2003, (ii) the closing of the initial
underwritten public offering of the Company's Common Stock pursuant to a
registration statement under the Securities Act of 1933, as amended or (iii) the
Acquisition (as defined below) of the Company (collectively, the "EXPIRATION
DATE") upon surrender to the Company at its principal office (or at such other
location as the Company may advise the Holder in writing) of this Warrant
properly endorsed with the Notice of Exercise and Investment Representation
Statement attached hereto duly filled in and executed and, if applicable, upon
payment in cash or by check of the aggregate Stock Purchase Price for the number
of shares for which this Warrant is being exercised determined in accordance
with the provisions hereof. The Stock Purchase Price and the number of shares
purchasable hereunder are subject to adjustment as provided in Section 3 of this
Warrant. For purposes hereof, an "Acquisition" shall mean any: (1) a sale of all
or substantially all of the assets of the Company; (2) a merger, reorganization
or consolidation pursuant to which the stockholders of the Company or its
successor immediately prior to such merger, reorganization or consolidation: (A)
hold less than 50% of the voting power of the surviving company following the
merger, reorganization or consolidation, or (B) in the event that the securities
of an affiliated entity are issued to the stockholders of the Company in the
transaction in exchange for their shares in the Company, hold less than 50% of
the voting power of such affiliated entity.
1. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
(a) GENERAL. This Warrant is exercisable at the option of the
Holder of record hereof, at any time or from time to time, up to the Expiration
Date for all or any part of the shares of Common Stock (but not for a fraction
of a share) which may be purchased hereunder.
(b) ISSUANCE OF CERTIFICATES. The Company agrees that the
shares of Common Stock purchased under this Warrant shall be and are deemed to
be issued to the Holder hereof as the record owner of such shares as of the
close of business on the date on which this Warrant shall have been surrendered,
properly endorsed and payment (if any) made for such shares. Certificates for
the
1.
<PAGE>
shares of Common Stock so purchased, together with any other securities or
property to which the Holder hereof are entitled upon such exercise, shall be
delivered to the Holder hereof by the Company at the Company's expense within a
reasonable time after the rights represented by this Warrant have been so
exercised. In case of a purchase of less than all the shares which may be
purchased under this Warrant, the Company shall cancel this Warrant and execute
and deliver a new Warrant or Warrants of like tenor for the balance of the
shares purchasable under the Warrant surrendered upon such purchase to the
Holder hereof within a reasonable time. Each stock certificate so delivered
shall be in such denominations of Common Stock as may be requested by the Holder
hereof and shall be registered in the name of such Holder or as directed by such
Holder.
2. SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company
covenants and agrees that all shares of Common Stock which may be issued upon
the exercise of the rights represented by this Warrant will, upon issuance, be
duly authorized, validly issued, fully paid and nonassessable and free from all
preemptive rights of any stockholders and free of all taxes, liens and charges
with respect to the issue thereof. The Company further covenants and agrees
that during the period within which the rights represented by this Warrant may
be exercised, the Company will at all times have authorized and reserved, for
the purpose of issue or transfer upon exercise of the subscription rights
evidenced by this Warrant, a sufficient number of shares of authorized but
unissued Common Stock, or other securities and property, when and as required to
provide for the exercise of the rights represented by this Warrant. The Company
will take all such action as may be necessary to assure that such shares of
Common Stock may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of any domestic securities
exchange upon which the Common Stock may be listed.
3. ADJUSTMENT OF STOCK PURCHASE PRICE AND NUMBER OF SHARES. The
Stock Purchase Price and the number of shares purchasable upon the exercise of
this Warrant shall be subject to adjustment from time to time upon the
occurrence of certain events described in this Section 3. Upon each adjustment
of the Stock Purchase Price, the Holder of this Warrant shall thereafter be
entitled to purchase, at the Stock Purchase Price resulting from such
adjustment, the number of shares obtained by multiplying the Stock Purchase
Price in effect immediately prior to such adjustment by the number of shares
purchasable pursuant hereto immediately prior to such adjustment, and dividing
the product thereof by the Stock Purchase Price resulting from such adjustment.
(a) SUBDIVISION OR COMBINATION OF STOCK. In case the Company
shall at any time subdivide its outstanding shares of Common Stock into a
greater number of shares, the Stock Purchase Price in effect immediately prior
to such subdivision shall be proportionately reduced, and conversely, in case
the outstanding shares of Common Stock of the Company shall be combined into a
smaller number of shares, the Stock Purchase Price in effect immediately prior
to such combination shall be proportionately increased.
(b) DIVIDENDS IN COMMON STOCK, OTHER STOCK, PROPERTY,
RECLASSIFICATION. If at any time or from time to time any holder of Common
Stock (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received or become entitled to receive,
without payment therefor,
(i) Common Stock or any shares of stock or other
securities which are at any time directly or indirectly convertible into or
exchangeable for Common Stock, or any rights or
2.
<PAGE>
options to subscribe for, purchase or otherwise acquire any of the foregoing
by way of dividend or other distribution;
(ii) Any cash paid or payable otherwise than as a cash
dividend; or
(iii) Common Stock or additional stock or other securities
or property (including cash) by way of spin-off, split-up, reclassification,
combination of shares or similar corporate rearrangement (other than (a) shares
of Common Stock issued as a stock split, adjustments in respect of which shall
be covered by the terms of Section 3(a) above or (b) an event for which
adjustment is otherwise made pursuant to Section 3(c) below);
then and in each such case, the Holder hereof shall, upon
the exercise of this Warrant, be entitled to receive, in addition to the number
of shares of Common Stock receivable thereupon, and without payment of any
additional consideration therefor, the amount of stock and other securities and
property (including cash in the case referred to in clause 3(b)(ii) above) which
such Holder would hold on the date of such exercise had they been the holder of
record of such Common Stock as of the date on which Holder of Common Stock
received or became entitled to receive such shares or all other additional stock
and other securities and property.
(c) REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR
SALE. If any capital reorganization of the capital stock of the Company, or any
consolidation or merger of the Company with another corporation, or the sale of
all or substantially all of its assets to another corporation shall be effected
in such a way that a holder of Common Stock shall be entitled to receive stock,
securities, or other assets or property, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provisions shall be made whereby the Holder hereof shall thereafter
have the right to purchase and receive (in lieu of the shares of the Common
Stock of the Company immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby) such shares of stock, securities or
other assets or property as may be issued or payable with respect to or in
exchange for a number of outstanding shares of such Common Stock equal to the
number of shares of such stock immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby PROVIDED, HOWEVER,
that in the event the value of the stock, securities or other assets or property
(determined in good faith by the Board of Directors of the Company) issuable or
payable with respect to one share of the Common Stock of the Company immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby is in excess of the Stock Purchase Price hereof effective at
the time of a merger and securities received in such reorganization, if any, are
publicly traded, then this Warrant shall expire unless exercised prior to such
reorganization, consolidation, merger or sale of assets. The Company will not
effect any such reorganization, consolidation, merger or sale unless, prior to
the consummation thereof, the successor corporation (if other than the Company)
or such corporation's parent resulting from such consolidation or the
corporation purchasing such assets shall assume by written instrument, executed
and mailed or delivered to the registered Holder hereof at the last address of
such Holder appearing on the books of the Company, the obligation to deliver to
such Holder such shares of stock, securities or assets as, in accordance with
the foregoing provisions, such Holder may be entitled to purchase.
(d) NOTICE OF ADJUSTMENT. Upon any adjustment of the Stock
Purchase Price or any increase or decrease in the number of shares purchasable
upon the exercise of this, the Company shall give written notice thereof, by
first class mail, postage prepaid, addressed to the
3.
<PAGE>
registered Holder of this Warrant at the address of such Holder as shown on the
books of the Company. The notice shall be signed by the Company's chief
financial officer and shall state the Stock Purchase Price resulting from such
adjustment and the increase or decrease, if any, in the number of shares
purchasable at such price upon the exercise of this Warrant, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.
(e) CERTAIN EVENTS. If any change in the outstanding Common
Stock of the Company or any other event occurs as to which the other provisions
of this Section 3 are not strictly applicable or if strictly applicable would
not fairly protect the purchase rights of the Holder of the Warrant in
accordance with such provisions, the Board of Directors of the Company shall
make an adjustment in the number and class of shares available under the
Warrant, the Stock Purchase Price or the application of such provisions, so as
to protect such purchase rights as aforesaid. The adjustment shall be such as
will give the Holder of the Warrant upon exercise for the same aggregate Stock
Purchase Price the total number, class and kind of shares as they would have
owned had the Warrant been exercised prior to the event and had they continued
to hold such shares until after the event requiring adjustment.
4. ISSUE TAX. The issuance of certificates for shares of Common
Stock upon the exercise of the Warrant shall be made without charge to the
Holder of the Warrant for any issue tax (other than any applicable income taxes)
in respect thereof; PROVIDED, HOWEVER, that the Company shall not be required to
pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of the then
Holder of the Warrant being exercised.
5. CLOSING OF BOOKS. The Company will at no time close its transfer
books against the transfer of any warrant or of any shares of Common Stock
issued or issuable upon the exercise of any warrant in any manner which
interferes with the timely exercise of this Warrant.
6. NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY. Nothing
contained in this Warrant shall be construed as conferring upon the Holder
hereof the right to vote or to consent or to receive notice as a stockholders of
the Company or any other matters or any rights whatsoever as a stockholders of
the Company. Except as otherwise provided herein, no dividends or interest
shall be payable or accrued in respect of this Warrant or the interest
represented hereby or the shares purchasable hereunder until, and only to the
extent that, this Warrant shall have been exercised. No provision hereof in the
absence of affirmative action by the Holder to purchase shares of Common Stock,
and no mere enumeration herein of the rights or privileges of the Holder hereof,
shall give rise to any liability of such Holder for the Stock Purchase Price or
as a stockholders of the Company, whether such liability is asserted by the
Company or by its creditors.
7. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The rights
and obligations of the Company, of the Holder of this Warrant and of the Holder
of shares of Common Stock issued upon exercise of this Warrant, referred to in
Section 7 shall survive the exercise of this Warrant.
8. NOTICES. Any notice, request or other document required or
permitted to be given or delivered to the Holder hereof or the Company shall be
delivered or shall be sent by certified mail, postage prepaid, to each such
holder at its address as shown on the books of the Company or to the Company at
the address indicated therefor in the first paragraph of this Warrant or such
other address as either may from time to time provide to the other and shall be
deemed to be received four
4.
<PAGE>
days after deposit in the U.S. Mail or two days after deposit with a nationally
recognized overnight courier.
9. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon
any corporation succeeding the Company by merger, consolidation or acquisition
of all or substantially all of the Company's assets. All of the obligations of
the Company relating to the Common Stock issuable upon the exercise of this
Warrant shall survive the exercise and termination of this Warrant. All of the
covenants and agreements of the Company shall inure to the benefit of the
successors and assigns of the Holder hereof.
10. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description headings
of the several sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. This Warrant
shall be construed and enforced in accordance with, and the rights of the
parties shall be governed by, the laws of the State of Colorado.
11. LOST WARRANTS. The Company represents and warrants to the Holder
hereof that upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction, or mutilation of this Warrant and, in the case of
any such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of such Warrant, the Company, at its expense, will
make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant.
12. FRACTIONAL SHARES. No fractional shares shall be issued upon
exercise of this Warrant. The Company shall, in lieu of issuing any fractional
share, pay the holder entitled to such fraction a sum in cash equal to such
fraction multiplied by the then effective Stock Purchase Price.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
5.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its officers, thereunto duly authorized this 1st day of August,
1999.
JATO COMMUNICATIONS CORP.
a Delaware Corporation
By: /s/ Brian E. Gast
-------------------------------------
Brian E. Gast
President and Chief Executive Officer
6.
<PAGE>
NOTICE OF EXERCISE
Date: _________________
JATO Communications Corp.
Attention: Chief Executive Officer
Ladies and Gentlemen:
/ / The undersigned hereby elects to exercise the warrant issued to it by
JATO Communications Corp. (the "COMPANY") and dated August 1, 1999
Warrant No. WCS-2 (the "WARRANT") and to purchase thereunder __________
__________________________________ shares of Common Stock of the Company
(the "SHARES") at a purchase price of _________________________________
___________________________________________ Dollars ($__________) per
Share or an aggregate purchase price of
__________________________________ Dollars ($__________) (the "PURCHASE
PRICE").
/ / The undersigned hereby elects to convert _______________________ percent
(____%) of the value of the Warrant pursuant to the provisions of Section
1(c) of the Warrant.
Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
___________________________________
(name)
___________________________________
___________________________________
(address)
Pursuant to the terms of the Warrant the undersigned has delivered the
Purchase Price, if any, herewith in full in cash or by certified check or wire
transfer. The undersigned also makes the representations set forth on the
attached Investment Representation Letter.
Very truly yours,
---------------------------------
By:
------------------------------
Title:
---------------------------
<PAGE>
INVESTMENT REPRESENTATION STATEMENT
TO: JATO Communications Corp.
With respect to the __________ shares of Common Stock ("SHARES") of JATO
COMMUNICATIONS CORP. ("COMPANY") which the undersigned ("PURCHASER") has
purchased from the Company today, the Purchaser hereby represents and warrants
as follows:
1. The Purchaser acknowledges that it has received no formal
prospectus or offering memorandum describing the business and operations of the
Company. It has, however, by virtue of his relationship with the Company, been
given access to all information that it believes is material to his decision to
purchase the Shares. The Purchaser has had the opportunity to ask questions of,
and receive answers from, representatives of the Company concerning its business
operations. Any questions raised by the Purchaser have been answered to his
satisfaction.
2. The Shares are being acquired by the Purchaser for its account,
for investment purposes only, and not with a view to the distribution or resale
thereof.
3. No representations or promises have been made concerning the
marketability or value of the Shares. The Purchaser understands that there is
currently no market for the transfer of the Shares. The Purchaser further
acknowledges that, because the Shares have not been registered under the
Securities Act of 1933, as amended (the "ACT"), or applicable state securities
laws, they cannot be resold unless they are subsequently registered under the
Act or applicable state securities laws, or an exemption from registration is
available, and the Purchaser must continue to bear the economic risk of his
investment in the Shares for an indefinite period of time. Specifically, the
Purchaser agrees that the Shares may not be transferred until the Company has
received an opinion of counsel reasonably satisfactory to it that the proposed
transfer will not violate federal or state securities laws. The Company has not
agreed or represented to the Purchaser that the Shares will be purchased or
redeemed from the Purchaser at any time in the future. The Purchaser further
understands that a notation will be made on the appropriate records of the
Company and on the stock certificate representing the Shares so that the
transfers of Shares will not be effected on those records without compliance
with the restrictions referred to above.
Date: By:
------------------------------- --------------------------------
Name:
------------------------------
Title:
-----------------------------
<PAGE>
JATO COMMUNICATIONS CORP.
FOUNDER'S STOCK PURCHASE AGREEMENT
THIS FOUNDER'S STOCK PURCHASE AGREEMENT (the "Agreement") is made as of
the 13th day of July, 1998, by and between JATO Communications Corp., a
Delaware corporation (the "Company"), and Brian E. Gast ("Purchaser").
WHEREAS, the Company desires to issue, and Purchaser desires to
purchase, stock of the Company as herein described, on the terms and
conditions hereinafter set forth; and
WHEREAS, the issuance of common stock hereby is in connection with a
compensatory benefit plan for the employees, directors, officers, advisers or
consultants of the Company and is intended to comply with the provisions of
Rule 701 promulgated by the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Act").
NOW, THEREFORE, IT IS AGREED between the parties as follows:
1. PURCHASE AND SALE OF STOCK. Purchaser hereby agrees to purchase
from the Company, and the Company hereby agrees to sell to Purchaser, an
aggregate of one million one hundred fifty-two thousand six hundred
sixty-seven (1,152,667) shares of the Common Stock of the Company (the
"Stock") at a purchase price of $.047 per share, for an aggregate purchase
price of $54,175.35, payable (i) in cash or by check , (ii) by assignment of
certain proprietary rights to the Company as set forth on EXHIBIT A attached
hereto or (iii) by a combination of (i) and (ii).
The closing hereunder, including payment for and delivery of the Stock
shall occur at the offices of the Company immediately following the execution
of this Agreement, or at such other time and place as the parties may
mutually agree.
2. CO-FOUNDERS REPURCHASE RIGHT. In the event that Purchaser
voluntarily terminates his relationship with the Company (or a parent or
subsidiary of the Company), whether as an employee, director or consultant,
then Leonard Allsup and Bruce E. Dines (each a "Co-Founder") shall each have
the right, exercisable upon written notice to Purchaser within thirty (30)
days of the date of such termination, to purchase his pro rata share of the
Stock which has not vested pursuant to Section 4 below as of such termination
date, at a purchase price of $.047 per share (the "Co-Founders' Option").
The Co-Founder's pro rata portion shall be that number of shares equal to the
product obtained by multiplying (x) the aggregate number of shares of Stock
which have not vested pursuant to Section 4 below by (y) a fraction the
numerator of which is the number of shares of Common Stock owned by such
Co-Founder (on an as-if-converted basis) at the time of Purchaser's
termination and the denominator of which is the total number of shares of
Common Stock owned by each of the Co-Founders (on an as-if-converted basis)
at the time of Purchaser's termination.
1.
<PAGE>
3. COMPANY'S REPURCHASE RIGHT.
(a) In the event that Purchaser voluntarily terminates his
relationship with the Company (or a parent or subsidiary of the Company),
whether as an employee, director or consultant, and the Co-Founders do not
purchase all of Purchaser's unvested Stock pursuant to the Co-Founders'
Option under Section 2 above within the period set forth therein, the Company
shall then have the right, exercisable upon written notice to Purchaser
within thirty (30) days after the expiration of the Co-Founders' Option, to
purchase all or a portion of the Stock which has not vested pursuant to
Section 4 below as of such termination date (less shares purchased by the
Co-Founders pursuant to Section 2 above), at a purchase price of $.047 per
share.
(b) In the event the Company terminates Purchaser's relationship
with the Company (or a parent or subsidiary of the Company), whether as an
employee, director or consultant, for Cause (as defined below), then the
Company shall have an option for a period of ninety (90) days after said
termination to repurchase from Purchaser, at a purchase price of $.047 per
share, up to but not exceeding the number of shares of Stock which have not
vested under the provisions of Section 4 below as of such termination date.
(c) "Cause" as used herein shall mean: (i) conviction of any
felony or of any crime involving moral turpitude or dishonesty; (ii)
participation in a fraud or act of dishonesty against the Company; (iii)
breach of Purchaser's duties to the Company, including persistent
unsatisfactory performance of job duties; (iv) intentional damage to any
property of the Company; or (v) conduct by Purchaser which in the good faith
and reasonable determination of the Board demonstrates gross unfitness to
serve; PROVIDED, HOWEVER, that Purchaser shall not be deemed to have been
terminated for Cause pursuant to clauses (iii) or (v) above unless the
Company shall have provided Purchaser written notice of such breach or
conduct and Purchaser shall have failed to cure the same to the reasonable
satisfaction of the Company within thirty (30) days after receipt of such
notice.
(d) In the event that Purchaser's relationship with the Company
(or a parent or subsidiary of the Company) is terminated by reason of
Purchaser's death or disability (as defined in Section 22(c)(3) of the
Internal Revenue Code of 1986, as amended (the "Code")), then the Company
shall have an option for a period of ninety (90) days after said termination
to repurchase from Purchaser's personal representative at a purchase price of
$.047 per share, up to but not exceeding fifty percent (50%) of the number of
shares of Stock which have not vested under the provisions of Section 4 below
as of such termination date (together with the options set forth in Sections
3(a) and 3(b) above, the "Repurchase Option").
(e) In the event that the Company terminates Purchaser's
relationship with the Company (or a parent or subsidiary of the Company),
whether as an employee, director or consultant, other than for Cause, the
Company shall have no right to repurchase from Purchaser any shares of Stock,
whether vested or unvested.
(f) The Repurchase Option shall be exercised by written notice
signed by an officer of the Company or by any assignee or assignees of the
Company and delivered or mailed
2.
<PAGE>
as provided in Section 17(a). Such notice shall identify the number of
shares of Stock to be repurchased and shall notify Purchaser of the time,
place and date for settlement of such repurchase, which shall be scheduled by
the Company within the term of the Repurchase Option set forth in this
Section 3. The Company shall be entitled to pay for any shares of Stock
repurchased pursuant to its Repurchase Option in cash or by offset against
any indebtedness owing to the Company by Purchaser, or by a combination of
both. Upon delivery of such notice and payment of the purchase price in any
of the ways described above, the Company shall become the legal and
beneficial owner of the Stock being repurchased and all rights and interest
therein or related thereto, and the Company shall have the right to transfer
to its own name the Stock being repurchased by the Company, without further
action by Purchaser.
4. VESTING. Subject to the acceleration of vesting set forth in
Section 7 below, 115,266 shares (representing ten percent (10%) of the Stock)
shall vest and be released from the Co-Founders' Option and the Repurchase
Option immediately on the date hereof. An additional 230,533 shares
(representing twenty percent (20%) of the Stock) shall vest and be released
from the Co-Founders' Option and the Repurchase Option on January 1, 2000.
The remaining 806,868 shares (representing seventy percent (70%) of the
Stock) shall vest in equal monthly installments thereafter, such that 33,619
shares shall vest and be released from the Co-Founders' Option and the
Repurchase Option on the first day of each month beginning on February 1,
2000, with a final installment of 33,631 shares vesting on January 1, 2002
(provided in each case that Purchaser's relationship as an employee, director
or consultant of the Company (or a parent or subsidiary of the Company) has
not been terminated prior to the date of such release).
5. ADJUSTMENTS TO STOCK. If, from time to time, during the term of the
Co-Founders' Option or the Repurchase Option, there is any change affecting
the Company's outstanding Common Stock as a class that is effected without
the receipt of consideration by the Company (through merger, consolidation,
reorganization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), then any and all new, substituted or
additional securities or other property to which Purchaser is entitled by
reason of Purchaser's ownership of Stock shall be immediately subject to the
Co-Founders' Option and the Repurchase Option and shall be deemed to be
"Stock" for all purposes hereunder with the same force and effect as the
shares of the Stock presently subject to the Co-Founders' Option and the
Repurchase Option, but only to the extent the Stock is, at the time, covered
by such Co-Founders' Option or Repurchase Option. While the aggregate
purchase price shall remain the same after each such event, the purchase
price per share of Stock upon exercise of the Co-Founders' Option or the
Repurchase Option shall be appropriately adjusted.
6. CORPORATE TRANSACTION. All previously unvested shares of Stock
shall vest immediately prior to the closing of (i) a sale of all or
substantially all of the assets of the Company; (ii) a merger or
consolidation in which the Company is not the surviving corporation; (iii) a
reverse merger in which the company is the surviving corporation but the
shares of the Company's Common Stock outstanding immediately preceding the
merger are converted by virtue of the merger into other property, whether in
the form of securities, cash or otherwise; or
3.
<PAGE>
(iv) the acquisition by any person, entity or group within the meaning of
Section 13(d) or 14(d) of the Exchange Act, or any comparable successor
provisions (excluding any employee benefit plan, or related trust, sponsored
or maintained by the Company or any affiliate) of the beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act, or
comparable successor rule) of securities of the Company representing at least
fifty percent (50%) of the combined voting power entitled to vote in the
election of directors ((i) through (iv) being collectively referred to herein
as a "Corporate Transaction").
7. TERMINATION OF CO-FOUNDERS' OPTION AND REPURCHASE OPTION. The
Co-Founders' Option and the Repurchase Option shall terminate (i) immediately
prior to the closing of a Corporate Transaction or (ii) upon exercise in full
or expiration of the Co-Founders' Option or the Repurchase Option, as
applicable, whichever first occurs.
8. ESCROW OF UNVESTED STOCK. As security for Purchaser's faithful
performance of the terms of this Agreement and to insure the availability for
delivery of Purchaser's Stock upon exercise of the Co-Founders' Option or the
Repurchase Option, Purchaser agrees, at the closing hereunder, to deliver to
and deposit with the Secretary, as escrow agent in this transaction (the
"Escrow Agent"), three (3) stock assignments duly endorsed (with date and
number of shares blank) in the form attached hereto as EXHIBIT B, together
with a certificate or certificates evidencing all of the Stock subject to the
Repurchase Option; said documents are to be held by the Escrow Agent and
delivered by said Escrow Agent pursuant to the Joint Escrow Instructions of
the Company and Purchaser set forth in EXHIBIT C attached hereto and
incorporated by this reference, which instructions shall also be delivered to
the Escrow Agent at the closing hereunder.
9. RIGHTS OF PURCHASER. Subject to the provisions of Sections 8, 10
and 13 herein, Purchaser shall at all times exercise all rights and
privileges of a stockholder of the Company with respect to the Stock, whether
vested or unvested, including all voting rights incident thereto.
10. LIMITATIONS ON TRANSFER. In addition to any other limitation on
transfer created by applicable securities laws, Purchaser shall not assign,
hypothecate, donate, encumber or otherwise dispose of any interest in the
Stock while the Stock is subject to the Co-Founders' Option or the Repurchase
Option. After any Stock has been released from the Co-Founders' Option and
the Repurchase Option, Purchaser shall not assign, hypothecate, donate,
encumber or otherwise dispose of any interest in the Stock except in
compliance with the provisions herein and applicable securities laws.
Furthermore, the Stock shall be subject to any right of first refusal in
favor of the Company or its assignees that may be contained in the Company's
Bylaws. Notwithstanding the foregoing, Purchaser may transfer all or any
portion of the Stock to his spouse, father, mother, brother, sister or lineal
descendants, PROVIDED; HOWEVER, that all shares of Stock so transferred by
Purchaser shall continue to be subject to the provisions of this Agreement
and shall remain "Stock" for all purposes hereunder.
4.
<PAGE>
11. RESTRICTIVE LEGENDS. All certificates representing the Stock shall
have endorsed thereon legends in substantially the following forms (in
addition to any other legend which may be required by other agreements
between the parties hereto):
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN
OPTION SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED
HOLDER, OR SUCH HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE
AT THE PRINCIPAL OFFICE OF THE COMPANY. ANY TRANSFER OR ATTEMPTED TRANSFER
OF ANY SHARES SUBJECT TO SUCH OPTION IS VOID WITHOUT THE PRIOR EXPRESS
WRITTEN CONSENT OF THE COMPANY."
(b) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED."
(c) Any legend required by appropriate blue sky officials.
12. INVESTMENT REPRESENTATIONS. In connection with the purchase of the
Stock, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company
to reach an informed and knowledgeable decision to acquire the Stock.
Purchaser is purchasing the Stock for investment for Purchaser's own account
only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Act.
(b) Purchaser understands that the Stock has not been registered
under the Act by reason of a specific exemption therefrom, which exemption
depends upon, among other things, the bona fide nature of Purchaser's
investment intent as expressed herein.
(c) Purchaser further acknowledges and understands that the Stock
must be held indefinitely unless the Stock is subsequently registered under
the Act or an exemption from such registration is available. Purchaser
further acknowledges and understands that the Company is under no obligation
to register the Stock. Purchaser understands that the certificate evidencing
the Stock will be imprinted with a legend which prohibits the transfer of the
Stock unless the Stock is registered or such registration is not required in
the opinion of counsel for the Company.
(d) Purchaser is familiar with the provisions of Rules 144 and
701, under the Act, as in effect from time to time, which, in substance,
permit limited public resale of "restricted securities" acquired, directly or
indirectly, from the issuer thereof (or from an affiliate of such issuer), in
a non-public offering subject to the satisfaction of certain conditions.
Rule 701
5.
<PAGE>
provides that if the issuer qualifies under Rule 701 at the time of issuance
of the securities, such issuance will be exempt from registration under the
Act. In the event the Company becomes subject to the reporting requirements
of Section 13 or 15(d) of the Securities Exchange Act of 1934, the securities
exempt under Rule 701 may be sold by Purchaser ninety (90) days thereafter,
subject to the satisfaction of certain of the conditions specified by Rule
144 and the market stand-off provision described in Section 13 below.
In the event that the sale of the Stock does not qualify under Rule 701
at the time of purchase, then the Stock may be resold by Purchaser in certain
limited circumstances subject to the provisions of Rule 144, which requires,
among other things: (i) the availability of certain public information about
the Company and (ii) the resale occurring following the required holding
period under Rule 144 after the Purchaser has purchased, and made full
payment of (within the meaning of Rule 144), the securities to be sold.
(e) Purchaser further understands that at the time Purchaser
wishes to sell the Stock there may be no public market upon which to make
such a sale, and that, even if such a public market then exists, the Company
may not be satisfying the current public information requirements of Rule 144
or 701, and that, in such event, Purchaser would be precluded from selling
the Stock under Rule 144 or 701 even if the minimum holding period
requirement had been satisfied.
(f) Purchaser further represents and warrants that Purchaser has
either (i) preexisting personal or business relationships with the Company or
any of its officers, directors or controlling persons or (ii) the capacity to
protect his own interests in connection with the purchase of the Stock by
virtue of the business or financial expertise of himself or of professional
advisors to Purchaser who are unaffiliated with and who are not compensated
by the Company or any of its affiliates, directly or indirectly.
13. MARKET STAND-OFF. In connection with the first firmly underwritten
public offering of the Company's securities under the Act (the "Initial
Offering"), Purchaser shall not sell, dispose of, transfer, make any short
sale of, grant any option for the purchase of, or enter into any hedging or
similar transaction with the same economic effect as a sale with respect to,
any Common Stock of the Company held by Purchaser, including the Stock (the
"Restricted Securities"), for a period of time specified by the
underwriter(s) (not to exceed one hundred eighty (180) days) following the
effective date of the registration statement filed under the Act in
connection with such Initial Offering. Purchaser agrees to execute and
deliver such other agreements as may be reasonably requested by the Company
and/or the underwriter(s) which are consistent with the foregoing or which
are necessary to give further effect thereto. In order to enforce the
foregoing covenant, the Company may impose stop-transfer instructions with
respect to Purchaser's Restricted Securities until the end of such period.
14. SECTION 83(b) ELECTION. Purchaser understands that Section 83(a)
of the Code, taxes as ordinary income the difference between the amount paid
for the Stock and the fair market value of the Stock as of the date any
restrictions on the Stock lapse. In this context, "restriction" includes the
right of the Co-Founders to buy the Stock from Purchaser pursuant to
6.
<PAGE>
the Co-Founders' Option set forth in Section 2 above and the right of the
Company to repurchase the Stock pursuant to the Repurchase Option set forth
in Section 3 above. Purchaser understands that Purchaser may elect to be
taxed at the time the Stock is purchased, rather than when and as the
Co-Founders' Option and the Repurchase Option expire, by filing an election
under Section 83(b) (an "83(b) Election") of the Code with the Internal
Revenue Service within thirty (30) days from the date of purchase in the form
attached hereto as EXHIBIT D. Even if the fair market value of the Stock at
the time of the execution of this Agreement equals the amount paid for the
Stock, the 83(b) Election must be made to avoid income under Section 83(a) in
the future. Purchaser understands that failure to file such an 83(b)
Election in a timely manner may result in adverse tax consequences for
Purchaser. Purchaser further understands that an additional copy of such
83(b) Election is required to be filed with his or her federal income tax
return for the calendar year in which the date of this Agreement falls.
Purchaser acknowledges that the foregoing is only a summary of the effect of
United States federal income taxation with respect to purchase of the Stock
hereunder, and does not purport to be complete. Purchaser further
acknowledges that the Company has directed Purchaser to seek independent
advice regarding the applicable provisions of the Code, the income tax laws
of any municipality, state or foreign country in which Purchaser may reside,
and the tax consequences of Purchaser's death. PURCHASER ASSUMES ALL
RESPONSIBILITY FOR FILING AN 83(B) ELECTION AND PAYING ALL TAXES RESULTING
FROM SUCH ELECTION OR THE LAPSE OF THE RESTRICTIONS ON THE STOCK.
15. REFUSAL TO TRANSFER. The Company shall not be required (i) to
transfer on its books any shares of Stock of the Company which shall have
been transferred in violation of any of the provisions set forth in this
Agreement or (ii) to treat as owner of such shares or to accord the right to
vote as such owner or to pay dividends to any transferee to whom such shares
shall have been so transferred.
16. NO EMPLOYMENT RIGHTS. This Agreement is not an employment contract
and shall not be deemed to create in any way whatsoever any obligation on
your part to continue in the employ of the Company (or a parent or subsidiary
of the Company), or of the Company (or a parent or subsidiary of the Company)
to continue your employment.
17. MISCELLANEOUS.
(a) NOTICES. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given upon personal delivery
or sent by telegram or fax or upon deposit in the United States Post Office,
by registered or certified mail with postage and fees prepaid, addressed to
the other party hereto at its address hereinafter shown below its signature
or at such other address as such party may designate by ten (10) days'
advance written notice to the other party hereto.
(b) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of the successors and assigns of the Company and, subject to the
restrictions on transfer herein set forth, be binding upon Purchaser,
Purchaser's successors, and assigns. The Repurchase Option of the Company
hereunder shall be assignable by the Company at any time or from time to
time, in whole or in part.
7.
<PAGE>
(c) ATTORNEYS' FEES; SPECIFIC PERFORMANCE. Purchaser shall
reimburse the Company for all costs incurred by the Company in enforcing the
performance of, or protecting its rights under, any part of this Agreement,
including reasonable costs of investigation and attorneys' fees. It is the
intention of the parties that the Company, upon exercise of the Repurchase
Option and payment of the purchase price thereunder, pursuant to the terms of
this Agreement, shall be entitled to receive the Stock, in specie, in order
to have such Stock available for future issuance without dilution of the
holdings of other stockholders. Furthermore, it is expressly agreed between
the parties that money damages are inadequate to compensate the Company for
the Stock and that the Company shall, upon proper exercise of the Repurchase
Option, be entitled to specific enforcement of its rights to purchase and
receive said Stock.
(d) GOVERNING LAW; VENUE. This Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado. The parties
agree that any action brought by either party to interpret or enforce any
provision of this Agreement shall be brought in, and each party agrees to,
and does hereby, submit to the jurisdiction and venue of, the appropriate
state or federal court for the district encompassing the Company's principal
place of business.
(e) FURTHER EXECUTION. The parties agree to take all such further
action(s) as may reasonably be necessary to carry out and consummate this
Agreement as soon as practicable, and to take whatever steps may be necessary
to obtain any governmental approval in connection with or otherwise qualify
the issuance of the securities that are the subject of this Agreement.
(f) INDEPENDENT COUNSEL. Purchaser acknowledges that this
Agreement has been prepared on behalf of the Company by Cooley Godward LLP,
counsel to the Company and that Cooley Godward LLP does not represent, and is
not acting on behalf of, Purchaser. Purchaser has been provided with an
opportunity to consult with Purchaser's own counsel with respect to this
Agreement.
(g) ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the
entire agreement between the parties with respect to the subject matter
hereof and supersedes and merges all prior agreements or understandings,
whether written or oral. This Agreement may not be amended, modified or
revoked, in whole or in part, except by an agreement in writing signed by
each of the parties hereto.
(h) SEVERABILITY. If a provision of this Agreement is held to be
unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i)
such provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and
(iii) the balance of the Agreement shall be enforceable in accordance with
its terms.
(i) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
8.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
JATO Communications Corp.
A Delaware corporation
By: /s/ Bruce E. Dines
--------------------------------------
Bruce E. Dines
Vice President and Secretary
Address: 5660 Greenwood Plaza Blvd.
Suite 220
Englewood, CO 80111
PURCHASER:
/s/ Brian E. Gast
-----------------------------------------
BRIAN E. GAST
Address: 45 Long Bow Circle
---------------------------------
Monument, CO 80132
-----------------------------------------
-----------------------------------------
CO-FOUNDERS:
/s/ Bruce E. Dines
-----------------------------------------
BRUCE E. DINES
/s/ Leonard Allsup
-----------------------------------------
LEONARD ALLSUP
ATTACHMENTS:
Exhibit A -- Assignment of Proprietary Rights
Exhibit B -- Stock Assignment Separate from Certificate
Exhibit C -- Joint Escrow Instructions
Exhibit D -- Section 83(b) Election
9.
<PAGE>
EXHIBIT A
ASSIGNMENT OF PROPRIETARY RIGHTS
In partial consideration for the sale to me of 1,152,667 shares of Common
Stock of JATO Communications Corp., a Delaware corporation (the "Company"), I,
Brian E. Gast, hereby assign all of my right, title and interest in the
following technology to the Company:
know-how related to data networks
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<PAGE>
EXHIBIT B
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Founder's Stock Purchase
Agreement (the "Agreement") dated as of July 13, 1998, Brian E. Gast hereby
sells, assigns and transfers unto ________________________,
_____________________________________________ (_________) shares of Common
Stock of JATO Communications Corp., a Delaware corporation (the "Company"),
standing in the undersigned's name on the Company's books represented by
Certificate No. _____ herewith, and does hereby irrevocably constitute and
appoint the Secretary of the Company attorney to transfer the said stock on
the books of the said Company with full power of substitution in the
premises. This Assignment may be used only in accordance with and subject to
the terms and conditions of the Agreement, in connection with the repurchase
of shares of Common Stock issued to the undersigned pursuant to the
Agreement, and only to the extent that such shares remain subject to the
Co-Founders' Option or the Company's Repurchase Option under the Agreement.
Dated:
----------------------------- -------------------------------------
[Signature]
-------------------------------------
Brian E. Gast
<PAGE>
EXHIBIT C
JOINT ESCROW INSTRUCTIONS
Bruce E. Dines
JATO Communications Corp.
5660 Greenwood Plaza Blvd.
Suite 220
Englewood, CO 80111
Dear Sir:
As Escrow Agent for both JATO Communications Corp., a Delaware
corporation (the "Company"), and the undersigned purchaser of stock of the
Company ("Purchaser"), you are hereby authorized and directed to hold the
documents delivered to you pursuant to the terms of that certain Founder's
Stock Purchase Agreement (the "Agreement"), dated July 13, 1998 to which a
copy of these Joint Escrow Instructions is attached as Exhibit C, in
accordance with the following instructions:
1. In the event a Co-Founder or the Company or an assignee of the
Company shall elect to exercise the Co-Founders' Option or the Repurchase
Option, as the case may be, as set forth in the Agreement, the Co-Founder or
the Company or its assignee, as the case may be, will give to Purchaser and
you a written notice specifying the number of shares of stock to be
purchased, the purchase price, and the time for a closing hereunder at the
principal office of the Company. Purchaser, the Co-Founders and the Company
hereby irrevocably authorize and direct you to close the transaction
contemplated by such notice in accordance with the terms of said notice.
2. At the closing you are directed (a) to date any stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Co-Founder or the
Company, as applicable, against the simultaneous delivery to you of the
purchase price (which may include suitable acknowledgment of cancellation of
indebtedness) of the number of shares of stock being purchased pursuant to
the exercise of the Co-Founders' Option or the Repurchase Option, as
applicable.
3. Purchaser irrevocably authorizes the Company to deposit with you
any certificates evidencing shares of stock to be held by you hereunder and
any additions and substitutions to said shares as specified in the Agreement.
Purchaser hereby irrevocably constitutes and appoints you as his
attorney-in-fact and agent for the term of this escrow to execute with
respect to such securities and other property all documents of assignment
and/or transfer and all stock certificates necessary or appropriate to make
all securities negotiable and complete any transaction herein contemplated.
<PAGE>
4. This escrow shall terminate upon (i) the expiration of the
Co-Founders' Option and the Repurchase Option or (ii) the exercise in full of
the Co-Founders' Option or the Repurchase Option, whichever occurs first.
5. If at the time of termination of this escrow you should have in
your possession any documents, securities, or other property belonging to
Purchaser, you shall deliver all of same to Purchaser and shall be discharged
of all further obligations hereunder; PROVIDED, HOWEVER, that if at the time
of termination of this escrow you are advised by the Company that the
property subject to this escrow is the subject of a pledge or other security
agreement, you shall deliver all such property to the pledgeholder or other
person designated by the Company.
6. Except as otherwise provided in these Joint Escrow Instructions,
your duties hereunder may be altered, amended, modified or revoked only by a
writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as
are specifically set forth herein and may rely and shall be protected in
relying or refraining from acting on any instrument reasonably believed by
you to be genuine and to have been signed or presented by the proper party or
parties or their assignees. You shall not be personally liable for any act
you may do or omit to do hereunder as Escrow Agent or as attorney-in-fact for
Purchaser while acting in good faith, and any act done or omitted by you
pursuant to the advice of your own attorneys shall be conclusive evidence of
such good faith.
8. You are hereby expressly authorized to disregard any and all
warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law, and are
hereby expressly authorized to comply with and obey orders, judgments or
decrees of any court. In case you obey or comply with any such order,
judgment or decree of any court, you shall not be liable to any of the
parties hereto or to any other person, firm or corporation by reason of such
compliance, notwithstanding any such order, judgment or decree being
subsequently reversed, modified, annulled, set aside, vacated or found to
have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authority or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or
called for hereunder.
10. You shall not be liable for the outlawing of any rights under any
statute of limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. You shall be entitled to employ such legal counsel (including
without limitation the firm of Cooley Godward LLP) and other experts as you
may deem necessary properly to advise you in connection with your obligations
hereunder, may rely upon the advice of such counsel, and may pay such counsel
reasonable compensation therefor.
<PAGE>
12. Your responsibilities as Escrow Agent hereunder shall terminate if
you shall resign by written notice to each party. In the event of any such
termination, the Company may appoint any officer or assistant officer of the
Company as successor Escrow Agent and Purchaser hereby confirms the
appointment of such successor or successors as his attorney-in-fact and agent
to the full extent of your appointment.
13. If you reasonably require other or further instruments in
connection with these Joint Escrow Instructions or obligations in respect
hereto, the necessary parties hereto shall join in furnishing such
instruments.
14. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
securities, you may (but are not obligated to) retain in your possession
without liability to anyone all or any part of said securities until such
dispute shall have been settled either by mutual written agreement of the
parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal
has been perfected, but you shall be under no duty whatsoever to institute or
defend any such proceedings.
15. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in any United States Post Office Box, by registered or certified mail
with postage and fees prepaid, addressed to each of the other parties
hereunto entitled at the following addresses specified below, or at such
other addresses as a party may designate by ten days' written notice to each
of the other parties hereto:
16. By signing these Joint Escrow Instructions you become a party
hereto only for the purpose of said Joint Escrow Instructions; you do not
become a party to the Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
17. This instrument shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns. It
is understood and agreed that references to "you" or "your" herein refer to
the original Escrow Agent and to any and all successor Escrow Agents. It is
understood and agreed that the Company may at any time or from time to time
assign its rights under the Agreement and these Joint Escrow Instructions in
whole or in part.
Very truly yours,
JATO COMMUNICATIONS CORP.
By:
----------------------------------------
Bruce E. Dines
Vice President and Secretary
Address:
5660 Greenwood Plaza Blvd.
Suite 220
Englewood, CO 80111
PURCHASER:
-------------------------------------------
BRIAN E. GAST
Address:
-------------------------------------------
-------------------------------------------
-------------------------------------------
ESCROW AGENT: CO-FOUNDERS:
- ---------------------------- -------------------------------------------
Bruce E. Dines Bruce E. Dines
-------------------------------------------
Leonard Allsup
<PAGE>
EXHIBIT D
FORM OF SECTION 83(b) ELECTION
_____________, 1998
Director of Internal Revenue
Internal Revenue Service Center
Ogden, UT 84201
Re: Election under Section 83(b)
Gentlemen:
The undersigned hereby elects, pursuant to the provisions of Sections 55-56
and 83(b) of the Internal Revenue Code of 1986, as amended (the "Code"), to
include in alternative minimum taxable income for the undersigned's current
taxable year, as compensation for services, the excess, if any, of the fair
market value of the property described below at the time of transfer over the
amount paid for such property. The undersigned also elects pursuant to
Section 83(b) of the Code to include in gross income for the taxable year in
which the undersigned disposes of some or all of the property described below
in a transaction which fails to satisfy the requirements of Section 422(a)(1)
of the Code (a "disqualifying disposition"), as compensation for services,
the excess, if any, of the fair market value of the disposed property at the
time of transfer to the undersigned over the amount paid for such property.
Pursuant to Treasury Regulations Section 1.83-2, the following information is
submitted:
1. Name: Brian E. Gast
("Purchaser")
Address:
-----------------------------------------
-----------------------------------------
Social Security No.:
-----------------------------------------
2. Property Description: 1,152,667 shares of Common Stock (the "Stock") of
JATO Communications Corp. (the "Company").
3. The date on which the Stock was purchased is July 13, 1998.
4. The taxable year for which the election is made is the calendar year 1998.
<PAGE>
5. RESTRICTIONS:
"In the event that Purchaser voluntarily terminates his relationship
with the Company (or a parent or subsidiary of the Company), whether as an
employee, director or consultant, then Leonard Allsup and Bruce E. Dines
(each a "Co-Founder") shall each have the right, exercisable upon written
notice to Purchaser within thirty (30) days of the date of such termination,
to purchase his pro rata share of the Stock which has not vested pursuant to
Section 4 below as of such termination date, at a purchase price of $.047 per
share (the "Co-Founders' Option"). The Co-Founder's pro rata portion shall
be that number of shares equal to the product obtained by multiplying (x) the
aggregate number of shares of Stock which have not vested pursuant to Section
4 below by (y) a fraction the numerator of which is the number of shares of
Common Stock owned by such Co-Founder (on an as-if-converted basis) at the
time of Purchaser's termination and the denominator of which is the total
number of shares of Common Stock owned by each of the Co-Founders (on an
as-if-converted basis) at the time of Purchaser's termination.
In the event that Purchaser voluntarily terminates his relationship with
the Company (or a parent or subsidiary of the Company), whether as an
employee, director or consultant, and the Co-Founders do not purchase all of
Purchaser's unvested Stock pursuant to the Co-Founders' Option under Section
2 above within the period set forth therein, the Company shall then have the
right, exercisable upon written notice to Purchaser within thirty (30) days
after the expiration of the Co-Founders' Option, to purchase all or a portion
of the Stock which has not vested pursuant to Section 4 below as of such
termination date (less shares purchased by the Co-Founders pursuant to
Section 2 above), at a purchase price of $.047 per share.
In the event the Company terminates Purchaser's relationship with the
Company (or a parent or subsidiary of the Company), whether as an employee,
director or consultant, for Cause (as defined below), then the Company shall
have an option for a period of ninety (90) days after said termination to
repurchase from Purchaser, at a purchase price of $.047 per share, up to but
not exceeding the number of shares of Stock which have not vested under the
provisions of Section 4 below as of such termination date.
In the event that Purchaser's relationship with the Company (or a parent
or subsidiary of the Company) is terminated by reason of Purchaser's death or
disability (as defined in Section 22(c)(3) of the Internal Revenue Code of
1986, as amended (the "Code")), then the Company shall have an option for a
period of ninety (90) days after said termination to repurchase from
Purchaser's personal representative at a purchase price of $.047 per share,
up to but not exceeding fifty percent (50%) of the number of shares of Stock
which have not vested under the provisions of Section 4 below as of such
termination date (together with the options set forth in Sections 3(a) and
3(b) above, the "Repurchase Option")."
6. The fair market value at the time of transfer of the Stock, determined
without regard to any restriction other than a restriction which by its terms
will never lapse, is $54,175.35 (1,152,667 shares having a fair market value
of $.047 per share).
7. PURCHASE PRICE: $54,175.35 (1,152,667 shares at $.047 per share).
<PAGE>
A copy of this statement has been furnished to the Company and the transferee
of the Stock if different than Purchaser.
Dated: _______________, 1998.
Very truly yours,
- ----------------------------
<PAGE>
JATO COMMUNICATIONS CORP.
FOUNDER'S STOCK PURCHASE AGREEMENT
THIS FOUNDER'S STOCK PURCHASE AGREEMENT (the "Agreement") is made as of the
13th day of July, 1998, by and between JATO Communications Corp., a Delaware
corporation (the "Company"), and Bruce E. Dines ("Purchaser").
WHEREAS, the Company desires to issue, and Purchaser desires to purchase,
stock of the Company as herein described, on the terms and conditions
hereinafter set forth; and
WHEREAS, the issuance of common stock hereby is in connection with a
compensatory benefit plan for the employees, directors, officers, advisers or
consultants of the Company and is intended to comply with the provisions of Rule
701 promulgated by the Securities and Exchange Commission under the Securities
Act of 1933, as amended (the "Act").
NOW, THEREFORE, IT IS AGREED between the parties as follows:
1. PURCHASE AND SALE OF STOCK. Purchaser hereby agrees to purchase from
the Company, and the Company hereby agrees to sell to Purchaser, an aggregate of
five hundred seventy-eight thousand six hundred sixty-seven (578,667) shares of
the Common Stock of the Company (the "Stock") at a purchase price of $.047 per
share, for an aggregate purchase price of $27,197.35, payable (i) in cash or by
check, (ii) by assignment of certain proprietary rights to the Company as set
forth on EXHIBIT A attached hereto, or (iii) by a combination of (i) and (ii).
The closing hereunder, including payment for and delivery of the Stock
shall occur at the offices of the Company immediately following the execution of
this Agreement, or at such other time and place as the parties may mutually
agree.
2. CO-FOUNDERS' REPURCHASE RIGHT. In the event that Purchaser
voluntarily terminates his relationship with the Company (or a parent or
subsidiary of the Company), whether as an employee, director or consultant, then
Leonard Allsup and Brian E. Gast (each a "Co-Founder") shall each have the
right, exercisable upon written notice to Purchaser within thirty (30) days of
the date of such termination, to purchase his pro rata share of the Stock which
has not vested pursuant to Section 4 below as of such termination date, at a
purchase price of $.047 per share (the "Co-Founders' Option"). The Co-Founder's
pro rata portion shall be that number of shares equal to the product obtained by
multiplying (x) the aggregate number of shares of Stock which have not vested
pursuant to Section 4 below by (y) a fraction the numerator of which is the
number of shares of Common Stock owned by such Co-Founder (on an as-if-converted
basis) at the time of Purchaser's termination and the denominator of which is
the total number of shares of Common Stock owned by each of the Co-Founders (on
an as-if-converted basis) at the time of Purchaser's termination.
1.
<PAGE>
3. COMPANY'S REPURCHASE RIGHT.
(a) In the event that Purchaser voluntarily terminates his
relationship with the Company (or a parent or subsidiary of the Company),
whether as an employee, director or consultant, and the Co-Founders do not
purchase all of Purchaser's unvested Stock pursuant to the Co-Founders' Option
under Section 2 above within the period set forth therein, the Company shall
then have the right, exercisable upon written notice to Purchaser within thirty
(30) days after the expiration of the Co-Founders' Option, to purchase all or a
portion of the Stock which has not vested pursuant to Section 4 below as of such
termination date (less shares purchased by the Co-Founders pursuant to Section 2
above), at a purchase price of $.047 per share.
(b) In the event the Company terminates Purchaser's relationship with
the Company (or a parent or subsidiary of the Company), whether as an employee,
director or consultant, for Cause (as defined below), then the Company shall
have an option for a period of ninety (90) days after said termination to
repurchase from Purchaser, at a purchase price of $.047 per share, up to but not
exceeding the number of shares of Stock which have not vested under the
provisions of Section 4 below as of such termination date.
(c) "Cause" as used herein shall mean: (i) conviction of any felony
or of any crime involving moral turpitude or dishonesty; (ii) participation in a
fraud or act of dishonesty against the Company; (iii) breach of Purchaser's
duties to the Company, including persistent unsatisfactory performance of job
duties; (iv) intentional damage to any property of the Company; or (v) conduct
by Purchaser which in the good faith and reasonable determination of the Board
demonstrates gross unfitness to serve; PROVIDED, HOWEVER, that Purchaser shall
not be deemed to have been terminated for Cause pursuant to clauses (iii) or (v)
above unless the Company shall have provided Purchaser written notice of such
breach or conduct and Purchaser shall have failed to cure the same to the
reasonable satisfaction of the Company within thirty (30) days after receipt of
such notice.
(d) In the event that Purchaser's relationship with the Company (or a
parent or subsidiary of the Company) is terminated by reason of Purchaser's
death or disability (as defined in Section 22(c)(3) of the Internal Revenue Code
of 1986, as amended (the "Code")), then the Company shall have an option for a
period of ninety (90) days after said termination to repurchase from Purchaser's
personal representative at a purchase price of $.047 per share, up to but not
exceeding fifty percent (50%) of the number of shares of Stock which have not
vested under the provisions of Section 4 below as of such termination date
(together with the options set forth in Sections 3(a) and 3(b) above, the
"Repurchase Option").
(e) In the event that the Company terminates Purchaser's relationship
with the Company (or a parent or subsidiary of the Company), whether as an
employee, director or consultant, other than for Cause, the Company shall have
no right to repurchase from Purchaser any shares of Stock, whether vested or
unvested.
(f) The Repurchase Option shall be exercised by written notice signed
by an officer of the Company or by any assignee or assignees of the Company and
delivered or mailed
2.
<PAGE>
as provided in Section 17(a). Such notice shall identify the number of
shares of Stock to be repurchased and shall notify Purchaser of the time,
place and date for settlement of such repurchase, which shall be scheduled by
the Company within the term of the Repurchase Option set forth in this
Section 3. The Company shall be entitled to pay for any shares of Stock
repurchased pursuant to its Repurchase Option in cash or by offset against
any indebtedness owing to the Company by Purchaser, or by a combination of
both. Upon delivery of such notice and payment of the purchase price in any
of the ways described above, the Company shall become the legal and
beneficial owner of the Stock being repurchased and all rights and interest
therein or related thereto, and the Company shall have the right to transfer
to its own name the Stock being repurchased by the Company, without further
action by Purchaser.
4. VESTING. Subject to the acceleration of vesting set forth in Section
7 below, 57,866 shares (representing ten percent (10%) of the Stock) shall vest
and be released from the Co-Founders' Option and the Repurchase Option
immediately on the date hereof. An additional 115,733 shares (representing
twenty percent (20%) of the Stock) shall vest and be released from the
Co-Founders' Option and the Repurchase Option on January 1, 2000. The remaining
405,068 shares (representing seventy percent (70%) of the Stock) shall vest in
equal monthly installments thereafter, such that 16,877 shares shall vest and be
released from the Co-Founders' Option and the Repurchase Option on the first day
of each month beginning on February 1, 2000, with a final installment of 16,897
shares vesting on January 1, 2002 (provided in each case that Purchaser's
relationship as an employee, director or consultant of the Company (or a parent
or subsidiary of the Company) has not been terminated prior to the date of such
release).
5. ADJUSTMENTS TO STOCK. If, from time to time, during the term of the
Co-Founders' Option or the Repurchase Option, there is any change affecting the
Company's outstanding Common Stock as a class that is effected without the
receipt of consideration by the Company (through merger, consolidation,
reorganization, reincorporation, stock dividend, dividend in property other than
cash, stock split, liquidating dividend, combination of shares, change in
corporate structure or other transaction not involving the receipt of
consideration by the Company), then any and all new, substituted or additional
securities or other property to which Purchaser is entitled by reason of
Purchaser's ownership of Stock shall be immediately subject to the Co-Founders'
Option and the Repurchase Option and shall be deemed to be "Stock" for all
purposes hereunder with the same force and effect as the shares of the Stock
presently subject to the Co-Founders' Option and the Repurchase Option, but only
to the extent the Stock is, at the time, covered by such Co-Founders' Option or
Repurchase Option. While the aggregate purchase price shall remain the same
after each such event, the purchase price per share of Stock upon exercise of
the Co-Founders' Option or the Repurchase Option shall be appropriately
adjusted.
6. CORPORATE TRANSACTION. All previously unvested shares of Stock shall
vest immediately prior to the closing of (i) a sale of all or substantially all
of the assets of the Company; (ii) a merger or consolidation in which the
Company is not the surviving corporation; (iii) a reverse merger in which the
company is the surviving corporation but the shares of the Company's Common
Stock outstanding immediately preceding the merger are converted by virtue of
the merger into other property, whether in the form of securities, cash or
otherwise; or
3.
<PAGE>
(iv) the acquisition by any person, entity or group within the meaning of
Section 13(d) or 14(d) of the Exchange Act, or any comparable successor
provisions (excluding any employee benefit plan, or related trust, sponsored
or maintained by the Company or any affiliate) of the beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act, or
comparable successor rule) of securities of the Company representing at least
fifty percent (50%) of the combined voting power entitled to vote in the
election of directors ((i) through (iv) being collectively referred to herein
as a "Corporate Transaction").
7. TERMINATION OF CO-FOUNDERS' OPTION AND REPURCHASE OPTION. The
Co-Founders' Option and the Repurchase Option shall terminate (i) immediately
prior to the closing of a Corporate Transaction or (ii) upon exercise in full
or expiration of the Co-Founders' Option or the Repurchase Option, as
applicable, whichever first occurs.
8. ESCROW OF UNVESTED STOCK. As security for Purchaser's faithful
performance of the terms of this Agreement and to insure the availability for
delivery of Purchaser's Stock upon exercise of the Co-Founders' Option or the
Repurchase Option, as the case may be, Purchaser agrees, at the closing
hereunder, to deliver to and deposit with the Treasurer, as escrow agent in
this transaction (the "Escrow Agent"), three (3) stock assignments duly
endorsed (with date and number of shares blank) in the form attached hereto
as EXHIBIT B, together with a certificate or certificates evidencing all of
the Stock subject to the Co-Founders' Option and the Repurchase Option; said
documents are to be held by the Escrow Agent and delivered by said Escrow
Agent pursuant to the Joint Escrow Instructions of the Company, the
Co-Founders and Purchaser set forth in EXHIBIT C attached hereto and
incorporated by this reference, which instructions shall also be delivered to
the Escrow Agent at the closing hereunder.
9. RIGHTS OF PURCHASER. Subject to the provisions of Sections 8, 10
and 13 herein, Purchaser shall at all times exercise all rights and
privileges of a stockholder of the Company with respect to the Stock, whether
vested or unvested, including all voting rights incident thereto.
10. LIMITATIONS ON TRANSFER. In addition to any other limitation on
transfer created by applicable securities laws, Purchaser shall not assign,
hypothecate, donate, encumber or otherwise dispose of any interest in the
Stock while the Stock is subject to the Co-Founders' Option or the Repurchase
Option. After any Stock has been released from the Co-Founders' Option or the
Repurchase Option, Purchaser shall not assign, hypothecate, donate, encumber
or otherwise dispose of any interest in the Stock except in compliance with
the provisions herein and applicable securities laws. Furthermore, the Stock
shall be subject to any right of first refusal in favor of the Company or its
assignees that may be contained in the Company's Bylaws. Notwithstanding the
foregoing, Purchaser may transfer all or any portion of the Stock to his
spouse, father, mother, brother, sister or lineal descendants, PROVIDED;
HOWEVER, that all shares of Stock so transferred by Purchaser shall continue
to be subject to the provisions of this Agreement and shall remain "Stock"
for all purposes hereunder.
4.
<PAGE>
11. RESTRICTIVE LEGENDS. All certificates representing the Stock shall
have endorsed thereon legends in substantially the following forms (in
addition to any other legend which may be required by other agreements
between the parties hereto):
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN
OPTION SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED
HOLDER, OR SUCH HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE
AT THE PRINCIPAL OFFICE OF THE COMPANY. ANY TRANSFER OR ATTEMPTED TRANSFER
OF ANY SHARES SUBJECT TO SUCH OPTION IS VOID WITHOUT THE PRIOR EXPRESS
WRITTEN CONSENT OF THE COMPANY."
(b) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED."
(c) Any legend required by appropriate blue sky officials.
12. INVESTMENT REPRESENTATIONS. In connection with the purchase of the
Stock, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company
to reach an informed and knowledgeable decision to acquire the Stock.
Purchaser is purchasing the Stock for investment for Purchaser's own account
only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Act.
(b) Purchaser understands that the Stock has not been registered
under the Act by reason of a specific exemption therefrom, which exemption
depends upon, among other things, the bona fide nature of Purchaser's
investment intent as expressed herein.
(c) Purchaser further acknowledges and understands that the Stock
must be held indefinitely unless the Stock is subsequently registered under
the Act or an exemption from such registration is available. Purchaser
further acknowledges and understands that the Company is under no obligation
to register the Stock. Purchaser understands that the certificate evidencing
the Stock will be imprinted with a legend which prohibits the transfer of the
Stock unless the Stock is registered or such registration is not required in
the opinion of counsel for the Company.
(d) Purchaser is familiar with the provisions of Rules 144 and
701, under the Act, as in effect from time to time, which, in substance,
permit limited public resale of "restricted securities" acquired, directly or
indirectly, from the issuer thereof (or from an affiliate of such issuer), in
a non-public offering subject to the satisfaction of certain conditions.
Rule 701
5.
<PAGE>
provides that if the issuer qualifies under Rule 701 at the time of issuance
of the securities, such issuance will be exempt from registration under the
Act. In the event the Company becomes subject to the reporting requirements
of Section 13 or 15(d) of the Securities Exchange Act of 1934, the securities
exempt under Rule 701 may be sold by Purchaser ninety (90) days thereafter,
subject to the satisfaction of certain of the conditions specified by Rule
144 and the market stand-off provision described in Section 13 below.
In the event that the sale of the Stock does not qualify under Rule 701
at the time of purchase, then the Stock may be resold by Purchaser in certain
limited circumstances subject to the provisions of Rule 144, which requires,
among other things: (i) the availability of certain public information about
the Company and (ii) the resale occurring following the required holding
period under Rule 144 after the Purchaser has purchased, and made full
payment of (within the meaning of Rule 144), the securities to be sold.
(e) Purchaser further understands that at the time Purchaser
wishes to sell the Stock there may be no public market upon which to make
such a sale, and that, even if such a public market then exists, the Company
may not be satisfying the current public information requirements of Rule 144
or 701, and that, in such event, Purchaser would be precluded from selling
the Stock under Rule 144 or 701 even if the minimum holding period
requirement had been satisfied.
(f) Purchaser further represents and warrants that Purchaser has
either (i) preexisting personal or business relationships with the Company or
any of its officers, directors or controlling persons or (ii) the capacity to
protect his own interests in connection with the purchase of the Stock by
virtue of the business or financial expertise of himself or of professional
advisors to Purchaser who are unaffiliated with and who are not compensated
by the Company or any of its affiliates, directly or indirectly.
13. MARKET STAND-OFF. In connection with the first firmly underwritten
public offering of the Company's securities under the Act (the "Initial
Offering"), Purchaser shall not sell, dispose of, transfer, make any short
sale of, grant any option for the purchase of, or enter into any hedging or
similar transaction with the same economic effect as a sale with respect to,
any Common Stock of the Company held by Purchaser, including the Stock (the
"Restricted Securities"), for a period of time specified by the
underwriter(s) (not to exceed one hundred eighty (180) days) following the
effective date of the registration statement filed under the Act in
connection with such Initial Offering. Purchaser agrees to execute and
deliver such other agreements as may be reasonably requested by the Company
and/or the underwriter(s) which are consistent with the foregoing or which
are necessary to give further effect thereto. In order to enforce the
foregoing covenant, the Company may impose stop-transfer instructions with
respect to Purchaser's Restricted Securities until the end of such period.
14. SECTION 83(b) ELECTION. Purchaser understands that Section 83(a)
of the Code, taxes as ordinary income the difference between the amount paid
for the Stock and the fair market value of the Stock as of the date any
restrictions on the Stock lapse. In this context, "restriction" includes the
right of the Co-Founders to buy the Stock from Purchaser pursuant to
6.
<PAGE>
the Co-Founders' Option set forth in Section 2 above and the right of the
Company to repurchase the Stock pursuant to the Repurchase Option set forth
in Section 3 above. Purchaser understands that Purchaser may elect to be
taxed at the time the Stock is purchased, rather than when and as the
Co-Founders' Option or the Repurchase Option expire, by filing an election
under Section 83(b) (an "83(b) Election") of the Code with the Internal
Revenue Service within thirty (30) days from the date of purchase in the form
attached hereto as EXHIBIT D. Even if the fair market value of the Stock at
the time of the execution of this Agreement equals the amount paid for the
Stock, the 83(b) Election must be made to avoid income under Section 83(a) in
the future. Purchaser understands that failure to file such an 83(b)
Election in a timely manner may result in adverse tax consequences for
Purchaser. Purchaser further understands that an additional copy of such
83(b) Election is required to be filed with his or her federal income tax
return for the calendar year in which the date of this Agreement falls.
Purchaser acknowledges that the foregoing is only a summary of the effect of
United States federal income taxation with respect to purchase of the Stock
hereunder, and does not purport to be complete. Purchaser further
acknowledges that the Company has directed Purchaser to seek independent
advice regarding the applicable provisions of the Code, the income tax laws
of any municipality, state or foreign country in which Purchaser may reside,
and the tax consequences of Purchaser's death. PURCHASER ASSUMES ALL
RESPONSIBILITY FOR FILING AN 83(b) ELECTION AND PAYING ALL TAXES RESULTING
FROM SUCH ELECTION OR THE LAPSE OF THE RESTRICTIONS ON THE STOCK.
15. REFUSAL TO TRANSFER. The Company shall not be required (i) to
transfer on its books any shares of Stock of the Company which shall have
been transferred in violation of any of the provisions set forth in this
Agreement or (ii) to treat as owner of such shares or to accord the right to
vote as such owner or to pay dividends to any transferee to whom such shares
shall have been so transferred.
16. NO EMPLOYMENT RIGHTS. This Agreement is not an employment contract
and shall not be deemed to create in any way whatsoever any obligation on
your part to continue in the employ of the Company (or a parent or subsidiary
of the Company), or of the Company (or a parent or subsidiary of the Company)
to continue your employment.
17. MISCELLANEOUS.
(a) NOTICES. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given upon personal delivery
or sent by telegram or fax or upon deposit in the United States Post Office,
by registered or certified mail with postage and fees prepaid, addressed to
the other party hereto at its address hereinafter shown below its signature
or at such other address as such party may designate by ten (10) days'
advance written notice to the other party hereto.
(b) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of the successors and assigns of the Company and, subject to the
restrictions on transfer herein set forth, be binding upon Purchaser,
Purchaser's successors, and assigns. The Repurchase Option of the Company
hereunder shall be assignable by the Company at any time or from time to
time, in whole or in part.
7.
<PAGE>
(c) ATTORNEYS' FEES; SPECIFIC PERFORMANCE. Purchaser shall
reimburse the Company for all costs incurred by the Company in enforcing the
performance of, or protecting its rights under, any part of this Agreement,
including reasonable costs of investigation and attorneys' fees. It is the
intention of the parties that the Company, upon exercise of the Repurchase
Option and payment of the purchase price thereunder, pursuant to the terms of
this Agreement, shall be entitled to receive the Stock, in specie, in order
to have such Stock available for future issuance without dilution of the
holdings of other stockholders. Furthermore, it is expressly agreed between
the parties that money damages are inadequate to compensate the Company for
the Stock and that the Company shall, upon proper exercise of the Repurchase
Option, be entitled to specific enforcement of its rights to purchase and
receive said Stock.
(d) GOVERNING LAW; VENUE. This Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado. The parties
agree that any action brought by either party to interpret or enforce any
provision of this Agreement shall be brought in, and each party agrees to,
and does hereby, submit to the jurisdiction and venue of, the appropriate
state or federal court for the district encompassing the Company's principal
place of business.
(e) FURTHER EXECUTION. The parties agree to take all such further
action(s) as may reasonably be necessary to carry out and consummate this
Agreement as soon as practicable, and to take whatever steps may be necessary
to obtain any governmental approval in connection with or otherwise qualify
the issuance of the securities that are the subject of this Agreement.
(f) INDEPENDENT COUNSEL. Purchaser acknowledges that this
Agreement has been prepared on behalf of the Company by Cooley Godward LLP,
counsel to the Company and that Cooley Godward LLP does not represent, and is
not acting on behalf of, Purchaser. Purchaser has been provided with an
opportunity to consult with Purchaser's own counsel with respect to this
Agreement.
(g) ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the
entire agreement between the parties with respect to the subject matter
hereof and supersedes and merges all prior agreements or understandings,
whether written or oral. This Agreement may not be amended, modified or
revoked, in whole or in part, except by an agreement in writing signed by
each of the parties hereto.
(h) SEVERABILITY. If a provision of this Agreement is held to be
unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i)
such provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and
(iii) the balance of the Agreement shall be enforceable in accordance with
its terms.
(i) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
8.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
JATO COMMUNICATIONS CORP.
A DELAWARE CORPORATION
By: /s/ Brian E. Gast
--------------------------------------
Brian E. Gast
President and Chief Executive Officer
Address: 5660 Greenwood Plaza Blvd.
Suite 220
Englewood, CO 80111
PURCHASER:
/s/ Bruce E. Dines
-----------------------------------------
BRUCE E. DINES
Address: 330 Cliff Falls Ct.
---------------------------------
Colorado Springs, CO 80919
-----------------------------------------
-----------------------------------------
CO-FOUNDERS:
/s/ Brian E. Gast
-----------------------------------------
BRIAN E. GAST
/s/ Leonard Allsup
-----------------------------------------
LEONARD ALLSUP
ATTACHMENTS:
Exhibit A -- Assignment of Proprietary Rights
Exhibit B -- Stock Assignment Separate from Certificate
Exhibit C -- Joint Escrow Instructions
Exhibit D -- Section 83(b) Election
9.
<PAGE>
EXHIBIT A
ASSIGNMENT OF PROPRIETARY RIGHTS
In partial consideration for the sale to me of 578,667 shares of Common Stock
of JATO Communications Corp., a Delaware corporation (the "Company"), I,
Bruce E. Dines, hereby assign all of my right, title and interest in the
following technology to the Company:
know-how related to data networks
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<PAGE>
EXHIBIT B
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Founder's Stock Purchase
Agreement (the "Agreement") dated as of July 13, 1998, Bruce E. Dines hereby
sells, assigns and transfers unto ________________________,
_____________________________________________ (_________) shares of Common
Stock of JATO Communications Corp., a Delaware corporation (the "Company"),
standing in the undersigned's name on the Company's books represented by
Certificate No. _____ herewith, and does hereby irrevocably constitute and
appoint the Treasurer of the Company attorney to transfer the said stock on
the books of the said Company with full power of substitution in the
premises. This Assignment may be used only in accordance with and subject to
the terms and conditions of the Agreement, in connection with the repurchase
of shares of Common Stock issued to the undersigned pursuant to the
Agreement, and only to the extent that such shares remain subject to the
Co-Founders' Option or the Company's Repurchase Option under the Agreement.
Dated:
--------------------------- ------------------------------
[Signature]
------------------------------
Leonard Allsup
<PAGE>
EXHIBIT C
JOINT ESCROW INSTRUCTIONS
Bruce E. Dines
JATO Communications Corp.
5660 Greenwood Plaza Blvd.
Suite 220
Englewood, CO 80111
Dear Sir:
As Escrow Agent for both JATO Communications Corp., a Delaware
corporation (the "Company"), and the undersigned purchaser of stock of the
Company ("Purchaser"), you are hereby authorized and directed to hold the
documents delivered to you pursuant to the terms of that certain Founder's
Stock Purchase Agreement (the "Agreement"), dated July 13, 1998 to which a
copy of these Joint Escrow Instructions is attached as Exhibit C, in
accordance with the following instructions:
1. In the event a Co-Founder or the Company or an assignee of the
Company shall elect to exercise the Co-Founders' Option or the Repurchase
Option, as the case may be, as set forth in the Agreement, the Co-Founder or
the Company or its assignee, as the case may be, will give to Purchaser and
you a written notice specifying the number of shares of stock to be
purchased, the purchase price, and the time for a closing hereunder at the
principal office of the Company. Purchaser, the Co-Founders and the Company
hereby irrevocably authorize and direct you to close the transaction
contemplated by such notice in accordance with the terms of said notice.
2. At the closing you are directed (a) to date any stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Co-Founder or the
Company, as applicable, against the simultaneous delivery to you of the
purchase price (which may include suitable acknowledgment of cancellation of
indebtedness) of the number of shares of stock being purchased pursuant to
the exercise of the Co-Founders' Option or the Repurchase Option, as
applicable.
3. Purchaser irrevocably authorizes the Company to deposit with you
any certificates evidencing shares of stock to be held by you hereunder and
any additions and substitutions to said shares as specified in the Agreement.
Purchaser hereby irrevocably constitutes and appoints you as his
attorney-in-fact and agent for the term of this escrow to execute with
respect to such securities and other property all documents of assignment
and/or transfer and all stock certificates necessary or appropriate to make
all securities negotiable and complete any transaction herein contemplated.
<PAGE>
4. This escrow shall terminate upon (i) the expiration of the
Co-Founders' Option and the Repurchase Option or (ii) the exercise in full of
the Co-Founders' Option or the Repurchase Option, whichever occurs first.
5. If at the time of termination of this escrow you should have in
your possession any documents, securities, or other property belonging to
Purchaser, you shall deliver all of same to Purchaser and shall be discharged
of all further obligations hereunder; PROVIDED, HOWEVER, that if at the time
of termination of this escrow you are advised by the Company that the
property subject to this escrow is the subject of a pledge or other security
agreement, you shall deliver all such property to the pledgeholder or other
person designated by the Company.
6. Except as otherwise provided in these Joint Escrow Instructions,
your duties hereunder may be altered, amended, modified or revoked only by a
writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as
are specifically set forth herein and may rely and shall be protected in
relying or refraining from acting on any instrument reasonably believed by
you to be genuine and to have been signed or presented by the proper party or
parties or their assignees. You shall not be personally liable for any act
you may do or omit to do hereunder as Escrow Agent or as attorney-in-fact for
Purchaser while acting in good faith, and any act done or omitted by you
pursuant to the advice of your own attorneys shall be conclusive evidence of
such good faith.
8. You are hereby expressly authorized to disregard any and all
warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law, and are
hereby expressly authorized to comply with and obey orders, judgments or
decrees of any court. In case you obey or comply with any such order,
judgment or decree of any court, you shall not be liable to any of the
parties hereto or to any other person, firm or corporation by reason of such
compliance, notwithstanding any such order, judgment or decree being
subsequently reversed, modified, annulled, set aside, vacated or found to
have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authority or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or
called for hereunder.
10. You shall not be liable for the outlawing of any rights under any
statute of limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. You shall be entitled to employ such legal counsel (including
without limitation the firm of Cooley Godward LLP) and other experts as you
may deem necessary properly to advise you in connection with your obligations
hereunder, may rely upon the advice of such counsel, and may pay such counsel
reasonable compensation therefor.
<PAGE>
12. Your responsibilities as Escrow Agent hereunder shall terminate if
you shall resign by written notice to each party. In the event of any such
termination, the Company may appoint any officer or assistant officer of the
Company as successor Escrow Agent and Purchaser hereby confirms the
appointment of such successor or successors as his attorney-in-fact and agent
to the full extent of your appointment.
13. If you reasonably require other or further instruments in
connection with these Joint Escrow Instructions or obligations in respect
hereto, the necessary parties hereto shall join in furnishing such
instruments.
14. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
securities, you may (but are not obligated to) retain in your possession
without liability to anyone all or any part of said securities until such
dispute shall have been settled either by mutual written agreement of the
parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal
has been perfected, but you shall be under no duty whatsoever to institute or
defend any such proceedings.
15. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in any United States Post Office Box, by registered or certified mail
with postage and fees prepaid, addressed to each of the other parties
hereunto entitled at the following addresses specified below, or at such
other addresses as a party may designate by ten days' written notice to each
of the other parties hereto:
16. By signing these Joint Escrow Instructions you become a party
hereto only for the purpose of said Joint Escrow Instructions; you do not
become a party to the Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
17. This instrument shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns. It
is understood and agreed that references to "you" or "your" herein refer to
the original Escrow Agent and to any and all successor Escrow Agents. It is
understood and agreed that the Company may at any time or from time to time
assign its rights under the Agreement and these Joint Escrow Instructions in
whole or in part.
Very truly yours,
JATO COMMUNICATIONS CORP.
By:
------------------------------------------
Brian E. Gast
President and Chief Executive Officer
Address:
5660 Greenwood Plaza Blvd.
Suite 220
Englewood, CO 80111
PURCHASER:
---------------------------------------------
BRUCE E. DINES
Address:
---------------------------------------------
---------------------------------------------
---------------------------------------------
ESCROW AGENT: CO-FOUNDERS:
- ----------------------------- ---------------------------------------------
Leonard Allsup Brian E. Gast
---------------------------------------------
Leonard Allsup
<PAGE>
EXHIBIT D
SECTION 83(b) ELECTION
July 29, 1998
Director of Internal Revenue
Internal Revenue Service Center
Ogden, UT 84201
RE: ELECTION UNDER SECTION 83(b)
Gentlemen:
The undersigned hereby elects, pursuant to the provisions of Sections 55-56
and 83(b) of the Internal Revenue Code of 1986, as amended (the "Code"), to
include in alternative minimum taxable income for the undersigned's current
taxable year, as compensation for services, the excess, if any, of the fair
market value of the property described below at the time of transfer over the
amount paid for such property. The undersigned also elects pursuant to
Section 83(b) of the Code to include in gross income for the taxable year in
which the undersigned disposes of some or all of the property described below
in a transaction which fails to satisfy the requirements of Section 422(a)(1)
of the Code (a "disqualifying disposition"), as compensation for services,
the excess, if any, of the fair market value of the disposed property at the
time of transfer to the undersigned over the amount paid for such property.
Pursuant to Treasury Regulations Section 1.83-2, the following information is
submitted:
1. NAME: Leonard Allsup
("PURCHASER")
Address:
-----------------------------------------
-----------------------------------------
SOCIAL SECURITY NO.:
-----------------------------------------
2. PROPERTY DESCRIPTION: 1,068,667 shares of Common Stock (the "Stock") of
JATO Communications Corp. (the "Company").
3. The date on which the Stock was purchased is July 13, 1998.
4. The taxable year for which the election is made is the calendar year 1998.
<PAGE>
5. RESTRICTIONS:
"In the event that Purchaser voluntarily terminates his relationship
with the Company (or a parent or subsidiary of the Company), whether as an
employee, director or consultant, then Leonard Allsup and Brian E. Gast (each
a "Co-Founder") shall each have the right, exercisable upon written notice to
Purchaser within thirty (30) days of the date of such termination, to
purchase his pro rata share of the Stock which has not vested pursuant to
Section 4 below as of such termination date, at a purchase price of $.047 per
share (the "Co-Founders' Option"). The Co-Founder's pro rata portion shall
be that number of shares equal to the product obtained by multiplying (x) the
aggregate number of shares of Stock which have not vested pursuant to Section
4 below by (y) a fraction the numerator of which is the number of shares of
Common Stock owned by such Co-Founder (on an as-if-converted basis) at the
time of Purchaser's termination and the denominator of which is the total
number of shares of Common Stock owned by each of the Co-Founders (on an
as-if-converted basis) at the time of Purchaser's termination.
In the event that Purchaser voluntarily terminates his relationship with
the Company (or a parent or subsidiary of the Company), whether as an
employee, director or consultant, and the Co-Founders do not purchase all of
Purchaser's unvested Stock pursuant to the Co-Founders' Option under Section
2 above within the period set forth therein, the Company shall then have the
right, exercisable upon written notice to Purchaser within thirty (30) days
after the expiration of the Co-Founders' Option, to purchase all or a portion
of the Stock which has not vested pursuant to Section 4 below as of such
termination date (less shares purchased by the Co-Founders pursuant to
Section 2 above), at a purchase price of $.047 per share.
In the event the Company terminates Purchaser's relationship with
the Company (or a parent or subsidiary of the Company), whether as an
employee, director or consultant, for Cause (as defined below), then the
Company shall have an option for a period of ninety (90) days after said
termination to repurchase from Purchaser, at a purchase price of $.047 per
share, up to but not exceeding the number of shares of Stock which have not
vested under the provisions of Section 4 below as of such termination date.
The fair market value at the time of transfer of the Stock, determined
without regard to any restriction other than a restriction which by its terms
will never lapse, is $27,197.35 (578,667 shares having a fair market value of
$.047 per share).
In the event that Purchaser's relationship with the Company (or a parent
or subsidiary of the Company) is terminated by reason of Purchaser's death or
disability (as defined in Section 22(c)(3) of the Internal Revenue Code of
1986, as amended (the "Code")), then the Company shall have an option for a
period of ninety (90) days after said termination to repurchase from
Purchaser's personal representative at a purchase price of $.047 per share,
up to but not exceeding fifty percent (50%) of the number of shares of Stock
which have not vested under the provisions of Section 4 below as of such
termination date (together with the options set forth in Sections 3(a) and
3(b) above, the "Repurchase Option")."
6. The fair market value at the time of transfer of the Stock, determined
without regard to any restriction other than a restriction which by its terms
will never lapse, is $27,197.35 (578,667 shares having a fair market value of
$.047 per share).
<PAGE>
7. PURCHASE PRICE: $27,197.35 (578,667 shares at $.047 per share).
A copy of this statement has been furnished to the Company and the transferee
of the Stock if different than Purchaser.
Dated: _______________, 1998.
Very truly yours,
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<PAGE>
JATO COMMUNICATIONS CORP.
FOUNDER'S STOCK PURCHASE AGREEMENT
THIS FOUNDER'S STOCK PURCHASE AGREEMENT (the "Agreement") is made as of the
13th day of July, 1998, by and between JATO Communications Corp., a Delaware
corporation (the "Company"), and Leonard Allsup ("Purchaser").
WHEREAS, the Company desires to issue, and Purchaser desires to purchase,
stock of the Company as herein described, on the terms and conditions
hereinafter set forth; and
WHEREAS, the issuance of common stock hereby is in connection with a
compensatory benefit plan for the employees, directors, officers, advisers or
consultants of the Company and is intended to comply with the provisions of Rule
701 promulgated by the Securities and Exchange Commission under the Securities
Act of 1933, as amended (the "Act").
NOW, THEREFORE, IT IS AGREED between the parties as follows:
1. PURCHASE AND SALE OF STOCK. Purchaser hereby agrees to purchase from
the Company, and the Company hereby agrees to sell to Purchaser, an aggregate of
one million sixty-eight thousand six hundred sixty-seven (1,068,667) shares of
the Common Stock of the Company (the "Stock") at a purchase price of $.047 per
share, for an aggregate purchase price of $50,000, payable in cash or by check.
The closing hereunder, including payment for and delivery of the Stock
shall occur at the offices of the Company immediately following the execution of
this Agreement, or at such other time and place as the parties may mutually
agree.
2. CO-FOUNDERS REPURCHASE RIGHT. In the event that Purchaser voluntarily
terminates his relationship with the Company (or a parent or subsidiary of the
Company), whether as an employee, director or consultant, then Bruce E. Dines
and Brian E. Gast (each a "Co-Founder") shall each have the right, exercisable
upon written notice to Purchaser within thirty (30) days of the date of such
termination, to purchase his pro rata share of the Stock which has not vested
pursuant to Section 4 below as of such termination date, at a purchase price of
$.047 per share (the "Co-Founders' Option"). The Co-Founder's pro rata portion
shall be that number of shares equal to the product obtained by multiplying (x)
the aggregate number of shares of Stock which have not vested pursuant to
Section 4 below by (y) a fraction the numerator of which is the number of shares
of Common Stock owned by such Co-Founder (on an as-if-converted basis) at the
time of Purchaser's termination and the denominator of which is the total number
of shares of Common Stock owned by each of the Co-Founders (on an
as-if-converted basis) at the time of Purchaser's termination.
1.
<PAGE>
3. COMPANY'S REPURCHASE RIGHT.
(a) In the event that Purchaser voluntarily terminates his
relationship with the Company (or a parent or subsidiary of the Company),
whether as an employee, director or consultant, and the Co-Founders do not
purchase all of Purchaser's unvested Stock pursuant to the Co-Founders' Option
under Section 2 above within the period set forth therein, the Company shall
then have the right, exercisable upon written notice to Purchaser within thirty
(30) days after the expiration of the Co-Founders' Option, to purchase all or a
portion of the Stock which has not vested pursuant to Section 4 below as of such
termination date (less shares purchased by the Co-Founders pursuant to Section 2
above), at a purchase price of $.047 per share.
(b) In the event the Company terminates Purchaser's relationship with
the Company (or a parent or subsidiary of the Company), whether as an employee,
director or consultant, for Cause (as defined below), then the Company shall
have an option for a period of ninety (90) days after said termination to
repurchase from Purchaser, at a purchase price of $.047 per share, up to but not
exceeding the number of shares of Stock which have not vested under the
provisions of Section 4 below as of such termination date.
(c) "Cause" as used herein shall mean: (i) conviction of any felony
or of any crime involving moral turpitude or dishonesty; (ii) participation in a
fraud or act of dishonesty against the Company; (iii) breach of Purchaser's
duties to the Company, including persistent unsatisfactory performance of job
duties; (iv) intentional damage to any property of the Company; or (v) conduct
by Purchaser which in the good faith and reasonable determination of the Board
demonstrates gross unfitness to serve; PROVIDED, HOWEVER, that Purchaser shall
not be deemed to have been terminated for Cause pursuant to clauses (iii) or (v)
above unless the Company shall have provided Purchaser written notice of such
breach or conduct and Purchaser shall have failed to cure the same to the
reasonable satisfaction of the Company within thirty (30) days after receipt of
such notice.
(d) In the event that Purchaser's relationship with the Company (or a
parent or subsidiary of the Company) is terminated by reason of Purchaser's
death or disability (as defined in Section 22(c)(3) of the Internal Revenue Code
of 1986, as amended (the "Code")), then the Company shall have an option for a
period of ninety (90) days after said termination to repurchase from Purchaser's
personal representative at a purchase price of $.047 per share, up to but not
exceeding fifty percent (50%) of the number of shares of Stock which have not
vested under the provisions of Section 4 below as of such termination date
(together with the options set forth in Sections 3(a) and 3(b) above, the
"Repurchase Option").
(e) In the event that the Company terminates Purchaser's relationship
with the Company (or a parent or subsidiary of the Company), whether as an
employee, director or consultant, other than for Cause, the Company shall have
no right to repurchase from Purchaser any shares of Stock, whether vested or
unvested.
(f) The Repurchase Option shall be exercised by written notice signed
by an officer of the Company or by any assignee or assignees of the Company and
delivered or mailed
2.
<PAGE>
as provided in Section 17(a). Such notice shall identify the number of
shares of Stock to be repurchased and shall notify Purchaser of the time,
place and date for settlement of such repurchase, which shall be scheduled by
the Company within the term of the Repurchase Option set forth in this
Section 3. The Company shall be entitled to pay for any shares of Stock
repurchased pursuant to its Repurchase Option in cash or by offset against
any indebtedness owing to the Company by Purchaser, or by a combination of
both. Upon delivery of such notice and payment of the purchase price in any
of the ways described above, the Company shall become the legal and
beneficial owner of the Stock being repurchased and all rights and interest
therein or related thereto, and the Company shall have the right to transfer
to its own name the Stock being repurchased by the Company, without further
action by Purchaser.
4. VESTING. Subject to the acceleration of vesting set forth in Section
7 below, 106,866 shares (representing ten percent (10%) of the Stock) shall
vest and be released from the Co-Founders' Option and the Repurchase Option
immediately on the date hereof. An additional 213,733 shares (representing
twenty percent (20%) of the Stock) shall vest and be released from the
Co-Founders' Option and the Repurchase Option on January 1, 2000. The remaining
748,068 shares (representing seventy percent (70%) of the Stock) shall vest in
equal monthly installments thereafter, such that 31,169 shares shall vest and be
released from the Co-Founders' Option and the Repurchase Option on the first day
of each month beginning on February 1, 2000, with a final installment of 31,181
shares vesting on January 1, 2002 (provided in each case that Purchaser's
relationship as an employee, director or consultant of the Company (or a parent
or subsidiary of the Company) has not been terminated prior to the date of such
release).
5. ADJUSTMENTS TO STOCK. If, from time to time, during the term of the
Co-Founders' Option or the Repurchase Option, there is any change affecting the
Company's outstanding Common Stock as a class that is effected without the
receipt of consideration by the Company (through merger, consolidation,
reorganization, reincorporation, stock dividend, dividend in property other than
cash, stock split, liquidating dividend, combination of shares, change in
corporate structure or other transaction not involving the receipt of
consideration by the Company), then any and all new, substituted or additional
securities or other property to which Purchaser is entitled by reason of
Purchaser's ownership of Stock shall be immediately subject to the Co-Founders'
Option and the Repurchase Option and shall be deemed to be "Stock" for all
purposes hereunder with the same force and effect as the shares of the Stock
presently subject to the Co-Founders' Option and the Repurchase Option, but only
to the extent the Stock is, at the time, covered by such Co-Founders' Option or
Repurchase Option. While the aggregate purchase price shall remain the same
after each such event, the purchase price per share of Stock upon exercise of
the Co-Founders' Option or the Repurchase Option shall be appropriately
adjusted.
6. CORPORATE TRANSACTION. All previously unvested shares of Stock shall
vest immediately prior to the closing of (i) a sale of all or substantially all
of the assets of the Company; (ii) a merger or consolidation in which the
Company is not the surviving corporation; (iii) a reverse merger in which the
company is the surviving corporation but the shares of the Company's Common
Stock outstanding immediately preceding the merger are converted by virtue of
the merger into other property, whether in the form of securities, cash or
otherwise; or
3.
<PAGE>
(iv) the acquisition by any person, entity or group within the meaning of
Section 13(d) or 14(d) of the Exchange Act, or any comparable successor
provisions (excluding any employee benefit plan, or related trust, sponsored
or maintained by the Company or any affiliate) of the beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act, or
comparable successor rule) of securities of the Company representing at least
fifty percent (50%) of the combined voting power entitled to vote in the
election of directors ((i) through (iv) being collectively referred to herein
as a "Corporate Transaction").
7. TERMINATION OF CO-FOUNDERS' OPTION AND REPURCHASE OPTION. The
Co-Founders' Option and the Repurchase Option shall terminate (i) immediately
prior to the closing of a Corporate Transaction or (ii) upon exercise in full
or expiration of the Co-Founders' Option or the Repurchase Option, as
applicable, whichever first occurs.
8. ESCROW OF UNVESTED STOCK. As security for Purchaser's faithful
performance of the terms of this Agreement and to insure the availability for
delivery of Purchaser's Stock upon exercise of the Co-Founders' Option or the
Repurchase Option, Purchaser agrees, at the closing hereunder, to deliver to and
deposit with the Secretary, as escrow agent in this transaction (the "Escrow
Agent"), three (3) stock assignments duly endorsed (with date and number of
shares blank) in the form attached hereto as EXHIBIT B, together with a
certificate or certificates evidencing all of the Stock subject to the
Repurchase Option; said documents are to be held by the Escrow Agent and
delivered by said Escrow Agent pursuant to the Joint Escrow Instructions of the
Company and Purchaser set forth in EXHIBIT C attached hereto and incorporated by
this reference, which instructions shall also be delivered to the Escrow Agent
at the closing hereunder.
9. RIGHTS OF PURCHASER. Subject to the provisions of Sections 8, 10 and
13 herein, Purchaser shall at all times exercise all rights and privileges of a
stockholder of the Company with respect to the Stock, whether vested or
unvested, including all voting rights incident thereto.
10. LIMITATIONS ON TRANSFER. In addition to any other limitation on
transfer created by applicable securities laws, Purchaser shall not assign,
hypothecate, donate, encumber or otherwise dispose of any interest in the Stock
while the Stock is subject to the Co-Founders' Option or the Repurchase Option.
After any Stock has been released from the Co-Founders' Option and the
Repurchase Option, Purchaser shall not assign, hypothecate, donate, encumber or
otherwise dispose of any interest in the Stock except in compliance with the
provisions herein and applicable securities laws. Furthermore, the Stock shall
be subject to any right of first refusal in favor of the Company or its
assignees that may be contained in the Company's Bylaws. Notwithstanding the
foregoing, Purchaser may transfer all or any portion of the Stock to his spouse,
father, mother, brother, sister or lineal descendants, PROVIDED; HOWEVER, that
all shares of Stock so transferred by Purchaser shall continue to be subject to
the provisions of this Agreement and shall remain "Stock" for all purposes
hereunder.
4.
<PAGE>
11. RESTRICTIVE LEGENDS. All certificates representing the Stock shall
have endorsed thereon legends in substantially the following forms (in addition
to any other legend which may be required by other agreements between the
parties hereto):
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN
OPTION SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER,
OR SUCH HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL OFFICE OF THE COMPANY. ANY TRANSFER OR ATTEMPTED TRANSFER OF ANY
SHARES SUBJECT TO SUCH OPTION IS VOID WITHOUT THE PRIOR EXPRESS WRITTEN CONSENT
OF THE COMPANY."
(b) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
(c) Any legend required by appropriate blue sky officials.
12. INVESTMENT REPRESENTATIONS. In connection with the purchase of the
Stock, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Stock. Purchaser is
purchasing the Stock for investment for Purchaser's own account only and not
with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Act.
(b) Purchaser understands that the Stock has not been registered
under the Act by reason of a specific exemption therefrom, which exemption
depends upon, among other things, the bona fide nature of Purchaser's investment
intent as expressed herein.
(c) Purchaser further acknowledges and understands that the Stock
must be held indefinitely unless the Stock is subsequently registered under the
Act or an exemption from such registration is available. Purchaser further
acknowledges and understands that the Company is under no obligation to register
the Stock. Purchaser understands that the certificate evidencing the Stock will
be imprinted with a legend which prohibits the transfer of the Stock unless the
Stock is registered or such registration is not required in the opinion of
counsel for the Company.
(d) Purchaser is familiar with the provisions of Rules 144 and 701,
under the Act, as in effect from time to time, which, in substance, permit
limited public resale of "restricted securities" acquired, directly or
indirectly, from the issuer thereof (or from an affiliate of such issuer), in a
non-public offering subject to the satisfaction of certain conditions. Rule 701
5.
<PAGE>
provides that if the issuer qualifies under Rule 701 at the time of issuance of
the securities, such issuance will be exempt from registration under the Act.
In the event the Company becomes subject to the reporting requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, the securities
exempt under Rule 701 may be sold by Purchaser ninety (90) days thereafter,
subject to the satisfaction of certain of the conditions specified by Rule 144
and the market stand-off provision described in Section 13 below.
In the event that the sale of the Stock does not qualify under Rule 701 at
the time of purchase, then the Stock may be resold by Purchaser in certain
limited circumstances subject to the provisions of Rule 144, which requires,
among other things: (i) the availability of certain public information about the
Company and (ii) the resale occurring following the required holding period
under Rule 144 after the Purchaser has purchased, and made full payment of
(within the meaning of Rule 144), the securities to be sold.
(e) Purchaser further understands that at the time Purchaser wishes
to sell the Stock there may be no public market upon which to make such a sale,
and that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144 or 701, and
that, in such event, Purchaser would be precluded from selling the Stock under
Rule 144 or 701 even if the minimum holding period requirement had been
satisfied.
(f) Purchaser further represents and warrants that Purchaser has
either (i) preexisting personal or business relationships with the Company or
any of its officers, directors or controlling persons or (ii) the capacity to
protect his own interests in connection with the purchase of the Stock by virtue
of the business or financial expertise of himself or of professional advisors to
Purchaser who are unaffiliated with and who are not compensated by the Company
or any of its affiliates, directly or indirectly.
13. MARKET STAND-OFF. In connection with the first firmly underwritten
public offering of the Company's securities under the Act (the "Initial
Offering"), Purchaser shall not sell, dispose of, transfer, make any short sale
of, grant any option for the purchase of, or enter into any hedging or similar
transaction with the same economic effect as a sale with respect to, any Common
Stock of the Company held by Purchaser, including the Stock (the "Restricted
Securities"), for a period of time specified by the underwriter(s) (not to
exceed one hundred eighty (180) days) following the effective date of the
registration statement filed under the Act in connection with such Initial
Offering. Purchaser agrees to execute and deliver such other agreements as may
be reasonably requested by the Company and/or the underwriter(s) which are
consistent with the foregoing or which are necessary to give further effect
thereto. In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to Purchaser's Restricted Securities
until the end of such period.
14. SECTION 83(b) ELECTION. Purchaser understands that Section 83(a) of
the Code, taxes as ordinary income the difference between the amount paid for
the Stock and the fair market value of the Stock as of the date any restrictions
on the Stock lapse. In this context, "restriction" includes the right of the
Co-Founders to buy the Stock from Purchaser pursuant to
6.
<PAGE>
the Co-Founders' Option set forth in Section 2 above and the right of the
Company to repurchase the Stock pursuant to the Repurchase Option set forth
in Section 3 above. Purchaser understands that Purchaser may elect to be
taxed at the time the Stock is purchased, rather than when and as the
Co-Founders' Option and the Repurchase Option expire, by filing an election
under Section 83(b) (an "83(b) Election") of the Code with the Internal
Revenue Service within thirty (30) days from the date of purchase in the form
attached hereto as EXHIBIT C. Even if the fair market value of the Stock at
the time of the execution of this Agreement equals the amount paid for the
Stock, the 83(b) Election must be made to avoid income under Section 83(a) in
the future. Purchaser understands that failure to file such an 83(b)
Election in a timely manner may result in adverse tax consequences for
Purchaser. Purchaser further understands that an additional copy of such
83(b) Election is required to be filed with his or her federal income tax
return for the calendar year in which the date of this Agreement falls.
Purchaser acknowledges that the foregoing is only a summary of the effect of
United States federal income taxation with respect to purchase of the Stock
hereunder, and does not purport to be complete. Purchaser further
acknowledges that the Company has directed Purchaser to seek independent
advice regarding the applicable provisions of the Code, the income tax laws
of any municipality, state or foreign country in which Purchaser may reside,
and the tax consequences of Purchaser's death. PURCHASER ASSUMES ALL
RESPONSIBILITY FOR FILING AN 83(b) ELECTION AND PAYING ALL TAXES RESULTING
FROM SUCH ELECTION OR THE LAPSE OF THE RESTRICTIONS ON THE STOCK.
15. REFUSAL TO TRANSFER. The Company shall not be required (i) to
transfer on its books any shares of Stock of the Company which shall have been
transferred in violation of any of the provisions set forth in this Agreement or
(ii) to treat as owner of such shares or to accord the right to vote as such
owner or to pay dividends to any transferee to whom such shares shall have been
so transferred.
16. NO EMPLOYMENT RIGHTS. This Agreement is not an employment contract
and shall not be deemed to create in any way whatsoever any obligation on your
part to continue in the employ of the Company (or a parent or subsidiary of the
Company), or of the Company (or a parent or subsidiary of the Company) to
continue your employment.
17. MISCELLANEOUS.
(a) NOTICES. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given upon personal delivery or
sent by telegram or fax or upon deposit in the United States Post Office, by
registered or certified mail with postage and fees prepaid, addressed to the
other party hereto at its address hereinafter shown below its signature or at
such other address as such party may designate by ten (10) days' advance written
notice to the other party hereto.
(b) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of the successors and assigns of the Company and, subject to the
restrictions on transfer herein set forth, be binding upon Purchaser,
Purchaser's successors, and assigns. The Repurchase Option of the Company
hereunder shall be assignable by the Company at any time or from time to time,
in whole or in part.
7.
<PAGE>
(c) ATTORNEYS' FEES; SPECIFIC PERFORMANCE. Purchaser shall reimburse
the Company for all costs incurred by the Company in enforcing the performance
of, or protecting its rights under, any part of this Agreement, including
reasonable costs of investigation and attorneys' fees. It is the intention of
the parties that the Company, upon exercise of the Repurchase Option and payment
of the purchase price thereunder, pursuant to the terms of this Agreement, shall
be entitled to receive the Stock, in specie, in order to have such Stock
available for future issuance without dilution of the holdings of other
stockholders. Furthermore, it is expressly agreed between the parties that
money damages are inadequate to compensate the Company for the Stock and that
the Company shall, upon proper exercise of the Repurchase Option, be entitled to
specific enforcement of its rights to purchase and receive said Stock.
(d) GOVERNING LAW; VENUE. This Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado. The parties
agree that any action brought by either party to interpret or enforce any
provision of this Agreement shall be brought in, and each party agrees to, and
does hereby, submit to the jurisdiction and venue of, the appropriate state or
federal court for the district encompassing the Company's principal place of
business.
(e) FURTHER EXECUTION. The parties agree to take all such further
action(s) as may reasonably be necessary to carry out and consummate this
Agreement as soon as practicable, and to take whatever steps may be necessary to
obtain any governmental approval in connection with or otherwise qualify the
issuance of the securities that are the subject of this Agreement.
(f) INDEPENDENT COUNSEL. Purchaser acknowledges that this Agreement
has been prepared on behalf of the Company by Cooley Godward LLP, counsel to the
Company and that Cooley Godward LLP does not represent, and is not acting on
behalf of, Purchaser. Purchaser has been provided with an opportunity to
consult with Purchaser's own counsel with respect to this Agreement.
(g) ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the
entire agreement between the parties with respect to the subject matter hereof
and supersedes and merges all prior agreements or understandings, whether
written or oral. This Agreement may not be amended, modified or revoked, in
whole or in part, except by an agreement in writing signed by each of the
parties hereto.
(h) SEVERABILITY. If a provision of this Agreement is held to be
unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith. In the event that the parties cannot reach a mutually
agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
(i) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
8.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
JATO COMMUNICATIONS CORP.
A DELAWARE CORPORATION
By: /s/ Brian E. Gast
--------------------------------------
Brian E. Gast
President and Chief Executive Officer
Address: 5660 Greenwood Plaza Blvd.
Suite 220
Englewood, CO 80111
PURCHASER:
/s/ Leonard Allsup
-----------------------------------------
LEONARD ALLSUP
Address:
---------------------------------
-----------------------------------------
-----------------------------------------
CO-FOUNDERS:
/s/ Brian E. Gast
-----------------------------------------
BRIAN E. GAST
/s/ Bruce E. Dines
-----------------------------------------
BRUCE E. DINES
ATTACHMENTS:
Exhibit A -- Stock Assignment Separate from Certificate
Exhibit B -- Joint Escrow Instructions
Exhibit C -- Section 83(b) Election
9.
<PAGE>
EXHIBIT A
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Founder's Stock Purchase
Agreement (the "Agreement") dated as of July 13, 1998, Leonard Allsup hereby
sells, assigns and transfers unto ________________________,
_____________________________________________ (_________) shares of Common Stock
of JATO Communications Corp., a Delaware corporation (the "Company"), standing
in the undersigned's name on the Company's books represented by Certificate No.
_____ herewith, and does hereby irrevocably constitute and appoint the Secretary
of the Company attorney to transfer the said stock on the books of the said
Company with full power of substitution in the premises. This Assignment may be
used only in accordance with and subject to the terms and conditions of the
Agreement, in connection with the repurchase of shares of Common Stock issued to
the undersigned pursuant to the Agreement, and only to the extent that such
shares remain subject to the Co-Founders' Option or the Company's Repurchase
Option under the Agreement.
Dated:
------------------- --------------------------------------
[Signature]
--------------------------------------
Leonard Allsup
<PAGE>
EXHIBIT B
JOINT ESCROW INSTRUCTIONS
Bruce E. Dines
JATO Communications Corp.
5660 Greenwood Plaza Blvd.
Suite 220
Englewood, CO 80111
Dear Sir:
As Escrow Agent for both JATO Communications Corp., a Delaware corporation
(the "Company"), and the undersigned purchaser of stock of the Company
("Purchaser"), you are hereby authorized and directed to hold the documents
delivered to you pursuant to the terms of that certain Founder's Stock Purchase
Agreement (the "Agreement"), dated July 13, 1998 to which a copy of these Joint
Escrow Instructions is attached as Exhibit C, in accordance with the following
instructions:
1. In the event a Co-Founder or the Company or an assignee of the Company
shall elect to exercise the Co-Founders' Option or the Repurchase Option, as the
case may be, as set forth in the Agreement, the Co-Founder or the Company or its
assignee, as the case may be, will give to Purchaser and you a written notice
specifying the number of shares of stock to be purchased, the purchase price,
and the time for a closing hereunder at the principal office of the Company.
Purchaser, the Co-Founders and the Company hereby irrevocably authorize and
direct you to close the transaction contemplated by such notice in accordance
with the terms of said notice.
2. At the closing you are directed (a) to date any stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Co-Founder or the
Company, as applicable, against the simultaneous delivery to you of the purchase
price (which may include suitable acknowledgment of cancellation of
indebtedness) of the number of shares of stock being purchased pursuant to the
exercise of the Co-Founders' Option or the Repurchase Option, as applicable.
3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as specified in the Agreement.
Purchaser hereby irrevocably constitutes and appoints you as his
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities and other property all documents of assignment and/or
transfer and all stock certificates necessary or appropriate to make all
securities negotiable and complete any transaction herein contemplated.
<PAGE>
4. This escrow shall terminate upon (i) the expiration of the
Co-Founders' Option and the Repurchase Option or (ii) the exercise in full of
the Co-Founders' Option or the Repurchase Option, whichever occurs first.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of same to Purchaser and shall be discharged of all
further obligations hereunder; PROVIDED, HOWEVER, that if at the time of
termination of this escrow you are advised by the Company that the property
subject to this escrow is the subject of a pledge or other security agreement,
you shall deliver all such property to the pledgeholder or other person
designated by the Company.
6. Except as otherwise provided in these Joint Escrow Instructions, your
duties hereunder may be altered, amended, modified or revoked only by a writing
signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties or
their assignees. You shall not be personally liable for any act you may do or
omit to do hereunder as Escrow Agent or as attorney-in-fact for Purchaser while
acting in good faith, and any act done or omitted by you pursuant to the advice
of your own attorneys shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law, and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court.
In case you obey or comply with any such order, judgment or decree of any court,
you shall not be liable to any of the parties hereto or to any other person,
firm or corporation by reason of such compliance, notwithstanding any such
order, judgment or decree being subsequently reversed, modified, annulled, set
aside, vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authority or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the outlawing of any rights under any
statute of limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. You shall be entitled to employ such legal counsel (including without
limitation the firm of Cooley Godward LLP) and other experts as you may deem
necessary properly to advise you in connection with your obligations hereunder,
may rely upon the advice of such counsel, and may pay such counsel reasonable
compensation therefor.
<PAGE>
12. Your responsibilities as Escrow Agent hereunder shall terminate if you
shall resign by written notice to each party. In the event of any such
termination, the Company may appoint any officer or assistant officer of the
Company as successor Escrow Agent and Purchaser hereby confirms the appointment
of such successor or successors as his attorney-in-fact and agent to the full
extent of your appointment.
13. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the securities, you
may (but are not obligated to) retain in your possession without liability to
anyone all or any part of said securities until such dispute shall have been
settled either by mutual written agreement of the parties concerned or by a
final order, decree or judgment of a court of competent jurisdiction after the
time for appeal has expired and no appeal has been perfected, but you shall be
under no duty whatsoever to institute or defend any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
any United States Post Office Box, by registered or certified mail with postage
and fees prepaid, addressed to each of the other parties hereunto entitled at
the following addresses specified below, or at such other addresses as a party
may designate by ten days' written notice to each of the other parties hereto:
16. By signing these Joint Escrow Instructions you become a party hereto
only for the purpose of said Joint Escrow Instructions; you do not become a
party to the Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
17. This instrument shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. It is
understood and agreed that references to "you" or "your" herein refer to the
original Escrow Agent and to any and all successor Escrow Agents. It is
understood and agreed that the Company may at any time or from time to time
assign its rights under the Agreement and these Joint Escrow Instructions in
whole or in part.
Very truly yours,
JATO COMMUNICATIONS CORP.
By:
------------------------------------------
Brian E. Gast
President and Chief Executive Officer
Address:
5660 Greenwood Plaza Blvd.
Suite 220
Englewood, CO 80111
PURCHASER:
---------------------------------------------
LEONARD ALLSUP
Address:
---------------------------------------------
---------------------------------------------
---------------------------------------------
ESCROW AGENT: CO-FOUNDERS:
- ----------------------- ---------------------------------------------
Bruce E. Dines Bruce E. Dines
---------------------------------------------
Brian E. Gast
<PAGE>
EXHIBIT C
SECTION 83(b) ELECTION
July 29, 1998
Director of Internal Revenue
Internal Revenue Service Center
Ogden, UT 84201
RE: ELECTION UNDER SECTION 83(b)
Ladies and Gentlemen:
The undersigned hereby elects, pursuant to the provisions of Sections 55-56 and
83(b) of the Internal Revenue Code of 1986, as amended (the "Code"), to include
in alternative minimum taxable income for the undersigned's current taxable
year, as compensation for services, the excess, if any, of the fair market value
of the property described below at the time of transfer over the amount paid for
such property. The undersigned also elects pursuant to Section 83(b) of the
Code to include in gross income for the taxable year in which the undersigned
disposes of some or all of the property described below in a transaction which
fails to satisfy the requirements of Section 422(a)(1) of the Code (a
"disqualifying disposition"), as compensation for services, the excess, if any,
of the fair market value of the disposed property at the time of transfer to the
undersigned over the amount paid for such property.
Pursuant to Treasury Regulations Section 1.83-2, the following information is
submitted:
1. NAME: Leonard Allsup
("PURCHASER")
Address:
---------------------------------------------
---------------------------------------------
SOCIAL SECURITY NO.: ---------------------------------------------
2. PROPERTY DESCRIPTION: 1,068,667 shares of Common Stock (the "Stock")
of JATO Communications Corp. (the "Company").
3. The date on which the Stock was purchased is July 13, 1998.
4. The taxable year for which the election is made is the calendar year 1998.
<PAGE>
5. RESTRICTIONS:
"In the event that Purchaser voluntarily terminates his relationship
with the Company (or a parent or subsidiary of the Company), whether as an
employee, director or consultant, then Bruce E. Dines and Brian E. Gast (each
a "Co-Founder") shall each have the right, exercisable upon written notice to
Purchaser within thirty (30) days of the date of such termination, to
purchase his pro rata share of the Stock which has not vested pursuant to
Section 4 below as of such termination date, at a purchase price of $.047 per
share (the "Co-Founders' Option"). The Co-Founder's pro rata portion shall
be that number of shares equal to the product obtained by multiplying (x) the
aggregate number of shares of Stock which have not vested pursuant to Section
4 below by (y) a fraction the numerator of which is the number of shares of
Common Stock owned by such Co-Founder (on an as-if-converted basis) at the
time of Purchaser's termination and the denominator of which is the total
number of shares of Common Stock owned by each of the Co-Founders (on an
as-if-converted basis) at the time of Purchaser's termination.
In the event that Purchaser voluntarily terminates his relationship with
the Company (or a parent or subsidiary of the Company), whether as an employee,
director or consultant, and the Co-Founders do not purchase all of Purchaser's
unvested Stock pursuant to the Co-Founders' Option under Section 2 above within
the period set forth therein, the Company shall then have the right, exercisable
upon written notice to Purchaser within thirty (30) days after the expiration of
the Co-Founders' Option, to purchase all or a portion of the Stock which has not
vested pursuant to Section 4 below as of such termination date (less shares
purchased by the Co-Founders pursuant to Section 2 above), at a purchase price
of $.047 per share.
In the event the Company terminates Purchaser's relationship with the
Company (or a parent or subsidiary of the Company), whether as an employee,
director or consultant, for Cause (as defined below), then the Company shall
have an option for a period of ninety (90) days after said termination to
repurchase from Purchaser, at a purchase price of $.047 per share, up to but not
exceeding the number of shares of Stock which have not vested under the
provisions of Section 4 below as of such termination date.
In the event that Purchaser's relationship with the Company (or a parent or
subsidiary of the Company) is terminated by reason of Purchaser's death or
disability (as defined in Section 22(c)(3) of the Internal Revenue Code of 1986,
as amended (the "Code")), then the Company shall have an option for a period of
ninety (90) days after said termination to repurchase from Purchaser's personal
representative at a purchase price of $.047 per share, up to but not exceeding
fifty percent (50%) of the number of shares of Stock which have not vested under
the provisions of Section 4 below as of such termination date (together with the
options set forth in Sections 3(a) and 3(b) above, the "Repurchase Option")."
6. The fair market value at the time of transfer of the Stock, determined
without regard to any restriction other than a restriction which by its terms
will never lapse, is $50,000 (1,068,667 shares having a fair market value of
$.047 per share).
7. PURCHASE PRICE: $50,000 (1,068,667 shares at $.047 per share).
<PAGE>
A copy of this statement has been furnished to the Company and the transferee of
the Stock if different than Purchaser.
Dated: July 29, 1998
Very truly yours,
- --------------------------
<PAGE>
JATO COMMUNICATIONS CORP.
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made as of the 28th
day of August, 1998, by and between JATO Communications Corp., a Delaware
corporation (the "Company"), and Rex A. Humston ("Purchaser").
WHEREAS, the Company desires to issue, and Purchaser desires to purchase,
stock of the Company as herein described, on the terms and conditions
hereinafter set forth; and
WHEREAS, the issuance of common stock hereby is in connection with a
compensatory benefit plan for the employees, directors, officers, advisers or
consultants of the Company and is intended to comply with the provisions of Rule
701 promulgated by the Securities and Exchange Commission under the Securities
Act of 1933, as amended (the "Act").
NOW, THEREFORE, IT IS AGREED between the parties as follows:
1. PURCHASE AND SALE OF STOCK. Purchaser hereby agrees to purchase
from the Company, and the Company hereby agrees to sell to Purchaser, an
aggregate of five hundred thousand (500,000) shares of the Common Stock of the
Company (the "Stock") at a purchase price of $.07 per share, for an aggregate
purchase price of $35,000, payable in cash or by check.
The closing hereunder, including payment for and delivery of the Stock
shall occur at the offices of the Company immediately following the execution of
this Agreement, or at such other time and place as the parties may mutually
agree.
2. CO-FOUNDERS REPURCHASE RIGHT. In the event that Purchaser
voluntarily terminates his relationship with the Company (or a parent or
subsidiary of the Company), whether as an employee, director or consultant,
then Leonard Allsup, Brian E. Gast and Bruce E. Dines (each a "Co-Founder")
shall each have the right, exercisable upon written notice to Purchaser
within thirty (30) days of the date of such termination, to purchase his pro
rata share of the Stock which has not vested pursuant to Section 4 below as
of such termination date, at a purchase price of $.07 per share (the
"Co-Founders' Option"). The Co-Founder's pro rata portion shall be that
number of shares equal to the product obtained by multiplying (x) the
aggregate number of shares of Stock which have not vested pursuant to Section
4 below by (y) a fraction the numerator of which is the number of shares of
Common Stock owned by such Co-Founder (on an as-if-converted basis) at the
time of Purchaser's termination and the denominator of which is the total
number of shares of Common Stock owned by each of the Co-Founders (on an
as-if-converted basis) at the time of Purchaser's termination.
1.
<PAGE>
3. COMPANY'S REPURCHASE RIGHT.
(a) In the event that Purchaser voluntarily terminates his
relationship with the Company (or a parent or subsidiary of the Company),
whether as an employee, director or consultant, and the Co-Founders do not
purchase all of Purchaser's unvested Stock pursuant to the Co-Founders' Option
under Section 2 above within the period set forth therein, the Company shall
then have the right, exercisable upon written notice to Purchaser within thirty
(30) days after the expiration of the Co-Founders' Option, to purchase all or a
portion of the Stock which has not vested pursuant to Section 4 below as of such
termination date (less shares purchased by the Co-Founders pursuant to Section 2
above), at a purchase price of $.07 per share.
(b) In the event the Company terminates Purchaser's
relationship with the Company (or a parent or subsidiary of the Company),
whether as an employee, director or consultant, for Cause (as defined below),
then the Company shall have an option for a period of ninety (90) days after
said termination to repurchase from Purchaser, at a purchase price of $.07 per
share, up to but not exceeding the number of shares of Stock which have not
vested under the provisions of Section 4 below as of such termination date.
(c) "Cause" as used herein shall mean: (i) conviction of any
felony or of any crime involving moral turpitude or dishonesty; (ii)
participation in a fraud or act of dishonesty against the Company; (iii) breach
of Purchaser's duties to the Company, including persistent unsatisfactory
performance of job duties; (iv) intentional damage to any property of the
Company; or (v) conduct by Purchaser which in the good faith and reasonable
determination of the Board demonstrates gross unfitness to serve; PROVIDED,
HOWEVER, that Purchaser shall not be deemed to have been terminated for Cause
pursuant to clauses (iii) or (v) above unless the Company shall have provided
Purchaser written notice of such breach or conduct and Purchaser shall have
failed to cure the same to the reasonable satisfaction of the Company within
thirty (30) days after receipt of such notice.
(d) In the event that Purchaser's relationship with the Company
(or a parent or subsidiary of the Company) is terminated by reason of
Purchaser's death or disability (as defined in Section 22(c)(3) of the Internal
Revenue Code of 1986, as amended (the "Code")), then the Company shall have an
option for a period of ninety (90) days after said termination to repurchase
from Purchaser's personal representative at a purchase price of $.07 per share,
up to but not exceeding fifty percent (50%) of the number of shares of Stock
which have not vested under the provisions of Section 4 below as of such
termination date (together with the options set forth in Sections 3(a) and 3(b)
above, the "Repurchase Option").
(e) In the event that the Company terminates Purchaser's
relationship with the Company (or a parent or subsidiary of the Company),
whether as an employee, director or consultant, other than for Cause, the
Company shall have no right to repurchase from Purchaser any shares of Stock,
whether vested or unvested.
(f) The Repurchase Option shall be exercised by written notice
signed by an officer of the Company or by any assignee or assignees of the
Company and delivered or mailed
2.
<PAGE>
as provided in Section 17(a). Such notice shall identify the number of
shares of Stock to be repurchased and shall notify Purchaser of the time,
place and date for settlement of such repurchase, which shall be scheduled by
the Company within the term of the Repurchase Option set forth in this
Section 3. The Company shall be entitled to pay for any shares of Stock
repurchased pursuant to its Repurchase Option in cash or by offset against
any indebtedness owing to the Company by Purchaser, or by a combination of
both. Upon delivery of such notice and payment of the purchase price in any
of the ways described above, the Company shall become the legal and
beneficial owner of the Stock being repurchased and all rights and interest
therein or related thereto, and the Company shall have the right to transfer
to its own name the Stock being repurchased by the Company, without further
action by Purchaser.
4. VESTING. Subject to the acceleration of vesting set forth in
Section 7 below, 500,000 shares (representing ten percent (10%) of the Stock)
shall vest and be released from the Co-Founders' Option and the Repurchase
Option immediately on the date hereof. An additional 100,000 shares
(representing twenty percent (20%) of the Stock) shall vest and be released from
the Co-Founders' Option and the Repurchase Option on January 1, 2000. The
remaining 350,000 shares (representing seventy percent (70%) of the Stock) shall
vest in equal monthly installments thereafter, such that 14,583 shares shall
vest and be released from the Co-Founders' Option and the Repurchase Option on
the first day of each month beginning on February 1, 2000, with a final
installment of 14,591 shares vesting on January 1, 2002 (provided in each case
that Purchaser's relationship as an employee, director or consultant of the
Company (or a parent or subsidiary of the Company) has not been terminated prior
to the date of such release).
5. ADJUSTMENTS TO STOCK. If, from time to time, during the term of
the Co-Founders' Option or the Repurchase Option, there is any change affecting
the Company's outstanding Common Stock as a class that is effected without the
receipt of consideration by the Company (through merger, consolidation,
reorganization, reincorporation, stock dividend, dividend in property other than
cash, stock split, liquidating dividend, combination of shares, change in
corporate structure or other transaction not involving the receipt of
consideration by the Company), then any and all new, substituted or additional
securities or other property to which Purchaser is entitled by reason of
Purchaser's ownership of Stock shall be immediately subject to the Co-Founders'
Option and the Repurchase Option and shall be deemed to be "Stock" for all
purposes hereunder with the same force and effect as the shares of the Stock
presently subject to the Co-Founders' Option and the Repurchase Option, but only
to the extent the Stock is, at the time, covered by such Co-Founders' Option or
Repurchase Option. While the aggregate purchase price shall remain the same
after each such event, the purchase price per share of Stock upon exercise of
the Co-Founders' Option or the Repurchase Option shall be appropriately
adjusted.
6. CORPORATE TRANSACTION. All previously unvested shares of Stock
shall vest immediately prior to the closing of (i) a sale of all or
substantially all of the assets of the Company; (ii) a merger or consolidation
in which the Company is not the surviving corporation; (iii) a reverse merger in
which the company is the surviving corporation but the shares of the Company's
Common Stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise; or
3.
<PAGE>
(iv) the acquisition by any person, entity or group within the meaning of
Section 13(d) or 14(d) of the Exchange Act, or any comparable successor
provisions (excluding any employee benefit plan, or related trust, sponsored
or maintained by the Company or any affiliate) of the beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act, or
comparable successor rule) of securities of the Company representing at least
fifty percent (50%) of the combined voting power entitled to vote in the
election of directors ((i) through (iv) being collectively referred to herein
as a "Corporate Transaction").
7. TERMINATION OF CO-FOUNDERS' OPTION AND REPURCHASE OPTION. The
Co-Founders' Option and the Repurchase Option shall terminate (i) immediately
prior to the closing of a Corporate Transaction or (ii) upon exercise in full
or expiration of the Co-Founders' Option or the Repurchase Option, as
applicable, whichever first occurs.
8. ESCROW OF UNVESTED STOCK. As security for Purchaser's faithful
performance of the terms of this Agreement and to insure the availability for
delivery of Purchaser's Stock upon exercise of the Co-Founders' Option or the
Repurchase Option, Purchaser agrees, at the closing hereunder, to deliver to
and deposit with the Secretary, as escrow agent in this transaction (the
"Escrow Agent"), three (3) stock assignments duly endorsed (with date and
number of shares blank) in the form attached hereto as EXHIBIT B, together
with a certificate or certificates evidencing all of the Stock subject to the
Repurchase Option; said documents are to be held by the Escrow Agent and
delivered by said Escrow Agent pursuant to the Joint Escrow Instructions of
the Company and Purchaser set forth in EXHIBIT C attached hereto and
incorporated by this reference, which instructions shall also be delivered to
the Escrow Agent at the closing hereunder.
9. RIGHTS OF PURCHASER. Subject to the provisions of Sections 8, 10
and 13 herein, Purchaser shall at all times exercise all rights and privileges
of a stockholder of the Company with respect to the Stock, whether vested or
unvested, including all voting rights incident thereto.
10. LIMITATIONS ON TRANSFER. In addition to any other limitation on
transfer created by applicable securities laws, Purchaser shall not assign,
hypothecate, donate, encumber or otherwise dispose of any interest in the Stock
while the Stock is subject to the Co-Founders' Option or the Repurchase Option.
After any Stock has been released from the Co-Founders' Option and the
Repurchase Option, Purchaser shall not assign, hypothecate, donate, encumber or
otherwise dispose of any interest in the Stock except in compliance with the
provisions herein and applicable securities laws. Furthermore, the Stock shall
be subject to any right of first refusal in favor of the Company or its
assignees that may be contained in the Company's Bylaws. Notwithstanding the
foregoing, Purchaser may transfer all or any portion of the Stock to his spouse,
father, mother, brother, sister or lineal descendants, PROVIDED; HOWEVER, that
all shares of Stock so transferred by Purchaser shall continue to be subject to
the provisions of this Agreement and shall remain "Stock" for all purposes
hereunder.
4.
<PAGE>
11. RESTRICTIVE LEGENDS. All certificates representing the Stock
shall have endorsed thereon legends in substantially the following forms (in
addition to any other legend which may be required by other agreements between
the parties hereto):
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
AN OPTION SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED
HOLDER, OR SUCH HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT
THE PRINCIPAL OFFICE OF THE COMPANY. ANY TRANSFER OR ATTEMPTED TRANSFER OF ANY
SHARES SUBJECT TO SUCH OPTION IS VOID WITHOUT THE PRIOR EXPRESS WRITTEN CONSENT
OF THE COMPANY."
(b) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
(c) Any legend required by appropriate blue sky officials.
12. INVESTMENT REPRESENTATIONS. In connection with the purchase of
the Stock, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Stock. Purchaser is
purchasing the Stock for investment for Purchaser's own account only and not
with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Act.
(b) Purchaser understands that the Stock has not been
registered under the Act by reason of a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of Purchaser's
investment intent as expressed herein.
(c) Purchaser further acknowledges and understands that the
Stock must be held indefinitely unless the Stock is subsequently registered
under the Act or an exemption from such registration is available. Purchaser
further acknowledges and understands that the Company is under no obligation to
register the Stock. Purchaser understands that the certificate evidencing the
Stock will be imprinted with a legend which prohibits the transfer of the Stock
unless the Stock is registered or such registration is not required in the
opinion of counsel for the Company.
(d) Purchaser is familiar with the provisions of Rules 144 and
701, under the Act, as in effect from time to time, which, in substance, permit
limited public resale of "restricted securities" acquired, directly or
indirectly, from the issuer thereof (or from an affiliate of such issuer), in a
non-public offering subject to the satisfaction of certain conditions. Rule 701
5.
<PAGE>
provides that if the issuer qualifies under Rule 701 at the time of issuance of
the securities, such issuance will be exempt from registration under the Act.
In the event the Company becomes subject to the reporting requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, the securities
exempt under Rule 701 may be sold by Purchaser ninety (90) days thereafter,
subject to the satisfaction of certain of the conditions specified by Rule 144
and the market stand-off provision described in Section 13 below.
In the event that the sale of the Stock does not qualify under Rule 701
at the time of purchase, then the Stock may be resold by Purchaser in certain
limited circumstances subject to the provisions of Rule 144, which requires,
among other things: (i) the availability of certain public information about the
Company and (ii) the resale occurring following the required holding period
under Rule 144 after the Purchaser has purchased, and made full payment of
(within the meaning of Rule 144), the securities to be sold.
(e) Purchaser further understands that at the time Purchaser
wishes to sell the Stock there may be no public market upon which to make such a
sale, and that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144 or 701, and
that, in such event, Purchaser would be precluded from selling the Stock under
Rule 144 or 701 even if the minimum holding period requirement had been
satisfied.
(f) Purchaser further represents and warrants that Purchaser
has either (i) preexisting personal or business relationships with the Company
or any of its officers, directors or controlling persons or (ii) the capacity to
protect his own interests in connection with the purchase of the Stock by virtue
of the business or financial expertise of himself or of professional advisors to
Purchaser who are unaffiliated with and who are not compensated by the Company
or any of its affiliates, directly or indirectly.
13. MARKET STAND-OFF. In connection with the first firmly
underwritten public offering of the Company's securities under the Act (the
"Initial Offering"), Purchaser shall not sell, dispose of, transfer, make any
short sale of, grant any option for the purchase of, or enter into any hedging
or similar transaction with the same economic effect as a sale with respect to,
any Common Stock of the Company held by Purchaser, including the Stock (the
"Restricted Securities"), for a period of time specified by the underwriter(s)
(not to exceed one hundred eighty (180) days) following the effective date of
the registration statement filed under the Act in connection with such Initial
Offering. Purchaser agrees to execute and deliver such other agreements as may
be reasonably requested by the Company and/or the underwriter(s) which are
consistent with the foregoing or which are necessary to give further effect
thereto. In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to Purchaser's Restricted Securities
until the end of such period.
14. SECTION 83(b) ELECTION. Purchaser understands that Section 83(a)
of the Code, taxes as ordinary income the difference between the amount paid for
the Stock and the fair market value of the Stock as of the date any restrictions
on the Stock lapse. In this context, "restriction" includes the right of the
Co-Founders to buy the Stock from Purchaser pursuant to
6.
<PAGE>
the Co-Founders' Option set forth in Section 2 above and the right of the
Company to repurchase the Stock pursuant to the Repurchase Option set forth
in Section 3 above. Purchaser understands that Purchaser may elect to be
taxed at the time the Stock is purchased, rather than when and as the
Co-Founders' Option and the Repurchase Option expire, by filing an election
under Section 83(b) (an "83(b) Election") of the Code with the Internal
Revenue Service within thirty (30) days from the date of purchase in the form
attached hereto as EXHIBIT D. Even if the fair market value of the Stock at
the time of the execution of this Agreement equals the amount paid for the
Stock, the 83(b) Election must be made to avoid income under Section 83(a) in
the future. Purchaser understands that failure to file such an 83(b)
Election in a timely manner may result in adverse tax consequences for
Purchaser. Purchaser further understands that an additional copy of such
83(b) Election is required to be filed with his or her federal income tax
return for the calendar year in which the date of this Agreement falls.
Purchaser acknowledges that the foregoing is only a summary of the effect of
United States federal income taxation with respect to purchase of the Stock
hereunder, and does not purport to be complete. Purchaser further
acknowledges that the Company has directed Purchaser to seek independent
advice regarding the applicable provisions of the Code, the income tax laws
of any municipality, state or foreign country in which Purchaser may reside,
and the tax consequences of Purchaser's death. PURCHASER ASSUMES ALL
RESPONSIBILITY FOR FILING AN 83(b) ELECTION AND PAYING ALL TAXES RESULTING
FROM SUCH ELECTION OR THE LAPSE OF THE RESTRICTIONS ON THE STOCK.
15. REFUSAL TO TRANSFER. The Company shall not be required (i) to
transfer on its books any shares of Stock of the Company which shall have been
transferred in violation of any of the provisions set forth in this Agreement or
(ii) to treat as owner of such shares or to accord the right to vote as such
owner or to pay dividends to any transferee to whom such shares shall have been
so transferred.
16. NO EMPLOYMENT RIGHTS. This Agreement is not an employment
contract and shall not be deemed to create in any way whatsoever any obligation
on your part to continue in the employ of the Company (or a parent or subsidiary
of the Company), or of the Company (or a parent or subsidiary of the Company) to
continue your employment.
17. MISCELLANEOUS.
(a) NOTICES. Any notice required or permitted hereunder shall
be given in writing and shall be deemed effectively given upon personal delivery
or sent by telegram or fax or upon deposit in the United States Post Office, by
registered or certified mail with postage and fees prepaid, addressed to the
other party hereto at its address hereinafter shown below its signature or at
such other address as such party may designate by ten (10) days' advance written
notice to the other party hereto.
(b) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of the successors and assigns of the Company and, subject to the
restrictions on transfer herein set forth, be binding upon Purchaser,
Purchaser's successors, and assigns. The Repurchase Option of the Company
hereunder shall be assignable by the Company at any time or from time to time,
in whole or in part.
7.
<PAGE>
(c) ATTORNEYS' FEES; SPECIFIC PERFORMANCE. Purchaser shall
reimburse the Company for all costs incurred by the Company in enforcing the
performance of, or protecting its rights under, any part of this Agreement,
including reasonable costs of investigation and attorneys' fees. It is the
intention of the parties that the Company, upon exercise of the Repurchase
Option and payment of the purchase price thereunder, pursuant to the terms of
this Agreement, shall be entitled to receive the Stock, in specie, in order to
have such Stock available for future issuance without dilution of the holdings
of other stockholders. Furthermore, it is expressly agreed between the parties
that money damages are inadequate to compensate the Company for the Stock and
that the Company shall, upon proper exercise of the Repurchase Option, be
entitled to specific enforcement of its rights to purchase and receive said
Stock.
(d) GOVERNING LAW; VENUE. This Agreement shall be governed by
and construed in accordance with the laws of the State of Colorado. The parties
agree that any action brought by either party to interpret or enforce any
provision of this Agreement shall be brought in, and each party agrees to, and
does hereby, submit to the jurisdiction and venue of, the appropriate state or
federal court for the district encompassing the Company's principal place of
business.
(e) FURTHER EXECUTION. The parties agree to take all such
further action(s) as may reasonably be necessary to carry out and consummate
this Agreement as soon as practicable, and to take whatever steps may be
necessary to obtain any governmental approval in connection with or otherwise
qualify the issuance of the securities that are the subject of this Agreement.
(f) INDEPENDENT COUNSEL. Purchaser acknowledges that this
Agreement has been prepared on behalf of the Company by Cooley Godward LLP,
counsel to the Company and that Cooley Godward LLP does not represent, and is
not acting on behalf of, Purchaser. Purchaser has been provided with an
opportunity to consult with Purchaser's own counsel with respect to this
Agreement.
(g) ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes
the entire agreement between the parties with respect to the subject matter
hereof and supersedes and merges all prior agreements or understandings, whether
written or oral. This Agreement may not be amended, modified or revoked, in
whole or in part, except by an agreement in writing signed by each of the
parties hereto.
(h) SEVERABILITY. If a provision of this Agreement is held to
be unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith. In the event that the parties cannot reach a mutually
agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
(i) COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
8.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
JATO COMMUNICATIONS CORP.
A DELAWARE CORPORATION
By: /s/ Brian E. Gast
--------------------------------------
Brian E. Gast
President and Chief Executive Officer
Address: 5660 Greenwood Plaza Blvd.
Suite 220
Englewood, CO 80111
PURCHASER:
/s/ Rex A. Humston
-----------------------------------------
REX A. HUMSTON
Address:
---------------------------------
-----------------------------------------
-----------------------------------------
CO-FOUNDERS:
/s/ Brian E. Gast
-----------------------------------------
BRIAN E. GAST
/s/ Bruce E. Dines
-----------------------------------------
BRUCE E. DINES
/s/ Leonard Allsup
-----------------------------------------
LEONARD ALLSUP
ATTACHMENTS:
9.
<PAGE>
Exhibit A -- Stock Assignment Separate from Certificate
Exhibit B -- Joint Escrow Instructions
Exhibit C -- Section 83(b) Election
10.
<PAGE>
EXHIBIT A
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Founder's Stock Purchase
Agreement (the "Agreement") dated as of August 28, 1998, Rex A. Humston hereby
sells, assigns and transfers unto ________________________, ___________________
_____________________________________________ (_________) shares of Common Stock
of JATO Communications Corp., a Delaware corporation (the "Company"), standing
in the undersigned's name on the Company's books represented by Certificate No.
_____ herewith, and does hereby irrevocably constitute and appoint the Secretary
of the Company attorney to transfer the said stock on the books of the said
Company with full power of substitution in the premises. This Assignment may be
used only in accordance with and subject to the terms and conditions of the
Agreement, in connection with the repurchase of shares of Common Stock issued to
the undersigned pursuant to the Agreement, and only to the extent that such
shares remain subject to the Co-Founders' Option or the Company's Repurchase
Option under the Agreement.
Dated:
------------------ ------------------------------
[Signature]
<PAGE>
EXHIBIT B
JOINT ESCROW INSTRUCTIONS
Bruce E. Dines
JATO Communications Corp.
5660 Greenwood Plaza Blvd.
Suite 220
Englewood, CO 80111
Dear Sir:
As Escrow Agent for both JATO Communications Corp., a Delaware
corporation (the "Company"), and the undersigned purchaser of stock of the
Company ("Purchaser"), you are hereby authorized and directed to hold the
documents delivered to you pursuant to the terms of that certain Founder's Stock
Purchase Agreement (the "Agreement"), dated July 13, 1998 to which a copy of
these Joint Escrow Instructions is attached as Exhibit C, in accordance with the
following instructions:
1. In the event a Co-Founder or the Company or an assignee of the
Company shall elect to exercise the Co-Founders' Option or the Repurchase
Option, as the case may be, as set forth in the Agreement, the Co-Founder or the
Company or its assignee, as the case may be, will give to Purchaser and you a
written notice specifying the number of shares of stock to be purchased, the
purchase price, and the time for a closing hereunder at the principal office of
the Company. Purchaser, the Co-Founders and the Company hereby irrevocably
authorize and direct you to close the transaction contemplated by such notice in
accordance with the terms of said notice.
2. At the closing you are directed (a) to date any stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Co-Founder or the
Company, as applicable, against the simultaneous delivery to you of the purchase
price (which may include suitable acknowledgment of cancellation of
indebtedness) of the number of shares of stock being purchased pursuant to the
exercise of the Co-Founders' Option or the Repurchase Option, as applicable.
3. Purchaser irrevocably authorizes the Company to deposit with
you any certificates evidencing shares of stock to be held by you hereunder
and any additions and substitutions to said shares as specified in the
Agreement. Purchaser hereby irrevocably constitutes and appoints you as his
attorney-in-fact and agent for the term of this escrow to execute with
respect to such securities and other property all documents of assignment
and/or transfer and all stock certificates necessary or appropriate to make
all securities negotiable and complete any transaction herein contemplated.
<PAGE>
4. This escrow shall terminate upon (i) the expiration of the
Co-Founders' Option and the Repurchase Option or (ii) the exercise in full of
the Co-Founders' Option or the Repurchase Option, whichever occurs first.
5. If at the time of termination of this escrow you should have in
your possession any documents, securities, or other property belonging to
Purchaser, you shall deliver all of same to Purchaser and shall be discharged of
all further obligations hereunder; PROVIDED, HOWEVER, that if at the time of
termination of this escrow you are advised by the Company that the property
subject to this escrow is the subject of a pledge or other security agreement,
you shall deliver all such property to the pledgeholder or other person
designated by the Company.
6. Except as otherwise provided in these Joint Escrow Instructions,
your duties hereunder may be altered, amended, modified or revoked only by a
writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as
are specifically set forth herein and may rely and shall be protected in relying
or refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties or
their assignees. You shall not be personally liable for any act you may do or
omit to do hereunder as Escrow Agent or as attorney-in-fact for Purchaser while
acting in good faith, and any act done or omitted by you pursuant to the advice
of your own attorneys shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all
warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law, and are hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case you obey or comply with any such order, judgment or decree of
any court, you shall not be liable to any of the parties hereto or to any other
person, firm or corporation by reason of such compliance, notwithstanding any
such order, judgment or decree being subsequently reversed, modified, annulled,
set aside, vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authority or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the outlawing of any rights under any
statute of limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. You shall be entitled to employ such legal counsel (including
without limitation the firm of Cooley Godward LLP) and other experts as you may
deem necessary properly to advise you in connection with your obligations
hereunder, may rely upon the advice of such counsel, and may pay such counsel
reasonable compensation therefor.
<PAGE>
12. Your responsibilities as Escrow Agent hereunder shall terminate if
you shall resign by written notice to each party. In the event of any such
termination, the Company may appoint any officer or assistant officer of the
Company as successor Escrow Agent and Purchaser hereby confirms the appointment
of such successor or successors as his attorney-in-fact and agent to the full
extent of your appointment.
13. If you reasonably require other or further instruments in
connection with these Joint Escrow Instructions or obligations in respect
hereto, the necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
securities, you may (but are not obligated to) retain in your possession without
liability to anyone all or any part of said securities until such dispute shall
have been settled either by mutual written agreement of the parties concerned or
by a final order, decree or judgment of a court of competent jurisdiction after
the time for appeal has expired and no appeal has been perfected, but you shall
be under no duty whatsoever to institute or defend any such proceedings.
15. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in any United States Post Office Box, by registered or certified mail
with postage and fees prepaid, addressed to each of the other parties hereunto
entitled at the following addresses specified below, or at such other addresses
as a party may designate by ten days' written notice to each of the other
parties hereto:
16. By signing these Joint Escrow Instructions you become a party
hereto only for the purpose of said Joint Escrow Instructions; you do not become
a party to the Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
17. This instrument shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns. It is
understood and agreed that references to "you" or "your" herein refer to the
original Escrow Agent and to any and all successor Escrow Agents. It is
understood and agreed that the Company may at any time or from time to time
assign its rights under the Agreement and these Joint Escrow Instructions in
whole or in part.
Very truly yours,
JATO COMMUNICATIONS CORP.
By:
--------------------------------------
Brian E. Gast
President and Chief Executive Officer
Address:
5660 Greenwood Plaza Blvd.
Suite 220
Englewood, CO 80111
PURCHASER:
-----------------------------------------
REX A. HUMSTON
Address:
-----------------------------------------
-----------------------------------------
-----------------------------------------
ESCROW AGENT: CO-FOUNDERS:
- ------------------------------- ------------------------------
Bruce E. Dines Bruce E. Dines
------------------------------
Leonard Allsup
------------------------------
Brian E. Gast
<PAGE>
EXHIBIT C
FORM OF SECTION 83(b) ELECTION
_____________, 1998
Director of Internal Revenue
Internal Revenue Service Center
Ogden, UT 84201
RE: ELECTION UNDER SECTION 83(b)
Gentlemen:
The undersigned hereby elects, pursuant to the provisions of Sections 55-56 and
83(b) of the Internal Revenue Code of 1986, as amended (the "Code"), to include
in alternative minimum taxable income for the undersigned's current taxable
year, as compensation for services, the excess, if any, of the fair market value
of the property described below at the time of transfer over the amount paid for
such property. The undersigned also elects pursuant to Section 83(b) of the
Code to include in gross income for the taxable year in which the undersigned
disposes of some or all of the property described below in a transaction which
fails to satisfy the requirements of Section 422(a)(1) of the Code (a
"disqualifying disposition"), as compensation for services, the excess, if any,
of the fair market value of the disposed property at the time of transfer to the
undersigned over the amount paid for such property.
Pursuant to Treasury Regulations Section 1.83-2, the following information is
submitted:
1. NAME: Rex A. Humston
("PURCHASER")
ADDRESS:
------------------------------
------------------------------
SOCIAL SECURITY NO.:
------------------------------
2. PROPERTY DESCRIPTION: 500,000 shares of Common Stock (the "Stock")
of JATO Communications Corp. (the "Company").
3. The date on which the Stock was purchased is August 28, 1998.
4. The taxable year for which the election is made is the calendar year
1998.
<PAGE>
5. RESTRICTIONS:
"In the event that Purchaser voluntarily terminates his relationship
with the Company (or a parent or subsidiary of the Company), whether as an
employee, director or consultant, then Leonard Allsup and Bruce E. Dines
(each a "Co-Founder") shall each have the right, exercisable upon written
notice to Purchaser within thirty (30) days of the date of such termination,
to purchase his pro rata share of the Stock which has not vested pursuant to
Section 4 below as of such termination date, at a purchase price of $.07 per
share (the "Co-Founders' Option"). The Co-Founder's pro rata portion shall
be that number of shares equal to the product obtained by multiplying (x) the
aggregate number of shares of Stock which have not vested pursuant to Section
4 below by (y) a fraction the numerator of which is the number of shares of
Common Stock owned by such Co-Founder (on an as-if-converted basis) at the
time of Purchaser's termination and the denominator of which is the total
number of shares of Common Stock owned by each of the Co-Founders (on an
as-if-converted basis) at the time of Purchaser's termination.
In the event that Purchaser voluntarily terminates his relationship with
the Company (or a parent or subsidiary of the Company), whether as an employee,
director or consultant, and the Co-Founders do not purchase all of Purchaser's
unvested Stock pursuant to the Co-Founders' Option under Section 2 above within
the period set forth therein, the Company shall then have the right, exercisable
upon written notice to Purchaser within thirty (30) days after the expiration of
the Co-Founders' Option, to purchase all or a portion of the Stock which has not
vested pursuant to Section 4 below as of such termination date (less shares
purchased by the Co-Founders pursuant to Section 2 above), at a purchase price
of $.07 per share.
In the event the Company terminates Purchaser's relationship with the
Company (or a parent or subsidiary of the Company), whether as an employee,
director or consultant, for Cause (as defined below), then the Company shall
have an option for a period of ninety (90) days after said termination to
repurchase from Purchaser, at a purchase price of $.07 per share, up to but not
exceeding the number of shares of Stock which have not vested under the
provisions of Section 4 below as of such termination date.
In the event that Purchaser's relationship with the Company (or a parent
or subsidiary of the Company) is terminated by reason of Purchaser's death or
disability (as defined in Section 22(c)(3) of the Internal Revenue Code of 1986,
as amended (the "Code")), then the Company shall have an option for a period of
ninety (90) days after said termination to repurchase from Purchaser's personal
representative at a purchase price of $.07 per share, up to but not exceeding
fifty percent (50%) of the number of shares of Stock which have not vested under
the provisions of Section 4 below as of such termination date (together with the
options set forth in Sections 3(a) and 3(b) above, the "Repurchase Option")."
6. The fair market value at the time of transfer of the Stock, determined
without regard to any restriction other than a restriction which by its terms
will never lapse, is $35,000 (500,000 shares having a fair market value of $.07
per share).
7. PURCHASE PRICE: $35,000 (500,000 shares at $.07 per share).
<PAGE>
A copy of this statement has been furnished to the Company and the transferee of
the Stock if different than Purchaser.
Dated: _______________, 1998.
Very truly yours,
- ----------------------------------
<PAGE>
JATO COMMUNICATIONS CORP.
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made as of the 14th
day of October, 1998, by and between JATO Communications Corp., a Delaware
corporation (the "Company"), and Patrick M. Green ("Purchaser").
WHEREAS, the Company desires to issue, and Purchaser desires to
purchase, stock of the Company as herein described, on the terms and
conditions hereinafter set forth; and
WHEREAS, the issuance of common stock hereby is in connection with a
compensatory benefit plan for the employees, directors, officers, advisers or
consultants of the Company and is intended to comply with the provisions of
Rule 701 promulgated by the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Act").
NOW, THEREFORE, IT IS AGREED between the parties as follows:
1. PURCHASE AND SALE OF STOCK. Purchaser hereby agrees to
purchase from the Company, and the Company hereby agrees to sell to
Purchaser, an aggregate of one hundred thirty thousand (130,000) shares of
the Common Stock of the Company (the "Stock") at a purchase price of $.25 per
share, for an aggregate purchase price of $32,500. The purchase price shall
be payable $20,000 in cash or by check , and $12,500 in services rendered to
the Company.
The closing hereunder, including payment for and delivery of the Stock
shall occur at the offices of the Company immediately following the execution
of this Agreement, or at such other time and place as the parties may
mutually agree.
2. CO-FOUNDERS REPURCHASE RIGHT. In the event that Purchaser
voluntarily terminates his relationship with the Company (or a parent or
subsidiary of the Company), whether as an employee, director or consultant,
then Leonard Allsup, Brian E. Gast and Bruce E. Dines (each a "Co-Founder")
shall each have the right, exercisable upon written notice to Purchaser
within thirty (30) days of the date of such termination, to purchase his pro
rata share of the Stock which has not vested pursuant to Section 4 below as
of such termination date, at a purchase price of $.25 per share (the
"Co-Founders' Option"). The Co-Founder's pro rata portion shall be that
number of shares equal to the product obtained by multiplying (x) the
aggregate number of shares of Stock which have not vested pursuant to Section
4 below by (y) a fraction the numerator of which is the number of shares of
Common Stock owned by such Co-Founder (on an as-if-converted basis) at the
time of Purchaser's termination and the denominator of which is the total
number of shares of Common Stock owned by each of the Co-Founders (on an
as-if-converted basis) at the time of Purchaser's termination.
1.
<PAGE>
3. COMPANY'S REPURCHASE RIGHT.
(a) In the event that Purchaser voluntarily terminates his
relationship with the Company (or a parent or subsidiary of the Company),
whether as an employee, director or consultant, and the Co-Founders do not
purchase all of Purchaser's unvested Stock pursuant to the Co-Founders'
Option under Section 2 above within the period set forth therein, the Company
shall then have the right, exercisable upon written notice to Purchaser
within thirty (30) days after the expiration of the Co-Founders' Option, to
purchase all or a portion of the Stock which has not vested pursuant to
Section 4 below as of such termination date (less shares purchased by the
Co-Founders pursuant to Section 2 above), at a purchase price of $.25 per
share.
(b) In the event the Company terminates Purchaser's
relationship with the Company (or a parent or subsidiary of the Company),
whether as an employee, director or consultant, for Cause (as defined below),
then the Company shall have an option for a period of ninety (90) days after
said termination to repurchase from Purchaser, at a purchase price of $.25
per share, up to but not exceeding the number of shares of Stock which have
not vested under the provisions of Section 4 below as of such termination
date.
(c) "Cause" as used herein shall mean: (i) conviction of
any felony or of any crime involving moral turpitude or dishonesty; (ii)
participation in a fraud or act of dishonesty against the Company; (iii)
breach of Purchaser's duties to the Company, including persistent
unsatisfactory performance of job duties; (iv) intentional damage to any
property of the Company; or (v) conduct by Purchaser which in the good faith
and reasonable determination of the Board demonstrates gross unfitness to
serve; PROVIDED, HOWEVER, that Purchaser shall not be deemed to have been
terminated for Cause pursuant to clauses (iii) or (v) above unless the
Company shall have provided Purchaser written notice of such breach or
conduct and Purchaser shall have failed to cure the same to the reasonable
satisfaction of the Company within thirty (30) days after receipt of such
notice.
(d) In the event that Purchaser's relationship with the
Company (or a parent or subsidiary of the Company) is terminated by reason of
Purchaser's death or disability (as defined in Section 22(c)(3) of the
Internal Revenue Code of 1986, as amended (the "Code")), then the Company
shall have an option for a period of ninety (90) days after said termination
to repurchase from Purchaser's personal representative at a purchase price of
$.25 per share, up to but not exceeding fifty percent (50%) of the number of
shares of Stock which have not vested under the provisions of Section 4 below
as of such termination date (together with the options set forth in Sections
3(a) and 3(b) above, the "Repurchase Option").
(e) In the event that the Company terminates Purchaser's
relationship with the Company (or a parent or subsidiary of the Company),
whether as an employee, director or consultant, other than for Cause, the
Company shall have no right to repurchase from Purchaser any shares of Stock,
whether vested or unvested.
(f) The Repurchase Option shall be exercised by written
notice signed by an officer of the Company or by any assignee or assignees of
the Company and delivered or mailed
2.
<PAGE>
as provided in Section 17(a). Such notice shall identify the number of
shares of Stock to be repurchased and shall notify Purchaser of the time,
place and date for settlement of such repurchase, which shall be scheduled by
the Company within the term of the Repurchase Option set forth in this
Section 3. The Company shall be entitled to pay for any shares of Stock
repurchased pursuant to its Repurchase Option in cash or by offset against
any indebtedness owing to the Company by Purchaser, or by a combination of
both. Upon delivery of such notice and payment of the purchase price in any
of the ways described above, the Company shall become the legal and
beneficial owner of the Stock being repurchased and all rights and interest
therein or related thereto, and the Company shall have the right to transfer
to its own name the Stock being repurchased by the Company, without further
action by Purchaser.
4. VESTING. Subject to the acceleration of vesting set forth in
Section 7 below, 13,000 shares (representing ten percent (10%) of the Stock)
shall vest and be released from the Co-Founders' Option and the Repurchase
Option immediately on the date hereof. An additional 39,000 shares
(representing thirty percent (30%) of the Stock) shall vest and be released
from the Co-Founders' Option and the Repurchase Option on January 1, 2000.
The remaining 78,000 shares (representing sixty percent (60%) of the Stock)
shall vest in equal monthly installments thereafter, such that 3,250 shares
shall vest and be released from the Co-Founders' Option and the Repurchase
Option on the first day of each month beginning on February 1, 2000, with a
final installment of 3,250 shares vesting on January 1, 2002 (provided in
each case that Purchaser's relationship as an employee, director or
consultant of the Company (or a parent or subsidiary of the Company) has not
been terminated prior to the date of such release).
5. ADJUSTMENTS TO STOCK. If, from time to time, during the term of
the Co-Founders' Option or the Repurchase Option, there is any change
affecting the Company's outstanding Common Stock as a class that is effected
without the receipt of consideration by the Company (through merger,
consolidation, reorganization, reincorporation, stock dividend, dividend in
property other than cash, stock split, liquidating dividend, combination of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), then any and all new, substituted
or additional securities or other property to which Purchaser is entitled by
reason of Purchaser's ownership of Stock shall be immediately subject to the
Co-Founders' Option and the Repurchase Option and shall be deemed to be
"Stock" for all purposes hereunder with the same force and effect as the
shares of the Stock presently subject to the Co-Founders' Option and the
Repurchase Option, but only to the extent the Stock is, at the time, covered
by such Co-Founders' Option or Repurchase Option. While the aggregate
purchase price shall remain the same after each such event, the purchase
price per share of Stock upon exercise of the Co-Founders' Option or the
Repurchase Option shall be appropriately adjusted.
6. CORPORATE TRANSACTION. All previously unvested shares of Stock
shall vest immediately prior to the closing of (i) a sale of all or
substantially all of the assets of the Company; (ii) a merger or
consolidation in which the Company is not the surviving corporation; (iii) a
reverse merger in which the company is the surviving corporation but the
shares of the Company's Common Stock outstanding immediately preceding the
merger are converted by virtue of the merger into other property, whether in
the form of securities, cash or otherwise; or
3.
<PAGE>
(iv) the acquisition by any person, entity or group within the meaning of
Section 13(d) or 14(d) of the Exchange Act, or any comparable successor
provisions (excluding any employee benefit plan, or related trust, sponsored
or maintained by the Company or any affiliate) of the beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act, or
comparable successor rule) of securities of the Company representing at least
fifty percent (50%) of the combined voting power entitled to vote in the
election of directors ((i) through (iv) being collectively referred to herein
as a "Corporate Transaction").
7. TERMINATION OF CO-FOUNDERS' OPTION AND REPURCHASE OPTION. The
Co-Founders' Option and the Repurchase Option shall terminate (i) immediately
prior to the closing of a Corporate Transaction or (ii) upon exercise in full
or expiration of the Co-Founders' Option or the Repurchase Option, as
applicable, whichever first occurs.
8. ESCROW OF UNVESTED STOCK. As security for Purchaser's faithful
performance of the terms of this Agreement and to insure the availability for
delivery of Purchaser's Stock upon exercise of the Co-Founders' Option or the
Repurchase Option, Purchaser agrees, at the closing hereunder, to deliver to
and deposit with the Secretary, as escrow agent in this transaction (the
"Escrow Agent"), three (3) stock assignments duly endorsed (with date and
number of shares blank) in the form attached hereto as EXHIBIT B, together
with a certificate or certificates evidencing all of the Stock subject to the
Repurchase Option; said documents are to be held by the Escrow Agent and
delivered by said Escrow Agent pursuant to the Joint Escrow Instructions of
the Company and Purchaser set forth in EXHIBIT C attached hereto and
incorporated by this reference, which instructions shall also be delivered to
the Escrow Agent at the closing hereunder.
9. RIGHTS OF PURCHASER. Subject to the provisions of Sections 8,
10 and 13 herein, Purchaser shall at all times exercise all rights and
privileges of a stockholder of the Company with respect to the Stock, whether
vested or unvested, including all voting rights incident thereto.
10. LIMITATIONS ON TRANSFER. In addition to any other limitation
on transfer created by applicable securities laws, Purchaser shall not
assign, hypothecate, donate, encumber or otherwise dispose of any interest in
the Stock while the Stock is subject to the Co-Founders' Option or the
Repurchase Option. After any Stock has been released from the Co-Founders'
Option and the Repurchase Option, Purchaser shall not assign, hypothecate,
donate, encumber or otherwise dispose of any interest in the Stock except in
compliance with the provisions herein and applicable securities laws.
Furthermore, the Stock shall be subject to any right of first refusal in
favor of the Company or its assignees that may be contained in the Company's
Bylaws. Notwithstanding the foregoing, Purchaser may transfer all or any
portion of the Stock to his spouse, father, mother, brother, sister or lineal
descendants, PROVIDED; HOWEVER, that all shares of Stock so transferred by
Purchaser shall continue to be subject to the provisions of this Agreement
and shall remain "Stock" for all purposes hereunder.
4.
<PAGE>
11. RESTRICTIVE LEGENDS. All certificates representing the Stock
shall have endorsed thereon legends in substantially the following forms (in
addition to any other legend which may be required by other agreements
between the parties hereto):
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO AN OPTION SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED
HOLDER, OR SUCH HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE
AT THE PRINCIPAL OFFICE OF THE COMPANY. ANY TRANSFER OR ATTEMPTED TRANSFER
OF ANY SHARES SUBJECT TO SUCH OPTION IS VOID WITHOUT THE PRIOR EXPRESS
WRITTEN CONSENT OF THE COMPANY."
(b) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED."
(c) Any legend required by appropriate blue sky officials.
12. INVESTMENT REPRESENTATIONS. In connection with the purchase of
the Stock, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company
to reach an informed and knowledgeable decision to acquire the Stock.
Purchaser is purchasing the Stock for investment for Purchaser's own account
only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Act.
(b) Purchaser understands that the Stock has not been
registered under the Act by reason of a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of
Purchaser's investment intent as expressed herein.
(c) Purchaser further acknowledges and understands that the
Stock must be held indefinitely unless the Stock is subsequently registered
under the Act or an exemption from such registration is available. Purchaser
further acknowledges and understands that the Company is under no obligation
to register the Stock. Purchaser understands that the certificate evidencing
the Stock will be imprinted with a legend which prohibits the transfer of the
Stock unless the Stock is registered or such registration is not required in
the opinion of counsel for the Company.
(d) Purchaser is familiar with the provisions of Rules 144
and 701, under the Act, as in effect from time to time, which, in substance,
permit limited public resale of "restricted securities" acquired, directly or
indirectly, from the issuer thereof (or from an affiliate of such issuer), in
a non-public offering subject to the satisfaction of certain conditions.
Rule 701
5.
<PAGE>
provides that if the issuer qualifies under Rule 701 at the time of issuance
of the securities, such issuance will be exempt from registration under the
Act. In the event the Company becomes subject to the reporting requirements
of Section 13 or 15(d) of the Securities Exchange Act of 1934, the securities
exempt under Rule 701 may be sold by Purchaser ninety (90) days thereafter,
subject to the satisfaction of certain of the conditions specified by Rule
144 and the market stand-off provision described in Section 13 below.
In the event that the sale of the Stock does not qualify under Rule
701 at the time of purchase, then the Stock may be resold by Purchaser in
certain limited circumstances subject to the provisions of Rule 144, which
requires, among other things: (i) the availability of certain public
information about the Company and (ii) the resale occurring following the
required holding period under Rule 144 after the Purchaser has purchased, and
made full payment of (within the meaning of Rule 144), the securities to be
sold.
(e) Purchaser further understands that at the time Purchaser
wishes to sell the Stock there may be no public market upon which to make
such a sale, and that, even if such a public market then exists, the Company
may not be satisfying the current public information requirements of Rule 144
or 701, and that, in such event, Purchaser would be precluded from selling
the Stock under Rule 144 or 701 even if the minimum holding period
requirement had been satisfied.
(f) Purchaser further represents and warrants that Purchaser
has either (i) preexisting personal or business relationships with the
Company or any of its officers, directors or controlling persons or (ii) the
capacity to protect his own interests in connection with the purchase of the
Stock by virtue of the business or financial expertise of himself or of
professional advisors to Purchaser who are unaffiliated with and who are not
compensated by the Company or any of its affiliates, directly or indirectly.
13. MARKET STAND-OFF. In connection with the first firmly
underwritten public offering of the Company's securities under the Act (the
"Initial Offering"), Purchaser shall not sell, dispose of, transfer, make any
short sale of, grant any option for the purchase of, or enter into any
hedging or similar transaction with the same economic effect as a sale with
respect to, any Common Stock of the Company held by Purchaser, including the
Stock (the "Restricted Securities"), for a period of time specified by the
underwriter(s) (not to exceed one hundred eighty (180) days) following the
effective date of the registration statement filed under the Act in
connection with such Initial Offering. Purchaser agrees to execute and
deliver such other agreements as may be reasonably requested by the Company
and/or the underwriter(s) which are consistent with the foregoing or which
are necessary to give further effect thereto. In order to enforce the
foregoing covenant, the Company may impose stop-transfer instructions with
respect to Purchaser's Restricted Securities until the end of such period.
14. SECTION 83(b) ELECTION. Purchaser understands that Section
83(a) of the Code, taxes as ordinary income the difference between the amount
paid for the Stock and the fair market value of the Stock as of the date any
restrictions on the Stock lapse. In this context, "restriction" includes the
right of the Co-Founders to buy the Stock from Purchaser pursuant to
6.
<PAGE>
the Co-Founders' Option set forth in Section 2 above and the right of the
Company to repurchase the Stock pursuant to the Repurchase Option set forth
in Section 3 above. Purchaser understands that Purchaser may elect to be
taxed at the time the Stock is purchased, rather than when and as the
Co-Founders' Option and the Repurchase Option expire, by filing an election
under Section 83(b) (an "83(b) Election") of the Code with the Internal
Revenue Service within thirty (30) days from the date of purchase in the form
attached hereto as EXHIBIT D. Even if the fair market value of the Stock at
the time of the execution of this Agreement equals the amount paid for the
Stock, the 83(b) Election must be made to avoid income under Section 83(a) in
the future. Purchaser understands that failure to file such an 83(b)
Election in a timely manner may result in adverse tax consequences for
Purchaser. Purchaser further understands that an additional copy of such
83(b) Election is required to be filed with his or her federal income tax
return for the calendar year in which the date of this Agreement falls.
Purchaser acknowledges that the foregoing is only a summary of the effect of
United States federal income taxation with respect to purchase of the Stock
hereunder, and does not purport to be complete. Purchaser further
acknowledges that the Company has directed Purchaser to seek independent
advice regarding the applicable provisions of the Code, the income tax laws
of any municipality, state or foreign country in which Purchaser may reside,
and the tax consequences of Purchaser's death. PURCHASER ASSUMES ALL
RESPONSIBILITY FOR FILING AN 83(b) ELECTION AND PAYING ALL TAXES RESULTING
FROM SUCH ELECTION OR THE LAPSE OF THE RESTRICTIONS ON THE STOCK.
15. REFUSAL TO TRANSFER. The Company shall not be required (i) to
transfer on its books any shares of Stock of the Company which shall have
been transferred in violation of any of the provisions set forth in this
Agreement or (ii) to treat as owner of such shares or to accord the right to
vote as such owner or to pay dividends to any transferee to whom such shares
shall have been so transferred.
16. NO EMPLOYMENT RIGHTS. This Agreement is not an employment
contract and shall not be deemed to create in any way whatsoever any
obligation on your part to continue in the employ of the Company (or a parent
or subsidiary of the Company), or of the Company (or a parent or subsidiary
of the Company) to continue your employment.
17. MISCELLANEOUS.
(a) NOTICES. Any notice required or permitted hereunder
shall be given in writing and shall be deemed effectively given upon personal
delivery or sent by telegram or fax or upon deposit in the United States Post
Office, by registered or certified mail with postage and fees prepaid,
addressed to the other party hereto at its address hereinafter shown below
its signature or at such other address as such party may designate by ten
(10) days' advance written notice to the other party hereto.
(b) SUCCESSORS AND ASSIGNS. This Agreement shall inure to
the benefit of the successors and assigns of the Company and, subject to the
restrictions on transfer herein set forth, be binding upon Purchaser,
Purchaser's successors, and assigns. The Repurchase Option of the Company
hereunder shall be assignable by the Company at any time or from time to
time, in whole or in part.
7.
<PAGE>
(c) ATTORNEYS' FEES; SPECIFIC PERFORMANCE. Purchaser shall
reimburse the Company for all costs incurred by the Company in enforcing the
performance of, or protecting its rights under, any part of this Agreement,
including reasonable costs of investigation and attorneys' fees. It is the
intention of the parties that the Company, upon exercise of the Repurchase
Option and payment of the purchase price thereunder, pursuant to the terms of
this Agreement, shall be entitled to receive the Stock, in specie, in order
to have such Stock available for future issuance without dilution of the
holdings of other stockholders. Furthermore, it is expressly agreed between
the parties that money damages are inadequate to compensate the Company for
the Stock and that the Company shall, upon proper exercise of the Repurchase
Option, be entitled to specific enforcement of its rights to purchase and
receive said Stock.
(d) GOVERNING LAW; VENUE. This Agreement shall be governed
by and construed in accordance with the laws of the State of Colorado. The
parties agree that any action brought by either party to interpret or enforce
any provision of this Agreement shall be brought in, and each party agrees
to, and does hereby, submit to the jurisdiction and venue of, the appropriate
state or federal court for the district encompassing the Company's principal
place of business.
(e) FURTHER EXECUTION. The parties agree to take all such
further action(s) as may reasonably be necessary to carry out and consummate
this Agreement as soon as practicable, and to take whatever steps may be
necessary to obtain any governmental approval in connection with or otherwise
qualify the issuance of the securities that are the subject of this Agreement.
(f) INDEPENDENT COUNSEL. Purchaser acknowledges that this
Agreement has been prepared on behalf of the Company by Cooley Godward LLP,
counsel to the Company and that Cooley Godward LLP does not represent, and is
not acting on behalf of, Purchaser. Purchaser has been provided with an
opportunity to consult with Purchaser's own counsel with respect to this
Agreement.
(g) ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes
the entire agreement between the parties with respect to the subject matter
hereof and supersedes and merges all prior agreements or understandings,
whether written or oral. This Agreement may not be amended, modified or
revoked, in whole or in part, except by an agreement in writing signed by
each of the parties hereto.
(h) SEVERABILITY. If a provision of this Agreement is held
to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i)
such provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and
(iii) the balance of the Agreement shall be enforceable in accordance with
its terms.
(i) COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
8.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
JATO COMMUNICATIONS CORP.
A DELAWARE CORPORATION
By: /s/ Brian E. Gast
--------------------------------------
Brian E. Gast
President and Chief Executive Officer
Address: 5660 Greenwood Plaza Blvd.
Suite 220
Englewood, CO 80111
PURCHASER:
/s/ Patrick M. Green
-----------------------------------------
PATRICK M. GREEN
Address:
---------------------------------
--------------------------------------
--------------------------------------
CO-FOUNDERS:
/s/ Brian E. Gast
-----------------------------------------
BRIAN E. GAST
/s/ Bruce E. Dines
-----------------------------------------
BRUCE E. DINES
/s/ Leonard Allsup
-----------------------------------------
LEONARD ALLSUP
ATTACHMENTS:
Exhibit A -- Stock Assignment Separate from Certificate
Exhibit B -- Joint Escrow Instructions
Exhibit C -- Section 83(b) Election
9.
<PAGE>
EXHIBIT A
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Founder's Stock
Purchase Agreement (the "Agreement") dated as of October 14, 1998, Patrick M.
Green hereby sells, assigns and transfers unto ______________________,
____________________________ (_________) shares of Common Stock of JATO
Communications Corp., a Delaware corporation (the "Company"), standing in the
undersigned's name on the Company's books represented by Certificate No.
_____ herewith, and does hereby irrevocably constitute and appoint the
Secretary of the Company attorney to transfer the said stock on the books of
the said Company with full power of substitution in the premises. This
Assignment may be used only in accordance with and subject to the terms and
conditions of the Agreement, in connection with the repurchase of shares of
Common Stock issued to the undersigned pursuant to the Agreement, and only to
the extent that such shares remain subject to the Co-Founders' Option or the
Company's Repurchase Option under the Agreement.
Dated:
----------------------------- -------------------------------
[Signature]
<PAGE>
EXHIBIT B
JOINT ESCROW INSTRUCTIONS
Bruce E. Dines
JATO Communications Corp.
5660 Greenwood Plaza Blvd.
Suite 220
Englewood, CO 80111
Dear Sir:
As Escrow Agent for both JATO Communications Corp., a Delaware
corporation (the "Company"), and the undersigned purchaser of stock of the
Company ("Purchaser"), you are hereby authorized and directed to hold the
documents delivered to you pursuant to the terms of that certain Founder's
Stock Purchase Agreement (the "Agreement"), dated October 14, 1998 to which a
copy of these Joint Escrow Instructions is attached as Exhibit C, in
accordance with the following instructions:
1. In the event a Co-Founder or the Company or an assignee of the
Company shall elect to exercise the Co-Founders' Option or the Repurchase
Option, as the case may be, as set forth in the Agreement, the Co-Founder or
the Company or its assignee, as the case may be, will give to Purchaser and
you a written notice specifying the number of shares of stock to be
purchased, the purchase price, and the time for a closing hereunder at the
principal office of the Company. Purchaser, the Co-Founders and the Company
hereby irrevocably authorize and direct you to close the transaction
contemplated by such notice in accordance with the terms of said notice.
2. At the closing you are directed (a) to date any stock
assignments necessary for the transfer in question, (b) to fill in the number
of shares being transferred, and (c) to deliver same, together with the
certificate evidencing the shares of stock to be transferred, to the
Co-Founder or the Company, as applicable, against the simultaneous delivery
to you of the purchase price (which may include suitable acknowledgment of
cancellation of indebtedness) of the number of shares of stock being
purchased pursuant to the exercise of the Co-Founders' Option or the
Repurchase Option, as applicable.
3. Purchaser irrevocably authorizes the Company to deposit with
you any certificates evidencing shares of stock to be held by you hereunder
and any additions and substitutions to said shares as specified in the
Agreement. Purchaser hereby irrevocably constitutes and appoints you as his
attorney-in-fact and agent for the term of this escrow to execute with
respect to such securities and other property all documents of assignment
and/or transfer and all stock certificates necessary or appropriate to make
all securities negotiable and complete any transaction herein contemplated.
<PAGE>
4. This escrow shall terminate upon (i) the expiration of the
Co-Founders' Option and the Repurchase Option or (ii) the exercise in full of
the Co-Founders' Option or the Repurchase Option, whichever occurs first.
5. If at the time of termination of this escrow you should have in
your possession any documents, securities, or other property belonging to
Purchaser, you shall deliver all of same to Purchaser and shall be discharged
of all further obligations hereunder; PROVIDED, HOWEVER, that if at the time
of termination of this escrow you are advised by the Company that the
property subject to this escrow is the subject of a pledge or other security
agreement, you shall deliver all such property to the pledgeholder or other
person designated by the Company.
6. Except as otherwise provided in these Joint Escrow
Instructions, your duties hereunder may be altered, amended, modified or
revoked only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties
as are specifically set forth herein and may rely and shall be protected in
relying or refraining from acting on any instrument reasonably believed by
you to be genuine and to have been signed or presented by the proper party or
parties or their assignees. You shall not be personally liable for any act
you may do or omit to do hereunder as Escrow Agent or as attorney-in-fact for
Purchaser while acting in good faith, and any act done or omitted by you
pursuant to the advice of your own attorneys shall be conclusive evidence of
such good faith.
8. You are hereby expressly authorized to disregard any and all
warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law, and are
hereby expressly authorized to comply with and obey orders, judgments or
decrees of any court. In case you obey or comply with any such order,
judgment or decree of any court, you shall not be liable to any of the
parties hereto or to any other person, firm or corporation by reason of such
compliance, notwithstanding any such order, judgment or decree being
subsequently reversed, modified, annulled, set aside, vacated or found to
have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the
identity, authority or rights of the parties executing or delivering or
purporting to execute or deliver the Agreement or any documents or papers
deposited or called for hereunder.
10. You shall not be liable for the outlawing of any rights under
any statute of limitations with respect to these Joint Escrow Instructions or
any documents deposited with you.
11. You shall be entitled to employ such legal counsel (including
without limitation the firm of Cooley Godward LLP) and other experts as you
may deem necessary properly to advise you in connection with your obligations
hereunder, may rely upon the advice of such counsel, and may pay such counsel
reasonable compensation therefor.
<PAGE>
12. Your responsibilities as Escrow Agent hereunder shall terminate
if you shall resign by written notice to each party. In the event of any
such termination, the Company may appoint any officer or assistant officer of
the Company as successor Escrow Agent and Purchaser hereby confirms the
appointment of such successor or successors as his attorney-in-fact and agent
to the full extent of your appointment.
13. If you reasonably require other or further instruments in
connection with these Joint Escrow Instructions or obligations in respect
hereto, the necessary parties hereto shall join in furnishing such
instruments.
14. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
securities, you may (but are not obligated to) retain in your possession
without liability to anyone all or any part of said securities until such
dispute shall have been settled either by mutual written agreement of the
parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal
has been perfected, but you shall be under no duty whatsoever to institute or
defend any such proceedings.
15. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in any United States Post Office Box, by registered or certified mail
with postage and fees prepaid, addressed to each of the other parties
hereunto entitled at the following addresses specified below, or at such
other addresses as a party may designate by ten days' written notice to each
of the other parties hereto:
16. By signing these Joint Escrow Instructions you become a party
hereto only for the purpose of said Joint Escrow Instructions; you do not
become a party to the Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
17. This instrument shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and permitted assigns.
It is understood and agreed that references to "you" or "your" herein refer
to the original Escrow Agent and to any and all successor Escrow Agents. It
is understood and agreed that the Company may at any time or from time to
time assign its rights under the Agreement and these Joint Escrow
Instructions in whole or in part.
Very truly yours,
JATO COMMUNICATIONS CORP.
By:
--------------------------------------
Brian E. Gast
President and Chief Executive Officer
Address:
5660 Greenwood Plaza Blvd.
Suite 220
Englewood, CO 80111
PURCHASER:
-----------------------------------------
PATRICK M. GREEN
Address:
-----------------------------------------
-----------------------------------------
-----------------------------------------
ESCROW AGENT: CO-FOUNDERS:
- --------------------------- ------------------------------
Bruce E. Dines Bruce E. Dines
------------------------------
Leonard Allsup
------------------------------
Brian E. Gast
<PAGE>
PROMISSORY NOTE
$12,500 October 14, 1998
Englewood, Colorado
FOR VALUE RECEIVED, Patrick M. Green (the "Debtor") hereby
unconditionally promises to pay to the order of JATO Communications Corp.
(the "Company"), 5660 Greenwood Plaza Blvd., Suite 220, Englewood, CO 80111
or at such other place as the holder hereof may designate in writing, in
lawful money of the United States of America, the principal sum of Twelve
Thousand Five Hundred Dollars ($12,500) together with interest accrued from
the date hereof on the unpaid principal at the rate of the lesser of 6% per
annum, or the maximum rate permissible by law, as follows:
PRINCIPAL REPAYMENT. The outstanding principal amount hereunder shall
be due and payable in full on March 1, 1999;
INTEREST PAYMENTS. Interest shall be payable at maturity and shall be
calculated on the basis of a 360-day year for the actual number of days
elapsed.
This Note is delivered as partial payment of the one hundred thousand
(100,000) shares of Common Stock of the Company purchased by Debtor pursuant
to that certain Common Stock Purchase Agreement by and between Debtor and the
Company of even date herewith. This Note is full recourse.
Principal and interest shall be forgiven by the Company if Debtor
performs the services set forth on Exhibit A attached hereto.
This Note may be prepaid at any time without penalty. All money paid
toward the satisfaction of this Note shall be applied first to the payment of
interest as required hereunder and then to the retirement of the principal.
The undersigned hereby waives presentment, protest and notice of
protest, demand for payment, notice of dishonor and all other notices or
demands in connection with the delivery, acceptance, performance, default or
endorsement of this Note.
The holder hereof shall be entitled to recover, and the undersigned
agrees to pay when incurred, all costs and expenses of collection of this
Note, including without limitation, reasonable attorneys' fees.
This Note shall be governed by, and construed, enforced and
interpreted in accordance with, the laws of the State of Colorado, excluding
conflict of laws principles that would cause the application of laws of any
other jurisdiction.
DEBTOR:
/s/ Patrick M. Green
------------------------------------
Patrick M. Green
Address: 12098 W. 75th Pl.
-----------------------------
Arvada, CO 80005
------------------------------------
<PAGE>
EXHIBIT A
DESCRIPTION OF SERVICES
Administration and negotiation of interconnection agreements, accounting and
administration projects and related activities as identified by JATO for a
period ending November 30, 1998.
<PAGE>
EXHIBIT C
FORM OF SECTION 83(b) ELECTION
October 14, 1998
Director of Internal Revenue
Internal Revenue Service Center
Ogden, UT 84201
RE: ELECTION UNDER SECTION 83(b)
Gentlemen:
The undersigned hereby elects, pursuant to the provisions of Sections 55-56
and 83(b) of the Internal Revenue Code of 1986, as amended (the "Code"), to
include in alternative minimum taxable income for the undersigned's current
taxable year, as compensation for services, the excess, if any, of the fair
market value of the property described below at the time of transfer over the
amount paid for such property. The undersigned also elects pursuant to
Section 83(b) of the Code to include in gross income for the taxable year in
which the undersigned disposes of some or all of the property described below
in a transaction which fails to satisfy the requirements of Section 422(a)(1)
of the Code (a "disqualifying disposition"), as compensation for services,
the excess, if any, of the fair market value of the disposed property at the
time of transfer to the undersigned over the amount paid for such property.
Pursuant to Treasury Regulations Section 1.83-2, the following information is
submitted:
1. NAME: Patrick M. Green
("PURCHASER")
Address:
---------------------------------------
---------------------------------------
SOCIAL SECURITY NO.:
---------------------------------------
2. PROPERTY DESCRIPTION: 130,000 shares of Common Stock (the "Stock")
of JATO Communications Corp. (the "Company").
3. The date on which the Stock was purchased is October 14, 1998.
4. The taxable year for which the election is made is the calendar year
1998.
<PAGE>
5. RESTRICTIONS:
"In the event that Purchaser voluntarily terminates his relationship
with the Company (or a parent or subsidiary of the Company), whether as an
employee, director or consultant, then Leonard Allsup and Bruce E. Dines
(each a "Co-Founder") shall each have the right, exercisable upon written
notice to Purchaser within thirty (30) days of the date of such termination,
to purchase his pro rata share of the Stock which has not vested pursuant to
Section 4 below as of such termination date, at a purchase price of $.25 per
share (the "Co-Founders' Option"). The Co-Founder's pro rata portion shall
be that number of shares equal to the product obtained by multiplying (x) the
aggregate number of shares of Stock which have not vested pursuant to Section
4 below by (y) a fraction the numerator of which is the number of shares of
Common Stock owned by such Co-Founder (on an as-if-converted basis) at the
time of Purchaser's termination and the denominator of which is the total
number of shares of Common Stock owned by each of the Co-Founders (on an
as-if-converted basis) at the time of Purchaser's termination.
In the event that Purchaser voluntarily terminates his relationship
with the Company (or a parent or subsidiary of the Company), whether as an
employee, director or consultant, and the Co-Founders do not purchase all of
Purchaser's unvested Stock pursuant to the Co-Founders' Option under Section
2 above within the period set forth therein, the Company shall then have the
right, exercisable upon written notice to Purchaser within thirty (30) days
after the expiration of the Co-Founders' Option, to purchase all or a portion
of the Stock which has not vested pursuant to Section 4 below as of such
termination date (less shares purchased by the Co-Founders pursuant to
Section 2 above), at a purchase price of $.25 per share.
In the event the Company terminates Purchaser's relationship with the
Company (or a parent or subsidiary of the Company), whether as an employee,
director or consultant, for Cause (as defined below), then the Company shall
have an option for a period of ninety (90) days after said termination to
repurchase from Purchaser, at a purchase price of $.25 per share, up to but
not exceeding the number of shares of Stock which have not vested under the
provisions of Section 4 below as of such termination date.
In the event that Purchaser's relationship with the Company (or a
parent or subsidiary of the Company) is terminated by reason of Purchaser's
death or disability (as defined in Section 22(c)(3) of the Internal Revenue
Code of 1986, as amended (the "Code")), then the Company shall have an option
for a period of ninety (90) days after said termination to repurchase from
Purchaser's personal representative at a purchase price of $.25 per share, up
to but not exceeding fifty percent (50%) of the number of shares of Stock
which have not vested under the provisions of Section 4 below as of such
termination date (together with the options set forth in Sections 3(a) and
3(b) above, the "Repurchase Option")."
6. The fair market value at the time of transfer of the Stock, determined
without regard to any restriction other than a restriction which by its terms
will never lapse, is $32,500 (130,000 shares having a fair market value of
$.25 per share).
7. PURCHASE PRICE: $32,500 (130,000 shares at $.25 per share).
<PAGE>
A copy of this statement has been furnished to the Company and the transferee of
the Stock if different than Purchaser.
Dated: _______________, 1998.
Very truly yours,
- ----------------------------------
<PAGE>
Exhibit 10.17
JATO COMMUNICATIONS CORP.
RESTRICTED STOCK PURCHASE AGREEMENT
THIS RESTRICTED STOCK PURCHASE AGREEMENT (the "Agreement") is entered
into as of August 31, 1999, by and between JATO COMMUNICATIONS CORP., a
Delaware corporation (the "Company"), and GERALD K. DINSMORE (the
"Purchaser").
RECITALS
WHEREAS, the Company has authorized the sale and issuance of five
hundred thousand (500,000) shares of its Common Stock to Purchaser (the
"Shares");
WHEREAS, the Purchaser desires to purchase the Shares on the terms and
conditions set forth herein; and
WHEREAS, the Company desires to issue and sell the Shares to Purchaser
on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereto agree as follows:
ARTICLE 1
AGREEMENT TO SELL AND PURCHASE
1.1 AUTHORIZATION OF SHARES. On or prior to the Closing (as
defined in Section 2 below), the Company shall have authorized the sale and
issuance to the Purchaser of the Shares. The Shares shall have the rights,
preferences, privileges and restrictions set forth in the Certificate of
Incorporation of the Company, as amended.
1.2 SALE AND PURCHASE. Subject to the terms and conditions hereof,
at the Closing (as hereinafter defined) the Company hereby agrees to issue
and sell to Purchaser the Shares at an aggregate purchase price of three
hundred seventy-five thousand dollars ($375,000). The aggregate par value
for the Shares, or five thousand dollars ($5,000) shall be paid in cash, with
the balance, three hundred seventy thousand dollars ($370,000), being
evidenced by a Promissory Note in the form attached hereto as EXHIBIT A-1.
The Shares shall be pledged to secure repayment of the Promissory Note
pursuant to the terms of a Pledge Agreement attached hereto as EXHIBIT A-2.
ARTICLE 2
CLOSING, DELIVERY AND PAYMENT
2.1 CLOSING. The closing of the sale and purchase of the Shares
under this Agreement (the "Closing") shall take place at 10:00 a.m. on the
date hereof, at the offices of the Company,
1.
<PAGE>
or at such other time or place as the Company and the Purchaser may mutually
agree (such date is hereinafter referred to as the "Closing Date").
2.2 DELIVERY. At the Closing, subject to the terms and conditions
hereof, the Company will deliver to the Purchaser certificates representing
the number of Shares to be purchased at the Closing by the Purchaser, against
payment of the purchase price therefor by execution of the attached
assignment.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchaser as follows:
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Colorado. The Company has all requisite corporate power
and authority to own and operate its properties and assets, to execute and
deliver this Agreement, to issue and sell the Shares and the Conversion
Shares and to carry out the provisions of this Agreement and the Certificate
of Incorporation and to carry on its business as presently conducted and as
presently proposed to be conducted. The Company is duly qualified and is
authorized to do business and is in good standing as a foreign corporation in
all jurisdictions in which the nature of its activities and of its properties
(both owned and leased) makes such qualification necessary, except for those
jurisdictions in which failure to do so would not have a material adverse
effect on the Company or its business. The Company owns no equity securities
of any other corporation, limited partnership or similar entity. The Company
is not a participant in any joint venture, partnership or similar arrangement.
3.2 AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on
the part of the Company, its officers, directors and shareholders necessary
for the authorization of this Agreement, the performance of all obligations
of the Company hereunder and thereunder at the Closing and the authorization,
sale, issuance and delivery of the Shares pursuant hereto has been taken or
will be taken prior to the Closing. The Agreement, when executed and
delivered, will be valid and binding obligations of the Company enforceable
in accordance with their terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application affecting enforcement of creditors' rights and (ii) general
principles of equity that restrict the availability of equitable remedies.
The sale of the Shares are not and will not be subject to any preemptive
rights or rights of first refusal that have not been properly waived or
complied with.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Each Purchaser hereby represents and warrants to the Company as
follows (such representations and warranties do not lessen or obviate the
representations and warranties of the Company set forth in this Agreement):
2.
<PAGE>
4.1 REQUISITE POWER AND AUTHORITY. The Purchaser has all necessary
power and authority under all applicable provisions of law to execute and
deliver this Agreement and to carry out its provisions. All action on the
Purchaser's part required for the lawful execution and delivery of this
Agreement has been or will be effectively taken prior to the Closing. The
Agreement, when executed and delivered, will be valid and binding obligations
of the Purchaser enforceable in accordance with their terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application affecting enforcement of creditors' rights
and (ii) general principles of equity that restrict the availability of
equitable remedies.
4.2 INVESTMENT REPRESENTATIONS. The Purchaser understands that
neither the Shares nor the Conversion Shares have been registered under the
Securities Act of 1933, as amended (the "Act"). The Purchaser also
understands that the Shares are being offered and sold pursuant to an
exemption from registration contained in the Act based in part upon the
Purchaser's representations contained in the Agreement. The Purchaser hereby
represents and warrants as follows:
(a) PURCHASER BEARS ECONOMIC RISK. The Purchaser has
substantial experience in evaluating and investing in private placement
transactions of securities in companies similar to the Company so that it is
capable of evaluating the merits and risks of its investment in the Company
and has the capacity to protect its own interests. The Purchaser must bear
the economic risk of this investment indefinitely unless the Shares are
registered pursuant to the Act or an exemption from registration is
available. The Purchaser understands that the Company has no present
intention of registering the Shares, the Conversion Shares or any shares of
its Common Stock. The Purchaser also understands that there is no assurance
that any exemption from registration under the Act will be available and
that, even if available, such exemption may not allow the Purchaser to
transfer all or any portion of the Shares or the Conversion Shares under the
circumstances, in the amounts or at the times the Purchaser might propose.
(b) ACQUISITION FOR OWN ACCOUNT. The Purchaser is acquiring
the Shares and the Conversion Shares for the Purchaser's own account for
investment only, and not with a view toward their distribution.
(c) PURCHASER CAN PROTECT ITS INTEREST. The Purchaser
represents that by reason of its, or of its management's, business or
financial experience, the Purchaser has the capacity to protect its own
interests in connection with the transactions contemplated in this Agreement.
Further, the Purchaser is aware of no publication of any advertisement in
connection with the transactions contemplated in the Agreement.
(d) RULE 144; RULE 701. The Shares are being issued
pursuant to the Company's 1998 Equity Incentive Plan. The issuance of the
Shares are pursuant to Rule 701 under the Securities Act of 1933, as amended.
The Purchaser acknowledges and agrees that the Shares must be held
indefinitely unless they are subsequently registered under the Act or an
exemption from such registration is available. The Purchaser has been
advised or is aware of the provisions of Rule 144 promulgated under the Act,
which permits limited resale of shares purchased in a private placement
subject to the satisfaction of certain conditions, including,
3.
<PAGE>
among other things: the availability of certain current public information
about the Company, the resale occurring not less than two years after a party
has purchased and paid for the security to be sold, the sale being through an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934, as
amended) and the number of shares being sold during any three-month period
not exceeding specified limitations.
ARTICLE 5
CONDITIONS TO CLOSING
5.1 CONDITIONS TO PURCHASER'S OBLIGATIONS AT THE CLOSING. The
Purchaser's obligations to purchase the Shares at the Closing are subject to
the satisfaction, at or prior to the Closing, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF
OBLIGATIONS. The representations and warranties made by the Company in
Section 3 hereof shall be true and correct in all material respects as of the
Closing Date with the same force and effect as if they had been made as of
the Closing Date, and the Company shall have performed all obligations and
conditions herein required to be performed or observed by it on or prior to
the Closing.
(b) LEGAL INVESTMENT. On the Closing Date, the sale and
issuance of the Shares shall be legally permitted by all laws and regulations
to which the Purchaser and the Company are subject.
(c) STOCKHOLDERS' AGREEMENT. Purchaser shall have executed
the Stockholders' Agreement.
5.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's
obligation to issue and sell the Shares at the Closing is subject to the
satisfaction, on or prior to the Closing, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The
representations and warranties made by the Purchaser in Section 4 hereof
shall be true and correct in all material respects at the date of the
Closing, with the same force and effect as if they had been made on and as of
said date.
(b) PERFORMANCE OF OBLIGATIONS. The Purchaser shall have
performed and complied with all agreements and conditions herein required to
be performed or complied with by the Purchaser on or before the Closing.
(c) STOCKHOLDERS' AGREEMENT. Purchaser shall have executed
the Stockholders' Agreement.
4.
<PAGE>
ARTICLE 6
REPURCHASE OPTION
6.1 REPURCHASE OPTION.
(a) Subject to Section 6.3 below, in the event of any
voluntary or involuntary termination of the Purchaser's employment by or
services to the Company for any or no reason before all of the Shares are
released from the Company's repurchase option as set forth in Section 6.2
below (the "Repurchase Option"), the Company shall, upon the date of such
termination (as reasonably fixed and determined by the Company) have an
irrevocable, exclusive option for a period of 90 days (or such longer period
of time either mutually agreed to by Purchaser and the Company or determined
by the Company in good faith to be necessary to avoid the loss of "qualified
small business stock" treatment under Section 1202 of the Internal Revenue
Code for any stockholder other than the Purchaser) from such date to
repurchase some or all of the Unreleased Shares (as defined in Section 5) at
the then current fair market value of the shares, determined in the sole
discretion of the Compensation Committee of the Board unless the employee
finds a bonified offer for the stock, principles of which would be agreeable
to the Compensation Committee (the "Repurchase Price").
(b) The Repurchase Option shall be exercised by the Company
by written notice to the Purchaser or the Purchaser's executor and by
delivery to the Purchaser or the Purchaser's executor with such notice of a
check in the amount of the Repurchase Price for the Shares being repurchased.
(c) Upon delivery of such notice and the payment of the
Repurchase Price, the Company shall become the legal and beneficial owner of
the Shares being repurchased and all rights and interests therein or relating
thereto, and the Company shall have the right to retain and transfer to its
own name the number of Shares being repurchased by the Company.
6.2 RELEASE OF SHARES FROM REPURCHASE OPTION.
(a) Subject to Section 6.3 below, the number of Shares to be
released from the Company's Repurchase Option is set forth in a schedule
attached hereto as EXHIBIT A, provided as to each incremental period
resulting in the release of Shares from such Repurchase Option that the
Purchaser's employment or services have not been terminated prior to the date
of any such release.
(b) Any of the Shares that have not yet been released from
the Company's Repurchase Option are referred to herein as "Unreleased Shares."
6.3 EVENTS OF ACCELERATED RELEASE FROM COMPANY'S REPURCHASE OPTION.
All of the Purchaser's Shares shall be released from the Company's Repurchase
Option upon the occurrence of (i) a sale of all or substantially all of the
assets of the Company, (ii) a transaction that results in a change of control
in which greater than 50% of the voting power is transferred, (iii)
termination of Executive's employment by the Company without Cause, or either
(iv) a material reduction in Executive's responsibilities, or (v) a material
downgrading of job title,
5.
<PAGE>
either of which is not cured within 30 days of being notified by Executive
(each an "Acceleration Event").
ARTICLE 7
MISCELLANEOUS
7.1 GOVERNING LAW. This Agreement shall be governed in all
respects by the laws of the State of Colorado as such laws are applied to
agreements between Colorado residents entered into and performed entirely in
Colorado.
7.2 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by the Purchaser
and the closing of the transactions contemplated hereby. All statements as
to factual matters contained in any certificate or other instrument delivered
by or on behalf of the Company pursuant hereto in connection with the
transactions contemplated hereby shall be deemed to be representations and
warranties by the Company hereunder solely as of the date of such certificate
or instrument.
7.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto and shall inure to the benefit of, and be enforceable by, each
person who shall be a holder of the Shares from time to time.
7.4 ENTIRE AGREEMENT. This Agreement and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and no party
shall be liable or bound to any other in any manner by any representations,
warranties, covenants and agreements except as specifically set forth herein
and therein.
7.5 SEVERABILITY. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
7.6 AMENDMENT AND WAIVER.
(a) This Agreement may be amended or modified only upon the
written consent of the Company and Purchaser.
(b) The obligations of the Company and the rights of the
holders of the Shares under the Agreement may be waived only with the written
consent of the Purchaser.
7.7 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement or the
Certificate of Incorporation shall impair any such right, power or remedy,
nor shall it be construed to be a waiver of any such breach, default or
noncompliance, or any acquiescence therein, or of or in any similar breach,
default or noncompliance thereafter occurring. It is further agreed that any
waiver, permit, consent or approval of any kind or character on the
Purchaser's part of any breach, default or noncompliance under this Agreement
6.
<PAGE>
or under the Certificate of Incorporation or any waiver on such party's part
of any provisions or conditions of the Agreement or the Certificate of
Incorporation must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, whether under this
Agreement, the Certificate of Incorporation, by law or otherwise afforded to
any party, shall be cumulative and not alternative.
7.8 NOTICES. All notices required or permitted hereunder shall be
in writing and shall be deemed effectively given: (i) upon personal delivery
to the party to be notified; (ii) when sent by confirmed telex or facsimile
if sent during normal business hours of the recipient, if not, then on the
next business day; (iii) five (5) days after having been sent by registered
or certified mail, return receipt requested, postage prepaid; or (iv) one (1)
day after deposit with a nationally recognized overnight courier, specifying
next day delivery, with written verification of receipt. All communications
shall be sent to the Company and the Purchaser at the addresses as set forth
on the signature page hereof or at such other address as the Company or the
Purchaser may designate by ten (10) days' advance written notice to the other
parties hereto.
7.9 TITLES AND SUBTITLES. The titles of the sections and
subsections of the Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
7.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
7.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth in the first paragraph hereof.
COMPANY:
JATO COMMUNICATIONS CORP.
By: /s/ Brian E. Gast
------------------------------------
Address:
---------------------------------------
---------------------------------------
PURCHASER:
/s/ Gerald K. Dinsmore
---------------------------------------
Gerald K. Dinsmore
Address:
---------------------------------------
---------------------------------------
8.
<PAGE>
EXHIBIT A
RELEASE SCHEDULE
So long as Purchaser continues to provide services to the Company:
<TABLE>
<CAPTION>
Shares Released
<S> <C>
On the first anniversary of employment 125,000
Each whole month thereafter 15,625
</TABLE>
A-1
<PAGE>
EXHIBIT A-1
PROMISSORY NOTE
$370,000 Denver, Colorado
August 31, 1999
FOR VALUE RECEIVED, the undersigned hereby unconditionally promises to
pay to the order of Jato Communications Corp., a Delaware corporation (the
"Company"), at 1099 18th Street, Suite 2200, Denver, CO 80202, or at such
other place as the holder hereof may designate in writing, in lawful money of
the United States of America and in immediately available funds, the
principal sum of Three Hundred Seventy Thousand ($370,000) together with
interest accrued from the date hereof on the unpaid principal at the rate of
7% per annum, or the maximum rate permissible by law (which under the laws of
the State of Colorado shall be deemed to be the laws relating to permissible
rates of interest on commercial loans), whichever is less, as follows:
Principal Repayment. The outstanding principal amount hereunder shall
be due and payable in full on August 30, 2001.
Interest Payments. Interest shall be payable at maturity and shall be
calculated on the basis of a 360-day year for the actual number of days
elapsed;
PROVIDED, HOWEVER, that in the event that the undersigned voluntarily
terminates his employment prior to payment in full of this Note, this Note
shall be accelerated and all remaining unpaid principal and interest shall
become due and payable within 90 days after such termination.
The Company may forgive the repayment of all or part of the principal
and interest due under this Note.
If the undersigned fails to pay any of the principal and accrued
interest when due, the Company, at its sole option, shall have the right to
accelerate this Note, in which event the entire principal balance and all
accrued interest shall become immediately due and payable, and immediately
collectible by the Company pursuant to applicable law.
This Note may be prepaid at any time without penalty. All money paid
toward the satisfaction of this Note shall be applied first to the payment of
interest as required hereunder and then to the retirement of the principal.
The full amount of this Note is secured by a pledge of shares of
Common Stock of the Company, and is subject to all of the terms and
provisions of the Restricted Stock Purchase Agreement and the Pledge
Agreement, each of even date herewith between the undersigned and the Company.
1.
<PAGE>
The undersigned hereby represents and agrees that the amounts due
under this Note are not consumer debt, and are not incurred primarily for
personal, family or household purposes, but are for business and commercial
purposes only.
The undersigned hereby waives presentment, protest and notice of
protest, demand for payment, notice of dishonor and all other notices or
demands in connection with the delivery, acceptance, performance, default or
endorsement of this Note.
The holder hereof shall be entitled to recover, and the undersigned
agrees to pay when incurred, all costs and expenses of collection of this
Note, including without limitation, reasonable attorneys' fees.
This Note shall be governed by, and construed, enforced and
interpreted in accordance with, the laws of the State of Colorado, excluding
conflict of laws principles that would cause the application of laws of any
other jurisdiction.
__________________________________
Gerald K. Dinsmore
2.
<PAGE>
EXHIBIT A-2
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT ("Pledge Agreement") is made by GERALD K.
DINSMORE, an individual, ("Pledgor"), in favor of JATO COMMUNICATIONS CORP.,
a Delaware corporation with its principal place of business at 1099 18th
Street, Suite 2200, Denver, CO 80202 ("Pledgee").
WHEREAS, Pledgor has concurrently herewith executed that certain
Promissory Note (the "Note") in favor of Pledgee in the amount of three
hundred seventy thousand dollars ($370,000) in partial payment of the
purchase price of five hundred thousand (500,000) shares of the Common Stock
of Pledgee; and
WHEREAS, Pledgee is willing to accept the Note from Pledgor, but only
upon the condition, among others, that Pledgor shall have executed and
delivered to Pledgee this Pledge Agreement and the Collateral (as defined
below):
NOW, THEREFORE, in consideration of the foregoing recitals and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, and intending to be legally bound, Pledgor hereby agrees
as follows:
1. As security for the full, prompt and complete payment and
performance when due (whether by stated maturity, by acceleration or
otherwise) of all indebtedness of Pledgor to Pledgee created under the Note
(all such indebtedness being the "Liabilities"), together with, without
limitation, the prompt payment of all expenses, including, without
limitation, reasonable attorneys' fees and legal expenses, incidental to the
collection of the Liabilities and the enforcement or protection of Pledgee's
lien in and to the collateral pledged hereunder, Pledgor hereby pledges to
Pledgee, and grants to Pledgee, a first priority security interest in all of
the following (collectively, the "Pledged Collateral"):
(a) Five hundred thousand (500,000) shares of Common Stock
of Pledgee represented by Certificates numbered [CERTIFICATE NUMBER] (the
"Pledged Shares"), and all dividends, cash, instruments, and other property
or proceeds from time to time received, receivable, or otherwise distributed
in respect of or in exchange for any or all of the Pledged Shares;
(b) all voting trust certificates held by Pledgor evidencing
the right to vote any Pledged Shares subject to any voting trust; and
(c) all additional shares and voting trust certificates from
time to time acquired by Pledgor in any manner (which additional shares shall
be deemed to be part of the Pledged Shares), and the certificates
representing such additional shares, and all dividends, cash, instruments,
and other property or proceeds from time to time received, receivable, or
otherwise distributed in respect of or in exchange for any or all of such
shares.
The term "indebtedness" is used herein in its most comprehensive sense
and includes any and all advances, debts, obligations and Liabilities
heretofore, now or hereafter made, incurred or
1.
<PAGE>
created, whether voluntary or involuntary and whether due or not due,
absolute or contingent, liquidated or unliquidated, determined or
undetermined, and whether recovery upon such indebtedness may be or hereafter
becomes unenforceable.
2. At any time, without notice, and at the expense of Pledgor,
Pledgee in its name or in the name of its nominee or of Pledgor may, but
shall not be obligated to: (1) collect by legal proceedings or otherwise all
dividends (except cash dividends other than liquidating dividends), interest,
principal payments and other sums now or hereafter payable upon or on account
of said Pledged Collateral; (2) enter into any extension, reorganization,
deposit, merger or consolidation agreement, or any agreement in any wise
relating to or affecting the Pledged Collateral, and in connection therewith
may deposit or surrender control of such Pledged Collateral thereunder,
accept other property in exchange for such Pledged Collateral and do and
perform such acts and things as it may deem proper, and any money or property
received in exchange for such Pledged Collateral shall be applied to the
indebtedness or thereafter held by it pursuant to the provisions hereof; (3)
insure, process and preserve the Pledged Collateral; (4) cause the Pledged
Collateral to be transferred to its name or to the name of its nominee; (5)
exercise as to such Pledged Collateral all the rights, powers and remedies of
an owner, except that so long as no default exists under the Note or
hereunder Pledgor shall retain all voting rights as to the Pledged Shares.
3. Pledgor agrees to pay prior to delinquency all taxes, charges,
liens and assessments against the Pledged Collateral, and upon the failure of
Pledgor to do so, Pledgee at its option may pay any of them and shall be the
sole judge of the legality or validity thereof and the amount necessary to
discharge the same.
4. At the option of Pledgee and without necessity of demand or
notice, all or any part of the indebtedness of Pledgor shall immediately
become due and payable irrespective of any agreed maturity, upon the
happening of any of the following events: (1) failure to keep or perform any
of the terms or provisions of this Pledge Agreement; (2) failure to pay any
installment of principal or interest on the Note when due; (3) the levy of
any attachment, execution or other process against the Pledged Collateral; or
(4) the insolvency, commission of an act of bankruptcy, general assignment
for the benefit of creditors, filing of any petition in bankruptcy or for
relief under the provisions of Title 11 of the United States Code of, by, or
against Pledgor.
5. In the event of the nonpayment of any indebtedness when due,
whether by acceleration or otherwise, or upon the happening of any of the
events specified in the last preceding paragraph, Pledgee may then, or at any
time thereafter, at its election, apply, set off, collect or sell in one or
more sales, or take such steps as may be necessary to liquidate and reduce to
cash in the hands of Pledgee in whole or in part, with or without any
previous demands or demand of performance or notice or advertisement, the
whole or any part of the Pledged Collateral in such order as Pledgee may
elect, and any such sale may be made either at public or private sale at its
place of business or elsewhere, or at any broker's board or securities
exchange, either for cash or upon credit or for future delivery; provided,
however, that if such disposition is at private sale, then the purchase price
of the Pledged Collateral shall be equal to the public market price then in
effect, or, if at the time of sale no public market for the Pledged
Collateral exists, then, in recognition of the fact that the sale of the
Pledged Collateral would have to be registered under the Securities Act of
1933 and that the expenses of such registration are
2.
<PAGE>
commercially unreasonable for the type and amount of collateral pledged
hereunder, Pledgee and Pledgor hereby agree that such private sale shall be
at a purchase price mutually agreed to by Pledgee and Pledgor or, if the
parties cannot agree upon a purchase price, then at a purchase price
established by a majority of three independent appraisers knowledgeable of
the value of such collateral, one named by Pledgor within 10 days after
written request by the Pledgee to do so, one named by Pledgee within such 10
day period, and the third named by the two appraisers so selected, with the
appraisal to be rendered by such body within 30 days of the appointment of
the third appraiser. The cost of such appraisal, including all appraiser's
fees, shall be charged against the proceeds of sale as an expense of such
sale. Pledgee may be the purchaser of any or all Pledged Collateral so sold
and hold the same thereafter in its own right free from any claim of Pledgor
or right of redemption. Demands of performance, notices of sale,
advertisements and presence of property at sale are hereby waived, and
Pledgee is hereby authorized to sell hereunder any evidence of debt pledged
to it. Any sale hereunder may be conducted by any officer or agent of
Pledgee.
6. The proceeds of the sale of any of the Pledged Collateral and
all sums received or collected by Pledgee from or on account of such Pledged
Collateral shall be applied by Pledgee to the payment of expenses incurred or
paid by Pledgee in connection with any sale, transfer or delivery of the
Pledged Collateral, to the payment of any other costs, charges, attorneys'
fees or expenses mentioned herein, and to the payment of the indebtedness or
any part hereof, all in such order and manner as Pledgee in its discretion
may determine. Pledgee shall then pay any balance to Pledgor.
7. Upon the transfer of all or any part of the indebtedness
Pledgee may transfer all or any part of the Pledged Collateral and shall be
fully discharged thereafter from all liability and responsibility with
respect to such Pledged Collateral so transferred, and the transferee shall
be vested with all the rights and powers of Pledgee hereunder with respect to
such Pledged Collateral so transferred; but with respect to any Pledged
Collateral not so transferred Pledgee shall retain all rights and powers
hereby given.
8. Until all indebtedness shall have been paid in full the power
of sale and all other rights, powers and remedies granted to Pledgee
hereunder shall continue to exist and may be exercised by Pledgee at any time
and from time to time irrespective of the fact that the indebtedness or any
part thereof may have become barred by any statute of limitations, or that
the personal liability of Pledgor may have ceased.
9. Pledgee agrees that so long as no default exists under the Note
or hereunder, the Pledged Shares shall, upon the request of Pledgor, be
released from pledge as the indebtedness is paid. Such releases shall be at
the rate of one share for each seventy five cents ($0.75) of principal amount
of indebtedness paid. Release from pledge, however, shall not result in
release from the provisions of those certain Joint Escrow Instructions, if
any, of even date herewith among the parties to this Pledge Agreement and the
Escrow Agent named therein.
10. Pledgee may at any time deliver the Pledged Collateral or any
part thereof to Pledgor and the receipt of Pledgor shall be a complete and
full acquittance for the Pledged Collateral so delivered, and Pledgee shall
thereafter be discharged from any liability or responsibility therefor.
3.
<PAGE>
11. The rights, powers and remedies given to Pledgee by this Pledge
Agreement shall be in addition to all rights, powers and remedies given to
Pledgee by virtue of any statute or rule of law. Any forbearance or failure
or delay by Pledgee in exercising any right, power or remedy hereunder shall
not be deemed to be a waiver of such right, power or remedy, and any single
or partial exercise of any right, power or remedy hereunder shall not
preclude the further exercise thereof; and every right, power and remedy of
Pledgee shall continue in full force and effect until such right, power or
remedy is specifically waived by an instrument in writing executed by Pledgee.
12. If any provision of this Pledge Agreement is held to be
unenforceable for any reason, it shall be adjusted, if possible, rather than
voided in order to achieve the intent of the parties to the extent possible.
In any event, all other provisions of this Pledge Agreement shall be deemed
valid and enforceable to the full extent possible.
13. This Pledge Agreement shall be governed by, and construed in
accordance with, the laws of the State of Colorado as applied to contracts
made and performed entirely within the State of Colorado by residents of such
State.
Dated: August 31, 1999
PLEDGOR:
________________________________________
Printed Name: Gerald K. Dinsmore
4.
<PAGE>
JATO COMMUNICATIONS CORP.
SERIES A PREFERRED STOCK
PURCHASE AGREEMENT
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
SECTION 1. AGREEMENT TO SELL AND PURCHASE.. . . . . . . . . . . . . . . . . . . 1
1.1 Authorization of Shares. . . . . . . . . . . . . . . . . . . . . . 1
1.2 Sale and Purchase. . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. CLOSING, DELIVERY AND PAYMENT. . . . . . . . . . . . . . . . . . . . 2
2.1 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Subsequent Sales of Shares . . . . . . . . . . . . . . . . . . . . 2
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. . . . . . . . . . . . 2
3.1 Organization, Good Standing and Qualification. . . . . . . . . . . 2
3.2 Capitalization; Voting Rights. . . . . . . . . . . . . . . . . . . 2
3.3 Authorization; Binding Obligations . . . . . . . . . . . . . . . . 3
3.4 Agreements; Action.. . . . . . . . . . . . . . . . . . . . . . . . 3
3.5 Title to Properties and Assets; Liens, etc.. . . . . . . . . . . . 4
3.6 Patents and Trademarks . . . . . . . . . . . . . . . . . . . . . . 4
3.7 Compliance with Other Instruments. . . . . . . . . . . . . . . . . 5
3.8 Litigation.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.9 Tax Returns and Payments . . . . . . . . . . . . . . . . . . . . . 5
3.10 Registration Rights. . . . . . . . . . . . . . . . . . . . . . . . 6
3.11 Compliance with Laws; Permits. . . . . . . . . . . . . . . . . . . 6
3.12 Environmental and Safety Laws. . . . . . . . . . . . . . . . . . . 6
3.13 Offering Valid . . . . . . . . . . . . . . . . . . . . . . . . . . 6
i
<PAGE>
TABLE OF CONTENTS
PAGE
<S> <C>
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS . . . . . . . . . . 7
4.1 Requisite Power and Authority. . . . . . . . . . . . . . . . . . . 7
4.2 Investment Representations . . . . . . . . . . . . . . . . . . . . 8
4.3 Transfer Restrictions. . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 5. CONDITIONS TO CLOSING. . . . . . . . . . . . . . . . . . . . . . . . 8
5.1 Conditions to Purchasers' Obligations at the Closing . . . . . . . 8
5.2 Conditions to Obligations of the Company. . . . . . . . . . . . . 9
SECTION 6. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.1 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.2 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . 10
6.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.5 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.6 Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . . 11
6.7 Delays or Omissions. . . . . . . . . . . . . . . . . . . . . . . . 11
6.8 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.9 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.10 Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.11 Titles and Subtitles . . . . . . . . . . . . . . . . . . . . . . . 12
6.12 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.13 Broker's Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.14 Exculpation Among Purchasers . . . . . . . . . . . . . . . . . . . 12
6.15 Pronouns.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
ii
<PAGE>
INDEX OF EXHIBITS
Schedule of Purchasers Exhibit A
Restated Articles Exhibit B
Investor Rights Agreement Exhibit C
Schedule of Exceptions Exhibit D
Form of Legal Opinion Exhibit E
iii
<PAGE>
JATO COMMUNICATIONS CORP.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES A PREFERRED STOCK PURCHASE AGREEMENT (the "AGREEMENT") is
entered into as of October 23, 1998, by and among JATO COMMUNICATIONS CORP.,
a Delaware corporation (the "COMPANY") and each of those persons and
entities, severally and not jointly, whose names are set forth on the
Schedule of Purchasers attached hereto as EXHIBIT A (which persons and
entities are hereinafter collectively referred to as "PURCHASERS" and each
individually as a "PURCHASER").
RECITALS
WHEREAS, the Company has authorized the sale and issuance of up to an
aggregate of three million (3,000,000) shares of its Series A Preferred Stock
(the "Shares");
WHEREAS, Purchasers desire to purchase the Shares on the terms and
conditions set forth herein; and
WHEREAS, the Company desires to issue and sell the Shares to
Purchasers on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereto agree as follows:
1. AGREEMENT TO SELL AND PURCHASE.
1.1 AUTHORIZATION OF SHARES. On or prior to the Closing (as
defined in Section 2 below), the Company shall have authorized (i) the sale
and issuance to Purchasers of the Shares and (ii) the issuance of such shares
of Common Stock to be issued upon conversion of the Shares (the "Conversion
Shares"). The Shares and the Conversion Shares shall have the rights,
preferences, privileges and restrictions set forth in the Restated Articles
of Incorporation of the Company, as amended, in the form attached hereto as
EXHIBIT B (the "Restated Articles) and the Investor Rights Agreement in the
form attached hereto as EXHIBIT C (the "Rights Agreement").
1.2 SALE AND PURCHASE. Subject to the terms and conditions hereof,
at the Closing (as hereinafter defined) the Company hereby agrees to issue
and sell to each Purchaser, severally and not jointly, and each Purchaser
agrees to purchase from the Company, severally and not jointly, the number of
Shares set forth opposite such Purchaser's name on EXHIBIT A, at a purchase
price of seventy-five cents ($.75) per share.
1.
<PAGE>
2. CLOSING, DELIVERY AND PAYMENT.
2.1 CLOSING. The closing of the sale and purchase of the Shares
under this Agreement (the "Closing") shall take place on the first date that
all of the conditions to closing have been met, at the offices of Cooley
Godward Castro Huddleson & Tatum, 2595 Canyon Boulevard, Boulder, Colorado,
80302, and may continue from time to time until October 31, 1998 or until all
of the Shares are sold or at such other time or place as the Company and
Purchasers may mutually agree (all such dates are hereinafter referred to as
the "Closing Date").
2.2 DELIVERY. At each Closing, subject to the terms and conditions
hereof, the Company will deliver to the Purchasers certificates representing
the number of Shares to be purchased at the Closing by each Purchaser,
against payment of the purchase price therefor by check, wire transfer made
payable to the order of the Company, cancellation of indebtedness or any
combination of the foregoing.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth on the Schedule of Exceptions attached hereto as EXHIBIT
D, the Company hereby represents and warrants to each Purchaser as follows:
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. The Company has all requisite corporate power
and authority to own and operate its properties and assets, to execute and
deliver this Agreement, to issue and sell the Shares and the Conversion
Shares and to carry out the provisions of this Agreement, the Restated
Articles and to carry on its business as presently conducted and as presently
proposed to be conducted. The Company is duly qualified and is authorized to
do business and is in good standing as a foreign corporation in all
jurisdictions in which the nature of its activities and of its properties
(both owned and leased) makes such qualification necessary, except for those
jurisdictions in which failure to do so would not have a material adverse
effect on the Company or its business. The Company owns no equity securities
of any other corporation, limited partnership or similar entity.
3.2 CAPITALIZATION; VOTING RIGHTS. The authorized capital stock of
the Company, immediately prior to the Closing, will consist of thirty-five
million (35,000,000) shares of Common Stock, six million three hundred twenty
thousand (6,320,000) shares of which are issued and outstanding and one
million (1,000,000) of which are reserved for future issuance to employees
pursuant to the Company's 1998 Equity Incentive Plan and sixteen million
(16,000,000) shares of Preferred Stock, three million (3,000,000) of which
are designated Series A Preferred Stock, none of which are issued and
outstanding. All issued and outstanding shares of the Company's Common Stock
(i) have been duly authorized and validly issued, (ii) are fully paid and
nonassessable, and (iii) were issued in compliance with all applicable state
and federal laws concerning the issuance of securities. The rights,
preferences, privileges and restrictions of the Shares are as stated in the
Restated Articles. The Conversion Shares have been duly and validly reserved
for issuance. There are no outstanding options, warrants, rights (including
conversion or preemptive rights and rights of first refusal), proxy or
shareholder
2.
<PAGE>
agreements, or agreements of any kind for the purchase or acquisition from
the Company of any of its securities. When issued in compliance with the
provisions of this Agreement and the Restated Articles, the Shares and the
Conversion Shares will be validly issued, fully paid and nonassessable, and
will be free of any liens or encumbrances; PROVIDED, HOWEVER, that the Shares
and the Conversion Shares may be subject to restrictions on transfer under
state and/or federal securities laws as set forth herein or as otherwise
required by such laws at the time a transfer is proposed.
3.3 AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on
the part of the Company, its officers, directors and shareholders necessary
for the authorization of this Agreement, the performance of all obligations
of the Company hereunder and thereunder at the Closing and the authorization,
sale, issuance and delivery of the Shares pursuant hereto and the Conversion
Shares pursuant to the Restated Articles has been taken or will be taken
prior to the Closing. The Agreement, when executed and delivered, will be
valid and binding obligations of the Company enforceable in accordance with
their terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights; (ii) general principles of equity that
restrict the availability of equitable remedies. The sale of the Shares and
the subsequent conversion of the Shares into Conversion Shares are not and
will not be subject to any preemptive rights or rights of first refusal that
have not been properly waived or complied with.
3.4 AGREEMENTS; ACTION.
(a) Except for agreements explicitly contemplated hereby and
agreements between the Company and its employees with respect to the sale of
the Company's Common Stock, there are no agreements, understandings or
proposed transactions between the Company and any of its officers, directors,
affiliates or any affiliate thereof.
(b) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to
which the Company is a party or to its knowledge by which it is bound which
may involve (i) obligations (contingent or otherwise) of, or payments to, the
Company in excess of $25,000 (other than obligations of, or payments to, the
Company arising from purchase or sale agreements entered into in the ordinary
course of business), or (ii) the license of any patent, copyright, trade
secret or other proprietary right to or from the Company (other than licenses
arising from the purchase of "off the shelf" or other standard products), or
(iii) provisions restricting or affecting the development, manufacture or
distribution of the Company's products or services, or (iv) indemnification
by the Company with respect to infringements of proprietary rights (other
than indemnification obligations arising from purchase or sale agreements
entered into in the ordinary course of business).
(c) The Company has not (i) declared or paid any dividends,
or authorized or made any distribution upon or with respect to any class or
series of its capital stock, (ii) incurred any indebtedness for money
borrowed or any other liabilities (other than with respect to dividend
obligations, distributions, indebtedness and other obligations incurred in
the ordinary course of business or as disclosed in the Financial Statements)
individually in excess of $25,000 or, in the
3.
<PAGE>
case of indebtedness and/or liabilities individually less than $25,000, in
excess of $100,000 in the aggregate, (iii) made any loans or advances to any
person, other than ordinary advances for travel expenses, or (iv) sold,
exchanged or otherwise disposed of any of its assets or rights, other than
the sale of its inventory in the ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including
persons or entities the Company has reason to believe are affiliated
therewith) shall be aggregated for the purpose of meeting the individual
minimum dollar amounts of such subsections.
(e) The Company has not engaged in the past three (3) months
in any discussion (i) with any representative of any corporation or
corporations regarding the consolidation or merger of the Company with or
into any such corporation or corporations, (ii) with any corporation,
partnership, association or other business entity or any individual regarding
the sale, conveyance or disposition of all or substantially all of the assets
of the Company, or a transaction or series of related transactions in which
more than fifty percent (50%) of the voting power of the Company is disposed
of, or (iii) regarding any other form of acquisition, liquidation,
dissolution or winding up of the Company.
3.5 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The Company has
good and marketable title to its properties and assets, and good title to its
leasehold estates, in each case subject to no mortgage, pledge, lien, lease,
encumbrance or charge, other than (i) those resulting from taxes which have
not yet become delinquent, (ii) minor liens and encumbrances which do not
materially detract from the value of the property subject thereto or
materially impair the operations of the Company, and (iii) those that have
otherwise arisen in the ordinary course of business. All facilities,
machinery, equipment, fixtures, vehicles and other properties owned, leased
or used by the Company are in good operating condition and repair and are
reasonably fit and usable for the purposes for which they are being used.
3.6 PATENTS AND TRADEMARKS. To its knowledge, the Company owns or
possesses sufficient legal rights to all patents, trademarks, service marks,
trade names, copyrights, trade secrets, information and other proprietary
rights and processes necessary for its business as now conducted and as
proposed to be conducted, without any known infringement of the rights of
others. There are no outstanding options, licenses or agreements of any kind
relating to the foregoing, nor is the Company bound by or a party to any
options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information and other proprietary rights and processes of any other person or
entity other than such licenses or agreements arising from the purchase of
"off the shelf" or standard products. The Company has not received any
communications alleging that the Company has violated or, by conducting its
business as proposed, would violate any of the patents, trademarks, service
marks, trade names, copyrights or trade secrets or other proprietary rights
of any other person or entity. The Company is not aware that any of its
employees is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative
4.
<PAGE>
agency, that would interfere with their duties to the Company or that would
conflict with the Company's business as proposed to be conducted. Neither
the execution nor delivery of this Agreement, nor the carrying on of the
Company's business by the employees of the Company, nor the conduct of the
Company's business as proposed, will, to the Company's knowledge, conflict
with or result in a breach of the terms, conditions or provisions of, or
constitute a default under, any contract, covenant or instrument under which
any employee is now obligated. The Company does not believe it is or will be
necessary to utilize any inventions, trade secrets or proprietary information
of any of its employees made prior to their employment by the Company, except
for inventions, trade secrets or proprietary information that have been
assigned to the Company.
3.7 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation or default of any term of its Restated Articles or Bylaws, or of
any provision of any mortgage, indenture, contract, agreement, instrument or
contract to which it is party or by which it is bound or of any judgment,
decree, order, writ or, to its knowledge, any statute, rule or regulation
applicable to the Company which would materially and adversely affect the
business, assets, liabilities, financial condition, operations or prospects
of the Company. The execution, delivery, and performance of and compliance
with this Agreement, and the issuance and sale of the Shares pursuant hereto
and of the Conversion Shares pursuant to the Restated Articles, will not,
with or without the passage of time or giving of notice, result in any such
material violation, or be in conflict with or constitute a default under any
such term, or result in the creation of any mortgage, pledge, lien,
encumbrance or charge upon any of the properties or assets of the Company or
the suspension, revocation, impairment, forfeiture or nonrenewal of any
permit license, authorization or approval applicable to the Company, its
business or operations or any of its assets or properties.
3.8 LITIGATION. There is no action, suit, proceeding or
investigation pending or to the Company's knowledge currently threatened
against the Company that questions the validity of this Agreement, or the
right of the Company to enter into any of such agreements, or to consummate
the transactions contemplated hereby or thereby, or which might result,
either individually or in the aggregate, in any material adverse change in
the assets, condition, affairs or prospects of the Company, financially or
otherwise, or any change in the current equity ownership of the Company, nor
is the Company aware that there is any basis for the foregoing. The
foregoing includes, without limitation, actions pending or threatened (or any
basis therefor known to the Company) involving the prior employment of any of
the Company's employees, their use in connection with the Company's business
of any information or techniques allegedly proprietary to any of their former
employers, or their obligations under any agreements with prior employers.
The Company is not a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by
the Company currently pending or which the Company intends to initiate.
3.9 TAX RETURNS AND PAYMENTS. The Company has timely filed all tax
returns (federal, state and local) required to be filed by it. All taxes
shown to be due and payable on such returns, any assessments imposed, and to
the Company's knowledge all other taxes due and
5.
<PAGE>
payable by the Company on or before the Closing have been paid or will be
paid prior to the time they become delinquent. The Company has not been
advised (i) that any of its returns, federal, state or other, have been or
are being audited as of the date hereof, or (ii) of any deficiency in
assessment or proposed judgment to its federal, state or other taxes. The
Company has no knowledge of any liability of any tax to be imposed upon its
properties or assets as of the date of this Agreement that is not adequately
provided for.
3.10 REGISTRATION RIGHTS. Except as required pursuant to the Rights
Agreement, the Company is presently not under any obligation, and has not
granted any rights, to register (as defined in Section 1.1 of the Rights
Agreement) any of the Company's presently outstanding securities or any of
its securities that may hereafter be issued.
3.11 COMPLIANCE WITH LAWS; PERMITS. To its knowledge, the Company
is not in violation of any applicable statute, rule, regulation, order or
restriction of any domestic or foreign government or any instrumentality or
agency thereof in respect of the conduct of its business or the ownership of
its properties which violation would materially and adversely affect the
business, assets, liabilities, financial condition, operations or prospects
of the Company. No governmental orders, permissions, consents, approvals or
authorizations are required to be obtained and no registrations or
declarations are required to be filed in connection with the execution and
delivery of this Agreement and the issuance of the Shares or the Conversion
Shares, except such as has been duly and validly obtained or filed, or with
respect to any filings that must be made after the Closing, as will be filed
in a timely manner. The Company has all franchises, permits, licenses and
any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties, prospects or financial condition of the Company and
believes it can obtain, without undue burden or expense, any similar
authority for the conduct of its business as planned to be conducted.
3.12 ENVIRONMENTAL AND SAFETY LAWS. To its knowledge, the Company
is not in violation of any applicable statute, law or regulation relating to
the environment or occupational health and safety, and to its knowledge, no
material expenditures are or will be required in order to comply with any
such existing statute, law or regulation.
3.13 OFFERING VALID. Assuming the accuracy of the representations
and warranties of the Purchasers contained in Section 4.2 hereof, the offer,
sale and issuance of the Shares and the Conversion Shares will be exempt from
the registration requirements of the Securities Act of 1933, as amended (the
"SECURITIES ACT") and will have been registered or qualified (or are exempt
from registration and qualification) under the registration, permit or
qualification requirements of all applicable state securities laws. Neither
the Company nor any agent on its behalf has solicited or will solicit any
offers to sell or has offered to sell or will offer to sell all or any part
of the Shares to any person or persons so as to bring the sale of such Shares
by the Company within the registration provisions of the Securities Act.
6.
<PAGE>
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.
Each Purchaser hereby represents and warrants to the Company as follows (such
representations and warranties do not lessen or obviate the representations
and warranties of the Company set forth in this Agreement):
4.1 REQUISITE POWER AND AUTHORITY. Purchaser has all necessary
power and authority under all applicable provisions of law to execute and
deliver this Agreement and to carry out their provisions. All action on
Purchaser's part required for the lawful execution and delivery of this
Agreement have been or will be effectively taken prior to the Closing. Upon
their execution and delivery, this Agreement will be valid and binding
obligations of Purchaser, enforceable in accordance with their terms, except
(i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement of
creditors' rights, (ii) general principles of equity that restrict the
availability of equitable remedies, and (iii) to the extent that the
enforceability of the indemnification provisions of Section 2.9 of the Rights
Agreement may be limited by applicable laws.
4.2 INVESTMENT REPRESENTATIONS. Purchaser understands that neither
the Shares nor the Conversion Shares have been registered under the
Securities Act. Purchaser also understands that the Shares are being offered
and sold pursuant to an exemption from registration contained in the
Securities Act based in part upon Purchaser's representations contained in
the Agreement. Purchaser hereby represents and warrants as follows:
(a) PURCHASER BEARS ECONOMIC RISK. Purchaser has
substantial experience in evaluating and investing in private placement
transactions of securities in companies similar to the Company so that it is
capable of evaluating the merits and risks of its investment in the Company
and has the capacity to protect its own interests. Purchaser must bear the
economic risk of this investment indefinitely unless the Shares (or the
Conversion Shares) are registered pursuant to the Securities Act, or an
exemption from registration is available. Purchaser understands that the
Company has no present intention of registering the Shares, the Conversion
Shares or any shares of its Common Stock. Purchaser also understands that
there is no assurance that any exemption from registration under the
Securities Act will be available and that, even if available, such exemption
may not allow Purchaser to transfer all or any portion of the Shares or the
Conversion Shares under the circumstances, in the amounts or at the times
Purchaser might propose.
(b) ACQUISITION FOR OWN ACCOUNT. Purchaser is acquiring the
Shares and the Conversion Shares for Purchaser's own account for investment
only, and not with a view towards their distribution.
(c) PURCHASER CAN PROTECT ITS INTEREST. Purchaser
represents that by reason of its, or of its management's, business or
financial experience, Purchaser has the capacity to protect its own interests
in connection with the transactions contemplated in this Agreement. Further,
Purchaser is aware of no publication of any advertisement in connection with
the transactions contemplated in the Agreement.
7.
<PAGE>
(d) ACCREDITED INVESTOR. Purchaser represents that it is an
accredited investor within the meaning of Regulation D under the Securities
Act.
(e) COMPANY INFORMATION. Purchaser has received and read
the Financial Statements and Business Plan and has had an opportunity to
discuss the Company's business, management and financial affairs with
directors, officers and management of the Company and has had the opportunity
to review the Company's operations and facilities. Purchaser has also had
the opportunity to ask questions of and receive answers from, the Company and
its management regarding the terms and conditions of this investment.
(f) RULE 144. Purchaser acknowledges and agrees that the
Shares, and, if issued, the Conversion Shares must be held indefinitely
unless they are subsequently registered under the Securities Act or an
exemption from such registration is available. Purchaser has been advised or
is aware of the provisions of Rule 144 promulgated under the Securities Act,
which permits limited resale of shares purchased in a private placement
subject to the satisfaction of certain conditions, including, among other
things: the availability of certain current public information about the
Company, the resale occurring not less than two years after a party has
purchased and paid for the security to be sold, the sale being through an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934, as
amended) and the number of shares being sold during any three-month period
not exceeding specified limitations.
(g) RESIDENCE. If the Purchaser is an individual, then the
Purchaser resides in the state or province identified in the address of the
Purchaser set forth on EXHIBIT A; if the Purchaser is a partnership,
corporation, limited liability company or other entity, then the office or
offices of the Purchaser in which its investment decision was made is located
at the address or addresses of the Purchaser set forth on EXHIBIT A.
4.3 TRANSFER RESTRICTIONS. Each Purchaser acknowledges and agrees
that the Shares and, if issued, the Conversion Shares are subject to
restrictions on transfer as set forth in the Rights Agreement.
5. CONDITIONS TO CLOSING.
5.1 CONDITIONS TO PURCHASERS' OBLIGATIONS AT THE CLOSING.
Purchasers' obligations to purchase the Shares at the Closing are subject to
the satisfaction, at or prior to the Closing, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF
OBLIGATIONS. The representations and warranties made by the Company in
Section 3 hereof shall be true and correct in all material respects as of the
Closing Date with the same force and effect as if they had been made as of
the Closing Date, and the Company shall have performed all obligations and
conditions herein required to be performed or observed by it on or prior to
the Closing.
8.
<PAGE>
(b) LEGAL INVESTMENT. On the Closing Date, the sale and
issuance of the Shares and the proposed issuance of the Conversion Shares
shall be legally permitted by all laws and regulations to which Purchasers
and the Company are subject.
(c) MINIMUM INVESTMENT. The Company shall have received
executed Agreements and funds from Purchasers that aggregates $750,000 or
greater.
(d) CONSENTS, PERMITS, AND WAIVERS. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate
for consummation of the transactions contemplated by the Agreement (except
for such as may be properly obtained subsequent to the Closing).
(e) FILING OF RESTATED ARTICLES. The Restated Articles
shall have been filed with the Secretary of State of the State of Delaware.
(f) CORPORATE DOCUMENTS. The Company shall have delivered
to Purchasers or their counsel, copies of all corporate documents of the
Company as Purchasers shall reasonably request.
(g) RESERVATION OF CONVERSION SHARES. The Conversion Shares
issuable upon conversion of the Shares shall have been duly authorized and
reserved for issuance upon such conversion.
(h) COMPLIANCE CERTIFICATE. The Company shall have
delivered to Purchasers a Compliance Certificate, executed by the President
of the Company, dated the date of the Closing, to the effect that the
conditions specified in subsections (a), (d), (e) and (g) of this Section 5.1
have been satisfied.
(i) RIGHTS AGREEMENT. The Rights Agreement substantially in
the form attached hereto as EXHIBIT C shall have been executed and delivered
by the parties thereto.
(j) LEGAL OPINION. The Purchasers shall have received from
legal counsel to the Company an opinion addressed to them, dated as of the
Closing Date, in substantially the form attached hereto as EXHIBIT E.
(k) PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the Closing
hereby and all documents and instruments incident to such transactions shall
be reasonably satisfactory in substance and form to the Purchasers and their
special counsel, and the Purchasers and their special counsel shall have
received all such counterpart originals or certified or other copies of such
documents as they may reasonably request.
5.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's
obligation to issue and sell the Shares at each Closing is subject to the
satisfaction, on or prior to the Closing, of the following conditions:
9.
<PAGE>
(a) REPRESENTATIONS AND WARRANTIES TRUE. The
representations and warranties made by Purchasers in Section 4 hereof shall
be true and correct in all material respects at the date of the Closing, with
the same force and effect as if they had been made on and as of said date.
(b) PERFORMANCE OF OBLIGATIONS. Purchasers shall have
performed and complied with all agreements and conditions herein required to
be performed or complied with by Purchasers on or before the Closing.
(c) FILING OF RESTATED ARTICLES. The Restated Articles
shall have been filed with the Secretary of State of the State of Delaware.
(d) RIGHTS AGREEMENT. The Rights Agreement substantially in
the form attached hereto as EXHIBIT C shall have been executed and delivered
by the Purchasers.
(e) CONSENTS, PERMITS, AND WAIVERS. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate
for consummation of the transactions contemplated by the Agreement (except
for such as may be properly obtained subsequent to the Closing).
6. MISCELLANEOUS.
6.1 GOVERNING LAW. This Agreement shall be governed in all
respects by the laws of the State of Delaware as such laws are applied to
agreements between Delaware residents entered into and performed entirely in
Delaware.
6.2 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by any Purchaser
and the closing of the transactions contemplated hereby. All statements as
to factual matters contained in any certificate or other instrument delivered
by or on behalf of the Company pursuant hereto in connection with the
transactions contemplated hereby shall be deemed to be representations and
warranties by the Company hereunder solely as of the date of such certificate
or instrument.
6.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Shares from time to time.
6.4 ENTIRE AGREEMENT. This Agreement, the Exhibits and Schedules
hereto, and the other documents delivered pursuant hereto constitute the full
and entire understanding and agreement between the parties with regard to the
subjects hereof and no party shall be liable or bound to any other in any
manner by any representations, warranties, covenants and agreements except as
specifically set forth herein and therein.
10.
<PAGE>
6.5 SEVERABILITY. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
6.6 AMENDMENT AND WAIVER.
(a) This Agreement may be amended or modified only upon the
written consent of the Company and holders of at least a majority of the
Shares (treated as if converted and including any Conversion Shares into
which the Shares have been converted that have not been sold to the public).
(b) The obligations of the Company and the rights of the
holders of the Shares and the Conversion Shares under the Agreement may be
waived only with the written consent of the holders of at least a majority of
the Shares (treated as if converted and including any Conversion Shares into
which the Shares have been converted that have not been sold to the public).
6.7 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement, or the
Restated Articles, shall impair any such right, power or remedy, nor shall it
be construed to be a waiver of any such breach, default or noncompliance, or
any acquiescence therein, or of or in any similar breach, default or
noncompliance thereafter occurring. It is further agreed that any waiver,
permit, consent or approval of any kind or character on any Purchaser's part
of any breach, default or noncompliance under this Agreement, or under the
Restated Articles or any waiver on such party's part of any provisions or
conditions of the Agreement, or the Restated Articles must be in writing and
shall be effective only to the extent specifically set forth in such writing.
All remedies, either under this Agreement, the Restated Articles, by law, or
otherwise afforded to any party, shall be cumulative and not alternative.
6.8 NOTICES. All notices required or permitted hereunder shall be
in writing and shall be deemed effectively given: (i) upon personal delivery
to the party to be notified; (ii) when sent by confirmed telex or facsimile
if sent during normal business hours of the recipient, if not, then on the
next business day; (iii) five (5) days after having been sent by registered
or certified mail, return receipt requested, postage prepaid; or (iv) one (1)
day after deposit with a nationally recognized overnight courier, specifying
next day delivery, with written verification of receipt. All communications
shall be sent to the Company at the address as set forth on the signature
page hereof and to Purchaser at the address set forth on EXHIBIT A attached
hereto or at such other address as the Company or Purchaser may designate by
ten (10) days advance written notice to the other parties hereto.
6.9 EXPENSES. The Company shall pay all costs and expenses that it
incurs with respect to the negotiation, execution, delivery and performance
of the Agreement. The Company shall, at the Closing, reimburse the
reasonable fees of and expenses of one special counsel for the Purchasers,
not to exceed 10,000, and shall reimburse such special counsel for reasonable
11.
<PAGE>
expenses incurred in connection with the negotiation, execution, delivery and
performance of this Agreement.
6.10 ATTORNEYS' FEES. In the event that any dispute among the
parties to this Agreement should result in litigation, the prevailing party
in such dispute shall be entitled to recover from the losing party all fees,
costs and expenses of enforcing any right of such prevailing party under or
with respect to this Agreement, including without limitation, such reasonable
fees and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
6.11 TITLES AND SUBTITLES. The titles of the sections and
subsections of the Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
6.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
6.13 BROKER'S FEES. Each party hereto represents and warrants that
no agent, broker, investment banker, person or firm acting on behalf of or
under the authority of such party hereto is or will be entitled to any
broker's or finder's fee or any other commission directly or indirectly in
connection with the transactions contemplated herein. Each party hereto
further agrees to indemnify each other party for any claims, losses or
expenses incurred by such other party as a result of the representation in
this Section 6.13 being untrue.
6.14 EXCULPATION AMONG PURCHASERS. Each Purchaser acknowledges that
it is not relying upon any person, firm, or corporation, other than the
Company and its officers and directors, in making its investment or decision
to invest in the Company. Each Purchaser agrees that no Purchaser nor the
respective controlling persons, officers, directors, partners, agents, or
employees of any Purchaser shall be liable for any action heretofore or
hereafter taken or omitted to be taken by any of them in connection with the
Shares and Conversion Shares.
6.15 PRONOUNS. All pronouns contained herein, and any variations
thereof, shall be deemed to refer to the masculine, feminine or neutral,
singular or plural, as to the identity of the parties hereto may require.
12.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed the SERIES A
PREFERRED STOCK PURCHASE AGREEMENT as of the date set forth in the first
paragraph hereof.
COMPANY: PURCHASERS:
JATO COMMUNICATIONS CORP.
----------------------------------
By: /s/ Brian E. Gast By:
------------------------------ -------------------------------
Brian E. Gast, President
Title:
----------------------------
<PAGE>
EXHIBIT A
SCHEDULE OF PURCHASERS
SECOND CLOSING, OCTOBER 30, 1998
<TABLE>
<CAPTION>
-----------------------------------------------------
NAME OF INVESTOR NUMBER OF SHARES
-----------------------------------------------------
<S> <C>
Mary Beazley 80,000
-----------------------------------------------------
Edward Brokaw 26,666
-----------------------------------------------------
William R. Cullen 66,666
-----------------------------------------------------
Aaron E. Gast 6,666
-----------------------------------------------------
Gregory & Nancy Gast 6,666
-----------------------------------------------------
Edverna Gilbert 15,000
-----------------------------------------------------
Trustee F.B.O. FWD 67,000
Corporation Savings &
Profit Sharing Trust--James
M. Green, Segregated
Account
-----------------------------------------------------
Robert J. Grubb 133,333
-----------------------------------------------------
Trustee F.B.O. FWD 26,667
Corporation Savings &
Profit Sharing
Trust--Joseph L. Kaufmann,
Segregated Account
-----------------------------------------------------
William Seybold 66,666
-----------------------------------------------------
Somes Ventures, LLC 66,666
-----------------------------------------------------
Edward H. Snowden 13,333
-----------------------------------------------------
Winterscheidt & Villiotti 33,333
PC Profit Sharing Plan and
Trust
-----------------------------------------------------
TOTAL 608,662
-----------------------------------------------------
</TABLE>
A-1
<PAGE>
EXHIBIT B
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
2.
<PAGE>
EXHIBIT C
INVESTOR RIGHTS AGREEMENT
3.
<PAGE>
EXHIBIT D
4.
<PAGE>
EXHIBIT E
FORM OF LEGAL OPINION
5.
<PAGE>
JATO COMMUNICATIONS CORP.
SERIES B PREFERRED STOCK
PURCHASE AGREEMENT
APRIL 16, 1999
<PAGE>
JATO COMMUNICATIONS CORP.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES B PREFERRED STOCK PURCHASE AGREEMENT (the "AGREEMENT") is
entered into as of this 16th day of April, 1999, by and among JATO
COMMUNICATIONS CORP., a Delaware corporation (the "COMPANY"), and each of those
persons and entities, severally and not jointly, whose names are set forth on
the Schedule of Purchasers attached hereto as EXHIBIT A (which persons and
entities are hereinafter collectively referred to as "PURCHASERS" and each
individually as a "PURCHASER").
RECITALS
WHEREAS, the Company has authorized the sale and issuance of an aggregate
of sixteen million (16,000,000) shares of its Series B Preferred Stock, $.01 par
value (the "SHARES"); and
WHEREAS, the Company desires to issue and sell the Shares to the
Purchasers and the Purchasers severally desire to purchase some or all of the
Shares from the Company on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the parties hereto agree as follows:
SECTION 1. AGREEMENT TO SELL AND PURCHASE
1.1 AUTHORIZATION OF SHARES. On or prior to the First Closing (as
defined in Section 2 below), the Company shall have authorized (i) the sale and
issuance to Purchasers of the Shares and (ii) the issuance of such shares of
Common Stock to be issued upon conversion of the Shares (the "CONVERSION
SHARES"). The Shares and the Conversion Shares shall have the rights,
preferences, privileges and restrictions set forth in the Restated Certificate
of Incorporation of the Company, in the form attached hereto as EXHIBIT B (the
"CERTIFICATE").
1.2 SALE AND PURCHASE. Subject to the terms and conditions hereof, at
the First Closing (as hereinafter defined), the Company hereby agrees to issue
and sell to each Purchaser, severally and not jointly, and each Purchaser agrees
to purchase from the Company, severally and not jointly, the number of Shares
set forth opposite such Purchaser's name on EXHIBIT A at a purchase price of
$1.50 per share.
SECTION 2. CLOSING, DELIVERY AND PAYMENT
2.1 CLOSING. The initial closing of the sale and purchase of the
Shares under this Agreement (the "FIRST CLOSING") shall take place on the date
hereof, at the offices of Cooley Godward LLP, 2595 Canyon Boulevard, Suite 250,
Boulder, Colorado 80302, or at such other time or place as the Company and
Purchasers may mutually agree. The subsequent closing(s) of the sale and
purchase of Shares as set forth in Section 2.3 below shall take place at such
time and place as the Company and Purchasers participating therein shall
mutually agree (a "SUBSEQUENT
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CLOSING") (the First Closing and any Subsequent Closing shall collectively be
referred to herein as a "CLOSING" and each such date is referred to as a
"CLOSING DATE")
2.2 DELIVERY. At each Closing, subject to the terms and conditions
hereof, the Company will deliver to the Purchasers one or more stock
certificates, as each Purchaser may request, representing the number of Shares
to be purchased at such Closing by each Purchaser, registered in such
Purchaser's name, against payment of the purchase price therefor, by check or
wire transfer made payable to the order of the Company.
2.3 SUBSEQUENT SALES OF SHARES. At any time on or before the 30th day
following the First Closing, the Company may sell up to the balance of the
Shares not sold at the First Closing. All such sales shall be made on the terms
and conditions set forth in this Agreement. Any Shares sold pursuant to this
Section 2.3 shall be deemed to be "Shares" for all purposes under this Agreement
and any purchasers thereof shall be deemed to be "Purchasers" for all purposes
under this Agreement; PROVIDED, THAT, the Company may not sell in excess of an
aggregate of fifteen million six hundred thousand (15,600,000) shares (including
those shares sold at the First Closing) of Series B Stock (as adjusted for stock
splits, stock dividends and the like).
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on a Schedule of Exceptions delivered by the Company
to the Purchasers at the First Closing or at any Subsequent Closing, as the case
may be, the Company hereby represents and warrants to each Purchaser as of the
date of this Agreement as follows:
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. Each of the
Company and Subsidiary (as defined in Section 3.2 below) is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Each of the Company and Subsidiary has all requisite corporate power
and authority to own and operate their respective properties and assets. The
Company has all requisite corporate power and authority to execute and deliver
this Agreement, the Investors' Rights Agreement, in the form attached hereto as
EXHIBIT C (the "INVESTORS' RIGHTS AGREEMENT"), and the Stockholders' Agreement,
in the form attached hereto as EXHIBIT D (the "STOCKHOLDERS' AGREEMENT"), issue
and sell the Shares and the Conversion Shares and to carry out the provisions of
this Agreement, the Investors' Rights Agreement, the Stockholders' Agreement and
the Certificate. Each of the Company and Subsidiary has the requisite corporate
power and authority to carry on its business as presently conducted and as
presently proposed to be conducted. Each of the Company and Subsidiary is duly
qualified and is authorized to do business and is in good standing as a foreign
corporation in all jurisdictions in which the nature of their respective
activities and of their respective properties (both owned and leased) make such
qualifications necessary, except for those jurisdictions in which failure to do
so would not have a material adverse effect on the Company or Subsidiary or
their respective businesses. The Company has made available to the Purchasers
true, correct and complete copies of the Company's Restated Certificate of
Incorporation and Bylaws, each as amended to date and in full force and effect
on the date hereof. The Company has made available to the Purchasers true,
correct and complete copies of Subsidiary's Certificate of Incorporation and
Bylaws, each as amended to date and in full force and effect on the date hereof.
Since its inception, Subsidiary has had no operations and has not incurred any
material obligations.
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3.2 SUBSIDIARIES. Other than JATO Operating Corp., a Delaware
corporation (the "SUBSIDIARY"), the Company owns no equity securities of any
other corporation, limited partnership or similar entity. The Company is not a
participant in any joint venture, partnership or similar arrangement. The
Company owns shares of the Subsidiary free and clear of all encumbrances.
3.3 CAPITALIZATION; VOTING RIGHTS.
(a) The authorized capital stock of the Company, immediately
prior to the Closing, will consist of (a) forty million (40,000,000) shares of
Common Stock, of which six million two hundred fifty thousand two (6,250,002)
shares are issued and outstanding, and (b) nineteen million (19,000,000) shares
of Preferred Stock, of which three million (3,000,000) shares are designated
Series A Preferred Stock, of which one million seven hundred fifty-one thousand
nine hundred eighty five (1,751,985) are issued and outstanding, and of which
sixteen million (16,000,000) shares are designated Series B Preferred Stock,
none of which are issued and outstanding. All issued and outstanding shares of
the Company's Common Stock and Preferred Stock (i) have been duly authorized and
validly issued, (ii) are fully paid and nonassessable and (iii) were issued in
compliance with all applicable state and federal laws concerning the issuance of
securities. The rights, preferences, privileges and restrictions of the Shares
are as stated in the Certificate. The Conversion Shares have been duly and
validly reserved for issuance. As of the First Closing, there has been no
action taken by the Company which would have required an adjustment to the
Series B Conversion Price, as defined in the Certificate. Except as set forth on
Schedule 3.3 hereto and except as may be granted pursuant to this Agreement or
the Investors' Rights Agreement, there are no outstanding options, warrants,
rights (including conversion or preemptive rights and rights of first refusal),
proxy or stockholder agreements, or agreements of any kind for the purchase or
acquisition from the Company of any of its securities. The Shares and the
Conversion Shares have been duly authorized and, when issued in compliance with
the provisions of this Agreement and the Certificate, will be validly issued
(including, without limitation, issued in compliance with applicable state and
federal securities laws), fully paid and nonassessable, subject to no preemptive
rights, and will be free of any liens or encumbrances; PROVIDED, HOWEVER, that
the Shares and the Conversion Shares may be subject to restrictions on transfer
under state and/or federal securities laws as set forth herein or as otherwise
required by such laws at the time transfer is proposed.
(b) The authorized capital stock of Subsidiary consists of one
hundred (100) shares of Common Stock, all of which are issued and outstanding
and held of record by the Company.
3.4 AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on the
part of the Company, its officers, directors and stockholders necessary for the
authorization of this Agreement, the Investors' Rights Agreement, the
Stockholders' Agreement and the Employment Agreements (as defined in
Section 5.1(j)), the performance of all obligations of the Company hereunder and
thereunder at the Closing and the authorization, sale, issuance and delivery of
the Shares pursuant hereto and the Conversion Shares pursuant to the Certificate
has been taken or will be taken prior to the Closing. The Agreement, the
Investors' Rights Agreement, the Stockholders' Agreement and the Employment
Agreements, when executed and delivered, will be valid and binding obligations
of the Company enforceable in accordance with their terms,
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except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement of
creditors' rights; (ii) general principles of equity that restrict the
availability of equitable remedies; and (iii) to the extent that the
enforceability of the indemnification provisions in Section 3.11 of the
Investors' Rights Agreement may be limited by applicable laws. The sale of the
Shares and the subsequent conversion of the Shares into Conversion Shares are
not and will not be subject to any preemptive rights or rights of first refusal
that have not been properly waived or complied with.
3.5 FINANCIAL STATEMENTS. The Company has delivered to each Purchaser
(i) its unaudited balance sheet as at December 31, 1998 and unaudited statement
of income and cash flows for the period from inception and ending December 31,
1998 and (ii) its unaudited balance sheet as at March 31, 1999 (the "STATEMENT
DATE") and unaudited consolidated statement of income for the three-month period
ending on the Statement Date (collectively, the "FINANCIAL STATEMENTS"). The
Financial Statements, together with the notes thereto, are complete and correct
in all material respects, have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated, except as disclosed therein, and present fairly the financial
condition and position of the Company as of December 31, 1998 and the Statement
Date; PROVIDED, HOWEVER, that the unaudited financial statements are subject to
normal recurring year-end audit adjustments (which are not expected to be
material), and may not contain all footnotes required under generally accepted
accounting principles.
3.6 LIABILITIES. The Company has no material liabilities and, to its
knowledge, knows of no material contingent liabilities not otherwise disclosed
in the Financial Statements, except current liabilities incurred in the ordinary
course of business subsequent to the Statement Date which have not been, either
in any individual case or in the aggregate, materially adverse.
3.7 AGREEMENTS; ACTION.
(a) Except as set forth on Schedule 3.3 hereto and except for
agreements explicitly contemplated hereby, there are no agreements,
understandings or proposed transactions between the Company and any of its
officers, directors, affiliates or any affiliate thereof.
(b) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which
the Company is a party or to its knowledge by which it is bound which may
involve (i) obligations (contingent or otherwise) of, or payments to, the
Company in excess of $25,000, or (ii) the license of any patent, copyright,
trade secret or other proprietary right to or from the Company (other than
licenses arising from the purchase of "off the shelf" or other standard
products), or (iii) provisions restricting or affecting the development,
manufacture or distribution of the Company's products or services, or (iv)
indemnification by the Company with respect to infringements of proprietary
rights.
(c) The Company has not (i) declared or paid any dividends, or
authorized or made any distribution upon or with respect to any class or series
of its capital stock, (ii) incurred any indebtedness for money borrowed or any
other liabilities (other than with respect to indebtedness and other obligations
incurred in the ordinary course of business or as disclosed in the Financial
Statements) individually in excess of $25,000 or, in the case of indebtedness
and/or
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liabilities individually less than $25,000, in excess of $75,000 in the
aggregate, (iii) made any loans or advances to any person, other than ordinary
advances for travel expenses, or (iv) sold, exchanged or otherwise disposed of
any of its assets or rights, other than the sale of its inventory in the
ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
3.8 OBLIGATIONS TO RELATED PARTIES. There are no obligations of the
Company to officers, directors, stockholders, or employees of the Company other
than (a) for payment of salary for services rendered, (b) reimbursement for
reasonable expenses incurred on behalf of the Company and (c) for other standard
employee benefits made generally available to all employees (including stock
option agreements outstanding under any stock option plan approved by the Board
of Directors of the Company). No such officer, director or stockholder, or any
member of their immediate families is, directly or indirectly, interested in any
material contract with the Company (other than such contracts as relate to any
such person's ownership of capital stock or other securities of the Company).
The Company is not a guarantor or indemnitor of any indebtedness of any other
person, firm or corporation.
3.9 ABSENCE OF CHANGES. Except as set forth in Schedule 3.9, since
the Statement Date, there has not been:
(a) Any change in the assets, liabilities, financial condition,
earnings or operations of the Company from that reflected in the Financial
Statements, other than changes in the ordinary course of business, none of which
individually or in the aggregate has had or is expected to have a material
adverse effect on such assets, liabilities, financial condition, earnings or
operations of the Company;
(b) Any resignation or termination of any key officers of the
Company; and the Company, to the best of its knowledge, does not know of the
impending resignation or termination of employment of any such officer;
(c) Any material change in the contingent obligations of the
Company by way of guaranty, endorsement, indemnity, warranty or otherwise;
(d) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, business or
prospects or financial condition of the Company;
(e) Any waiver by the Company of a valuable right or of a
material debt owed to it;
(f) Any direct or indirect loans made by the Company to any
stockholder, employee, officer or director of the Company, other than immaterial
advances made in the ordinary course of business;
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(g) Any material change in any compensation arrangement or
agreement with any employee, officer, director or stockholder including, without
limitation, any (i) increase in the compensation payable or to become payable by
the Company to any of the Company's employees, (ii) any bonus, incentive
compensation, service award or other like benefit, granted, made or accrued,
contingently or otherwise, to or for the credit of the Company's employees, or
(iii) any employee welfare, pension, retirement, profit-sharing or similar
payment or arrangement (whether or not subject to ERISA) made or agreed to by
the Company;
(h) Any declaration or payment of any dividend or other
distribution of the assets of the Company;
(i) Any labor organization activity;
(j) Any debt, obligation or liability incurred, assumed or
guaranteed by the Company, except those for immaterial amounts and for current
liabilities incurred in the ordinary course of business;
(k) Any sale, assignment or transfer of any patents,
trademarks, copyrights, trade secrets or other intangible assets;
(l) Any change in any material agreement to which the Company
is a party or by which it is bound which materially and adversely affects the
business, assets, liabilities, financial condition, operations or prospects of
the Company;
(m) (i) Any change in practice with respect to taxes, (ii) any
making, changing or revoking of any tax election, or (iii) any settlement or
compromise of any dispute involving a tax liability;
(n) Any change in the number of shares of capital stock of the
Company issued and outstanding;
(o) Any failure to conduct the business of the Company in the
ordinary course;
(p) Any change in the method of accounting or accounting
practice of the Company;
(q) Any change in the Company's lines of business; or
(r) Any other event or condition of any character that, either
individually or cumulatively, has materially and adversely affected the
business, assets, liabilities, financial condition, operations or prospects of
the Company. For purposes of this subsection (r), a material and adverse effect
shall only be deemed to occur if its monetary impact exceeds, or with the
passage of time, will exceed $75,000.
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3.10 REAL PROPERTIES; TANGIBLE PERSONAL PROPERTY.
(a) REAL PROPERTIES. Schedule 3.10 sets forth each lease or
other agreement (including easements) under which the Company leases or has
rights in any real property (the "REAL PROPERTY LEASES," and, each individually,
a "REAL PROPERTY LEASE"). The Company has a valid and subsisting leasehold
interest in all the real property which is the subject of each Real Property
Lease. The Company does not presently own, and has never owned, any real
property and does not presently operate, and has never operated, any real
property, other than as a lessee.
(b) TANGIBLE PERSONAL PROPERTY. Except as set forth in
Schedule 3.10 hereto, (i) the Company has good, marketable and valid title to
all of the items of tangible personal property used in its operations and (ii)
all such tangible personal property is reflected on the Company's unaudited
Financial Statements, except as sold or disposed of subsequent to the date
thereof in the ordinary course of business consistent with past practices. The
tangible personal property of the Company is in good repair and working order,
reasonable wear and tear excepted, and constitutes all of the tangible personal
property necessary for the operation of the business as currently conducted.
3.11 PATENTS AND TRADEMARKS. The Company is the sole owner, free of
any lien or encumbrance, of, or has a valid license, on commercially reasonable
terms, to, all U.S. and foreign patents, registered designs, copyrights,
computer software and databases, trademarks, service marks and trade names,
whether or not registered, and other trade secrets, research and development,
formulae, inventions, processes, know-how and proprietary and intellectual
property rights and information, including all grants, registrations and
applications relating thereto (collectively, the "PROPRIETARY RIGHTS") necessary
for the conduct of its business as now conducted (the "COMPANY RIGHTS"). The
Company's rights in the Company Rights are, to the Company's knowledge, valid
and enforceable. The Company has received no demand, claim, notice or inquiry
from any person in respect of the Company Rights which challenges, threatens to
challenge or inquires as to whether there is any basis to challenge, the
validity of, or the rights of the Company in, any such Company Rights. There
are no outstanding options, licenses or agreements of any kind relating to the
Company Rights, nor is the Company bound by or a party to any options, licenses
or agreements of any kind with respect to the Proprietary Rights of any other
person or entity other than such licenses or agreements arising from the
purchase of "off the shelf" or standard products. The Company has taken, and
will take, all actions which are necessary in order to protect the Company
Rights and to acquire additional Proprietary Rights, consistent with prudent
commercial practices in the telecommunications industry. To the knowledge of
the Company, the Company is not in violation or infringement of, and has not
violated or infringed, any Proprietary Rights of any other person. To the
knowledge of the Company, no person is infringing any Company Rights. The
Company is not aware that any of its employees is obligated under any contract
(including licenses, covenants or commitments of any nature) or other agreement,
or subject to any judgment, decree or order of any court or administrative
agency, that would interfere with their duties to the Company's business by the
employees of the Company, nor will, to the Company's knowledge, the conduct of
the Company's business as proposed conflict with or result in a breach of the
terms, conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any employee is now obligated. The Company
does not believe it is or will be necessary to utilize any inventions, trade
secrets or proprietary information of any of its employees made
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prior to their employment by the Company, except for inventions, trade secrets
or proprietary information that have been assigned to the Company.
3.12 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation or default of any term of its Certificate or Bylaws, or of any
provision of any mortgage, indenture, contract, agreement, instrument or
contract to which it is party or by which it is bound or of any judgment,
decree, order, writ or any statute, rule or regulation applicable to the Company
which would materially and adversely affect the business, assets, liabilities,
financial condition, operations or prospects of the Company. The execution,
delivery, and performance of and compliance with this Agreement, the Investors'
Rights Agreement, the Stockholders' Agreement, the Employment Agreements and the
Compliance Certificate to be delivered pursuant to Section 5.1(f) hereof, and
the issuance and sale of the Shares pursuant hereto and of the Conversion Shares
pursuant to the Certificate, will not, with or without the passage of time or
giving of notice, result in any such material violation, or be in conflict with
or constitute a default under any such term, or result in the creation of any
mortgage, pledge, lien, encumbrance or charge upon any of the properties or
assets of the Company or the suspension, revocation, impairment, forfeiture or
nonrenewal of any permit, license, authorization or approval applicable to the
Company, its business or operations or any of its assets or properties.
3.13 LITIGATION. There is no action, suit, proceeding or investigation
pending, or to the Company's knowledge, currently threatened against the Company
that questions the validity of this Agreement, the Investors' Rights Agreement
or the Stockholders' Agreement or the right of the Company to enter into any of
such agreements, or to consummate the transactions contemplated hereby or
thereby, or which might result, either individually or in the aggregate, in any
material adverse change in the assets, condition, affairs or prospects of the
Company, financially or otherwise, or any change in the current equity ownership
of the Company, nor is the Company aware that there is any basis for the
foregoing. The foregoing includes, without limitation, actions pending or
threatened (or any basis therefor known to the Company) involving the prior
employment of any of the Company's employees, their use in connection with the
Company's business of any information or techniques allegedly proprietary to any
of their former employers, or their obligations under any agreements with prior
employers. The Company is not a party or subject to the provisions of or in
violation of any order, writ, injunction, judgment or decree or any rule or
regulation of any court or government agency or instrumentality. There is no
action, suit, proceeding or investigation by the Company currently pending or
which the Company intends to initiate.
3.14 TAX RETURNS AND PAYMENTS. The Company has timely filed all tax
returns (federal, state and local) required to be filed by it. All taxes shown
to be due and payable on such returns, any assessments imposed, and to the
Company's knowledge all other taxes due and payable by the Company on or before
the Closing have been paid or will be paid prior to the time they become
delinquent. The Company has not been advised (i) that any of its returns,
federal, state or other, have been or are being audited as of the date hereof,
or (ii) of any deficiency in assessment or proposed judgment to its federal,
state or other taxes. The Company has no knowledge of any liability of any tax
to be imposed upon its properties or assets as of the date of this Agreement
that is not adequately provided for. Neither the Company nor the Subsidiary is
a party to any agreement relating to allocating or sharing the payment of, or
liability for taxes with respect to, any taxable period. Neither the Company
nor Subsidiary has any deferred income
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reportable for a period ending after the Closing Date that is attributable to a
transaction (e.g., an installment sale) occurring in, or resulting from a change
of accounting method for, a period ending on or prior to the Closing Date.
3.15 EMPLOYEES. The Company is not a party to or bound by any
currently effective employment contract, deferred compensation arrangement,
bonus plan, incentive plan, profit sharing plan, retirement agreement or other
employee compensation plan or agreement. Neither the Company, nor any entity
which is required to be aggregated with the Company pursuant to Sections 414(b),
(c), (m) or (o) of the Internal Revenue Code of 1986 has any liability whether
actual or contingent, with respect to any employee benefit plan or arrangement.
To the Company's knowledge, no employee of the Company, nor any consultant with
whom the Company has contracted, is in violation of any term of any employment
contract, proprietary information agreement or any other agreement relating to
the right of any such individual to be employed by, or to contract with, the
Company because of the nature of the business to be conducted by the Company;
and to the Company's knowledge the continued employment by the Company of its
present employees, and the performance of the Company's contracts with its
independent contractors, will not result in any such violation. The Company has
not received any notice alleging that any such violation has occurred. No
employee of the Company has been granted the right to continued employment by
the Company or to any material compensation following termination of employment
with the Company. The Company is not aware that any officer or key employee, or
that any group of key employees, intends to terminate their employment with the
Company, nor does the Company have a present intention to terminate the
employment of any officer, key employee or group of key employees. To the
Company's knowledge, the Company is in compliance with all laws and orders
relating to the employment of labor, including, without limitation, all such
laws and orders relating to wages, hours, discrimination, civil rights, safety
and the collection and payment of withholding and/or Social Security taxes and
similar taxes. There are no complaints, charges or claims against the Company
pending, or, to the Company's knowledge, threatened to be brought or filed, with
any governmental entity or arbitrator based on, arising out of, in connection
with, or otherwise relating to the employment or termination of employment of
any individual by the Company.
3.16 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS. Each current
employee, officer and consultant of the Company has executed a Proprietary
Information and Inventions Agreement that effectively waives any ownership
rights in the invention or authorship of any Company Rights and has assigned to
the Company all rights with respect thereto. No current employee, officer or
consultant of the Company has excluded works or inventions made prior to his or
her employment with the Company from his or her assignment of the works or
inventions pursuant to such employee, officer or consultant's Non-Competition,
Proprietary Information and Inventions Agreement in the form attached hereto as
EXHIBIT E.
3.17 OBLIGATIONS OF MANAGEMENT. Each officer of the Company is
currently devoting one hundred percent (100%) of his business time to the
conduct of the business of the Company. The Company is not aware of any officer
or key employee of the Company planning to work less than full time at the
Company in the future.
3.18 REGISTRATION RIGHTS. Except as required pursuant to the
Investors' Rights Agreement, the Company is presently not under any obligation,
and has not granted any rights, to
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register (as defined in Section 1 of the Investors' Rights Agreement) any of the
Company's presently outstanding securities or any of its securities that may
hereafter be issued.
3.19 COMPLIANCE WITH LAWS; PERMITS. The Company is not in violation of
any applicable statute, rule, regulation, order or restriction of any domestic
or foreign government or any instrumentality or agency thereof in respect of the
conduct of its business or the ownership of its properties which violation would
materially and adversely affect the business, assets, liabilities, financial
condition, operations or prospects of the Company. No governmental orders,
permissions, consents, approvals or authorizations are required to be obtained
and no registrations or declarations are required to be filed in connection with
the execution and delivery of this Agreement and the issuance of the Shares or
the Conversion Shares, except such as has been duly and validly obtained or
filed, or with respect to any filings that must be made after the Closing, as
will be filed in a timely manner. Schedule 3.19 sets forth the states in which
the Company has obtained all franchises, permits, licenses and any similar
authority necessary for the conduct of its business as now being conducted by
it, the lack of which could materially and adversely affect the business,
properties, prospects or financial condition of the Company.
3.20 OFFERING VALID. Assuming the accuracy of the representations and
warranties of the Purchasers contained in Section 4.2 hereof, the offer, sale
and issuance of the Shares and the Conversion Shares will be exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"SECURITIES ACT"), and will have been registered or qualified (or are exempt
from registration and qualification) under the registration, permit or
qualification requirements of all applicable state securities laws. Neither the
Company nor any agent on its behalf has solicited or will solicit any offers to
sell or has offered to sell or will offer to sell all or any part of the Shares
to any person or persons so as to bring the sale of such Shares by the Company
within the registration provisions of the Securities Act or any state securities
laws.
3.21 FULL DISCLOSURE. This Agreement, the Exhibits hereto, the
Investors' Rights Agreement, the Stockholders' Agreement and all other documents
delivered by the Company to Purchasers or their attorneys or agents in
connection herewith or therewith or with the transactions contemplated hereby or
thereby, do not contain any untrue statement of a material fact nor omit to
state a material fact necessary in order to make the statements contained herein
or therein not misleading. There is no fact peculiar to the Company and known to
the Company which materially adversely affects, or reasonably could be expected
to materially adversely affect in the future, the business, property or assets,
or financial condition of the Company, which has not been set forth in this
Agreement or in the other documents described herein or furnished to the
Purchasers by or on behalf of the Company prior to the date hereof in connection
with the transactions contemplated hereby.
3.22 APPLICATION OF PROCEEDS. The proceeds of the sale of the Shares
will be used by the Company to fund the capital expenditures and working capital
needs of the Company and for other general corporate purposes. The Company does
not own any "margin security' within the meaning of Regulation G (12 CFR Part
207) of the Board of Governors of the Federal Reserve System (herein called a
"margin security"). Neither the Company nor any agent acting on its behalf, has
taken or will take any action which might cause this Agreement to violate
Regulation G, Regulation T, Regulation X or any other regulation of the Board of
Governors of the Federal
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Reserve System or to violate the Securities Exchange Act of 1934, in each case
as in effect now or as the same hereafter may be in effect.
3.23 CERTAIN LIMITATIONS. Neither the nature of the Company, nor any
of its respective businesses or properties, nor any relationship between the
Company and any other person, nor any circumstance in connection with the offer,
issue, sale or delivery of the Shares (other than in any such case, any matter
relating to the Purchasers) is, such as to require or give rise to any
limitation on any Purchaser's ownership of any equity securities of the Company.
3.24 ENVIRONMENTAL.
(a) To the Company's knowledge, the Company complies, and at
all times has complied, in all material respects with all applicable
Environmental Laws. For the purposes hereof, "ENVIRONMENTAL LAW" shall mean any
judgment, decree, order, law, permit, license, rule, regulation or agency
requirement relating to or addressing the environment, health or safety (to the
extent relating to exposure to any hazardous substance), including, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act, as amended, the Resource Conservation and Recovery Act, as amended, the
Superfund Amendments and Reauthorization Act of 1986, the Federal Clean Water
Act, the Federal Clean Air Act, the Toxic Substances Control Act and any
federal, state, local or foreign statute, regulation, ordinance, order or decree
relating to health, safety (in the case of health and safety to the extent
relating to exposure in the workplace or otherwise to any Hazardous Substance)
or the environment.
(b) There is not now pending or, to the Company's knowledge,
threatened any action, claim, proceeding or investigation nor has the Company
received any notice, claim, demand letter, or request for information at any
time, alleging that the Company may be in violation of, or liable under, any
Environmental Law.
(c) To the Company's knowledge, without initiating any inquiry,
there are no hazardous substances located on the properties currently or
formerly owned or operated by the Company (including soil, groundwater or
surface features and buildings or structures thereon) other than as permitted
under applicable Environmental Laws, and none of the properties contain, or has
contained, any underground storage tank.
3.25 INSURANCE. The Company maintains and/or is covered by valid
policies of workers' compensation insurance and of insurance with respect to its
properties and business. The Company currently maintains, in full force,
insurance covering the risks of the Company, if any, of such types and in such
amounts and with such deductibles as are customary for other companies engaged
in similar lines of business and with good and responsible insurance companies.
3.26 SMALL BUSINESS MATTERS. The Company acknowledges that ABN AMRO
Private Equity is a federally licensed Small Business Investment Company (an
"SBIC HOLDER") under the Small Business Investment Company Act. The information
regarding the Company and its affiliates in Small Business Administration Form
480, Form 652 and Parts A and B of Form 1031 delivered at or promptly following
the Closing is accurate in all material respects. Neither the Company nor any
subsidiary of the Company presently engages in, or shall hereinafter
11.
<PAGE>
engage in, any activities, nor shall the Company nor any subsidiary of the
Company use the proceeds from the sale of Series B Stock directly or indirectly
for any purpose for which an SBIC Holder is prohibited from providing funds by
Small Business Investment Company Act regulations.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser hereby represents and warrants to the Company as follows
(such representations and warranties do not lessen or obviate the
representations and warranties of the Company set forth in this Agreement):
4.1 REQUISITE POWER AND AUTHORITY. Purchaser has all necessary power
and authority under all applicable provisions of law to execute and deliver this
Agreement, the Investors' Rights Agreement, the Stockholders' Agreement and to
carry out their provisions. All action on Purchaser's part required for the
lawful execution and delivery of this Agreement, the Investors' Rights Agreement
and the Stockholders' Agreement has been or will be effectively taken prior to
the Closing. Upon their execution and delivery, this Agreement, the Investors'
Rights Agreement and the Stockholders' Agreement will be valid and binding
obligations of Purchaser, enforceable in accordance with their terms, except
(i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other laws of general application affecting enforcement of creditors' rights,
(ii) general principles of equity that restrict the availability of equitable
remedies and (iii) to the extent that the enforceability of the indemnification
provisions of the Investors' Rights Agreement may be limited by applicable laws.
4.2 INVESTMENT REPRESENTATIONS. Purchaser understands that neither
the Shares nor the Conversion Shares have been registered under the Securities
Act. Purchaser also understands that the Shares are being offered and sold
pursuant to an exemption from registration contained in the Securities Act based
in part upon Purchaser's representations contained in the Agreement. Purchaser
hereby represents and warrants as follows:
(a) PURCHASER BEARS ECONOMIC RISK. Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. Purchaser must bear the economic risk of
this investment indefinitely unless the Shares (or the Conversion Shares) are
registered pursuant to the Securities Act, or an exemption from registration is
available. Purchaser also understands that there is no assurance that any
exemption from registration under the Securities Act will be available and that,
even if available, such exemption may not allow Purchaser to transfer all or any
portion of the Shares or the Conversion Shares under the circumstances, in the
amounts or at the times Purchaser might propose.
(b) ACQUISITION FOR OWN ACCOUNT. Purchaser is acquiring the
Shares and the Conversion Shares for Purchaser's own account for investment
only, and not with a view towards their distribution.
12.
<PAGE>
(c) ACCREDITED INVESTOR. Purchaser represents that it is an
"accredited investor" within the meaning of Regulation D under the Securities
Act.
(d) RULE 144. Purchaser acknowledges and agrees that the
Shares, and, if issued, the Conversion Shares must be held indefinitely unless
they are subsequently registered under the Securities Act or an exemption from
such registration is available. Purchaser has been advised or is aware of the
provisions of Rule 144 promulgated under the Securities Act as in effect from
time to time, which permits limited resale of shares purchased in a private
placement subject to the satisfaction of certain conditions, including, among
other things, the availability of certain current public information about the
Company, the resale occurring following the required holding period under
Rule 144 and the number of shares being sold during any three-month period not
exceeding specified limitations.
(e) RESIDENCE. If the Purchaser is an individual, then the
Purchaser resides in the state or province identified in the address of the
Purchaser set forth on EXHIBIT A; if the Purchaser is a partnership,
corporation, limited liability company or other entity, then the office or
offices of the Purchaser in which its investment decision was made is located at
the address or addresses of the Purchaser set forth on EXHIBIT A.
4.3 TRANSFER RESTRICTIONS. Each Purchaser acknowledges and agrees
that the Shares and, if issued, the Conversion Shares are subject to
restrictions on transfer as set forth in the Investors' Rights Agreement and the
Stockholders' Agreement.
SECTION 5. CONDITIONS TO CLOSING
5.1 CONDITIONS TO PURCHASERS' OBLIGATIONS AT EACH CLOSING.
Purchasers' obligations to purchase the Shares at each Closing are subject to
the satisfaction, at or prior to each Closing, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF
OBLIGATIONS. With respect to the First Closing, the representations and
warranties made by the Company in Section 3 hereof shall be true and correct in
all respects as of such Closing Date with the same force and effect as if they
had been made as of such Closing Date, and the Company shall have performed all
obligations and conditions herein required to be performed or observed by it on
or prior to such Closing. With respect to any Subsequent Closing, the Company
shall have delivered an updated Schedule of Exceptions satisfactory to the
Purchasers, and the representations and warranties made by the Company in
Section 3 hereof, as modified by such revised Schedule of Exceptions, shall be
true and correct in all material respects as of such Closing Date, and the
Company shall have performed all obligations and conditions herein required to
be performed or observed by it on or prior to such Closing.
(b) LEGAL INVESTMENT. On each Closing Date, the sale and
issuance of the Shares and the proposed issuance of the Conversion Shares shall
be legally permitted by all laws and regulations to which Purchasers and the
Company are subject.
(c) CONSENTS, PERMITS, AND WAIVERS. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by the Agreement, the Investors'
Rights Agreement and the
13.
<PAGE>
Stockholders' Agreement (except for such as may be properly obtained subsequent
to the Closing).
(d) FILING OF CERTIFICATE. The Certificate shall have been
approved by the Board of Directors of the Company and filed with the Secretary
of State of the State of Delaware and shall be in full force and effect.
(e) RESERVATION OF CONVERSION SHARES. The Conversion Shares
issuable upon conversion of the Shares shall have been duly authorized and
reserved for issuance upon such conversion.
(f) COMPLIANCE CERTIFICATE. The Company shall have delivered
to Purchasers a Compliance Certificate, executed by the President of the
Company, dated as of the Closing Date, to the effect that the conditions
specified in subsections (a), (c), (d) and (e) of this Section 5.1 have been
satisfied.
(g) INVESTORS' RIGHTS AGREEMENT. An Investors' Rights
Agreement, substantially in the form attached hereto as EXHIBIT C, shall have
been executed and delivered by the parties thereto.
(h) STOCKHOLDERS' AGREEMENT. A Stockholders' Agreement,
substantially in the form attached hereto as EXHIBIT D, shall have been executed
and delivered by the parties thereto.
(i) BOARD OF DIRECTORS. Upon the Closing, the authorized size
of the Board of Directors of the Company shall be five (5) members and the Board
shall consist of Leonard Allsup, Brian Gast, Gregg Mockenhaupt and James Collis,
with one (1) vacancy existing.
(j) LEGAL OPINION. At the First Closing, the Purchasers shall
have received from Cooley Godward LLP an opinion addressed to them, dated as of
the Closing Date, in substantially the form attached hereto as EXHIBIT F.
(k) EMPLOYMENT AGREEMENTS. Leonard Allsup, Bruce Dines, Brian
Gast, Patrick Green and Rex Humston shall have each executed and delivered an
Employment Agreement (collectively, the "EMPLOYMENT AGREEMENTS"), in form and
substance satisfactory to the Purchasers participating in the First Closing.
(l) MINIMUM AMOUNT OF INVESTMENT. A minimum of ten million
(10,000,000) shares of the Company's Shares shall be sold at the First Closing.
(m) PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the Closing
hereby, all documents and instruments incident to such transactions and all
documents, instruments and proceedings related to the Purchasers' business,
technical and legal due diligence shall be reasonably satisfactory in substance
and form to the Purchasers and their special counsel, and the Purchasers and
their special counsel shall have received all such counterpart originals or
certified or other copies of such documents as they may reasonably request.
14.
<PAGE>
(n) EXPENSES. On the Closing Date, the Company shall have paid
(i) the reasonable out-of-pocket expenses of Crest Communications Partners, L.P.
and CEA Capital Partners USA, L.P. and (ii) the reasonable fees and expenses of
Dewey Ballantine LLP and Kraskin, Lesse & Cosson, LLP as special counsel to the
Purchasers, in an amount not to exceed $75,000.
(o) CREDIT FACILITY. As of the First Closing Date, the Company
shall have received a commitment for the credit facility with Lucent
Technologies on terms and conditions acceptable to the Purchasers.
(p) BYLAWS. The Company shall have amended its bylaws,
substantially in the form attached hereto as EXHIBIT G.
5.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's
obligation to issue and sell the Shares at each Closing is subject to the
satisfaction, on or prior to such Closing, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations
and warranties made by the Purchasers in Section 4 hereof shall be true and
correct in all respects at the date of each Closing, with the same force and
effect as if they had been made on and as of said date.
(b) PERFORMANCE OF OBLIGATIONS. Purchasers shall have
performed and complied with all agreements and conditions herein required to be
performed or complied with by Purchasers on or before each Closing.
(c) CONSENTS, PERMITS, AND WAIVERS. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by the Agreement and the
Investors' Rights Agreement (except for such as may be properly obtained
subsequent to the Closing).
(d) FILING OF CERTIFICATE. The Certificate shall have been
approved by the Board of Directors of the Company and filed with the Secretary
of State of the State of Delaware and shall be in full force and effect.
(e) INVESTORS' RIGHTS AGREEMENT. An Investors' Rights
Agreement, substantially in the form attached hereto as EXHIBIT C, shall have
been executed and delivered by the Purchasers.
(f) STOCKHOLDERS' AGREEMENT. A Stockholders' Agreement,
substantially in the form attached hereto as EXHIBIT D, shall have been executed
and delivered by Purchasers.
(g) EMPLOYMENT AGREEMENTS. Leonard Allsup, Bruce Dines, Brian
Gast, Patrick Green and Rex Humston shall have each executed and delivered an
Employment Agreement, in form and substance satisfactory to the Purchasers
participating in the First Closing.
15.
<PAGE>
(h) MINIMUM AMOUNT OF INVESTMENT. A minimum of ten million
(10,000,000) shares of the Company's Shares shall be sold at the First Closing.
SECTION 6. MISCELLANEOUS
6.1 GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Colorado without regard to its
conflict-of-laws rules.
6.2 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by any Purchaser and
the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
6.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Shares from time to time.
6.4 ENTIRE AGREEMENT. This Agreement, the Exhibits and Schedules
hereto, including the Investors' Rights Agreement and the Stockholders'
Agreement, and the other documents delivered pursuant hereto constitute the full
and entire understanding and agreement between the parties with regard to the
subjects hereof and no party shall be liable or bound to any other in any manner
by any representations, warranties, covenants and agreements except as
specifically set forth herein and therein.
6.5 SEVERABILITY. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
6.6 AMENDMENT AND WAIVER.
(a) This Agreement may be amended or modified only upon the
written consent of the Company and holders of at least sixty-six and two-thirds
percent (66 2/3%) of the Shares (treated as if converted and including any
Conversion Shares into which the Shares have been converted that have not been
sold to the public).
(b) The obligations of the Company and the rights of the
holders of the Shares and the Conversion Shares under the Agreement may be
waived only with the written consent of the holders of at least sixty-six and
two thirds percent (66 2/3%) of the Shares (treated as if converted and
including any Conversion Shares into which the Shares have been converted that
have not been sold to the public).
6.7 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement, the Investors'
Rights Agreement, the Stockholders' Agreement or the Certificate, shall impair
any such right, power or remedy, nor shall it be construed to be a
16.
<PAGE>
waiver of any such breach, default or noncompliance thereafter occurring. It is
further agreed that any waiver, permit, consent or approval of any kind or
character on any Purchaser's part of any breach, default or noncompliance under
this Agreement, the Investors' Rights Agreement, the Stockholders' Agreement or
under the Certificate or any waiver on such party's part of any provisions or
conditions of the Agreement, the Investors' Rights Agreement, the Stockholders'
Agreement or the Certificate must be in writing and shall be effective only to
the extent specifically set forth in such writing. All remedies, either under
this Agreement, the Investors' Rights Agreement, the Stockholders' Agreement,
the Certificate, by law, or otherwise afforded to any party, shall be cumulative
and not alternative.
6.8 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to
the party to be notified; (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day; (iii) upon receipt after having been sent by registered or certified mail,
return receipt requested, postage prepaid; or (iv) one (1) day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt. All communications shall be sent to the
Company at the address as set forth on the signature page hereof and to
Purchaser at the address set forth on EXHIBIT A attached hereto or at such other
address as the Company or Purchaser may designate by ten (10) days advance
written notice to the other parties hereto.
6.9 TITLES AND SUBTITLES. The titles of the sections and subsections
of the Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
6.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
6.11 BROKER'S FEES. Each party hereto represents and warrants that,
with the exceptions of Daniels & Associates and North River Ventures, Inc., the
fees and expenses of which shall be paid by the Company, no agent, broker,
investment banker, person or firm acting on behalf of or under the authority of
such party hereto is or will be entitled to any broker's or finder's fee or any
other commission directly or indirectly in connection with the transactions
contemplated herein. Each party hereto further agrees to indemnify each other
party for any claims, losses or expenses incurred by such other party as a
result of the representation in this Section 6.11 being untrue.
6.12 ATTORNEYS' FEES. In the event that any dispute among the parties
to this Agreement, the Investors' Rights Agreement or the Stockholders'
Agreement, including any dispute with respect to, or attempt to enforce the
provisions of, the Certificate or Shares, should result in litigation, the
prevailing party in such dispute shall be entitled to recover from the losing
party all fees, costs and expenses of enforcing any right of such prevailing
party under or with respect to this Agreement, the Investors' Rights Agreement,
the Stockholders' Agreement or the Certificate or the Shares, including without
limitation, such reasonable fees and expenses of attorneys and accountants,
which shall include, without limitation, all fees, costs and expenses of
appeals.
17.
<PAGE>
6.13 EXPENSES. The Company shall pay all reasonable costs and expenses
incurred with respect to the negotiation, execution and delivery of any
amendment to this Agreement, the Certificate, the Investors' Rights Agreement
and the Stockholders' Agreement, to the extent any such amendment would
adversely affect the holders of Series B Stock.
6.14 EXCULPATION AMONG PURCHASERS. Each Purchaser acknowledges that it
is not relying upon any person, firm, or corporation, other than the Company and
its officers and directors, in making its investment or decision to invest in
the Company. Each Purchaser agrees that no Purchaser nor the respective
controlling persons, officers, directors, partners, agents, or employees of any
Purchaser shall be liable for any action heretofore or hereafter taken or
omitted to be taken by any of them in connection with the Shares and Conversion
Shares.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
18.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed the SERIES B
PREFERRED STOCK PURCHASE AGREEMENT as of the date set forth in the first
paragraph hereof.
COMPANY: PURCHASERS:
JATO COMMUNICATIONS CORP. ------------------------------------
Please Print Name of Purchaser
By: /s/ Brian E. Gast By:
----------------------------- ---------------------------------
Name: Name:
--------------------------- -------------------------------
Title: Title:
-------------------------- ------------------------------
1099-18th Street, Suite 700 Address:
Denver, CO 80202 ----------------------------
------------------------------------
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
EXHIBIT A
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
FIRST CLOSING: APRIL 16,1999
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PURCHASE PRICE
---------------- ---------------- --------------
<S> <C> <C>
Crest Communications 4,000,000 $6,000,000.00
Partners L.P.
320 Park Avenue
17th Floor
New York, NY 10022
Attn: Gregg Mockenhaupt
CEA Capital Partners USA, L.P. 3,057,200 $4,585,800.00
17 State Street
35th Floor
New York, NY 10004
Attn: Steve McCall
CEA Capital Partners USA 942,800 $1,414,200.00
CI, L.P.
17 State Street
35th Floor
New York, NY 10004
Attn: Steve McCall
ABN AMRO Capital (USA), Inc. 1,631,816 $2,447,724.00
208 S. LaSalle Street
10th Floor
Chicago, IL 60604
Attn: Daniel Forman
I Eagle Trust 590,554 $885,831.00
208 S. LaSalle Street
10th Floor
Chicago, IL 60604
Attn: Daniel Forman
ABN AMRO Incorporated 110,963 $166,444.50
208 S. LaSalle Street
10th Floor
Chicago, IL 60604
Attn: Daniel Forman
<PAGE>
Access Technology Partners, L.P. 1,580,000 $2,370,000.00
Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
Attn: Alex Sloan
Access Technology Partners 17,500 $26,250.00
Brokers Fund, L.P.
Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
Attn: Alex Sloan
Hambrecht & Quist California 195,000 $292,500.00
One Bush Street
San Francisco, CA 94104
Attn: Alex Sloan
Hambrecht & Quist Employee 75,000 $112,500.00
Venture Fund, L.P. II
One Bush Street
San Francisco, CA 94104
Attn: Alex Sloan
H&Q JATO Communications 132,500 $198,750.00
Investors, L.P.
Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
John P. Raeder, Jr. and 133,333 $199,999.50
Deborah M. Raeder, as Joint
Tenants
5625 S. Bellaire Ct.
Greenwood Village, CO 80121
Gilbert Family Trust 75,000 $112,500.00
1211 Whispering Oaks
Danville, CA 94506
Attn: Dean Gilbert
Jeffrey D. Morgan 66,666 $99,999.00
2883 Lee Hill Road
Boulder, CO 80302
<PAGE>
Karin W. Morgan 66,666 $99,999.00
2883 Lee Hill Road
Boulder, CO 80302
Marty S. Clayman 66,666 $99,999.00
2401 Shady Oak Place
Lexington, KY 40515
Michael S. Grunwald 66,666 $99,999.00
C/o Lehman Brothers
555 California Street
30th Floor
San Francisco, CA 94104
Robert J. Grubb 40,000 $60,000.00
7259 Longview Drive
Niwot, CO 80503
Richard K. Coleman, Jr. 33,333 $49,999.50
22 Viking Drive
Englewood, CO 80110
GC&H Investments 33,333 $49,999.50
C/o Cooley Godward LLP
One Maritime Plaza
20th Floor
San Francisco, CA 94111
Attn: John Cardoza
Mark T. Stolte 33,333 $49,999.50
22595 Treetop Lane
Golden, CO 80401
Seybold Brothers Investments 16,666 $24,999.00
4075 Hermitage Road
Colorado Springs, CO 80906
Attn: William Seybold
Leonard Allsup 333 $500.00
1720 Wyncoop
Unit 203
Denver, CO 80202-1077
TOTAL 12,965,328 $19,447,992.50
</TABLE>
<PAGE>
SUBSEQUENT CLOSINGS
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PURCHASE PRICE DATE OF
---------------- ---------------- -------------- -------
PURCHASE
--------
<S> <C> <C> <C>
William J.B. Brady III 33,333 $50,000.00 April 19, 1999
Credit Suisse First Boston
2400 Hanover Street
Palo Alto, CA 94304
Stephen S. Hyde and 133,333 $200,000.00 April 22, 1999
Lorreen L. George, joint
Tenants w/Right of
Survivorship
31 Broadmoor Avenue
Colorado Springs, CO
80906
Frank P. Quattrone and 33,333 $50,000.00 April 29, 1999
Denise Foderavo, Trustees
Quattrone Family Trust
UTA DTD 9/14/91
Credit Suisse First Boston
2400 Hanover Street
Palo Alto, CA 94304
Ian C. and Susan D. Griffis 33,333 $50,000.00 April 30, 1999
3519 E. Palmer Divide Road
Larkspur, CO 80118
Charles Calloway 40,000 $60,000.00 April 29, 1999
1616 17th Street, Suite 600
Denver, CO 80202
Mark Mangiola 33,333 $50,000.00 April 29, 1999
425 Broadway Street
Redwood City, CA 94063
Benefactor Funding Corp. 33,333 $50,000.00 May 10, 1999
234 Columbine Street
Suite 240
Denver, CO 80206
Attn: Randy Carter
Richard & Julie K. Wham 66,666 $100,000.00 May 10, 1999
JTWROS
15 Polo Club Drive
Denver, CO 80209
<PAGE>
Gerald H. Parrick III 66,666 $100,000.00 May 11, 1999
25 Sandlewood Drive
Novato, CA 94945
Bruce E. Dines, Jr. 3,333 $5,000.00 May 12, 1999
825 York Street
Denver, CO 80206
Jill S. Dines 3,333 $5,000.00 May 12, 1999
825 York Street
Denver, CO 80206
Katherine Dines 3,333 $5,000.00 May 12, 1999
2000 Little Raven #1-C
Denver, CO 80202
Curtis J. Ahart 66,666 $100,000.00 May 13, 1999
6090 Spruce Hill Court
Shorewood, MN 55331
Keith Bennett 66,666 $100,000.00 May 14, 1999
16728 E. Prentice Circle
Aurora, CO 80015
Richard K. Coleman, Jr. 33,333 $50,000.00 May 13, 1999
22 Viking Drive
Englewood, CO 80110
SUBTOTAL: 649,994 $975,000.00
TOTAL SERIES B FINANCING 13,615,322 $20,422,992.50
</TABLE>
<PAGE>
EXHIBIT B
RESTATED CERTIFICATE OF INCORPORATION
<PAGE>
EXHIBIT C
INVESTORS' RIGHTS AGREEMENT
<PAGE>
EXHIBIT D
STOCKHOLDERS' AGREEMENT
<PAGE>
EXHIBIT E
FROM OF PROPRIETARY INFORMATION
AND INVENTIONS AGREEMENT
<PAGE>
NON-COMPETITION, PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
As an employee of JATO Communications Corp., a Delaware corporation, its
subsidiaries or its affiliates (together, the "Company"), and as a condition
of my employment by the Company and in consideration of the compensation now
and hereafter paid to me, I agree to the following (the "Agreement"):
1. MAINTAINING CONFIDENTIAL INFORMATION
(a) COMPANY INFORMATION. I agree at all times during the term of
my employment and thereafter to hold in strictest confidence, and not to use,
except for the benefit of the Company, or to disclose to any person, firm or
corporation, without the written authorization of the Board of Directors of
the Company, any trade secrets, confidential knowledge, data or other
proprietary information of the Company. By way of illustration and not
limitation, this shall include information relating to products, processes,
know-how, methods, software, developmental work, improvements, discoveries,
plans for marketing and selling, business plans, budgets and unpublished
financial statements, licenses, prices and costs, suppliers and customers,
and information regarding the skills and compensation of other employees of
the Company. Notwithstanding the foregoing, confidential information shall
not include any information which:
(i) at the time of disclosure, or thereafter, is generally available to
and known by the public;
(ii) was or is available to me on a non-confidential basis from a source
other than the Company; or
(iii) has been independently acquired or developed by me without
violating any of my obligations under this Agreement, as shown by my
competent written records.
(b) THIRD PARTY INFORMATION. I recognize that the Company has
received and in the future will receive confidential or proprietary
information from third parties subject to a duty on the Company's part to
maintain the confidentiality of such information and, in some cases, to use
it only for certain limited purposes. I agree that I owe the Company and
such third parties, both during the term of my employment and thereafter, a
duty to hold all such confidential or proprietary information in the
strictest confidence and not to, except as is consistent with the Company's
agreement with the third party, disclose it to any person, firm or
corporation or use it for the benefit of anyone other than the Company or
such third party, unless expressly authorized to act otherwise by an officer
of the Company.
2. ASSIGNMENT OF INVENTIONS AND ORIGINAL WORKS.
I agree that I will make prompt written disclosure to the Company, will
hold in trust for the sole right and benefit of the Company, and hereby
assign to the Company all my right, title and interest in and to any ideas,
inventions, original works of authorship, developments, improvements or trade
secrets which I may solely or jointly conceive or reduce to practice, or
cause to be conceived or reduced to practice, during the period of my
employment with the Company and for one (1) year after my employment. This
Agreement will not be deemed to require assignment of any invention developed
entirely on my own time without using the Company's equipment, supplies,
facilities or trade secrets and neither related to the Company's actual or
anticipated business, research or development, nor resulted from work
performed by me for the Company.
3. NO CONFLICTS OR SOLICITATION
For the period of my employment by the Company and for one (1) year
following my termination, I will not interfere with the business of the
Company by (i) soliciting, attempting to solicit, inducing, or otherwise
causing any employee of the Company to terminate his or her employment in
order to become an employee, consultant or independent contractor to or for
any other entity engaged in marketing or selling the type of products and
services offered by the Company or (ii) directly soliciting the business of
any customer or client of the Company (other than on behalf of the Company)
for the type of products and services offered by the Company.
4. COVENANT NOT TO COMPETE.
(a) I agree that during my employment with the Company, I will not
directly or indirectly engage in (whether as an employee, consultant,
proprietor, partner, director or otherwise), or have any ownership interest
1
<PAGE>
in, or participate in the financing, operation, management or control of, any
person, firm, corporation or business that engages in a "Restricted Business"
in a "Restricted Territory" (as defined below). It is agreed that ownership
of (i) no more than ten percent (10%) of the outstanding voting stock of a
publicly traded corporation or (ii) any stock I presently own or (iii) any
options or other rights to acquire shares of a company's capital stock I
presently own shall not constitute a violation of this provision.
(b) As used herein, the terms:
(i) "Restricted Business" shall mean any competitive local exchange
carrier, high speed data communication services provider or any business
which otherwise engages in any other manner in any business which is
competitive with the Company.
(ii) "Restricted Territory" shall mean all regions within a fifty mile
radius of those cities in which the Company operates, or has disclosed to
you that it intends to operate, a business.
5. RETURN OF COMPANY DOCUMENTS
When I leave the employ of the Company, I will deliver to the Company
(and will not keep in my possession, recreate or deliver to anyone else) any
and all documents and other property, together with all copies thereof (in
whatever medium recorded) belonging to the Company, its successors or assigns
whether kept at the Company, home or elsewhere. I further agree that any
property situated on the Company's premises and owned by the Company,
including disks and other storage media, filing cabinets or other work areas,
is subject to inspection by Company personnel at any time with or without
notice.
6. LEGAL AND EQUITABLE REMEDIES
Because my services are personal and unique and because I may have access
to and become acquainted with the proprietary information of the Company, the
Company shall have the right to enforce this Agreement and any of its
provisions by injunction, specific performance or other equitable relief,
without bond and without prejudice to any other rights and remedies that the
Company may have for a breach of this Agreement.
7. NOT AN EMPLOYMENT CONTRACT. I agree and understand that nothing in
this Agreement shall confer any right with respect to continuation of my
employment by the Company, nor shall it interfere in any way with my right or
the Company's right to terminate my employment at a ny time, with or without
cause.
8. GENERAL PROVISIONS.
(a) GOVERNING LAW. This Agreement will be governed by and
construed according to the laws of the State of Colorado, excluding conflicts
of laws principles. I hereby expressly consent to the personal jurisdiction
of the state and federal courts located in Colorado for any lawsuit filed
there against me by the Company arising from or relating to this Agreement,
or such other location as the Company's principal executive office may then
be located.
(b) SEVERABILITY. If one or more of the provisions in this
Agreement are deemed unenforceable by law, then the remaining provisions will
continue in full force and effect. Moreover, if any restriction set forth in
Sections 3 or 4 hereof is found by any court of competent jurisdiction to be
unenforceable because it extends for too long a period of time or over too
great a range of activities or in too broad a geographic area, it shall be
interpreted to extend only over the maximum period of time, range of
activities or geographic area as to which it may be enforceable.
(c) BENEFIT; BINDING EFFECT. This Agreement will be binding upon
my heirs, executors, administrators and other legal representatives and will
be for the benefit of the Company, its successors and its assigns.
(d) SURVIVAL. The provisions of this Agreement shall survive the
termination of my employment and the assignment of this Agreement by the
Company to any successor in interest or other assignee.
2
<PAGE>
I UNDERSTAND THAT THIS AGREEMENT AFFECTS MY RIGHTS TO INVENTIONS I MAKE
DURING MY EMPLOYMENT, AND RESTRICTS MY RIGHT TO DISCLOSE OR USE THE COMPANY'S
PROPRIETARY INFORMATION DURING OR SUBSEQUENT TO MY EMPLOYMENT.
I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS.
Dated:
----------------------- ------------------------------
Name
Address
-----------------------
------------------------------
------------------------------
ACCEPTED AND AGREED TO:
JATO COMMUNICATIONS CORP.
By:
--------------------------
Name:
------------------------
Title:
-----------------------
3
<PAGE>
EXHIBIT F
LEGAL OPINION
<PAGE>
EXHIBIT G
FORM OF AMENDED BYLAWS
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 1. AGREEMENT TO SELL AND PURCHASE. . . . . . . . . . . . . . . . . . . . . 1
1.1 Authorization of Shares. . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Sale and Purchase. . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. CLOSING, DELIVERY AND PAYMENT . . . . . . . . . . . . . . . . . . . . . 1
2.1 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Subsequent Sales of Shares . . . . . . . . . . . . . . . . . . . . . 2
Section 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . 2
3.1 Organization, Good Standing and Qualification. . . . . . . . . . . . 2
3.2 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.3 Capitalization; Voting Rights. . . . . . . . . . . . . . . . . . . . 3
3.4 Authorization; Binding Obligations . . . . . . . . . . . . . . . . . 3
3.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 4
3.6 Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.7 Agreements; Action . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.8 Obligations to Related Parties . . . . . . . . . . . . . . . . . . . 5
3.9 Absence of Changes . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.10 Real Properties; Tangible Personal Property. . . . . . . . . . . . . 7
3.11 Patents and Trademarks . . . . . . . . . . . . . . . . . . . . . . . 7
3.12 Compliance with Other Instruments. . . . . . . . . . . . . . . . . . 8
3.13 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.14 Tax Returns and Payments . . . . . . . . . . . . . . . . . . . . . . 8
3.15 Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.16 Proprietary Information and Inventions Agreements. . . . . . . . . . 9
3.17 Obligations of Management. . . . . . . . . . . . . . . . . . . . . . 9
3.18 Registration Rights. . . . . . . . . . . . . . . . . . . . . . . . . 9
3.19 Compliance with Laws; Permits. . . . . . . . . . . . . . . . . . . .10
3.20 Offering Valid . . . . . . . . . . . . . . . . . . . . . . . . . . .10
3.21 Full Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . .10
3.22 Application of Proceeds. . . . . . . . . . . . . . . . . . . . . . .10
3.23 Certain Limitations. . . . . . . . . . . . . . . . . . . . . . . . .11
</TABLE>
i.
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
3.24 Environmental. . . . . . . . . . . . . . . . . . . . . . . . . . . .11
3.25 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
3.26 Small Business Matters . . . . . . . . . . . . . . . . . . . . . . .11
Section 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. . . . . . . . . . . .12
4.1 Requisite Power and Authority. . . . . . . . . . . . . . . . . . . .12
4.2 Investment Representations . . . . . . . . . . . . . . . . . . . . .12
4.3 Transfer Restrictions. . . . . . . . . . . . . . . . . . . . . . . .13
Section 5. CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . .13
5.1 Conditions to Purchasers' Obligations at each Closing. . . . . . . .13
5.2 Conditions to Obligations of the Company . . . . . . . . . . . . . .15
Section 6. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
6.1 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . .16
6.2 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
6.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . .16
6.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . .16
6.5 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
6.6 Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . . .16
6.7 Delays or Omissions. . . . . . . . . . . . . . . . . . . . . . . . .16
6.8 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
6.9 Titles and Subtitles . . . . . . . . . . . . . . . . . . . . . . . .17
6.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
6.11 Broker's Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . .17
6.12 Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . . . . .17
6.13 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
6.14 Exculpation Among Purchasers . . . . . . . . . . . . . . . . . . . .18
</TABLE>
ii.
<PAGE>
INDEX OF EXHIBITS
Schedule of Purchasers Exhibit A
Restated Certificate of Incorporation Exhibit B
Investors' Rights Agreement Exhibit C
Stockholders' Agreement Exhibit D
Form of Non-Competition Proprietary
Information and Inventions Agreement Exhibit E
Form of Legal Opinion Exhibit F
Form of Amended Bylaws Exhibit G
<PAGE>
JATO COMMUNICATIONS CORP.
SERIES C PREFERRED STOCK
PURCHASE AGREEMENT
SEPTEMBER 16, 1999
<PAGE>
JATO COMMUNICATIONS CORP.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES C PREFERRED STOCK PURCHASE AGREEMENT (the "AGREEMENT") is
entered into as of this 16th day of September, 1999, by and among JATO
COMMUNICATIONS CORP., a Delaware corporation (the "COMPANY"), and each of those
persons and entities, severally and not jointly, whose names are set forth on
the Schedule of Purchasers attached hereto as EXHIBIT A (which persons and
entities are hereinafter collectively referred to as "PURCHASERS" and each
individually as a "PURCHASER").
RECITALS
WHEREAS, the Company has authorized the sale and issuance of up to an
aggregate of five million seven hundred fourteen thousand two hundred
eighty-five (5,714,285) shares of its Series C Preferred Stock, $.01 par value
(the "SHARES"); and
WHEREAS, the Company desires to issue and sell the Shares to the Purchasers
and the Purchasers severally desire to purchase some or all of the Shares from
the Company on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the parties hereto agree as follows:
SECTION 1. AGREEMENT TO SELL AND PURCHASE
1.1 AUTHORIZATION OF SHARES. On or prior to the Closing (as defined in
Section 2 below), the Company shall have authorized (i) the sale and issuance to
Purchasers of the Shares and (ii) the issuance of such shares of Common Stock to
be issued upon conversion of the Shares (the "CONVERSION SHARES"). The Shares
and the Conversion Shares shall have the rights, preferences, privileges and
restrictions set forth in the Restated Certificate of Incorporation of the
Company, in the form attached hereto as EXHIBIT B (the "CERTIFICATE").
1.2 SALE AND PURCHASE. Subject to the terms and conditions hereof, at the
Closing (as hereinafter defined), the Company hereby agrees to issue and sell to
each Purchaser, severally and not jointly, and each Purchaser agrees to purchase
from the Company, severally and not jointly, the number of Shares set forth
opposite such Purchaser's name on EXHIBIT A at a purchase price of $ 7.00 per
share.
SECTION 2. CLOSING, DELIVERY AND PAYMENT
2.1 CLOSING. The closing of the sale and purchase of the Shares under this
Agreement (the "CLOSING") shall take place on the date hereof, at the offices of
Cooley Godward LLP, 2595 Canyon Boulevard, Suite 250, Boulder, Colorado 80302,
or at such other time or place as the Company and the Purchasers acquiring in
the aggregate more than half of the Shares may mutually agree (such date is
hereinafter referred to as the "CLOSING DATE").
1.
<PAGE>
2.2 DELIVERY. At the Closing, subject to the terms and conditions hereof,
the Company will deliver to the Purchasers one or more stock certificates, as
each Purchaser may request, representing the number of Shares to be purchased at
the Closing by each Purchaser, registered in such Purchaser's name, against
payment of the purchase price therefor, by check or wire transfer made payable
to the order of the Company. In addition, TCI Satellite Entertainment, Inc.
shall deliver a promissory note to the Company, in the form previously approved
by the Company, in the amount of $3,000,000.00 (the "TCI NOTE") against payment
of the purchase price therefor of the number of Shares set forth opposite such
purchaser's name on EXHIBIT A hereto.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on a Schedule of Exceptions delivered by the Company to
the Purchasers at the Closing, the Company hereby represents and warrants to
each Purchaser as of the date of this Agreement as follows:
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company and each
Subsidiary (as defined in Section 3.2 below) is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
or, with respect to Jato Communications Corp. of Virginia, the Commonwealth of
Virginia. Each of the Company and Subsidiary has all requisite corporate power
and authority to own and operate their respective properties and assets. The
Company has all requisite corporate power and authority to execute and deliver
this Agreement, the Amended and Restated Investors' Rights Agreement, in the
form attached hereto as EXHIBIT C (the "INVESTORS' RIGHTS AGREEMENT"), and the
Amended and Restated Stockholders' Agreement, in the form attached hereto as
EXHIBIT D (the "STOCKHOLDERS' AGREEMENT"), issue and sell the Shares and the
Conversion Shares and to carry out the provisions of this Agreement, the
Investors' Rights Agreement, the Stockholders' Agreement and the Certificate.
Each of the Company and Subsidiary has the requisite corporate power and
authority to carry on its business as presently conducted and as presently
proposed to be conducted. Each of the Company and Subsidiary is duly qualified
and is authorized to do business and is in good standing as a foreign
corporation in all jurisdictions in which the nature of their respective
activities and of their respective properties (both owned and leased) make such
qualifications necessary, except for those jurisdictions in which failure to do
so would not have a material adverse effect on the Company or Subsidiary or
their respective businesses. The Company has made available to the Purchasers
true, correct and complete copies of the Company's Restated Certificate of
Incorporation and Amended Bylaws, each as amended to date and in full force and
effect on the date hereof. The Company has made available to the Purchasers
true, correct and complete copies of Subsidiary's Certificate of Incorporation
and Bylaws, each as amended to date and in full force and effect on the date
hereof. Since its inception, Subsidiary has had no operations and has not
incurred any material obligations.
3.2 SUBSIDIARIES. Other than Jato Operating Corp., a Delaware corporation,
Jato Operating Two Corp., a Delaware corporation, and Jato Communications Corp.
of Virginia, a Virginia corporation (collectively, the "SUBSIDIARY"), the
Company owns no equity securities of any other corporation, limited partnership
or similar entity. The Company is not a participant in any joint venture,
partnership or similar arrangement. The Company owns shares of the Subsidiary
free and clear of all encumbrances.
2.
<PAGE>
3.3 CAPITALIZATION; VOTING RIGHTS.
(a) The authorized capital stock of the Company, immediately prior to
the Closing, will consist of (a) eighty million (80,000,000) shares of Common
Stock, of which six million seven hundred sixty-five thousand two (6,765,002)
shares are issued and outstanding, and (b) twenty-five million (25,000,000)
shares of Preferred Stock, of which one million seven hundred fifty-one thousand
nine hundred eighty-five (1,751,985) shares are designated Series A Preferred
Stock, of which one million seven hundred fifty-one thousand nine hundred eighty
five (1,751,985) are issued and outstanding, of which thirteen million six
hundred fifteen thousand three hundred twenty-two (13,615,322) shares are
designated Series B Preferred Stock, of which thirteen million six hundred
fifteen thousand three hundred twenty-two (13,615,322) are issued and
outstanding, and of which five million seven hundred fourteen thousand two
hundred eighty-five (5,714,285) shares are designated Series C Preferred Stock,
none of which are issued and outstanding. All issued and outstanding shares of
the Company's Common Stock and Preferred Stock (i) have been duly authorized and
validly issued, (ii) are fully paid and nonassessable and (iii) were issued in
compliance with all applicable state and federal laws concerning the issuance of
securities. The rights, preferences, privileges and restrictions of the Shares
are as stated in the Certificate. The Conversion Shares have been duly and
validly reserved for issuance. As of the Closing, there has been no action taken
by the Company which would have required an adjustment to the Series C
Conversion Price, as defined in the Certificate. Except as set forth on the
Schedule of Exceptions and except as may be granted pursuant to this Agreement
or the Investors' Rights Agreement, there are no outstanding options, warrants,
rights (including conversion or preemptive rights and rights of first refusal),
proxy or stockholder agreements, or agreements of any kind for the purchase or
acquisition from the Company of any of its securities. The Shares and the
Conversion Shares have been duly authorized and, when issued in compliance with
the provisions of this Agreement and the Certificate, will be validly issued
(including, without limitation, issued in compliance with applicable state and
federal securities laws), fully paid and nonassessable, subject to no preemptive
rights, and will be free of any liens or encumbrances; PROVIDED, HOWEVER, that
the Shares and the Conversion Shares may be subject to restrictions on transfer
under state and/or federal securities laws as set forth herein or as otherwise
required by such laws at the time transfer is proposed.
(b) The authorized capital stock of (i) Jato Operating Corp. consists
of eleven hundred (1,100) shares of Common Stock, (ii) Jato Operating Two Corp.
consists of one hundred (100) shares of Common Stock, and (iii) Jato
Communications Corp. of Virginia consists of one hundred (100) shares of Common
Stock, all of which shares are issued and outstanding and held of record by the
Company.
3.4 AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on the part of
the Company, its officers, directors and stockholders necessary for the
authorization of this Agreement, the Investors' Rights Agreement and the
Stockholders' Agreement, the performance of all obligations of the Company
hereunder and thereunder at the Closing and the authorization, sale, issuance
and delivery of the Shares pursuant hereto and the Conversion Shares pursuant to
the Certificate has been taken or will be taken prior to the Closing. The
Agreement, the Investors' Rights Agreement and the Stockholders' Agreement, when
executed and delivered, will be valid and binding obligations of the Company
enforceable in accordance with their terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other
3.
<PAGE>
laws of general application affecting enforcement of creditors' rights; (ii)
general principles of equity that restrict the availability of equitable
remedies; and (iii) to the extent that the enforceability of the indemnification
provisions in Section 3.12 of the Investors' Rights Agreement may be limited by
applicable laws. The sale of the Shares and the subsequent conversion of the
Shares into Conversion Shares are not and will not be subject to any preemptive
rights or rights of first refusal that have not been properly waived or complied
with.
3.5 FINANCIAL STATEMENTS. The Company has delivered to each Purchaser (i)
its audited balance sheet as at December 31, 1998 and audited statement of
income and cash flows for the period from inception and ending December 31, 1998
and (ii) its unaudited balance sheet as at June 30, 1999 (the "STATEMENT DATE")
and unaudited consolidated statement of income for the six-month period ending
on the Statement Date (collectively, the "FINANCIAL STATEMENTS"). The Financial
Statements, together with the notes thereto, are complete and correct in all
material respects, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated, except as disclosed therein, and present fairly the financial
condition and position of the Company as of December 31, 1998 and the Statement
Date; PROVIDED, HOWEVER, that the unaudited financial statements are subject to
normal recurring year-end audit adjustments (which are not expected to be
material), and may not contain all footnotes required under generally accepted
accounting principles.
3.6 LIABILITIES. The Company has no material liabilities and, to its
knowledge, knows of no material contingent liabilities not otherwise disclosed
in the Financial Statements, except current liabilities incurred in the ordinary
course of business subsequent to the Statement Date which have not been, either
in any individual case or in the aggregate, materially adverse.
3.7 AGREEMENTS; ACTION.
(a) Except as set forth on the Schedule of Exceptions and except for
agreements explicitly contemplated hereby, there are no agreements,
understandings or proposed transactions between the Company and any of its
officers, directors, affiliates or their respective affiliates.
(b) There are no agreements, understandings, instruments, contracts,
proposed transactions, judgments, orders, writs or decrees to which the Company
is a party or to its knowledge by which it is bound which may involve (i)
obligations (contingent or otherwise) of, or payments to, the Company in excess
of $25,000, or (ii) the license of any patent, copyright, trade secret or other
proprietary right to or from the Company (other than licenses arising from the
purchase of "off the shelf" or other standard products), or (iii) provisions
restricting or affecting the development, manufacture or distribution of the
Company's products or services, or (iv) indemnification by the Company with
respect to infringements of proprietary rights.
(c) The Company has not (i) declared or paid any dividends, or
authorized or made any distribution upon or with respect to any class or series
of its capital stock, (ii) incurred any indebtedness for money borrowed or any
other liabilities (other than with respect to indebtedness and other obligations
incurred in the ordinary course of business or as disclosed in the Financial
Statements) individually in excess of $25,000 or, in the case of indebtedness
and/or liabilities individually less than $25,000, in excess of $75,000 in the
aggregate, (iii) made any
4.
<PAGE>
loans or advances to any person, other than ordinary advances for travel
expenses, or (iv) sold, exchanged or otherwise disposed of any of its assets or
rights, other than the sale of its inventory in the ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
3.8 OBLIGATIONS TO RELATED PARTIES. There are no obligations of the Company
to officers, directors, stockholders, or employees of the Company other than (a)
for payment of salary for services rendered, (b) reimbursement for reasonable
expenses incurred on behalf of the Company and (c) for other standard employee
benefits made generally available to all employees (including stock option
agreements outstanding under any stock option plan approved by the Board of
Directors of the Company). No such officer, director or stockholder, or any
member of their immediate families is, directly or indirectly, interested in any
material contract with the Company (other than such contracts as relate to any
such person's ownership of capital stock or other securities of the Company).
The Company is not a guarantor or indemnitor of any indebtedness of any other
person, firm or corporation.
3.9 ABSENCE OF CHANGES. Except as set forth on the Schedule of Exceptions,
since the Statement Date, there has not been:
(a) Any change in the assets, liabilities, financial condition,
earnings or operations of the Company from that reflected in the Financial
Statements, other than changes in the ordinary course of business, none of which
individually or in the aggregate has had or is expected to have a material
adverse effect on such assets, liabilities, financial condition, earnings or
operations of the Company;
(b) Any resignation or termination of any key officers of the Company;
and the Company, to the best of its knowledge, does not know of the impending
resignation or termination of employment of any such officer;
(c) Any material change in the contingent obligations of the Company by
way of guaranty, endorsement, indemnity, warranty or otherwise;
(d) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, business or
prospects or financial condition of the Company;
(e) Any waiver by the Company of a valuable right or of a material debt
owed to it;
(f) Any direct or indirect loans made by the Company to any
stockholder, employee, officer or director of the Company, other than immaterial
advances made in the ordinary course of business;
5.
<PAGE>
(g) Any material change in any compensation arrangement or agreement
with any employee, officer, director or stockholder including, without
limitation, any (i) increase in the compensation payable or to become payable by
the Company to any of the Company's employees, (ii) any bonus, incentive
compensation, service award or other like benefit, granted, made or accrued,
contingently or otherwise, to or for the credit of the Company's employees, or
(iii) any employee welfare, pension, retirement, profit-sharing or similar
payment or arrangement (whether or not subject to ERISA) made or agreed to by
the Company;
(h) Any declaration or payment of any dividend or other distribution of
the assets of the Company;
(i) Any labor organization activity;
(j) Any debt, obligation or liability incurred, assumed or guaranteed
by the Company, except those for immaterial amounts and for current liabilities
incurred in the ordinary course of business;
(k) Any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets;
(l) Any change in any material agreement to which the Company is a
party or by which it is bound which materially and adversely affects the
business, assets, liabilities, financial condition, operations or prospects of
the Company;
(m) (i) Any change in practice with respect to taxes, (ii) any making,
changing or revoking of any tax election, or (iii) any settlement or compromise
of any dispute involving a tax liability;
(n) Any change in the number of shares of capital stock of the Company
issued and outstanding;
(o) Any failure to conduct the business of the Company in the ordinary
course;
(p) Any change in the method of accounting or accounting practice of
the Company;
(q) Any change in the Company's lines of business; or
(r) Any other event or condition of any character that, either
individually or cumulatively, has materially and adversely affected the
business, assets, liabilities, financial condition, operations or prospects of
the Company. For purposes of this subsection (r), a material and adverse effect
shall only be deemed to occur if its monetary impact exceeds, or with the
passage of time, will exceed $75,000.
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3.10 REAL PROPERTIES; TANGIBLE PERSONAL PROPERTY.
(a) REAL PROPERTIES. The Schedule of Exceptions sets forth each lease
or other agreement (including easements) under which the Company leases or has
rights in any real property (the "REAL PROPERTY LEASES," and, each individually,
a "REAL PROPERTY LEASE"). The Company has a valid and subsisting leasehold
interest in all the real property which is the subject of each Real Property
Lease. The Company does not presently own, and has never owned, any real
property and does not presently operate, and has never operated, any real
property, other than as a lessee.
(b) TANGIBLE PERSONAL PROPERTY. Except as set forth on the Schedule of
Exceptions, (i) the Company has good, marketable and valid title to all of the
items of tangible personal property used in its operations and (ii) all such
tangible personal property is reflected on the Company's unaudited Financial
Statements, except as sold or disposed of subsequent to the date thereof in the
ordinary course of business consistent with past practices. The tangible
personal property of the Company is in good repair and working order, reasonable
wear and tear excepted, and constitutes all of the tangible personal property
necessary for the operation of the business as currently conducted.
3.11 PATENTS AND TRADEMARKS. The Company is the sole owner, free of any
lien or encumbrance, of, or has a valid license, on commercially reasonable
terms, to, all U.S. and foreign patents, registered designs, copyrights,
computer software and databases, trademarks, service marks and trade names,
whether or not registered, and other trade secrets, research and development,
formulae, inventions, processes, know-how and proprietary and intellectual
property rights and information, including all grants, registrations and
applications relating thereto (collectively, the "PROPRIETARY RIGHTS") necessary
for the conduct of its business as now conducted (the "COMPANY RIGHTS"). The
Company's rights in the Company Rights are, to the Company's knowledge, valid
and enforceable. The Company has received no demand, claim, notice or inquiry
from any person in respect of the Company Rights which challenges, threatens to
challenge or inquires as to whether there is any basis to challenge, the
validity of, or the rights of the Company in, any such Company Rights. There are
no outstanding options, licenses or agreements of any kind relating to the
Company Rights, nor is the Company bound by or a party to any options, licenses
or agreements of any kind with respect to the Proprietary Rights of any other
person or entity other than such licenses or agreements arising from the
purchase of "off the shelf" or standard products. The Company has taken, and
will take, all actions which are necessary in order to protect the Company
Rights and to acquire additional Proprietary Rights, consistent with prudent
commercial practices in the telecommunications industry. To the knowledge of the
Company, the Company is not in violation or infringement of, and has not
violated or infringed, any Proprietary Rights of any other person. To the
knowledge of the Company, no person is infringing any Company Rights. The
Company is not aware that any of its employees is obligated under any contract
(including licenses, covenants or commitments of any nature) or other agreement,
or subject to any judgment, decree or order of any court or administrative
agency, that would interfere with their duties to the Company's business by the
employees of the Company, nor will, to the Company's knowledge, the conduct of
the Company's business as proposed conflict with or result in a breach of the
terms, conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any employee is now obligated. The Company
does not believe it is or will be necessary to
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utilize any inventions, trade secrets or proprietary information of any of its
employees made prior to their employment by the Company, except for inventions,
trade secrets or proprietary information that have been assigned to the Company.
3.12 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in violation or
default of any term of its Certificate or Amended Bylaws, or of any provision of
any mortgage, indenture, contract, agreement, instrument or contract to which it
is party or by which it is bound or of any judgment, decree, order, writ or any
statute, rule or regulation applicable to the Company which would materially and
adversely affect the business, assets, liabilities, financial condition,
operations or prospects of the Company. The execution, delivery, and performance
of and compliance with this Agreement, the Investors' Rights Agreement, the
Stockholders' Agreement and the Compliance Certificate to be delivered pursuant
to Section 5.1(f) hereof, and the issuance and sale of the Shares pursuant
hereto and of the Conversion Shares pursuant to the Certificate, will not, with
or without the passage of time or giving of notice, result in any such material
violation, or be in conflict with or constitute a default under any such term,
or result in the creation of any mortgage, pledge, lien, encumbrance or charge
upon any of the properties or assets of the Company or the suspension,
revocation, impairment, forfeiture or nonrenewal of any permit, license,
authorization or approval applicable to the Company, its business or operations
or any of its assets or properties.
3.13 LITIGATION. There is no action, suit, proceeding or investigation
pending, or to the Company's knowledge, currently threatened against the Company
that questions the validity of this Agreement, the Investors' Rights Agreement
or the Stockholders' Agreement or the right of the Company to enter into any of
such agreements, or to consummate the transactions contemplated hereby or
thereby, or which might result, either individually or in the aggregate, in any
material adverse change in the assets, condition, affairs or prospects of the
Company, financially or otherwise, or any change in the current equity ownership
of the Company, nor is the Company aware that there is any basis for the
foregoing. The foregoing includes, without limitation, actions pending or
threatened (or any basis therefor known to the Company) involving the prior
employment of any of the Company's employees, their use in connection with the
Company's business of any information or techniques allegedly proprietary to any
of their former employers, or their obligations under any agreements with prior
employers. The Company is not a party or subject to the provisions of or in
violation of any order, writ, injunction, judgment or decree or any rule or
regulation of any court or government agency or instrumentality. There is no
action, suit, proceeding or investigation by the Company currently pending or
which the Company intends to initiate.
3.14 TAX RETURNS AND PAYMENTS. The Company has timely filed all tax returns
(federal, state and local) required to be filed by it. All taxes shown to be due
and payable on such returns, any assessments imposed, and to the Company's
knowledge all other taxes due and payable by the Company on or before the
Closing have been paid or will be paid prior to the time they become delinquent.
The Company has not been advised (i) that any of its returns, federal, state or
other, have been or are being audited as of the date hereof, or (ii) of any
deficiency in assessment or proposed judgment to its federal, state or other
taxes. The Company has no knowledge of any liability of any tax to be imposed
upon its properties or assets as of the date of this Agreement that is not
adequately provided for. Neither the Company nor the Subsidiary is a party to
any agreement relating to allocating or sharing the payment of, or liability for
taxes with
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respect to, any taxable period. Neither the Company nor Subsidiary
has any deferred income reportable for a period ending after the Closing Date
that is attributable to a transaction (e.g., an installment sale) occurring in,
or resulting from a change of accounting method for, a period ending on or prior
to the Closing Date.
3.15 EMPLOYEES. The Company is not a party to or bound by any currently
effective employment contract, deferred compensation arrangement, bonus plan,
incentive plan, profit sharing plan, retirement agreement or other employee
compensation plan or agreement. Neither the Company, nor any entity which is
required to be aggregated with the Company pursuant to Sections 414(b), (c), (m)
or (o) of the Internal Revenue Code of 1986 has any liability whether actual or
contingent, with respect to any employee benefit plan or arrangement. To the
Company's knowledge, no employee of the Company, nor any consultant with whom
the Company has contracted, is in violation of any term of any employment
contract, proprietary information agreement or any other agreement relating to
the right of any such individual to be employed by, or to contract with, the
Company because of the nature of the business to be conducted by the Company;
and to the Company's knowledge the continued employment by the Company of its
present employees, and the performance of the Company's contracts with its
independent contractors, will not result in any such violation. The Company has
not received any notice alleging that any such violation has occurred. No
employee of the Company has been granted the right to continued employment by
the Company or to any material compensation following termination of employment
with the Company. The Company is not aware that any officer or key employee, or
that any group of key employees, intends to terminate their employment with the
Company, nor does the Company have a present intention to terminate the
employment of any officer, key employee or group of key employees. To the
Company's knowledge, the Company is in compliance with all laws and orders
relating to the employment of labor, including, without limitation, all such
laws and orders relating to wages, hours, discrimination, civil rights, safety
and the collection and payment of withholding and/or Social Security taxes and
similar taxes. There are no complaints, charges or claims against the Company
pending, or, to the Company's knowledge, threatened to be brought or filed, with
any governmental entity or arbitrator based on, arising out of, in connection
with, or otherwise relating to the employment or termination of employment of
any individual by the Company.
3.16 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS. Each current
employee, officer and consultant of the Company has executed a Proprietary
Information and Inventions Agreement that effectively waives any ownership
rights in the invention or authorship of any Company Rights and has assigned to
the Company all rights with respect thereto. No current employee, officer or
consultant of the Company has excluded works or inventions made prior to his or
her employment with the Company from his or her assignment of the works or
inventions pursuant to such employee, officer or consultant's Non-Competition,
Proprietary Information and Inventions Agreement in the form attached hereto as
EXHIBIT E.
3.17 OBLIGATIONS OF MANAGEMENT. Each officer of the Company is currently
devoting one hundred percent (100%) of his business time to the conduct of the
business of the Company. The Company is not aware of any officer or key employee
of the Company planning to work less than full time at the Company in the
future.
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3.18 REGISTRATION RIGHTS. Except as required pursuant to the Investors'
Rights Agreement, the Company is presently not under any obligation, and has not
granted any rights, to register (as defined in Section 1 of the Investors'
Rights Agreement) any of the Company's presently outstanding securities or any
of its securities that may hereafter be issued.
3.19 COMPLIANCE WITH LAWS; PERMITS. The Company is not in violation of any
applicable statute, rule, regulation, order or restriction of any domestic or
foreign government or any instrumentality or agency thereof in respect of the
conduct of its business or the ownership of its properties which violation would
materially and adversely affect the business, assets, liabilities, financial
condition, operations or prospects of the Company. No governmental orders,
permissions, consents, approvals or authorizations are required to be obtained
and no registrations or declarations are required to be filed in connection with
the execution and delivery of this Agreement and the issuance of the Shares or
the Conversion Shares, except such as has been duly and validly obtained or
filed, or with respect to any filings that must be made after the Closing, as
will be filed in a timely manner. The Schedule of Exceptions sets forth the
states in which the Company has obtained all franchises, permits, licenses and
any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties, prospects or financial condition of the Company.
3.20 OFFERING VALID. Assuming the accuracy of the representations and
warranties of the Purchasers contained in Section 4.2 hereof, the offer, sale
and issuance of the Shares and the Conversion Shares will be exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"SECURITIES ACT"), and will have been registered or qualified (or are exempt
from registration and qualification) under the registration, permit or
qualification requirements of all applicable state securities laws. Neither the
Company nor any agent on its behalf has solicited or will solicit any offers to
sell or has offered to sell or will offer to sell all or any part of the Shares
to any person or persons so as to bring the sale of such Shares by the Company
within the registration provisions of the Securities Act or any state securities
laws.
3.21 FULL DISCLOSURE. This Agreement, the Exhibits hereto, the Schedule of
Exceptions, the Investors' Rights Agreement, the Stockholders' Agreement and all
other documents delivered by the Company to Purchasers or their attorneys or
agents in connection herewith or therewith or with the transactions contemplated
hereby or thereby, do not contain any untrue statement of a material fact nor
omit to state a material fact necessary in order to make the statements
contained herein or therein not misleading. There is no fact peculiar to the
Company and known to the Company which materially adversely affects, or
reasonably could be expected to materially adversely affect in the future, the
business, property or assets, or financial condition of the Company, which has
not been set forth in this Agreement or in the other documents described herein
or furnished to the Purchasers by or on behalf of the Company prior to the date
hereof in connection with the transactions contemplated hereby.
3.22 APPLICATION OF PROCEEDS. The proceeds of the sale of the Shares will
be used by the Company to fund the capital expenditures and working capital
needs of the Company and for other general corporate purposes. The Company does
not own any "margin security' within the meaning of Regulation T (12 CFR Part
220) of the Board of Governors of the Federal Reserve System (herein called a
"margin security") or "margin stock" within the meaning of Regulation
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U (12 CFR Part 221) of the Board of Governors of the Federal Reserve System
(herein called "margin stock"). Neither the Company nor any agent acting on its
behalf, has taken or will take any action which might cause this Agreement to
violate Regulation T, Regulation U, Regulation X or any other regulation of the
Board of Governors of the Federal Reserve System or to violate the Securities
Exchange Act of 1934, in each case as in effect now or as the same hereafter may
be in effect.
3.23 CERTAIN LIMITATIONS. Neither the nature of the Company, nor any of its
respective businesses or properties, nor any relationship between the Company
and any other person, nor any circumstance in connection with the offer, issue,
sale or delivery of the Shares (other than in any such case, any matter relating
to the Purchasers) is, such as to require or give rise to any limitation on any
Purchaser's ownership of any equity securities of the Company.
3.24 ENVIRONMENTAL.
(a) To the Company's knowledge, the Company complies, and at all times
has complied, in all material respects with all applicable Environmental Laws.
For the purposes hereof, "ENVIRONMENTAL LAW" shall mean any judgment, decree,
order, law, permit, license, rule, regulation or agency requirement relating to
or addressing the environment, health or safety (to the extent relating to
exposure to any hazardous substance), including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, the Resource Conservation and Recovery Act, as amended, the Superfund
Amendments and Reauthorization Act of 1986, the Federal Clean Water Act, the
Federal Clean Air Act, the Toxic Substances Control Act and any federal, state,
local or foreign statute, regulation, ordinance, order or decree relating to
health, safety (in the case of health and safety to the extent relating to
exposure in the workplace or otherwise to any Hazardous Substance) or the
environment.
(b) There is not now pending or, to the Company's knowledge, threatened
any action, claim, proceeding or investigation nor has the Company received any
notice, claim, demand letter, or request for information at any time, alleging
that the Company may be in violation of, or liable under, any Environmental Law.
(c) To the Company's knowledge, without initiating any inquiry, there
are no hazardous substances located on the properties currently or formerly
owned or operated by the Company (including soil, groundwater or surface
features and buildings or structures thereon) other than as permitted under
applicable Environmental Laws, and none of the properties contain, or has
contained, any underground storage tank.
3.25 INSURANCE. The Company maintains and/or is covered by valid policies
of workers' compensation insurance and of insurance with respect to its
properties and business. The Company currently maintains, in full force,
insurance covering the risks of the Company, if any, of such types and in such
amounts and with such deductibles as are customary for other companies engaged
in similar lines of business and with good and responsible insurance companies.
3.26 SMALL BUSINESS MATTERS. The Company acknowledges that ABN AMRO Private
Equity is a federally licensed Small Business Investment Company (an "SBIC
HOLDER") under
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the Small Business Investment Company Act. The information regarding the Company
and its affiliates in Small Business Administration Form 480, Form 652 and Parts
A and B of Form 1031 delivered at or promptly following the Closing is accurate
in all material respects. Neither the Company nor any subsidiary of the Company
presently engages in, or shall hereinafter engage in, any activities, nor shall
the Company nor any subsidiary of the Company use the proceeds from the sale of
Series C Stock directly or indirectly for any purpose for which an SBIC Holder
is prohibited from providing funds by Small Business Investment Company Act
regulations.
3.27 QUALIFIED SMALL BUSINESS. The Company represents and warrants to the
Purchasers that, to the best of its knowledge, the Company is a "qualified small
business" within the meaning of Section 1202(d) of the Internal Revenue Code of
1986, as amended (the "Code") as of the date hereof and the Shares should
qualify as "qualified small business stock" as defined in Section 1202(c) of the
Code as of the date hereof. The Company further represents and warrants that, as
of the date hereof, it meets the "active business requirement" of Section
1202(e) of the Code, and it has made no "significant redemptions" within the
meaning of Section 1202(c)(3)(B) of the Code.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser hereby represents and warrants to the Company as follows
(such representations and warranties do not lessen or obviate the
representations and warranties of the Company set forth in this Agreement):
4.1 REQUISITE POWER AND AUTHORITY. Purchaser has all necessary power and
authority under all applicable provisions of law to execute and deliver this
Agreement, the Investors' Rights Agreement, the Stockholders' Agreement and to
carry out their provisions. All action on Purchaser's part required for the
lawful execution and delivery of this Agreement, the Investors' Rights Agreement
and the Stockholders' Agreement has been or will be effectively taken prior to
the Closing. Upon their execution and delivery, this Agreement, the Investors'
Rights Agreement and the Stockholders' Agreement will be valid and binding
obligations of Purchaser, enforceable in accordance with their terms, except (i)
as limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application affecting enforcement of creditors' rights,
(ii) general principles of equity that restrict the availability of equitable
remedies and (iii) to the extent that the enforceability of the indemnification
provisions of the Investors' Rights Agreement may be limited by applicable laws.
4.2 INVESTMENT REPRESENTATIONS. Purchaser understands that neither the
Shares nor the Conversion Shares have been registered under the Securities Act.
Purchaser also understands that the Shares are being offered and sold pursuant
to an exemption from registration contained in the Securities Act based in part
upon Purchaser's representations contained in the Agreement. Purchaser hereby
represents and warrants as follows:
(a) PURCHASER BEARS ECONOMIC RISK. Purchaser has substantial experience
in evaluating and investing in private placement transactions of securities in
companies similar to the Company so that it is capable of evaluating the merits
and risks of its investment in the
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Company and has the capacity to protect its own interests. Purchaser must bear
the economic risk of this investment indefinitely unless the Shares (or the
Conversion Shares) are registered pursuant to the Securities Act, or an
exemption from registration is available. Purchaser also understands that there
is no assurance that any exemption from registration under the Securities Act
will be available and that, even if available, such exemption may not allow
Purchaser to transfer all or any portion of the Shares or the Conversion Shares
under the circumstances, in the amounts or at the times Purchaser might propose.
(b) ACQUISITION FOR OWN ACCOUNT. Purchaser is acquiring the Shares and
the Conversion Shares for Purchaser's own account for investment only, and not
with a view towards their distribution.
(c) ACCREDITED INVESTOR. Purchaser represents that it is an "accredited
investor" within the meaning of Regulation D under the Securities Act.
(d) RULE 144. Purchaser acknowledges and agrees that the Shares, and,
if issued, the Conversion Shares must be held indefinitely unless they are
subsequently registered under the Securities Act or an exemption from such
registration is available. Purchaser has been advised or is aware of the
provisions of Rule 144 promulgated under the Securities Act as in effect from
time to time, which permits limited resale of shares purchased in a private
placement subject to the satisfaction of certain conditions, including, among
other things, the availability of certain current public information about the
Company, the resale occurring following the required holding period under Rule
144 and the number of shares being sold during any three-month period not
exceeding specified limitations.
(e) RESIDENCE. If the Purchaser is an individual, then the Purchaser
resides in the state or province identified in the address of the Purchaser set
forth on EXHIBIT A; if the Purchaser is a partnership, corporation, limited
liability company or other entity, then the office or offices of the Purchaser
in which its investment decision was made is located at the address or addresses
of the Purchaser set forth on EXHIBIT A.
4.3 TRANSFER RESTRICTIONS. Each Purchaser acknowledges and agrees that the
Shares and, if issued, the Conversion Shares are subject to restrictions on
transfer as set forth in the Investors' Rights Agreement and the Stockholders'
Agreement.
SECTION 5. CONDITIONS TO CLOSING
5.1 CONDITIONS TO PURCHASERS' OBLIGATIONS AT THE CLOSING. Purchasers'
obligations to purchase the Shares at the Closing are subject to the
satisfaction, at or prior to the Closing, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF OBLIGATIONS.
The representations and warranties made by the Company in Section 3 hereof shall
be true and correct in all respects as of the Closing Date with the same force
and effect as if they had been made as of the Closing Date, and the Company
shall have performed all obligations and conditions herein required to be
performed or observed by it on or prior to the Closing.
13.
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(b) LEGAL INVESTMENT. On the Closing Date, the sale and issuance of the
Shares and the proposed issuance of the Conversion Shares shall be legally
permitted by all laws and regulations to which Purchasers and the Company are
subject.
(c) CONSENTS, PERMITS, AND WAIVERS. The Company shall have obtained any
and all consents, permits and waivers necessary or appropriate for consummation
of the transactions contemplated by the Agreement, the Investors' Rights
Agreement and the Stockholders' Agreement (except for such as may be properly
obtained subsequent to the Closing).
(d) FILING OF CERTIFICATE. The Certificate shall have been approved by
the Board of Directors of the Company and filed with the Secretary of State of
the State of Delaware and shall be in full force and effect.
(e) RESERVATION OF CONVERSION SHARES. The Conversion Shares issuable
upon conversion of the Shares shall have been duly authorized and reserved for
issuance upon such conversion.
(f) COMPLIANCE CERTIFICATE. The Company shall have delivered to
Purchasers a Compliance Certificate, executed by the Chief Executive Officer of
the Company, dated as of the Closing Date, to the effect that the conditions
specified in subsections (a), (c), (d) and (e) of this Section 5.1 have been
satisfied.
(g) AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT. An Amended and
Restated Investors' Rights Agreement, substantially in the form attached hereto
as EXHIBIT C, shall have been executed and delivered by the parties thereto.
(h) AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT. An Amended and
Restated Stockholders' Agreement, substantially in the form attached hereto as
EXHIBIT D, shall have been executed and delivered by the parties thereto.
(i) BOARD OF DIRECTORS. Upon the Closing, the authorized size of the
Board of Directors of the Company shall be six (6) members and the Board shall
consist of Leonard Allsup, Brian Gast, Gregg Mockenhaupt, James Collis, Gerald
K. Dinsmore, and Todd Brooks.
(j) LEGAL OPINION. The Purchasers shall have received from Cooley
Godward LLP an opinion addressed to them, dated as of the Closing Date, in
substantially the form attached hereto as EXHIBIT F.
(k) MINIMUM AMOUNT OF INVESTMENT. A minimum of three million five
hundred seventy-one thousand four hundred twenty-eight (3,571,428) shares of the
Company's Shares shall be sold at the Closing.
(l) PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated at the Closing hereby, all
documents and instruments incident to such transactions and all documents,
instruments and proceedings related to the Purchasers' business, technical and
legal due diligence shall be reasonably satisfactory in substance and form to
the Purchasers and their special counsel, and the Purchasers and their
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special counsel shall have received all such counterpart originals or certified
or other copies of such documents as they may reasonably request.
(m) EXPENSES. On the Closing Date, the Company shall have paid the
reasonable fees and expenses of Dewey Ballantine LLP as special counsel for the
Purchasers, in an amount not to exceed $15,000.
5.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's obligation to
issue and sell the Shares at the Closing is subject to the satisfaction, on or
prior to the Closing, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties made by the Purchasers in Section 4 hereof shall be true and correct
in all respects at the date of the Closing, with the same force and effect as if
they had been made on and as of said date.
(b) PERFORMANCE OF OBLIGATIONS. Purchasers shall have performed and
complied with all agreements and conditions herein required to be performed or
complied with by Purchasers on or before the Closing.
(c) CONSENTS, PERMITS, AND WAIVERS. The Company shall have obtained any
and all consents, permits and waivers necessary or appropriate for consummation
of the transactions contemplated by the Agreement, the Investors' Rights
Agreement and the Stockholders' Agreement (except for such as may be properly
obtained subsequent to the Closing).
(d) FILING OF CERTIFICATE. The Certificate shall have been approved by
the Board of Directors of the Company and filed with the Secretary of State of
the State of Delaware and shall be in full force and effect.
(e) AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT. An Amended and
Restated Investors' Rights Agreement, substantially in the form attached hereto
as EXHIBIT C, shall have been executed and delivered by the Purchasers.
(f) AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT. An Amended and
Restated Stockholders' Agreement, substantially in the form attached hereto as
EXHIBIT D, shall have been executed and delivered by Purchasers.
(g) MINIMUM AMOUNT OF INVESTMENT. A minimum of three million five
hundred seventy-one thousand four hundred twenty-eight (3,571,428) shares of the
Company's Shares shall be sold at the Closing.
SECTION 6. MISCELLANEOUS
6.1 GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Colorado without regard to its
conflict-of-laws rules.
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6.2 SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by any Purchaser and the
closing of the transactions contemplated hereby. All statements as to factual
matters contained in any certificate or other instrument delivered by or on
behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
6.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto
and shall inure to the benefit of and be enforceable by each person who shall be
a holder of the Shares from time to time.
6.4 ENTIRE AGREEMENT. This Agreement, the Exhibits and Schedules hereto,
including the Investors' Rights Agreement, the Stockholders' Agreement and the
Schedule of Exceptions, and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
6.5 SEVERABILITY. In case any provision of the Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
6.6 AMENDMENT AND WAIVER.
(a) This Agreement may be amended or modified only upon the written
consent of the Company and holders of at least sixty-six and two-thirds percent
(66 2/3%) of the Shares (treated as if converted and including any Conversion
Shares into which the Shares have been converted that have not been sold to the
public).
(b) The obligations of the Company and the rights of the holders of the
Shares and the Conversion Shares under the Agreement may be waived only with the
written consent of the holders of at least sixty-six and two thirds percent (66
2/3%) of the Shares (treated as if converted and including any Conversion Shares
into which the Shares have been converted that have not been sold to the
public).
6.7 DELAYS OR OMISSIONS. It is agreed that no delay or omission to exercise
any right, power or remedy accruing to any party, upon any breach, default or
noncompliance by another party under this Agreement, the Investors' Rights
Agreement, the Stockholders' Agreement or the Certificate, shall impair any such
right, power or remedy, nor shall it be construed to be a waiver of any such
breach, default or noncompliance thereafter occurring. It is further agreed that
any waiver, permit, consent or approval of any kind or character on any
Purchaser's part of any breach, default or noncompliance under this Agreement,
the Investors' Rights Agreement, the Stockholders' Agreement or under the
Certificate or any waiver on such party's part of any provisions or conditions
of the Agreement, the Investors' Rights Agreement, the Stockholders' Agreement
or the Certificate must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, the Investors'
16.
<PAGE>
Rights Agreement, the Stockholders' Agreement, the Certificate, by law, or
otherwise afforded to any party, shall be cumulative and not alternative.
6.8 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified; (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day; (iii) upon receipt after having been sent by registered or certified mail,
return receipt requested, postage prepaid; or (iv) one (1) day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt. All communications shall be sent to the
Company at the address as set forth on the signature page hereof and to
Purchaser at the address set forth on EXHIBIT A attached hereto or at such other
address as the Company or Purchaser may designate by ten (10) days advance
written notice to the other parties hereto.
6.9 TITLES AND SUBTITLES. The titles of the sections and subsections of the
Agreement are for convenience of reference only and are not to be considered in
construing this Agreement.
6.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
6.11 BROKER'S FEES. Each party hereto represents and warrants that no
agent, broker, investment banker, person or firm acting on behalf of or under
the authority of such party hereto is or will be entitled to any broker's or
finder's fee or any other commission directly or indirectly in connection with
the transactions contemplated herein. Each party hereto further agrees to
indemnify each other party for any claims, losses or expenses incurred by such
other party as a result of the representation in this Section 6.11 being untrue.
6.12 ATTORNEYS' FEES. In the event that any dispute among the parties to
this Agreement, the Investors' Rights Agreement or the Stockholders' Agreement,
the prevailing party in such dispute shall be entitled to recover from the
losing party all fees, costs and expenses of enforcing any right of such
prevailing party under or with respect to this Agreement, the Investors' Rights
Agreement, the Stockholders' Agreement, including without limitation, such
reasonable fees and expenses of attorneys and accountants, which shall include,
without limitation, all fees, costs and expenses of appeals.
6.13 EXPENSES. The Company shall pay all reasonable costs and expenses
incurred with respect to the negotiation, execution and delivery of any
amendment to this Agreement, the Certificate, the Investors' Rights Agreement
and the Stockholders' Agreement, to the extent any such amendment would
adversely affect the holders of Series C Stock.
6.14 HSR FILING FEES. The Company shall pay all costs and expenses of each
Purchaser, as they are incurred, with respect to any filing under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder, in connection with such Purchaser's
investment in the Company, regardless of when such costs or expenses are
incurred.
6.15 EXCULPATION AMONG PURCHASERS. Each Purchaser acknowledges that it is
not relying upon any person, firm, or corporation, other than the Company and
its officers and
17.
<PAGE>
directors, in making its investment or decision to invest in the Company. Each
Purchaser agrees that no Purchaser nor the respective controlling persons,
officers, directors, partners, agents, or employees of any Purchaser shall be
liable for any action heretofore or hereafter taken or omitted to be taken by
any of them in connection with the Shares and Conversion Shares.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
18.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed the SERIES C PREFERRED
STOCK PURCHASE AGREEMENT as of the date set forth in the first paragraph hereof.
COMPANY: PURCHASERS:
JATO COMMUNICATIONS CORP.
--------------------------------------
Please Print Name of Purchaser
By: /s/ Brian E. Gast By:
------------------------------ -----------------------------------
Name: Brian E. Gast Name:
---------------------------- ---------------------------------
Title: Title:
--------------------------- --------------------------------
1099 18th Street, Suite 700 Address:
Denver, CO 80202 ------------------------------
--------------------------------------
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
EXHIBIT A
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PURCHASE PRICE
- ---------------- ---------------- --------------
<S> <C> <C>
Mayfield X, L.P. 1,367,143 $9,570,001.00
2800 Sand Hill Road
Suite 250
Menlo Park, CA 94025
Attn: Todd Brooks
Mayfield Associates Fund IV, L.P. 47,143 $330,001.00
2800 Sand Hill Road
Suite 250
Menlo Park, CA 94025
Attn: Todd Brooks
Mayfield Principals Fund, L.L.C. 157,143 $1,100,001.00
2800 Sand Hill Road
Suite 250
Menlo Park, CA 94025
Attn: Todd Brooks
Crest Communications Partners L.P. 428,571 2,999,997.00
320 Park Avenue
17th Floor
New York, NY 10022
Attn: Gregg Mockenhaupt
CEA Capital Partners USA, L.P. 327,557 $2,292,899.00
17 State Street
35th Floor
New York, NY 10004
Attn: Steve McCall
CEA Capital Partners USA CI, L.P. 101,014 $707,098.00
17 State Street
35th Floor
New York, NY 10004
Attn: Steve McCall
A-1
<PAGE>
ABN AMRO Capital (USA), Inc. 198,096 $1,386,672.00
208 S. LaSalle Street
10th Floor
Chicago, IL 60604
Attn: Daniel Foreman
I Eagle Trust 71,690 $501,830.00
208 S. LaSalle Street
10th Floor
Chicago, IL 60604
Attn: Daniel Foreman
ABN AMRO Incorporated 15,928 $111,496.00
208 S. LaSalle Street
10th Floor
Chicago, IL 60604
Attn: Daniel Foreman
Access Technology Partners, L.P. 228,571 $1,599,997.00
Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
Attn: Alex Sloan
Access Technology Partners Brokers Fund, 4,286 $30,002.00
L.P.
Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
Attn: Alex Sloan
Hambrecht & Quist California 14,286 $100,002.00
Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
Attn: Alex Sloan
Hambrecht & Quist Employee Venture Fund, 14,286 $100,002.00
L.P. II
Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
Attn: Alex Sloan
<PAGE>
H&Q JATO Communications Investors, L.P. 24,285 $169,995.00
Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
Attn: Alex Sloan
TCI Satellite Entertainment, Inc. 714,286 $5,000,002.00(1)
8085 S. Chester Street
Suite 110
Englewood, CO 80112
Attn: Ken Carroll
Keith Bennett 5,000 $35,000.00
16728 E. Prentice Circle
Aurora, CO 80015
Jeffrey D. Morgan 14,286 $100,002.00
2883 Lee Hill Road
Boulder, CO 80302
Karin W. Morgan 14,285 $99,995.00
2883 Lee Hill Road
Boulder, CO 80302
John P. Raeder, Jr. and Deborah M. Raeder, 50,000 $350,000.00
as Joint Tenants
5625 S. Bellaire Ct.
Greenwood Village, CO 80121
Michael S. Grunwald 28,571 $199,997.00
340 Lombard Street
Apt. A
San Francisco, CA 94133
- -----------------------------
(1) Payment to made by delivery of $2,000,000.00 and a note in the amount of
$3,000,002.00.
<PAGE>
Gerald K. Dinsmore 30,000 $210,000.00
c/o Jato Communications Corp.
1099 18th Street
Denver, CO 80202
Jerome C. Ramsey 8,000 $56,000.00
506 Providence Drive
Castle Rock, CO 80104
Robert G. Vidal and Tina M. Vidal, 5,000 $35,000
as Joint Tenants
5 Snowy Owl Lane
Littleton, CO 80127
Gerard A. Maglio 14,286 $100,002.00
5640 S. Bellaire Court
Greenwood Village, CO 80121
Rex Humston 7,143 $50,001.00
6889 S. Salida Street
Foxfield, CO 80016
Edward Ziehm 14,286 $100,002.00
864 Meadow Rose Lane
Castle Rock, CO 80104
<PAGE>
Trustee F.B.O. FWD Corporation Savings & 14,286 $100,002.00
Profit Sharing Trust,
James M. Green, Segregated Account
c/o - James P. Cooney, President
Pension Inc., Trustee
136 N. Maple Avenue
Green Bay, WI 54303
COPY OF ANY CORRESPONDENCE TO :
James M. Green, Segregated Account
W8397 Cloverleaf Lake Road
Clintonville, WI 54929
Patrick M. Green 2,143 $15,001.00
12098 W. 75th Place
Arvada, CO 80005
William D. Myers and Dana D. Myers, as 7,143 $50,001.00
Joint Tenants
3822 South Sebring Court
Denver, CO 80237
Marty S. Clayman 10,000 $70,000.00
2401 Shady Oak Place ------ ----------
Lexington, KY 40515
Total 3,938,714 $27,570,998.00
--------- --------------
--------- --------------
</TABLE>
<PAGE>
EXHIBIT B
RESTATED CERTIFICATE OF INCORPORATION
B-1
<PAGE>
EXHIBIT C
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
C-1
<PAGE>
EXHIBIT D
AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
D-1
<PAGE>
EXHIBIT E
FORM OF PROPRIETARY INFORMATION
AND INVENTIONS AGREEMENT
E-1
<PAGE>
EXHIBIT F
LEGAL OPINION
F-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
SECTION 1.AGREEMENT TO SELL AND PURCHASE......................................1
1.1 Authorization of Shares.....................................1
1.2 Sale and Purchase...........................................1
SECTION 2.CLOSING, DELIVERY AND PAYMENT.......................................1
2.1 Closing.....................................................1
2.2 Delivery....................................................2
SECTION 3.REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................2
3.1 Organization, Good Standing and Qualification...............2
3.2 Subsidiaries................................................2
3.3 Capitalization; Voting Rights...............................3
3.4 Authorization; Binding Obligations..........................3
3.5 Financial Statements........................................4
3.6 Liabilities.................................................4
3.7 Agreements; Action..........................................4
3.8 Obligations to Related Parties..............................5
3.9 Absence of Changes..........................................5
3.10 Real Properties; Tangible Personal Property.................7
3.11 Patents and Trademarks......................................7
3.12 Compliance with Other Instruments...........................8
3.13 Litigation..................................................8
3.14 Tax Returns and Payments....................................8
3.15 Employees...................................................9
3.16 Proprietary Information and Inventions Agreements...........9
3.17 Obligations of Management...................................9
3.18 Registration Rights........................................10
3.19 Compliance with Laws; Permits..............................10
3.20 Offering Valid.............................................10
3.21 Full Disclosure............................................10
3.22 Application of Proceeds....................................10
3.23 Certain Limitations........................................11
3.24 Environmental..............................................11
i.
<PAGE>
3.25 Insurance..................................................11
3.26 Small Business Matters.....................................11
3.27 Qualified Small Business...................................12
SECTION 4.REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS...................12
4.1 Requisite Power and Authority..............................12
4.2 Investment Representations.................................12
4.3 Transfer Restrictions......................................13
SECTION 5.CONDITIONS TO CLOSING..............................................13
5.1 Conditions to Purchasers' Obligations at the Closing.......13
5.2 Conditions to Obligations of the Company...................15
SECTION 6.MISCELLANEOUS......................................................15
6.1 Governing Law..............................................15
6.2 Survival...................................................16
6.3 Successors and Assigns.....................................16
6.4 Entire Agreement...........................................16
6.5 Severability...............................................16
6.6 Amendment and Waiver.......................................16
6.7 Delays or Omissions........................................16
6.8 Notices....................................................17
6.9 Titles and Subtitles.......................................17
6.10 Counterparts...............................................17
6.11 Broker's Fees..............................................17
6.12 Attorneys' Fees............................................17
6.13 Expenses...................................................17
6.14 HSR Filing Fees............................................17
6.15 Exculpation Among Purchasers...............................17
</TABLE>
ii.
<PAGE>
INDEX OF EXHIBITS
<TABLE>
<S> <C>
Schedule of Purchasers Exhibit A
Restated Certificate of Incorporation Exhibit B
Amended and Restated Investors' Rights Agreement Exhibit C
Amended and Restated Stockholders' Agreement Exhibit D
Form of Non-Competition Proprietary
Information and Inventions Agreement Exhibit E
Form of Legal Opinion Exhibit F
</TABLE>
<PAGE>
JATO COMMUNICATIONS CORP.
1998 EQUITY INCENTIVE PLAN
ADOPTED AUGUST 10, 1998
APPROVED BY STOCKHOLDERS AUGUST 10, 1998
AMENDED APRIL 13, 1999
AMENDED SEPTEMBER 2, 1999
APPROVED BY STOCKHOLDERS APRIL 15, 1999
APPROVED BY STOCKHOLDERS SEPTEMBER 7, 1999
TERMINATION DATE: AUGUST 10, 2008
1. PURPOSES.
(a) ELIGIBLE STOCK AWARD RECIPIENTS. The persons eligible to
receive Stock Awards are the Employees, Directors and Consultants of the
Company and its Affiliates.
(b) AVAILABLE STOCK AWARDS. The purpose of the Plan is to provide
a means by which eligible recipients of Stock Awards may be given an
opportunity to benefit from increases in value of the Common Stock through
the granting of the following Stock Awards: (i) Incentive Stock Options,
(ii) Nonstatutory Stock Options, (iii) stock appreciation rights, (iv) stock
bonuses and (v) rights to acquire restricted stock.
(c) GENERAL PURPOSE. The Company, by means of the Plan, seeks to
retain the services of the group of persons eligible to receive Stock Awards,
to secure and retain the services of new members of this group and to provide
incentives for such persons to exert maximum efforts for the success of the
Company and its Affiliates.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary
corporation of the Company, whether now or hereafter existing, as those terms
are defined in Sections 424(e) and (f), respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a Committee appointed by the Board in
accordance with subsection 3(c).
(e) "COMMON STOCK" means the common stock of the Company.
(f) "COMPANY" means JATO Communications Corp., a Delaware corporation.
(g) "CONSULTANT" means any person, including an advisor, (1)
engaged by the Company or an Affiliate to render consulting or advisory
services and who is compensated for such services or (2) who is a member of
the Board of Directors of an Affiliate. However, the
1
<PAGE>
term "Consultant" shall not include either Directors of the Company who are
not compensated by the Company for their services as Directors or Directors
of the Company who are merely paid a director's fee by the Company for their
services as Directors.
(h) "CONTINUOUS SERVICE" means that the Participant's service with
the Company or an Affiliate, whether as an Employee, Director or Consultant,
is not interrupted or terminated. The Participant's Continuous Service shall
not be deemed to have terminated merely because of a change in the capacity
in which the Participant renders service to the Company or an Affiliate as an
Employee, Consultant or Director or a change in the entity for which the
Participant renders such service, provided that there is no interruption or
termination of the Participant's Continuous Service. For example, a change
in status from an Employee of the Company to a Consultant of an Affiliate or
a Director of the Company will not constitute an interruption of Continuous
Service. The Board or the chief executive officer of the Company, in that
party's sole discretion, may determine whether Continuous Service shall be
considered interrupted in the case of any leave of absence approved by that
party, including sick leave, military leave or any other personal leave.
(i) "COVERED EMPLOYEE" means the chief executive officer and the
four (4) other highest compensated officers of the Company for whom total
compensation is required to be reported to stockholders under the Exchange
Act, as determined for purposes of Section 162(m) of the Code.
(j) "DIRECTOR" means a member of the Board of Directors of the
Company.
(k) "DISABILITY" means the permanent and total disability of a
person within the meaning of Section 22(e)(3) of the Code.
(l) "EMPLOYEE" means any person employed by the Company or an
Affiliate. Mere service as a Director or payment of a director's fee by the
Company or an Affiliate shall not be sufficient to constitute "employment" by
the Company or an Affiliate.
(m) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(n) "FAIR MARKET VALUE" means, as of any date, the value of the Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or traded on the Nasdaq National Market System or the Nasdaq
SmallCap Market, the Fair Market Value of a share of Common Stock shall be
the closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such exchange or market (or the exchange or market
with the greatest volume of trading in the Common Stock) on the last market
trading day prior to the day of determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable.
(ii) In the absence of such markets for the Common Stock, the
Fair Market Value shall be determined in good faith by the Board.
2
<PAGE>
(o) "INCENTIVE STOCK OPTION" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code and
the regulations promulgated thereunder.
(p) "NON-EMPLOYEE DIRECTOR" means a Director of the Company who
either (i) is not a current Employee or Officer of the Company or its parent
or a subsidiary, does not receive compensation (directly or indirectly) from
the Company or its parent or a subsidiary for services rendered as a
consultant or in any capacity other than as a Director (except for an amount
as to which disclosure would not be required under Item 404(a) of Regulation
S-K promulgated pursuant to the Securities Act ("Regulation S-K")), does not
possess an interest in any other transaction as to which disclosure would be
required under Item 404(a) of Regulation S-K and is not engaged in a business
relationship as to which disclosure would be required under Item 404(b) of
Regulation S-K; or (ii) is otherwise considered a "non-employee director" for
purposes of Rule 16b-3.
(q) "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.
(r) "OFFICER" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(s) "OPTION" means an Incentive Stock Option or a Nonstatutory
Stock Option granted pursuant to the Plan.
(t) "OPTION AGREEMENT" means a written Option Agreement and Notice
of Stock Option Grant between the Company and an Optionholder evidencing the
terms and conditions of an individual Option grant. Each Option Agreement
and Grant Notice shall be subject to the terms and conditions of the Plan.
(u) "OPTIONHOLDER" means a person to whom an Option is granted
pursuant to the Plan or, if applicable, such other person who holds an
outstanding Option.
(v) "OUTSIDE DIRECTOR" means a Director of the Company who either
(i) is not a current employee of the Company or an "affiliated corporation"
(within the meaning of Treasury Regulations promulgated under Section 162(m)
of the Code), is not a former employee of the Company or an "affiliated
corporation" receiving compensation for prior services (other than benefits
under a tax qualified pension plan), was not an officer of the Company or an
"affiliated corporation" at any time and is not currently receiving direct or
indirect remuneration from the Company or an "affiliated corporation" for
services in any capacity other than as a Director or (ii) is otherwise
considered an "outside director" for purposes of Section 162(m) of the Code.
(w) "PARTICIPANT" means a person to whom a Stock Award is granted
pursuant to the Plan or, if applicable, such other person who holds an
outstanding Stock Award.
(x) "PLAN" means this JATO Communications Corp. 1998 Equity
Incentive Plan.
3
<PAGE>
(y) "RULE 16b-3" means Rule 16b-3 promulgated under the Exchange
Act or any successor to Rule 16b-3, as in effect from time to time.
(z) "SECURITIES ACT" means the Securities Act of 1933, as amended.
(aa) "STOCK AWARD" means any right granted under the Plan, including
an Option, a stock appreciation right, a stock bonus and a right to acquire
restricted stock.
(bb) "STOCK AWARD AGREEMENT" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions of
an individual Stock Award grant. Each Stock Award Agreement shall be subject
to the terms and conditions of the Plan.
(cc) "TEN PERCENT STOCKHOLDER" means a person who owns (or is deemed
to own pursuant to Section 424(d) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of
the Company or of any of its Affiliates.
3. ADMINISTRATION.
(a) ADMINISTRATION BY BOARD. The Board will administer the Plan
unless and until the Board delegates administration to a Committee, as
provided in subsection 3(c).
(b) POWERS OF BOARD. The board shall have the power, subject to,
and within the limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the persons
eligible under the Plan shall be granted Stock Awards; when and how each
Stock Award shall be granted; what type or combination of types of Stock
Award shall be granted; the provisions of each Stock Award granted (which
need not be identical), including the time or times when a person shall be
permitted to receive stock pursuant to a Stock Award; and the number of
shares with respect to which a Stock Award shall be granted to each such
person.
(ii) To construe and interpret the Plan and Stock Awards
granted under it, and to establish, amend and revoke rules and regulations
for its administration. The Board, in the exercise of this power, may
correct any defect, omission or inconsistency in the Plan or in any Stock
Award Agreement, in a manner and to the extent it shall deem necessary or
expedient to make the Plan fully effective.
(iii) To amend the Plan or a Stock Award as provided in
Section 12.
(iv) Generally, to exercise such powers and to perform such
acts as the Board deems necessary or expedient to promote the best interests
of the Company which are not in conflict with the provisions of the Plan.
(c) DELEGATION TO COMMITTEE.
(i) GENERAL. The Board may delegate administration of the
Plan to a Committee or Committees of one or more members of the Board, and
the term "Committee"
4
<PAGE>
shall apply to any person or persons to whom such authority has been
delegated. If administration is delegated to a Committee, the Committee
shall have, in connection with the administration of the Plan, the powers
theretofore possessed by the Board, including the power to delegate to a
subcommittee any of the administrative powers the Committee is authorized to
exercise (and references in this Plan to the Board shall thereafter be to the
Committee or subcommittee), subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted from time to
time by the Board. The Board may abolish the Committee at any time and
revest in the Board the administration of the Plan.
(ii) COMMITTEE COMPOSITION WHEN COMMON STOCK IS PUBLICLY
TRADED. At such time as the Common Stock is publicly traded, in the
discretion of the Board, a Committee may consist solely of two or more
Outside Directors, in accordance with Section 162(m) of the Code, and/or
solely of two or more Non-Employee Directors, in accordance with Rule 16b-3.
Within the scope of such authority, the Board or the Committee may (i)
delegate to a committee of one or more members of the Board who are not
Outside Directors, the authority to grant Stock Awards to eligible persons
who are either (a) not then Covered Employees and are not expected to be
Covered Employees at the time of recognition of income resulting from such
Stock Award or (b) not persons with respect to whom the Company wishes to
comply with Section 162(m) of the Code and/or (ii) delegate to a committee of
one or more members of the Board who are not Non-Employee Directors the
authority to grant Stock Awards to eligible persons who are not then subject
to Section 16 of the Exchange Act.
4. SHARES SUBJECT TO THE PLAN.
(a) SHARE RESERVE. Subject to the provisions of Section 11
relating to adjustments upon changes in stock, the stock that may be issued
pursuant to Stock Awards shall not exceed in the aggregate of five million
six hundred seventy-five thousand (5,675,000) shares of Common Stock.
(b) REVERSION OF SHARES TO THE SHARE RESERVE. If any Stock Award
shall for any reason expire or otherwise terminate, in whole or in part,
without having been exercised in full (or vested in the case of Restricted
Stock), the stock not acquired under such Stock Award shall revert to and
again become available for issuance under the Plan. Shares subject to stock
appreciation rights exercised in accordance with the Plan shall not be
available for subsequent issuance under the Plan. If any Common Stock
acquired pursuant to the exercise of an Option shall for any reason be
repurchased by the Company under an unvested share repurchase option provided
under the Plan, the stock repurchased by the Company under such repurchase
option shall not revert to and again become available for issuance under the
Plan.
(c) SOURCE OF SHARES. The stock subject to the Plan may be
unissued shares or reacquired shares, bought on the market or otherwise.
5
<PAGE>
5. ELIGIBILITY.
(a) ELIGIBILITY FOR SPECIFIC STOCK AWARDS. Incentive Stock Options
may be granted only to Employees. Stock Awards other than Incentive Stock
Options may be granted to Employees, Directors and Consultants.
(b) TEN PERCENT STOCKHOLDERS. No Ten Percent Stockholder shall be
eligible for the grant of an Incentive Stock Option unless the exercise price
of such Option is at least one hundred ten percent (110%) of the Fair Market
Value of the Common Stock at the date of grant and the Option is not
exercisable after the expiration of five (5) years from the date of grant.
(c) SECTION 162(m) LIMITATION. Subject to the provisions of
Section 11 relating to adjustments upon changes in stock, no employee shall
be eligible to be granted Options covering more than two hundred thousand
(200,000) shares of the Common Stock during any calendar year.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. All Options shall be
separately designated Incentive Stock Options or Nonstatutory Stock Options
at the time of grant, and a separate certificate or certificates will be
issued for shares purchased on exercise of each type of Option. The
provisions of separate Options need not be identical, but each Option shall
include (through incorporation of provisions hereof by reference in the
Option or otherwise) the substance of each of the following provisions:
(a) TERM. Subject to the provisions of subsection 5(b) regarding
Ten Percent Stockholders, no Incentive Stock Option shall be exercisable
after the expiration of ten (10) years from the date it was granted.
(b) EXERCISE PRICE OF AN INCENTIVE STOCK OPTION. Subject to the
provisions of subsection 5(b) regarding Ten Percent Stockholders, the
exercise price of each Incentive Stock Option shall be not less than one
hundred percent (100%) of the Fair Market Value of the stock subject to the
Option on the date the Option is granted. Notwithstanding the foregoing, an
Incentive Stock Option may be granted with an exercise price lower than that
set forth in the preceding sentence if such Option is granted pursuant to an
assumption or substitution for another option in a manner satisfying the
provisions of Section 424(a) of the Code.
(c) EXERCISE PRICE OF A NONSTATUTORY STOCK OPTION. The exercise
price of each Nonstatutory Stock Option shall be not less than fifty percent
(50%) of the Fair Market Value of the stock subject to the Option on the date
the Option is granted. Notwithstanding the foregoing, a Nonstatutory Stock
Option may be granted with an exercise price lower than that set forth in the
preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of
Section 424(a) of the Code.
6
<PAGE>
(d) CONSIDERATION. The purchase price of stock acquired pursuant
to an Option shall be paid, to the extent permitted by applicable statutes
and regulations, either (i) in cash at the time the Option is exercised or
(ii) at the discretion of the Board at the time of the grant of the Option
(or subsequently in the case of a Nonstatutory Stock Option) by delivery to
the Company of other Common Stock, according to a deferred payment or other
arrangement (which may include, without limiting the generality of the
foregoing, the use of other Common Stock) with the Participant or in any
other form of legal consideration that may be acceptable to the Board;
provided, however, that at any time that the Company is incorporated in
Delaware, payment of the Common Stock's "par value," as defined in the
Delaware General Corporation Law, shall not be made by deferred payment.
In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be
interest under the deferred payment arrangement.
(e) TRANSFERABILITY OF AN INCENTIVE STOCK OPTION. An Incentive
Stock Option shall not be transferable except by will or by the laws of
descent and distribution and shall be exercisable during the lifetime of the
Optionholder only by the Optionholder. Notwithstanding the foregoing
provisions of this subsection 6(e), the Optionholder may, by delivering
written notice to the Company, in a form satisfactory to the Company,
designate a third party who, in the event of the death of the Optionholder,
shall thereafter be entitled to exercise the Option.
(f) TRANSFERABILITY OF A NONSTATUTORY STOCK OPTION. A Nonstatutory
Stock Option shall be transferable to the extent provided in the Option
Agreement. If the Nonstatutory Stock Option does not provide for
transferability, then the Nonstatutory Stock Option shall not be transferable
except by will or by the laws of descent and distribution and shall be
exercisable during the lifetime of the Optionholder only by the Optionholder.
Notwithstanding the foregoing provisions of this subsection 6(f), the
Optionholder may, by delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the event of the
death of the Optionholder, shall thereafter be entitled to exercise the
Option.
(g) VESTING GENERALLY. The total number of shares of Common Stock
subject to an Option may, but need not, vest and therefore become exercisable
in periodic installments which may, but need not, be equal. The Option may
be subject to such other terms and conditions on the time or times when it
may be exercised (which may be based on performance or other criteria) as the
Board may deem appropriate. The vesting provisions of individual Options may
vary. The provisions of this subsection 6(g) are subject to any Option
provisions governing the minimum number of shares as to which an Option may
be exercised.
(h) TERMINATION OF CONTINUOUS SERVICE. In the event an
Optionholder's Continuous Service terminates (other than upon the
Optionholder's death or Disability), the Optionholder may exercise his or her
Option (to the extent that the Optionholder was entitled to exercise it as of
the date of termination) but only within such period of time ending on the
earlier of (i) the date three (3) months following the termination of the
Optionholder's Continuous Service (or such longer or shorter period specified
in the Option Agreement), or (ii) the expiration of the
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<PAGE>
term of the Option as set forth in the Option Agreement. If, after
termination, the Optionholder does not exercise his or her Option within the
time specified in the Option Agreement, the Option shall terminate.
(i) EXTENSION OF TERMINATION DATE. An Optionholder's Option
Agreement may also provide that if the exercise of the Option following the
termination of the Optionholder's Continuous Service (other than upon the
Optionholder's death or Disability) would be prohibited at any time solely
because the issuance of shares would violate the registration requirements
under the Securities Act, then the Option shall terminate on the earlier of
(i) the expiration of the term of the Option set forth in subsection 6(a) or
(ii) the expiration of a period of three (3) months after the termination of
the Optionholder's Continuous Service during which the exercise of the Option
would not be in violation of such registration requirements.
(j) DISABILITY OF OPTIONHOLDER. In the event an Optionholder's
Continuous Service terminates as a result of the Optionholder's Disability,
the vesting of his or her Option shall accelerate such that the Option is
fully exercisable and the Optionholder may exercise such Option, but only
within such period of time ending on the earlier of (i) the date twelve (12)
months following such termination (or such longer or shorter period specified
in the Option Agreement) or (ii) the expiration of the term of the Option as
set forth in the Option Agreement. If, after termination, the Optionholder
does not exercise his or her Option within the time specified herein, the
Option shall terminate.
(k) DEATH OF OPTIONHOLDER. In the event an Optionholder's
Continuous Service terminates as a result of the Optionholder's death, the
vesting of his or her Option shall accelerate such that the Option is fully
exercisable. In the event (i) an Optionholder's Continuous Service
terminates as a result of the Optionholder's death or (ii) the Optionholder
dies within the period (if any) specified in the Option Agreement after the
termination of the Optionholder's Continuous Service for a reason other than
death, then the Option may be exercised (to the extent the Optionholder was
entitled to exercise the Option as of the date of death) by the
Optionholder's estate, by a person who acquired the right to exercise the
Option by bequest or inheritance or by a person designated to exercise the
option upon the Optionholder's death pursuant to subsection 6(e) or 6(f), but
only within the period ending on the earlier of (1) the date eighteen (18)
months following the date of death (or such longer or shorter period
specified in the Option Agreement) or (2) the expiration of the term of such
Option as set forth in the Option Agreement. If, after death, the Option is
not exercised within the time specified herein, the Option shall terminate.
(l) EARLY EXERCISE. The Option may, but need not, include a
provision whereby the Optionholder may elect at any time before the
Optionholder's Continuous Service terminates to exercise the Option as to any
part or all of the shares subject to the Option prior to the full vesting of
the Option. Any unvested shares so purchased may be subject to an unvested
share repurchase option in favor of the Company or to any other restriction
the Board determines to be appropriate.
(m) RE-LOAD OPTIONS. Without in any way limiting the authority of
the Board to make or not to make grants of Options hereunder, the Board shall
have the authority (but not an
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<PAGE>
obligation) to include as part of any Option Agreement a provision entitling
the Optionholder to a further Option (a "Re-Load Option") in the event the
Optionholder exercises the Option evidenced by the Option Agreement, in whole
or in part, by surrendering other shares of Common Stock in accordance with
this Plan and the terms and conditions of the Option Agreement. Any such
Re-Load Option shall (i) provide for a number of shares equal to the number
of shares surrendered as part or all of the exercise price of such Option;
(ii) have an expiration date which is the same as the expiration date of the
Option the exercise of which gave rise to such Re-Load Option; and (iii) have
an exercise price which is equal to one hundred percent (100%) of the Fair
Market Value of the Common Stock subject to the Re-Load Option on the date of
exercise of the original Option. Notwithstanding the foregoing, a Re-Load
Option shall be subject to the same exercise price and term provisions
heretofore described for Options under the Plan.
Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board may designate at the time of the
grant of the original Option; provided, however, that the designation of any
Re-Load Option as an Incentive Stock Option shall be subject to the one
hundred thousand dollars ($100,000) annual limitation on exercisability of
Incentive Stock Options described in subsection 10(d) and in Section 422(d)
of the Code. There shall be no Re-Load Options on a Re-Load Option. Any
such Re-Load Option shall be subject to the availability of sufficient shares
under subsection 4(a) and the "Section 162(m) Limitation" on the grants of
Options under subsection 5(c) and shall be subject to such other terms and
conditions as the Board may determine which are not inconsistent with the
express provisions of the Plan regarding the terms of Options.
7. PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.
(a) STOCK BONUS AWARDS. Each stock bonus agreement shall be in
such form and shall contain such terms and conditions as the Board shall deem
appropriate. The terms and conditions of stock bonus agreements may change
from time to time, and the terms and conditions of separate stock bonus
agreements need not be identical, but each stock bonus agreement shall
include (through incorporation of provisions hereof by reference in the
agreement or otherwise) the substance of each of the following provisions:
(i) CONSIDERATION. A stock bonus shall be awarded in
consideration for past services actually rendered to the Company for its
benefit.
(ii) VESTING. Shares of Common Stock awarded under the stock
bonus agreement may, but need not, be subject to a share repurchase option in
favor of the Company in accordance with a vesting schedule to be determined
by the Board.
(iii) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. In the
event a Participant's Continuous Service terminates, the Company may
reacquire any or all of the shares of Common Stock held by the Participant
which have not vested as of the date of termination under the terms of the
stock bonus agreement.
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<PAGE>
(iv) TRANSFERABILITY. Rights to acquire shares under the
stock bonus agreement shall be transferable by the Participant only upon such
terms and conditions as are set forth in the stock bonus agreement, as the
Board shall determine in its discretion, so long as stock awarded under the
stock bonus agreement remains subject to the terms of the stock bonus
agreement.
(b) RESTRICTED STOCK AWARDS. Each restricted stock purchase
agreement shall be in such form and shall contain such terms and conditions
as the Board shall deem appropriate. The terms and conditions of the
restricted stock purchase agreements may change from time to time, and the
terms and conditions of separate restricted stock purchase agreements need
not be identical, but each restricted stock purchase agreement shall include
(through incorporation of provisions hereof by reference in the agreement or
otherwise) the substance of each of the following provisions:
(i) PURCHASE PRICE. The purchase price under each
restricted stock purchase agreement shall be such amount as the Board shall
determine and designate in such restricted stock purchase agreement. The
purchase price shall not be less than eighty-five percent (85%) of the
stock's Fair Market Value on the date such award is made or at the time the
purchase is consummated.
(ii) CONSIDERATION. The purchase price of stock acquired
pursuant to the restricted stock purchase agreement shall be paid either:
(i) in cash at the time of purchase; (ii) at the discretion of the Board,
according to a deferred payment or other arrangement with the Participant; or
(iii) in any other form of legal consideration that may be acceptable to the
Board in its discretion; provided, however, that at any time that the Company
is incorporated in Delaware, payment of the Common Stock's "par value," as
defined in the Delaware General Corporation Law, shall not be made by
deferred payment.
(iii) VESTING. Shares of Common Stock acquired under the
restricted stock purchase agreement may, but need not, be subject to a share
repurchase option in favor of the Company in accordance with a vesting
schedule to be determined by the Board.
(iv) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. In the
event a Participant's Continuous Service terminates, the Company may
repurchase or otherwise reacquire any or all of the shares of Common Stock
held by the Participant which have not vested as of the date of termination
under the terms of the restricted stock purchase agreement.
(v) TRANSFERABILITY. Rights to acquire shares under the
restricted stock purchase agreement shall be transferable by the Participant
only upon such terms and conditions as are set forth in the restricted stock
purchase agreement, as the Board shall determine in its discretion, so long
as stock awarded under the restricted stock purchase agreement remains
subject to the terms of the restricted stock purchase agreement.
(c) STOCK APPRECIATION RIGHTS.
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(i) AUTHORIZED RIGHTS. The following three types of stock
appreciation rights shall be authorized for issuance under the Plan:
(1) TANDEM RIGHTS. A "Tandem Right" means a stock
appreciation right granted appurtenant to an Option which is subject to the
same terms and conditions applicable to the particular Option grant to which
it pertains with the following exceptions: The Tandem Right shall require
the holder to elect between the exercise of the underlying Option for shares
of Common Stock and the surrender, in whole or in part, of such Option for an
appreciation distribution. The appreciation distribution payable on the
exercised the Tandem Right shall be in cash (or, if so provided, in an
equivalent number of shares of Common Stock based on Fair Market Value on the
date of the Option surrender) in an amount up to the excess of (A) the Fair
Market Value (on the date of the Option surrender) of the number of shares of
Common Stock covered by that portion of the surrendered Option in which the
Optionholder is vested over (B) the aggregate exercise price payable for such
vested shares.
(2) CONCURRENT RIGHTS. A "Concurrent Right" means a
stock appreciation right granted appurtenant to an Option which applies to
all or a portion of the shares of Common Stock subject to the underlying
Option and which is subject to the same terms and conditions applicable to
the particular Option grant to which it pertains with the following
exceptions: A Concurrent Right shall be exercised automatically at the same
time the underlying Option is exercised with respect to the particular shares
of Common Stock to which the Concurrent Right pertains. The appreciation
distribution payable on an exercised Concurrent Right shall be in cash (or,
if so provided, in an equivalent number of shares of Common Stock based on
Fair Market Value on the date of the exercise of the Concurrent Right) in an
amount equal to such portion as determined by the Board at the time of the
grant of the excess of (A) the aggregate Fair Market Value (on the date of
the exercise of the Concurrent Right) of the vested shares of Common Stock
purchased -under the underlying Option which have Concurrent Rights
appurtenant to them over (B) the aggregate exercise price paid for such
shares.
(3) INDEPENDENT RIGHTS. An "Independent Right" means
a stock appreciation right granted independently of any Option but which is
subject to the same terms and conditions applicable to a Nonstatutory Stock
Option with the following exceptions: An Independent Right shall be
denominated in share equivalents. The appreciation distribution payable on
the exercised Independent Right shall be not greater than an amount equal to
the excess of (a) the aggregate Fair Market Value (on the date of the
exercise of the Independent Right) of a number of shares of Company stock
equal to the number of share equivalents in which the holder is vested under
such Independent Right, and with respect to which the holder is exercising
the Independent Right on such date, over (b) the aggregate Fair Market Value
(on the date of the grant of the Independent Right) of such number of shares
of Company stock. The appreciation distribution payable on the exercised
Independent Right shall be in cash or, if so provided, in an equivalent
number of shares of Common Stock based on Fair Market Value on the date of
the exercise of the Independent Right.
(ii) RELATIONSHIP TO OPTIONS. Stock appreciation rights
appurtenant to Incentive Stock Options may be granted only to Employees. The
"Section 162(m) Limitation"
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provided in subsection 5(c) and any authority to reprice Options shall apply
as well to the grant of stock appreciation rights.
(iii) EXERCISE. To exercise any outstanding stock
appreciation right, the holder shall provide written notice of exercise to
the Company in compliance with the provisions of the Stock Award Agreement
evidencing such right. Except as provided in subsection 5(c) regarding the
"Section 162(m) Limitation," no limitation shall exist on the aggregate
amount of cash payments that the Company may make under the Plan in
connection with the exercise of a stock appreciation right.
8. COVENANTS OF THE COMPANY.
(a) AVAILABILITY OF SHARES. During the terms of the Stock Awards,
the Company shall keep available at all times the number of shares of Common
Stock required to satisfy such Stock Awards.
(b) SECURITIES LAW COMPLIANCE. The Company shall seek to obtain
from each regulatory commission or agency having jurisdiction over the Plan
such authority as may be required to grant Stock Awards and to issue and sell
shares of Common Stock upon exercise of the Stock Awards; provided, however,
that this undertaking shall not require the Company to register under the
Securities Act the Plan, any Stock Award or any stock issued or issuable
pursuant to any such Stock Award. If, after reasonable efforts, the Company
is unable to obtain from any such regulatory commission or agency the
authority which counsel for the Company deems necessary for the lawful
issuance and sale of stock under the Plan, the Company shall be relieved from
any liability for failure to issue and sell stock upon exercise of such Stock
Awards unless and until such authority is obtained.
9. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall
constitute general funds of the Company.
10. MISCELLANEOUS.
(a) ACCELERATION OF EXERCISABILITY AND VESTING. The Board shall
have the power to accelerate the time at which a Stock Award may first be
exercised or the time during which a Stock Award or any part thereof will
vest in accordance with the Plan, notwithstanding the provisions in the Stock
Award stating the time at which it may first be exercised or the time during
which it will vest.
(b) STOCKHOLDER RIGHTS. No Participant shall be deemed to be the
holder of, or to have any of the rights of a holder with respect to, any
shares subject to such Stock Award unless and until such Participant has
satisfied all requirements for exercise of the Stock Award pursuant to its
terms.
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<PAGE>
(c) NO EMPLOYMENT OR OTHER SERVICE RIGHTS. Nothing in the Plan or
any instrument executed or Stock Award granted pursuant thereto shall confer
upon any Participant or other holder of Stock Awards any right to continue to
serve the Company or an Affiliate in the capacity in effect at the time the
Stock Award was granted or shall affect the right of the Company or an
Affiliate to terminate (i) the employment of an Employee with or without
notice and with or without cause, (ii) the service of a Consultant pursuant
to the terms of such Consultant's agreement with the Company or an Affiliate
or (iii) the service of a Director pursuant to the Bylaws of the Company or
an Affiliate, and any applicable provisions of the corporate law of the state
in which the Company or the Affiliate is incorporated, as the case may be.
(d) INCENTIVE STOCK OPTION $100,000 LIMITATION. To the extent that
the aggregate Fair Market Value (determined at the time of grant) of stock
with respect to which Incentive Stock Options are exercisable for the first
time by any Optionholder during any calendar year (under all plans of the
Company and its Affiliates) exceeds one hundred thousand dollars ($100,000),
the Options or portions thereof which exceed such limit (according to the
order in which they were granted) shall be treated as Nonstatutory Stock
Options.
(e) INVESTMENT ASSURANCES. The Company may require a Participant,
as a condition of exercising or acquiring stock under any Stock Award, (i) to
give written assurances satisfactory to the Company as to the Participant's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters and that he
or she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (ii)
to give written assurances satisfactory to the Company stating that the
Participant is acquiring the stock subject to the Stock Award for the
Participant's own account and not with any present intention of selling or
otherwise distributing the stock. The foregoing requirements, and any
assurances given pursuant to such requirements, shall be inoperative if (iii)
the issuance of the shares upon the exercise or acquisition of stock under
the Stock Award has been registered under a then currently effective
registration statement under the Securities Act or (iv) as to any particular
requirement, a determination is made by counsel for the Company that such
requirement need not be met in the circumstances under the then applicable
securities laws. The Company may, upon advice of counsel to the Company,
place legends on stock certificates issued under the Plan as such counsel
deems necessary or appropriate in order to comply with applicable securities
laws, including, but not limited to, legends restricting the transfer of the
stock.
(f) WITHHOLDING OBLIGATIONS. To the extent provided by the terms
of a Stock Award Agreement, the Participant may satisfy any federal, state or
local tax withholding obligation relating to the exercise or acquisition of
stock under a Stock Award by any of the following means (in addition to the
Company's right to withhold from any compensation paid to the Participant by
the Company) or by a combination of such means: (i) tendering a cash
payment; (ii) authorizing the Company to withhold shares from the shares of
the Common Stock otherwise issuable to the participant as a result of the
exercise or acquisition of stock under the Stock
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<PAGE>
Award; or (iii) delivering to the Company owned and unencumbered shares of
the Common Stock.
(g) CANCELLATION AND RE-GRANT OF OPTIONS.
(i) AUTHORITY TO REPRICE. The Board shall have the
authority to effect, at any time and from time to time, (i) the repricing of
any outstanding Options under the Plan and/or (ii) with the consent of any
adversely affected holders of Options, the cancellation of any outstanding
Options under the Plan and the grant in substitution therefor of new Options
under the Plan covering the same or different numbers of shares of Common
Stock. The exercise price per share shall be not less than that specified
under the Plan for newly granted Stock Awards. Notwithstanding the
foregoing, the Board may grant an Option with an exercise price lower than
that set forth above if such Option is granted as part of a transaction to
which Section 424(a) of the Code applies.
(ii) EFFECT OF REPRICING UNDER SECTION 162(m) OF THE CODE.
Shares subject to an Option which is amended or canceled in order to set a
lower exercise price per share shall continue to be counted against the
maximum award of Options permitted to be granted pursuant to subsection 5(c).
The repricing of an Option under this subsection 10(i) resulting in a
reduction of the exercise price shall be deemed to be a cancellation of the
original Option and the grant of a substitute Option; in the event of such
repricing, both the original and the substituted Options shall be counted
against the maximum awards of Options permitted to be granted pursuant to
subsection 5(c). The provisions of this subsection 10(i)(b) shall be
applicable only to the extent required by Section 162(m) of the Code.
11. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) CAPITALIZATION ADJUSTMENTS. If any change is made in the stock
subject to the Plan, or subject to any Stock Award, without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange
of shares, change in corporate structure or other transaction not involving
the receipt of consideration by the Company), the Plan will be appropriately
adjusted in the class(es) and maximum number of securities subject to the
Plan pursuant to subsection 4(a) and the maximum number of securities subject
to award to any person pursuant to subsection 5(c), and the outstanding Stock
Awards will be appropriately adjusted in the class(es) and number of
securities and price per share of stock subject to such outstanding Stock
Awards. Such adjustments shall be made by the Board, the determination of
which shall be final, binding and conclusive. (The conversion of any
convertible securities of the Company shall not be treated as a transaction
"without receipt of consideration" by the Company.)
(b) CHANGE IN CONTROL--DISSOLUTION OR LIQUIDATION. In the event of
a dissolution or liquidation of the Company, then such Stock Awards shall be
terminated if not exercised (if applicable) prior to such event.
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(c) CHANGE IN CONTROL--ASSET SALE, MERGER, CONSOLIDATION OR REVERSE
MERGER. In the event of (1) a sale of substantially all of the assets of the
Company, (2) a merger or consolidation in which the Company is not the
surviving corporation, (3) a reverse merger in which the Company is the
surviving corporation but the shares of Common Stock outstanding immediately
preceding the merger are converted by virtue of the merger into other
property, whether in the form of securities, cash or otherwise, or (4) an
acquisition by any person, entity or group within the meaning of Section
13(d) or 14(d) of the Exchange Act, or any comparable successor provisions
(excluding any employee benefit plan, or related trust, sponsored or
maintained by the Company or an Affiliate) of the beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act, or
comparable successor rule) of securities of the Company representing at least
fifty percent (50%) of the combined voting power entitled to vote in the
election of directors then any surviving corporation or acquiring corporation
shall assume any Stock Awards outstanding under the Plan or shall substitute
similar stock awards (including an award to acquire the same consideration
paid to the stockholders in the transaction described in this subsection
11(c) for those outstanding under the Plan). In the event any surviving
corporation or acquiring corporation refuses to assume such Stock Awards or
to substitute similar stock awards for those outstanding under the Plan, then
with respect to Stock Awards held by Participants whose Continuous Service
has not terminated, the vesting of such Stock Awards (and, if applicable, the
time during which such Stock Awards may be exercised) shall be accelerated in
full, and the Stock Awards shall terminate if not exercised (if applicable)
at or prior to such event. With respect to any other Stock Awards
outstanding under the Plan, such Stock Awards shall terminate if not
exercised (if applicable) prior to such event.
12. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(a) AMENDMENT OF PLAN. The Board at any time, and from time to
time, may amend the Plan. However, except as provided in Section 11 relating
to adjustments upon changes in stock, no amendment shall be effective unless
approved by the stockholders of the Company to the extent stockholder
approval is necessary to satisfy the requirements of Section 422 of the Code,
Rule 16b-3 or any Nasdaq or securities exchange listing requirements.
(b) STOCKHOLDER APPROVAL. The Board may, in its sole discretion,
submit any other amendment to the Plan for stockholder approval, including,
but not limited to, amendments to the Plan intended to satisfy the
requirements of Section 162(m) of the Code and the regulations thereunder
regarding the exclusion of performance-based compensation from the limit on
corporate deductibility of compensation paid to certain executive officers.
(c) CONTEMPLATED AMENDMENTS. It is expressly contemplated that the
Board may amend the Plan in any respect the Board deems necessary or
advisable to provide eligible Employees with the maximum benefits provided or
to be provided under the provisions of the Code and the regulations
promulgated thereunder relating to Incentive Stock Options and/or to bring
the Plan and/or Incentive Stock Options granted under it into compliance
therewith.
(d) NO IMPAIRMENT OF RIGHTS. Rights under any Stock Award granted
before amendment of the Plan shall not be impaired by any amendment of the
Plan unless (i) the Company requests the consent of the Participant and (ii)
the Participant consents in writing.
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(e) AMENDMENT OF STOCK AWARDS. The Board at any time, and from
time to time, may amend the terms of any one or more Stock Awards; provided,
however, that the rights under any Stock Award shall not be impaired by any
such amendment unless (i) the Company requests the consent of the Participant
and (ii) the Participant consents in writing.
13. TERMINATION OR SUSPENSION OF THE PLAN.
(a) PLAN TERM. The Board may suspend or terminate the Plan at any
time. Unless sooner terminated, the Plan shall terminate on the day before
the tenth (10th) anniversary of the date the Plan is adopted by the Board or
approved by the stockholders of the Company, whichever is earlier. No Stock
Awards may be granted under the Plan while the Plan is suspended or after it
is terminated.
(b) NO IMPAIRMENT OF RIGHTS. Rights and obligations under any
Stock Award granted while the Plan is in effect shall not be impaired by
suspension or termination of the Plan, except with the written consent of the
Participant.
14. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no
Stock Award shall be exercised (or, in the case of a stock bonus, shall be
granted) unless and until the Plan has been approved by the stockholders of
the Company, which approval shall be within twelve (12) months before or
after the date the Plan is adopted by the Board.
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JATO COMMUNICATIONS CORP.
STOCK OPTION GRANT NOTICE
(1998 EQUITY INCENTIVE PLAN)
[STANDARD FORM]
JATO COMMUNICATIONS CORP. (the "Company"), pursuant to its 1998 Equity
Incentive Plan (the "Plan"), hereby grants to Optionee an option to purchase
the number of shares of the Company's common stock set forth below. This
option is subject to all of the terms and conditions as set forth herein and
in Attachments I, II, and III, which are incorporated herein in their
entirety.
Optionee:
------------------------------
Date of Grant:
------------------------------
Vesting Commencement Date:
------------------------------
Shares Subject to Option:
------------------------------
Exercise Price Per Share:
------------------------------
Expiration Date:
------------------------------
Incentive Stock Option
-----
Nonstatutory Stock Option
-----
VESTING SCHEDULE: 25% vested on the one year anniversary of the Vesting
Commencement Date; 1/48th vests on each monthly anniversary
thereafter.
PAYMENT: Payment shall be made by cash or check or by delivery of previously
owned shares of the Company's Common Stock.
ADDITIONAL TERMS/ACKNOWLEDGEMENTS: The undersigned Optionee acknowledges
receipt of, and understands and agrees to, this Grant Notice, the Stock
Option Agreement and the Plan. Optionee further acknowledges that as of the
Date of Grant, this Grant Notice, the Stock Option Agreement and the Plan set
forth the entire understanding between Optionee and the Company regarding the
acquisition of stock in the Company and supersede all prior oral and written
agreements on that subject with the exception of (i) options previously
granted and delivered to Optionee under the Plan, and (ii) the following
agreements only:
OTHER AGREEMENTS:
------------------------------------
------------------------------------
------------------------------------
JATO COMMUNICATIONS CORP. OPTIONEE:
By:
-------------------------- ------------------------------
Signature
Title:
-----------------------
Date: Date:
------------------------ ------------------------
Attachment I: Stock Option Agreement
Attachment II: 1998 Amended and Restated Equity Incentive Plan
Attachment III: Notice of Exercise
<PAGE>
JATO COMMUNICATIONS CORP.
STOCK OPTION AGREEMENT
Pursuant to the Grant Notice and this Stock Option Agreement, JATO
Communications Corp. (the "Company") has granted you an option to purchase the
number of shares of the Company's common stock ("Common Stock") indicated in the
Grant Notice at the exercise price indicated in the Grant Notice.
Your option is granted in connection with and in furtherance of the
Company's compensatory benefit plan for the Company's employees (including
officers), directors or consultants, and is intended to comply with the
provisions of Rule 701 promulgated by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Securities Act"). Defined
terms not explicitly defined in this Stock Option Agreement but defined in the
1998 Equity Incentive Plan (the "Plan") shall have the same definitions as in
the Plan.
The details of your option are as follows:
1. VESTING. Subject to the limitations contained herein, your option
will vest as provided in the Grant Notice, provided that vesting will cease upon
the termination of your Continuous Service.
2. METHOD OF PAYMENT. Payment of the exercise price by cash or check
is due in full upon exercise of all or any part of your option, provided that
you may elect, to the extent permitted by applicable law and the Grant Notice,
to make payment of the exercise price under one of the following alternatives:
(a) Payment pursuant to a program developed under Regulation T
as promulgated by the Federal Reserve Board which, prior to the issuance of
Common Stock, results in either the receipt of cash (or check) by the Company or
the receipt of irrevocable instructions to pay the aggregate exercise price to
the Company from the sales proceeds; and
(b) Provided that at the time of exercise the Company's Common
Stock is publicly traded and quoted regularly in the Wall Street Journal,
payment by delivery of already-owned shares of Common Stock, held for the period
required to avoid a charge to the Company's reported earnings, and owned free
and clear of any liens, claims, encumbrances or security interests, which Common
Stock shall be valued at its fair market value on the date of exercise.
3. EXERCISE PRIOR TO VESTING. If permitted in the Grant Notice, and
subject to the provisions of your option contained herein, you may elect, at any
time that is BOTH (i) during your Continuous Service and (ii) during your
option's term, to exercise all or part of your option, including the nonvested
portion of your option; PROVIDED, HOWEVER, that:
(a) a partial exercise of your option shall be deemed to cover
first vested shares and then the earliest vesting installment of unvested
shares;
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<PAGE>
(b) any shares so purchased from installments which have not
vested as of the date of exercise shall be subject to the purchase option in
favor of the Company as described in the Company's form of Early Exercise Stock
Purchase Agreement;
(c) you shall enter into the Company's form of Early Exercise
Stock Purchase Agreement with a vesting schedule that will result in the same
vesting as if no early exercise had occurred; and
(d) your option shall not be exercisable with respect to any
unvested installment to the extent such exercise would cause the aggregate fair
market value of any shares subject to incentive stock options granted you by the
Company (valued as of their grant date) which would become exercisable for the
first time during any calendar year to exceed $100,000.
4. WHOLE SHARES. Your option may only be exercised for whole shares.
5. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the
contrary contained herein, your option may not be exercised unless the shares
issuable upon exercise of your option are then registered under the Securities
Act or, if such shares are not then so registered, the Company has determined
that such exercise and issuance would be exempt from the registration
requirements of the Securities Act.
6. TERM. The term of your option commences on the date of grant and
expires upon the earliest of:
(i) the Expiration Date indicated in the Grant Notice;
(ii) the tenth (10th) anniversary of the Date of Grant;
(iii) twelve (12) months after your death, if you die
during, or within three (3) months after the termination of your Continuous
Service; or
(iv) twelve (12) months after the termination of your
Continuous Service due to disability; or
(v) three (3) months after the termination of your
Continuous Service for any other reason, provided that if: (a) during any part
of such three (3) month period the option is not exercisable solely because of
the condition set forth in paragraph 5 (Securities Law Compliance), in which
event the option shall not expire until the earlier of the Expiration Date or
until it shall have been exercisable for an aggregate period of three (3) months
after the termination of Continuous Service, and (b) exercise of the option
within three (3) months after termination of your Continuous Service would
result in liability under section 16(b) of the Securities Exchange Act of 1934
(the "Exchange Act"), the option will expire on the earliest of (i) the
Expiration Date, (ii) the tenth (10th) day after the last date upon which
exercise would result in such liability or (iii) six (6) months and ten (10)
days after the termination of your Continuous Service.
To obtain the federal income tax advantages associated with an
"incentive stock option," the Code requires that at all times beginning on the
date of grant of the option and
2
<PAGE>
ending on the day three (3) months before the date of the option's exercise,
you must be an employee of the Company or an Affiliate of the Company, except
in the event of your death or permanent and total disability. The Company
has provided for continued vesting or extended exercisability of your option
under certain circumstances for your benefit, but cannot guarantee that your
option will necessarily be treated as an "incentive stock option" if you
provide services to the Company or an Affiliate of the Company as a
consultant or if you exercise your option more than three (3) months after
the date your employment with the Company terminates.
7. EXERCISE.
(a) You may exercise the vested portion of your option during
its term (and the unvested portion of your option if the Grant Notice so
permits) by delivering a notice of exercise (in a form designated by the
Company) together with the exercise price to the Secretary of the Company, or to
such other person as the Company may designate, during regular business hours,
together with such additional documents as the Company may then require.
(b) By exercising your option you agree that:
(i) as a condition to any exercise of your option, the
Company may require you to enter an arrangement providing for the payment by you
to the Company of any tax withholding obligation of the Company arising by
reason of (1) the exercise of your option; (2) the lapse of any substantial risk
of forfeiture to which the shares are subject at the time of exercise; or
(3) the disposition of shares acquired upon such exercise;
(ii) you will notify the Company in writing within
fifteen (15) days after the date of any disposition of any of the shares of the
Common Stock issued upon exercise of an incentive stock option that occurs
within two (2) years after the date of your option grant or within one (1) year
after such shares of Common Stock are transferred upon exercise of your option;
and
(iii) the Company (or a representative of the
underwriters) may, in connection with the first underwritten registration of the
offering of any securities of the Company under the Act, require that you not
sell, dispose of, transfer, make any short sale of, grant any option for the
purchase of, or enter into any hedging or similar transaction with the same
economic effect as a sale, any shares of Common Stock or other securities of the
Company held by you, for a period of time specified by the underwriter(s) (not
to exceed one hundred eighty (180) days) following the effective date of the
registration statement of the Company filed under the Act. You further agree to
execute and deliver such other agreements as may be reasonably requested by the
Company and/or the underwriter(s) which are consistent with the foregoing or
which are necessary to give further effect thereto. In order to enforce the
foregoing covenant, the Company may impose stop-transfer instructions with
respect to your Common Stock until the end of such period.
(iv) the shares of Common Stock issued upon the exercise
shall be subject to the terms of a Stockholders Agreement, which you agree to
execute and be bound by in connection with your exercise.
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<PAGE>
8. TRANSFERABILITY. Your option is not transferable, except by will
or by the laws of descent and distribution, and is exercisable during your life
only by you. Notwithstanding the foregoing, by delivering written notice to the
Company, in a form satisfactory to the Company, you may designate a third party
who, in the event of your death, shall thereafter be entitled to exercise your
option.
9. RIGHT OF FIRST REFUSAL. Before any shares of Common Stock (the
"Shares") issued upon exercise of an option to you or any transferee (either
being sometimes referred to herein as the "Holder") may be sold or otherwise
transferred (including transfer by gift or operation of law), the Company shall
have an assignable right of first refusal to purchase the Shares on the terms
and conditions set forth in this Section 9 (the "Right of First Refusal").
(a) NOTICE OF PROPOSED TRANSFER. The Holder of the Shares
shall deliver to the Company a written notice (the "Notice") stating: (i) the
Holder's bona fide intention to sell or otherwise transfer the Shares; (ii) the
name of each proposed purchaser or other transferee (the "Proposed Transferee");
(iii) the number of Shares to be transferred to each Proposed Transferee; and
(iv) the bona fide cash price or other consideration for which the Holder
proposed to transfer the Shares (the "Offered Price"); and the Holder shall
offer to sell the Shares at the Offered Price to the Company.
(b) EXERCISE OF RIGHT OF FIRST REFUSAL. At any time within
thirty (30) days after receipt of the Notice, the Company or its assignee may,
by giving written notice to the Holder, elect to purchase all (but not less than
all) of the Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the Offered Price.
(c) Payment. Payment of the purchase price shall be made, at
the option of the Company or its assignee, either (i) in cash (by check) or (ii)
in the manner and at the time(s) set forth in the Notice.
(d) HOLDER'S RIGHT TO TRANSFER. If all the Shares proposed in
the Notice to be transferred to a given Proposed Transferee are not purchased by
the Company and/or its assignee as provided in this Section 9, then the Holder
may sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, PROVIDED, THAT, such sale or other transfer
is consummated within one hundred twenty (120) days after the date of the Notice
and provided further that any such sale or other transfer is effected in
accordance with any applicable securities laws. If the Shares described in the
Notice are not transferred to the Proposed Transferee within such period, a new
Notice shall be given to the Company, and the Company shall again be offered the
Right of First Refusal, before any Shares held by the Holder may be sold or
otherwise transferred.
(e) EXCEPTION FOR CERTAIN FAMILY TRANSFERS. Anything to the
contrary contained in this Section 9 notwithstanding, the transfer of any or all
of the Shares during the Optionee's lifetime or on the Optionee's death by will
or intestacy to Optionee's immediate family or to a trust for the benefit of
Optionee or Optionee's immediate family shall be exempt from the provisions of
this Section 9; PROVIDED THAT, as a condition to receiving the Shares, the
transferee or other recipient shall agree in writing to receive and hold the
Shares so transferred subject to the provisions of the Plan, and to transfer
such Shares no further except in accordance
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<PAGE>
with the terms of the Plan. As used herein, "immediate family" shall mean
spouse, lineal descendant or antecedent, father, mother, brother or sister.
(f) TERMINATION OF RIGHT OF FIRST REFUSAL. The Right of First
Refusal shall terminate as to any Shares upon the first sale of Common Stock of
the Company to the general public pursuant to a registration statement filed
with and declared effective by the Securities and Exchange Commission (other
than a registration statement solely covering an employee benefit plan or
corporate reorganization).
10. OPTION NOT A SERVICE CONTRACT. Your option is not an employment
contract and nothing in your option shall be deemed to create in any way
whatsoever any obligation on your part to continue in the employ of the Company,
or of the Company to continue your employment with the Company. In addition,
nothing in your option shall obligate the Company, or any Affiliate of the
Company, or their respective stockholders, Board of Directors, officers or
employees to continue any relationship which you might have as a Director or
Consultant for the Company.
11. NOTICES. Any notices provided for in your option or the Plan
shall be given in writing and shall be deemed effectively given upon receipt or,
in the case of notices delivered by the Company to you, five (5) days after
deposit in the United States mail, postage prepaid, addressed to you at the last
address you provided to the Company.
12. GOVERNING PLAN DOCUMENT. Your option is subject to all the
provisions of the Plan, the provisions of which are hereby made a part of your
option, including without limitation the provisions of the Plan relating to
option provisions, and is further subject to all interpretations, amendments,
rules and regulations which may from time to time be promulgated and adopted
pursuant to the Plan. In the event of any conflict between the provisions of
your option and those of the Plan, the provisions of the Plan shall control.
5
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DENVER PLACE PLAZA TOWER
AGREEMENT OF LEASE
BETWEEN
DENVER-STELLAR ASSOCIATES LIMITED PARTNERSHIP,
LANDLORD
AND
JATO COMMUNICATIONS CORP.,
A DELAWARE CORPORATION,
TENANT
<PAGE>
OFFICE LEASE
DENVER PLACE PLAZA TOWER
DENVER, COLORADO
AGREEMENT OF LEASE (the "LEASE") is made as of the lst day of January
1999 (the "EFFECTIVE DATE") between DENVER-STELLAR ASSOCIATES LIMITED
PARTNERSHIP, a Delaware limited partnership (hereinafter referred to as
"LANDLORD") and JATO COMMUNICATIONS CORP., a Delaware corporation, whose present
address is 5660 Greenwood Plaza Blvd., Suite 220, Englewood, Colorado 80111
(hereinafter referred to as "TENANT").
WITNESSETH:
Landlord hereby leases to Tenant, and Tenant hereby accepts from
Landlord, the premises (hereinafter referred to as the "PREMISES") containing
approximately 4,215 square feet of rentable area and designated on the plan
attached hereto as EXHIBIT A and further described as in the building known as
Denver Place Plaza Tower (hereinafter referred to as the "BUILDING") located at
1099 18th Street, Denver, Colorado, 80202, subject to the covenants, terms,
provisions and conditions of this Lease. The Building, the land upon which it
is situated, all surrounding improvements, any garage or other related
improvements and all common areas appurtenant to, associated with or servicing
the Building are hereinafter called the "Real Property" or the "Property".
In consideration thereof, Landlord and Tenant covenant and agree as
follows:
1. TERM. The term of this Lease (the "TERM") shall commence on that
date (the "COMMENCEMENT DATE") which is the sooner of January 1, 1999 (the
"SCHEDULED COMMENCEMENT DATE") or the date upon which Tenant shall have
commenced occupancy of any part of the Premises and, unless sooner terminated as
provided herein, shall end, absolutely and without the need for notice from
either party to the other, on June 30, 2004 (the "TERMINATION DATE"). Once the
Term of the Lease has commenced, Landlord and Tenant shall confirm the
Commencement Date and Termination Date of the Lease in the form of the Lease
Term Agreement attached hereto as EXHIBIT C. Notwithstanding the foregoing,
Tenant may enter the Premises commencing December 26, 1998, for Tenant's
installation of furniture, phones and equipment. Tenant's entry of the Premises
during such period prior to the Commencement Date shall be subject to all terms
of the Lease except for the payment of any rent. Such early entry shall not be
deemed to advance the Commencement or Termination Dates of the Lease.
2. BASE RENT. Subject to adjustment as herein provided, the Base
Rent to be paid hereunder shall be ________ per annum which shall be paid in
advance on or before the first day of each calendar month during the Term, in
equal monthly installments of ___________ PROVIDED, HOWEVER, that Tenant shall
pay the first full monthly installment at the time of execution of this Lease.
If the Term commences other than on the first day of a month or ends other than
on the last day of a mouth, the Base Rent for such month shall be prorated. The
Base Rent for the portion of the month in which the Term commences shall be paid
on the first day of the first full month of the Term.
1.
<PAGE>
3. COMPLETION OF IMPROVEMENTS. Landlord shall have no obligation for
the completion or remodeling of the Premises, and Tenant shall accept the
Premises in their "as is" condition on the Effective Date. Notwithstanding the
foregoing, Landlord agrees at its sole cost and expense, to: (i) clean the
carpet currently existing in the Premises by the later of December 28, 1998 or
the Scheduled Commencement Date; (ii) construct prior to July 1, 1999, a common
area corridor adjacent to the seventh floor elevator to provide an entry way to
the Premises; and (iii) install demising walls for the Premises, as the seventh
floor of the Building was previously occupied by a full floor tenant. If Tenant
elects to install any improvements in the Premises, such improvements shall be
carried out pursuant to Section 8 of this Lease.
4. ADDITIONAL RENT. In addition to paying the Base Rent specified in
Paragraph 2 hereof, Tenant shall pay as "additional rent", the amounts
determined as hereinafter set forth in this Paragraph 4. The Base Rent and
additional rent are sometimes herein collectively referred to as the "rent".
All amounts due under this lease as additional rent shall be payable in the same
manner and at the same place as the Base Rent.
(a) DEFINITIONS. As used in this Paragraph 4, the terms:
(i) OPERATING EXPENSE BASE AMOUNT. Operating Expense
Base amount shall mean $5.20 per rentable square foot per annum.
(ii) TAX BASE AMOUNT. Tax Base Amount shall mean $1.40
per rentable square foot per annum. But in no event shall the combined
Operating Expense Base Amount and Tax Base Amount be less than $6.60 per
rentable square foot.
(iii) CALENDAR YEAR. Calendar Year shall mean each
calendar year in which any part of the Term falls, through and including the
year in which the Term expires.
(iv) TENANT'S PROPORTIONATE SHARE. Tenant's
Proportionate Share shall mean 0.82% being the percentage calculated by dividing
4,215 square feet, the rentable area of the Premises provided at the beginning
of this Lease, by 514,000 square feet (being 95% of the rentable all of the
office space in the Building). The rentable area of the Premises has been
calculated according to a method pursuant to which a portion of the common areas
has been deemed included in the Premises.
(v) TAXES. Taxes for any Calendar Year shall mean the
Building's Proportionate Tax Share of all real estate taxes and assessments,
special or otherwise, levied or assessed upon that parcel of land known as Lots
I through 32 inclusive and adjacent vacated alley, block 95, East Denver
Subdivision (the "LAND") and/or the building during such Calendar Year;
PROVIDED, HOWEVER, that if Landlord subdivides the Land so that the Building is
located on its own tax lot (i.e., there are no other buildings on such tax lot),
then (1) such separate tax lot shall be referred to as the "BUILDING TAX LOT",
and (2) for each year that the Building Tax Lot is taxed separately from the
remainder of the Land, the term "Taxes" shall mean all real estate taxes and
assessments, special or otherwise, levied or assessed upon the Building Tax Lot
and/or the Building during such Calendar Year. For purposes of this
subparagraph "Buildings Proportionate Tax Share" for any Calendar Year shall
mean the fraction the numerator of which is equal to the assessed valuation for
the Building only for such Calendar Year and the
2.
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denominator of which is equal to the sum of the assessed valuations for all
buildings and improvements on the Land (including the Building) for such
Calendar Year. Should the State of Colorado, or any political subdivision
thereof, or any other governmental authority, impose a tax, assessment, charge
or fee, which Landlord shall be required to pay, wholly or partially in
substitution of any of the above Taxes, all such taxes, assessments, fees or
charges shall be deemed to constitute Taxes hereunder but shall be computed as
if the Real Property and any other shared use real property referred to in this
subparagraph were the only real property of Landlord. "Taxes" shall also
include all fees and costs, including reasonable attorneys' fees, appraisals
and consultants' fees, incurred by Landlord in seeking to obtain a reduction of,
or a limit on, any increase in any Taxes (regardless of whether any reduction or
limitation is obtained). In the event that the Real Property shall be for any
taxes or assessments assessed under the same assessment as other real property,
the amount of such taxes or assessment to be included within Taxes shall be such
portion thereof as Landlord fairly and equitably shall deem attributable
thereto,
(vi) OPERATING EXPENSES. Operating Expenses shall mean
all expenses, costs and disbursements (other than Taxes) of every kind and
nature paid or incurred by or on behalf of Landlord in connection with the
ownership, management, operation, maintenance and repair of the Property (and,
as allocated by Landlord, those paid or incurred in connection with the
ownership, operation, maintenance, management and repair of any garage or other
improvements the use of which is shared by the Building and one or more other
buildings) except the following:
(1) costs of alterations of any tenant's
premises;
(2) principal or interest payments on loans
secured by mortgages or trust deeds on the Real Property;
(3) costs of capital improvements, except that
Operating Expenses shall include the costs as amortized over such number of
years as Landlord may reasonably determine, with interest at the rate of 12% per
annum on the unamortized amount, of any capital improvements which, (1) in
Landlord's reasonable opinion, will have the effect of reducing any component
cost included within Operating Expenses, (2) are made or installed to assure
compliance with all governmental rules and regulations applicable from time to
time, or (3) under generally applied real estate accounting practices may be
expensed or treated as deferred expenses (and the amortization and interest so
determined for each Calendar Year shall be included in Operating Expenses for
that Calendar Year); and
(4) leasing commissions for space in the
Building.
(b) EXPENSE ADJUSTMENT.
(i) Tenant shall pay as additional rent for each
Calendar Year, that amount ("EXPENSE ADJUSTMENT AMOUNT") which is Tenant's
Proportionate Share of the amount by which the Operating Expenses incurred with
respect to such Calendar Year exceed the Operating Expense Base Amount;
PROVIDED, HOWEVER, that in determining the amount of Operating Expenses for each
Calendar Year, if less than 95% of the rentable office area of the
3.
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Building shall have been occupied at any time during such Calendar Year,
Operating Expenses shall be deemed for such Calendar Year to be in the amount
reasonably determined by Landlord to be equal to that amount of like expenses
which normally would be expected to be incurred had such occupancy been 95%
throughout such Calendar Year.
(ii) The Expense Adjustment Amount with respect to each
Calendar Year shall be paid in monthly installments, in advance on the first day
of each calendar month during the course of such year, in amounts estimated from
time to time by Landlord and communicated by written notice to Tenant. Landlord
shall cause to be kept books and records showing Operating Expenses in
accordance with generally accepted accounting principles. Following the close
of each Calendar Year, Landlord shall cause the amount of the Expense Adjustment
Amount for such Calendar Year to be computed based on Operating Expenses for
such Calendar Year, and Landlord shall deliver to Tenant a statement of such
amount; thereupon Tenant shall pay any deficiency as shown by such statement to
Landlord within 30 days after receipt of such statement. If the total of the
estimated monthly installments paid by Tenant during any Calendar Year exceed
the actual Expense Adjustment Amount due from Tenant for such Calendar Year,
then, at Landlord's option, such excess shall be either credited against
payments next due hereunder or refunded by Landlord, provided Tenant is not then
in default hereunder.
(c) ADJUSTMENT FOR SERVICES NOT RENDERED. If Landlord shall
not be furnishing any particular work or service (the cost of which, if
furnished by Landlord would be included in Operating Expenses) to a tenant who
undertakes to itself perform or obtain such work or service in lieu of the
furnishing thereof by Landlord, Operating Expenses shall be deemed for purposes
of this Paragraph 4 to be increased by an amount equal to the additional
Operating Expenses, as reasonably determined by Landlord, which would have been
incurred during such period if Landlord had at its own expense furnished such
work or service to such tenant.
(d) TAX ADJUSTMENT. Tenant shall pay as additional rent for
each Calendar Year that amount (the "TAX ADJUSTMENT AMOUNT") which is Tenant's
Proportionate Share of the amount by which the Taxes incurred with respect to
such Calendar Year exceed the Tax Base Amount. The Tax Adjustment Amount with
respect to each Calendar Year shall be paid in monthly installments, in an
amount estimated from time to time by Landlord and communicated by written
notice to Tenant. Following the close of each Calendar Year, Landlord shall
cause the amount of the Tax Adjustment Amount for such Calendar Year to be
computed based on Taxes for such Calendar Year and Landlord shall deliver to
Tenant a statement of such amount and Tenant shall pay any deficiency as shown
by such statement to Landlord within 30 days after receipt of such statement.
If the total of the estimated monthly installments paid by Tenant during any
Calendar Year exceeds the actual Tax Adjustment Amount due from Tenant for such
Calendar Year, then, at Landlord's option such excess shall be either credited
against payments next due hereunder or refunded by Landlord, provided Tenant is
not then in default hereunder. The amount of any refund of Taxes received by
Landlord shall be credited against Taxes for the year in which such refund is
received. In determining the amount of Taxes for any year, the amount of
special assessments to be included shall be limited to the amount of the
installment (plus any interest payable thereon) of such special assessment
required to be paid during such year as if the Landlord had elected to have such
special assessment paid over the maximum
4.
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period of time permitted by law; if the authority to whom such assessment is to
be paid shall not permit such assessment to be paid in installments, the amount
of such assessment shall be treated as being amortized over such number of
calendar years, beginning with the Calendar Year in which the assessment is
payable, as Landlord shall reasonably determine, with interest at the rate of
15% per annum on the unamortized amount, and such amortization and interest for
each Calendar Year shall be included in Taxes for that Calendar Year.
(e) PARTIAL YEAR. If only part of any Calendar Year shall fall
within the Term, the amounts computed as additional rent, with respect to such
Calendar Year under the foregoing provisions of this Paragraph 4 shall be
prorated in proportion to the portion of such Calendar Year falling within the
Term, but the expiration or termination of this Lease prior to the end of such
Calendar Year shall not impair the Tenant's obligation hereunder to pay such
prorated portion of such additional rent with respect to that portion of such
year falling within the Term.
(f) DISPUTES. Any statement furnished to Tenant by Landlord
under the provisions of this Paragraph 4 shall constitute a final determination
as between Landlord and Tenant as to the rent set forth therein due from Tenant
for the period represented thereby, unless Tenant, within 60 days after such
statement is furnished, shall give a notice to Landlord that it disputes the
correctness thereof, specifying in detail the basis for such assertion. Pending
resolution of such dispute, Tenant shall pay all disputed amounts in accordance
with the statement furnished by Landlord. Landlord agrees, upon prior written
request, during normal business hours to make available for Tenant's inspection,
at Landlord's offices, Landlord's books and records which are relevant to any
items in dispute, provided Tenant has paid all amounts billed to Tenant on
account of the Expense Adjustment Amount and the Tax Adjustment Amount and all
installments thereof and all other rents and sums then and previously due under
this Lease.
(g) PLACE OF PAYMENT. Tenant shall, without any demand
therefor and without set-off, pay to DENVER-STELLAR ASSOCIATES LTD. PARTNERHSIP,
A/R DEPARTMENT, DENVER, COLORADO 80256-0170, or to such other person and/or at
such other place as Landlord may from time to time direct by notice given to
Tenant, the Base Rent as well as all other sums which may become due by Tenant
under this Lease. All such other sums shall be payable as additional rent.
(h) TENANT TAXES.
(i) Any provision hereof to the contrary
notwithstanding, Tenant shall, upon demand from time to time, as additional
rent, pay to Agent or, as Landlord may direct, to Landlord or to the tax
collecting authority, the full amount of all taxes, levies, charges and
assessments legally required or authorized to be collected by Landlord from
Tenant or any subtenant or occupant of the Premises and all taxes, levies,
charges and assessments legally required to be paid by Landlord (or imposed upon
the Property), other than taxes based on Landlord's income, if not paid by or
collected from Tenant or a subtenant or occupant of the Premises. Tenant hereby
agrees to defend, indemnify and hold harmless Landlord from and against all
loss, cost, liability and expenses (including counsel fees and costs of
litigation) which Landlord may suffer, incur or be exposed to as a result of any
assertion against Landlord of
5.
<PAGE>
liability for any of the taxes referred to in this subparagraph (h), and from
and against any penalties or interest relating thereto, which Tenant fails to
pay pursuant hereto.
(ii) Tenant shall timely pay when due all taxes, levies,
charges and assessments which are required to be paid by Tenant with respect to
Tenant's use or occupancy of the Premises or which are or could become a lien
upon the personal property, trade fixtures, furniture or facilities of Tenant on
the Premises. Tenant hereby agrees to defend, indemnify and hold harmless
Landlord from and against all loss, cost, liability and expense (including,
without limitation, counsel fees and costs of litigation) which Landlord may
suffer or incur, or to which Landlord may be exposed, as a result of Tenant's
failure to pay any of the foregoing.
(iii) Within 15 days after each date upon which such taxes
are due, Tenant shall deliver to Landlord official receipts for the payment of
all taxes due with respect to the personal property, trade fixtures, furniture
or facilities of Tenant on the Premises. In addition, within 15 days after
written notice from Landlord to do so, Tenant shall deliver to Landlord official
receipts for the payment of all other taxes, levies, charges and assessments
within the scope of subparagraph (ii) above that were due and payable in the
calendar year in which such notice is given and in the preceding calendar year.
If Tenant shall fail to present any of the receipts referred to in this
subparagraph within the times set forth herein, Landlord shall have the right to
pay the amounts of the taxes which Landlord reasonably determines would have
been covered thereby, together with the full interest and penalties chargeable
thereon in accordance with law, and Landlord shall, upon demand, be entitled to
reimbursement for all of such payments together with interest at the "Lease
Interest Rate" (defined in Paragraph 21 hereof.
(iv) Tenant shall cause all of the personal property,
trade fixtures, furniture and facilities of Tenant on the Premises, and all
alterations, additions and improvements made by Tenant to the Premises which for
purposes of personal property taxes are treated as personal property (such as
built-in cabinets, counters and partitions) to be assessed separately from
Landlord's property, and, if they are not so separately assessed, Landlord shall
be entitled to reimbursement, within 10 days after demand made from time to
time, for any tax payable by Landlord which is attributable to any of such items
taxable as personal property.
(i) DELAY IN COMPUTATION. Delay in computation of the Expense
Adjustment Amount or Tax Adjustment Amount shall not be deemed a default
hereunder or a waiver of Landlord's right to collect any of such amounts.
5. USE OF PREMISES. Tenant shall use and occupy the Premises solely
as a general business office and for no other purpose.
6. CONDITION OF PREMISES. The Tenant's taking possession of the
Premises or any portion thereof shall be conclusive evidence that the Premises
or any such portion was in good order and satisfactory Condition when the Tenant
took possession. At the expiration or other termination of this Lease or of
Tenant's right of possession, Tenant shall leave the Premises, and during the
Term will keep the same, in good order and condition, ordinary wear and tear,
damage by fire or other casualty (which fire or other casualty has not occurred
through the negligence of Tenant or those claiming under Tenant or their
employees or invitees
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respectively) alone excepted; and for that purpose, Tenant shall make all
necessary repairs and replacements. Tenant shall give Landlord prompt notice of
any damage to or accident upon the Premises and of any breakage or defects in
the window glass, wiring or plumbing, heating, ventilating or cooling or
electrical apparatus or systems on or serving the Premises. Tenant shall at the
expiration or termination of this Lease or of Tenant's right of possession, also
have had removed from the Premises all furniture, trade fixtures, office
equipment and all other items of Tenant's property (including, without
limitation, the items Tenant is required to remove pursuant to Paragraph 8(b)
hereof) so that Landlord may again have and repossess the Premises. All such
items not removed from the Premises at such expiration or termination, shall
conclusively be deemed to have been abandoned and may be appropriated, sold,
stored, destroyed or otherwise disposed of by Landlord without notice to Tenant
or any other party with an interest in such Property and without any obligation
to account therefor. Tenant shall pay Landlord all expenses incurred in
connection with the disposition of such property, and if Landlord shall choose
to store any such items, Landlord shall have no liability for the safekeeping
thereof and such items may not be retrieved by Tenant or any other person except
upon payment of such charges as may be imposed for the removal and storage,
Tenant shall comply with all laws, rules, orders, ordinances and regulations at
any time issued or in force by any lawful authority, applicable to Tenant or any
other occupant of the Premises, or to the Premises, or to the use or occupancy
of the Premises. Tenant shall, upon demand, pay to Landlord the amount of any
damages suffered or incurred by Landlord as a result of any injury to any part
of the Property other than the Premises, done by Tenant or any subtenant or any
agent, employee, contractor or invitee of Tenant or any subtenant, including,
without limitation, damage done by the bringing or removal of furniture and
other property. Tenant shall forthwith repair all damage done to the Premises
by installation or removal of furniture and property by Tenant or any subtenant
or by any agent, employee, contractor or invitee of Tenant or of any subtenant
or, if Landlord shall so request, pay to Landlord the cost of such repair.
Tenant shall not do or commit, or suffer or permit to be done of committed, any
act or thing as a result of which any Policy of insurance of any kind on or in
connection with the Property shall become void or suspeded, or any insurance
risk on or in connection with the Building or any other portion of the Property
shall (in the opinion of the insurer or any insurance organization) be rendered
more hazardous or require payment of a greater premium; without limitation of
any other rights and remedies of Landlord, Tenant shall pay as additional rent
the amount of any increase of premiums for such insurance, resulting from any
breach of this provision. Tenant shall leave the Premises in a reasonably tidy
condition on all days upon which janitorial services are to be provided by
Landlord. Landlord shall, at Landlord's expense, replace any glass broken in
the Premises windows in the exterior walls of the Building, unless such glass is
broken by Tenant, its servants, employees, agents, invitees, licensees or
contractors, in which case Tenant shall, upon demand, pay the cost of
replacement by Landlord. Tenant shall replace and pay for any other glass
broken in or about the Premises.
7. SERVICES.
(a) LIST OF SERVICES. Landlord shall provide the following
services on all days during the Term, except Sundays and holidays, unless
otherwise stated:
(i) Heating, ventilation and air conditioning, as deemed
appropriate by Landlord, from Monday through Friday within the period from 6: 00
a. m. to 6: 00 p. m. and on Saturday within the period from 8:00 a.m. to 1:00
p.m., holidays excepted. Tenant, within ten
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days after its receipt of each bill therefor, will pay for all heating,
ventilating and air conditioning requested and furnished at other times, at
rates to be established from time to time by Landlord, which rates shall not
exceed landlord's actual costs of labor and utilities plus a reasonable
administration fee. Landlord shall not be responsible for the failure of the
HVAC system to provide normal comfort if such failure results from occupancy of
the Premises by more than an average of one person for each 200 square feet of
floor area or if Tenant uses heat-producing equipment or equipment the
electrical load of which, when combined with the load of all lighting fixtures,
exceeds 4.2 watts per square foot of floor area in any one room or area. Unless
otherwise consented to by Landlord, window coverings shall be uniform in the
Building and shall be closed when exterior office windows are exposed to the sun
without regard to Tenant's specific use of the space or to the installation of
any computers or data processing equipment. In addition, if the Premises are
used in a manner exceeding the aforementioned occupancy and electric load
criteria or if such window covering requirement shall not be observed or if
heat-producing or controlled climate equipment is used, Tenant shall pay to
Landlord, promptly upon billing, Landlord's additional costs of supplying air
conditioning resulting from such causes, at such rates as Landlord shall
establish therefor, which rates shall not exceed Landlord's actual additional
costs related thereto plus a reasonable administration fee. If due to use of
the Premises in a manner exceeding the aforementioned occupancy and electrical
load criteria, or due to the arrangement of partitioning, or the use of
heat-producing or controlled climate equipment, or the distribution system
within the Premises, impairment of normal operation of the HVAC system in the
Premises results, necessitating changes in HVAC distribution system within the
Premises, such changes may be made by Landlord upon request by Tenant at
Tenant's sole cost and expense, provided that they can be accommodated by
Landlord's systems. Tenant agrees at all times to cooperate fully with Landlord
and to abide by all the regulations and requirements which Landlord may
prescribe for the proper functioning and protection of the HVAC system. After
Landlord has balanced the air-conditioning system for Tenant, if Tenant installs
partitions, equipment, or fixtures requiring rebalancing of the system, Landlord
at Tenant's request and at Tenant's expense (which shall be charged as
additional rent payable upon demand) shall endeavor to do such rebalancing.
(ii) Subject to subparagraph 7(b) hereof, electrical
energy for standard building lighting fixtures provided by Landlord and for the
operation of desk-top office equipment, provided that (A) the connected
electrical load of such equipment (exclusive of standard building lighting
fixtures) does not exceed an average of 2.5 watts per square foot of the
Premises and (13) the electricity so furnished for equipment uses will be at a
nominal 120 volts and no electrical circuit for the supply of such use need have
a current capacity exceeding 20 amperes. If Tenant's requirements for
electricity are in excess of those set forth in the preceding sentence, and if,
in Landlord's sole judgment, Landlord's facilities are inadequate for such
additional requirements and if electrical energy for such additional
requirements is available to Landlord, Landlord upon written request and at the
sole cost and expense of Tenant, will furnish and install, or, at Landlord's
sole discretion, permit Tenant to furnish and install, such additional wires,
risers, conduits, feeders and switchboards as reasonably may be required to
supply such additional requirements of Tenant provided (1) that the same shall
be permitted by applicable laws and insurance regulations, (2) that, in
Landlord's sole judgment, the same are necessary and will not cause permanent
damage or injury to the Building or the Premises or cause or create a dangerous
or hazardous condition or entail excessive or unreasonable alterations or
repairs or interfere with or disturb other tenants or occupants of the Building,
(3) that, in Landlord's sole
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judgment, the same will not in any way diminish or adversely affect the
electricity which Landlord deems should remain available for other tenants, and
(4) that Tenant, at Tenant's expense, shall, concurrently with the making of
such written request, execute and deliver to Landlord, Tenant's written
undertaking, in form and substance satisfactory to Landlord, obligating Tenant
to fully and promptly pay the entire cost and expense of so furnishing and
installing any additional wires, risers, conduits, feeders and/or switchboards.
(iii) Ordinary water from the regular Building outlets for
drinking, lavatory and toilet purposes.
(iv) Janitorial services Monday through Friday in and
about the Premises (except holidays). If any material use made of the Premises
after 6:00 p.m. shall by reason of work force scheduling or security, overtime,
union rules or otherwise cause any increase, in Landlord's cost for providing
janitorial services, Tenant shall, as additional rent, pay all bills for
reimbursement of Landlord for such increase, within ten days after Tenant's
receipt of such bill. All janitorial services shall be performed solely at
Landlord's discretion without interference from Tenant.
(v) Automatic passenger elevator service at all times.
(vi) Freight elevator services subject to reasonable
scheduling by Landlord.
(b) BILLING FOR ELECTRICITY.
(i) LANDLORD'S PAYMENT FOR NORMAL SERVICE. Landlord
shall provide and pay for electric service as described in the first sentence of
subparagraph 7(a)(ii) during the period from 6:00 a.m. to 6:00 p.m. from Monday
through Friday, and during the period from 8:00 a.m. to 1:00 p.m. on Saturday,
holidays excepted. In the event that Landlord, in Landlord's sole discretion,
determines that Tenant's use of electricity exceeds the service to be provided
under the first sentence of subparagraph 7(a)(ii) above or goes materially
beyond the hours specified in this subparagraph 7(b)(i), Tenant shall pay, as
additional rent, such amounts for such excess and/or other hours use as shall be
required under subparagraph 7(b)(ii) and (iii) below.
(ii) MEASURED USAGE. In the event that Tenant's use of
the Premises includes the use of computers or other electrical equipment or
fixtures causing, in Landlord's sole determination, Tenant's use of electric
service to exceed the service to be provided under the first sentence of
subparagraph 7(a)(ii) above, or if there shall be at the Premises any other
hours (i.e. outside the hours specified in 7(b)(i)) use of electricity which
Landlord believes may be material, Landlord shall install in the Premises or
elsewhere, if Landlord shall so elect, or, if Tenant shall so request and if
feasible in Landlord's reasonable judgment, one or more meters or other devices
to measure the electricity used by such computers or other equipment or fixtures
and/or such other hours use; and Tenant shall pay Landlord for such electricity
within ten days after submission of each bill by Landlord therefor, at such
rates as shall be from time to time determined by Landlord, provided that the
rates charged by Landlord shall not exceed Landlord's cost (including, without
limitation, taxes, fuel adjustment charges, and other like charges regularly
passed on to customers by public utility companies and transformer costs) of
supplying
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such electricity as determined by Landlord using reasonable accounting methods;
and the cost of obtaining and installing such meters or other devices shall be
paid by Tenant to Landlord within ten days after submission of each bill by
Landlord to Tenant therefor.
(iii) ESTIMATED USAGE. For any other hours use of
electricity determined by Landlord to be material, and for any use of
electricity which is determined by Landlord to be in excess of the service to be
provided under the first sentence of subparagraph 7(a)(ii) above, and which is
not actually measured, Tenant shall pay to Landlord, in monthly installments at
the times prescribed for the monthly installments of the Base Rent, amounts, as
reasonably estimated by Landlord from time to time, which Tenant would be
required to pay for such excess and/or other hours electrical service if the
same were actually measured as provided in subparagraph (b)(ii) above.
(c) INTERRUPTION OF SERVICE. Tenant agrees that Landlord shall
not be liable for damages (by abatement of rent or otherwise) for failure to
furnish or delay in furnishing any service, or for any diminution in the quality
or quantity thereof, when such failure or delay or diminution is occasioned, in
whole or in part, by repairs, renewals, or improvements, by any strike, lockout
or other labor trouble, by inability to secure fuel, by governmental laws,
regulations or orders, by Landlord's compliance, in whole or in part with any
government promulgated program (whether voluntary or mandatory), for
conservation of energy by any accident or casualty whatsoever, by act or default
of Tenant or other parties, or by any cause beyond Landlord's reasonable
control; and such failures or delays or diminution shall never be deemed to
constitute an eviction or disturbance of the Tenant's use and possession of the
Premises or relieve the Tenant from paying rent or performing any of its
obligations under this Lease. Landlord's obligation to furnish services shall
also be further conditioned upon the availability of adequate energy sources
from the public utility companies then servicing the downtown Denver area.
8. ALTERATIONS.
(a) Tenant shall not, without the prior written consent of
Landlord, make any alterations, improvements or additions to the Premises. If
Landlord consents to any alterations, improvements or additions, it may impose
such conditions with respect thereto as Landlord deems appropriate, including,
without limitation, Landlord's approval of plans and specifications for the work
(but Tenant shall not be entitled to rely upon such approval as evidencing that
the plans and specifications are proper in any respect), use of Landlord's
approved contractors to perform the work (it being agreed that W.B. Keiding is
pre-approved by Landlord), insurance against liabilities which may arise out of
such work, permits necessary for such work and as-built drawings upon completion
of such work and the furnishing to Landlord of such security as is determined by
Landlord to be appropriate for the proper completion of such work and its
completion free of mechanics', materialmen's and similar liens or claims
thereof. Upon Tenant's request, Landlord shall provide Tenant with the
currently existing architectural, plumbing, mechanical and electrical "as-built"
drawings of the Premises. All work done by Tenant or its contractors shall be
done in a first-class workmanlike manner, using only good grades of materials
and without disturbing other tenants and shall comply with all insurance
requirements and all applicable laws or ordinances and rules and regulations of
governmental departments or agencies. Before proceeding with any such work,
Tenant shall reimburse
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Landlord for Landlord's costs of Landlord's architects' review of Tenant's plans
and specifications. Any work performed by or for Tenant shall be performed by
competent workmen whose labor union affiliations are compatible with those of
the workmen who may be employed in the Building by Landlord, its contractors or
subcontractors, and Landlord shall have the right, at its option, to directly
supervise the work, which supervision shall be for the protection of Landlord's
interest only.
(b) All alterations, additions or improvements made by Tenant
and all fixtures attached to the Premises shall become the property of Landlord
and remain at the Premises or, at Landlord's option, Landlord may designate any
or all of the foregoing to be removed at the cost of Tenant before the
expiration or sooner termination of this Lease, by giving Tenant written notice
thereof at the time Landlord approves Tenant's plans for such alterations,
additions or improvements, and in such event Tenant shall repair all damage to
the Premises caused by the installation and/or removal thereof. Tenant shall
not permit or suffer any signs advertisements or notices to be displayed,
inscribed upon or affixed on any pan of the outside or inside of the Premises,
or in the Building, except on the entrance doors of the Premises, and then only
of such size, color and style as Landlord may approve, Landlord shall have the
right to remove unauthorized signs at Tenant's expense.
9. LIENS.
(a) Tenant shall not permit there to be filed against the
Property or Landlord's interest therein or any part of either, and shall within
ten days after Tenant has notice of the claim or lien, remove or have removed,
any mechanics', or materialmen's or other lien, or claim thereof, filed by
reason of work, labor, services or materials provided for or at the request of
Tenant (other than work, labor, services or materials provided by the Landlord)
or any subtenant or occupant or for any contractor or subcontractor employed by
Tenant or any subtenant or occupant, and shall exonerate, protect, defend and
hold free and harmless Landlord against and from any and all such claims or
liens. Without limitation of the foregoing, if any such claim or lien be filed,
Landlord may, but shall not be obligated to, discharge it either by paying the
amount claimed to be due in the claim or lien or by procuring the discharge of
such lien or claim by deposit or by bonding proceedings. Any amount so paid by
Landlord and all costs and expenses, including, without limitation, reasonable
attorney's fees, in connection therewith, together with interest thereon at the
Lease Interest Rate (hereinafter defined) from the respective dates of
Landlord's making of the payments and incurring of the costs and expenses, shall
constitute additional rent payable by Tenant under this Lease and shall be paid
by Tenant to Landlord on demand.
(b) At least ten days before the commencement of any work
ordered by Tenant on the Premises, Tenant shall notify Landlord of the proposed
work and of the names and addresses of the persons supplying labor and materials
for the proposed work so that Landlord may avail itself of the provisions of
statutes such as C.R.S. 1973 38-22-105(2). During any such work on the
Premises, Landlord, or its representatives, shall have the right to go upon and
inspect the Leased Premises at all reasonable times, and shall have the right to
post and keep posted thereon notices such as those provided for by C.R.S. 1973
38-22-105(2) or to take any action that Landlord may deem advisable to protect
Landlord's interest in the Premises,
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10. INSURANCE AND WAIVER OF SUBROGATION.
(a) Tenant, at its sole cost, shall maintain with responsible
insurance companies acceptable to Landlord and qualified to do business in
Colorado, general comprehensive public liability insurance against claims for
personal injury (including death) and property damage, arising from occurrences
in, on and about the Premises, with coverage on an occurrence basis in all cases
of not less than a combined single limit of $3,000,000.00 per occurrence.
Landlord shall be designated a named insured in the policies for such insurance,
which shall contain endorsements providing that the naming of more than one
insured shall not operate to limit or void the coverage of any named insured
relating to claims by another named insured.
(b) Tenant, at its sole cost, shall maintain with responsible
insurance companies acceptable to Landlord and qualified to do business in
Colorado, "All Risk" or equivalent insurance upon all personal property upon the
Premises and all equipment, fixtures, additions, alterations and improvements
and betterments installed by or for Tenant upon the Premises, including, without
limitation, anything in the nature of a leasehold improvement, in an amount
which is at least 90% of the full replacement cost thereof, which insurance
shall name Landlord as a named insured and Landlord's mortgagees as mortgagees
under a standard mortgagee clause. In the event of damage or destruction to any
leasehold improvements, Tenant shall use the proceeds of such insurance to
repair or restore such leasehold improvements. If this Lease shall be
terminated pursuant to Paragraph 11(a) on account of damage by fire or other
casualty to the Building or the Premises, Landlord shall be entitled to all of
the insurance proceeds payable under the aforesaid insurance relating to the
leasehold improvements and the Premises.
(c) Tenant shall, prior to the commencement of the Term, and at
least 30 days prior to the expiration date of each policy, furnish to Landlord
certificates evidencing the coverage required hereinabove in this Paragraph and
the renewal thereof, which certificates shall state that such insurance coverage
may not be materially changed or cancelled without at least ten days prior
written notice to Landlord and Landlord's mortgagee.
(d) Notwithstanding anything herein to the contrary, Landlord
and Tenant each hereby release the other, its officers, directors, partners,
agents and employees (and Tenant hereby also releases Agent, its partners,
officers, directors, agents and employees), to the extent of the releasing
party's coverage under its insurance policies, from any and all liability for
any loss or damage which may be inflicted upon the property of such party,
notwithstanding that such loss or damage shall have arisen out of the negligence
of the other party, its partners, officers, directors, agents or employees;
PROVIDED, HOWEVER, that this release shall be effective only with respect to
occurrences occurring during such time as the appropriate policy of insurance of
the party so releasing shall contain a clause to the effect that such release
shall not affect the said policy or the right of the insured to recover
thereunder.
11. FIRE OR CASUALTY.
(a) If the Premises or the Building (including machinery or
equipment used in the operation of the Building) shall be damaged by fire or
other casualty and if such damage does
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not render all or a substantial portion of the Premises or Building
untenantable, then Landlord shall repair and restore the same with reasonable
promptness, subject to reasonable delays for insurance adjustments and delays
caused by matters beyond Landlord's reasonable control. If any such damage
renders all or a substantial portion of the Premises or Building untenantable,
Landlord shall have the right to terminate this Lease (with appropriate
prorations of rent being made for Tenant's possession subsequent to the date of
such damage of those tenantable portions of the Premises) upon giving written
notice to the Tenant at any time within 120 days after the date of such damage;
and if such notice is given Landlord shall have no obligation to repair or
restore. Landlord shall have no liability to Tenant, and Tenant shall not be
entitled to terminate this Lease by virtue of any delays in completion of such
repairs and restoration. Rent, however, shall abate on those portions of the
Premise as are, from time to time, untenantable as a result of such damage.
(b) Notwithstanding anything to the contrary herein set forth,
Landlord shall have no duty pursuant to this Paragraph 11 to repair or restore
any portion of any alterations, additions or improvements in the Premises or the
decorations thereto except to the extent that such alterations, additions,
improvements and decorations were provided by Landlord at the beginning of the
Term.
12. WAIVER OF CLAIMS; INDEMNIFICATION. To the extent not prohibited
by law Landlord, Agent and their respective officers, directors, partners,
agents, servants and employees shall not be liable for, and it and they are
hereby released by Tenant from all liability for, any damage either to person or
property or resulting from the loss of use thereof or any other loss, or any
death, sustained by Tenant or by other persons claiming through Tenant due to
the Property or any part thereof or any appurtenances thereof becoming out of
repair, or due to the happening of any accident or event in, on or about the
Property, or due to any act or neglect of any tenant or occupant of the Building
or of any other person, or to the extent due to Landlord's gross negligence or
willful misconduct. This provision shall apply particularly, but not
exclusively, to damage caused by gas, electricity, snow, frost, steam, sewage,
sewer gas or odors, fire, water or by the bursting or leaking of pipes, faucets,
sprinklers, plumbing fixtures and windows, and shall apply without distinction
as to the person (whether Landlord, Agent or other) whose act or neglect was
responsible for the damage and whether or not such act or neglect occurred
before, at or after the execution of this Lease, and whether the damage was due
to any of the causes specifically enumerated above or to some other cause of an
entirely different kind. Tenant further agrees that all personal property of
Tenant upon the Premises, or upon loading docks, receiving and holding areas, or
elsewhere in, on or about the Property, shall be at the risk of Tenant only, and
that neither Landlord nor Agent, nor their partners, directors or officers,
shall be liable for any loss or damage thereto or theft thereof. Without
limitation of any other provisions hereof, Tenant agrees to defend, protect,
indemnify and save harmless Landlord and Agent, and their respective partners,
officers, directors and employees, from and against all liability to third
parties arising out of the acts or omissions of Tenant or any subtenant or the
servants, agents, employees, contractors, suppliers, workmen and invitees of
Tenant or any subtenant.
Tenant agrees to indemnify and save harmless, and upon request, defend,
Landlord, Agent, and their respective partners, directors, officers and
employees (herein called
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"INDEMNITIES") against and from any and all claims by or on behalf of any
person, arising out of or related to:
(a) Tenant's use or occupancy of the Premises or the conduct of
its business, or any activity, work, or thing, permitted or suffered by Tenant,
in, on or about the Premises or the Property;
(b) any occurrence in, on or about the Premises;
(c) any breach or default on Tenant's part in the performance
or observance of, or compliance with, any term, covenant or condition on
Tenant's part to be performed pursuant to the terms of this Lease; or
(d) any act or negligence of Tenant or any subtenant, or any of
their respective agents, contractors, servants, employees, invitees or
licensees, whether or not the fault or negligence of Landlord, or of any other
indemnitee or of the agents, contractors, servants, employees, invitees or
licensees of Landlord or any indemnitee, (whether or not occurring before or
after the execution of this Lease), contributed thereto or was the cause
thereof, and from and against all costs, counsel fees, expenses, penalties,
fines and liabilities which Landlord or any other indemnitee may suffer or incur
in connection with any such claim and any action or proceeding brought with
respect thereto. In the event that any action or proceeding shall be brought by
reason of any such claim, against any party to be indemnified hereunder, Tenant
covenants that Tenant, upon notice from such party and at Tenant's expense,
shall resist and defend such action or proceeding by counsel reasonably
satisfactory to such party.
13. NONWAIVER. No waiver of any provision of this Lease shall be
implied by any failure of Landlord to enforce any remedy on account of the
violation of such provision, even if such violation be continued or repeated
subsequently, and no express waiver shall affect any provision other than the
one specified in such waiver and that one only for the time and in the manner
specifically stated. No receipt of moneys by Landlord or its agents from Tenant
after the termination of this Lease shall in any way alter the length of the
Term or of Tenant's right of possession hereunder or after the giving of any
notice shall reinstate, continue or extend the Term or affect any notice given
Tenant prior to the receipt of such moneys, it being agreed that after the
service of notice or the commencement of a suit or after final judgment for
possession of the Premises, Landlord may receive and collect any rent due, and
the payment and acceptance of payment of rent shall not waive or affect said
notice, suit or judgment.
14. CONDEMNATION. In the event that the whole of the Premises shall
be lawfully condemned or taken for a public or quasi-public use, this Lease
shall terminate as of the date that possession is to be surrendered to the
condemnor or taking authority. In the event that there shall be a lawful
condemnation or taking for any public or quasi-public use of any part of the
Building, without there being condemned or taken all of the Premises, then, at
the option of Landlord, exercisable by notice given to Tenant not later than 90
days after the date upon which Landlord receives notice of the taking or
condemnation, this Lease shall terminate as of the date that possession of the
Premises taken is required to be surrendered to the condemnor or taking
authority. In the event of any such taking or condemnation of all or any part
of the Premises or of all or any part of the Property, Tenant shall have no
claim against Landlord and shall not have
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any claim or right to any portion of the amount that may be awarded as damages
or paid as a result of such taking or condemnation; and all rights of Tenant to
damages therefor are hereby assigned by Tenant to Landlord and Tenant shall have
no claim against Landlord or the condemnor for the value of the unexpired term
of this Lease. HOWEVER, the foregoing provisions of this section shall not be
construed to deprive Tenant of the right to claim and receive payment from the
condemnor or taking authority for moving and related expenses as long as such
claim or the payment thereof does not reduce the award which Landlord would
otherwise be entitled to receive. In the event of any such taking or
condemnation of part of the Premises, the Base Rent, the Tax Adjustment and the
Operating Expense Adjustment shall be proportionately reduced from the date that
possession is required to be surrendered to the condemnor or taking authority.
15. ASSIGNMENT AND SUBLETTING. Tenant shall not, without the prior
written consent of Landlord (which shall not be unreasonably withheld in the
case of an assignment or subletting), (a) assign, convey or mortgage this Lease
or any interest hereunder; (b) suffer to occur or permit to exist any assignment
of this Lease, or any lien upon Tenant's interest hereunder, whether
voluntarily, involuntarily or by operation of law; (c) sublet the Premises or
any part thereof, or (d) permit the use of the Premises by any parties other
than Tenant and its employees. Any such action on the part of Tenant without
Landlord's consent, shall be void and of no effect. Landlord's consent to any
assignment, subletting or transfer or Landlord's election to accept any
assignee, subtenant or transferee as the tenant hereunder and to collect rent
from such assignee, subtenant or transferee shall not release Tenant or any
subsequent tenant from any covenant or obligation under this Lease. Landlord's
consent to any assignment, subletting or other act or occurrence requiring
Landlord's consent shall not constitute a waiver of Landlord's right to withhold
its consent to any future assignment, subletting or act or occurrence requiring
Landlord's consent. Without limitation of the circumstances in which Landlord's
withholding of consent to an assignment or subletting shall not be unreasonable,
it shall not be unreasonable for Landlord to withhold its consent if the
reputation, financial responsibility, or business of the proposed assignee or
subtenant is unsatisfactory to Landlord, or if Landlord deems such business to
be not consonant with that of other tenants in the Building, or if the intended
use by the proposed assignee or subtenant conflicts with any commitment made by
Landlord to any other tenant in the Building, or if in Landlord's judgment the
assignment or subletting will have financial consequences adverse to Landlord's
interest, or if the proposed assignee or subtenant shall be (i) a government or
any subdivision or agency thereof, (ii) a school, college, university or
educational institution of any type, whether for profit or non-profit or (iii)
an employment, recruitment or temporary help service or agency or (iv) an
existing or former tenant of the Project or any affiliate or guarantor thereof
who defaulted under any of its lease obligations to Landlord or any affiliate of
Landlord.
At least 15 days prior to any proposed subletting or assignment, Tenant
shall submit to Landlord a statement seeking Landlord's consent and containing
the name and address of the proposed subtenant or assignee, the terms of the
proposed sublease or assignment (including, without limitation, the date upon
which the assignee or subtenant is to take possession) and such financial and
other information with respect to the proposed assignee or subtenant as Landlord
reasonably may request. Landlord shall indicate its consent or non-consent
within 11 days of its receipt of said statement.
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Contemporaneously with any request or proposal by tenant to sublet or
assign any part of this Lease, Tenant shall pay up to $750.00 of all costs,
including reasonable attorneys' fees, incurred by Landlord or anticipated to be
incurred by Landlord, in connection with Landlord's investigation of any
financial or other information of the proposed assignee or subtenant. Landlord
may require that all or a portion of the costs or anticipated costs be paid in
advance by Tenant. The payment of such costs shall not obligate Landlord in any
way to consent to any proposed assignment or subletting nor shall the amount of
costs paid by Tenant be applied or used as a set-off to any amounts due or to
become due by Tenant to Landlord.
In addition to withholding its consent, Landlord shall have the
additional right, exercisable within such 15 day period, to terminate this Lease
in its entirety (where Tenant seeks to assign this Lease or sublet the entire
Premises) or as to that portion of the Premises which Tenant seeks to sublet
(where Tenant seeks to sublet only a portion of the Premises). Landlord may
exercise such right to terminate by giving written notice to Tenant at any time
prior to Landlord's written consent to such assignment or sublease. In the
event that Landlord exercises such right to terminate, the termination shall be
effective as of such date as Landlord may specify in its notice which shall not
be later than the later of (i) the proposed date for possession by such assignee
or subtenant, or (ii) 90 days after the date of Landlord's notice of termination
to Tenant. Further, to the extent Landlord elects to exercise its termination
rights as set forth above and Tenant has improved the Premises, Landlord shall
pay to Tenant on or before the date of termination with regard to the applicable
portion of the Premises, the unamortized costs of Tenant's improvements (based
on the square footage of the Premises being terminated) calculated by amortizing
the applicable Tenant's costs of the improvements over the term of the Lease.
The costs of Tenant's improvements shall be determined by Landlord's receipt of
third party contractor's invoices previously paid by Tenant (and marked "PAID IN
FULL" by the applicable contractor) and shall exclude any improvements,
alterations or additions which were not approved by landlord pursuant to the
terms of Paragraph 8 above or those items which Landlord notified Tenant would
be required to be removed at the end of the Term pursuant to said Paragraph 8.
If Landlord fails to exercise its termination right and its right to
withhold its consent as set forth in the preceding paragraphs, Tenant shall pay
to Landlord 50% of all profit derived by Tenant from the assignment or sublease.
Whenever requested by Landlord, Tenant shall furnish Landlord with a sworn
statement, certified by an independent certified public accountant, setting
forth in detail the computation of profit (which computation shall be based upon
generally accepted accounting principles), and Landlord, or its representatives,
shall have access to the books, records and papers of Tenant in relation
thereto, and to make copies thereof. Any rent in excess of that paid by Tenant
hereunder by reason of such assignment or sub-lease shall be deemed an item of
such profit. Such percentage of Tenant's profits shall be paid to Landlord
promptly by Tenant upon Tenant's receipt from time to time of periodic payments
from such assignee or subtenant or at such other earlier time as Tenant shall
realize its profits from such assignment or sublease.
16. HOLDOVER. If the Tenant or any person claiming through the Tenant
shall retain possession of the Premises or any part thereof after the expiration
or earlier termination of the Term and if Landlord shall consent to such
continuation of possession, such possession shall be (unless the parties hereto
shall otherwise have agreed in writing) deemed to be under a month-to-
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month tenancy which shall continue until either party shall notify the other in
writing, at least 30 days prior to the end of any calendar month, that the party
giving such notice elects to terminate such tenancy at the end of such calendar
month, in which event such tenancy shall so terminate. Anything contained in
the foregoing provisions of this paragraph to the contrary notwithstanding, the
rental payable with respect to each such monthly period shall be 1/9 of the per
annum Base Rent and 1/12 of the Tax Adjustment Amount and of the Expense
Adjustment Amount (both calculated in accordance with the provisions of
Paragraph 4 hereof) which would have been payable had this Lease been renewed
until the end of the calendar year which includes such month on the terms and
conditions in effect immediately prior to the expiration or termination of the
Term; and such month-to-month tenancy with Landlord's consent shall be upon the
same terms and subject to the, same conditions as those which are set forth in
this Lease except as aforesaid. If Tenant or any person claiming through Tenant
shall retain possession of the Premises or any part thereof, after the
expiration or earlier termination of the term or of Tenant's right of
possession, and if such retention shall be without Landlord's consent, Tenant
shall pay Landlord (a) for each month or portion thereof during which such
possession continues, an amount equal to the rental to be paid for each month
pursuant to the foregoing provisions of this Paragraph when such possession is
with Landlord's consent, plus all other sums which would have been payable
hereunder had the term continued during such retention of possession and (b) all
other damages sustained by Landlord, whether direct or consequential, by reason
of such retention of possession. During any such retention of possession
without Landlord's consent, all of Tenant's obligations with respect to the use,
occupancy and maintenance of the Premises shall continue. The provisions of
this Paragraph shall not be deemed to limit or constitute a waiver of any other
rights or remedies of Landlord provided herein or at law or in equity and
applicable to unlawful retention of possession or otherwise.
17. ESTOPPEL CERTIFICATE. Tenant shall from time to time, within ten
days after Tenant's receipt of Landlord's request therefor, execute, acknowledge
and deliver to Landlord a written instrument in recordable form (a) certifying
(i) that this Lease is in full force and effect and has not been modified,
supplemented or amended in any way (or, if there have been modifications,
supplements or amendments thereto, that it is in full force and effect as
modified, supplemented or amended, and stating such modifications, supplements
and amendments) and that this Lease (as modified, supplemented or amended, as
aforesaid) represents the entire agreement among Landlord and Tenant as to the
Premises and the leasehold; (ii) the dates to which the Base Rent, additional
rent and other charges arising hereunder have been paid, (iii) the amount of any
prepaid rents or credits due to Tenant, if any; and (iv) that if applicable,
Tenant has entered into occupancy of the Premises; and (b) stating, to the best
knowledge of Tenant, whether or not all conditions under the Lease to be
performed by Landlord prior to the date of such certificate have been satisfied
and whether or not Landlord is then in default in the performance of any
covenant, agreement or condition contained in this Lease and specifying, if any,
each such unsatisfied condition and each such default; and (c) stating any other
fact or certifying any other condition reasonably requested by Landlord or by
any mortgagee or prospective mortgagee or purchaser of the Property or of any
interest therein.
18. SUBORDINATION.
(a) This Lease shall be subject and subordinate at all times to
the lien of any mortgage or deed of trust, heretofore or hereafter placed by
Landlord on the Property or any part
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thereof and of all renewals, modifications, consolidations, replacements and
extensions thereof (all of which are hereinafter referred to collectively as a
"MORTGAGE"), all automatically and without the necessity of any further act on
the part of Tenant to effectuate such subordination. Tenant shall, at the
request of the holder of any such mortgage, upon foreclosure thereof attorn to
such holder. Tenant shall also execute, acknowledge and deliver, within 15 days
after Tenant's receipt of demand from Landlord or such holder, such other
instrument or instruments evidencing such subordination of Tenant's right, title
and interest under this Lease to the lien of any such mortgage, and such other
instrument or instruments of attornment, as shall be desired by such holder.
(b) Anything contained in the foregoing provisions of this
Paragraph to the contrary notwithstanding, any such holder may at any time
subordinate its mortgage to this Lease, without the necessity of obtaining
Tenant's consent, by giving notice of the same in writing to Tenant, and
thereupon this Lease shall be deemed to be prior to such mortgage without regard
to their respective dates of execution, delivery or recordation and/or the date
of commencement of Tenant's possession, and in that event such holder shall have
the same rights with respect to this Lease as though this Lease shall have been
executed, delivered and recorded prior to the execution and delivery of such
mortgage.
(c) If Landlord is or becomes lessee of premises of which the
Premises are a part, Tenant agrees that, automatically and without the necessity
of any further act, Tenant's possession shall be as a subtenant and shall be
subordinate to the interest of Landlord's lessor, its heirs, personal
representatives, successors and assigns (which lessor, its heirs, personal
representatives, successors and assigns, or any of them, is hereinafter called
"PARAMOUNT LESSOR"), but notwithstanding the foregoing, if Landlord's tenancy
shall terminate by expiration, by forfeiture or otherwise, then Tenant hereby
agrees, upon request of Paramount Lessor, to attorn to Paramount Lessor, and to
recognize such lessor as Tenant's landlord for the balance of the term of this
lease and any extensions or renewals hereof. Tenant shall execute, acknowledge
and deliver, upon demand by Landlord or Paramount Lessor, such other instrument
or instruments evidencing such subordination of Tenant's right, title and
interest under this Lease to the interest of such lessor, and such other
instrument or instruments of attornment, as shall be prescribed by such lessor.
19. CERTAIN RIGHTS RESERVED BY LANDLORD. Landlord shall have the
following rights, each of which Landlord may exercise without notice to Tenant
and without liability to Tenant for damage or injury to property, person or
business on account of the exercise thereof, and the exercise of any such rights
shall not be deemed to constitute an eviction or disturbance of Tenant's use or
possession of the Premises and shall not give rise to any claim for set-off or
abatement of rent or any other claim:
(a) to change the Building's name or street address;
(b) to install, affix and maintain any and all signs on the
exterior and on the interior of the Building;
(c) to decorate or to make changes, repairs, alterations,
additions, or improvements, whether structural or otherwise (including
alterations in the configuration of, and
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elimination of, any common areas), in and about the Building and Property or any
part thereof, and for such purposes to enter upon the Premises, and during the
continuance of any of said work, to temporarily close doors, entry ways, public
space and corridors in the Building and to interrupt or temporarily suspend
services or use of facilities; PROVIDED, HOWEVER, that any such changes,
repairs, alterations, additions or improvements shall not result in a material
adverse effect on Tenant's access to and use and occupancy of the Premises and
during the construction of the same, but Landlord shall endeavor to perform any
such work in or about the Premises so as to cause the minimum inconvenience to
Tenant practicable under the circumstances;
(d) to designate and approve all window coverings used in the
Building;
(e) to approve, disapprove or restrict the weight, size and
location of safes, vaults and other heavy equipment and articles in and about
the Premises and the Building so as not to exceed the live load per square foot
designated by the structural engineers for the Building, and to require all such
items and furniture and similar items to be moved into or out of the Building
and Premises only at such times and in such manner as Landlord shall direct in
writing. Tenant shall not install or operate machinery or any mechanical
devices of a nature not directly related to Tenant's ordinary use of the
Premises without the prior written consent of Landlord, Tenant's movements of
property into or out of the Building or Premises and within the Building are
entirely at the risk and responsibility of Tenant, and Landlord reserves the
right to require permits before allowing any property to be moved into or out of
the Building or Premises;
(f) to establish controls for the purpose of regulating all
property and packages, both personal and otherwise, to be moved into or out of
the Building and Premises and all persons using the Building after normal office
hours;
(g) to regulate delivery and service of supplies in order to
insure the cleanliness and security of the Premises and to avoid congestion of
the loading docks, receiving areas and freight elevators;
(h) to show, after, to the extent able and as a courtesy,
providing Tenant with advance verbal notice, the Premises to prospective tenants
at reasonable hours during the last twelve months of the Term and, if vacated or
abandoned, to show the Premises at any time and to prepare the Premises for
re-occupancy;
(i) to erect, use and maintain pipes, ducts, wiring and
conduits, and appurtenances thereto, in and through the Premises at reasonable
locations; and
(j) to enter the Premises at any reasonable time to inspect the
Premises.
20. RULES AND REGULATIONS. Tenant shall, and shall cause all of its
subtenants and occupants, its and their agents, employees, invitees and
licensees to, observe faithfully, and comply strictly with, the rules and
regulations attached to this Lease as EXHIBIT B, as they may be supplemented and
revised by Landlord from time to time, and such other rules and regulations
promulgated from time to time by Landlord, as in the Landlord's judgment may be
desirable for the safety, care and cleanliness of the Building and the Premises,
or for the preservation of good order therein. Landlord shall not be liable to
Tenant for violation of such rules and regulations
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by, or for Landlord's failure to enforce the same against, any other tenant, its
subtenants and occupants and its and their agents, employees, invitees or
licensees, nor shall any such violation or failure constitute, or be treated as
contributing to, an eviction, actual or constructive, or affect Tenant's
covenants and obligations hereunder, or allow Tenant to reduce, abate or offset
the payment of any rent under this Lease.
21. REMEDIES.
(a) If default shall be made in the payment of any rent or any
installment thereof or in the payment of any other sum required to be paid by
Tenant under this Lease or under the terms of any other agreement between
Landlord and Tenant and such default shall continue for ten days, or if default
shall be made in the observance or performance of any of the other agreements,
covenants or conditions in this Lease (or in any other agreement between
Landlord and Tenant) which Tenant is required to observe and perform and such
default shall continue for fifteen (15) days after written notice of default to
Tenant, or if the interest of Tenant in this Lease shall be levied on under
execution or other legal process; or
(b) If Tenant becomes the subject of commencement of an
involuntary case under the federal bankruptcy law as now or hereafter
constituted, or there is filed a petition against Tenant seeking reorganization,
arrangement, adjustment or composition of or in respect of Tenant under the
federal bankruptcy law as now or hereafter constituted, or under any other
applicable federal or state bankruptcy, insolvency, reorganization or other
similar law, or seeking the appointment of a receiver, liquidator or assignee,
custodian, trustee, sequestrator (or similar official) of Tenant or any
substantial part of its property, or seeking the winding-up or liquidation of
its affairs and such involuntary case or petition is not dismissed within 60
days after the filing thereof, or if Tenant commences a voluntary case or
institutes proceedings to be adjudicated a bankrupt or insolvent, or consents to
the institution of bankruptcy or insolvency proceedings against it, under the
Federal bankruptcy laws as now or hereafter constituted, or any other applicable
Federal or state bankruptcy or insolvency or other similar law, or consents to
the appointment of or taking possession by a receiver or liquidator or assignee,
trustee, custodian, sequestrator (or other similar official) of Tenant or of any
substantial part of its property, or makes any assignment for the benefit of
creditors or admits in writing its inability to pay its debts generally as they
become due or fails to generally pay its debts as they become due or if Tenant
or its stockholders or board of directors or any committee thereof takes any
corporate action in contemplation, preparation or furtherance of or for any of
the occurrences, steps, procedures, proceedings or other items mentioned in this
subparagraph 21(b); or
(c) Any one or more of the foregoing events is a breach of this
Lease, and thereupon, at Landlord's option, Landlord may, without notice or
demand of any kind to Tenant or any other person, have any one or more of the
following described remedies in addition to all other rights and remedies
provided at law or in equity or elsewhere herein:
(i) At the option of Landlord, the whole balance of
rent, charges and all other sums payable hereunder, whether or not payable as
rent, for the entire balance of the Term, and any renewal or extension thereof,
herein reserved or agreed to be paid by Tenant, or any part of such rent,
charges and other sums, and also all or any costs and sheriff's, marshall's,
constable's or other official's fees and charges, whether chargeable to Landlord
or Tenant, shall
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be taken to be due and payable from Tenant and in arrears as if by the terms of
this Lease said balance of rent, charges and other sums and expenses were on
that date payable in advance; and/or
(ii) Landlord, by giving written notice to Tenant, may
terminate this Lease and the Term, in which event Landlord may immediately
repossess the premises by legal proceedings, force or otherwise; and/or
(iii) Landlord, by giving written notice to Tenant, may
terminate Tenant's right of possession and may immediately repossess the
Premises by legal proceedings, force or otherwise, without terminating this
Lease.
(iv) After reentry, retaking, repossessing or recovering
of the Premises, whether or not Landlord has terminated this Lease, Landlord
may, but shall be under no obligation to, relet the same or any portion thereof
for such rent and upon such terms as shall be deemed advisable by Landlord; and
whether or not the Premises are relet, Tenant shall be liable for any loss of
rent for such period as would be the balance of the term of this Lease and any
renewals thereof plus the costs and expenses of reentry, retaking, repossession
and recovering, and of reletting and of redecorating, remodelling and making
repairs and alterations to the Premises for the purpose of reletting, the amount
of such liability to be computed monthly and paid by Tenant to Landlord at the
end of each month. Landlord shall in no event have any duty to relet the
Premises, nor shall any damages or other sums to be paid by Tenant to Landlord
be reduced by any failure to relet the Premises or failure to collect the rent
from any reletting, Tenant shall not be entitled to any rents received by
Landlord in excess of the rents provided for in this Lease, Tenant agrees that
Landlord may file suit to recover any sums falling due under the terms of this
Paragraph 21 from time to time and that no suit or recovery of any portion due
Landlord hereunder shall be any defense to any subsequent action brought for any
amount not theretofore reduced to judgment in favor of Landlord. If Landlord
relets the Premises, such reletting shall not be considered a termination of
this Lease unless Landlord has given Tenant a notice wherein Landlord expressly
states that this Lease is terminated. Nothing contained in this Paragraph 21
shall be construed or interpreted to relieve Landlord of its obligation to
mitigate damages as provided under the laws of State of Colorado. Nothing
contained in this Paragraph 21 shall be construed as expanding the Landlord's
rights concerning acceleration of the Tenant's obligations.
(v) If Landlord shall terminate this Lease as provided
in subparagraph (b) above, Landlord, at its option, shall be entitled to recover
as damages the excess, if any, at the time of such termination, of the amount of
the Base Rent payable under this lease for the balance of the term of this Lease
(including, any extension options which have been exercised) over the then fair
rental value of the Premises for the same period, plus all costs and expenses of
Landlord caused by Tenant's default, including, but not limited to, reasonable
attorney's fees.
(vi) If any payment of rent or any other sum, or any part
of any such payment, to be made by Tenant under the terms of this Lease shall
become overdue for a period in excess of five days Tenant shall pay to Landlord
(x) a "late charge" of $.05 for each dollar so overdue, for the purpose of
defraying the expense incident to handling such overdue or delinquent payment,
and (y) interest on the overdue amount at the Lease Interest Rate (defined
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below) from the date when such payment was due until the date paid, but in no
event more than the amount or rate which is the maximum amount or rate Landlord
may lawfully charge in respect of Tenant in such circumstances under applicable
law. The "Base Interest Rate" shall mean the greater of 18% per annum or such
variable rate which is from time to time equal to 3% above the prime rate as
stated by Colorado National Bank, Denver, Colorado or its successor, or, in the
absence of there being a successor to Colorado National Bank, by such other bank
having an office in the City of Denver, as Landlord may from time to time
select. Nothing herein shall be construed as waiving any rights of Landlord
arising out of any default of Tenant by reason of Landlord's accepting any such
late charge or interest; the right to collect a late charge and interest is
separate and apart from any other rights or remedies of Landlord after default
by Tenant.
(vii) Without limiting the generality of the foregoing, if
Tenant shall be in default in the performance of any of its obligations
hereunder, Landlord may (but shall not be obligated to), in addition to any
other rights it may have in law or in equity, cure such default on behalf of
Tenant, and Tenant shall reimburse Landlord upon demand for any sums paid or
costs incurred by Landlord in curing such default, including reasonable
attorneys' fees and other legal expenses, together with interest at the Lease
Interest Rate from the dates of Landlord's incurring of costs or expenses.
(viii) All remedies available to Landlord hereunder and
otherwise available at law or in equity shall be cumulative and concurrent. No
termination of this Lease nor taking or recovering possession of the Premises
shall deprive Landlord of any remedies or actions against Tenant for rent, for
charges, or for damages for the breach of any term, covenant or condition herein
contained, nor shall the bringing of any such action for rent, charges or breach
of term, covenant or condition, nor the resort to any other remedy or right for
the recovery of rent, charges or damages for such breach be construed as a
waiver or release of the right to insist upon the forfeiture and to obtain
possession. The failure of Landlord to insist upon strict and/or prompt
performance of the terms, agreements, covenants and conditions of this Lease or
any of them, and/or the acceptance of such performance thereafter shall not
constitute or be construed as a waiver of Landlord's right to thereafter enforce
the same strictly according to the tenor thereof in the event of a continuing or
subsequent default.
(ix) Notwithstanding anything in this Paragraph 21 or any
other provision of this Lease to the contrary, this Lease shall not be
terminated by service upon Tenant of a notice from Landlord demanding payment of
rent or possession of the Premises following default by Tenant, or by any action
of Tenant to vacate the Premises following receipt of such a notice, unless the
notice served by Landlord includes a statement expressly terminating this Lease.
Further, Landlord reserves the right to receive payment of all unaccrued rent
for the balance of the Term originally contemplated under Paragraph 1 of this
Lease (and any extensions or renewals thereof to which Tenant shall have become
bound) following service of such a notice for payment or possession, or a notice
terminating this Lease for Tenant's default.
22. EXPENSES OF ENFORCEMENT. Tenant shall pay upon demand all
Landlord's costs, charges and expenses, including the fees and out-of-pocket
expenses of counsel, agents and others retained by Landlord, incurred by
Landlord, whether or not suit is brought, in enforcing Tenant's obligations
hereunder or in collecting any amounts due from Tenant or any
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subtenant or assignee hereof or in enforcing any provision of this Lease or in
any litigation, negotiation or transaction in which Tenant causes Landlord
without the Landlord's fault to become involved or concerned or in reletting the
Premises or any portion thereof after default by Tenant.
23. COVENANT OF QUIET ENJOYMENT. Landlord covenants that Tenant, on
paying the rent, charges for services and other payments herein reserved or
required and on keeping, observing and performing all the other terms,
covenants, conditions, provisions and agreements herein contained on the part of
the Tenant to be kept, observed and performed, shall, during the Term, peaceably
and quietly have, hold and enjoy the Premises free from interference by Landlord
or any person claiming by, from or under Landlord, subject, HOWEVER, to the
terms, covenants, conditions, provisions and agreements hereof.
24. SECURITY DEPOSIT. Upon the execution of this Lease, Tenant shall
deposit with Landlord the sum of $6,673.75 (hereinafter referred to as
"COLLATERAL"), as security for the prompt, full and faithful performance by
Tenant of each and every provision of this Lease and of all obligations of
Tenant hereunder. No interest shall be paid to Tenant on the Collateral and
Landlord may co-mingle the collateral with any other funds of Landlord.
If Tenant fails to perform any of its obligations hereunder, Landlord may
use, apply or retain the whole or any part of the Collateral for the payment of
(a) any rent or other sums of money which Tenant may not have paid when due, (b)
any sum expended by Landlord on Tenant's behalf in accordance with the
provisions of this Lease, and/or (c) any damages which Landlord may sustain or
sums which Landlord may expend or be required to expend by reason of Tenant's
default, including, without limitation, any damage or deficiency in or from the
reletting of the Premises as provided in Paragraph 21. The use, application or
retention of the Collateral, or any portion thereof, by Landlord shall not
prevent Landlord from exercising any other right or remedy provided by this
Lease or by law (it being intended that Landlord shall not first be required to
proceed against the Collateral) and shall not operate as a limitation on any
recovery to which Landlord may otherwise be entitled. If any portion of the
Collateral is used, applied or retained by Landlord for the purposes set forth
above, Tenant agrees, within ten days after the written demand therefor is made
by Landlord, to deposit cash with the Landlord in an amount sufficient to
restore the Collateral to its original amount.
If Tenant shall fully and faithfully comply with all of the provisions of
this Lease, the Collateral, or any balance thereof, shall be returned to Tenant
without interest after the expiration of the Term or upon any later date after
which Tenant has vacated the Premises. In the absence of evidence satisfactory
to Landlord of any permitted assignment of the right to receive the Collateral,
or of the remaining balance thereof, Landlord may return the same to the
original Tenant, regardless of one or more assignments of Tenant's interest in
this Lease or the Collateral. In such event, upon the return of the Collateral,
or the remaining balance thereof to the original Tenant, Landlord shall be
completely relieved of liability under this Paragraph 24 or otherwise with
respect to the Collateral.
Tenant acknowledges that Landlord has the right to transfer or mortgage
its interest in the Property and in this Lease and Tenant agrees that in the
event of any such transfer or mortgage, Landlord shall have the right to
transfer or assign the Collateral to the transferee or mortgagee.
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Upon written acknowledgment of transferee's or mortgagee's receipt of such
Collateral, Landlord shall thereby be released by Tenant from all liability or
obligation for the return of such Collateral and Tenant shall look solely to
such transferee or mortgagee for the return of the Collateral.
The Collateral shall not be mortgaged, assigned or encumbered in any
manner whatsoever by Tenant.
25. REAL ESTATE BROKER. Tenant represents that Tenant has dealt with
(and only with) Cushman Realty Corporation as Tenant's broker in connection with
this Lease and Amerimar Realty Management Co. -Colorado is acting as Landlord's
broker and Garth R. O. Tait, Broker, Ltd., is acting as sub-agent for Landlord
in connection herewith, and that insofar as Tenant knows, no other broker
negotiated this Lease or is entitled to any commission in connection therewith.
Tenant agrees to indemnify, defend and hold Landlord harmless from and against
any claims, for a commission or other compensation in connection with this
Lease, made by any broker or finder other than the broker named above who claims
to have dealt with or communicated to Tenant in connection with this Lease,
provided that Landlord has not in fact retained such broker or finder.
26. MISCELLANEOUS.
(a) RIGHTS CUMULATIVE. All rights and remedies of Landlord
under this Lease shall be cumulative and none shall exclude any other rights or
remedies allowed by law, in equity or otherwise.
(b) CAPTIONS AND USAGE. The titles appearing in connection
with the various sections and paragraphs of this lease are for convenience only;
they are not intended to indicate all of the subject matter in the text and they
are not to be used in interpreting this Lease nor for any other purpose in the
event of any controversy. As used herein (i) the term "person" shall be deemed
to include a natural person, a trustee, a corporation, a partnership, a
governmental unit and any other form of legal entity; (ii) all usages in the
singular or plural number shall be deemed to have been made, respectively, in
the plural or singular number as well; the use of any gender includes all
genders.
(c) BINDING EFFECT. Each of the provisions of this Lease shall
extend to and shall, as the case may require, bind or inure to the benefit not
only of the Landlord and of Tenant, but also of their respective successors or
assigns, provided this clause shall not permit any assignment by Tenant contrary
to the provisions of Paragraph 15 hereof,
(d) LEASE CONTAINS ALL TERMS. There are no promises,
representations, warranties or undertakings by, or binding upon, Landlord with
respect to the Building, the Premises or the Real Property, including, but not
limited to, any with regard to alteration, remodeling, redecorating or
installation of equipment or fixtures in the Premises, except those, if any,
that are, expressly set forth in this Lease, No modification, waiver or
amendment of this Lease or of any of its conditions or provisions shall be
binding upon the Landlord unless in writing signed by Landlord or by a duly
authorized agent of Landlord empowered by a written authority signed by
Landlord.
24.
<PAGE>
(e) SUBMISSION OF LEASE. Submission of this Lease by Landlord
for execution by Tenant, or Tenant's execution hereof without Landlord's prior
or simultaneous execution, shall not bind Landlord in any manner, and no binding
Lease or obligation of the Landlord shall arise until Lease is signed by both
Landlord and Tenant and delivery is made to each.
(f) NO AIR RIGHTS. No rights to any view or to light or air
over any property, whether belonging to Landlord or any other person, are
granted to Tenant by this Lease.
(g) MODIFICATION OF LEASE. If any lender requires, as a
condition to its lending funds, the repayment of which is to be secured by a
mortgage or trust deed on the Property or any pan thereof, that certain
modifications be made to this Lease, which modifications will not require Tenant
to pay any additional amounts or otherwise change materially the rights or
obligations of Tenant hereunder, Tenant shall, upon Landlord's request, execute
appropriate instruments effecting such modifications.
(h) SUBSTITUTION OF OTHER PREMISES.
(i) Subject to the provisions of subparagraph (v) below,
at any time hereafter, Landlord shall have the right to substitute for the
premises then being leased or to be leased hereunder (the "EXISTING PREMISES")
other premises within the Building (herein referred to as the "NEW PREMISES")
provided that the New Premises shall be of at least substantially the same size
and configuration as the Existing Premises and the New Premises shall have a
comparable elevator identity, similar tenant finish, and similar view and corner
location within the Building.
(ii) If Tenant shall not have received possession of the
Existing Premises, then, as of the date Landlord gives notice of a substitution,
such substitution shall be effective, the New Premises shall be the Premises
hereunder and the Existing Premises shall cease to be the Premises hereunder.
(iii) The provisions of this subparagraph (iii) shall
apply if Tenant shall have already received possession of the Existing Premises
as of the date Landlord gives notice of substitution. Tenant shall vacate and
surrender the Existing Premises not later than the later of the 30th day after
the date that Landlord shall notify Tenant of Landlord's intent to make the
substitution in question or the 15th day after Landlord shall have substantially
completed the work to be done by Landlord in the New Premises pursuant to the
subparagraph (iii). As of the sooner of such 15th day or the date of such
surrender and vacation, the New Premises shall be the Premises leased under this
Lease and the Existing Premises shall cease to be the Premises leased under this
Lease. Landlord shall (A) pay the actual and reasonable out-of-pocket expenses
of Tenant's moving of its property from the Existing Premises to the New
Premises, and (B) shall improve the New Premises so that they are substantially
similar to the Existing Premises and (C) promptly reimburse Tenant for its
actual and reasonable out-of-pocket costs in connection with (a) the relocation
of any telephone or other communications equipment from the Existing Premises to
the New Premises and (b) the replacement of a reasonable quantity of then
existing stock of stationery, letterhead, etc, which bears the suite number of
the Premises. HOWEVER, instead of only paying the expenses of Tenant's moving
of its property, Landlord may
25.
<PAGE>
elect to either move Tenant's property or provide personnel to do so under
Tenant's direction, in which event such move may not be made except during
evenings, weekends or holidays, so as to incur the least inconvenience to
Tenant.
(iv) Tenant shall not be entitled to any compensation for
any inconvenience or interference with Tenant's business, nor to any abatement
or reduction in rent, nor shall Tenant's obligations under this Lease be
otherwise affected, as a result of the substitution except as otherwise provided
in this subparagraph (h). Tenant agrees to cooperate with Landlord so as to
facilitate the prompt completion by Landlord of its obligations under this
subparagraph (h). Without limiting the generality of the preceding sentence,
Tenant agrees to provide to Landlord promptly such approvals, instructions,
plans, specifications or other information, as may be reasonably requested by
Landlord.
(v) Notwithstanding anything to the contrary otherwise
set forth in this subparagraph (h), if Tenant adds the Additional Space to the
Premises in accordance with the Addendum hereto, Landlord shall thereafter have
no rights under this subparagraph (h) to substitute space for the Premises.
(i) TRANSFER OF LANDLORD'S INTEREST. Notwithstanding anything
contained herein to the contrary, Tenant agrees that neither Landlord nor any
partner in Landlord, nor any other person having any interest, direct or
indirect, immediate or more removed than immediate, in Landlord, shall have any
personal liability with respect to any of the provisions of this Lease and
Tenant shall look solely to the estate and property of Landlord in the Property
for the satisfaction of Tenant's remedies, including without limitation, the
collection of any judgment or the enforcement of other judicial process
requiring the payment or expenditure of money by Landlord, subject, HOWEVER, to
the prior rights of any holder of any mortgage covering all or part of the
Property, and no other assets of Landlord or its partners, or of any other
aforesaid person having an interest in Landlord, shall be subject to levy,
execution or other judicial process for the satisfaction of Tenant's claims.
Without limitation of the foregoing, upon each transfer of the Building and the
Landlord's interest in this Lease, the transferor shall automatically be
released from all liability and obligations under this Lease which shall accrue
after the date of the transfer.
(j) RECORDING; SHORT FORM MEMO. This Lease shall not be
recorded by Tenant. If it is recorded by Tenant, Landlord shall have the right
to terminate this Lease as of the date of recording or thereafter and Landlord
shall have all rights and remedies provided in the case of default by Tenant
hereunder, If requested by Landlord, Tenant shall execute, in recordable form, a
short form memorandum of lease that may, at Landlord's option, be placed of
record. In addition, if requested by Landlord, Tenant shall execute a
memorandum of lease to be filed with the Colorado Department of Revenue, on such
form as may be prescribed by said Department, within ten days after the
execution of this Lease, or any other such memorandum, so that the Landlord may
avail itself of the provision of statutes such as C.R.S. 1973 39-22-604(7)(c).
(k) COVENANTS AND CONDITIONS. All of the covenants of Tenant
hereunder shall be deemed and construed to also be "conditions", if Landlord so
elects, as well as "covenants" as though the words specifically expressing or
importing covenants and conditions
26.
<PAGE>
were used in each separate instance. Tenant's covenants to pay rent are
independent of any other covenant, agreement, term or condition of this Lease.
(l) APPLICATION OF PAYMENTS. Landlord shall have the right to
apply payments received from Tenant pursuant to this Lease (regardless of
Tenant's designation of such payments) to satisfy any obligations of Tenant
hereunder, in such order and amounts as Landlord in its sole discretion, may
elect; PROVIDED, HOWEVER, Landlord agrees that such payments shall be applied
first to Tenant's Base Rent.
(m) SECURITY INTEREST. [INTENTIONALLY DELETED]
(n) GOVERNING LAW; PARTIAL INVALIDITY. This Lease shall be
governed and construed in accordance with the law of the state in which the
Premises is located. If any term, provision or condition contained in this
Lease shall, to any extent, be invalid or unenforceable, the remainder of this
Lease (or the application of such term, provision or condition to persons or
circumstances other than those in respect of which it is invalid or
unenforceable) shall not be affected thereby, and each and every other term,
provision and condition of this Lease, shall be valid and enforceable to the
fullest extent possible permitted by law,
(o) HAZARDOUS MATERIALS. Tenant shall not store highly
flammable materials or goods, explosives, perishable foodstuffs, contraband,
live animals, materials or goods which emit odors in or upon the Premises.
The Tenant covenants that it shall not store, use or possess nor permit the
storage, use or possession of any Hazardous Substance (hereinafter defined) upon
the Premises. Hazardous Substance for purposes of this Lease shall mean,
without limitation, any flammable explosives, radon, radioactive materials,
asbestos, urea-formaldehyde foam insulation, polychlorinated biphenyls,
petroleum and petroleum based products, methane, hazardous materials, hazardous
wastes, hazardous or toxic substances or related materials, as defined in the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended (42 U.S.C. Sections 9601, et seq.), the Hazardous Materials
Transportation Act, as amended (49 U.S.C. Section 1801 et seq.), Sections 6901
et seq.), the Toxic Substances Control Act, as amended (15 U.S.C. Sections 2601
et seq.), or any other similar law, rules, regulation or statute concerning the
protection of the environment (collectively "ENVIRONMENT LAWS"). Tenant hereby
covenants and agrees, at its sole cost and expense, to indemnify, protect and
defend and save harmless the Landlord and any of its partners, employees and
agents from and against any all damages, losses, liabilities, obligations,
penalties, claims, litigation, demands, defenses, judgments, suites, actions,
proceedings, costs, disbursements and/or expenses (including, without
limitation, attorneys' and experts' fees, expenses and disbursements) of any
kind or nature whatsoever which may at any time impose upon, incurred by or
asserted or awarded against the Landlord, its partners, agents or employees
relating to, resulting from or arising out of Tenant's failure to comply with
its obligations under the foregoing paragraph or Tenant's violation of any
Environmental Law with respect to its use of the Premises. Notwithstanding any
provision contained in this Lease to the contrary, the indemnification
provisions set forth in this paragraph shall survive any expiration and/or
termination of this Lease.
27.
<PAGE>
27. TELEPHONE AND TELECOMMUNICATIONS SERVICE.
(a) Tenant acknowledges and agrees that all telephone and
telecommunications services ("TELECOMMUNICATIONS SERVICES") desired by Tenant
shall be ordered and utilized at the sole expense of Tenant. Unless Landlord
otherwise requests or consents in writing, all equipment, apparatus and devices,
including without limitation wiring and cables, for the provisions of
Telecommunications Services (the "TELECOMMUNICATIONS EQUIPMENT") shall be and
remain solely in the Premises. Unless otherwise specifically agreed in writing,
Landlord shall have no responsibility for the maintenance of Tenant's
Telecommunications Equipment, nor for any wiring or other infrastructure to
which Tenant's Telecommunications Equipment may be connected, Tenant agrees
that, to the extent any Telecommunications Services are interrupted, curtailed
or discontinued, Landlord shall have no obligation or liability with respect
thereto and it shall be the sole obligation of Tenant, at its sole expense, to
obtain substitute service,
(b) Landlord shall have the right, upon such notice as is
practicable in the case of emergencies, and otherwise upon reasonable prior
notice to Tenant, to interrupt or turn off telecommunications facilities in the
event of emergency or as necessary in connection with repairs to the Building or
installation of telecommunications equipment for other tenants of the Building.
(c) Any and all Telecommunications Equipment installed in the
Premises, or elsewhere in the Building by or on behalf of Tenant, including
wiring and other facilities for the provision of Telecommunications Services,
shall be removed by Tenant upon the expiration or earlier termination of the
Tenant of this Lease, by Tenant at its sole expense or, at Landlord's election,
by Landlord at Tenant's sole expense, with the cost thereof to be paid as
Additional Rent under this Lease.
(d) If the Telecommunications Equipment is not removed within
thirty (30) days of the termination or expiration of this Lease, the
Telecommunications Equipment shall conclusively be deemed to have been abandoned
and may be removed, appropriated, sold, stored, destroyed, otherwise disposed
of, or retained and used, by Landlord without notice to Tenant, without
obligation to account therefor, and without payment to Tenant or credit against
any amount due from Tenant to Landlord pursuant to this Lease, Tenant shall pay
to Landlord upon demand all costs of any such removal, disposition and storage
of the Telecommunications Equipment, as well as all costs to repair any damage
to the Building caused by such removal.
(e) In the event that Tenant wishes at any time to utilize the
services of a telephone or telecommunications provider whose equipment is not
then servicing the Building (a "NEW PROVIDER"), no such New Provider shall be
permitted to install its lines or other equipment within the Building without
first securing the prior written approval of the Landlord, which approval may be
withheld in Landlord's sole and absolute discretion. Landlord's approval shall
not be deemed any kind of warranty or representation by Landlord, including,
without limitation, any warranty or representation as to the suitability,
competence or financial strength of the New Provider. Without limitation of
Landlord's right to withhold consent in its sole and absolute discretion,
Landlord may refuse to give its approval unless all of the following conditions
are satisfied: (i) Landlord shall incur no expense whatsoever with respect to
any aspect of the New
28.
<PAGE>
Provider's provision of its services, including, without limitation, the costs
of installation, materials and services; (ii) prior to commencement of any work
in or about the Building by the New Provider, the New Provider shall supply
Landlord with such written indemnities, insurance, financial statements, and
such other items as Landlord, in its sole and absolute discretion, determines to
be necessary to protect its financial interests and the interests of the
Building related to the proposed activities of the New Provider; (iii) the New
Provider agrees in writing to abide by such rules and regulations, building and
other codes, job site rules and such other requirements as are determined by
Landlord, in its sole and absolute discretion, to be necessary to protect the
interest of the Building, the tenants in the Building and Landlord; (iv)
Landlord determines, in its sole and absolute discretion, that there is
sufficient space in the Building for the placement of all of the New Provider's
equipment and materials; (v) Landlord receives from the New Provider such
compensation as is determined by the Landlord, in its sole and absolute
discretion, to compensate it for space used in the Building for the storage and
maintenance of the New Provider's equipment, for the fair market value of the
New Provider's access to the Building, and any costs which may be expected to be
incurred by Landlord; and (vi) all of the foregoing matters are documented in a
written agreement between Landlord and the New Provider, the form and content of
which are satisfactory to Landlord in its sole and absolute discretion.
(f) Notwithstanding any provision of the preceding subsection
to the contrary, the refusal of Landlord to grant its approval to any New
Provider shall not be deemed a default or breach by Landlord of its obligation
under this Lease, and in no event shall Tenant have the right to terminate this
Lease or claim entitlement to rent abatement for Landlord's refusal to grant
Tenant's request for approval of a New Provider. The provisions of this Section
27 may be enforced solely by Tenant and Landlord and are not for the benefit of
any other party. Specifically, but without limitation, no telephone or
telecommunications provider is intended to be, nor shall be deemed, a third
party beneficiary of this Lease.
(g) Tenant shall not utilize any wireless communications
equipment (other than usual and customary cellular and digital telephones),
including antenna and satellite receiver dishes, within the Premises or the
Building, without Landlord' prior written consent. Such consent shall be
granted only in the sole and absolute discretion of the Landlord, and shall be
conditioned in such a manner, in Landlord's sole and absolute discretion, so as
to protect Landlord's financial interests and the interests of the Building, and
the other tenants therein.
28. NOTICES. All notices to be given under this Lease shall be in
writing and delivered personally or deposited in the United States mail,
certified or registered mail with return receipt requested, postage prepaid,
addressed as follows:
IF TO LANDLORD:
Amerimar Realty Management Co.-Colorado
999 18th Street
Suite 1000
Denver, Color-ado 80202
or to such other person or such other address designed by notice sent by
Landlord or Tenant.
29.
<PAGE>
IF TO TENANT:
At the address set forth at the beginning of this Lease,
and after occupancy of the Premises by Tenant, at the Premises, or to such other
address as is designated by Tenant in a notice to Landlord; it being agreed that
if Tenant shall vacate the Premises, notices to Tenant thereafter shall
nevertheless be properly given if addressed to Tenant at the Premises unless and
until another address is designated by Tenant by notice to Landlord.
Notice by mail shall be deemed to have been given when deposited in the
United States mail as aforesaid.
[REST OF PAGE INTENTIONALLY LEFT BLANK]
30.
<PAGE>
29. TIME IS OF THE ESSENCE.
Time is of the essence hereof.
IN WITNESS WHEREOF, Landlord and Tenant, intending to be legally bound
hereby, have executed this Agreement of lease as of the day and year first above
written.
LANDLORD:
DENVER-STELLAR ASSOCIATES
LIMITED PARTNERSHIP
a Delaware limited partnership
By: Amerimar Realty Management Co.,
Colorado
By: Amerimar Realty Management Co.,
Pennsylvannia
its general partner
By: ARC-Management Co., Inc.
its general partner
Date: 2/24/99 By: /s/ David G. Marshall
---------------- ---------------------------
David G. Marshall,
President
TENANT:
JATO COMMUNICATIONS CORP.,
a Delaware corporation
Date: By: /s/ President & CEO
---------------- ----------------------------------------
Authorized Signature (title)
ATTEST:
Date: By: /s/ Director
---------------- ----------------------------------------
Authorized Signature (title)
31.
<PAGE>
ADDENDUM
THIS ADDENDUM, made as of the 1st day of January 1999, is between
Amerimar Realty Management Co. -Colorado, as agent for DENVER-STELLAR ASSOCIATES
LIMITED PARTNERSHIP, a Delaware limited partnership ("LANDLORD") JATO
COMMUNICATIONS CORP., a Delaware corporation ("TENANT"). Landlord and Tenant
have executed simultaneously with this Addendum that certain DENVER PLACE PLAZA
TOWER Office Lease (the "LEASE") pertaining to certain space in the building
commonly known as Denver Place Plaza Tower and located at 1099 Eighteenth
Street, Denver, Colorado. In the event of any conflict between the provisions
of this Addendum and the provisions of the other portions of the lease, the
provisions of this Addendum shall control. The capitalized terms used herein
and not defined herein shall have the same meanings used in the other portions
of the Lease. Landlord and Tenant hereby agree that the Lease is amended and
supplemented as follows:
30. SIGNAGE. Landlord at its sole cost and expenses shall provide
Tenant with the building standard suite signage and the building standard
directory strips in the lobby directory.
31. IMPROVEMENTS ALLOWANCE. As additional consideration for Tenant
entering this Lease, Landlord shall provide Tenant an allowance not to exceed
$50,580.00 for Tenant's use in the completion of improvements in the Premises
originally demised hereunder. Such improvements shall be accomplished by Tenant
subject to and in accordance with the terms and provisions of Section 8 of this
Lease. The improvements allowance shall be paid by Landlord to Tenant as a
reimbursement of Tenant costs of improvements in the form of a rent credit, by
crediting 1/12 of the total of Tenant's costs of the improvements (not to exceed
$50,580.00) against each of the next due 12 monthly Rent installments commencing
with the month following Landlord's receipt of invoices from Tenant evidencing
completion of, and Tenant's payment for, costs of the improvements and evidence
that the Premises are free of mechanics', materialmen's and similar liens or
claims thereof related to Tenant's completion of the improvements. Any costs of
the improvements in excess of the improvements allowance shall be at Tenant's
costs and expense and not subject to reimbursement by Landlord.
32. ADDITIONAL SPACE. Provided that this Lease shall be in full force
and effect and Tenant shall not be in default hereunder, Tenant shall have the
ability, exercisable by written notice to Landlord ("TENANT'S NOTICE") given on
or before April 30, 1999 to lease the approximately 6,219 rentable square feet
of space located adjacent to the Premises as such location is delineated on
EXHIBIT E attached hereto (the "ADDITIONAL SPACE"), which lease of the
Additional Space shall commence July 1, 1999. If Tenant leases the Additional
Space pursuant to the provisions of this Paragraph, it shall be on all of the
terms, covenants and conditions of this Lease, including the annual Base Rent
rate. Accordingly, Tenant's annual Base Rent shall thereafter be increased by
$118,161.00 for a total annual Base Rent of $198,246.00 for the entirety of the
Premises (including the Additional Space), Tenant's monthly installments of Base
Rent shall increase to $16,520.50 for the entirety of the Premises (including
the Additional Space) and Tenant shall receive an improvement allowance for the
Additional Spare in the amount of $74,628.00, to be provided in the form of a
rent credit over the 12 month period commencing July, 1999, which improvement
allowance shall be used in the Additional Space
32.
<PAGE>
pursuant to the terms of Paragraph 31 above. Further, the parties shall enter
into an amendment to this Lease, evidencing the addition of the Additional Space
to the Premises hereunder,
33. RIGHT OF FIRST REFUSAL. If Tenant has failed to exercise its
option as to the Additional Space as provided above, and provided that this
Lease shall be in full force and effect and Tenant shall not be in default
hereunder, Landlord hereby grants to Tenant a right of first refusal (the "RIGHT
OF FIRST REFUSAL") on the Additional Space above described. If at any time
after April 30, 1999, Landlord shall desire to lease all or a part of the
Additional Space (whether or not as part of a larger space), as evidenced by the
issuance of a bona fide proposal to a third party by or on behalf of Landlord
covering the Additional Space, or Landlord's acceptance of a bona fide proposal
from a third party ("THIRD PARTY PROPOSAL"), Landlord shall first offer to lease
the Additional Space to Tenant, subject to the limitations provided below, by
giving written notice to Tenant. Such notice shall specify the amount of space
covered by the Third Party Proposal and the date on which the space under Third
Party Proposal is expected to be available for Tenant's lease. Within 5 days
after receiving Landlord's notice, Tenant shall give written notice of its
election to exercise the Right of First Refusal as to the Additional Space and
shall further specify any additional square footage covered in the Third Party
Proposal it wishes to lease; in no event, HOWEVER, may Tenant lease less than
the 6,219 square feet of Additional Space or be requested to lease more than the
6,219 square feet of Additional Space, even if the Third Party Proposal was for
less or more than the Additional Space. This Right of First Refusal shall
require Tenant to lease the Additional Space on the same terms and conditions
(including the same annual per square foot rental rate) included within the
Third Party Proposal; PROVIDED, HOWEVER, if Tenant shall exercise the Right of
First Refusal on or prior to June 30, 1999, Landlord agrees that (with respect
to only the 6,219 rentable square feet identified on EXHIBIT E as the Additional
Space): (i) the annual Base Rent rate for the Additional Space shall not exceed
$19.00 per rentable square foot of the Additional Space and (ii) Tenant shall be
entitled to receive a tenant improvements allowance from Landlord for Tenant's
completion of improvements in the Additional Space subject to and in accordance
with Section 8 of this Lease, in an amount not to exceed $74,628.00 ($12.00 x
6,219 rsf), which tenant improvements allowance shall be in the form of a rent
credit, by crediting the 12 next due monthly Rent installments with 1/12 of the
improvements allowance each. If Tenant fails to exercise the Right of First
Refusal by delivering written notice to Landlord within such 5-day period,
Tenant shall be deemed to have waived its Right of First Refusal. Tenant shall
have no right to exercise the Right of First Refusal at any time that it is in
default under this Lease. If Tenant waived or is deemed to have waived its
Right of First Refusal, Landlord thereafter shall have the unfettered right to
lease any portion of the Additional Space to any party upon such terms and
conditions and for such period or successive periods of time as Landlord, in its
sole, subjective and absolute discretion, shall determine; PROVIDED, HOWEVER, in
the event Landlord does not consummate a lease with a third party within 180
days of Tenant's waiver of its Right of First Refusal (provided Landlord is not
in ongoing lease negotiations with a third party) than Tenant's Right of First
Refusal shall be reinstated. Tenant's Right of First Refusal shall be subject
and subordinate to any renewal rights, expansion options, right of first refusal
and rights of first offer previously granted by Landlord to Sprint.
34. TERMINATION OPTION. Provided that Tenant has not exercised its
expansion option (as set forth in Section 32 above) or its Right of First
Refusal (as set forth in Section 33 above), with respect to the Additional Space
and subject to the other conditions herein set forth,
33.
<PAGE>
Tenant may elect to terminate this Lease ("TERMINATION OPTION") effective as of
the last day of the calendar month occurring 120 days after Tenant gives
Landlord written notice of its desire to terminate (the "EARLY TERMINATION
DATE"), which notice of termination must be actually received by Landlord
between May 1, 1999 and June 30, 1999 ("TENANT'S TERMINATION NOTICE"). Tenant's
Termination Option is conditioned on the following: (1) on or before the Early
Termination Date, Tenant has paid Landlord all amounts due and owing under the
Lease; and (2) Tenant pays to Landlord, within 15 days after notice from
Landlord informing Tenant of the amount of the termination penalty, which
termination penalty shall be the amount equal to the unamortized portion of
Landlord's Costs, as hereinafter defined, as of the Early Termination Date
calculated by amortizing Landlord's Costs over the Term on a daily basis, plus
interest thereon at the rate of 10% per annum. "LANDLORD'S COSTS" means
Landlord's costs related to this Lease, including, but not limited to costs
Landlord incurred in preparing the Premises for lease by Tenant, legal costs,
and leasing commissions. Tenant's right to exercise the Termination Option is
further conditioned on: (i) Tenant not being in default at the time of exercise
of the Termination Option or on the Early Termination Date; and (ii) Tenant not
having subleased or vacated more than 25% of the Premises or assigned its
interest under the Lease as of the date of exercise of the Termination Option or
on the Early Termination Date. If the Termination Option is timely exercised,
Tenant will deliver possession of the Premises to Landlord on the Early
Termination Date in accordance with the terms of the Lease and all other terms
and provisions will apply as if the Lease had expired according to its terms,
including Tenant's obligation for payment of any increases in Operating Expenses
attributable to periods prior to the Early Termination Date at such time as such
obligation is determined. if Tenant fails to timely give notice, Tenant will be
deemed to have waived its right to terminate under this Paragraph. Tenant's
right to terminate the Lease pursuant to this Paragraph is personal to Tenant
and may not be assigned. In the event of an assignment of the Lease or a
subletting or vacation of more than 25% of the Premises, this Paragraph is null
and void.
All of the terms and provisions of the Lease, as herein amended and
supplemented, are hereby ratified and confirmed, and shall remain in full force
and effect.
34.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be
duly executed as of the day and year first above written.
LANDLORD:
DENVER-STELLAR ASSOCIATES
LIMITED PARTNERSHIP
a Delaware limited partnership
By: Amerimar Realty Management Co.,
Colorado
By: Amerimar Realty Management Co.,
Pennsylvannia
its general partner
By: ARC-Management Co., Inc.
its general partner
Date: 2/24/99 By: /s/ David G. Marshall
---------------- ---------------------------
David G. Marshall,
President
TENANT:
JATO COMMUNICATIONS CORP.,
a Delaware corporation
Date: By: /s/ Brian E. Gast
---------------- ----------------------------------------
Authorized Signature (title)
ATTEST:
Date: By: /s/
---------------- ----------------------------------------
Authorized Signature (title)
35.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
1. Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
2. Base Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
3. Completion of Improvements. . . . . . . . . . . . . . . . . . . . . . . . . .2
4. Additional Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
(a) Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
(b) Expense Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . .3
(c) Adjustment for Services Not Rendered . . . . . . . . . . . . . . . . .4
(d) Tax Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
(e) Partial Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
(f) Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
(g) Place of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . .5
(h) Tenant Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
(i) Delay in Computation . . . . . . . . . . . . . . . . . . . . . . . . .6
5. Use of Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
6. Condition of Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
7. Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
(a) List of Services . . . . . . . . . . . . . . . . . . . . . . . . . . .7
(b) Billing for Electricity. . . . . . . . . . . . . . . . . . . . . . . .9
(c) Interruption of Service. . . . . . . . . . . . . . . . . . . . . . . 10
8. Alterations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
10. Insurance and Waiver of Subrogation . . . . . . . . . . . . . . . . . . . . 12
11. Fire or Casualty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
12. Waiver of Claims; Indemnification . . . . . . . . . . . . . . . . . . . . . 13
13. Nonwaiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
14. Condemnation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
15. Assignment and Subletting . . . . . . . . . . . . . . . . . . . . . . . . . 15
16. Holdover. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
17. Estoppel Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
18. Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
i
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
19. Certain Rights Reserved By Landlord . . . . . . . . . . . . . . . . . . . . 18
20. Rules and Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
21. Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
22. Expenses of Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . 22
23. Covenant of Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . 23
24. Security Deposit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
25. Real Estate Broker. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
26. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(a) Rights Cumulative. . . . . . . . . . . . . . . . . . . . . . . . . . 24
(b) Captions and Usage . . . . . . . . . . . . . . . . . . . . . . . . . 24
(c) Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(d) Lease Contains All Terms . . . . . . . . . . . . . . . . . . . . . . 24
(e) Submission of Lease. . . . . . . . . . . . . . . . . . . . . . . . . 25
(f) No Air Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(g) Modification of Lease. . . . . . . . . . . . . . . . . . . . . . . . 25
(h) Substitution of Other Premises . . . . . . . . . . . . . . . . . . . 25
(i) Transfer of Landlord's Interest. . . . . . . . . . . . . . . . . . . 26
(j) Recording; Short Form Memo . . . . . . . . . . . . . . . . . . . . . 26
(k) Covenants and Conditions . . . . . . . . . . . . . . . . . . . . . . 26
(l) Application of Payments. . . . . . . . . . . . . . . . . . . . . . . 27
(m) Security Interest. . . . . . . . . . . . . . . . . . . . . . . . . . 27
(n) Governing Law; Partial Invalidity. . . . . . . . . . . . . . . . . . 27
(o) Hazardous Materials. . . . . . . . . . . . . . . . . . . . . . . . . 27
27. Telephone and Telecommunications Service. . . . . . . . . . . . . . . . . . 28
28. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
29. Time is of the Essence. . . . . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
ii
<PAGE>
FIRST AMENDMENT TO LEASE
THIS FIRST AMENDMENT TO LEASE ("FIRST AMENDMENT") is made and entered
into as of this 7th day of May, 1999, by and between DENVER-STELLAR ASSOCIATES
LIMITED PARTNERSHIP, a Delaware limited partnership (hereinafter called
"LANDLORD") and JATO COMMUNICATIONS CORP., a Delaware corporation (hereinafter
called "TENANT").
RECITALS
A. Landlord and Tenant entered into that certain Denver Place Plaza
Tower Agreement of Lease dated as of January 1, 1999 (the "LEASE"), pursuant to
which Tenant leased approximately 4,215 square feet of rentable area located on
the seventh (7th) floor and known as Suite 700 (the "EXISTING PREMISES"), in the
office building known as Denver Place Plaza Tower, located at 1099 18th Street,
Denver, Colorado 80202 (the "BUILDING").
B. Tenant and Landlord desire to substitute the Existing Premises for
approximately 21,454 square feet of rentable area located upon the twenty-second
(22nd) floor of the Building.
C. Landlord and Tenant are the sole parties in interest under the
Lease.
D. Landlord and Tenant now desire to amend the Lease in the manner
and form set forth herein.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, Landlord and Tenant hereby amend the Lease as follows:
1. SUBSTITUTION OF PREMISES.
(a) The Existing Premises shall be substituted with that
certain office space located on and consisting of the entire rentable area of
the twenty-second (22nd) floor of the Building which is known as Suite 2200 and
consists of approximately 21,454 square feet of rentable area depicted on the
floor plan attached as EXHIBIT A-1, and hereby made a part hereof (hereinafter
referred to as the "NEW PREMISES") effective 12:01 a.m. (Denver time) on the
date (the "EFFECTIVE DATE") which is the later of (i) July 1, 1999 (the
"SCHEDULED EFFECTIVE DATE") or (ii) the first day that the New Premises are
Ready for Occupancy (hereinafter defined). As of the Effective Date, the New
Premises shall be deemed to be the Premises for all purposes of the Lease as
amended by this First Amendment and all references in the Lease to the Premises
shall be deemed to refer to the New Premises instead of and in place of the
Existing Premises.
(b) Landlord shall, subject to any applicable governmental
laws, rules, and regulations permit Tenant to enter upon the New Premises five
(5) days prior to the Effective Date (as reasonably estimated by Landlord) for
the purpose of installing furniture, fixtures and equipment subject to the terms
of the Lease as herein amended; PROVIDED, HOWEVER, Tenant shall not be obligated
to pay any rent (Base Rent and additional rent). Tenant shall completely vacate
the Existing Premises on or before 11:59 p.m. (Denver time), on the first
Business Day following
1.
<PAGE>
the Effective Date in accordance with the provisions of paragraph 6 of the Lease
and relinquish and redeliver possession of the Existing Premises to Landlord.
2. COMPLETION OF NEW PREMISES IMPROVEMENTS.
(a) PRELIMINARY INFORMATION AND PLANS. Landlord has heretofore
delivered to Tenant for use by Tenant's architect or engineer, such plan or
plans and other information with respect to the New Premises and the Building as
Tenant may reasonably require for proper and expeditious preparation of Tenant's
layout plans for the New Premises ("TENANT'S LAYOUT PLANS"). Receipt of all
such information is hereby acknowledged by Tenant.
(b) TENANT'S LAYOUT PLANS. Tenant shall cause to be prepared
at Tenant's expense and, not later than 12:00 noon (Denver time), May 7, 1999,
shall deliver to Landlord one mylar and two black line prints of complete and
final architectural working drawings (which shall be 1/8" scale), three copies
of all specifications and two (2) non-copyrighted CADD disks, prepared by an
architect or space planner approved by Landlord ("TENANT'S LAYOUT PLANS") for
the construction and finishing of the New Premises for Tenant's occupancy.
Tenant's Layout Plans shall (i) include the layout of Tenant's furniture,
fixtures and equipment, (ii) include electrical and heat specifications for all
of Tenant's fixtures and equipment, (iii) be signed and sealed by an architect
licensed by and registered in the State of Colorado, and (iv) conform to all
applicable laws and requirements of public authorities and insurance
underwriters' requirements. Tenant's Layout Plans shall be subject to
Landlord's review and written approval, which approval shall not be unreasonably
withheld or delayed, and such plans shall be deemed modified to take account of
any changes reasonably required by Landlord and approved by Tenant (which
approval shall not be unreasonably withheld or delayed). Landlord shall notify
Tenant whether or not the Tenant Layout Plans are approved within three (3)
business days after their delivery to Landlord. Tenant's Layout Plans as
approved by Landlord and with the aforesaid modifications, if any, are herein
called the "Final Layout Plans". Tenant designates Eliot Boyle and/or Lynn Coit
as Tenant's representative who Tenant agrees shall be available to meet and
consult with Landlord at the New Premises respecting the matters which are the
subject of this Paragraph 2 and who, as between Landlord and Tenant, shall have
the power to legally bind Tenant, in making requests for changes, giving
approval of plans or work, giving directions to Landlord or the like, under this
Paragraph 2; and any notice or delivery given to such person personally or at
his place of business shall have the same effect as a notice or delivery given
to Tenant.
(c) ENGINEERING PLANS. Landlord shall direct its engineers to
prepare at Tenant's expense and, not later than ten (10) days after approval by
Landlord of the Final Layout Plans, shall deliver to Tenant mechanical,
electrical and fire protection engineering drawings and specifications
("ENGINEERING PLANS"), based on the Final Layout Plans (and such pertinent
additional information as shall have been submitted by Tenant with Tenant's
Layout Plans or as requested by Landlord), as may be required to complete the
New Premises in accordance with the Final Layout Plans. As soon as reasonably
possible, and in any event within five (5) days after submission to Tenant by
Landlord of the Engineering Plans, Tenant shall give its written approval
thereof if they are in substantial conformity with or a direct extension of the
Final Layout Plans, otherwise such approval shall not be unreasonably withheld;
HOWEVER, the Engineering Plans shall be deemed to have been approved by Tenant
unless Tenant shall have
2.
<PAGE>
notified Landlord in writing to the contrary within five (5) days of their
receipt by Tenant, stating in which respects such plans fail to conform with the
Final Layout Plans. The Engineering Plans shall be deemed to have been approved
by Tenant if they are returned by Tenant with specified changes noted and such
changes are made, whether or not approval is thereafter specifically noted on
the Engineering Plans so changed,
(d) COMPLETION BY LANDLORD. Landlord shall, in a good and
workmanlike manner, cause the New Premises to be improved and completed in
accordance with the Final Layout Plans and the Engineering Plans (the "TENANT
WORK") (such plans are hereinafter together called the "CONSTRUCTION PLANS").
Landlord reserves the right, HOWEVER; (i) to make substitutions of material or
components of equivalent grade and quality when and if any specified material or
component shall not be readily or reasonably available, and (ii) to make changes
necessitated by conditions met in the course of construction, PROVIDED THAT
Tenant's approval of any substantial change shall first be obtained (which
approval shall not be unreasonably withheld or delayed so long as there shall be
general conformity with the Final Layout Plans); PROVIDED, HOWEVER, Landlord
shall not substitute carpet, floor coverings, paint or wall coverings without
Tenant's prior approval which shall not be unreasonably withheld or delayed.
The Tenant Work shall be furnished, installed and performed by Landlord for an
amount (hereinafter called the "Tenant Improvements Costs") equal to Landlord's
out-of-pocket contract or purchase price or prices to be paid by Landlord to
architects, engineers, material suppliers, subcontractors, independent
contractors and/or other sources for the material, labor and services applied to
the Tenant Work, plus a three percent (3%) construction management fee payable
to Landlord and applicable sales taxes. Landlord agrees to obtain not less than
three (3) bids for the completion of the Tenant Work from general contractors
reasonably acceptable to Landlord and Tenant maintaining an "A" or "B" license
with the City and County of Denver and the general contractor submitting the
lowest bid shall be selected to complete the Tenant Work; PROVIDED, HOWEVER,
that Landlord and Tenant may agree to select any other general contractor who
submits a bid within two percent (2%) of the lowest bid PROVIDED such selection
is made within one (1) business day after Landlord delivers the final bid
summary to Tenant. Landlord currently estimates that the Tenant Work can be
completed Ready for Occupancy by the Scheduled Effective Date (subject to delays
beyond Landlord's control), PROVIDED the Final Layout Plans are completed on or
before 5:00 p.m. (Denver time), May 7, 1999. "Ready for Occupancy" shall mean
(i) the date on which Landlord has substantially completed the Tenant Work as
reasonably determined by Landlord and as certified by Tenant's architect and
Landlord's architect, Lewis Himes Associates, Inc., in accordance with the
Construction Plans, (ii) a certificate or approval has been issued by the City
and County of Denver permitting Tenant's occupancy of the New Premises, and
(iii) Landlord's representative and Tenant's architect have jointly inspected
the New Premises and accepted such work as substantially completed (in the
exercise of their reasonable discretion), except for items or decorations which
do not prevent Tenant's use of the New Premises. The Tenant Work shall be
performed pursuant to a "guaranteed maximum price" construction contract, Tenant
shall have the right to approve such construction contract, PROVIDED such
approval shall not be unreasonably withheld or delayed.
(e) INITIAL IMPROVEMENTS ALLOWANCE. Landlord shall provide an
allowance for the Tenant Improvements Costs in the amount of Two Hundred
Fifty-Seven Thousand Four Hundred Forty-Eight and No/100 Dollars ($257,448.00)
("Initial Improvements Allowance").
3.
<PAGE>
Tenant shall pay for all Tenant Improvements Costs exceeding the Initial
Improvements Allowance(the "Excess Tenant Improvements Costs"). Tenant shall
pay fifty percent (50%) of the Excess Tenant Improvements Costs to Landlord
within thirty (30) days after the date that the contract for the completion of
the Tenant Work is awarded and Landlord has furnished Tenant with an itemized
bid summary, in reasonable detail, of the Tenant Improvements Costs and Tenant
shall pay the balance of the Excess Tenant Improvements Costs to Landlord on or
before the thirtieth (30th) day following the first day the Tenant Work is Ready
for Occupancy. In addition, Landlord may require that, before the commencement
of the construction of any work requested in any change orders to the Tenant
Work that Tenant pay to Landlord one hundred percent (100%) of the cost to
complete the work contemplated under such change orders as reasonably estimated
by Landlord. Notwithstanding anything in this Amendment to the contrary, any
costs incurred due to the remediation of Hazardous Materials, where such were
not caused by Tenant shall not be included in the cost of Tenant Work and shall
be the sole responsibility of Landlord.
(f) ACCESS; ACCEPTANCE OF WORK. Landlord shall afford Tenant
and its employees and agents (each herein referred to as a "Tenant Party")
access to the New Premises at reasonable times prior to the commencement of the
Term only in the presence of a representative of the Landlord, and at Tenant's
sole risk and expense, for the purposes of inspecting and verifying Landlord's
performance of the Tenant Work. Landlord agrees to provide a representative to
accompany a representative of Tenant to inspect the New Premises during
Landlord's normal business hours upon not less than four (4) hours' prior verbal
notice. Tenant shall advise Landlord promptly of any objection to the
performance of such work. In the event a Tenant Party accesses the New Premises
prior to the date (the "Tenant Installation Date"), the New Premises are made
available to Tenant pursuant to the provisions of Paragraph l(b) hereof, Tenant
shall indemnify and hold Landlord and its partners, agents, servants, employees
and general contractor (each herein referred to as an "Indemnified Party")
harmless from any and all claims, losses, damages, fines and penalties incurred
by an Indemnified Party including, but not limited to, reasonable attorneys'
fees that in any way result from a Tenant Party's negligent and/or willfully
wrongful activities within the New Premises without the supervision of a
representative of the Landlord. In addition, Tenant agrees to pay to Landlord
the sum of One Thousand Dollars ($1,000) each time a Tenant Party visits the New
Premises prior to the Tenant Installation Date without the supervision of a
representative of Landlord which payment shall not be deemed to be a fine or
penalty but shall be deemed the payment of liquidated damages to the Landlord
for Tenant's failure to comply with the provisions of this paragraph 2(f), it
being further agreed that the Landlord's actual damages would be difficult to
ascertain.
(g) DELIVERY OF POSSESSION. If Landlord shall, for any reason
(including, without limitation, failure to complete the work, if any, required
to be done by Landlord under this First Amendment), fail to make available to
Tenant possession of the New Premises on or before the Scheduled Commencement
Date or any other date, Landlord shall not be subject to any liability for such
failure nor for any failure to timely complete any work Under such circumstances
Tenant's obligation to pay the Base Rent and additional rent pertaining to the
New Premises shall not commence until the date the New Premises are Ready for
Occupancy; and such failure to make available to Tenant possession of the New
Premises on or before the Scheduled Commencement Date or any other date or to
timely complete any work, shall not in
4.
<PAGE>
any other way affect the validity or continuance of the Lease as herein
amended; PROVIDED, HOWEVER, the Term shall be extended such that the Termination
Date shall occur on the last day of the sixtieth (60th) complete calendar month
to occur after the Effective Date; PROVIDED, HOWEVER, that in the event the New
Premises are not Ready for Occupancy on or before October 1, 1999, Tenant shall
have the right to terminate the Lease as amended herein upon delivery of written
notice to Landlord on or before November 15, 1999. Such deferral of rent and
Tenant's right to terminate shall be Tenant's sole and exclusive rights and
remedies with respect to any such failure. There shall be no deferral of rent
or right to terminate, HOWEVER, if any such failure is caused in whole or part
by any act or omission of Tenant, its agents, servants, employees or
contractors, which has the effect of hindering or delaying Landlord's delivery
of possession or the timely completion of any work to be done by Landlord
(hereinafter a "Tenant Delay") including, without limitation, (i) any delay
which is caused by changes in the work to be performed by Landlord in readying
the New Premises for Tenant's occupancy, which changes are requested by Tenant
after Tenant's submission of the Tenant Layout Plans as required by Landlord for
approval thereof, or (ii) any delay which is caused by any failure by Tenant,
without regard to any grace period applicable thereto, to furnish to Landlord
any required plan, information, approval or consent within the period of time
required therefor by the terms of this First Amendment, or (iii) any delay which
is caused by the performance of any work or activity in the New Premises by
Tenant or any of its employees, agents or contractors. Tenant also shall pay to
Landlord, within thirty (30) days after receipt of demand made from time to
time, a sum equal to any additional out-of-pocket cost incurred by Landlord in
completing the Tenant Work resulting from any Tenant Delay.
(h) OCCUPANCY. The Premises shall not be deemed incomplete or
not Ready for Occupancy or for delivery of possession, if details of
construction, mechanical adjustments or decoration, or other items of the Tenant
Work which do not materially interfere with Tenant's use of the New Premises,
remain to be done, provided a Certificate of Substantial Completion is issued by
Landlord's architect.
(i) ADDITIONAL IMPROVEMENTS ALLOWANCE. Provided Tenant is not
in default (after the expiration of any applicable cure periods) in the
performance of its obligations under the Lease as herein amended, Landlord
agrees on a date occurring after December 15, 1999 and prior to January 15, 2000
to reimburse Tenant to the extent it has paid Excess Tenant Improvements Costs
up to an amount not to exceed One Hundred Twenty-Eight Thousand Seven Hundred
Twenty-Four and No/100 Dollars ($128,724.00) (the "Additional Improvements
Allowance"). In addition, Landlord agrees to provide an allowance of up to
Forty Thousand and No/100 Dollars ($40,000.00) (the "Common Area Allowance") to
renovate the Common areas located on the twenty-second (22nd) floor of the
Building (including restrooms, elevator lobby, fire stairwell doors, freight
elevator doors and restroom entrance doors). In the event any portion of the
Common Area Allowance is not used, it shall be added to the Additional
Improvements Allowance.
3. BASE RENT. Commencing on the Effective Date, Tenant shall pay to
Landlord the following Base Rent:
(a) Months one (1) through three (3): $338,774.76 annually /
$28,231.23 monthly.
5.
<PAGE>
(b) Months four (4) through sixty (60): $487,005.84 annually /
$40,583.82 monthly.
Base Rent shall be paid in advance on or before the first day of each
calendar month during the Term.
4. ADDITIONAL RENT. In addition to paying the Base Rent specified in
Paragraph 3 above, from the Effective Date through and including the Termination
Date, Tenant shall pay as additional rent the amounts determined in accordance
with the provisions of paragraph 4 of the Lease, PROVIDED that Tenant's
Proportionate Share shall be 4.174% (being the percentage calculated by dividing
21,454 square feet, the rentable area of the New Premises by 514,000 (being 95%
of the rentable area of the office space in the Building). The rentable area of
the New Premises has been calculated according to a method pursuant to which a
portion of the common areas has been deemed included in the New Premises. The
Base Rent and additional rent are sometimes herein collectively referred to as
the "rent". All amounts of additional rent shall be payable in the same manner
and at the same place as the Base Rent. Notwithstanding any provision contained
in the Lease or this First Amendment to the contrary, Tenant shall not be
obligated to pay any additional rent pursuant to the terms of this Paragraph 4
for the Calendar Year 1999.
5. SECURITY DEPOSIT. ADDITION TO SECURITY DEPOSIT. On or before May
7, 1999 Tenant shall deposit with Landlord the sum of$33,910.82 which shall be
added to the Collateral and held as security for the prompt, full and faithful
performance by Tenant of each and every provision of the Lease as herein amended
and of all obligations of Tenant hereunder in accordance with the provisions of
paragraph 24 of the Lease.
6. FIRST RIGHT OF REFUSAL.
(a) Landlord hereby grants to Tenant a continuing right of
first refusal (the "First Right of Refusal") covering all of the office space
located upon the twenty-first (21st) floor of the Building (the "First Refusal
Space"). If at any time after the date hereof, Landlord shall desire to lease
all or part of the First Refusal Space (whether or not as part of a larger
space), as evidenced by the issuance of a bona fide proposal to a third party by
or on behalf of Landlord covering such space, or Landlord's acceptance of a bona
fide proposal from a third party ("Third Party Proposal"), Landlord shall first
offer to lease the First Refusal Space subject to the limitations provided
below, by giving written notice ("Landlord's First Refusal Space Notice") to
Tenant. Landlord's First Refusal Space Notice shall specify the amount of First
Refusal Space covered by the Third Party Proposal (the "Designated First Refusal
Space") and the date on which the Designated First Refusal Space is expected to
be available for Tenant's lease. Within five (5) days after receiving
Landlord's notice, Tenant shall give written notice to Landlord ("First Refusal
Space Exercise Notice"), elect or decline to exercise its First Right of Refusal
as to the Designated First Refusal Space. This First Right of Refusal shall
require Tenant to lease the Designated First Offer Space on the same terms and
conditions (including the same annual per square foot rental rates) included
within such Third Party Proposal. If Tenant fails to exercise the First Right
of Refusal by delivering written notice to Landlord within such five (5) day
period, Tenant shall be deemed to have declined to exercise its First Right of
Refusal. Notwithstanding the foregoing, Tenant shall have no night to exercise
the First Right of
6.
<PAGE>
Refusal at any time that it is in default under the Lease as amended herein. If
Tenant declines or is deemed to have declined to exercise the First Right of
Refusal, Landlord thereafter shall have the right to lease the Designated First
Refusal Space to a third party pursuant to terms that are substantially the same
as such Third Party Proposal; PROVIDED, HOWEVER, in the event Landlord does not
consummate a lease with a third party within 180 days after Tenant declines or
is deemed to have declined to exercise its First Right of Refusal (provided
Landlord is not in ongoing lease negotiations with a third party), then Tenant's
First Right of Refusal shall be reinstated.
(b) The First Right of Refusal shall be subject and subordinate
to (i) Landlord's right to lease the First Refusal Space, or any portion
thereof, to Arcadis Geraghty & Miller, Inc., the tenant currently occupying the
First Refusal Space and/or its successors and assigns, and (ii) any renewal
rights, expansion rights, rights of first refusal, rights of first offer and any
similar rights subsequently granted by Landlord to a tenant leasing the First
Refusal Space, or any portion thereof, after Tenant has declined to exercise its
First Right of Refusal.
7. SECOND RIGHT OF REFUSAL.
(a) Landlord hereby grants to Tenant a one time right of first
refusal (the "Second Right of Refusal") covering that office space consisting of
approximately 7,600 square feet of rentable space located upon the twenty-third
(23rd) floor of the Building and which is depicted on EXHIBIT A-2 attached
hereto and incorporated herein by this reference (the "Second Refusal Space").
If at any time after the date hereof, Landlord shall desire to lease all or part
of the Second Refusal Space (whether or not as part of a larger space), as
evidenced by the issuance of a Third Party Proposal by or on behalf of Landlord
covering such space, or Landlord's acceptance of a bona fide Third Party
Proposal, Landlord shall first offer to lease the Second Refusal Space subject
to the limitations provided below, by giving written notice ("Landlord's Second
Refusal Space Notice") to Tenant. Landlord's Second Refusal Space Notice shall
specify the amount of Second Refusal Space covered by the Third Party Proposal
(the "Designated Second Refusal Space") and the date on which the Designated
Second Offer Space is expected to be available for Tenant's lease, Within five
(5) days after receiving Landlord's notice, Tenant shall give written notice to
Landlord ("Second Refusal Space Exercise Notice"), elect or decline to exercise
its Second Right of Refusal as to the Designated Refusal Space. This Second
Right of Refusal shall require Tenant to lease the Designated First Refusal
Space on the same terms and conditions (including the same annual per square
foot rental rate) included within such Third Party Proposal. If Tenant fails to
exercise the Second Right of Refusal by delivering written notice to Landlord
within such five (5) day period, Tenant shall be deemed to have declined to
exercise its Second Right of Refusal. Notwithstanding the foregoing, Tenant
shall have no right to exercise the Second Right of Refusal at any time that it
is in default under the Lease as amended. If Tenant declines or is deemed to
have declined to exercise the Second Right of Refusal, Landlord thereafter shall
have the right to lease the Designated Second Refusal Space to a third party
pursuant to terms that are substantially the same as such Third Party Proposal;
PROVIDED, HOWEVER, in the event Landlord does not consummate a lease with a
third party within 180 days after Tenant declines or is deemed to have declined
to exercise its Second Right of Refusal (provided Landlord is not in ongoing
lease negotiations with a third party), then Tenant's Second Right of Refusal
shall be reinstated.
7.
<PAGE>
(b) The Second Right of Refusal shall be subject and
subordinate to Landlord's right to lease the Second Refusal Space, or any
portion thereof, to the tenant currently occupying the Second Offer Space and/or
its successors and assigns.
8. RENEWAL OPTION.
(a) Tenant shall have the option to renew ("Renewal Option")
the Term of the Lease as amended herein for one (1) additional term of five (5)
years ("Renewal Term"), commencing July 1, 2004, and expiring at 11:59 p.m.
(Denver time), June 30, 2009 on the condition that Tenant is not in default
(after the expiration of applicable cure periods) under the Lease as amended
herein at the time Tenant gives notice of exercise of the Renewal Option or at
the time of commencement of the Renewal Term. Such renewal shall be on all of
the terms, covenants and conditions of the Lease, as amended herein, except: (i)
Tenant shall not have any right to further renewal beyond such additional
five-year Renewal Term; (ii) Tenant shall not have any Second Right of Refusal
during such Renewal Term; (iii) the annual Base Rent for the Premises for the
Renewal Term shall be the greater of (A) $19.50 multiplied by the number of
rentable square feet comprising the Premises at the time of the commencement of
the Renewal Term or (B) the Fair Market Rental Rate (as hereinafter defined) of
the Premises; PROVIDED, HOWEVER, that in the event the Fair Market Rental Rate
is less than $19.50 on a per rentable square foot basis, the annual Base Rent
for the Renewal Term shall be a market rate reasonably determined by Landlord
based upon lease and/or lease renewal transactions (collectively the "Lease
Transactions") pertaining to office space in the Building comparable to the
Premises, entered into within three (3) months preceding the date of Tenant's
delivery of notice exercising the Renewal Option, PROVIDED, in no event, shall
the annual Base Rent during the Renewal Term be less than $14.00 multiplied by
the number of rentable square feet comprising the premises at the time of the
commencement of the Renewal Term; (iv) Landlord's Operating Expense Contribution
shall mean $6.60 per square foot; (v) all parking spaces provided to Tenant for
lease under the Parking Agreement shall be available for lease by Tenant during
the Renewal Term at the monthly rate(s) announced from time to tune by the
Operator of the Parking Garage. Tenant's Renewal Option shall be exercised only
by Tenant giving Landlord written notice of Tenant's election to renew, on or
before October 31, 2003, time being of the essence with respect to such notice.
As of the date the Renewal Term begins, the Lease as herein amended shall be
deemed modified in the manner set forth above, without the necessity of any
further agreement or document; PROVIDED, HOWEVER, that either party to this
First Amendment shall, upon request of the other party, execute, acknowledge,
and deliver an instrument evidencing such renewal and modification of the Lease
as herein amended,
(b) For the purposes of this Paragraph 8, the term "Fair Market
Rental Rate" or "FMRR" for the Premises for the Renewal Term shall mean an
amount per square foot of the rentable area of the Premises per annum,
reasonably determined by Landlord by reference to the market for comparable
space (including the floor location and the extent and condition of the
build-out) in first class office buildings located in the central business
district of Denver, Colorado similar in age and quality to the Building, that a
willing landlord would offer and a willing tenant would accept in an arms length
transaction for the lease of such office space:
(i) commencing on the commencement date of the renewal
Term;
8.
<PAGE>
(ii) providing for a tenant finish allowance equal to the
value of the tenant improvements in place upon the Premises to a prospective
tenant as of the commencement date of the Renewal Term; and
(iii) otherwise on all of the terms and conditions of the
Lease as amended herein, including the Tenant's obligation to pay Tenant's
Proportionate Share of Operating Expenses and Taxes in accordance with the
provisions of Paragraph 4 hereof.
(c) Landlord shall deliver to Tenant its proposed FMRR for the
Renewal Term within thirty (30) days after Landlord's receipt of notice of
Tenant's election to exercise the Renewal Option ("Renewal Notice"). Landlord
and Tenant shall use reasonable good faith efforts to mutually agree upon the
FMRR within sixty (60) days after Tenant's delivery of the Renewal Notice.
(d) In the event Landlord and Tenant cannot agree upon the FMRR
for the Renewal Term within the sixty (60) days after Tenant's delivery of the
Renewal Notice the FMRR shall be determined by appraisal, said appraisal shall
be conducted in accordance with the following procedures:
(i) Within twenty (20) days after receipt of a notice to
appraise given by either party, Landlord and Tenant shall each select a real
estate appraiser, who shall be a member of the American Institute of Real Estate
Appraisers, and who shall have at least five (5) years appraisal experience with
respect to commercial and office rental properties in the central business
district of Denver, Colorado. If one of the parties hereto fails to appoint an
appraiser within the time period prescribed, then the single appraiser appointed
shall be the sole appraiser and shall determine the FMRR at issue. If two
appraisers are appointed, they shall have thirty (30) days from the date the
second appraiser is appointed (the "30-day Appraisal Period") within which to
agree upon the FMRR at issue. The appraiser(s) shall be advised that the
determination of the FMRR at issue shall be governed by the definitions of same
set forth in this First Amendment. The determination by the two appraisers of
the FMRR at issue shall be binding on Landlord and Tenant.
(ii) The two appraisers appointed by the parties hereto
are unable to agree upon the FMRR at issue within the 30-day Appraisal Period,
then said appraisers shall attempt, within ten (10) days after the expiration of
the 30-day Appraisal Period, to select a third appraiser (the "Third
Appraiser"). If the first two appraisers are unable to agree on the Third
Appraiser within the ten (10) day period prescribed in the immediately preceding
sentence, either Landlord or Tenant, by giving ten (10) days notice to the other
party hereto, shall request that the presiding judge of the District Court for
the City and County of Denver, State of Colorado select the Third Appraiser.
The Third Appraiser, however selected, shall meet the qualifications set forth
in subparagraph 8(d)(i) above, and shall be a person who has not previously
acted in any capacity for either Landlord or Tenant.
(iii) On or before the tenth (10th) day after the Third
Appraiser is appointed or selected, the first two appraisers shall each
simultaneously submit in sealed envelopes his/her opinion of the fair market
base rent at issue, together with any written arguments or data in support of
said opinion(s), to the Third Appraiser. Within thirty (30) days
9.
<PAGE>
after he/she is appointed or selected, the Third Appraiser shall determine the
FMRR at issue by selecting one of the opinions submitted by the first two
appraisers. The selection of the Third Appraiser shall be binding on Landlord
and Tenant.
(iv) Each party hereto shall pay the fees and expenses of
the appraiser selected by such party, and the fees and expenses of the Third
Appraiser shall be borne equally by Landlord and Tenant.
9. PARKING. Effective as of the Effective Date, the first paragraph
of EXHIBIT D of the Lease following the introductory provisions is amended to
provide in its entirety as follows:
The Building in which the Premises are located contains a
parking garage for the benefit of tenants and the general
public (hereinafter called "Parking Garage"). Landlord does
not operate or manage the Parking Garage, but maintains a
management agreement with an independent contractor
(hereinafter called "Operator") for the management and
operation of the Parking Garage. In order to rent parking
space in the Parking Garage, Tenant must contract
separately with Operator for such rentals. Landlord shall
make available for Tenant and Tenant shall have a
non-assignable option to rent from the Operator for the
exclusive use of Tenant's employees thirty (30) parking
spaces located in the Parking Garage at the prevailing
monthly rate posted by the Operator. Tenant may exercise
its option to rent these parking spaces by renting the
parking spaces directly from the Operator on or before
August 31, 1999. Tenant's failure to pay any rent due for
such parking spaces shall constitute an event of default
under the Lease as herein amended.
10. TERMINATION OF LEASE PROVISIONS. The provisions contained in
Sections 31 and 32 of the Addendum to the Lease are terminated and null, void
and of no further effect.
11. TERMINATION OF RIGHT OF FIRST REFUSAL. The Tenant's Fight of
First Offer provided in Section 33 of the Addendum to the Lease is terminated
and null, void and of no further effect.
12. TERMINATION OF RIGHT OF EARLY TERMINATION. Tenant's Termination
Option as provided in under Section 34 of the Addendum to the Lease is
terminated and null, void and of no further effect.
13. TERMINATION OF LANDLORD'S RIGHT TO SUBSTITUTE PREMISES.
Landlord's right to substitute the Premises as provided in paragraph 26(h) of
the Lease is terminated and null, void, and of no further effect.
14. SERVICES. The third sentence of subparagraph 7(a)(i) of the Lease
is amended to provide in its entirety as follows:
Landlord shall not be responsible for the failure of the
HVAC system to provide normal comfort if such failure
results from occupancy of the Premises by more than an
average of one person for each 180 square feet
10.
<PAGE>
of floor area or if Tenant uses heat producing equipment or
equipment with electrical load of which, when combined with the
load of all lighting fixtures, exceeds 2.5 watts per square foot
of floor area in any one room or area.
15. ASSIGNMENT AND SUBLETTING. This first sentence of paragraph 15 of
the Lease is amended to provide in its entirety as follows:
In addition to withholding its consent, Landlord shall have
the additional right, exercisable within such 15 day
period, to terminate this Lease in its entirety (where
Tenant seeks to assign this Lease or sublet the entire
Premises) or as to that portion of the Premises which
Tenant seeks to sublet (where Tenant seeks to sublet only a
portion of the Premises), PROVIDED THAT Landlord's right to
termination in the event of a sublet shall only arise if
the portion of the Premises Tenant seeks to sublet consists
of greater than 10,000 rentable square feet.
16. WAIVER OF TRIAL BY JURY. LANDLORD AND TENANT SHALL AND HEREBY DO
WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTER CLAIM BROUGHT BY EITHER
OF THE PARTIES HERETO AGAINST THE OTHER ON ANY MATTERS WHATSOEVER ARISING OUT OF
OR IN ANY WAY CONNECTED WITH THE LEASE AND/OR THIS FIRST AMENDMENT, THE
RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S USE OF OR OCCUPANCY OF THE
PREMISES, AND ANY EMERGENCY STATUTORY OR ANY OTHER STATUTORY REMEDY.
17. REAL ESTATE BROKER. Landlord and Tenant acknowledge and agree
that: (i) Landlord has been represented in connection with this First Amendment
by Amerimar Realty Management Co. Colorado ("Amerimar") as Landlord's agent and
by Garth R. D. Tait, Broker, Ltd. ("Tait") as Landlord's subagent, and (ii)
Tenant has been represented in connection with this First Amendment by Cushman
Realty Corporation (Mark T. Stolte) ("Cushman") as Tenant's agent. Tenant
agrees to indemnify, defend and hold Landlord harmless from and against any
claims, for a commission or other compensation in connection with this First
Amendment, made by any broker or finder (other than Amerimar, Tait and Cushman)
who claim to have dealt with or communicated to Tenant in connection with this
First Amendment, PROVIDED THAT Landlord has not in fact retained such broker or
finder. Landlord agrees to indemnify, defend and hold Tenant harmless from and
against any claims, for a commission or other compensation in connection with
this First Amendment, made by any broker or finder who claim to have dealt with
or communicated to Landlord in connection with this First Amendment, provided
that Tenant has not in fact retained such broker or finder.
18. BINDING EFFECT. This First Amendment becomes effective only upon
the execution by Landlord and Tenant,
19. DEFINITIONS. All capitalized terms used herein, but not defined
herein, shall have the Same meanings given to such terms in the Lease unless
otherwise indicated.
11.
<PAGE>
20. TENANT'S REPRESENTATIONS CONCERNING ASSIGNMENT AND SUBLEASE.
Tenant represents and warrants to Landlord that (i) there are no subleases,
assignments or other agreements between the Tenant and any third party
concerning or affecting the Lease or the Premises or any portion thereof; and,
(ii) Tenant has not assigned, conveyed, pledged or granted any interest in the
Lease or any portion of the Premises to any person or entity.
21. REAFFIRMATION OF LEASE TERMS. Tenant and Landlord agree that the
terms, covenants and conditions of the Lease shall remain and continue in full
force and effect as amended herein. If there is any conflict between the terms
and provisions of this First Amendment and the terms and provisions of the
Lease, the terms and provisions of this First Amendment shall govern.
22. GOVERNING LAW. The governing law of this First Amendment and all
provisions hereunder shall be governed by and construed in accordance with the
laws of the State of Colorado.
23. COMPLETE AGREEMENT. This First Amendment contains all agreements,
understandings and arrangements between the parties hereto with regard to the
matters described herein.
24. BENEFIT. Subject to the limitations on Tenant's assignment and
subleasing provided in the Lease, this First Amendment shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns.
25. COUNTERPARTS. This First Amendment may be executed in two (2) or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same agreement.
12.
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this First
Amendment to Lease as of the day and year first above written.
LANDLORD:
DENVER-STELLAR ASSOCIATES
LIMITED PARTNERSHIP,
A DELAWARE LIMITED PARTNERSHIP
By: ARC Denver Associates L.L.C.,
a Delaware limited liability company,
its general partner
By: ARC Denver Inc.,
a Delaware corporation, its manager
Date: 6/11/99 By: /s/ David G. Marshall
---------------- -----------------------------------------
David G. Marshall, President
TENANT:
JATO COMMUNICATIONS CORP.,
a Delaware corporation
Date: 5/11/99 By: /s/ Brian E. Gast
---------------- -----------------------------------------
(title)
13.
<PAGE>
EXHIBIT A-1
[FLOOR PLANS]
<PAGE>
EXHIBIT A-2
[FLOOR PLANS]
<PAGE>
SECOND AMENDMENT TO LEASE
THIS SECOND AMENDMENT TO LEASE ("SECOND AMENDMENT") is made and entered
into as of this 27th day of May, 1999, by and between DENVER-STELLAR ASSOCIATES
LIMITED PARTNERSHIP, a Delaware limited partnership (hereinafter called
"LANDLORD") and JATO COMMUNICATIONS CORP., a Delaware corporation (hereinafter
called "TENANT").
RECITALS
A. Landlord and Tenant entered into that certain Denver Place Plaza
Tower Agreement of Lease dated as of January 1, 1999 (the "LEASE"), as amended
by a First Amendment to Lease dated May 26, 1999 (the "FIRST AMENDMENT"),
pursuant to which Tenant leases approximately 4,215 square feet of rentable area
located on the seventh (7th) floor known as Suite 700 (the "EXISTING PREMISES")
and approximately 21,454 square feet of rentable area located on the
twenty-second (22nd) floor known as Suite 2200 (the "NEW PREMISES"), in the
office building known as Denver Place Plaza Tower, located at 1099 18th Street,
Denver, Colorado 80202 (the "BUILDING"). The Lease as amended by the First
Amendment will be hereinafter collectively referred to as the "Lease."
B. Tenant and Landlord desire to amend certain terms related to the
Addition to Security Deposit described in Paragraph 5 of the First Amendment.
C. Landlord and Tenant are the sole parties in interest under the
Lease.
D. Landlord and Tenant now desire to amend the Lease in the manner
and form set forth herein.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, Landlord and Tenant hereby amend the Lease as follows:
1. AMENDMENT TO PARAGRAPH 5 OF FIRST AMENDMENT. Paragraph 5 of the
First Amendment is hereby amended by deleting the entire paragraph set forth in
the First Amendment and replacing it with the following in its entirety:
5. SECURITY DEPOSIT. ADDITION TO SECURITY DEPOSIT. On or
before the date of this Second Amendment, Tenant shall deposit the following
with Landlord:
(a) the sum of $33,910.82 which shall be added to the
Collateral and held as security for the prompt, full and faithful performance by
Tenant of each and every provision of the Lease as herein amended and of all
obligations of Tenant hereunder in accordance with the provisions of paragraph
24 of the Lease;
(b) a certificate of deposit in the face amount of
$270,000 ("CD"), issued by a state or federally chartered bank reasonably
acceptable to Landlord, to be held by Landlord for the balance of the Term to be
held as additional security for the prompt, full and
1.
<PAGE>
faithful performance by Tenant of each and every provision of the Lease as
herein amended and of all obligations of Tenant hereunder, which CD may be
reduced or replaced only as provided in this paragraph.
The CD is subject to the following additional terms and
conditions:
(i) Tenant may substitute a letter of credit government
security or other investment grade security reasonably acceptable to Landlord
("ALTERNATE COLLATERAL") for the CD provided that the terms of the Alternate
Collateral are acceptable to Landlord and offer reasonably similar security to
Landlord as the CD, and further provided that all the provisions in this
paragraph are satisfied with respect to the Alternate Collateral.
(ii) Tenant may reduce the face amount of the CD in
$54,000 increments, at Tenant's election, on the following dates: (a) January
30, 2001, (b) July 31, 2001, (c) July 31, 2002, and (d) July 31, 2003, with the
amount which has theretofore not been applied refunded at the end of the Term.
In the event of a monetary or material default beyond any applicable cure
periods under the Lease occurs, Tenant will not be entitled to reduce the face
amount of the CD, at all, and will immediately provide a CD to Landlord in the
original face amount required in this paragraph, to be held for the balance of
the Term, without reduction.
(iii) The CD may be fully refunded at Tenant's election in
the event Tenant gives Landlord satisfactory evidence that Tenant has received
at least $30 million in new equity invested in Tenant's corporation for common
stock or preferred stock in Tenant after May 31, 1999, as shown on Tenant's
audited financial statement after the transfer of such equity to Tenant, which
financial statement will be prepared by a licensed certified public accountant
and certified as true and correct by the chief financial officer of Tenant and
further provided that no monetary or material default under the Lease has
occurred beyond any applicable cure periods.
(iv) The CD will be initially purchased with a maturity
date not greater than six months. The initial maturity date will be selected by
Tenant and then Tenant will notify Landlord in writing of the maturity date.
Upon maturity of the CD, all principal will be automatically reinvested in a
subsequent three-month CD, with all accrued interest paid to Tenant on the date
such CD matures, Each time the CD matures, the principal of the CD, as such
principal may be reduced pursuant to the terms of this paragraph, will be
reinvested in a subsequent three-month CD and accrued interest will be paid to
Tenant until the end of the Term of the Lease.
2. BINDING EFFECT. This Second Amendment becomes effective only upon
the execution by Landlord and Tenant,
3. DEFINITIONS. All capitalized terms used herein, but not defined
herein, shall have the same meanings given to such terms in the Lease unless
otherwise indicated.
4. REAFFIRMATION OF LEASE TERMS. Tenant and Landlord agree that the
terms, covenants and conditions of the Lease shall remain and continue in full
force and effect as amended herein. If there is any conflict between the terms
and provisions of this Second Amendment and the terms and provisions of the
Lease, the terms and provisions of this Second Amendment shall govern.
2.
<PAGE>
5. GOVERNING LAW. The governing law of this Second Amendment and all
provisions hereunder shall be governed by and construed in accordance with the
laws of the State of Colorado.
6. COMPLETE AGREEMENT. This Second Amendment contains all
agreements, understandings and arrangements between the parties hereto with
regard to the matters described herein.
7. BENEFIT. Subject to the limitations on Tenant's assignment and
subleasing provided in the Lease, this Second Amendment shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns.
8. COUNTERPARTS. This Second Amendment may be executed in two (2) or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same agreement.
3.
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Second
Amendment to Lease as of the day and year first above written.
LANDLORD:
DENVER-STELLAR ASSOCIATES
LIMITED PARTNERSHIP,
A DELAWARE LIMITED PARTNERSHIP
By: ARC Denver Associates L.L.C.,
a Delaware limited liability company,
its general partner
By: ARC Denver Inc.,
a Delaware corporation,
its manager
Date: 6/11/99 By: /s/ David G. Marshall
---------------- -----------------------------------------
David G. Marshall, President
TENANT:
JATO COMMUNICATIONS CORP.,
a Delaware corporation
Date: By: /s/ Brian E. Gast
---------------- -----------------------------------------
(title)
4.
<PAGE>
THIRD AMENDMENT TO LEASE
THIS THIRD AMENDMENT TO LEASE ("Third Amendment") is made and entered
into as of this 20th day of October, 1999, by and between DENVER-STELLAR
ASSOCIATES LIMITED PARTNERSHIP, a Delaware limited partnership (hereinafter
called "Landlord") and JATO COMMUNICATIONS CORP., a Delaware corporation
(hereinafter called "Tenant").
R E C I T A L S
A. Landlord and Tenant entered into that certain Denver Place Plaza
Tower Agreement of Lease as of January 1, 1999 (the "Original Lease"), as
amended by a First Amendment to Lease dated as of May 7, 1999 (the "First
Amendment"), and Second Amendment to Lease dated as of May 27, 1999, pursuant
to which Tenant leased approximately 4,215 square feet of rentable area
located on the seventh (7th) floor known as Suite 700 (the "Original
Premises") and approximately 21,454 square feet of rentable area located on
the twenty-second (22nd) floor known as Suite 2200 (the "New Premises"), in
the office building known as Denver Place Plaza Tower, located at 1099 - 18th
Street, Denver, Colorado 80202 (the "Building"). The Lease as amended by the
First Amendment and Second Amendment will be hereinafter collectively
referred to as the "Lease".
B. Tenant and Landlord desire to provide for Tenant's lease of
additional office space located upon the twenty-eighth (28th) floor of the
Building consisting of approximately 4,120 square feet of rentable area.
C. Landlord and Tenant are the sole parties in interest under the
Lease.
D. Landlord and Tenant now desire to amend the Lease in the manner and
form set forth herein.
A G R E E M E N T
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, Landlord and Tenant hereby amend the Lease effective at
12:01 a.m. (Denver time), October 20, 1999 (the "Third Amendment Effective
Date") as follows:
1. ACKNOWLEDGMENT AND AGREEMENT OF FIRST AMENDMENT EFFECTIVE DATE.
Tenant acknowledges and agrees that the Effective Date under the First
Amendment occurred August 1, 1999 and Tenant accepted the New Premises as of
the Effective Date.
2. FIRST ADDED PREMISES. Effective as of the Third Amendment
Effective Date, that office space, known as Suite 2850, located on the
twenty-eighth (28th) floor of the Building, consisting of approximately 4,120
square feet of rentable area which is depicted on EXHIBIT A-1 attached hereto
and incorporated herein by this reference ("First Added Premises"), shall be
added to and constitute to a part of the Premises described in the Lease,
from the Third Amendment Effective Date, which is December 9, 1999 through
and until 11:59 p.m. (Denver time) December 8, 2002 ("First Added Premises
Termination Date"), upon the same terms and conditions as set forth in the
Lease, except as otherwise provided in this Third Amendment. Tenant shall
vacate the First Added Premises on or before the First Added Premises
Termination Date and deliver the First Added Premises to Landlord in
compliance with the provisions of Paragraph 6 of the Original Lease.
3. BASE RENT. Effective as of the Effective Date, Tenant shall pay to
Landlord the following Base Rent:
<PAGE>
(a) From January 1, 1999 through July 31, 1999:
Original Premises: $80,085.00 annually/$6,673.75 monthly
(b) From August 1, 1999 through October 31, 1999:
New Premises: $338,774.76 annually/$28,231.23 monthly
(c) From November 1, 1999 through December 8, 1999:
New Premises: $487,005.84 annually/$40,583.82 monthly
(d) From December 9, 1999 through December 8, 2002:
New Premises: $487,005.84 annually/$40,583.82 monthly
First Added Premises: $90,640.08 annually/$7,553.34 monthly
(e) From December 9, 2002 through June 30, 2004:
New Premises: $487,005.84 annually/$40,583.82 monthly
4. ADDITIONAL RENT. In addition to paying the Base Rent specified in
Paragraph 3 above, on and after January 1, 2000 Tenant shall pay as
"additional rent", the amounts determined in accordance with the provisions
of Paragraph 4 of the Original Lease and Tenant shall pay as "additional
rent", the amounts determined in accordance with the provisions of this
Paragraph 4. The Base Rent and additional rent are sometimes herein
collectively referred to as the "rent". All amounts of additional rent shall
be payable in the same manner and as the same place as the Base Rent.
Tenant's Proportionate Share shall mean [A] .82% during such portion of
the Term that the Premises consist of the Original Premises being the
percentage calculated by dividing 4,215 square feet (the rentable area of the
Premises), by 514,000 square feet, [B] 4.174% during such portion of the Term
that the Premises consists of the New Premises being the percentage
calculated by dividing 21,454 square feet (the rentable area of the Premises)
by 514,000 square feet, and [C] 4.975% during such portion of the Term that
the Premises consists of the New Premises and First Added Premises being the
percentage calculated by dividing 25,574 square feet (the rentable area of
the Premises) by 514,000 square feet. Notwithstanding any provision contained
in the Lease or this Third Amendment to the contrary, Tenant shall not be
obligated to pay any additional rent pursuant to the terms of this Paragraph
4 for the Calendar Year 1999.
5. ACCEPTANCE OF FIRST ADDED PREMISES AND REFURBISHMENT ALLOWANCE
(a) Tenant acknowledges that it has had the opportunity to inspect
the First Added Premises and agrees to accept the First Added Premises
in its current "as is" condition; provided, however, that Landlord
agrees to construct demising walls to separate the First Added Premises
from the adjacent premises and to paint the interior walls of the First
Added Premises with Building standard paint-color to be selected by
Tenant. Any modifications required to the First Added Premises to be
compliant with code, including but not limiting to exiting requirements,
and shall be at Landlord's sole cost.
(b) In the event the Tenant does not exercise the Partial
Termination Option (hereinafter defined) and provided that Tenant has
performed all of its obligations under the Lease as herein amended,
Landlord shall provide, after October 1, 2000, an allowance (the "First
Added Premises Allowance") to Tenant to refurbish and repair the First
Added Premises, in the amount of Twelve Thousand Three Hundred Sixty and
No/100 Dollars ($12,360.00); provided, however, that the First Added
Premises Allowance shall only be used for the repair, maintenance,
replacement or new construction of tenant improvements
<PAGE>
located and constructed upon the First Added Premises. Tenant shall be
entitled to disbursements from the First Added Premises Allowance within
thirty (30) days after submitting a written request to the Landlord
together with evidence of Tenant's payment(s), and applicable mechanic's
lien releases reasonably acceptable to Landlord. Any request for
disbursement from the First Added Premises Allowance shall be not less than
Three Thousand and No/100 Dollars ($3,000.00) excluding any final request
necessary to cause a disbursement of the remaining balance of the First
Added Premises Allowance. In the event the Tenant does not use the First
Added Premises Allowance on or before March 31, 2001, Tenant shall not be
entitled to any payment of the unused portion of the First Added Premises
Allowance.
6. TENANT'S PARTIAL TERMINATION OPTION. Provided that (i) Tenant is not in
default under the Lease as herein amended, and (ii) Tenant has exercised its
First Right of Refusal pursuant to the provisions of Paragraph 6(a) of the First
Amendment to add not less than 4,120 square feet of rentable area (such area
being herein referred to as the "Twenty-first Floor Premises") located upon the
twenty-first (21st) floor of the Building to the Premises on or before July 31,
2000 ("Partial Termination Date"), Tenant shall have the option ("Partial
Termination Option") to partially terminate this Lease as of the later of
October 31, 2000 or the date the Twenty-first Floor Premises are ready for
Tenant's occupancy (such date is herein referred to as the "First Added Premises
Early Termination Date") with respect to the entire First Added Premises,
provided that the Tenant delivers written notice of its intent to exercise said
option ("Partial Termination Notice") to the Landlord on or before the Partial
Termination Date. In the event Tenant has not delivered the Partial
Termination Notice to Landlord on or before the Partial Termination Date,
Tenant's Partial Termination Option shall be deemed to have expired. If the
Tenant exercises the Partial Termination Option as provided in this paragraph,
then,
(a) the First Added Premises shall no longer constitute a part of
the Premises as of 11:59 p.m. (Denver time), on the First Added Premises
Early Termination Date in compliance with the provisions of Paragraph 6
of the Original Lease.
(b) "Exhibit D" of the Lease shall be amended to provide for thirty
(30) parking spaces instead of thirty-four (34) parking spaces.
(c) Tenant's annual Base Rent under Paragraph 3 herein shall be
amended to eliminate any Base Rent for the First Added Premises.
(d) Tenant's Proportionate Share, pursuant to Paragraph 4 above,
shall be calculated so as not to include the First Added Premises.
7. PARKING. Effective as of the Third Amendment Effective Date, the
first paragraph of "Exhibit D" of the Lease following the introductory
provisions is amended to provide in its entirety as follows:
The Building in which the Premises are located contains a parking
garage for the benefit of tenants and the general public
(hereinafter called "Parking Garage"). Landlord does not operate or
manage the Parking Garage, but maintains a management agreement with
an independent contractor (hereinafter called "Operator") for the
management and operation of the Parking Garage. In order to rent
parking space in the Parking Garage, Tenant must contract separately
with Operator for such rentals. Landlord shall make available for
Tenant and Tenant shall have a non-assignable option to rent from
the Operator for the exclusive use of Tenant's employees thirty-four
(34) unreserved parking spaces located in the Parking Garage at the
prevailing monthly rate posted by the Operator. Tenant may exercise
its option to rent these parking spaces by renting the parking
spaces directly from the Operator on or before October 31, 1999.
Tenant's failure to
3
<PAGE>
pay any rent due for such parking spaces shall constitute an event of
default under the Lease as herein amended.
8. WAIVER BY TRIAL BY JURY. LANDLORD AND TENANT SHALL AND HEREBY DO
WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY
EITHER OF THE PARTIES HERETO AGAINST THE OTHER ON ANY MATTERS WHATSOEVER
ARISING OUT OF OR IN ANY WAY CONNECTED WITH THE LEASE AND/OR THIS THIRD
AMENDMENT, THE RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S USE OF OR
OCCUPANCY OF THE PREMISES, AND ANY EMERGENCY STATUTORY OR ANY OTHER STATUTORY
REMEDY.
9. REAL ESTATE BROKER. Landlord and Tenant acknowledge and agree
that: (i) Landlord has been represented in connection with this Third
Amendment by Amerimar Realty Management Co.-Colorado ("Amerimar") as
Landlord's agent and by Garth R. D. Tait, Broker, Ltd. ("Tait") as Landlord's
subagent, and (ii) Tenant has been represented in connection with this Third
Amendment by Cushman Realty Corporation (Mark T. Stolte) ("Cushman") as
Tenant's agent. Tenant agrees to indemnify, defend and hold Landlord harmless
from and against any claims, for a commission or other compensation in
connection with this Third Amendment, made by any broker or finder (other
than Amerimar, Tait and Cushman) who claim to have dealt with or
communicated to Tenant in connection with this Third Amendment, provided that
Landlord has not in fact retained such broker or finder. Landlord agrees to
indemnify, defend and hold Tenant harmless from and against any claims, for a
commission or other compensation in connection with this Third Amendment,
made by any broker or finder who claim to have dealt with or communicated to
Landlord in connection with this Third Amendment, provided that Tenant has
not in fact retained such broker or finder.
10. BINDING EFFECT. This Third Amendment becomes effective only upon
the execution by Landlord and Tenant.
11. DEFINITIONS. All capitalized terms used herein, but not defined
herein, shall have the same meanings given to such terms in the Lease unless
otherwise indicated.
12. TENANT'S REPRESENTATIONS CONCERNING ASSIGNMENT AND SUBLEASE.
Tenant represents and warrants to Landlord that (i) there are no subleases,
assignments or other agreements between the Tenant and any third party
concerning or affecting the Lease or the Premises or any portion thereof;
and, (ii) Tenant has not assigned, conveyed, pledged or granted any interest
in the Lease or any portion of the Premises to any person or entity.
13. REAFFIRMATION OF LEASE TERMS. Tenant and Landlord agree that the
terms, covenants and conditions of the Lease shall remain and continue in
full force and effect as amended herein. If there is any conflict between the
terms and provisions of this Third Amendment and the terms and provisions of
the Lease, the terms and provisions of this Third Amendment shall govern.
14. GOVERNING LAW. The governing law of this Third Amendment and all
provisions hereunder shall be governed by and construed in accordance with
the laws of the State of Colorado.
15. COMPLETE AGREEMENT. This Third Amendment contains all agreements,
understandings and arrangements between the parties hereto with regard to the
matters described herein.
16. BENEFIT. Subject to the limitations on Tenant's assignment and
subleasing provided in the Lease, this Third Amendment shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns.
17. COUNTERPARTS. This Third Amendment may be executed in two (2) or
more counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same agreement.
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18. ADDITION TO SECURITY DEPOSIT. On or before the date of this Third
Amendment, Tenant shall deposit with Landlord an additional sum of $7,553.34,
which shall be added to the Collateral for a total of $48,137.91, to be held
as security for the prompt, full, and faithful performance by Tenant of each
and every provision of the Lease as herein amended and of all obligations of
Tenant hereunder in accordance with the provisions of Paragraph 24 of the
Original Lease. In all other respects, Paragraph 24 of the Original Lease and
Paragraph 1 of the Second Amendment are ratified and confirmed.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Third
Amendment to Lease as of the day and year first above written.
LANDLORD:
DENVER-STELLAR ASSOCIATES
LIMITED PARTNERSHIP, a Delaware
limited partnership
By: ARC Denver Associates L.L.C., a
Delaware limited liability company,
its general partner
By: ARC Denver Inc., a Delaware
corporation, its manager
Date: By: /s/ David G. Marshall
---------------------- --------------------------------------
David G. Marshall, President
TENANT:
JATO COMMUNICATIONS CORP.,
a Delaware corporation
Date: By: /s/ William D. Myers
---------------------- --------------------------------------
(Title)
5
<PAGE>
DENVER PLACE SOUTH TOWER
AGREEMENT OF LEASE
BETWEEN
DENVER PLACE ASSOCIATES LIMITED PARTNERSHIP, LANDLORD
AND
JATO COMMUNICATIONS CORP., TENANT
<PAGE>
DENVER PLACE SOUTH TOWER
AGREEMENT OF LEASE
BETWEEN
DENVER PLACE ASSOCIATES LIMITED PARTNERSHIP, LANDLORD
AND
JATO COMMUNICATIONS CORP., TENANT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. TERM ............................................................ 1
2. BASE RENT ....................................................... 1
3. IMPROVEMENTS .................................................... 1
4. ADDITIONAL RENT ................................................. 2
(a) DEFINITIONS ................................................ 2
(b) PAYMENT OF ADDITIONAL RENT ................................. 3
(c) ADJUSTMENT FOR SERVICES NOT RENDERED ....................... 4
(d) PARTIAL YEAR ............................................... 4
(e) DISPUTES ................................................... 4
(f) PLACE OF PAYMENT ........................................... 4
(g) TENANT TAXES ............................................... 4
(h) DELAY IN COMPUTATION ....................................... 5
5. USE OF PREMISES ................................................. 5
6. CONDITION OF PREMISES ........................................... 5
7. SERVICES ........................................................ 6
(a) STANDARD SERVICES .......................................... 6
(b) ADDITIONAL SERVICES ........................................ 6
(c) INTERRUPTION OF SERVICES ................................... 8
8. ALTERATIONS ..................................................... 9
9. LIENS ........................................................... 9
10. INSURANCE AND WAIVER OF SUBROGATION ............................. 10
11. FIRE OR CASUALTY ................................................ 10
12. WAIVER OF CLAIMS -- INDEMNIFICATION ............................. 11
13. NONWAIVER ....................................................... 11
14. CONDEMNATION .................................................... 12
15. ASSIGNMENT AND SUBLETTING ....................................... 12
16. HOLDOVER ........................................................ 13
17. ESTOPPEL CERTIFICATE ............................................ 14
18. SUBORDINATION ................................................... 14
19. CERTAIN RIGHTS RESERVED BY LANDLORD ............................. 15
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<PAGE>
20. RULES AND REGULATIONS .......................................... 16
21. REMEDIES ....................................................... 16
22. EXPENSES OF ENFORCEMENT ........................................ 18
23. COVENANT OF QUIET ENJOYMENT .................................... 18
24. SECURITY DEPOSIT ............................................... 18
25. REAL ESTATE BROKER ............................................. 18
26. MISCELLANEOUS .................................................. 18
(a) RIGHTS CUMULATIVE ......................................... 18
(b) CAPTIONS AND USAGE ........................................ 19
(c) BINDING EFFECT ............................................ 19
(d) LEASE CONTAINS ALL TERMS .................................. 19
(e) SUBMISSION OF LEASE ....................................... 19
(f) NO AIR RIGHTS ............................................. 19
(g) MODIFICATION OF LEASE ..................................... 19
(h) SUBSTITUTION OF OTHER PREMISES ............................ 19
(i) TRANSFER OF LANDLORD'S INTEREST ........................... 20
(j) RECORDING; SHORT FORM MEMO ................................ 20
(k) COVENANTS AND CONDITIONS .................................. 20
(l) APPLICATION OF PAYMENTS ................................... 20
(m) SECURITY INTEREST ......................................... 20
(n) GOVERNING LAW; PARTIAL INVALIDITY ......................... 20
(o) HAZARDOUS MATERIALS ....................................... 21
(p) WARRANTY DISCLAIMER ....................................... 21
(q) WAIVER OF TRIAL BY JURY ................................... 21
(r) FORCE MAJEURE ............................................. 21
(s) LIST OF EXHIBITS .......................................... 21
27. TELEPHONE AND TELECOMMUNICATIONS SERVICE ....................... 22
28. NOTICES ........................................................ 23
29. TIME IS OF THE ESSENCE ......................................... 23
Addendum
Exhibit A -- Premises
Exhibit B -- Rules and Regulations
Exhibit C -- Lease Term Agreement
Exhibit D -- Parking Agreement
</TABLE>
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<PAGE>
OFFICE LEASE
DENVER PLACE SOUTH TOWER
DENVER, COLORADO
AGREEMENT OF LEASE made as of the 29th day of September, 1999
(hereinafter referred to as the "Lease") between Amerimar Realty Management
Co.-Colorado, as agent for DENVER-STELLAR ASSOCIATES LIMITED PARTNERSHIP, a
Delaware limited partnership (hereinafter referred to as "Landlord") and JATO
COMMUNICATIONS CORP., a Delaware corporation, whose present address is 1099 -
18th Street, Suite _____, Denver, Colorado 80202 (hereinafter referred to as
"Tenant").
W I T N E S S E T H
Landlord hereby leases to Tenant, and Tenant hereby accepts from
Landlord, subject to the covenants, terms, provisions and conditions of this
Lease, the premises (hereinafter referred to as the "Premises") containing
approximately 13,106 square feet of rentable area and designated on the plan
attached hereto as Exhibit "A" and further described as Suite 2600 the
building known as Denver Place (hereinafter referred to as the "Building")
located at 999 - 18th Street, Denver, Colorado, 80202, which is situated on a
portion of real property being more particularly described as Lots 1 through
32 inclusive, Block 110, East Denver Subdivision, City and County of Denver,
State of Colorado. The Building, the land upon which it is situated,
all surrounding improvements, any garage or other related improvements and all
common areas appurtenant to, associated with or servicing the Building are
hereinafter called the "Real Property" or the "Property".
In consideration thereof, Landlord and Tenant covenant and agree as
follows:
1. TERM. The term of this Lease (the "Term") shall commence on
December 1, 1999 (the "Commencement Date") and, unless sooner terminated as
provided herein, shall end, absolutely and without the need for notice from
either party to the other, on January 31, 2003 (the "Termination Date").
2. BASE RENT. Subject to adjustment as herein provided, the "Base
Rent" to be paid hereunder shall be $262,120.08 per annum which shall be paid
in advance on or before the first day of each calendar month during the Term,
in equal monthly installments of $21,843.34, provided, however, that Tenant
shall pay the first full monthly installment at the time of execution of this
Lease. If the Term commences other than on the first day of a month or ends
other than on the last day of a month, the Base Rent for such month shall be
prorated. The Base Rent for the portion of the month in which the Term
commences shall be paid on the first day of the first full month of the Term.
3. IMPROVEMENTS.
(a) Tenant acknowledges that it has had the opportunity to
inspect the Premises and agrees to accept the Premises in its current "as
is" condition; provided, however, that Landlord shall provide an allowance
(the "Initial Refurbishment Allowance") to Tenant to refurbish and repair the
Premises, in the amount of Twenty-Six Thousand Two Hundred Twelve and No/100
Dollars ($26,212.00); provided, however, that the Initial Refurbishment
Allowance shall only be used for the repair, maintenance, replacement or new
construction of tenant improvements located and constructed upon the
Premises. Tenant shall be entitled to disbursements from the Initial
Refurbishment Allowance within thirty (30) days after submitting a written
request to the Landlord together with evidence of Tenant's payment(s), and
applicable mechanic's lien releases reasonably acceptable to Landlord. Any
request for disbursement from the Initial Refurbishment Allowance shall not
be less than Three Thousand and No/100 Dollars ($3,000.00) excluding any final
request necessary to cause a disbursement of the remaining balance of the
Initial Refurbishment Allowance. In the event the Tenant does not use the
Initial Refurbishment Allowance on or before March 31, 2001, Tenant shall not
be entitled to any payment of the unused portion of the Initial
Refurbishment Allowance.
(b) In the event the Tenant does not exercise either the
Partial Termination Option (hereinafter defined) and provided that Tenant has
performed all of its obligations under this Lease,
<PAGE>
Landlord shall provide, after November 1, 2000, an allowance (the "Additional
Refurbishment Allowance") to Tenant to refurbish and repair the Premises, in
the amount of Fifty-Two Thousand Four Hundred Twenty-Four and No/100 Dollars
($52,424.00); provided, however, that the Additional Refurbishment Allowance
shall only be used for the repair, maintenance, replacement or new
construction of tenant improvements located and constructed upon the
Premises. Tenant shall be entitled to disbursements from the Additional
Refurbishment Allowance within thirty (30) days after submitting a written
request to Landlord together with evidence of Tenant's payment(s), and
applicable mechanic's lien releases reasonably acceptable to Landlord. Any
request for disbursement from the Additional Refurbishment Allowance shall not
be less than Five Thousand and No/100 Dollars ($5,000.00) excluding any
final request necessary to cause a disbursement of the remaining balance of
the Initial Refurbishment Allowance. In the event the Tenant does not use the
Additional Refurbishment Allowance on or before March 31, 2001, Tenant shall
not be entitled to any payment of the unused portion of the Additional
Refurbishment Allowance.
4. ADDITIONAL RENT. In addition to paying the Base Rent specified
in Paragraph 2 hereof, Tenant shall pay "Additional Rent," which is equal to
the sum of the Expense and Adjustment Amount and Additional Services Charge
(all as hereinafter defined) and any other charges noted in this Lease. The
Base Rent and Additional Rent are sometimes herein collectively referred to
as the "Rent." Unless otherwise specified, all amounts due under this lease
as Additional Rent shall be payable in the same manner and at the same place
as the Base Rent.
(a) DEFINITIONS. As used in this Paragraph 4, the terms;
(i) "Operating Expense and Tax Base Amount" shall
mean $7.00 per rentable square foot per annum.
(ii) "Calendar Year" shall mean each calendar in which
any part of the Term falls, through and including the year in which the Term
expires.
(iii) "Tenant's Proportionate Share" shall mean 1.74%
being the percentage calculated by dividing 13,106 square feet, the rentable
area of the Premises provided at the beginning of this Lease, by 754,288
square feet (being 95% of the rentable area of the office space in the
Building). The rentable area of the Premises has been calculated according to
a method pursuant to which a portion of the common areas has been deemed
included in the Premises.
(iv) "Taxes" for any Calendar Year shall mean all real
estate taxes and assessments, special or otherwise, levied or assessed upon
that parcel of land known as Lots 1 through 32 inclusive and Block 110, East
Denver Subdivision, City and County of Denver, State of Colorado (the "Land")
or the Building during such Calendar Year. Should the State of Colorado, or
any political subdivision thereof, or any other governmental authority,
impose a tax, assessment, charge or fee, which Landlord shall be required to
pay, wholly or partially in substitution of any of the above Taxes, all such
taxes, assessments fees or charges shall be deemed to constitute Taxes
hereunder but shall be computed as if the Real Property and any other shared
use real property referred to in this subparagraph was the only real property
of Landlord. "Taxes" shall also include all fees and costs, including
reasonable attorneys' fees, appraisals and consultants' fees, incurred by
Landlord in seeking to obtain a reduction of, or a limit on, any increase in
any Taxes (regardless of whether any reduction or limitation is obtained).
In the event that the Real Property shall be for any taxes or assessments
assessed under the same assessment as other real property, the amount of such
taxes or assessment to be included within Taxes shall be such portion thereof
as Landlord fairly and equitably shall deem attributable thereto.
(v) "Operating Expenses" shall mean all expenses, costs
and disbursements (other than Taxes) of every kind and nature paid or
incurred by or on behalf of Landlord in connection with the ownership,
management, operation, maintenance and repair of the Property, other than
those costs reimbursable to Landlord by other tenants in the Building (and,
as allocated by Landlord, those paid or incurred in connection with the
ownership, operation, maintenance, management and repair of any garage or
other improvements the use of which is shared by the Building and one or more
other buildings), except the following:
[A] Costs of alterations of any tenant's
premises;
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<PAGE>
[B] Principal or interest payments on loans
secured by mortgages or trust deeds on the Real Property;
[C] Costs of capital improvements, except that
Operating Expenses shall include the costs as amortized over such number of
years as Landlord may reasonably determine, with interest at the rate of 12%
per annum on the unamortized amount, of any capital improvements which, (1)
in Landlord's reasonable opinion, will have the effect of reducing any
component cost included within Operating Expenses, (2) are made or installed
to assure compliance with all governmental rules and regulations applicable
from time to time, or (3) under generally applied real estate accounting
practices may be expensed or treated as deferred expenses (and the
amortization and interest so determined for each Calendar Year shall be
included in Operating Expenses for that Calendar Year); and
[D] Leasing commissions for space in the
Building.
(vi) "Expense and Tax Adjustment Amount" shall mean
Tenant's Proportionate Share of the amount by which the Operating Expenses
and Taxes incurred with respect to such Calendar Year exceed the Operating
Expense and Tax Base Amount; provided, however, that in determining the amount
of Operating Expenses for each Calendar Year, if less than 95% of the
rentable office area of the Building shall have been occupied at any time
during such Calendar Year, Operating Expenses shall be deemed for such
Calendar Year to be in the amount reasonably determined by Landlord to be
equal to that amount of like expenses which normally would be expected to be
incurred had such occupancy been 95% throughout such Calendar Year.
(vii) "Additional Services Charge" shall mean all
expenses and disbursements that Landlord incurs in connection with the
ownership, operation, and maintenance of the Premises, in addition to the
service provided as standard to all premises in the Building, which Additional
Services are more specifically described and defined in Paragraph 7 below.
(b) PAYMENT OF ADDITIONAL RENT.
(i) EXPENSE AND TAX ADJUSTMENT. The Expense and Tax
Adjustment Amount with respect to each Calendar Year shall be paid in monthly
installments, in advance on the first day of each calendar month during the
course of such year, in amounts estimated from time to time by Landlord and
communicated by written notice to Tenant. Landlord shall cause to be kept
books and records showing Operating Expenses and Taxes in accordance with
generally accepted accounting principles. Following the close of each
Calendar Year, Landlord shall cause the amount of the Expense and Tax
Adjustment Amount for such Calendar Year to be computed based on Operating
Expenses and Taxes for such Calendar Year, and Landlord shall deliver to
Tenant a statement of such amount; thereupon Tenant shall pay any deficiency
as shown by such statement to Landlord within 30 days after receipt of such
statement. If the total of the estimated monthly installments paid by Tenant
during any Calendar Year exceed the actual Expense and Tax Adjustment Amount
due from Tenant for such Calendar Year, then, at Landlord's option, such
excess shall be either credited against payments next due hereunder or
refunded by Landlord, provided Tenant is not then in default hereunder. The
amount of any refund of Taxes received by Landlord shall be credited against
Taxes for the year in which such refund is received. In determining the
amount of Taxes for any year, the amount of special assessments to be
included shall be limited to the amount of the installment (plus any interest
payable thereon) of such special assessment required to be paid during such
year as if Landlord had elected to have such special assessment paid over the
maximum period of time permitted by law; if the authority to whom such
assessment is to be paid shall not permit such assessment to be paid
in installments, the amount of such assessment shall be treated as being
amortized over such number of calendar years, beginning with the Calendar
Year in which the assessment is payable, as Landlord shall reasonably
determine, with interest at the rate of 15% per annum on the unamortized
amount, and such amortization and interest for each Calendar Year shall be
included in Taxes for that Calendar Year.
(ii) ADDITIONAL SERVICES CHARGE. The Additional
Services Charge shall be paid in monthly installments, in arrears, on the
first day of each calendar month during the course of such year, in amounts
estimated from time to time by Landlord and communicated by written notice to
Tenant. Following the close of each Calendar Year, Landlord shall cause the
amount of the Additional Services Charge for such Calendar Year to be
computed and Landlord shall deliver to
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<PAGE>
Tenant a statement of such amount, whereupon Tenant shall pay any deficiency
as shown by such statement to Landlord within 30 days after receipt of such
statement. If the total of the estimated monthly installments paid by Tenant
during any Calendar Year exceeds the actual Additional Services Charge due
from Tenant for such Calendar Year, then, at Landlords's option, such excess
shall be either credited against payments next due hereunder or refunded by
Landlord, provided Tenant is not then in default hereunder.
(c) ADJUSTMENT FOR SERVICES NOT RENDERED. If Landlord shall not be
furnishing any particular work or service (the cost of which, if furnished by
Landlord would be included in Operating Expenses) to a tenant who undertakes
to itself perform or obtain such work or service in lieu of the furnishing
thereof by Landlord, Operating Expenses shall be deemed for purposes of this
Paragraph 4 to be increased by an amount equal to the additional Operating
Expenses, as reasonably determined by Landlord, which would have been
incurred during such period if Landlord had at its own expense furnished such
work or service to such tenant.
(d) PARTIAL YEAR. If only part of any Calendar Year shall fall
within the Term, the amounts computed as Additional Rent, with respect to
such Calendar Year under the foregoing provisions of this Paragraph 4 shall
be prorated in proportion to the portion of such Calendar Year falling within
the Term, but the expiration or termination of this Lease prior to the end of
such Calendar Year shall not impair Tenant's obligation hereunder to pay such
prorated portion of such Additional Rent with respect to that portion of such
year falling within the Term.
(e) DISPUTES. Any statement furnished to Tenant by Landlord under
the provisions of this Paragraph 4 shall constitute a final determination as
between Landlord and Tenant as to the Rent set forth therein due from Tenant
for the period represented thereby, unless Tenant, within 60 days after such
statement is furnished, shall give a notice to Landlord that it disputes the
correctness thereof, specifying in detail the basis for such assertion.
Pending resolution of such dispute, Tenant shall pay all disputed amounts in
accordance with the statement furnished by Landlord. Landlord agrees, upon
prior written request, during normal business hours to make available for
Tenant's inspection, at Landlord's offices, Landlord's books and records
which are relevant to any items in dispute, provided Tenant has paid all
amounts billed to Tenant on account of the Additional Rent and all
installments thereof, and all other rents and sums then and previously due
under this Lease.
(f) PLACE OF PAYMENT. Tenant shall, without any demand therefor
and without set-off, pay to DENVER PLACE ASSOCIATES LIMITED PARTNERSHIP, A/R
DEPARTMENT, DENVER, COLORADO 80256-0165, or to such other person or at such
other place as Landlord may from time to time direct by notice given to
Tenant, the Base Rent as well as all other sums which may become due by
Tenant under this Lease. All such other sums shall be payable as Additional
Rent.
(g) TENANT TAXES.
(i) Any provision hereof to the contrary notwithstanding,
Tenant shall, upon demand from time to time, as Additional Rent, pay to Agent
or, as Landlord may direct, to Landlord or to the tax collecting authority,
the full amount of all taxes, levies, charges and assessments legally
required or authorized to be collected by Landlord from Tenant or any
subtenant or occupant of the Premises and all taxes, levies, charges and
assessments required to be paid by Landlord (or imposed upon the Property),
other than taxes based on Landlord's income, if not paid by or collected from
Tenant or a subtenant or occupant of the Premises. Tenant hereby agrees to
defend, indemnify and hold harmless Landlord from and against all loss, cost,
liability and expenses (including counsel fees and costs of litigation) which
Landlord may suffer, incur or be exposed to as a result of any assertion
against Landlord of liability for any of the taxes referred to in this
subparagraph (h), and from and against any penalties or interest relating
thereto, which Tenant fails to pay pursuant hereto.
(ii) Tenant shall timely pay when due all taxes, levies,
charges and assessments which are required to be paid by Tenant with respect
to Tenant's use or occupancy of the Premises or which are or could become a
lien upon the personal property, trade fixtures, furniture or facilities of
Tenant on the Premises. Tenant hereby agrees to defend, indemnify and hold
harmless Landlord from and against all loss, cost, liability and expense
(including, without limitation, counsel
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<PAGE>
fees and costs of litigation) which Landlord may suffer or incur, or to which
Landlord may be exposed, as a result of Tenant's failure to pay any of the
foregoing.
(iii) Within 15 days after each date upon which such taxes
are due, Tenant shall deliver to Landlord official receipts for the payment
of all taxes due with respect to the personal property, trade fixtures,
furniture or facilities of Tenant on the Premises. In addition, within 15 days
after written notice from Landlord to do so, Tenant shall deliver to Landlord
official receipts for the payment of all other taxes, levies, charges and
assessments within the scope of subparagraph (ii) above that were due and
payable in the calendar year in which such notice is given and in the
preceding calendar year. If Tenant shall fail to present any of the receipts
referred to in this subparagraph within the times set forth herein, Landlord
shall have the right to pay the amounts of the taxes which Landlord
reasonably determines would have been covered thereby, together with the full
interest and penalties chargeable thereon in accordance with law, and
Landlord shall, upon demand, be entitled to reimbursement for all of such
payments together with interest at the "Lease Interest Rate" (defined in
Paragraph 21 hereof).
(iv) Tenant shall cause all of the personal property, trade
fixtures, furniture and facilities of Tenant on the Premises, and all
alterations, additions and improvements made by Tenant to the Premises which
for purposes of personal property taxes are treated as personal property
(such as built-in cabinets, counters and partitions) to be assessed
separately from Landlord's property, and, if they are not so separately
assessed, Landlord shall be entitled to reimbursement, within 10 days after
demand made from time to time, for any tax payable by Landlord which is
attributable to any of such items taxable as personal property.
(h) DELAY IN COMPUTATION. Delay in computation of the Expense and
Adjustment Amount or Additional Services Charge shall not be deemed a default
hereunder or a waiver of Landlord's right to collect any of such amounts.
5. USE OF PREMISES. Tenant shall use and occupy the Premises solely as
a general business office and for no other purpose.
6. CONDITION OF PREMISES. Tenant's taking possession of the Premises
or any portion thereof shall be conclusive evidence that the Premises or any
such portion was in good order and satisfactory condition when Tenant took
possession. At the expiration or other termination of this Lease or of
Tenant's right of possession, Tenant shall leave the Premises, and during the
Term will keep the same, in good order and condition, ordinary wear and tear,
damage by fire or other casualty (which fire or other casualty has not
occurred through the negligence of Tenant or those claiming under Tenant or
their employees or invitees respectively) alone excepted; and for that
purpose, Tenant shall make all necessary repairs and replacements. Tenant
shall give Landlord prompt notice of any damage to or accident upon the
Premises and of any breakage or defects in the window glass, wiring or
plumbing, heating, ventilating or cooling or electrical apparatus or systems
on or serving the Premises. Tenant shall at the expiration or termination of
this Lease or of Tenant's right of possession, also have had removed from the
Premises all furniture, trade fixtures, office equipment and all other items
of Tenant's property (including, without limitation, the items Tenant is
required to remove pursuant to subparagraph 8(c) hereof) so that Landlord may
again have and repossess the Premises. All such items not removed from the
Premises at such expiration or termination, shall conclusively be deemed to
have been abandoned and may be appropriated, sold, stored, destroyed or
otherwise disposed of by Landlord without notice to Tenant or any other party
with an interest in such property and without any obligation to account
therefor. Tenant shall pay Landlord all expenses incurred in connection with
the disposition of such property, and if Landlord shall choose to store any
such items, Landlord shall have no liability for the safekeeping thereof and
such items may not be retrieved by Tenant or any other person except upon
payment of such charges as may be imposed for the removal and storage. Tenant
shall comply with all laws, rules, orders, ordinances and regulations at any
time issued or in force by any lawful authority, applicable to Tenant or any
other occupant of the Premises, or to the Premises, or to the use or
occupancy of the Premises. Tenant shall, upon demand, pay to Landlord the
amount of any damages suffered or incurred by Landlord as a result of any
injury to any part of the Property other than the Premises, done by tenant or
any subtenant or any agent, employee, contractor or invitee of Tenant or any
subtenant, including, without limitation, damage done by the bringing or
removal of furniture and other property. Tenant shall forthwith repair all
damage done to the Premises by installation or removal of furniture and
property by Tenant or any subtenant or by any agent, employee, contractor or
invitee of Tenant or of any subtenant or,
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if Landlord shall so request, pay to Landlord the cost of such repair. Tenant
shall not do or commit, or suffer or permit to be done or committed, any act
or thing as a result of which any policy of insurance of any kind on or in
connection with the Property shall become void or suspended, or any insurance
risk on or in connection with the Building or any other portion of the
Property shall (in the opinion of the insurer or any insurance organization)
be rendered more hazardous or require payment of a greater premium; without
limitation of any other rights and remedies of Landlord, Tenant shall pay as
Additional Rent the amount of any increase of premiums for such insurance,
resulting from any breach of this provision. Tenant shall leave the Premises
in a reasonably tidy condition on all days upon which janitorial services are
to be provided by Landlord. Landlord shall, at Landlord's expense, replace
any glass broken in the Premises windows in the exterior walls of the
Building, unless such glass is broken by Tenant, its servants, employees,
agents, invitees,licensees or contractors, in which case Tenant shall, upon
demand, pay the cost of replacement by Landlord. Tenant shall replace and pay
for any other glass broken in or about the Premises.
7. SERVICES.
(a) STANDARD SERVICES. Landlord shall provide the following
services on all days during the Term, except Sundays and holidays, unless
otherwise stated:
(i) HVAC. Heating, ventilation and air conditioning, as
deemed appropriate by Landlord, from Monday through Friday within the period
from 6:00 a.m. to 6:00 p.m. and on Saturday within the period from 8:00 a.m.
to 1:00 p.m., holidays excepted. Tenant, within ten days after its receipt of
each bill therefor, will pay for all heating, ventilating and air
conditioning requested and furnished at other times, at rates to be
established from time to time by Landlord. Landlord shall not be responsible
for the failure of the HVAC system to provide normal comfort if such failure
results from occupancy of the Premises by more than an average of one person
for each 200 square feet of floor area or if Tenant uses heat-producing
equipment or equipment the electrical load of which, when combined with the
load of all lighting fixtures, exceeds 4.2 watts per square foot of floor
area in any one room or area. Unless otherwise consented to by Landlord,
window coverings shall be uniform in the Building and shall be closed when
exterior office windows are exposed to the sun without regard to Tenant's
specific use of the space or to the installation of any computers or data
processing equipment.
(ii) ELECTRICITY. Subject to subparagraph 7(b) hereof,
electrical energy for Building-standard lighting fixtures provided by
Landlord and for the operation of desk-top office equipment, provided that
(A) the connected electrical load of such equipment does not exceed an
average of 2.5 watts per square foot of the Premises and (B) the electricity
so furnished for equipment uses will be at a nominal 120 volts and no
electrical circuit for the supply of such use need have a current capacity
exceeding 20 amperes. Landlord shall provide and pay for electric service as
described in this subparagraph 7(a)(ii) during the period from 6:00 a.m. to
6:00 p.m. from Monday through Friday and during the period from 8:00 a.m. to
1:00 p.m. on Saturday, holidays excepted.
(iii) WATER. Ordinary water from the regular Building outlets
for drinking, lavatory and toilet purposes.
(iv) JANITORIAL SERVICES. Janitorial services, including,
without limitation, replacement of fluorescent bulbs in Building-standard
lighting fixtures, Monday through Friday in and about the Premises (except
holidays). If any material use made of the Premises after 6:00 p.m. shall, by
reason of work force scheduling or security, overtime, union rules or
otherwise, cause any increase in Landlord's cost for providing janitorial
services, Tenant shall, as an Additional Services Charge, pay all bills for
reimbursement of Landlord for such increase, within ten days after Tenant's
receipt of such bill, or Landlord may bill Tenant for such services with
other Additional Services. All janitorial services shall be performed solely
at Landlord's direction without interference from Tenant.
(v) PASSENGER ELEVATOR. Automatic passenger elevator service
at all times.
(vi) FREIGHT ELEVATOR. Freight elevator services subject to
reasonable scheduling by Landlord.
(b) ADDITIONAL SERVICES. The following services are being provided
to the Premises in addition to the standard services described in
subparagraph 7(a) above ("Additional Services"), and
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costs and expenses therefor incurred by Landlord will be charged directly to
Tenant as an Additional Services charge and will not be included in the
Operating Expenses for the Building:
(i) EXCESS UTILITY USE.
(A) AFTER-HOURS UTILITIES. In the event that Landlord,
in Landlord's sole discretion, determines that Tenant's use of electricity
exceeds the service to be provided under subparagraph 7(a) above or goes
materially beyond the hours specified in subparagraph 7(a), Tenant shall pay,
as an Additional Services Charge, such amounts for such excess or other hours
use with other Additional Services as shall be required under this
subparagraph 7(b)(i). In addition, if the Premises are used in a manner
exceeding the aforementioned occupancy and electric load criteria or if such
window covering requirement shall not be observed or if heat-producing or
controlled climate equipment is used, Tenant shall pay to Landlord, promptly
upon billing, Landlord's additional costs of supplying air conditioning
resulting from such causes, at such rates as Landlord shall establish
therefor. If due to use of the Premises in a manner exceeding the
aforementioned occupancy and electrical load criteria, or due to the
arrangement of partitioning, or the use of heat-producing or controlled
climate equipment, or the distribution system within the Premises, impairment
of normal operation of the HVAC system in the Premises results, necessitating
changes in HVAC distribution system within the Premises, such changes may be
made by Landlord upon request by Tenant at Tenant's sole cost and expense,
provided that they can be accommodated by Landlord's systems. Tenant agrees
at all times to cooperate fully with Landlord and to abide by all the
regulations and requirements which Landlord may prescribe for the proper
functioning and protection of the HVAC system. After Landlord has balanced
the air-conditioning system for Tenant, if Tenant installs partitions,
equipment, or fixtures requiring rebalancing of the system, Landlord, at
Tenant's request and at Tenant's expense (which shall be charged as an
Additional Services Charge payable upon demand) shall endeavor to do such
rebalancing. If Tenant's requirements for electricity or other utilities are
in excess of those set forth in subparagraph 7(a), and if, in Landlord's sole
judgment, Landlord's facilities are inadequate for such additional
requirements and if electrical energy for such additional requirements is
available to Landlord, Landlord, upon written request and at the sole cost
and expense of Tenant, will furnish and install, or, at Landlord's sole
discretion, permit Tenant to furnish and install, such additional wires,
risers, conduits, feeders, cabling, or other pipelines or conduits and
switchboards as reasonably may be required to supply such additional
requirements of Tenant provided that (1) the same shall be permitted by
applicable laws and insurance regulations; (2) in Landlord's sole judgment,
the same are necessary and will not cause permanent damage or injury to the
Building or the Premises or cause or create a dangerous or hazardous
condition or entail excessive or unreasonable alterations or repairs or
interfere with or disturb other tenants or occupants of the Building; (3) in
Landlord's sole judgment, the same will not in any way diminish or adversely
affect the utilities which Landlord deems should remain available for other
tenants; and (4) Tenant, at Tenant's expense, shall, concurrently with the
making of such written request, execute and deliver to Landlord Tenant's
written undertaking, in form and substance satisfactory to Landlord,
obligating Tenant to fully and promptly pay the entire cost and expense of so
furnishing and installing any additional wires, risers, conduits, feeders,
cabling, and other pipelines and conduits and switchboards as Additional
Services.
(B) MEASURED USAGE. In the event that Tenant's use of
the Premises includes the use or installation of any machines, equipment, or
devices in the Premises that do not constitute standard office equipment
provided to all tenants of the Building, including, without limitation,
refrigerators, dishwashers, garbage disposals, air conditioning units,
heating units, computer, or other electrical equipment or fixtures
("Non-Standard Equipment") causing, in Landlord's sole determination,
Tenant's use of electric service or other utilities provided to the Premises
to exceed the service to be provided under subparagraph 7(a) above, or if
there shall be at the Premises any other hours (i.e., outside the hours
specified in 7(a)) use of electricity or other utilities which Landlord
believes may be material, Landlord shall install in the Premises or
elsewhere, if Landlord shall so elect, or, if Tenant shall so request and if
feasible in Landlord's reasonable judgment, one or more meters or other
devices to measure the electricity or other utilities used by such computers
or other equipment or fixtures or such other hours use; and Tenant shall pay
Landlord for such electricity or other utilities as Additional Services within
ten days after submission of each bill by Landlord therefor, or Landlord may
bill Tenant for such services with other Additional Services, at such rates
as shall be from time to time determined by Landlord, provided that the rates
charged by Landlord shall not exceed Landlord's cost (including, without
limitation, taxes, fuel adjustment charges, and other like charges regularly
passed on to customers by public utility
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companies and transformer costs) of supplying such electricity or other
utilities as determined by Landlord using reasonable accounting methods; and
the cost of obtaining and installing such meters or other devices shall be
paid by Tenant to Landlord within ten days after submission of each bill by
Landlord to Tenant therefor, or Landlord may bill Tenant for such services
with other Additional Services.
(C) ESTIMATED USAGE. For any other hours use of
electricity or other utilities determined by Landlord to be material, and for
any use of electricity or other utilities which is determined by Landlord to
be in excess of the service to be provided under subparagraph 7(a) above, and
which is not actually measured, Tenant shall pay to Landlord, in monthly
installments at the times prescribed for the monthly installments of the Base
Rent, as Additional Services, amounts, as reasonably estimated by Landlord
from time to time, which Tenant would be required to pay for such excess or
other hours electrical or other utilities service if the same were actually
measured as provided in subparagraph 7(b)(i)(B) above.
(ii) LANDLORD'S REPAIR OF NON-STANDARD EQUIPMENT. If
Non-Standard Equipment located in the Premises requires maintenance or repair
in excess of the amount provided to all tenants of the Building, Landlord will
provide such excess services to Tenant within a reasonable amount of time
after Tenant's request is made to the manager of the Building, provided that
such excess services are available from the manager of the Building or the
contractors already retained by the manager for the Building. Tenant will
pay the cost of such excess services as Additional Services.
(iii) EXCESS JANITORIAL SERVICES. If Tenant requires any
janitorial or cleaning services in excess of the amounts provided by Landlord
according to subparagraph 7(a)(iv) (such as cleaning services beyond normal
office janitorial services for kitchens, computer rooms, or other special use
areas and carpet cleaning), Landlord will provide such excess services to
Tenant within a reasonable period after Tenant's request is made to the
manager of the Building, provided that such excess services are available
from Landlord's regular janitorial or cleaning contractor. Tenant will pay
the cost of such excess services as Additional Services. Landlord will also
provide, within a reasonable period after Tenant's request is made to the
manager of the Building or at Tenant's cost and to the extend available to
Landlord, replacement of bulbs, tubes or ballasts in any Building
non-standard lighting fixtures in the Premises. Tenant will pay the costs of
such services as Additional Services.
(iv) EXCESS SERVICES. If Tenant requires any work, service,
or materials performed for, or facilities or materials furnished to Tenant,
to a greater extent or in a manner more favorable to Tenant than those
performed for or furnished to other tenants of the Building, including, but
not limited to, supplying paper towels, restocking recycling containers,
hanging pictures or whiteboards, providing extra keys to the Premises and any
other work or services which relate to Tenant's use of the Premises, Landlord
will provide such excess services to Tenant within a reasonable period after
Tenant's request is made to the manager of the Building provided that such
excess services are available from the manager of the Building, or the
contractors already retained by the manager of the Building. Tenant will pay
the cost of such excess services as Additional Services.
(c) INTERRUPTION OF SERVICES. Tenant agrees that Landlord shall
not be liable for damages (by abatement of rent or otherwise) for failure to
furnish or delay in furnishing any service, or for any diminution in the
quality or quantity thereof, when such failure or delay or diminution is
occasioned, in whole or in part, by repairs, renewals, or improvements, by
any strike, lockout or other labor trouble, by inability to secure fuel, by
governmental laws, regulations or orders, by Landlord's compliance, in whole
or in part with any government promulgated program (whether voluntary or
mandatory), for conversation of energy by any accident or casualty
whatsoever, by act or default of Tenant or other parties, or by any cause
beyond Landlord's reasonable control; and such failures or delays or
diminution shall never be deemed to constitute an eviction or disturbance of
Tenant's use and possession of the Premises or relieve Tenant from paying
rent or performing any of its obligations under this Lease. Landlord's
obligation to furnish services shall also be further conditioned upon the
availability of adequate energy sources from the public utility companies
then servicing the downtown Denver area.
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8. ALTERATIONS
(a) Tenant shall not, without the prior written consent of
Landlord, make any alterations, improvements or additions to the Premises. If
Landlord consents to any alterations, improvements or additions, it may
impose such conditions with respect thereto as Landlord deems appropriate,
including, without limitation, Landlord's approval of plans and
specifications for the work (but Tenant shall not be entitled to rely upon
such approval as evidencing that the plans and specifications are proper in
any respect), use of Landlord's approved contractors to perform the work (it
being agreed that W.E. Keiding is pre-approved by Landlord), insurance
against liabilities which may arise out of such work, permits necessary for
such work and as-built drawings upon completion of such work and the
furnishing to Landlord of such security as is determined by Landlord to be
appropriate for the proper completion of such work and its completion free of
mechanics', materialmen's and similar liens or claims thereof. All work done
by Tenant or its contractors shall be done in a first-class workmanlike
manner, using only good grades of materials and without disturbing other
tenants and shall comply with all insurance requirements and all applicable
laws or ordinances and rules and regulations of governmental departments or
agencies. Before proceeding with any such work, Tenant shall reimburse
Landlord for Landlord's costs of Landlord's architects' review of Tenant's
plans and specifications. Any work performed by or for Tenant shall be
performed by competent workmen whose labor union affiliations are compatible
with those of the workmen who may be employed in the Building by Landlord,
its contractors or subcontractors, and Landlord shall have the right, at its
option, to directly supervise the work, which supervision shall be for the
protection of Landlord's interest only.
(b) If Tenant requests that Landlord, through its contractors,
perform the work associated with any alteration, improvement or addition to
the Premises, and Landlord agrees, in its sole discretion, to perform such
work, Landlord shall provide Tenant with a Tenant Work Order describing the
work to be performed by Landlord and stating the total cost to Tenant for the
performance of the work. Upon Tenant's acceptance of the Tenant Work Order,
the total cost for the work stated therein shall become a sum required to be
paid under this Lease and subject to the provisions of subparagraph 8(a).
(c) All alterations, additions or improvements made by Tenant and
all fixtures attached to the Premises shall become the property of Landlord
and remain at the Premises or, at Landlord's option, any or all of the
foregoing shall be removed at the cost of Tenant before the expiration or
sooner termination of this Lease and in such event Tenant shall repair all
damage to the Premises caused by the installations or removal thereof.
Tenant shall not permit or suffer any signs advertisements or notices to be
displayed, inscribed upon or affixed on any part of the outside or inside of
the Premises, or in the Building, except on the entrance doors of the
Premises, and then only of such size, color and style as Landlord may
approve. Landlord shall have the right to remove unauthorized signs at
Tenant's expense.
9. LIENS.
(a) Tenant shall not permit there to be filed against the Property
or Landlord's interest therein or any part of either, and shall within ten
days after Tenant has notice of the claim or lien, remove or have removed,
and mechanics', or materialmen's or other lien, or claim thereof, filed by
reason of work, labor, services or materials provided for or at the request
of Tenant (other than work, labor, services or materials provided by
Landlord) or any subtenant or occupant or for any contractor or subcontractor
employed by Tenant or any subtenant or occupant, and shall exonerate,
protect, defend and hold free and harmless Landlord against and from any and
all such claims or liens. Without limitation of the foregoing, if any such
claim or lien be filed, Landlord may, but shall not be obligated to,
discharge it either by paying the amount claimed to be due in the claim or
lien or by procuring the discharge of such lien or claim by deposit or by
bonding proceedings. Any amount so paid by Landlord and all costs and
expenses, including, without limitation, reasonable attorney's fees, in
connection therewith, together with interest thereon at the Lease Interest
Rate (hereinafter defined) from the respective dates of Landlord's making of
the payments and incurring of the costs and expenses, shall constitute
Additional Rent payable by Tenant under this Lease and shall be paid by
Tenant to Landlord on demand.
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(b) At least ten days before the commencement of any work ordered
by Tenant on the Premises, Tenant shall notify Landlord of the proposed work
and of the names and addresses of the persons supplying labor and materials
for the proposed work so that Landlord may avail itself of the provisions of
statutes such as C.R.S. Section 38-22-105(2). During any such work on
the Premises, Landlord, or its representatives, shall have the right to go
upon and inspect the Premises at all reasonable times, and shall have the
right to post and keep posted thereon notices such as those provided for by
C.R.S. Section 38-22-105(2) or to take any action that Landlord may deem
advisable to protect Landlord's interest in the Premises.
10. INSURANCE AND WAIVER OF SUBROGATION.
(a) Tenant, at its sole cost, shall maintain with responsible
insurance companies acceptable to Landlord and qualified to do business in
Colorado, general comprehensive public liability insurance against claims for
personal injury (including death) and property damage, arising from
occurrences in, on and about the Premises, with coverage on an occurrence
basis in all cases of not less than a combined single limit of $3,000,000.00
per occurrence. Landlord shall be designated a named insured in the policies
for such insurance, which shall contain endorsements providing that the
naming of more than one insured shall not operate to limit or void the
coverage of any named insured relating to claims by another named insured.
(b) Tenant, at its sole cost, shall maintain with responsible
insurance companies acceptable to Landlord and qualified to do business in
Colorado, "All Risk" or equivalent insurance upon all personal property upon
the Premises and all equipment, fixtures, additions, alterations and
improvements and betterments installed by or for Tenant upon the Premises,
including, without limitation, anything in the nature of a leasehold
improvement, in an amount which is at least 80% of the full replacement cost
thereof, which insurance shall name Landlord as a named insured and
Landlord's mortgagees as mortgagees under a standard mortgagee clause. In the
event of damage or destruction to any leasehold improvements, Tenant shall
use the proceeds of such insurance to repair or restore such leasehold
improvements. If this Lease shall be terminated pursuant to subparagraph
11(a) on account of damage by fire or other casualty to the Building or the
Premises, Landlord shall be entitled to all of the insurance proceeds payable
under the aforesaid insurance relating to the leasehold improvements and the
Premises.
(c) Tenant shall, prior to the commencement of the Term, and at
least 30 days prior to the expiration date of each policy, furnish to Landlord
certificates evidencing the coverage required hereinabove in this Paragraph
and the renewal thereof, which certificates shall state that such insurance
coverage may not be materially changed or canceled without at least ten days
prior written notice to Landlord and Landlord's mortgagee.
(d) Notwithstanding anything herein to the contrary, Landlord and
Tenant each hereby release the other, its officers, directors, partners,
agents and employees (and Tenant hereby also releases Agent, its partners,
officers, directors, agents and employees), to the extent of the releasing
party's coverage under its insurance policies, from any and all liability for
any loss or damage which may be inflicted upon the property of such party,
notwithstanding that such loss or damage shall have arisen out of the
negligence of the other party, its partners, officers, directors, agents or
employees; provided, however, that this release shall be effective only with
respect to occurrences occurring during such time as the appropriate policy
of insurance of the party so releasing shall contain a clause to the effect
that such release shall not affect this said policy or the right of the
insured to recover thereunder.
11. FIRE OR CASUALTY.
(a) If the Premises or the Building (including machinery or
equipment used in the operation of the Building) shall be damaged by fire or
other casualty and if such damage does not render all or a substantial
portion of the Premises or Building untenantable, then Landlord shall repair
and restore the same with reasonable promptness, subject to reasonable delays
for insurance adjustments and delays caused by matters beyond Landlord's
reasonable control. If any such damage renders all or a substantial portion
of the Premises or Building untenantable, Landlord shall have the right to
terminate this Lease (with appropriate prorations of rent being made for
Tenant's possession subsequent to the date of such damage of those tenantable
portions of the Premises) upon giving written notice to Tenant at any time
within 120 days after the date of such damage; and if such notice
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is given Landlord shall have no obligation to repair or restore. Landlord
shall have no liability to Tenant, and Tenant shall not be entitled to
terminate this Lease by virtue of any delays in completion of such repairs
and restoration. Rent, however, shall abate on those portions of the Premise
as are, from time to time, untenantable as a result of such damage.
(b) Notwithstanding anything to the contrary herein set forth,
Landlord shall have no duty pursuant to this Paragraph 11 to repair or
restore any portion of any alterations, additions or improvements in the
Premises or the decorations thereto except to the extent that such
alterations, additions, improvements and decorations were provided by
Landlord at the beginning of the Term.
12. WAIVER OF CLAIMS - INDEMNIFICATION. To the extent not prohibited by
law, Landlord, Agent and their respective officers, directors, partners,
agents, servants and employees shall not be liable for, and it and they are
hereby released by Tenant from all liability for, any damage either to person
or property or resulting from the loss of use thereof or any other loss, or
any death, sustained by Tenant or by other persons claiming through Tenant
due to the Property or any part thereof or any appurtenances thereof becoming
out of repair, or due to the happening of any accident or event in, on or
about the Property, or due to any act or neglect of any tenant or occupant of
the Building or any other person. This provision shall apply particularly,
but not exclusively, to damage caused by gas, electricity, snow, frost,
steam, sewage, sewer gas or odors, fire, water or by the bursting or leaking
of pipes, faucets, sprinklers, plumbing fixtures and windows, and shall apply
without distinction as to the person (whether Landlord, Agent or other) whose
act or neglect was responsible for the damage and whether or not such act or
neglect occurred before, at or after the execution of this Lease, and whether
the damage was due to any of the causes specifically enumerated above or to
some other cause of an entirely different kind. Tenant further agrees that
all personal property of Tenant upon the Premises, or upon loading docks,
receiving and holding areas, or elsewhere in, on or about the Property, shall
be at the risk of Tenant only, and that neither Landlord nor Agent, nor their
partners, directors or officers, shall be liable for any loss or damage
thereto or theft thereof. Without limitation of any other provisions hereof,
Tenant agrees to defend, protect, indemnify and save harmless Landlord and
Agent, and their respective partners, officers, directors and employees, from
and against all liability to third parties arising out of the acts or
omissions of Tenant or any subtenant or the servants, agents, employees,
contractors, suppliers, workmen and invitees of Tenant or any subtenant.
Tenant agrees to indemnify and save harmless, and upon request, defend,
Landlord, Agent, and their respective partners, directors, officers and
employees (herein called "indemnitees") against and from any and all claims
by or on behalf of any person, arising out of or related to:
(a) Tenant's use or occupancy of the Premises or the conduct of
its business, or any activity, work, or thing, permitted or suffered by
Tenant, in, on or about the Premises or the Property;
(b) any occurrence in, on or about the Premises;
(c) any breach or default on Tenant's part in the performance or
observance of, or compliance with, any term, covenant or condition on
Tenant's part to be performed pursuant to the terms of this Lease; or
(d) any act or negligence of Tenant or any subtenant, or any of
their respective agents, contractors, servants, employees, invitees or
licensees, whether or not the fault or negligence of Landlord, or of any
other indemnitee or of the agents, contractors, servants, employees,
invitees, or licensees of Landlord or any indemnitee, (whether or not
occurring before or after the execution of this Lease), contributed thereto
or was the cause thereof, and from and against all costs, counsel fees,
expenses, penalties, fines and liabilities which Landlord or any other
indemnitee may suffer or incur in connection with any such claim and any
action or proceeding brought with respect thereto. In the event that any
action or proceeding shall be brought by reason of any such claim, against
any party to be indemnified hereunder, Tenant covenants that Tenant, upon
notice from such party and at Tenant's expense, shall resist and defend such
action or proceeding by counsel reasonably satisfactory to such party.
13. NONWAIVER. No waiver of any provision of this Lease shall be implied
by any failure of Landlord to enforce any remedy on account of the violation
of such provision, even if such
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violation be continued or repeated subsequently, and no express waiver shall
affect any provision other than the one specified in such waiver and that one
only for the time and in the manner specifically stated. No receipt of moneys
by Landlord or its agents from Tenant after the termination of this Lease
shall in any way alter the length of the Term or of Tenant's right of
possession hereunder or after the giving of any notice shall reinstate,
continue or extend the Term or affect any notice given Tenant prior to the
receipt of such moneys, it being agreed that after the service of notice or
the commencement of a suit or after final judgment for possession of the
Premises, Landlord may receive and collect any rent due, and the payment and
acceptance of payment of rent shall not waive or affect said notice, suit or
judgment.
14. CONDEMNATION. In the event that the whole of the Premises shall be
lawfully condemned or taken for a public or quasi-public use, this Lease
shall terminate as of the date that possession is to be surrendered to the
condemnor or taking authority. In the event that there shall be a lawful
condemnation or taking for any public or quasi-public use of any part of the
Building, without there being condemned or taken all of the Premises, then,
at the option of Landlord, exercisable by notice given to Tenant not later
than 90 days after the date upon which Landlord receives notice of the taking
or condemnation, this Lease shall terminate as of the date that possession of
the Premises taken is required to be surrendered to the condemnor or taking
authority. In the event of any such taking or condemnation of all or any part
of the Premises or of all or any part of the Property, Tenant shall have no
claim against Landlord and shall not have any claim or right to any portion
of the amount that may be awarded as damages or paid as a result of such
taking or condemnation; and all rights of Tenant to damages therefor are
hereby assigned by Tenant to Landlord and Tenant shall have no claim against
Landlord or the condemnor for the value of the unexpired term of this Lease.
However, the foregoing provisions of this paragraph shall not be construed to
deprive Tenant of the right to claim and receive payment from the condemnor
or taking authority for moving and related expenses as long as such claim or
the payment thereof does not reduce the award which Landlord would otherwise
be entitled to receive. In the event of any such taking or condemnation of
part of the Premises, the Base Rent, and the Operating Expense and Tax
Adjustment shall be proportionately reduced from the date that possession is
required to be surrendered to the condemnor or taking authority.
15. ASSIGNMENT AND SUBLETTING. Tenant shall not, without the prior
written consent of Landlord (which shall not be unreasonably withheld in the
case of an assignment or subletting), (a) assign, convey or mortgage this
Lease or any interest hereunder; (b) suffer to occur or permit to exist any
assignment of this Lease, or any lien upon Tenant's interest hereunder,
whether voluntarily, involuntarily or by operation of law; (c) sublet the
Premises or any part thereof, or (d) permit the use of the Premises by any
parties other than Tenant and its employees. Any such action on the part of
Tenant without Landlord's consent, shall be void and of no effect. Landlord's
consent to any assignment, subletting or transfer or Landlord's election to
accept any assignee, subtenant or transferee as the tenant hereunder and to
collect rent from such assignee, subtenant or transferee shall not release
Tenant or any subsequent tenant from any covenant or obligation under this
Lease. Landlord's consent to any assignment, subletting or other act or
occurrence requiring Landlord's consent shall not constitute a waiver of
Landlord's right to withhold its consent to any future assignment, subletting
or act or occurrence requiring Landlord's consent. Without limitation of the
circumstances in which Landlord's withholding of consent to an assignment or
subletting shall not be unreasonable, it shall not be unreasonable for
Landlord to withhold its consent if the reputation, financial responsibility,
or business of the proposed assignee or subtenant is unsatisfactory to
Landlord, or if Landlord deems such business to be not consonant with that of
other tenants in the Building, or if the intended use by the proposed
assignee or subtenant conflicts with any commitment made by Landlord to any
other tenant in the Building, or if in Landlord's judgement the assignment or
subletting will have financial consequences adverse to Landlord's interest,
or if the proposed assignee or subtenant shall be (i) a government or any
subdivision or agency thereof, (ii) a school, college, university or
educational institution of any type, whether for profit or non-profit or
(iii) an employment, recruitment or temporary help service or agency or (iv)
an existing or former tenant of the Project or any affiliate or guarantor
thereof who defaulted under any of its lease obligations to Landlord or any
affiliate of Landlord.
At least fifteen (15) days prior to any proposed subletting or
assignment, Tenant shall submit to Landlord a statement seeking Landlord's
consent and containing the name and address of the proposed subtenant or
assignee, the terms of the proposed sublease or assignment (including,
without limitation, the date upon which the assignee or subtenant is to take
possession and the amount of rent
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that Tenant will be charging the proposed assignee or subtenant) and such
financial and other information with respect to the proposed assignee or
subtenant as Landlord reasonably may request. Landlord shall indicate its
consent or non-consent within eleven (11) days of its receipt of said
statement.
Contemporaneously with any request or proposal by tenant to sublet or
assign any part of this Lease, Tenant shall pay up to $750.00 all costs,
including reasonable attorneys' fees, incurred by Landlord or anticipated to
be incurred by Landlord, in connection with Landlord's investigation of any
financial or other information of the proposed assignee or subtenant.
Landlord may require that all or a portion of the costs or anticipated costs
be paid in advance by Tenant. The payment of such costs shall not obligate
Landlord in any way to consent to any proposed assignment or subletting nor
shall the amount of costs paid by Tenant be applied or used as a set-off to
any amounts due or to become due by Tenant to Landlord.
In addition to withholding its consent, Landlord shall have the
additional right, exercisable within such 15-day period, to terminate this
Lease in its entirety (where Tenant seeks to assign this Lease or sublet the
entire Premises) or as to that portion of the Premises which Tenant seeks to
sublet (where Tenant seeks to sublet only a portion of the Premises).
Landlord may exercise such right to terminate by giving written notice to
Tenant at any time prior to Landlord's written consent to such assignment or
sublease. In the event that Landlord exercises such right to terminate, the
termination shall be effective as of such date as Landlord may specify in its
notice which shall not be later than the later of (i) the proposed date for
possession by such assignee or subtenant, or (ii) 90 days after the date of
Landlord's notice of termination of Tenant. Further, to the extent Landlord
elects to exercise its termination rights as set forth above and Tenant has
improved the Premises, Landlord shall pay to Tenant on or before the date of
termination with regard to the applicable portion of the Premises, the
unamortized costs of Tenant's improvements (based on the square footage of
the Premises being terminated) calculated by amortizing the applicable
Tenant's costs of the improvements over the term of the Lease. The costs of
Tenant's improvements shall be determined by Landlord's receipt of third
party contractor's invoices previously paid by Tenant (and marked "paid in
full" by the applicable contractor) and shall exclude any improvements,
alterations or additions which were not approved by Landlord pursuant to the
terms of Paragraph 8 above or those items which Landlord notified Tenant
would be required to be removed at the end of the Term pursuant to said
Paragraph 8.
If Landlord fails to exercise its termination right and its right to
withhold its consent as set forth in the preceding paragraphs, Tenant shall
pay to Landlord 50% of all profit derived by Tenant from the assignment or
sublease. Whenever requested by Landlord, Tenant shall furnish Landlord with
a sworn statement, certified by an independent certified public accountant,
setting forth in detail the computation of profit (which computation shall be
based upon generally accepted accounting principles), and Landlord, or its
representatives, shall have access to the books, records and papers of Tenant
in relation thereto, and to make copies thereof. Any rent in excess of that
paid by Tenant hereunder realized by reason of such assignment or sublease
shall be deemed an item of such profit. Such percentage of Tenant's profits
shall be paid to Landlord promptly by Tenant upon Tenant's receipt from time
to time of periodic payments from such assignee or subtenant or at such other
earlier time as Tenant shall realize its profits from such assignment or
sublease.
Landlord and Tenant further agree that Tenant shall not publish or
otherwise disseminate any written advertising material in connection with any
proposed assignment or sublease of all or any portion of the Premises (the
"Advertising") without Landlord's prior written approval of the same, which
approval shall not be unreasonably withheld; provided, however, that no
Advertising shall contain any reference to the price to be charged in
connection with any proposed assignment or sublease.
16. HOLDOVER. If Tenant or any person claiming through Tenant shall
retain possession of the Premises or any part thereof after the expiration or
earlier termination of the Term and if Landlord shall consent to such
continuation of possession, such possession shall be (unless the parties
hereto shall otherwise have agreed in writing) deemed to be under a
month-to-month tenancy which shall continue until either party shall notify
the other in writing, at least 30 days prior to the end of any calendar
month, that the party giving such notice elects to terminate such tenancy at
the end of such calendar month, in which event such tenancy shall so
terminate. Anything contained in the foregoing provisions of this paragraph
to the contrary notwithstanding, with respect to each such
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monthly period and in addition to other rent and charges due under this
Lease, Tenant shall pay rent equal to 1/9 of the per annum Base Rent and 1/12
of the Expense and Tax Adjustment Amount, and Additional Services Charge
(calculated in accordance with the provisions of Paragraph 4 hereof) which
would have been payable had this Lease been renewed until the end of the
calendar year which includes such month on the terms and conditions in effect
immediately prior to the expiration or termination of the Term; and such
month-to-month tenancy with Landlord's consent shall be upon the same terms
and subject to the same conditions as those which are set forth in this Lease
except as aforesaid. If Tenant or any person claiming through Tenant shall
retain possession of the Premises or any part thereof, after the expiration
or earlier termination of the term or of Tenant's right of possession, and if
such retention shall be without Landlord's consent, Tenant shall pay Landlord
(a) for each month or portion thereof during which such possession continues,
an amount equal to the rental to be paid for each month pursuant to the
foregoing provisions of this Paragraph when such possession is with
Landlord's consent, plus all other sums which would have been payable
hereunder had the term continued during such retention of possession and (b)
all other damages sustained by Landlord, whether direct or consequential, by
reason of such retention of possession. During any such retention of
possession without Landlord's consent, all of Tenant's obligations with
respect to the use, occupancy and maintenance of the Premises shall continue.
The provisions of this Paragraph 16 shall not be deemed to limit or
constitute a waiver of any other rights or remedies of Landlord provided
herein or at law or in equity and applicable to unlawful retention of
possession or otherwise.
17. ESTOPPEL CERTIFICATE. Tenant shall from time to time, within ten
days after Tenant's receipt of Landlord's request therefor, execute,
acknowledge and deliver to Landlord a written instrument in recordable form
(a) certifying (i) that this Lease is in full force and effect and has not
been modified, supplemented or amended in any way (or, if there have been
modifications, supplements or amendments thereto, that it is in full force
and effect as modified, supplemented or amended, and stating such
modifications, supplements and amendments) and that this Lease (as modified,
supplemented or amended, as aforesaid) represents the entire agreement among
Landlord and Tenant as to the Premises and the leasehold; (ii) the dates to
which the Base Rent, Additional Rent and other charges arising hereunder have
been paid, (iii) the amount of any prepaid rents or credits due to Tenant, if
any; and (iv) that if applicable, Tenant has entered into occupancy of the
Premises; and (b) stating, to the best knowledge of Tenant, whether or not
all conditions under the Lease to be performed by Landlord prior to the date
of such certificate have been satisfied and whether or not Landlord is then
in default in the performance of any covenant, agreement or condition
contained in this Lease and specifying, if any, each such unsatisfied
condition and each such default; and (c) stating any other fact or certifying
any other condition reasonably requested by Landlord, Landlord's Mortgagee (as
defined below), or any prospective mortgagee or purchaser of the Property or
of any interest therein.
18. SUBORDINATION.
(a) This Lease shall be subject and subordinate at all times to
the lien of any mortgage, deed of trust, or other security instrument, or
ground lease, master lease, or primary lease heretofore or hereafter placed
by Landlord on the Property or any part thereof and of all renewals,
modifications, consolidations, replacements and extensions thereof (all of
which are hereinafter referred to collectively as "Mortgage"), all
automatically and without the necessity of any further act on the part of
Tenant to effectuate such subordination. Tenant shall, at the request of the
holder of any Mortgage ("Landlord's Mortgagee"), upon foreclosure thereof
attorn to Landlord's Mortgagee. Tenant shall also execute, acknowledge and
deliver, within 15 days after Tenant's receipt of demand from Landlord or
Landlord's Mortgagee, such other instrument or instruments evidencing such
subordination of Tenant's right, title and interest under this Lease to the
lien of the Mortgage and such other instrument or instruments of attornment,
as shall be desired by Landlord's Mortgagee. With respect to any Mortgage
first encumbering the Building subsequent to the Commencement Date of the
Lease, upon Tenant's request, Landlord will use its good faith efforts to
cause Landlord's Mortgagee to agree that so long as Tenant is not in default
of its obligations under the Lease, the Lease will not be terminated and
Tenant's possession of the Premises will not be disturbed by the termination
or foreclosure, or proceeds for enforcement, of such Mortgage.
(b) Anything contained in the foregoing provisions of this
Paragraph 18 to the contrary notwithstanding, Landlord's Mortgagee may at any
time subordinate its Mortgage to this Lease, without the necessity of
obtaining Tenant's consent, by giving notice of the same in writing to
Tenant, and thereupon this Lease shall be deemed to be prior to the Mortgage
without regard to
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its date of execution, delivery, or recordation or the date of commencement
of Tenant's possession, and in that event Landlord's Mortgagee shall have the
same rights with respect to this Lease as though this Lease shall have been
executed, delivered and recorded prior to the execution and delivery of the
Mortgage.
(c) If Landlord is or becomes lessee of premises of which the
Premises are a part, Tenant agrees that, automatically and without the
necessity of any further act, Tenant's possession shall be as a subtenant and
shall be subordinate to the interest of Landlord's lessor, its heirs,
personal representatives, successors and assigns (which lessor, its heirs,
personal representatives, successors and assigns, or any of them, is
hereinafter called "Paramount Lessor"), but notwithstanding the foregoing, if
Landlord's tenancy shall terminate by expiration, by forfeiture or otherwise,
then Tenant hereby agrees, upon request of Paramount Lessor, to attorn to
Paramount Lessor, and to recognize such lessor as Tenant's landlord for the
balance of the term of this lease and any extensions or renewals hereof.
Tenant shall execute, acknowledge and deliver, upon demand by Landlord or
Paramount Lessor, such other instrument or instruments evidencing such
subordination of Tenant's right, title and interest under this Lease to the
interest of such lessor, and such other instrument or instruments of
attornment, as shall be prescribed by such lessor.
19. CERTAIN RIGHTS RESERVED BY LANDLORD. Landlord shall have the
following rights, each of which Landlord may exercise without notice to
Tenant and without liability to Tenant for damage or injury to property,
person or business on account of the exercise thereof, and the exercise of
any such rights shall not be deemed to constitute an eviction or disturbance
of Tenant's use or possession of the Premises and shall not give rise to any
claim for set-off or abatement of rent or any other claim:
(a) to change the Building's name or street address;
(b) to install, affix and maintain any and all signs on the
exterior and on the interior of the Building;
(c) to decorate or to make changes, repairs, alterations,
additions, or improvements, whether structural or otherwise (including
alterations in the configuration of, and elimination of, any common areas),
in and about the Building and Property or any part thereof, and for such
purposes to enter upon the Premises, and during the continuance of any of
said work, to temporarily close doors, entry ways, public space and corridors
in the Building and to interrupt or temporarily suspend services or use of
facilities; but Landlord shall endeavor to perform any such work in or about
the Premises so as to cause the minimum inconvenience to Tenant practicable
under the circumstances;
(d) to designate and approve all window coverings used in the
Building;
(e) to approve, disapprove or restrict the weight, size and
location or safes, vaults and other heavy equipment and articles in and about
the Premises and the Building so as not to exceed the live load per square
foot designated by the structural engineers for the Building, and to require
all such items and furniture and similar items to be moved into or out of the
Building and Premises only at such times and in such manner as Landlord shall
direct in writing. Tenant shall not install or operate machinery or any
mechanical devices of a nature not directly related to Tenant's ordinary use
of the Premises without the prior written consent of Landlord. Tenant's
movements of property into or out of the Building or Premises and within the
Building are entirely at the risk and responsibility of Tenant, and Landlord
reserves the right to require permits before allowing any property to be
moved into or out of the Building or Premises;
(f) to establish controls for the purpose of regulating all
property and packages, both personal and otherwise, to be moved into or out
of the Building and Premises and all persons using the Building after normal
office hours;
(g) to regulate delivery and service of supplies in order to
insure the cleanliness and security of the Premises and to avoid congestion
of the loading docks, receiving areas and freight elevators;
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(h) to show the Premises to prospective tenants at reasonable hours
during the last twelve months of the Term and, if vacated or abandoned, to show
the Premises at any time and to prepare the Premises for re-occupancy;
(i) to erect, use and maintain pipes, ducts, wiring and conduits, and
appurtenances thereto, in and through the Premises at reasonable locations; and
(j) to enter the Premises at any reasonable time to inspect the
Premises.
20. RULES AND REGULATIONS. Tenant shall, and shall cause all of its
subtenants and occupants, its and their agents, employees, invitees and
licensees to, observe faithfully, and comply strictly with, the rules and
regulations attached to this Lease as EXHIBIT "B", as they may be supplemented
and revised by Landlord from time to time, and such other rules and regulations
promulgated from time to time by Landlord, as in Landlord's judgment may be
desirable for the safety, care and cleanliness of the Building and the Premises,
or for the preservation of good order therein. Landlord shall not be liable to
Tenant for violation of such rules and regulations by, or for Landlord's failure
to enforce the same against, any other tenant, its subtenants and occupants and
its and their agents, employees, invitees or licensees, nor shall any such
violation or failure constitute, or be treated as contributing to, an eviction,
actual or constructive, or affect Tenant's covenants and obligations hereunder,
or allow Tenant to reduce, abate or offset the payment of any rent under this
Lease.
21. REMEDIES.
(a) If default shall be made in the payment of any rent or any
installment thereof or in the payment of any other sum required to be paid by
Tenant under this Lease or under the terms of any other agreement between
Landlord and Tenant and such default shall continue for ten (10) days, or if
default shall be made in the observance or performance of any of the other
agreements, covenants or conditions in this Lease (or in any other agreement
between Landlord and Tenant) which Tenant is required to observe and perform and
such default shall continue for fifteen (15) days after written notice to
Tenant, or if the interest of Tenant in this Lease shall be levied on under
execution or other legal process; or
(b) if default shall be made by Tenant under that Denver Place Plaza
Tower Office Lease between Tenant and Landlord's affiliate Denver-Stellar
Associates Limited Partnership dated as of January 1, 1999 and any amendments
thereto (hereinafter referred to as the "Plaza Tower Lease");
(c) if Tenant becomes the subject of commencement of an involuntary
case under the federal bankruptcy law as now or hereafter constituted, or there
is filed a petition against Tenant seeking reorganization, arrangement,
adjustment or composition of or in respect of Tenant under the federal
bankruptcy law as now or hereafter constituted, or under any other applicable
federal or state bankruptcy, insolvency, reorganization or other similar law, or
seeking the appointment of a receiver, liquidator or assignee, custodian,
trustee, sequestrator (or similar official) of Tenant or any substantial part of
its property, or seeking the winding-up or liquidation of its affairs and such
involuntary case or petition is not dismissed within sixty (60) days after the
filing thereof, or if Tenant commences a voluntary case or institutes
proceedings to be adjudicated a bankrupt or insolvent, or consents to the
institution of bankruptcy or insolvency proceedings against it, under the
Federal bankruptcy laws as now or hereafter constituted, or any other applicable
Federal or state bankruptcy or insolvency or other similar law, or consents to
the appointment of or taking possession by a receiver or liquidator or assignee,
trustee, custodian, sequestrator (or other similar official) of Tenant or of any
substantial part of its property, or makes any assignment for the benefit of
creditors or admits in writing its inability to pay its debts generally as they
become due or fails to generally pay its debts as they become due or if Tenant
or its stockholders or board of directors or any committee thereof takes any
corporate action in contemplation, preparation or furtherance of or for any of
the occurrences, steps, procedures, proceedings or other items mentioned in this
subparagraph (b);
(d) Landlord may treat the occurrence of any one or more of the
foregoing events as a breach of this Lease, and thereupon at its option may,
without notice or demand of any kind to Tenant or any other person, have any one
or more of the following described remedies in addition to all other rights and
remedies provided at law or in equity or elsewhere herein:
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(i) At the option of Landlord, the whole balance of Rent,
charges and all other sums payable hereunder, whether or not payable as Rent,
for the entire balance of the Term, and any renewal or extension thereof, herein
reserved or agreed to be paid by Tenant, or any part of such rent, charges and
other sums, and also all or any costs and sheriff's, marshall's, constable's or
other official's fees and charges, whether chargeable to Landlord or Tenant,
shall be taken to be due and payable from Tenant and in arrears as if by the
terms of this Lease said balance of rent, charges and other sums and expenses
were on that date payable in advance; or
(ii) Landlord, by giving written notice to Tenant, may terminate
this Lease and the Term, in which event Landlord may immediately repossess the
Premises by legal proceedings, force or otherwise; or
(iii) Landlord, by giving written notice to Tenant, may terminate
Tenant's right of possession and may immediately repossess the Premises by legal
proceedings, force or otherwise, without terminating this Lease.
(iv) After reentry, retaking, repossessing or recovering of the
Premises, whether or not Landlord has terminated this Lease, Landlord may, but
shall be under no obligation to, relet the same or any portion thereof for such
rent and upon such terms as shall be deemed advisable by Landlord; and whether
or not Premises are relet, Tenant shall be liable for any loss of rent for such
period as would be the balance of the term of this Lease and any renewals
thereof plus the costs and expenses of reentry, retaking, repossession and
recovering, and of reletting and of redecorating, remodelling and making repairs
and alterations to the Premises for the purpose of reletting, the amount of such
liability to be computed monthly and paid by Tenant to Landlord at the end of
each month. Landlord shall in no event have any duty to relet the Premises, nor
shall any damages or other sums to be paid by Tenant to Landlord be reduced by
any failure to relet the Premises or failure to collect the rent from any
reletting. Tenant shall not be entitled to any rents received by Landlord in
excess of the rents provided for in this Lease. Tenant agrees that Landlord may
file suit to recover any sums falling due under the terms of this Paragraph 21
from time to time and that no suit or recovery of any portion due Landlord
hereunder shall be any defense to any subsequent action brought for any amount
not theretofore reduced to judgment in favor of Landlord. If Landlord relets the
Premises, such reletting shall not be considered a termination of this Lease
unless Landlord has given Tenant a notice wherein Landlord expressly states that
this Lease is terminated.
(v) If Landlord shall terminate this Lease as provided in
subparagraph (b) above, Landlord, at its option, shall be entitled to recover as
damages the excess, if any, at the time of such termination, of the amount of
the Base Rent payable under this lease for the balance of the term of this Lease
(including, any extension options which have been exercised) over the then fair
rental value of the Premises for the same period, plus all costs and expenses of
Landlord caused by Tenant's default, including, but not limited to, reasonable
attorney's fees.
If any payment of Rent or any other sum, or any part of any such
payment, to be made by Tenant under the terms of this Lease shall become
overdue for a period in excess of five (5) days Tenant shall pay to Landlord
(x) a "late charge" of $.05 for each dollar so overdue, for the purpose of
defraying the expense incident to handling such overdue or delinquent
payment, and (y) interest on the overdue amount at the Lease Interest Rate
(defined below) from the date when such payment was due until the date paid,
but in no event more than the amount or rate which is the maximum amount or
rate Landlord may lawfully charge in respect of Tenant in such circumstances
under applicable law. The "Lease Interest Rate" shall mean the greater of 18%
per annum or such variable rate which is from time to time equal to 3% above
the prime rate as stated by US Bank, Denver, Colorado or its successor, or,
in the absence of there being a successor to US Bank, by such other bank
having an office in the City of Denver, as Landlord may from time to time
select. Nothing herein shall be construed as waiving any rights of Landlord
arising out of any default of Tenant by reason of Landlord's accepting any
such late charge or interest; the right to collect a late charge and interest
is separate and apart from any other rights or remedies of Landlord after
default by Tenant.
Without limiting the generality of the foregoing, if Tenant shall be in
default in the performance of any of its obligations hereunder, Landlord may
(but shall not be obligated to), in addition to any other rights it may have in
law or in equity, cure such default on behalf of Tenant, and Tenant shall
reimburse Landlord upon demand for any sums paid or costs incurred by Landlord
in
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curing such default, including reasonable attorneys' fees and other legal
expenses, together with interest at the Lease Interest Rate from the dates of
Landlord's incurring of costs or expenses.
All remedies available to Landlord hereunder and otherwise available at law
or in equity shall be cumulative and concurrent. No termination of this Lease
nor taking or recovering possession of the Premises shall deprive Landlord of
any remedies or actions against Tenant for Rent, for charges, or for damages for
the breach of any term, covenant or condition herein contained, nor shall the
bringing of any such action for Rent, charges or breach of term, covenant or
condition, nor the resort to any other remedy or right for the recovery of Rent,
charges or damages for such breach be construed as a waiver or release of the
right to insist upon the forfeiture and to obtain possession. The failure of
Landlord to insist upon strict or prompt performance of the terms, agreements,
covenants and conditions of this Lease or any of them, or the acceptance of such
performance thereafter shall not constitute or be construed as a waiver of
Landlord's right to thereafter enforce the same strictly according to the tenor
thereof in the event of a continuing or subsequent default.
Notwithstanding anything in this Paragraph 21 or any other provision of
this Lease to the contrary, this Lease shall not be terminated by service upon
Tenant of a notice from Landlord demanding payment of Rent or possession of the
Premises following default by Tenant, or by any action of Tenant to vacate the
Premises following receipt of such a notice, unless the notice served by
Landlord includes a statement expressly terminating this Lease. Further,
Landlord reserves the right to receive payment of all unaccrued Rent for the
balance of the Term originally contemplated under Paragraph 1 of this Lease (and
any extensions or renewals thereof to which Tenant shall have become bound)
following service of such a notice for payment or possession, or a notice
terminating this Lease for Tenant's default.
22. EXPENSES OF ENFORCEMENT. Tenant shall pay upon demand all Landlord's
costs, charges and expenses, including the fees and out-of-pocket expenses of
counsel, agents and others retained by Landlord, incurred by Landlord, whether
or not suit is brought, in enforcing Tenant's obligations hereunder or in
collecting any amounts due from Tenant or any subtenant or assignee hereof or in
enforcing any provision of this Lease or in any litigation, negotiation or
transaction in which Tenant causes Landlord without Landlord's fault to become
involved or concerned or in reletting the Premises or any portion thereof after
default by Tenant.
23. COVENANT OF QUIET ENJOYMENT. Landlord covenants that Tenant, on paying
the Rent, charges for services and other payments herein reserved or required
and on keeping, observing and performing all the other terms, covenants,
conditions, provisions and agreements herein contained on the part of Tenant to
be kept, observed and performed, shall, during the Term, peaceably and quietly
have, hold and enjoy the Premises free from interference by Landlord or any
person claiming by, from or under Landlord, subject, however, to the terms,
covenants, conditions, provisions and agreements hereof.
24. SECURITY DEPOSIT. INTENTIONALLY DELETED.
25. REAL ESTATE BROKER. Landlord and Tenant acknowledge and agree that:
(i) Landlord has been represented in connection with this Lease by Agent as
Landlord's agent and by Garth R.D. Tait, Broker, Ltd. ("Tait") as Landlord's
subagent, and (ii) Tenant has been represented in connection with this Lease
by Cushman Realty Corporation (Mark T. Stolte) ("Cushman") as Tenant's agent.
Tenant agrees to indemnify, defend and hold Landlord harmless from and
against any claims, for a commission or other compensation in connection with
this Lease, made by any broker or finder (other than Agent, Tait and Cushman)
who claim to have dealt with or communicated to Tenant in connection with
this Lease, provided that Landlord has not in fact retained such broker or
finder. Landlord agrees to indemnify, defend and hold Tenant harmless from
and against any claims, for a commission or other compensation in connection
with this Lease, made by any broker or finder who claim to have dealt with or
communicated to Landlord in connection with this Lease, provided that Tenant
has not in fact retained such broker or finder.
26. MISCELLANEOUS
(a) RIGHTS CUMULATIVE. All rights and remedies of Landlord under this
Lease shall be cumulative and none shall exclude any other rights or remedies
allowed by law, in equity or otherwise.
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(b) CAPTIONS AND USAGE. The titles appearing in connection with the
various sections and paragraphs of this lease are for convenience only; they
are not intended to indicate all of the subject matter in the text and they
are not to be used in interpreting this Lease nor for any other purpose in
the event of any controversy. As used herein (i) the term "person" shall be
deemed to include a natural person, a trustee, a corporation, a partnership, a
governmental unit and any other form of legal entity; (ii) all usages in the
singular or plural number shall be deemed to have been made, respectively, in
the plural or singular number as well; the use of any gender includes all
genders.
(c) BINDING EFFECT. Each of the provisions of this Lease shall
extend to and shall, as the case may require, bind or inure to the benefit
not only of Landlord and of Tenant, but also of their respective successors or
assigns, provided this clause shall not permit any assignment by Tenant
contrary to the provisions of Paragraph 15 hereof.
(d) LEASE CONTAINS ALL TERMS. There are no promises,
representations, warranties or undertakings by, or binding upon, Landlord
with respect to the Building, the Premises or the Real Property, including,
but not limited to, any with regard to alteration, remodeling, redecorating
or installation of equipment or fixtures in the Premises, except those, if
any, that are expressly set forth in this Lease. No modification, waiver or
amendment of this Lease or of any of its conditions or provisions shall be
binding upon Landlord unless in writing signed by Landlord or by a duly
authorized agent of Landlord empowered by a written authority signed by
Landlord.
(e) SUBMISSION OF LEASE. The submission of this Lease to Tenant, or
its broker or other agent, does not constitute an offer to Tenant to lease
the Premises. This Lease shall have no force and effect until this Lease is
signed by both Landlord and Tenant and delivery is made to each.
(f) NO AIR RIGHTS. No rights to any view or to light or air over
any property, whether belonging to Landlord or any other person, are granted
to Tenant by this Lease.
(g) MODIFICATION OF LEASE. If any lender requires, as a condition
to its lending funds, the repayment of which is to be secured by a mortgage
or trust deed on the Property or any part thereof, that certain modifications
be made to this Lease, which modifications will not require Tenant to pay any
additional amounts or otherwise change materially the rights or obligations
of Tenant hereunder, Tenant shall, upon Landlord's request, execute
appropriate instruments effecting such modifications.
(h) SUBSTITUTION OF OTHER PREMISES.
(i) Subject to the provisions of subparagraph (v) below, at
any time hereafter, Landlord shall have the right to substitute for the
premises then being leased or to be leased hereunder (the "Existing
Premises") other premises within the Building (herein referred to as the "New
Premises") provided that the New Premises shall be of at least substantially
the same size and configuration as the Existing Premises and the New Premises
shall have a comparable elevator identity, similar tenant finish and similar
view and corner location within the Building.
(ii) If Tenant shall not have received possession of the
Existing Premises, then, as of the date Landlord gives notice of a
substitution, such substitution shall be effective, the New Premises shall be
the Premises hereunder and the Existing Premises shall cease to be the
Premises hereunder.
(iii) The provisions of this subparagraph (iii) shall apply
if Tenant shall have already received possession of the Existing Premises as
of the date Landlord gives notice of substitution. Tenant shall vacate and
surrender the Existing Premises not later than the later of the thirtieth
(30th) day after the date that Landlord shall notify Tenant of Landlord's
intent to make the substitution in question or the fifteenth (15th) day after
Landlord shall have substantially completed the work to be done by Landlord
in the New Premises pursuant to this subparagraph (iii). As of the sooner of
such 15th day or the date of such surrender and vacation, the New Premises
shall be the Premises leased under this Lease and the Existing Premises shall
cease to be the Premises leased under this Lease. Landlord shall (A) pay the
actual and reasonable out-of-pocket expenses of Tenant's moving of its
property from the Existing Premises to the New Premises, (B) shall improve
the New Premises so that they are substantially similar to the Existing
Premises and (C) promptly
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<PAGE>
reimburse Tenant for its actual and reasonable out-of-pocket costs in
connection with (i) the relocation of any telephone or other communications
equipment from the Existing Premises to the New Premises, and (ii) the
replacement of a reasonable stock of stationery, letterhead, etc. which bears
the suite number of the Premises. However, instead of only paying the
expenses of Tenant's moving of its property, Landlord may elect to either
move Tenant's property or provide personnel to do so under Tenant's
direction, in which event such move may not be made except during evenings,
weekends or holidays, so as to incur the least inconvenience to Tenant.
(iv) Tenant shall not be entitled to any compensation for any
inconvenience or interference with Tenant's business, nor to any abatement or
reduction in rent, nor shall Tenant's obligations under this Lease be
otherwise affected, as a result of the substitution except as otherwise
provided in this subparagraph (h). Tenant agrees to cooperate with Landlord
so as to facilitate the prompt completion by Landlord of its obligations
under this subparagraph (h). Without limiting the generality of the preceding
sentence, Tenant agrees to provide to Landlord promptly such approvals,
instructions, plans, specifications or other information, as may be
reasonably requested by Landlord.
(i) TRANSFER OF LANDLORD'S INTEREST. Notwithstanding anything
contained herein to the contrary, Tenant agrees that neither Landlord nor any
partner in Landlord, nor any other person having any interest, direct or
indirect, immediate or more removed than immediate, in Landlord, shall have
any personal liability with respect to any of the provisions of this Lease and
Tenant shall look solely to the estate and property of Landlord in the
Property for the satisfaction of Tenant's remedies, including without
limitation, the collection of any judgment or the enforcement of other
judicial process requiring the payment or expenditure of money by Landlord,
subject, however, to the prior rights of any holder of any mortgage covering
all or part of the Property, and no other assets of Landlord or its partners,
or of any other aforesaid person having an interest in Landlord, shall be
subject to levy, execution or other judicial process for the satisfaction of
Tenant's claims. Without limitation of the foregoing, upon each transfer of
the Building and Landlord's interest in this Lease, the transferor shall
automatically be released from all liability and obligations under this Lease
which shall accrue after the date of the transfer.
(j) RECORDING; SHORT FORM MEMO. This Lease shall not be recorded by
Tenant. If it is recorded by Tenant, Landlord shall have the right to
terminate this Lease as of the date of recording or thereafter and Landlord
shall have all rights and remedies provided in the case of default by Tenant
hereunder. If requested by Landlord, Tenant shall execute, in recordable
form, a short form memorandum of lease that may, at Landlord's option, be
placed of record. In addition, if requested by Landlord, Tenant shall execute
a memorandum of lease to be filed with the Colorado Department of Revenue, on
such form as may be prescribed by said Department, within ten days after the
execution of this Lease, or any other such memorandum, so that Landlord may
avail itself of the provision of statutes such as C.R.S. Section
39-22-604(7)(c).
(k) COVENANTS AND CONDITIONS. All of the covenants of Tenant
hereunder shall be deemed and construed to also be "conditions", if Landlord
so elects, as well as "covenants" as though the words specifically expressing
or importing covenants and conditions were used in each separate instance.
Tenant's covenants to pay rent are independent of any other covenant,
agreement, term or condition of this Lease.
(l) APPLICATION OF PAYMENTS. Landlord shall have the right to apply
payments received from Tenant pursuant to this Lease (regardless of Tenant's
designation of such payments) to satisfy any obligations of Tenant hereunder,
in such order and amounts as Landlord in its sole discretion, may elect;
provided, however, Landlord agrees that such payments shall be applied first
to Tenant's Base Rent.
(m) SECURITY INTEREST. INTENTIONALLY DELETED.
(n) GOVERNING LAW; PARTIAL INVALIDITY. This Lease shall be governed
and construed in accordance with the law of the state in which the Premises
is located. If any term, provision of condition contained in this Lease
shall, to any extent, be invalid or unenforceable, the remainder of this
Lease (or the application of such term, provision or condition to persons or
circumstances other than those in respect of which it is invalid or
unenforceable) shall not be affected thereby, and each and every other term,
provision and condition of this Lease shall be valid and enforceable to the
fullest extent possible permitted by law.
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<PAGE>
(o) HAZARDOUS MATERIALS. Tenant shall not store highly flammable
materials or goods, explosives, perishable foodstuffs, contraband, live
animals, materials or goods which emit odors in or upon the Premises. The
Tenant covenants that it shall not store, use or possess nor permit the
storage, use or possession of any Hazardous Substance (hereinafter defined)
upon the Premises. Hazardous Substance for purposes of this Lease shall mean,
without limitation, any flammable explosives, radon, radioactive materials,
asbestos, urea-formaldehyde foam insulation, polychlorinated biphenyls,
petroleum and petroleum based products, methane, hazardous materials,
hazardous wastes, hazardous or toxic substances or related materials, as
defined in the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. Sections 9601, et seq.
(including the so-called "Superfund" amendments thereto); the Toxic
Substances Control Act, as amended, 15 U.S.C. Sections 2601, et seq.; the
Resource Conservation and Recovery Act of 1976, as amended, 42 U.S.C.
Sections 6901, et seq.; the Hazardous Materials Transportation Act, as
amended, 49 U.S.C. Sections 5101, et seq. (formerly 49 U.S.C. 1801, et seq.);
or any other similar law, rule, regulation or statute concerning the
protection of the environment (collectively "Environmental Laws"). Tenant
hereby covenants and agrees, at its sole cost and expense, to indemnify,
protect and defend and save harmless the Landlord and any of its members,
managers, employees and agents from and against any and all damages, losses,
liabilities, obligations, penalties, claims, litigation, demands, defenses,
judgments, suits, actions, proceedings, costs, disbursements and expenses
(including, without limitation, attorneys' and experts' fees, expenses and
disbursements) of any kind or nature whatsoever which may at any time be
imposed upon, incurred by or asserted or awarded against the Landlord, its
members, managers, agents or employees relating to, resulting from or arising
out of Tenant's failure to comply with its obligations under the foregoing
section or Tenant's violation of any Environmental Law with respect to its
use of the Premises. Notwithstanding any provision contained in this Lease to
the contrary, the indemnification provisions set forth in this subparagraph
26(o) shall survive any expiration or termination of this Lease.
(p) WARRANTY DISCLAIMER. LANDLORD AND TENANT EXPRESSLY DISCLAIM ANY
IMPLIED WARRANTY THAT THE PREMISES ARE SUITABLE FOR TENANT'S INTENDED
COMMERCIAL PURPOSE, AND TENANT'S OBLIGATION TO PAY RENT HEREUNDER IS NOT
DEPENDENT UPON THE CONDITION OF THE PREMISES OR THE PERFORMANCE BY LANDLORD
OF ITS OBLIGATIONS HEREUNDER, AND, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED
HEREIN, TENANT SHALL CONTINUE TO PAY THE RENT, WITHOUT ABATEMENT, SETOFF OR
DEDUCTION, NOTWITHSTANDING ANY BREACH BY LANDLORD OF ITS DUTIES OR
OBLIGATIONS HEREUNDER, WHETHER EXPRESS OR IMPLIED.
(q) WAIVER OF TRIAL BY JURY. LANDLORD AND TENANT SHALL, AND HEREBY
DO, WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY
EITHER OF THE PARTIES HERETO AGAINST THE OTHER ON ANY MATTERS WHATSOEVER
ARISING OUT OF OR IN ANY WAY CONNECTED WITH THE LEASE, THE RELATIONSHIP OF
LANDLORD AND TENANT, TENANT'S USE OR OCCUPANCY OF THE PREMISES, AND ANY
EMERGENCY STATUTORY OR ANY OTHER STATUTORY REMEDY.
(r) FORCE MAJEURE. Other than for Tenant's obligations under this
Lease that can be performed by the payment of money (e.g., payment of Rent and
maintenance of insurance), whenever a period of time is herein prescribed for
action to be taken by either party hereto, such party shall not be liable or
responsible for, and there shall be excluded from the computation of any such
period of time, any delays due to strikes, riots, acts of God, shortages of
labor or materials, war, governmental laws, regulations, or restrictions, or
any other causes of any kind whatsoever which are beyond the control of such
party.
(s) LIST OF EXHIBITS. All exhibits and attachments hereto are
incorporated herein by this reference:
Addendum
Exhibit A Premises
Exhibit B Rules and Regulations
Exhibit C Lease Term Agreement
Exhibit D Parking Agreement
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<PAGE>
27. TELEPHONE AND TELECOMMUNICATIONS SERVICE.
(a) Tenant acknowledges and agrees that all telephone and
telecommunications services ("Telecommunications Services") desired by Tenant
shall be ordered and utilized at the sole expense of Tenant. Unless Landlord
otherwise requests or consents in writing, all equipment, apparatus and devices,
including without limitation wiring and cables, for the provisions of
Telecommunications Services (the "Telecommunications Equipment") shall be and
remain solely in the Premises. Unless otherwise specifically agreed in writing,
Landlord shall have no responsibility for the maintenance of Tenant's
Telecommunications Equipment, nor for any wiring or other infrastructure to
which Tenant's Telecommunications Equipment may be connected. Tenant agrees
that, to the extent any Telecommunications Services are interrupted, curtailed
or discontinued, Landlord shall have no obligation or liability with respect
thereto and it shall be the sole obligation of Tenant, at its sole expense, to
obtain substitute service.
(b) Landlord shall have the right, upon such notice as is
practicable in the case of emergencies, and otherwise upon reasonable prior
notice to Tenant, to interrupt or turn off telecommunications facilities in the
event of emergency or as necessary in connection with repairs to the Building or
installation of telecommunications equipment for other tenants of the Building.
(c) Any and all Telecommunications Equipment installed in the
Premises, or elsewhere in the Building by or on behalf of Tenant, including
wiring and other facilities for the provision of Telecommunications Services,
shall be removed by Tenant upon the expiration or earlier termination of the
Term of this Lease, by Tenant at its sole expense or, at Landlord's election, by
Landlord at Tenant's sole expense, with the cost thereof to be paid as
Additional Rent under this Lease.
(d) If the Telecommunications Equipment is not removed within
thirty (30) days of the termination or expiration of this Lease, the
Telecommunications Equipment shall conclusively be deemed to have been abandoned
and may be removed, appropriated, sold, stored, destroyed, otherwise disposed
of, or retained and used, by Landlord without notice to Tenant, without
obligation to account therefor, and without payment to Tenant or credit against
any amount due from Tenant to Landlord pursuant to this Lease. Tenant shall pay
to Landlord upon demand all costs of any such removal, disposition and storage
of the Telecommunications Equipment, as well as all costs to repair any damage
to the Building caused by such removal.
(e) In the event that Tenant wishes at any time to utilize the
services of a telephone or telecommunications provider whose equipment is not
then servicing the Building (a "New Provider"), no such New Provider shall be
permitted to install its lines or other equipment within the Building without
first securing the prior written approval of Landlord, which approval may be
withheld in Landlord's sole and absolute discretion. Landlord's approval shall
not be deemed any kind of warranty or representation by Landlord, including,
without limitation, any warranty or representation as to the suitability,
competence or financial strength of the New Provider. Without limitation of
Landlord's right to withhold consent in its sole and absolute discretion,
Landlord may refuse to give its approval unless all of the following conditions
are satisfied: (i) Landlord shall incur no expense whatsoever with respect to
any aspect of the New Provider's provision of its services, including, without
limitation, the costs of installation, materials and services; (ii) prior to
commencement of any work in or about the Building by the New Provider, the New
Provider shall supply Landlord with such written indemnities, insurance,
financial statements, and such other items as Landlord, in its sole and absolute
discretion, determines to be necessary to protect its financial interests and
the interests of the Building related to the proposed activities of the New
Provider; (iii) the New Provider agrees in writing to abide by such rules and
regulations, building and other codes, job site rules and such other
requirements as are determined by Landlord, in its sole and absolute discretion,
to be necessary to protect the interest of the Building, the tenants in the
Building and Landlord; (iv) Landlord determines, in its sole and absolute
discretion, that there is sufficient space in the Building for the placement of
all of the New Provider's equipment and materials; (v) Landlord receives from
the New Provider such compensation as is determined by Landlord, in its sole and
absolute discretion, to compensate it for space used in the Building for the
storage and maintenance of the New Provider's equipment, for the fair market
value of the New Provider's access to the Building, and any costs which may be
expected to be incurred by Landlord; and (vi) all of the foregoing matters are
documented in a written agreement between Landlord and the New Provider, the
form and content of which are satisfactory to Landlord in its sole and absolute
discretion.
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<PAGE>
(f) Notwithstanding any provision of the preceding subparagraph
to the contrary, the refusal of Landlord the grant its approval to any New
Provider shall not be deemed a default or breach by Landlord of its obligation
under this Lease, and in no event shall Tenant have the right to terminate this
Lease or claim entitlement to rent abatement for Landlord's refusal to grant
Tenant's request for approval of a New Provider. The provisions of this
Paragraph 27 may be enforced solely by Tenant and Landlord and are not for the
benefit of any other party. Specifically, but without limitation, no telephone
or telecommunications provider is intended to be, nor shall be deemed, a third
party beneficiary of this Lease.
(g) Tenant shall not utilize any wireless communications
equipment (other than usual and customary cellular telephones), including
antenna and satellite receiver dishes, within the Premises or the Building,
without Landlord prior written consent. Such consent shall be granted only in
the sole and absolute discretion of Landlord, and shall be conditioned in such a
manner, in Landlord's sole and absolute discretion, so as to protect Landlord's
financial interests and the interests of the Building, and the other tenants
therein.
28. NOTICES. All notices to be given under this Lease shall be in
writing and delivered personally or deposited in the United States mail,
certified or registered mail with return receipt requested, postage prepaid or
by reputable overnight courier, addressed as follows:
If to Landlord: Amerimar Realty Management Co.-Colorado
999 - 18th Street, Suite 1000
Denver, Colorado 80202
with a copy to: Denver Place Associates Limited Partnership
210 West Rittenhouse Square, Suite 2000
Philadelphia, Pennsylvania 19103
or to such other person or such other address designed by notice sent by
Landlord or Tenant.
If to Tenant: JATO Communications Corp.
1099 - 18th Street, Suite 2200
Denver, Colorado 80222
Notice by mail shall be deemed to have been given seventy-two (72)
hours after being deposited in the United States mail or the following Business
Day after deposit with a reputable overnight carrier.
29. TIME IS OF THE ESSENCE. Time is of the essence hereof.
IN WITNESS WHEREOF, Landlord and Tenant, intending to be legally bound
hereby, have executed this Agreement of lease as of the day and year first above
written.
LANDLORD:
DENVER PLACE ASSOCIATES LIMITED PARTNERSHIP, a
Delaware limited partnership
By: ARC Denver Associates, L.L.C., a Delaware
limited liability company, its general partner
By: ARC Denver, Inc., a Delaware corporation,
its manager
By
---------------------------------------
David G. Marshall, President
TENANT:
JATO COMMUNICATIONS CORP., a Delaware corporation
By:
-------------------------------------------------------
(Title)
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<PAGE>
ADDENDUM
THIS ADDENDUM, made as of the 29th day of September, 1999, is between
Amerimar Realty Management Co.-Colorado, as agent for DENVER PLACE ASSOCIATES
LIMITED PARTNERSHIP, a Delaware limited partnership ("Landlord") JATO
COMMUNICATIONS CORP., a Delaware corporation ("Tenant"). Landlord and Tenant
have executed simultaneously with this Addendum that certain Denver Place
Office Lease (the "Lease") pertaining to certain space in the building
commonly known as Denver Place and located at 999 - 18th Street, Denver,
Colorado. In the event of any conflict between the provisions of this
Addendum and the provisions of the other portions of the lease, the
provisions of this Addendum shall control. The capitalized terms used herein
and not defined herein shall have the same meanings used in the other
portions of the Lease. Landlord and Tenant hereby agree that the Lease is
amended and supplemented as follows:
30. TENANT'S TERMINATION OPTION. Provided that (i) Tenant is not in
default under this Lease, and (ii) Tenant has exercised its First Right of
Refusal pursuant to the provisions of Paragraph 6(a) of the First Amendment
of the Plaza Tower Lease to add not less than [A] 13,106 square feet of
rentable area if Tenant has not exercised either the Partial Termination
Option under the Plaza Tower Lease or [B] 17,606 square feet of rentable area
if Tenant has exercised either the Partial Termination Option under the Plaza
Tower Lease (such area being herein referred to as the "Twenty-First Floor
Premises") located upon the twenty-first (21st) floor of Plaza Tower to the
Premises described in the Plaza Tower Lease on or before July 31, 2000
("Partial Termination Date"), Tenant shall have the option ("Termination
Option") to terminate this Lease as of the later of October 31, 2000 or the
date the Twenty-First Floor Premises are ready for Tenant's occupancy (such
date is herein referred to as the "Early Termination Date"), provided that
the Tenant delivers written notice of its intent to exercise said option
("Termination Notice") to the Landlord on or before the Termination Date. In
the event Tenant has not delivered the Termination Notice to Landlord on or
before the Termination Date, Tenant's Termination Option shall be deemed to
have expired.
LANDLORD:
DENVER PLACE ASSOCIATES LIMITED
PARTNERSHIP, a Delaware limited partnership
By: Amerimar Realty Management Co.-Colorado
By: Amerimar Realty Management Co.-
Pennsylvania, its general partner
By: ARC-Management Co., Inc., its
general partner
Date: __________________ By _______________________________
David G. Marshall, President
TENANT:
JATO COMMUNICATIONS CORP., a Delaware
corporation
Date: __________________ By _______________________________
(Title)
<PAGE>
EXHIBIT A
PREMISES
<PAGE>
EXHIBIT B
RULES AND REGULATIONS
Rules and Regulations, to Lease between DENVER PLACE ASSOCIATES LIMITED
PARTNERSHIP, a Delaware limited partnership, as Landlord ("Landlord") and
JATO COMMUNICATIONS CORP., a Delaware corporation ("Tenant") pertaining to
certain space in Denver Place, 999 - 18th Street, Denver, Colorado 80202.
1. Any sign, lettering, picture, notice or advertisement installed
within the Premises which is visible to the public from within the Building
shall be installed at Tenant's cost and in such manner, character and style
as Landlord may approve in writing. No sign, lettering, picture, notice or
advertisement shall be placed on any outside window or in any position so as
to be visible from outside the Building.
2. The use of the name of the Building or of pictures or illustrations
of the Building in advertising or other publicity, without prior written
consent of Landlord, is prohibited.
3. Tenant, its subtenants and its and their customers, invitees,
licensees, and guests
a. shall not obstruct and shall not use for any purpose other than
ingress and egress, the sidewalks, entrances, passages, corridors,
vestibules, halls, elevators and stairways in and about the Building;
b. shall not place objects against glass partitions or doors or
windows or adjacent to any open common space which would be unsightly
from the Building corridors or from the exterior of the Building, and
will promptly remove the same upon notice from Landlord;
c. shall not make noises, cause disturbances, create vibrations,
odors or noxious fumes or use or operate any electrical or electronic
devices or other devices that emit sound waves or are dangerous to other
tenants and occupants of the Building or that would interfere with the
operation of any device or equipment or radio or television broadcasting
or reception from or within the Building or elsewhere, and shall not
place or install any projections, antennae, aerials or similar devices
inside or outside of the Premises;
d. shall not make any room-to-room canvass to solicit business
from other tenants in the Building, and shall not exhibit, sell or offer
to sell, use, rent or exchange any item or services in or from the
Premises unless ordinarily embraced within the Tenant's use of the
Premises as specified in its Lease;
e. shall refrain from attempting to adjust any controls;
f. shall not waste, and shall not suffer or permit to be wasted,
electricity or water and shall cooperate fully with Landlord to assure
the most effective operation of the Building's heating and air
conditioning;
g. shall keep public corridor doors closed;
h. shall neither install nor operate machinery or any mechanical
devices of a nature not directly related to Tenant's ordinary use of the
Premises without the written permission of the Landlord;
i. shall not use rest rooms or water fixtures for any purpose
other than that for which they are designed;
j. shall not mark upon, paint, cut, drill into, drive nails or
screws into, or in any way deface the walls, ceiling partitions or
floors of the Premises or of the Building;
<PAGE>
k. shall not unduly obstruct any pipes, conduits and ducts in the
Premises; and
l. shall use chair pads, to be furnished by Tenant, under all
rolling and ordinary desk chairs in the carpeted areas.
4. Tenant assumes full responsibility for protecting its space from
theft, robbery and pilferage, which includes keeping doors locked and other
means of entry to the Premises closed and secured.
5. Peddlers, solicitors and beggars shall be reported to the office of
the Building or as Landlord otherwise requests.
6. No person or contractor not employed by Landlord shall be used to
perform window washing, cleaning, or other work in the Premises.
7. Unless Landlord so consents, Tenant shall not, and Tenant shall not
permit or suffer anyone to:
a. Cook in the Premises;
b. Place vending or dispensing machines of any kind in the
Premises;
c. At any time sell, purchase or give away, or permit the sale,
purchase or gift of, food in any form; or
d. Use the Premises for lodging or for any immoral or illegal
purposes.
e. Use the Premises to engage in the manufacture or sale of, or
permit the use of, any spirituous, fermented, intoxicating or alcoholic
beverages on the Premises.
f. Use the Premises to engage in the manufacture or sale of, or
permit the use of, any illegal drugs.
8. No furniture shall be placed in front of the Building or in any
lobby or corridor, without the prior written consent of Landlord. Landlord
shall have the right to remove all non-permitted signs and furniture, without
notice to Tenant, at Tenant's expense.
9. No animals are allowed in the Building.
10. No lock or other security device shall be placed by Tenant on any
door in the Building without the Building manager being kept furnished with
two of the keys, cards or other means of access therefore. At the termination
of its tenancy, Tenant shall promptly deliver to Landlord all keys, entry
cards and other means of access to offices, rest rooms and vaults.
11. The use of oil, gas or inflammable liquids for heating, lighting,
or any other purpose is expressly prohibited. Explosives or other hazardous
articles shall not be brought into the Building.
12. Electric floor space heaters, humidifiers or A/C fans are not
permitted.
13. a. Landlord shall have the right to approve or disapprove the
movers or moving company employed by Tenant. Tenant shall cause said
movers to use only the loading facilities and elevator designated by
Landlord. In the event Tenant's movers damage the elevator or any part
of the Building, Tenant shall forthwith pay to Landlord the amount
required to repair said damage.
b. Furniture, equipment and supplies shall be moved in or out of
the Building only during such hours and in such manner as may be
prescribed by Landlord.
c. No safe or article, the weight of which may constitute a hazard
or danger to the Building or its equipment shall be moved into the
Premises.
<PAGE>
d. Safes and other equipment, the weight of which is not excessive
shall be moved into, from or about the Building only during such hours
and in such manner as shall be prescribed by Landlord, and Landlord
shall have the right to designate the location of such articles in the
Premises.
14. Smoking shall not be permitted in any common areas of the Building
(including but not limited to the parking garage, elevator lobbies,
elevators, public corridors and restrooms), or within three feet of the
exterior entrance to any doorway or entryway of the Building. Smoking shall
only be permitted in those areas of the Retail Mall which have been
designated as public smoking areas.
15. Roller skates, bicycles or other vehicles shall not be permitted in
the offices, halls, common areas, or corridors in the Building. All vehicles
shall use designated parking meters.
16. No window shades, blinds, screens, draperies or other window
coverings will be attached or detached by Tenant without Landlord's prior
written consent. Tenant agrees to abide by Landlord's rules with respect to
maintaining uniform curtain, draperies and/or linings at all windows and
hallways.
17. If Tenant desires telegraphic, telephonic, computer or other
electric connections, Landlord, or its agents, will direct the electricians
as to where and how the wires may be introduced, and without such directions,
no boring or cuttings for wires will be permitted. Any such installation and
connection shall be made at Tenant's expense, and, at Landlord's option,
shall be removed at Tenants expense at the expiration or termination of its
Lease.
18. Landlord reserves the right to modify and make such other and
further reasonable rules and regulations as in its judgment may, from time to
time, be needful and desirable for the safety, security, care and cleanliness
of the Premises and preservation of good order therein.
<PAGE>
EXHIBIT C
LEASE TERM AGREEMENT
THIS AGREEMENT, made as of the 29th day of September, 1999, between
DENVER PLACE ASSOCIATES LIMITED PARTNERSHIP, a Delaware limited partnership
(hereinafter referred to as "Landlord") and JATO COMMUNICATIONS CORP., a
Delaware corporation (hereinafter referred to as "Tenant").
W I T N E S S E T H
WHEREAS, by Lease (hereinafter called "Lease") made the 29th day of
September, 1999, Landlord leased unto Tenant certain premises known as Suite
Number 2600, located at 999 - 18th Street, Denver, Colorado, for a term of
_____ (____) years, _____ (____) months and _____ (____) days commencing on
______________, 1999, unless sooner terminated or extended as provided
therein, and
WHEREAS, Landlord and Tenant now desire to set forth the correct
Commencement Date of the term and to adjust the Expiration Date of the Term
to provide for a full term of the Lease of _____ years, _____ months and
_____ days.
NOW, THEREFORE, Landlord and Tenant do hereby agree as follows:
1. The Term of the Lease commenced on _____________ 19___, and shall
continue until ___________________, unless sooner terminated or
extended as provided therein.
2. Except as hereby amended, the Lease shall continue in full force and
effect.
3. This Agreement shall be binding on the parties hereto, their heirs,
executors, successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
LANDLORD:
DENVER PLACE ASSOCIATES LIMITED
PARTNERSHIP, a Delaware limited partnership
By: Amerimar Realty Management Co.-Colorado
By: Amerimar Realty Management Co.-
Pennsylvania, its general partner
By: ARC-Management Company, its
general partner
Date: ______________________ By: _______________________________________
David G. Marshall, President
TENANT:
JATO COMMUNICATIONS CORP., a Delaware
corporation
Date: ______________________ By: _______________________________________
(Title)
<PAGE>
EXHIBIT D
PARKING AGREEMENT
DENVER PLACE ASSOCIATES LIMITED PARTNERSHIP, a Delaware limited
partnership, by Amerimar Realty Management Co.-Colorado, as agent for
Landlord, and JATO COMMUNICATIONS CORP., a Delaware corporation, as Tenant,
have executed simultaneously with this Agreement a Lease (hereinafter called
"Lease") pertaining to certain space at 999 - 18th Street to be occupied by
Tenant. In consideration of the mutual covenants herein contained, Landlord
and Tenant further agree as follows:
The Building in which the Premises are located contains a parking garage
for the benefit of Tenants and the general public (hereinafter called
"Parking Garage"). Landlord does not operate or manage the Parking Garage,
but maintains a management agreement with an independent contractor
(hereinafter called "Operator") for the management and operation of the
Parking Garage. In order to rent parking spaces in the Parking Garage, Tenant
must contract separately with the Operator for such rentals. Landlord shall
make available for Tenant and Tenant shall have non-assignable option to rent
from the Operator for fifteen (15) parking spaces located in the Denver Place
complex at the prevailing monthly rate posted by the Operator. The parking
space shall be available for a period expiring November 30, 1999. Tenant must
exercise its option within this period by renting the parking spaces directly
from the Operator.
The terms and conditions of Tenant's rental shall be governed and fixed
solely by the rental agreement between Tenant and Operator, however, Tenant's
failure to comply with any term of any such rental agreement shall constitute
a default under the Lease. In the event that Tenant chooses to rent parking
spaces from the Operator as provided for herein, Tenant shall be responsible
for payments to the Operator of a refundable security deposit for each parking
card issued by the Operator in connection with Tenant's rental of the parking
spaces (the "Security Deposit"). The Security Deposit shall be in an amount
to be determined by the Operator in its sole discretion. Notwithstanding
anything in this Agreement or the Lease to the contrary, in no event shall
Landlord be responsible for payment of the Security Deposit to the Operator
on behalf of Tenant. Payment and refund of the Security Deposit shall be
governed and fixed solely by the rental agreement between Tenant and
Operator. Landlord's holding of parking spaces shall not constitute any
assumption of and Tenant hereby releases Landlord from any and all liability
with respect to such rentals, and any and all damage, loss or injury with
respect to such rentals shall be at the sole risk of Tenant unless otherwise
provided by Operator under the rental agreement.
The provisions of this Agreement supplement but are subject to all
provisions of the Lease. Capitalized terms not otherwise defined in this
Agreement have the same meaning as the same terms have in the Lease.
LANDLORD:
DENVER PLACE ASSOCIATES LIMITED
PARTNERSHIP, a Delaware limited partnership
By: Amerimar Realty Management Co.-Colorado
By: Amerimar Realty Management-
Pennsylvania, its general partner
By: ARC-Management Company, its
general partner
Date: By:
---------------------- ---------------------------------------
David G. Marshall, President
TENANT:
JATO COMMUNICATIONS CORP., a Delaware
corporation
Date: By:
---------------------- ---------------------------------------
(Title)
<PAGE>
Exhibit 10.25
- ------------------------------------------------------------------------------
JATO COMMUNICATIONS CORP.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
September 16, 1999
- ------------------------------------------------------------------------------
<PAGE>
JATO COMMUNICATIONS CORP.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
This AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (the
"AGREEMENT") is entered into as of the 16TH day of September, 1999, by and
among JATO COMMUNICATIONS CORP., a Delaware corporation (the "COMPANY"),
certain holders of the Company's Common Stock set forth on EXHIBIT A hereto
(each, a "FOUNDER," and, collectively, the "FOUNDERS"), the holders of the
Company's Series A Preferred Stock (the "SERIES A STOCK") set forth on
EXHIBIT A hereto, the holders of the Company's Series B Preferred Stock (the
"SERIES B STOCK") set forth on EXHIBIT A hereto, and the holders of the
Company's Series C Preferred Stock (the "SERIES C STOCK") set forth on
EXHIBIT A hereto. The Founders, the Series A Holders, the Series B Holders
and the Series C Holders shall be referred to hereinafter as the "INVESTORS"
and each individually as an "INVESTOR."
WHEREAS, the Company has granted registration rights, information
rights, preemptive rights and certain other rights pursuant to that certain
Investors' Rights Agreement, by and among the Company, the Founders, the
Series A Holders and the Series B Holders, dated as of April 16, 1999 (the
"PRIOR AGREEMENT");
WHEREAS, the Company proposes to sell and issue shares of its Series C
Stock pursuant to the Series C Preferred Stock Purchase Agreement of even
date herewith (the "PURCHASE AGREEMENT"); and
WHEREAS, as a condition of entering into the Purchase Agreement, the
prospective purchasers have requested that the Company extend to them
registration rights, information rights and other rights as set forth below,
and the Company and the parties to the Prior Agreement are willing to amend
the rights given to them pursuant to such agreements by replacing such rights
in their entirety with the rights set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement and the Purchase Agreement, the parties mutually agree as follows:
1. GENERAL
1.1 AMENDMENT AND RESTATEMENT OF THE PRIOR AGREEMENT.
(a) The undersigned parties who constitute the parties
necessary to amend the Prior Agreement hereby agree that, effective upon the
date hereof, the Prior Agreement is null and void and superseded by the
rights and obligations set forth in this Agreement.
1.2 DEFINITIONS.
(a) "COMMON STOCK" shall mean the common stock, $.01 par
value per share, of the Company.
<PAGE>
(b) "EQUITY SECURITIES" shall mean (i) any Common Stock,
Preferred Stock or other security of the Company, (ii) any security
convertible into any Common Stock, Preferred Stock or other security
(including any option to purchase such a convertible security), (iii) any
security carrying any warrant or right to subscribe to or purchase any Common
Stock, Preferred Stock or other security or (iv) any such warrant or right.
(c) "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended.
(d) "FORM S-3" means such form under the Securities Act as
in effect on the date hereof or any successor registration form under the
Securities Act subsequently adopted by the SEC which permits inclusion or
incorporation of substantial information by reference to other documents
filed by the Company with the SEC.
(e) "HOLDER" means any Investor owning of record Registrable
Securities that have not been sold to the public or any assignee of record of
such Registrable Securities in accordance with Section 3.9 hereof.
(f) "INITIAL OFFERING" shall mean the Company's first firm
commitment underwritten public offering of its Common Stock registered under
the Securities Act.
(g) "PREFERRED STOCK" shall mean the preferred stock, $.01
par value per share, of the Company.
(h) "QUALIFIED PUBLIC OFFERING" shall mean a firm commitment
underwritten public offering pursuant to an effective registration statement
under the Securities Act covering the offer and sale of Common Stock for the
account of the Company in which (i) the per share price is at least equal to
the "Target Multiple" (as hereinafter defined) multiplied by the
then-effective Series B Conversion Price (the "SERIES B CONVERSION PRICE"),
determined in accordance with the Company's Restated Certificate of
Incorporation, as filed with the Secretary of State of the State of Delaware
(the "THRESHOLD PRICE"), (ii) the gross cash proceeds to the Company (before
underwriting discounts, commissions and fees) are at least $30,000,000 and
(iii) the shares of Common Stock are listed on any national securities
exchange or have been registered under Section 12(g) of the Exchange Act. As
used herein, "TARGET MULTIPLE" shall mean (A) an amount equal to the product
of 2.5 prior to the third anniversary of the date hereof and (B) an amount
equal to 3.5 on or after the third anniversary of the date hereof.
(i) The terms "REGISTER," "REGISTERED," and "REGISTRATION"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act and the declaration or
ordering of effectiveness of such registration statement or document.
(j) The term "REGISTRABLE SECURITIES" shall mean (a) Common
Stock of the Company issued or issuable upon conversion of the Shares and (b)
any Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a
dividend or other distribution with respect to, or in exchange for or in
replacement of, the Common Stock or Shares referred to in clause (a) above.
Notwithstanding the foregoing, Registrable Securities shall not include any
securities sold by a person to the
2.
<PAGE>
public either pursuant to a registration statement or Rule 144 or sold in a
private transaction in which the transferor's rights under Section 3 of this
Agreement with respect to such registration rights are not assigned.
(k) "REGISTRABLE SECURITIES THEN OUTSTANDING" shall be the
number of shares determined by calculating the total number of shares of the
Company's Common Stock that are Registrable Securities and either (i) are
then issued and outstanding or (ii) are issuable pursuant to then exercisable
or convertible securities.
(l) "REGISTRATION EXPENSES" shall mean all expenses incident
to the Company's performance of or compliance with its obligations under
Section 3 hereof, including without limitation, all Commission, NASD and
stock exchange or NASDAQ registration and filing fees and expenses, fees and
expenses of compliance with applicable state securities or "blue sky" laws
(including, without limitation, reasonable fees and disbursements of counsel
for the underwriters in connection with "blue sky" qualifications of the
Registrable Securities), printing expenses, messenger and delivery expenses,
the fees and expenses incurred in connection with the listing of the
securities to be registered in an initial public offering on each securities
exchange or national market system on which such securities are to be so
listed and, following such initial public offering, the fees and expenses
incurred in connection with the listing of such securities to be registered
on each securities exchange or national market system on which such
securities are listed, fees and disbursements of counsel for the Company and
all independent certified public accountants (including the expenses of any
annual audit and "cold comfort" letters required by or incident to such
performance and compliance), the fees and disbursements of underwriters
customarily paid by issuers or sellers of securities (including the fees and
expenses of any "qualified independent underwriter" required by the NASD),
the reasonable fees of one counsel retained in connection with each such
registration by the holders of a majority of the Registrable Securities being
registered, not to exceed $20,000, the reasonable fees and expenses of any
special experts retained by the Company in connection with such registration,
and fees and expenses of other Persons retained by the Company (but not
including any underwriting discounts or commission or transfer taxes, if any,
attributable to the sale of Registrable Securities by holders of such
Registrable Securities other than the Company).
(m) "RULE 144" shall mean Rule 144 of the rules and
regulations promulgated under the Securities Act.
(n) "SEC" means the Securities and Exchange Commission.
(o) "SECURITIES ACT" shall mean the Securities Act of 1933,
as amended.
(p) "SELLING EXPENSES" shall mean all underwriting discounts
and selling commissions applicable to the sale of Registrable Securities.
(q) "SERIES A HOLDERS" shall mean the holders of the
Company's Series A Preferred Stock.
(r) "SERIES B HOLDERS" shall mean the holders of the
Company's Series B Stock.
3.
<PAGE>
(s) "SERIES C HOLDERS" shall mean the holders of the
Company's Series C Stock.
(t) "SERIES A SHARES" shall mean all shares of capital stock
of the Company registered in the names of the Series A Holders or
beneficially owned by them as of the date hereof and any and all other
securities of the Company legally acquired by the Series A Holders after the
date hereof (including but not limited to all shares of Common Stock issued
upon conversion of, or as dividends or other rights with respect to, the
Series A Stock).
(u) "SERIES B SHARES" shall mean all shares of capital stock
of the Company registered in the names of the Series B Holders or
beneficially owned by them as of the date hereof and any and all other
securities of the Company legally acquired by the Series B Holders after the
date hereof (including but not limited to all shares of Common Stock issued
upon conversion of, or as dividends or other rights with respect to, the
Series B Stock).
(v) "SERIES C SHARES" shall mean all shares of capital stock
of the Company registered in the names of the Series C Holders or
beneficially owned by them as of the date hereof and any and all other
securities of the Company legally acquired by the Series C Holders after the
date hereof (including but not limited to all shares of Common Stock issued
upon conversion of, or as dividends or other rights with respect to, the
Series C Stock).
(w) "STOCKHOLDERS" shall mean the Founders and the Series A
Holders.
(x) "STOCKHOLDER SHARES" shall mean all shares of capital
stock of the Company registered in the names of the Founders and the Series A
Holders or beneficially owned by them as of the date hereof and any and all
other securities of the Company legally acquired by the Founders and Series A
Holders after the date hereof.
(y) "SHARES" shall mean the Company's (i) Common Stock held
by the Founders, (ii) the Series A Stock issued pursuant to the Series A
Preferred Stock Purchase Agreement, dated as of October 23, 1998, (iii) the
Series B Stock issued pursuant to the Series B Stock Purchase Agreement,
dated as of April 16, 1999, (iv) the Series C Stock issued pursuant to the
Purchase Agreement and (v) any such shares held by a transferee to the extent
such transferee shall become a party to this Agreement.
2. RESTRICTIONS ON TRANSFER.
2.1 RESTRICTIONS ON TRANSFER.
(a) Each Holder agrees not to make any disposition of all or
any portion of the Shares or Registrable Securities unless and until the
transferee has agreed in writing for the benefit of the Company to be bound
by this Section 2.1 unless and until:
(i) There is then in effect a registration statement
under the Securities Act covering such proposed disposition and such
disposition is made in accordance with such registration statement; or
4.
<PAGE>
(ii) (A) Such Holder shall have notified the Company
of the proposed disposition and shall have furnished the Company with a
detailed statement of the circumstances surrounding the proposed disposition
and (B) if reasonably requested by the Company, such Holder shall have
furnished the Company with an opinion of counsel, reasonably satisfactory to
the Company, that such disposition will not require registration of such
shares under the Securities Act or any applicable state securities or Blue
Sky laws. It is agreed that the Company will not require opinions of counsel
for transactions made pursuant to Rule 144 except in unusual circumstances.
(iii) Notwithstanding the provisions of paragraphs (i)
and (ii) above, no such registration statement or opinion of counsel shall be
necessary for a transfer by a Holder which is (A) a partnership to any or all
of its partners or former partners, (B) a corporation to its stockholders in
accordance with their interest in the corporation, (C) a limited liability
company to its members or former members in accordance with their membership
interest, (D) by a trust to its beneficiaries in accordance with their
interests in the trust, (E) to the Holder's family member or trust for the
benefit of an individual Holder or (F) to an affiliate of the Holder;
PROVIDED, THAT, the transferee will be subject to the terms of this Agreement
to the same extent as if he were an original Holder hereunder; and PROVIDED,
FURTHER, HOWEVER, that such transfer is pursuant to an exemption under the
Securities Act.
PROVIDED, HOWEVER, that in connection with any such transfer or disposition
other than as described in paragraph (i) above, the transferee shall have
agreed in writing to be bound by the provisions of the Agreement.
(b) Each certificate representing Shares or Registrable
Securities shall (unless otherwise permitted by the provisions of the
Agreement) be stamped or otherwise imprinted with a legend substantially
similar to the following (in addition to any legend required under applicable
state securities laws or as provided elsewhere in this Agreement):
FIRST LEGEND:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS AND UNTIL REGISTERED
UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS
NOT REQUIRED.
SECOND LEGEND:
THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF EXCEPT IN COMPLIANCE WITH THE AMENDED AND RESTATED
INVESTORS'
5.
<PAGE>
RIGHTS AGREEMENT, DATED SEPTEMBER 16, 1999, COPIES OF WHICH ARE ON FILE
AT THE OFFICE OF THE ISSUER.
(c) The Company shall reissue promptly unlegended
certificates at the request of any holder thereof if the holder shall have
obtained an opinion of counsel (which counsel may be counsel to the Company)
reasonably acceptable to the Company to the effect that the securities
proposed to be disposed of may lawfully be so disposed of without
registration, qualification or legend.
(d) Any legend endorsed on an instrument pursuant to
applicable state securities laws and the stop-transfer instructions with
respect to such securities shall be removed upon receipt by the Company of an
order of the appropriate blue sky authority authorizing such removal.
2.2 "MARKET STAND OFF" AGREEMENT. Each Holder hereby agrees that
during the one hundred eighty (180) day period following the effective date
of a registration statement of the Company filed under the Securities Act, it
shall not, to the extent requested by the Company and the managing
underwriter, sell or otherwise transfer or dispose of (other than to donees
who agree to be similarly bound) any Common Stock of the Company held by it
at any time during such period except Common Stock included in such
registration; PROVIDED, THAT, all officers and directors of the Company enter
into similar agreements.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such one hundred eighty (180) day
period.
3. REGISTRATION
3.1 DEMAND REGISTRATION.
(a) Subject to the conditions of this Section 3.1, if the
Company shall receive a written request from either (i) the holders of more
than forty percent (40%) of the Stockholder Shares or share equivalents then
outstanding (the "SERIES A INITIATING HOLDERS"), or (ii) the holders of at
least fifty-one percent (51%) of the Series B Shares or share equivalents
then outstanding (the "SERIES B INITIATING HOLDERS" and, together with the
Series A Initiating Holders, the "INITIATING HOLDERS") that the Company file
a registration statement under the Securities Act covering the registration
of, Registrable Securities having an aggregate offering price to the public
of at least $10,000,000, then the Company shall, within thirty (30) days of
the receipt thereof, give written notice of such request to all Holders, and
subject to the limitations of this Section 3.1, use its best efforts to
effect, as soon as practicable, the registration under the Securities Act of
all Registrable Securities that the Holders request to be registered.
(b) If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
this Section 3.1 requesting inclusion in such registration and the Company
shall include such information in the written notice referred to in Section
3.1(a). In such event, the right of any Holder to include its Registrable
Securities in such registration shall
6.
<PAGE>
be conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority in interest of the Initiating Holders
and such Holder) to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by a majority in interest of the Initiating
Holders (which underwriter or underwriters shall be reasonably acceptable to
the Company). Notwithstanding any other provision of this Section 3.1, if
the underwriter advises the Company that marketing factors require a
limitation of the number of securities to be underwritten (including
Registrable Securities) then the Company shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares that may be included in the underwriting shall be
allocated to the Holders of such Registrable Securities requesting inclusion
in such registration on a pro rata basis based on the number of Registrable
Securities held by all such Holders (including Initiating Holders); PROVIDED,
HOWEVER, that if the Initiating Holders are the Series B Initiating Holders,
any shares proposed to be included by the Series B Holders shall be included
in such registration before any such allocation takes place. Any Registrable
Securities excluded or withdrawn from such underwriting shall be withdrawn
from the registration.
(c) The Company shall not be required to effect a
registration pursuant to this Section 3.1:
(i) prior to the earlier of (A) one hundred eighty
(180) days following the effectiveness of the Company's Initial Offering and
(B) the third anniversary of the date hereof; or
(ii) with respect to the Series A Initiating Holders,
after the Company has filed two (2) registration statements pursuant to this
Section 3.1, and: (A) such registration has been declared or ordered
effective; or (B) the request for such registration has been subsequently
withdrawn by the Series A Initiating Holders, unless the withdrawal is based
upon material adverse information concerning the Company of which the Series
A Initiating Holders were not aware at the time of such request; or (C) such
registration includes at least eighty percent (80%) of the Registrable
Securities of which the holders of Common Stock and Series A Holders have
requested registration pursuant to Section 3.1(a); or
(iii) with respect to the Series B Initiating Holders,
after the Company has filed two (2) registration statements pursuant to this
Section 3.1, and: (A) such registration has been declared or ordered
effective; or (B) the request for such registration has been subsequently
withdrawn by the Series B Initiating Holders, unless the withdrawal is based
upon material adverse information concerning the Company of which the Series
B Initiating Holders were not aware at the time of such request; or (C) such
registration includes at least eighty percent (80%) of the Registrable
Securities of which the Series B Holders have requested registration pursuant
to Section 3.1(a); or
(iv) if such registration is the first registration
requested pursuant to this Section 3.1 and the Initiating Holders do not
include holders of a majority of the Series B Shares then outstanding; or
7.
<PAGE>
(v) if within thirty (30) days of receipt of a
written request from Initiating Holders pursuant to Section 3.1(a), the
Company gives notice to the Holders of the Company's intention to make an
Initial Offering within ninety (90) days and proceeds diligently and in good
faith to see that such Initial Offering be declared effective; PROVIDED,
HOWEVER, that this clause (v) shall not affect any request by Initiating
Holdings in accordance with clause (i)(B) above; or
(vi) if the Company shall furnish to Holders
requesting a registration statement pursuant to this Section 3.1, a
certificate signed by the Chairman of the Board (or, if there is no Chairman,
a majority of the Board of Directors) stating that in the good faith judgment
of the Board of Directors of the Company, it would be seriously detrimental
to the Company and its stockholders for such registration statement to be
effected at such time, in which event the Company shall have the right to
defer such filing for a period of not more than ninety (90) days after
receipt of the request of the Initiating Holders; PROVIDED, THAT, the right
to delay a request shall be exercised by the Company not more than once in
any twelve (12) month period.
3.2 PIGGYBACK REGISTRATIONS. The Company shall notify all Holders
of Registrable Securities in writing at least thirty (30) days prior to the
filing of any registration statement under the Securities Act for purposes of
a public offering of securities of the Company (including, but not limited
to, registration statements relating to secondary offerings of securities of
the Company and to offerings of securities of the Company initiated by any
party exercising its demand registration rights, but excluding registration
statements relating to employee benefit plans and corporate reorganizations
or other transactions under Rule 145 of the Securities Act) and will afford
each such Holder an opportunity to include in such registration statement all
or part of such Registrable Securities held by such Holder. Each Holder
desiring to include in any such registration statement all or any part of the
Registrable Securities held by it shall, within fifteen (15) days after
receipt of the above-described notice from the Company, so notify the Company
in writing. Such notice shall state the intended method of disposition of
the Registrable Securities by such Holder. If a Holder decides not to
include all of its Registrable Securities in any registration statement
thereafter filed by the Company, such Holder shall nevertheless continue to
have the right to include any Registrable Securities in any subsequent
registration statement or registration statements as may be filed by the
Company with respect to offerings of its securities, all upon the terms and
conditions set forth herein.
If the registration statement under which the Company gives notice
under this Section 3.2 is for an underwritten offering, the Company shall so
advise the Holders of Registrable Securities. In such event, the right of
any such Holder to be included in a registration pursuant to this Section 3.2
shall be conditioned upon such Holder's participation in such underwriting
and the inclusion of such Holder's Registrable Securities in the underwriting
to the extent provided herein. All Holders proposing to distribute their
Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of this Agreement, if the underwriter determines in good faith that
the inclusion of such shares will materially and adversely affect the
marketing of the offering, the number of shares that may be included in the
underwriting shall be allocated as follows: (i) first, to the Company, (ii)
second, to the Holders on a pro rata basis based on the total number of
Registrable
8.
<PAGE>
Securities held by the Holders and (iii) third, to any stockholder of the
Company (other than a Holder) on a pro rata basis. No such reduction shall
(i) reduce the securities being offered by the Company for its own account to
be included in the registration and underwriting or (ii) reduce the amount of
securities of the selling Holders included in the registration below
twenty-five percent (25%) of the total amount of securities included in such
registration, unless such offering is the Initial Offering and such
registration does not include shares of any other selling stockholders, in
which event any or all of the Registrable Securities of the Holders may be
excluded in accordance with the immediately preceding sentence. In no event
will shares of any other selling stockholder be included in such registration
which would reduce the number of shares which may be included by the Holders.
The Company shall have the right to terminate or withdraw any registration
initiated by it under this Section 3.2 prior to the effectiveness of such
registration whether or not any Holder has elected to include securities in
such registration. The Registration Expenses of such withdrawn registration
shall be borne by the Company in accordance with Section 3.4 hereof.
3.3 FORM S-3 REGISTRATION. In case the Company shall receive a
written request from the Holders of more than twenty-five percent (25%) of
the Registrable Securities then outstanding that the Company effect a
registration on Form S-3 (or any successor to Form S-3) or any similar
short-form registration statement and any related qualification or compliance
with respect to all or a part of the Registrable Securities owned by such
Holder or Holders, the Company will:
(a) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other
Holders of Registrable Securities; and
(b) as soon as practicable, effect such registration and all
such qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Holder's or Holders' Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any Holder
or Holders joining in such request as are specified in a written request
given within fifteen (15) days after receipt of such written notice from the
Company; PROVIDED, HOWEVER, that the Company shall not be obligated to
effect any such registration, qualification or compliance pursuant to this
Section 3.3:
(i) if the Company has already effected two (2)
registrations on Form S-3 for such Holders pursuant to this Section 3.3 in
any calendar year and such registration includes at least fifty percent (50%)
of the Registrable Securities of which the Holders have requested
registration pursuant to Section 3.3; or
(ii) if such registration is the first registration
requested pursuant to this Section 3.3 and the holders requesting
registration do not include holders of a majority of the Series B Shares and
Series C Shares, taken together, then outstanding;
(iii) if Form S-3 (or any successor or similar form) is
not available for such offering by the Holders; or
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(iv) if such Holders, together with the holders of any
other securities of the Company entitled to inclusion in such registration,
propose to sell Registrable Securities and such other securities (if any) at
an aggregate price to the public of less than $5,000,000; or
(v) if the Company shall furnish to the Holders a
certificate signed by the Chairman of the Board of Directors of the Company
(or, if there is no Chairman, a majority of the Board of Directors) stating
that, in the good faith judgment of the Board of Directors of the Company, it
would be seriously detrimental to the Company and its stockholders for such
Form S-3 Registration to be effected at such time, in which event the Company
shall have the right to defer the filing of the Form S-3 registration
statement for a period of not more than ninety (90) days after receipt of the
request of the Holder or Holders under this Section 3.3; PROVIDED, THAT, the
right to delay a request shall be exercised by the Company not more than once
in any twelve (12) month period, or
(vi) in any particular jurisdiction in which the
Company would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration, qualification
or compliance.
(c) Subject to the foregoing, the Company shall file a Form
S-3 registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after receipt
of the request or requests of the Holders.
3.4 REGISTRATION EXPENSES. The Company shall bear all Registration
Expenses, except that each participating Holder shall bear its proportionate
share of all Selling Expenses. The Company shall not, however, be required
to pay for expenses of any registration proceeding begun pursuant to Sections
3.1 or 3.3, the request of which has been subsequently withdrawn by the
Holders, unless the withdrawal is based upon material adverse information
concerning the Company of which the Holders initiating the registration
request were not aware at the time of such request. If the Holders are
required to pay their Registration Expenses, such expenses shall be borne by
the holders of securities (including Registrable Securities) requesting such
registration in proportion to the number of shares for which registration was
requested.
3.5 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective and keep such registration
statement effective for up to ninety (90) days.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply
with the provisions of the Securities Act with respect to the disposition of
all securities covered by such registration statement.
(c) Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
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(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities
or Blue Sky laws of such jurisdictions as shall be reasonably requested by
the Holders, PROVIDED, THAT, the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter(s) of such offering. Each
Holder participating in such underwriting shall also enter into and perform
its obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by
such registration statement, at any time when a prospectus relating thereto
is required to be delivered under the Securities Act, of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary
to make the statements therein not misleading or incomplete in the light of
the circumstances then existing.
3.6 TERMINATION OF REGISTRATION RIGHTS. All registration rights
granted under this Section 3 shall terminate and be of no further force and
effect five (5) years after the Company has completed its Initial Offering.
In addition, the right of any Holder to request inclusion of Registrable
Securities in any registration pursuant to this Section 3 shall terminate (i)
twelve (12) months following the date on which all Registrable Securities
held by and issuable to such Holder (and its affiliates, partners and former
partners) may be sold under Rule 144 during any ninety (90) day period and
(ii) when the Company has completed its Initial Offering and is subject to
the provisions of the Exchange Act.
3.7 FURNISH INFORMATION.
(a) It shall be a condition precedent to the obligations of
the Company to take any action pursuant to this Section 3 that the selling
Holders shall furnish to the Company such information regarding themselves,
the Registrable Securities held by them and the intended method of
disposition of such securities as shall be required to effect the
registration of their Registrable Securities.
(b) The Company shall have no obligation with respect to any
registration requested pursuant to Section 3.1 or 3.3 if, due to the
operation of subsection 3.1(b), the anticipated aggregate offering price of
the Registrable Securities to be included in the registration does not equal
or exceed the number of shares or the anticipated aggregate offering price
required to originally trigger the Company's obligation to initiate such
registration as specified in Section 3.1 or 3.3, whichever is applicable.
3.8 DELAY OF REGISTRATION. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect
to the interpretation or implementation of this Section 3.
3.9 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to this Section 3 may be
assigned by a Holder to a transferee or
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assignee of Registrable Securities which (a) is a subsidiary, parent, general
partner, limited partner, retired partner, member, retired member, affiliate
or trust beneficiary of a Holder, (b) is a Holder's family member or trust
for the benefit of an individual Holder or (c) acquires at least sixty-six
thousand six hundred sixty-six (66,666) shares of Registrable Securities (as
adjusted for stock dividends, stock splits and combinations); PROVIDED,
HOWEVER, (A) the transferor shall, within ten (10) days after such transfer,
furnish to the Company written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned and (B) such transferee shall agree to
be subject to all restrictions set forth in this Agreement.
3.10 AMENDMENT OR WAIVER OF REGISTRATION RIGHTS. Any provision of
this Section 3 may be amended and the observance thereof may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and (a) the
holders of a majority of the Series B Shares and Series C Shares, taken
together, or share equivalents then outstanding with respect to Section 3.3
only, (b) the holders of a majority of the Series B Shares or share
equivalents then outstanding with respect to all other provisions of this
Section 3, and (c) the holders of a majority of the Stockholder Shares then
outstanding. Any amendment or waiver effected in accordance with this
Section 3.10 shall be binding upon each Holder and the Company. By
acceptance of any benefits under this Agreement, Holders of Registrable
Securities hereby agree to be bound by the provisions hereunder.
3.11 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. After the date
of this Agreement, the Company shall not, without the prior written consent
of the holders of at least fifty-one percent (51%) of the Series B Shares or
share equivalents then outstanding, enter into any agreement with any holder
or prospective holder of any securities of the Company that would grant such
holder registration rights senior (as to time of exercise, includability in
any underwritten offering in connection with an underwriters' cutback or in
any other respect) to those granted to the Holders hereunder.
3.12 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under Sections 3.1, 3.2 or 3.3:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, the partners, officers, directors
and legal counsel of each Holder, any underwriter (as defined in the
Securities Act) for such Holder and each person, if any, who controls such
Holder or underwriter within the meaning of the Securities Act or the
Exchange Act, against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the Securities Act, the
Exchange Act or other federal or state law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations
(collectively a "VIOLATION") by the Company: (i) any untrue statement or
alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or
alleged omission to state therein a material fact required to be stated
therein, or necessary to make the statements therein not misleading, or (iii)
any violation or alleged violation by the Company of the Securities Act, the
Exchange Act, any state securities law or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any state securities law in
connection
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with the offering covered by such registration statement; and the Company
will reimburse each such Holder, partner, officer or director, underwriter or
controlling person for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
damage, liability or action; PROVIDED, HOWEVER, that the Company shall not be
liable in any such case for any such loss, claim, damage, liability or action
to the extent that it arises out of or is based upon a Violation which occurs
in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by such Holder,
partner, officer, director, underwriter or controlling person of such Holder.
(b) To the extent permitted by law, each Holder will, if
Registrable Securities held by such Holder are included in the securities as
to which such registration qualifications or compliance is being effected,
indemnify and hold harmless the Company, each of its directors, its officers,
and legal counsel and each person, if any, who controls the Company within
the meaning of the Securities Act, any underwriter and any other Holder
selling securities under such registration statement or any of such other
Holder's partners, directors or officers or any person who controls such
Holder, against any losses, claims, damages or liabilities (joint or several)
to which the Company or any such director, officer, controlling person,
underwriter or other such Holder, or partner, director, officer or
controlling person of such other Holder may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as
such losses, claims, damages or liabilities (or actions in respect thereto)
arise out of or are based upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by such Holder under an
instrument duly executed by such Holder and stated to be specifically for use
in connection with such registration; and each such Holder will reimburse any
legal or other expenses reasonably incurred by the Company or any such
director, officer, controlling person, underwriter or other Holder, or
partner, officer, director or controlling person of such other Holder in
connection with investigating or defending any such loss, claim, damage,
liability or action if it is judicially determined that there was such a
Violation; PROVIDED, HOWEVER, that the indemnity agreement contained in this
Section 3.12(b) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld; provided further, that in no event shall any indemnity under this
Section 3.12(b) exceed the net proceeds from the offering received by such
Holder.
(c) Promptly after receipt by an indemnified party under
this Section 3.12 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 3.12,
deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate in,
and, to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party; PROVIDED, HOWEVER,
that an indemnified party shall have the right to retain its own counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or reasonably likely
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if
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materially prejudicial to its ability to defend such action, shall relieve
such indemnifying party to the extent of any liability to the indemnified
party under this Section 3.12 caused by such failure, but the omission to so
deliver written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under this
Section 3.12.
(d) If the indemnification provided for in this Section 3.12
is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any losses, claims, damages or liabilities
referred to herein, the indemnifying party, in lieu of indemnifying such
indemnified party thereunder, shall to the extent permitted by applicable law
contribute to the amount paid or payable by such indemnified party as a
result of such loss, claim, damage or liability in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the
one hand and of the indemnified party on the other in connection with the
Violation(s) that resulted in such loss, claim, damage or liability, as well
as any other relevant equitable considerations. The relative fault of the
indemnifying party and of the indemnified party shall be determined by a
court of law by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the indemnifying party or by
the indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission;
PROVIDED, THAT, in no event shall any contribution by a Holder hereunder
exceed the proceeds from the offering received by such Holder.
(e) The obligations of the Company and Holders under this
Section 3.12 shall survive completion of any offering of Registrable
Securities in a registration statement. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of
each Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation.
3.13 RULE 144 REPORTING. With a view to making available to the
Holders the benefits of certain rules and regulations of the SEC which may
permit the sale of the Registrable Securities to the public without
registration, the Company agrees to use its best efforts to:
(a) Make and keep public information available, as those
terms are understood and defined in SEC Rule 144 or any similar or analogous
rule promulgated under the Securities Act, at all times after the effective
date of the first registration under the Securities Act filed by the Company
for an offering of its securities to the general public.
(b) File with the SEC, in a timely manner, all reports and
other documents required of the Company under the Securities Act and the
Exchange Act;
(c) So long as a Holder owns any Registrable Securities,
furnish to such Holder forthwith upon request: a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144
of the Securities Act, and of the Exchange Act (at any time after it has
become subject to such reporting requirements); a copy of the most recent
annual or quarterly report of the Company; and such other reports and
documents as a Holder may reasonably request in availing itself of any rule
or regulation of the SEC allowing it to sell any such securities without
registration.
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4. COVENANTS OF THE COMPANY
4.1 BASIC FINANCIAL INFORMATION AND REPORTING.
(a) The Company will maintain true books and records of
account in which full and correct entries will be made of all its business
transactions pursuant to a system of accounting established and administered
in accordance with generally accepted accounting principles consistently
applied, and will set aside on its books all such proper accruals and
reserves as shall be required under generally accepted accounting principles
consistently applied.
(b) So long as a holder of Series A Shares, Series B Shares
or Series C Shares (with its affiliates) shall own not less than sixty-six
thousand six hundred sixty-six (66,666) shares of Registrable Securities (as
adjusted for stock dividends, stock splits and combinations) (a "MAJOR
INVESTOR"), as soon as practicable after the end of each fiscal year of the
Company, and in any event within ninety (90) days thereafter, the Company
will furnish each such Major Investor and each Founder an audited
consolidated balance sheet of the Company, as at the end of such fiscal year,
an audited consolidated statement of income and an audited consolidated
statement of cash flows of the Company, for such year, all prepared in
accordance with generally accepted accounting principles and setting forth in
each case, in comparative form, the figures for the previous fiscal year, all
in reasonable detail.
(c) The Company will furnish each Major Investor and each
Founder, as soon as practicable after the end of the first, second and third
quarterly accounting periods in each fiscal year of the Company, and in any
event within forty-five (45) days thereafter, an unaudited consolidated
balance sheet of the Company as of the end of each such quarterly period, an
unaudited consolidated statement of income and an unaudited consolidated
statement of cash flows of the Company for such period and for the current
fiscal year to date, prepared in accordance with generally accepted
accounting principles, with the exception that no notes need be attached to
such statements and year-end audit adjustments may not have been made.
Additionally, the Company will furnish each Series B Holder, as soon as
practicable after the end of the first, second and third quarterly accounting
periods in each fiscal year of the Company, and in any event within thirty
(30) days thereafter, (i) a letter from the Company's management discussing
the revenues and operations of the Company in each such period and (ii) a
compliance certificate, executed by the President or Chief Executive Officer
of the Company, to the effect that the Company has complied with the
covenants set forth in this Section 4.1 in each such period.
(d) The Company will furnish each Series B Holder, as soon
as practicable after the end of each month, and in any event within thirty
(30) days thereafter, an unaudited consolidated balance sheet of the Company
as of the end of each such month and an unaudited consolidated statement of
income and an unaudited consolidated statement of cash flows of the Company
for such month and for the current fiscal year to date, prepared in
accordance with generally accepted accounting principles, with the exception
that no notes need be attached to such statements and year-end audit
adjustments may not have been made.
(e) The Company will furnish each member of the Board of
Directors with (i) the information set forth in Sections 4.1(b)-(d) above at
the time it is distributed to the Major
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Investors and Founders, (ii) copies of all filings with the SEC, (iii)
information as to any pending material litigation and any material default
under any material agreement of the Company, (iv) copies of management
letters of accountants and, (v) within thirty (30) days after the beginning
of each fiscal year, an annual budget for such fiscal year.
(f) Each Series B Holder is hereby authorized to deliver a
copy of any financial statement delivered to it pursuant to this Section 4.1
to any regulatory body having jurisdiction over it which requests such
information.
4.2 INSPECTION RIGHTS. Each Major Investor and Founder shall have
the right to visit and inspect any of the properties of the Company or any of
its subsidiaries, and to discuss the affairs, finances and accounts of the
Company or any of its subsidiaries with its officers and to review such
information as is reasonably requested all at such reasonable times and as
often as may be reasonably requested; PROVIDED, HOWEVER, that the Company
shall not be obligated under this Section 4.2 with respect to a competitor of
the Company or with respect to information which the Board of Directors
determines in good faith is confidential and should not, therefore, be
disclosed.
4.3 CONFIDENTIALITY OF RECORDS. Each Investor agrees to use, and
to use its best efforts to insure that its authorized representatives uses,
the same degree of care as such Investor uses to protect its own confidential
information to keep confidential any information furnished to it which the
Company identifies as being confidential or proprietary (so long as such
information is not in the public domain), except that such Investor may
disclose such proprietary or confidential information to any partner,
subsidiary or parent of such Investor for the purpose of evaluating its
investment in the Company as long as such partner, subsidiary or parent is
advised of the confidentiality provisions of this Section 4.3.
4.4 RESERVATION OF COMMON STOCK. The Company will at all times
reserve and keep available, solely for issuance and delivery upon the
conversion of the Series B Stock and Series C Stock, all Common Stock
issuable from time to time upon such conversion.
4.5 SEC COMPLIANCE. During any time that the Company is subject to
the reporting requirements of the Exchange Act, the Company shall timely file
all required reports pursuant to the Exchange Act. Additionally, the Company
shall make available to Investors the information contemplated by Rule 144A.
At such time that any stock held by an Investor is eligible for transfer
pursuant to Rule 144(k), the Company shall, upon the request of such
Investor, remove any restrictive legend from the applicable stock certificate
at no cost to such Investor.
4.6 MEETINGS OF THE BOARD OF DIRECTORS. The Board of Directors
shall meet as often as is necessary to review the operating results and
developments of the Company, but, in any case, not less than quarterly.
4.7 COMMITTEES. The Company agrees to maintain audit and
compensation committees with such duties and powers as are customarily
performed by such committees. Both committees shall include a representative
of each of Crest Communications Partners LP, CEA Capital Partners USA, L.P.
and Mayfield X, L.P.
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4.8 CORPORATE EXISTENCE, LICENSES AND PERMITS; MAINTENANCE OF
PROPERTIES. So long as any Holder shall hold any Series B Shares, the
Company will at all times use commercially reasonable efforts to do or cause
to be done all things necessary to maintain, preserve and renew its existence
as a corporation organized under the laws of a state of the U.S., preserve
and keep in force and effect, and cause any subsidiary to apply for on a
timely basis, preserve and keep in force and effect, all licenses and permits
necessary and material to the conduct of the business of the Company and any
consolidated subsidiary, taken as a whole, and to maintain and keep, and
cause any subsidiary to maintain and keep, its and their respective
properties in good repair, working order and condition (except for normal
wear and tear), and from time to time to make all needful and proper repairs,
renewals and replacements, including, without limitation, all trade name and
trademark registration renewals, in each case so that any business material
to the Company carried on in connection therewith may be properly and
advantageously conducted.
4.9 BOARD OF DIRECTORS APPROVAL. The Company shall not, without
the approval of a majority of the Board of Directors, including at least two
(2) representatives of the holders of the Series B Stock, take any of the
following actions:
(a) incur, refinance, guarantee or assume any indebtedness
other than (i) in the ordinary course of business, PROVIDED, THAT, any such
indebtedness does not exceed $500,000 in the aggregate at any one time and
(ii) drawdowns under existing credit facilities consistent with the terms of
the budget presented to the Board of Directors pursuant to Section 4.1(e)(v)
above;
(b) terminate any member of the Company's existing senior
management team (consisting of Leonard Allsup, Bruce Dines and Brian Gast) or
approve or alter the compensation paid to any member of the Company's
existing senior management team except such changes in benefits as may be
consistent with changes made in the Company's standard benefit plans;
(c) enter into any new line of business;
(d) enter or agree to enter into any contract or other
agreement which involves obligations of the Company in excess of $500,000;
(e) acquire or dispose of, in one or a series of
transactions within a twelve (12) months period, assets having a fair market
value in excess of $500,000 or which involve the payment to or by the Company
of consideration in excess of $500,000 (including assumption of
indebtedness), other than capital expenditures consistent with the terms of
the budget presented to the Board of Directors pursuant to Section 4.1(e)(v)
above;
(f) enter into, amend, modify, terminate or waive any
material provision of any agreement involving obligations of the Company in
excess of $500,000;
(g) adopt, amend, modify or terminate any employee benefit
plan or collective bargaining agreement or contract with any union that will,
in the aggregate, materially increase the cost of such plan or arrangement
relative to the Company's existing arrangements;
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(h) initiate any litigation, or undertake any course of
defense, in connection with any litigation brought against the Company or any
of its subsidiaries, or settle any claim, litigation or insurance claim in an
amount in excess of $500,000;
(i) enter into any transaction with an affiliate of the
Company unless approved by a majority of the disinterested directors of the
Company's Board of Directors; or
(j) engage or dismiss the existing primary auditors or
existing principal corporate legal counsel of the Company or any of its
subsidiaries.
4.10 SBIC REGULATORY PROVISIONS.
(a) The Company shall notify each Series B Holder and Series
C Holder who is a Small Business Investment Company (an "SBIC HOLDER") as
soon as practicable prior to taking any action after which the number of
record holders of the Company's voting stock would be increased from fewer
than fifty (50) to fifty (50) or more, and the Company shall notify each SBIC
Holder of any other action or occurrence after which the number of record
holders of the Company's voting stock was increased (or would increase) from
fewer than fifty (50) to fifty (50) or more, as soon as practicable after the
Company becomes aware that such other action or occurrence has occurred or is
proposed to occur.
(b) At the request of any SBIC Holder, following the Closing
(as defined in the Purchase Agreement), the Company shall provide each such
SBIC Holder with a written statement certified by the Company's president,
chief executive officer or chief financial officer describing in reasonable
detail the use of the proceeds from the sale of Series B Stock or Series C
Stock, as applicable. In addition to any other rights granted hereunder, the
Company shall grant such SBIC Holder and the United States Small Business
Administration ("SBA") access to the Company's records solely for the purpose
of verifying the use of such proceeds.
(c) At the request of any SBIC Holder, after the end of each
fiscal year, the Company shall deliver to each such SBIC Holder a written
assessment of the economic impact of the SBIC Holder's investment in the
Company, specifying the full-time equivalent jobs created or retained in
connection with the investment, the impact of the investment on the
businesses of the Company in terms of expanded revenue and taxes and other
economic benefits resulting from the investment (including, but not limited
to, technology development or commercialization, minority business
development, urban or rural business development and expansion of exports).
4.11 BOARD OBSERVER.
ABN AMRO, Inc. ("ABN AMRO") shall be entitled to have one (1)
observer (the "NON-VOTING OBSERVER") selected by ABN AMRO present at all
meetings of the Company's Board of Directors. Such Non-Voting Observer shall
have the same access to information concerning the business and operations of
the Company and at the same time as the directors of the Company and shall be
entitled to participate in discussions and consult with, and make proposals
and furnish advice to, the Board of Directors, without voting; PROVIDED,
HOWEVER, that the Board of Directors shall be under no obligation to take any
action with respect to any proposals made or advice furnished by such
Non-Voting Observer; and PROVIDED, FURTHER, that
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the provisions of this Section 4.11(a) shall terminate at such time that ABN
AMRO no longer holds at least fifty percent (50%) of the shares of Series B
Stock it holds on the date hereof.
4.12 QUALIFIED SMALL BUSINESS. For so long as the Series C Shares
or the shares issuable upon conversion of the Series C Shares ("Conversion
Shares") are held by a Series C Holder (or a transferee in whose hands such
Series C Shares or Conversion Shares are eligible to qualify as "qualified
small business stock") as defined in Section 1202(c) of the Code, the Company
will use reasonable efforts to comply with the reporting and recordkeeping
requirements of Section 1202 of the Code, any regulations promulgated
thereunder and any similar state laws and regulations. The Company covenants
and agrees, on the reasonable request of any Series C Holder, to conduct a
reasonable investigation into the question of whether the Series C Shares or
Conversion Shares are "qualified small business stock" within the meaning of
the Code, and to thereafter deliver to such Series C Holder a duly executed
Certificate of Representations in the form attached hereto as EXHIBIT B (the
"QSBS Certificate"). If the Company is unable to deliver an executed QSBS
Certificate because representation statement 2 in the QSBS Certificate is
inaccurate, the Company covenants and agrees to deliver a statement
explaining the reasons for such inaccuracy.
4.13 TERMINATION OF COVENANTS. All covenants of the Company
contained in Section 4 of this Agreement, other than those contained in
Sections 4.4 and 4.5, shall expire and terminate as to each Investor on the
effective date of the registration statement pertaining to a Qualified
Offering and may be waived by any individual Investor as to such Investor at
any time in its sole discretion.
5. PREEMPTIVE RIGHTS
5.1 SUBSEQUENT OFFERINGS. Each Major Investor shall have a
preemptive right to purchase up to eighty percent (80%) of its pro rata share
of all Equity Securities that the Company may, from time to time, propose to
sell and issue after the date of this Agreement, other than the Equity
Securities excluded by Section 5.6 hereof. Each Major Investor's pro rata
share is equal to the ratio of (A) the number of shares of the Company's
Common Stock (including all shares of Common Stock issued or issuable upon
conversion of the Shares) of which such Major Investor is deemed to be a
holder immediately prior to the issuance of such Equity Securities to (B) the
total number of shares of the Company's outstanding Common Stock on a
fully-diluted basis (including all shares of Common Stock issued or issuable
upon the conversion of options, warrants or convertible securities or issued
or then issuable upon the exercise of options or warrants) immediately prior
to the issuance of the Equity Securities.
5.2 EXERCISE OF RIGHTS. If the Company proposes to issue any
Equity Securities, it shall give each Major Investor written notice of its
intention, describing the Equity Securities, the price and the terms and
conditions upon which the Company proposes to issue the same. Each Major
Investor shall have fifteen (15) days from the giving of such notice to agree
to purchase its eighty percent (80%) pro rata share of the Equity Securities
for the price and upon the terms and conditions specified in the notice by
giving written notice to the Company and stating therein the quantity of
Equity Securities to be purchased. Notwithstanding the foregoing, the Company
shall not be required to offer or sell such Equity Securities to any Major
Investor who would
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cause the Company to be in violation of applicable federal securities laws by
virtue of such offer or sale.
5.3 ISSUANCE OF EQUITY SECURITIES TO MAJOR INVESTORS. If not all
of the Major Investors elect to purchase eighty percent (80%) of their pro
rata share of the Equity Securities, then the Company shall promptly notify
in writing the Major Investors who do so elect and shall offer such Major
Investors the right to acquire such unsubscribed shares. The Major Investors
shall have five (5) days after receipt of such notice to notify the Company
of its election to purchase all or a portion thereof of the unsubscribed
shares. If the Major Investors fail to exercise in full their preemptive
rights, the Company shall have ninety (90) days thereafter to sell the Equity
Securities in respect of which the Major Investors' rights were not
exercised, at a price and upon general terms and conditions materially no
more favorable to the purchasers thereof than specified in the Company's
notice to the Major Investors pursuant to Section 5.2 hereof. If the Company
has not sold such Equity Securities within one hundred ten (110) days of the
notice provided pursuant to Section 5.2, the Company shall not thereafter
issue or sell any Equity Securities, without first offering such securities
to the Major Investors in the manner provided above.
5.4 TERMINATION OF PREEMPTIVE RIGHTS. The preemptive rights
established by this Section 5 shall not apply to, and shall terminate upon,
the effective date of the registration statement pertaining to a Qualified
Public Offering.
5.5 TRANSFER OF PREEMPTIVE RIGHTS. The preemptive rights of each
Major Investor under this Section 5 may be transferred to the same parties,
subject to the same restrictions, as any transfer of registration rights
pursuant to Section 3.9.
5.6 EXCLUDED SECURITIES. The preemptive rights established by this
Section 5 shall have no application to any of the following Equity Securities:
(a) shares of Common Stock (and/or options, warrants or
other Common Stock purchase rights issued pursuant to such options, warrants
or other rights) (as adjusted for stock splits, recapitalizations and the
like) issued or to be issued to employees, officers or directors of, or
consultants or advisors to the Company or any subsidiary, pursuant to stock
purchase or stock option plans or other arrangements that are approved by the
Board of Directors;
(b) stock issued pursuant to any rights, agreements,
options, warrants and convertible promissory notes outstanding as of the date
of this Agreement and referenced in the schedule of exceptions (Schedule 3.3)
to the Purchase Agreement; and stock issued pursuant to any such rights or
agreements granted after the date of this Agreement, PROVIDED, THAT, the
preemptive rights established by this Section 5 applied with respect to the
initial sale or grant by the Company of such rights or agreements;
(c) any Equity Securities issued for consideration other
than cash pursuant to a merger, consolidation, acquisition or similar
business combination approved by the Board of Directors;
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(d) shares of Common Stock issued in connection with any
stock split, stock dividend or recapitalization by the Company;
(e) shares of Common Stock issued upon conversion of the
Shares;
(f) any Equity Securities that are issued by the Company
pursuant to a registration statement filed under the Securities Act; and
(g) shares of capital stock, or other securities, or
warrants, rights, options or other convertible securities, issued in any
transaction in which the price per share of Common Stock equivalents is not
less than the then-effective Series C Conversion Price, PROVIDED, THAT, the
value of shares issued do not exceed $500,000 with respect to any one
transaction and $1,500,000 in the aggregate.
6. RIGHT OF FIRST REFUSAL ON FOUNDER TRANSFERS
6.1 RIGHT OF FIRST REFUSAL ON FOUNDER TRANSFERS. No Founder shall
sell, assign, pledge, or in any manner transfer any of the Shares of the
Company held by such Founder or any right or interest therein, whether
voluntarily or by operation of law, or by gift or otherwise, except by a
transfer which meets the requirements hereinafter set forth in this Section 6
and, if applicable, Section 9.
6.2 EXERCISE OF RIGHTS. If a Founder receives from anyone a bona
fide offer acceptable to such Investor to purchase any of his Shares, then
the Founder shall first deliver written notice (the "NOTICE") thereof to the
other Founders and the Series B Holders and the Company. The Notice shall
name the proposed transferee and state the price and quantity of the Equity
Securities to be transferred, as well as all other terms and conditions of
the offer.
6.3 ISSUANCE OF EQUITY SECURITIES TO THE NON-SELLING FOUNDERS. For
a period of fifteen (15) days following receipt of such Notice, the
non-selling Founders shall have the option to purchase all or a portion of
the Shares specified in the Notice at the price and upon the terms set forth
in such bona fide offer. In the event the non-selling Founders elect to
acquire any of the Shares of the selling Founder as specified in said selling
Founder's Notice, the purchasing Founders shall so notify the selling Founder
and settlement thereof shall be made in cash within fourteen (14) days
following receipt of said selling Founder's Notice; PROVIDED, THAT, if the
terms of payment set forth in said selling Founder's Notice were other than
cash against delivery, the purchasing Founder shall pay for said Shares on
the same terms and conditions set forth in said selling Founder's Notice.
6.4 ISSUANCE OF EQUITY SECURITIES TO THE SERIES B HOLDERS. In the
event the non-selling Founders do not elect to acquire all of the Shares
specified in the selling Founder's Notice, the selling Founder shall promptly
notify the Series B Holders of the number of Shares available for purchase by
the Series B Holders and the Series B Holders shall have the right,
exercisable upon written notice to the selling Founder within thirty (30)
days following receipt of the notice described in this Section 6.4, to
purchase all or any portion of the Shares (less any purchased by the
non-selling Founders pursuant to Section 6.3 above) on the terms and
conditions specified in the Notice. Settlement for any Shares purchased,
pursuant to this Section 6.4 shall be made in cash within forty-five (45)
days following receipt of the Notice
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described in this Section 6.4, PROVIDED, THAT, if the terms of payment set
forth in the selling Founder's Notice were other than cash against delivery
the Company shall pay for said Shares on the same terms and conditions set
forth in the Notice.
6.5 ISSUANCE OF EQUITY SECURITIES TO THE COMPANY. In the event
the non-selling Founders and the Series B Holders do not elect to acquire all
of the Shares specified in the selling Founder's Notice, the selling Founder
shall promptly notify the Company of the number of Shares available for
purchase by the Company and the Company shall have the right, exercisable
upon written notice to the selling Founder within forty-five (45) days
following receipt of the original Notice described in Section 6.2 above, to
purchase all or any portion of the Shares (less any purchased by the
non-selling Founders pursuant to Section 6.3 above and the Series B Holders
pursuant to Section 6.4 above) on the terms and conditions specified in the
Notice. Settlement for any Shares purchased, pursuant to this Section 6.5
shall be made in cash within sixty (60) days following receipt of the
original Notice described in Section 6.2 above, PROVIDED, THAT, if the terms
of payment set forth in the selling Founder's Notice were other than cash
against delivery the Company shall pay for said Shares on the same terms and
conditions set forth in the Notice.
6.6 NO PARTICIPATION. Subject to the provisions of Section 10
below, in the event that neither the non-selling Founders nor the Series B
Holders nor the Company elect to acquire all of the Shares specified in the
selling Founder's Notice, said selling Founder may, within the sixty (60) day
period following the expiration of the option rights granted to the Company,
sell elsewhere the Shares specified in said selling Founder's Notice which
were not acquired, in accordance with the provisions of this Section 6,
PROVIDED, THAT, said sale shall not be on terms and conditions more favorable
to the purchaser than those contained in the bona fide offer set forth in
said selling Founder's Notice; PROVIDED FURTHER, that said sale shall not be
to a competitor of the Company as determined in good faith by the Board of
Directors; and, PROVIDED FURTHER, HOWEVER, that the transferee of such Shares
shall become a party to this Agreement as if an Investor hereunder.
6.7 TERMINATION OF RIGHT OF FIRST REFUSAL. The right of first
refusal established by this Section 6 shall not apply to, and shall terminate
upon, the Company's consummation of an Initial Offering.
6.8 EXEMPT SECURITIES. The right of first refusal established by
this Section 6 shall not apply to (a) any transfer or transfers by any
Stockholder which, in the aggregate, over the term of this Agreement, amount
to no more than one hundred thousand (100,000) Shares (as adjusted for stock
splits, stock dividends and the like) held by such stockholder, (b) any
pledge of Shares made pursuant to a bona fide loan transaction with a
financial institution that creates a mere security interest or to the
foreclosure of such pledge, (c) any transfer to the ancestors, descendants or
spouse or to trusts, limited partnerships or limited liabilities companies
established for the benefit of such persons or the selling stockholder, or
(d) any bona fide gift (those items set forth in (a), (b), (c) and (d) above,
the "EXEMPT SECURITIES"); PROVIDED, THAT, in the event of any pledge or
transfer of Exempt Securities, the pledgee, transferee or donee shall furnish
the Company with a written agreement to be bound by and comply with all
provisions of this Agreement.
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7. RIGHT OF FIRST REFUSAL ON TRANSFERS BY SERIES A HOLDERS
7.1 RIGHT OF FIRST REFUSAL ON SERIES A TRANSFERS. No Series A
Holder shall sell, assign, pledge, or in any manner transfer any of the
Shares of the Company held by such Series A Holder or any right or interest
therein, whether voluntarily or by operation of law, or by gift or otherwise,
except by a transfer which meets the requirements hereinafter set forth in
this Section 7 and, if applicable, Section 9.
7.2 RIGHT OF FIRST REFUSAL ON TRANSFERS BY SERIES A HOLDERS. If
any Series A Holder proposes to sell or transfer any Shares, then such Series
A Holder shall promptly give written notice (the "SERIES A NOTICE")
simultaneously to the Company, to each of the non-selling Series A Holders
and the Series B Holders. The Series A Notice shall describe in reasonable
detail the proposed sale or transfer including, without limitation, the
number of Shares to be sold or transferred, the nature of such sale or
transfer, the consideration to be paid, and the name and address of each
prospective purchaser or transferee. In the event that the sale or transfer
is being made pursuant to the provisions of Sections 7.5 hereof, the Series A
Notice shall state under which section the sale or transfer is being made.
7.3 COMPANY'S RIGHT TO PURCHASE. For a period of fifteen (15) days
following receipt of any Series A Notice described in Section 7.2, the
Company shall have the right to purchase all or a portion of the Shares
subject to such Series A Notice on the same terms and conditions as set forth
therein. The Company's purchase right shall be exercised by written notice
signed by an officer of the Company and delivered to the selling Series A
Holder with a check for payment for the Shares being purchased.
7.4 SERIES A HOLDERS' RIGHT TO PURCHASE. If the Company does not
purchase all of the Shares available pursuant to its rights under Section 7.3
within the period set forth therein, each non-selling Series A Holder shall
then have the right, exercisable upon written notice to the selling Series A
Holder within thirty (30) days of the date of the original Series A Notice
described in Section 7.1, to purchase its pro rata share of the Shares
subject to the Notice (less shares purchased by the Company pursuant to
Section 7.3) on the same terms and conditions.
(a) Each non-selling Series A Holder may buy all or any part
of that number of shares equal to the product obtained by multiplying (x) the
aggregate number of shares of Shares covered by the Series A Notice (less
shares purchased by the Company pursuant to Section 7.3) by (y) a fraction
the numerator of which is the number of shares of Common Stock owned by the
non-selling Series A Holder (on an as-if-converted basis) at the time of the
sale or transfer and the denominator of which is the total number of shares
of Common Stock owned by all of the non-selling Series A Holders (on an
as-if-converted basis) at the time of the sale or transfer.
(b) If not all of the non-selling Series A Holders elect to
purchase their pro rata share of the Shares covered by the Series A Notice as
provided in Section 7.4(a) above, then the selling Series A Holder shall
promptly notify the non-selling Series A Holders who do so elect and shall
offer such non-selling Series A Holders the right to acquire such
unsubscribed shares. The non-selling Series A Holders who elect to
participate shall have five (5) days after
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receipt of such notice to notify the selling Series A Holder of its election
to purchase all or a portion thereof of the unsubscribed shares.
7.5 SERIES B HOLDERS' RIGHT TO PURCHASE. If the Series A Holders
do not purchase all of the Shares available pursuant to its rights under
Section 7.4 within the period set forth therein, each Series B Holder shall
then have the right, exercisable upon written notice to the selling Series A
Holder within forty-five (45) days of the date of the original Series A
Notice described in Section 7.2, to purchase its pro rata share of the Shares
subject to the Notice (less shares purchased by the Company pursuant to
Section 7.3 and the Series A Holders pursuant to Section 7.4) on the same
terms and conditions.
(a) Each Series B Holder may buy all or any part of that
number of shares equal to the product obtained by multiplying (x) the
aggregate number of shares of Shares covered by the Series A Notice (less
shares purchased by the Company pursuant to Section 7.3 and Series A Holders
pursuant to Section 7.4) by (y) a fraction the numerator of which is the
number of shares of Common Stock owned by the Series B Holder (on an
as-if-converted basis) at the time of the sale or transfer and the
denominator of which is the total number of shares of Common Stock owned by
all of the Series B Holders (on an as-if-converted basis) at the time of the
sale or transfer.
(b) If not all of the Series B Holders elect to purchase
their pro rata share of the Shares covered by the Series A Notice as provided
in Section 7.5(a) above, then the selling Series A Holder shall promptly
notify the Series B Holders who do so elect and shall offer such Series B
Holders the right to acquire such unsubscribed shares. The Series B Holders
who elect to participate shall have five (5) days after receipt of such
notice to notify the selling Series A Holders of its election to purchase all
or a portion thereof of the unsubscribed shares.
7.6 SALE OF SHARES. Subject to the provisions of Section 10 below,
should any Shares remain for sale to a third-party following the exercise or
expiration of the rights of purchase described in Sections 7.3, 7.4 and 7.5,
then the selling Series A Holder may, not later than ninety (90) days
following delivery to the Company of the Series A Notice, enter into an
agreement providing for the closing of the transfer of the Shares covered by
the Series A Notice (less shares purchased pursuant to Sections 7.3, 7.4 and
7.5) within thirty (30) days of such agreement on terms and conditions not
more favorable to the transferor than those described in the Series A Notice.
Any proposed transfer on terms and conditions more favorable than those
described in the Series A Notice, as well as any subsequent proposed transfer
of any of the Shares by the selling Investor, shall again be subject to the
purchase rights of the Company and the Series A Holders and shall require
compliance by the selling Series A Holder with the procedures described in
this Section 7.
7.7 TERMINATION OF RIGHT OF FIRST REFUSAL. The right of first
refusal established by this Section 7 shall not apply to, and shall terminate
upon, the Company's consummation of an Initial Offering.
7.8 EXEMPT TRANSFERS. The right of first refusal established by
this Section 7 shall not apply to the Exempt Securities; PROVIDED, THAT, in
the event of any pledge or transfer of
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Exempt Securities, the pledgee, transferee or donee shall furnish the Company
with a written agreement to be bound by and comply with all provisions of
this Agreement.
8. VOTING
8.1 VOTING. The Investors agree to hold all Shares subject to, and
to vote their Shares in accordance with, the provisions of this Agreement.
8.2 ELECTION OF DIRECTORS.
(a) At each election of directors in which the Series B
Holders, voting together as a separate class on an as-converted basis, are
entitled to elect directors of the Company pursuant to Article IV(E)(2)(d) of
the Company's Restated Certificate of Incorporation, the Series B Holders
shall vote their respective Shares so as to elect (i) one (1) person
designated by Crest Communications Partners LP and (ii) one (1) person
designated by CEA Capital Partners USA, L.P.
(b) At each election of directors in which the holders of
Common Stock, Series A Holders, Series B Holders and Series C Holders, voting
together as a separate class on an as-converted basis, are entitled to elect
directors of the Company pursuant to Article IV(E)(2)(d) of the Company's
Restated Certificate of Incorporation, the holders of Common Stock, Series A
Holders, Series B Holders and Series C Holders shall vote their respective
Shares so as to elect the following persons as directors: (i) the person
serving as Chief Executive Officer of the Company; (ii) one (1) person
designated by the person serving as Chief Executive Officer of the Company;
(iii) one (1) person designated by Mayfield X, L.P.; and (iv) one other
independent person as are nominated by the Company who is mutually acceptable
to the existing members of the Board of Directors.
8.3 VACANCIES. If any director is unable to serve, or once having
commenced to serve, is removed or withdrawn from the Board of Directors of
the Company, the party or parties who designated such directors will be
entitled to designate a person to fill the vacancy on the Board of Directors
of the Company so created and the holders of Common Stock, Series A Holders,
Series B Holders and Series C Holders shall vote their respective Shares to
fill the vacancy so created with the person so designated.
8.4 EXPENSES. The Company hereby agrees that the Company will pay
(a) all reasonable travel and other out-of-pocket expenses of the directors
designated by the Series B Holders, of any independent, non-employee
directors and any Non-Voting Observer and (b) such fees as are paid to
directors, severally, that are not employees of the Company or any of its
affiliates.
9. CO-SALE RIGHT.
9.1 SALES BY STOCKHOLDERS.
(a) If a Stockholder proposes to sell or transfer fifty
percent (50%) or more of the Stockholder Shares held by such Stockholder, as
calculated prior to the exercise by the Company, Series A Holders and Series
B Holders of their rights under Sections 6 and 7, as
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applicable, and the Company, Stockholders and Series B Holders should fail to
exercise their respective rights to purchase all the Stockholder Shares
described in the Notice or Series A Notice, as applicable, following the
exercise or expiration of the applicable rights of purchase described in
Sections 6.3, 6.4, 6.5, 7.2, 7.3, 7.4 and 7.5, then each Series B Holder
shall have the right, exercisable upon written notice to the selling
Stockholder within sixty (60) days after the date of the original Notice or
Series A Notice (described in Sections 6.2 and 7.1, respectively), as
applicable, to participate in such sale of Stockholder Shares on the same
terms and conditions. Such notice shall indicate the number of Series B
Shares such Series B Holder wishes to sell under his or her right to
participate. Subject to the provisions of subsection (c) below, to the
extent one or more of the Series B Holders exercise such right of
participation in accordance with the terms and conditions set forth below,
the number of Stockholder Shares that the selling Stockholder may sell in the
transaction shall be correspondingly reduced.
(b) Each electing Series B Holder (a "PARTICIPANT") may sell
all or any part of that number of Common Stock shares equal to the product
obtained by multiplying the aggregate number of Common Stock or Stockholder
Share equivalents covered by the Notice by a fraction the numerator of which
is the number of shares of Common Stock (on an as-converted basis) owned by
such Participant at the time of the sale or transfer and the denominator of
which is the total number of shares of Common Stock equivalents (on an
as-converted basis) owned by the selling Stockholder.
(c) Each Participant shall effect its participation in the
sale by promptly delivering to the selling Stockholder for transfer to the
prospective purchaser one or more certificates, properly endorsed for
transfer, which represent the type and number of shares of Common Stock or
Preferred Stock which such Participant elects to sell; PROVIDED, HOWEVER,
that if the prospective purchaser objects to the delivery of Preferred Stock
in lieu of Common Stock, such Participant shall convert such Preferred Stock
into Common Stock and deliver Common Stock. The Company agrees to make any
such conversion concurrent with the actual transfer of such shares to the
purchaser.
(d) The stock certificate or certificates that the
Participant delivers to the selling Stockholder pursuant to Section 10.1(c)
shall be transferred to the prospective purchaser in consummation of the sale
of the Common Stock or Preferred Stock pursuant to the terms and conditions
specified in the Notice or Series A Notice, as applicable, and the purchaser
or transferee shall concurrently therewith remit to such Participant that
portion of the sale proceeds to which such Participant is entitled by reason
of its participation in such sale. To the extent that any prospective
purchaser or purchasers prohibits such assignment or otherwise refuses to
purchase shares or other securities from a Participant exercising its rights
of co-sale hereunder, the selling Stockholder shall not sell to such
prospective purchaser or purchasers any Stockholder Shares unless and until,
simultaneously with such sale, the selling Stockholder shall purchase such
shares or other securities from such Participant on the same terms and
conditions specified in the Notice.
(e) In the event that the prospective purchaser(s)
purchase(s) fewer shares than set forth in the Notice, the shares sold by the
selling Stockholder and the Participants shall be reduced pro rata calculated
pursuant to Section 9.1(b), based on the number of shares they
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would have been entitled to sell had the purchaser(s) purchased all the
shares set forth in the Notice.
(f) The exercise or non-exercise of the rights of the
Participants hereunder to participate in one or more sales of Stockholder
Shares made by the Stockholder shall not adversely affect their rights to
participate in subsequent sales of Stockholder Shares subject to the terms of
this Agreement.
(g) Subject to the provisions of Section 9.1(a), should any
Stockholder Shares remain for sale to a third party following the exercise or
expiration of the rights of first refusal described in Sections 6.3, 6.4,
6.5, 7.3, 7.4 and 7.5, the selling Stockholder may, not later than ninety
(90) days following delivery of the Notice or Series A Notice, as applicable,
enter into an agreement providing for the closing of the transfer of the
Stockholder Shares covered by the Notice or Series A Notice, as applicable
(less shares purchased pursuant to Sections 6.3, 6.4, 6.5, 7.3, 7.4 and 7.5)
within thirty (30) days of such agreement on terms and conditions not more
favorable to the transferor than those described in the Notice or Series A
Notice, as applicable. Any proposed transfer on terms and conditions more
favorable than those specified in the Notice or Series A Notice, as
applicable, shall again be subject to the rights of first refusal and co-sale
rights described herein.
9.2 EXEMPT TRANSFERS. The co-sale rights established by this
Section 9 shall not apply to any transfer or transfers that comply with
Section 6.8 above.
9.3 TERMINATION OF CO-SALE RIGHTS. The co-sale rights established
by this Section 10 shall not apply to, and shall terminate upon, the
Company's consummation of an Initial Offering.
9.4 PROHIBITED TRANSFERS.
(a) In the event that any Stockholder should sell any
Stockholder Shares in contravention of the co-sale rights of each Series B
Holder under this Agreement (a "PROHIBITED TRANSFER"), each Series B Holder,
in addition to such other remedies as may be available at law, in equity or
hereunder, shall have the put option provided below, and the selling
Stockholder shall be bound by the applicable provisions of such option.
(b) In the event of a Prohibited Transfer, each Series B
Holder shall have the right to sell to the selling Stockholder the type and
number of shares of Common Stock or Preferred Stock equal to the number of
shares each Series B Holder would have been entitled to transfer to the
purchaser under Section 9.1(b) hereof had the Prohibited Transfer been
effected pursuant to and in compliance with the terms hereof. Such sale
shall be made on the following terms and conditions:
(i) The price per share at which the shares are to be
sold by the selling Series B Holder shall be equal to the price per share
paid by the purchaser to the selling Stockholder in such Prohibited Transfer.
The selling Stockholder shall also reimburse each Series B Holder for any
and all fees and expenses, including legal fees and expenses, incurred
pursuant to the exercise or the attempted exercise of the Series B Holder's
rights under Section 9.1 and this Section 9.4.
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(ii) Within one hundred twenty (120) business days
after the date on which a Series B Holder received notice of the Prohibited
Transfer or otherwise became aware of the Prohibited Transfer, such Series B
Holder shall, if exercising the option created hereby, deliver to the selling
Stockholder the certificate or certificates representing shares to be sold,
each certificate to be properly endorsed for transfer.
(iii) The selling Stockholder shall, upon receipt of
the certificate or certificates for the shares to be sold by a Series B
Holder, pursuant to this Section 9.4(b), pay the aggregate purchase price
therefor and the amount of reimbursable fees and expenses, as specified in
Section 9.4(b)(i), in cash or by other means acceptable to the Investor.
(iv) Notwithstanding the foregoing, any attempt by the
selling Stockholder to transfer Stockholder Shares in violation of Section
9.1 hereof shall be voidable at the option (which option must be exercised
within fifteen (15) business days after the date on which a Series B Holder
received notice of a Prohibited Transfer) of any Series B Holder if such
Series B Holder does not elect to exercise the put option set forth in this
Section 9.4, and the Company agrees it will not effect such a transfer nor
will it treat any alleged transferee as the holder of such shares without the
written consent of a majority in interest of the Series B Holders.
10. APPROVED SALE.
10.1 VOTING OF SHARES. The Investors each agree to vote their
respective Shares in accordance with the provisions of this Section 10.
10.2 DRAG-ALONG PROVISION. At any time following the first
anniversary of the date of this Agreement, (a) the holders of more than
seventy-five percent (75%) of the Series B Shares then outstanding and (b)
the holders of a majority of the outstanding capital stock of the Company
then outstanding (the "REQUISITE HOLDERS") shall have the option to compel a
sale of the Company or of all or substantially all of the Company's assets at
any time (a "DRAG-ALONG SALE"); PROVIDED, THAT, in the event that the holders
of Series B Shares constitute at least a majority of the outstanding capital
stock of the Company (on an as-converted basis) the provisions of Section
10.2(b) shall not apply. The Drag-Along Right established by this Section
10.2 shall not apply to, and shall terminate upon, the Company's consummation
of an Initial Offering.
10.3 FORCED SALE. The Company hereby covenants and agrees that, if
the Company has not effected a Qualified Public Offering or obtained the
Minimum Trading Requirement (as defined below) prior to the fourth
anniversary of the date of this Agreement, the Company shall use commercially
reasonable efforts, including retaining an appropriate investment bank
reasonably satisfactory to a majority in interest of the Series B Holders, to
identify a suitable purchaser of the Company to be effected by means of a
merger, consolidation or sale of stock or assets, auction or otherwise at
such time (a "FORCED SALE," and, together with a Drag-Along Sale, an
"APPROVED SALE"). As used herein, the "MINIMUM TRADING REQUIREMENT" shall be
obtained following an Initial Offering on the business day following the end
of a one hundred eighty (180) consecutive day period during which the average
closing price of the Company's Common Stock on each such day exceeded the
Threshold Price.
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10.4 NO OBJECTIONS. Each Investor agrees that in the event of an
Approved Sale, it shall consent to and raise no objections against the
Approved Sale, and if the Approved Sale is structured as (a) a merger or
consolidation of the Company, or a sale of all or substantially all of the
Company's assets, each such Holder shall waive any dissenters' rights,
appraisal rights or similar rights in connection with such merger,
consolidation or asset sale or (b) a sale of the stock of the Company, then
each such Investor shall agree to sell its respective Shares on the terms and
conditions approved by the Requisite Holders, PROVIDED, THAT, such terms do
not provide that the Series A Holders, Series B Holders or Series C Holders
would receive less than the amount that would be distributed to such Holders
in the event of a liquidation of the Company in accordance with the Company's
Restated Certification of Incorporation. The Investors shall each take all
necessary and desirable actions approved by the Requisite Holders, in
connection with the consummation of the Approved Sale, including the
execution of such agreements and such instruments and other actions
reasonably necessary to (a) provide the representations, warranties,
indemnities, covenants, conditions, non-compete agreements, escrow agreements
and other provisions and agreements relating to such Approved Sale and (b)
effectuate the allocation and distribution of the aggregate consideration
upon the Approved Sale.
11. MISCELLANEOUS
11.1 GOVERNING LAW. This Agreement shall be construed and enforced
in accordance with the laws of the State of Colorado without regard to its
conflict-of-laws rules; PROVIDED, THAT, the provisions of Section 8 shall be
governed by the laws of the State of Delaware.
11.2 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of Shares from time to time.
11.3 SEVERABILITY. In case any provision of the Agreement shall be
invalid, illegal, or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
11.4 SUBSEQUENT INVESTORS. No person or persons ("SUBSEQUENT
INVESTORS") shall acquire, either by purchase or otherwise any shares of
Series A Stock, Series B Stock or Series C Stock of the Company subsequent to
the date hereof, unless such Subsequent Investors shall become a party to
this Agreement and agree to be bound by the provisions hereof. Such
Subsequent Investors shall be considered "Investors" for all purposes hereof
and all shares of capital stock of the Company held by such Investors shall
be deemed to be "Shares" for all purposes hereof.
11.5 AMENDMENT AND WAIVER.
(a) Except as otherwise expressly provided, this Agreement
may be amended or modified only upon the written consent of the Company and
(i) the holders of a majority of the Series B Shares and Series C Shares or
share equivalents then outstanding and (ii) the holders of a majority of the
Stockholder Shares then outstanding. Notwithstanding the foregoing, the
29.
<PAGE>
right of a party to designate a member of the Board of Directors pursuant to
the provisions of Section 8.2 may not be amended without such party's consent
and the provisions of Sections 10.2 and 10.3 may not be amended without the
consent of the holders of a majority of the Series B Shares.
(b) Except as otherwise expressly provided, the obligations
of the Company and the rights of the Holders under this Agreement may be
waived only with the written consent of (i) the holders of a majority of the
Series B Shares and Series C Shares or share equivalents then outstanding and
(ii) the holders of a majority of the Stockholder Shares then outstanding.
Notwithstanding the foregoing, the right of any party to designate a member
of the Board of Directors pursuant to the provisions of Section 8.2 may not
be waived without such party's consent.
11.6 NOTICES, ETC. All notices required or permitted hereunder
shall be deemed effectively given: (i) upon personal delivery to the party
to be notified, (ii) when sent by confirmed telex or facsimile if sent during
normal business hours of the recipient; if not, then on the next business
day, (iii) upon receipt after having been sent by registered or certified
mail, return receipt requested, postage prepaid, or (iv) one (1) day after
deposit with a nationally recognized overnight courier, specifying next day
delivery, with written verification of receipt. All communications shall be
sent to the party to be notified at the address set forth on the signature
pages hereto or EXHIBIT A hereto or at such other address as such party may
designate by ten (10) days advance written notice to the other parties hereto.
11.7 ATTORNEYS' FEES. If legal action is brought to enforce or
interpret this Agreement, the prevailing party shall be entitled to recover
from the losing party all fees, costs and expenses of enforcing any rights of
such prevailing party under or with respect to this Agreement, including
without limitation, such reasonable fees and expenses of attorneys and
accountants, which shall include, without limitation, all fees, costs and
expenses of appeals.
11.8 INJUNCTIVE RELIEF. It is acknowledged that it will be
impossible to measure in money the damages that would be suffered if the
parties fail to comply with certain of the obligations imposed on them by
this Agreement and that, in the event of any such failure, an aggrieved
person will be irreparably damaged and will not have an adequate remedy at
law. Any such person shall, therefore, be entitled to injunctive relief
and/or specific performance to enforce such obligations, and if any action
should be brought in equity to enforce any of such provisions of this
Agreement, none of the parties hereto shall raise the defense that there is
an adequate remedy at law.
11.9 TITLES AND SUBTITLES. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
11.10 COMPLETE AGREEMENT. This Agreement constitutes the entire
agreement and supersedes all other prior and contemporaneous agreements and
undertakings, both written and oral, between the parties hereto with regard
to the subject matter hereof.
30.
<PAGE>
11.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
31.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth in the first paragraph hereof.
COMPANY: INVESTORS:
JATO COMMUNICATIONS CORP. /s/
-----------------------------------
Please Print Name of Investor
By: /s/ Brian E. Gast By:
-------------------------------- --------------------------------
Name: Brian E. Gast Name:
------------------------------ ------------------------------
Title: Chief Executive Officer Title
----------------------------- ------------------------------
INVESTORS' RIGHTS AGREEMENT
<PAGE>
EXHIBIT A
JATO COMMUNICATIONS CORP.
INVESTORS' RIGHTS AGREEMENT
FOUNDERS
NAME AND ADDRESS:
- -----------------
Leonard Allsup
1099 18th Street, Suite 700
Denver, CO 80202
Bruce E. Dines
1099 18th Street, Suite 700
Denver, CO 80202
Brian E. Gast
1099 18th Street, Suite 700
Denver, CO 80202
SERIES A HOLDERS
Leonard Allsup, as Custodian for Alexandra L. Allsup
1099 18th Street, Suite 700
Denver, CO 80202
Joe G. Allsup and Agnes A. Allsup
3708 East 85th Place
Tulsa, OK 74137
Mary Beazley
P.O. Box 62028
Colorado Springs, CO 80962
Andrew Bermingham
27 Gledhow Gardens
Number 6
London, England sw5oaz
Buck Blessing
1501 Wood Avenue
Colorado Springs, CO 80907
2.
<PAGE>
Edward Brokaw
c/o BT Alex. Brown
P.O. Box 2612
Greenwich, CT 06836
Charles Callaway
1616 17th Street, Suite 600
Denver, CO 80202
First Trust Corporation FBO TTEE, Randall A. Carter, acct. #x204622-0001
332 Vine Street
Denver, CO 80206
William R. Cullen
5 Diamonte Lane
Palos Verdes, CA 90275
Bruce E. Dines
2552 E. Alameda Street #23
Denver, CO 80209
Dorothy Dines
2552 E. Alameda Street #23
Denver, CO 80209
Aaron E. Gast
878 Jefferson Way
West Chester, PA 19380
Beverly S. Gast
9233 Germantown Avenue
Philadelphia, PA 19118
Gregory & Nancy Gast
1011 Hawthorne Lane
Fort Washington, PA 19034
Edverna Gilbert
6910 Sandalwood Dr.
Broomfield, MI 48301
Gilbert Family Trust
1211 Whispering Oaks Drive
Danville, CA 94506
3.
<PAGE>
Trustee F.B.O. FWD Corporation Savings & Profit Sharing Trust,
James M. Green, Segregated Account
c/o - James P. Cooney, President
Pension Inc., Trustee
136 N. Maple Avenue
Green Bay, WI 54303
COPY OF ANY CORRESPONDENCE TO :
James M. Green, Segregated Account
W8397 Cloverleaf Lake Road
Clintonville, WI 54929
Ian C. and Susan D. Griffis
3519 E. Palmer Divide Road
Larkspur, CO 80118
Robert J. Grubb
7259 Longview Drive
Niwot, CO 80503
David and Brenda Hebble
11375 E. Berry Drive
Englewood, CO 80111
Michael D. Johnson
1185 River Road
Sunshine, LA 70780
Trustee F.B.O. FWD Corporation Savings & Profit Sharing Trust,
Joseph L. Kaufmann, Segregated Account
c/o - James P. Cooney, President
Pension Inc., Trustee
136 N. Maple Avenue
Green Bay, WI 54303
COPY OF ANY CORRESPONDENCE TO:
Joseph L. Kaufmann, Segregated Account
N2541 Lakeshore Drive
Bonduel, WI 54107
Gerard A. Maglio
5640 S. Bellaire Court
Greenwood Village, CO 80121
4.
<PAGE>
Louise A. McConnell and Jerry McConnell
8703 East 62nd Place
Tulsa, OK 74133
David Miller
680 West Sam Houston Parkway South #3104
Houston, TX 77042
Pamela Murdock
809 Illinois Street
Golden, CO 80401
Charles O'Brien
2011 Sunnydale Road
Pittsburgh, PA 15243
John M. and Cindy K. O'Brien
9706 West 128th Terr
Overland Park, KS 66213
Lisa Pheil
213 W. Moreland Road
Hatboro, PA 19040
Jerome C. Ramsey
506 Providence Drive
Castle Rock, CO 80104
William Seybold
Retirement Accounts & Co.
FBO William R. Seybold
P.O. Box 173785
Denver, CO 80217-3785
Brent D. Smith
6649 88th Place
Tulsa, OK 74133
Larry D. Smith and Marcella M. Smith
6649 East 88th Place
Tulsa, OK 74133
Edward H. Snowden
1 Stevens Road
Marblehead, MA 01945
5.
<PAGE>
Somes Ventures, LLC
P.O. Box 1981
Avon, CO 81620
John W. Street
P.O. Box 62028
Colorado Springs, CO 80962
Winterscheidt & Villiotti PC Profit Sharing Plan and Trust
5613 DTC Parkway, Suite 850
Greenwood Village, CO 80111
Hildreth Wold
920 South Beech Street
Casper, WY 82601
George F. Wood
959 S. Williams Street
Denver, CO 80209
SERIES B HOLDERS
Crest Communications Partners L.P.
320 Park Avenue
17th Floor
New York, NY 10022
Attn: Gregg Mockenhaupt
CEA Capital Partners USA, L.P.
17 State Street
35th Floor
New York, NY 10004
Attn: Steve McCall
CEA Capital Partners USA
CI, L.P.
17 State Street
35th Floor
New York, NY 10004
Attn: Steve McCall
6.
<PAGE>
ABN AMRO Capital (USA), Inc.
208 S. LaSalle Street
10th Floor
Chicago, IL 60604
Attn: Daniel Forman
I Eagle Trust
208 S. LaSalle Street
10th Floor
Chicago, IL 60604
Attn: Daniel Forman
ABN AMRO Incorporated
208 S. LaSalle Street
10th Floor
Chicago, IL 60604
Attn: Daniel Forman
Access Technology Partners, L.P.
Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
Attn: Alex Sloan
Access Technology Partners Brokers Fund, L.P.
Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
Attn: Alex Sloan
Hambrecht & Quist California
One Bush Street
San Francisco, CA 94104
Attn: Alex Sloan
Hambrecht & Quist Employee Venture Fund, L.P. II
One Bush Street
San Francisco, CA 94104
Attn: Alex Sloan
7.
<PAGE>
H&Q Jato Communications
Investors, L.P.
Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
John P. Raeder, Jr. and Deborah M. Raeder, as Joint Tenants
5625 S. Bellaire Ct.
Greenwood Village, CO 80121
Gilbert Family Trust
1211 Whispering Oaks
Danville, CA 94506
Attn: Dean Gilbert
Jeffrey D. Morgan
2883 Lee Hill Road
Boulder, CO 80302
Karin W. Morgan
2883 Lee Hill Road
Boulder, CO 80302
Marty S. Clayman
2401 Shady Oak Place
Lexington, KY 40515
Robert J. Grubb
7259 Longview Drive
Niwot, CO 80503
Richard K. Coleman, Jr.
22 Viking Drive
Englewood, CO 80110
8.
<PAGE>
GC&H Investments
C/o Cooley Godward LLP
One Maritime Plaza
20th Floor
San Francisco, CA 94111
Attn: John Cardoza
Michael S. Grunwald
C/o Lehman Brothers
555 California Street
30th Floor
San Francisco, CA 94104
Mark T. Stolte
22595 Treetop Lane
Golden, CO 80401
Seybold Brothers Investments
4075 Hermitage Road
Colorado Springs, CO 80906
Attn: William Seybold
Leonard Allsup
1720 Wyncoop
Unit 203
Denver, CO 80202-1077
William J.B. Brady III
Credit Suisse First Boston
2400 Hanover Street
Palo Alto, CA 94304
Stephen S. Hyde and Lorreen L.
George, joint tenants w/right of
survivorship
31 Broadmoor Avenue
Colorado Springs, CO 80906
Frank P. Quattrone and
Denise Foderavo, Trustees
Quattrone Family Trust UTA DTD 9/14/91
Credit Suisse First Boston
2400 Hanover Street
Palo Alto, CA 94304
9.
<PAGE>
Ian C. and Susan D. Griffis
3519 E. Palmer Divide Road
Larkspur, CO 80118
Charles Calloway
1616 17th Street, Suite 600
Denver, CO 80202
Mark Mangiola
425 Broadway Street
Redwood City, CA 94063
Benefactor Funding Corp.
234 Columbine Street
Suite 240
Denver, CO 80206
Attn: Randy Carter
Richard & Julie K. Wham JTWROS
15 Polo Club Drive
Denver, CO 80209
Gerald H. Parrick III
25 Sandlewood Drive
Novato, CA 94945
Bruce E. Dines, Jr.
825 York Street
Denver, CO 80206
Jill S. Dines
825 York Street
Denver, CO 80206
Katherine Dines
2000 Little Raven #1-C
Denver, CO 80202
Curtis J. Ahart
6090 Spruce Hill Court
Shorewood, MN 55331
Keith Bennett
16728 E. Prentice Circle
Aurora, CO 80015
10.
<PAGE>
SERIES C HOLDERS
NAME AND ADDRESS
Mayfield X, L.P.
2800 Sand Hill Road
Suite 250
Menlo Park, CA 94025
Attn: Todd Brooks
Mayfield Associates Fund IV, L.P.
2800 Sand Hill Road
Suite 250
Menlo Park, CA 94025
Attn: Todd Brooks
Mayfield Principals Fund, L.L.C.
2800 Sand Hill Road
Suite 250
Menlo Park, CA 94025
Attn: Todd Brooks
Crest Communications Partners L.P.
320 Park Avenue
17th Floor
New York, NY 10022
Attn: Gregg Mockenhaupt
CEA Capital Partners USA, L.P.
17 State Street
35th Floor
New York, NY 10004
Attn: Steve McCall
CEA Capital Partners USA CI, L.P.
17 State Street
35th Floor
New York, NY 10004
Attn: Steve McCall
ABN AMRO Capital (USA), Inc.
208 S. LaSalle Street
10th Floor
11.
<PAGE>
Chicago, IL 60604
Attn: Daniel Foreman
I Eagle Trust
208 S. LaSalle Street
10th Floor
Chicago, IL 60604
Attn: Daniel Foreman
ABN AMRO Incorporated
208 S. LaSalle Street
10th Floor
Chicago, IL 60604
Attn: Daniel Foreman
Access Technology Partners, L.P.
Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
Attn: Alex Sloan
Access Technology Partners
Brokers Fund, L.P.
Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
Attn: Alex Sloan
Hambrecht & Quist California
Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
Attn: Alex Sloan
Hambrecht & Quist Employee Venture Fund,
L.P. II
Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
Attn: Alex Sloan
12.
<PAGE>
H&Q JATO Communications Investors, L.P.
Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
Attn: Alex Sloan
TCI Satellite Entertainment, Inc.
8085 S. Chester Street
Suite 110
Englewood, CO 80112
Attn: Ken Carroll
Keith Bennett
16728 E. Prentice Circle
Aurora, CO 80015
Jeffrey D. Morgan
2883 Lee Hill Road
Boulder, CO 80302
Karin W. Morgan
2883 Lee Hill Road
Boulder, CO 80302
John P. Raeder, Jr. and Deborah
M. Raeder, as Joint Tenants
5625 S. Bellaire Ct.
Greenwood Village, CO 80121
Michael S. Grunwald
340 Lombard Street
Apt. A
San Francisco, CA 94133
13.
<PAGE>
Gerald K. Dinsmore
c/o Jato Communications Corp.
1099 18th Street
Denver, CO 80202
Jerome C. Ramsey
506 Providence Drive
Castle Rock, CO 80104
Robert G. Vidal and Tina M.
Vidal, as Joint Tenants
5 Snowy Owl Lane
Littleton, CO 80127
Gerard A. Maglio
5640 S. Bellaire Court
Greenwood Village, CO 80121
Rex Humston
6889 S. Salida Street
Foxfield, CO 80016
Edward Ziehm
864 Meadow Rose Lane
Castle Rock, CO 80104
14.
<PAGE>
Trustee F.B.O. FWD Corporation
Savings & Profit Sharing Trust,
James M. Green, Segregated
Account
c/o - James P. Cooney, President
Pension Inc., Trustee
136 N. Maple Avenue
Green Bay, WI 54303
COPY OF ANY CORRESPONDENCE TO :
James M. Green, Segregated
Account
W8397 Cloverleaf Lake Road
Clintonville, WI 54929
Patrick M. Green
12098 W. 75th Place
Arvada, CO 80005
William D. Myers and Dana D.
Myers, as Joint Tenants
3822 South Sebring Court
Denver, CO 80237
Marty S. Clayman
2401 Shady Oak Place
Lexington, KY 40515
15.
<PAGE>
EXHIBIT B
JATO COMMUNICATIONS CORP.,
A DELAWARE CORPORATION
CERTIFICATE OF REPRESENTATIONS
REGARDING QUALIFIED SMALL BUSINESS STOCK
THIS CERTIFICATE OF REPRESENTATIONS REGARDING QUALIFIED SMALL BUSINESS STOCK
(this "Certificate") is executed as of September __, 1999 by Jato
Communications Corp., a Delaware corporation (the "Company"), for the benefit
of Mayfield ____________, a Delaware Limited Partnership ("Mayfield"). As
used herein, the term "Stock" means those shares of Company stock issued by
the Company to Mayfield and described more fully on Schedule A hereto.
REPRESENTATIONS
Subject to the limitations and qualifications set forth below, the Company
hereby represents as follows:
1. The Company has conducted a reasonable investigation into the question
of whether the Stock is "qualified small business stock" ("QSBS") within the
meaning of Section 1202(c) of the Internal Revenue Code of 1986, as amended
(the "Code"); and
2. As of the date first above written, and assuming that Mayfield has not
sold, distributed, or otherwise transferred the Stock, all of the Stock is
QSBS.
QUALIFICATIONS AND LIMITATIONS
1. Qualification of the Stock as QSBS is based, in part, on the value of
Company stock or other assets at certain relevant times. For purposes of the
representations made in this Certificate, the Company has made a good faith
determination of such values, taking into account all material facts and
circumstances, but cannot guarantee that the Internal Revenue Service will
not successfully assert that such determination is incorrect.
2. Qualification of the Stock as QSBS is based, in part, on whether the
Company has been engaged in the active conduct of one or more qualified
trades or businesses. The term "qualified trade or business" set forth in
Section 1202(e)(3) of the Code is not clearly defined in all respects. For
purposes of the representations made in this Certificate, the Company has
made a good faith effort to apply the definition of qualified trade or
business set forth in Section 1202(e)(3) of the
12.
<PAGE>
Code, but cannot guarantee that the Internal Revenue Service will not
successfully assert a contrary definition.
3. Qualification of the Stock as QSBS is based, in part, on whether at
least eighty percent (by value) of the Company's assets have been used in the
active conduct of one or more qualified trades or businesses. For this
purpose, assets held as "working capital" of a qualified trade or business
within the meaning of Section 1202(e)(6) of the Code are treated as used in
the active conduct of such trade or business. The term "working capital" set
forth in Section 1202(e)(6) of the Code is not clearly defined in all
respects. For purposes of the representations made in this Certificate, the
Company has made a good faith effort to apply the definition of working
capital set forth in Section 1202(e)(6) of the Code, but cannot guarantee
that the Internal Revenue Service will not successfully assert a contrary
definition.
4. Qualification of the Stock as QSBS is based, in part, on whether the
Company purchased any of its stock from a person related to Mayfield during a
relevant testing period. For purposes of the representations made in this
Certificate, the Company has made a good faith determination that such
purchases did not occur, but cannot guarantee that the Internal Revenue
Service will not successfully assert that such determination is incorrect.
5. While the representations contained herein are made in good faith, the
Company assumes no liability for the failure of the Stock to qualify as QSBS.
IN WITNESS WHEREOF, the Company has executed this Certificate as of the date
first above written.
BY:_____________________________
TITLE:__________________________
13.
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Class/Type of Stock Certificate Number Number of Shares Issue Date
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Series C Preferred Stock
</TABLE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C> <C>
1. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.1 Amendment and Restatement of the Prior Agreement.. . . . . . . .1
1.2 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . .1
2. RESTRICTIONS ON TRANSFER. . . . . . . . . . . . . . . . . . . . . . . .4
2.1 Restrictions on Transfer.. . . . . . . . . . . . . . . . . . . .4
2.2 "Market Stand Off" Agreement.. . . . . . . . . . . . . . . . . .6
3. REGISTRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
3.1 Demand Registration. . . . . . . . . . . . . . . . . . . . . . .6
3.2 Piggyback Registrations. . . . . . . . . . . . . . . . . . . . .8
3.3 Form S-3 Registration. . . . . . . . . . . . . . . . . . . . . .9
3.4 Registration Expenses. . . . . . . . . . . . . . . . . . . . . 10
3.5 Obligations of the Company.. . . . . . . . . . . . . . . . . . 10
3.6 Termination of Registration Rights . . . . . . . . . . . . . . 11
3.7 Furnish Information. . . . . . . . . . . . . . . . . . . . . . 11
3.8 Delay of Registration. . . . . . . . . . . . . . . . . . . . . 11
3.9 Assignment of Registration Rights. . . . . . . . . . . . . . . 11
3.10 Amendment or Waiver of Registration Rights.. . . . . . . . . . 12
3.11 Limitation on Subsequent Registration Rights.. . . . . . . . . 12
3.12 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . 12
3.13 Rule 144 Reporting.. . . . . . . . . . . . . . . . . . . . . . 14
4. COVENANTS OF THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . 15
4.1 Basic Financial Information and Reporting. . . . . . . . . . . 15
4.2 Inspection Rights. . . . . . . . . . . . . . . . . . . . . . . 16
4.3 Confidentiality of Records.. . . . . . . . . . . . . . . . . . 16
4.4 Reservation of Common Stock. . . . . . . . . . . . . . . . . . 16
4.5 SEC Compliance.. . . . . . . . . . . . . . . . . . . . . . . . 16
4.6 Meetings of the Board of Directors.. . . . . . . . . . . . . . 16
4.7 Committees.. . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.8 Corporate Existence, Licenses and Permits; Maintenance of
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.9 Board of Directors Approval. . . . . . . . . . . . . . . . . . 17
</TABLE>
i.
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C> <C> <C>
4.10 SBIC Regulatory Provisions.. . . . . . . . . . . . . . . . . . 18
4.11 Board Observer.. . . . . . . . . . . . . . . . . . . . . . . . 18
4.12 Qualified Small Business.. . . . . . . . . . . . . . . . . . . 19
4.13 Termination of Covenants.. . . . . . . . . . . . . . . . . . . 19
5. PREEMPTIVE RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.1 Subsequent Offerings.. . . . . . . . . . . . . . . . . . . . . 19
5.2 Exercise of Rights.. . . . . . . . . . . . . . . . . . . . . . 19
5.3 Issuance of Equity Securities to Major Investors.. . . . . . . 20
5.4 Termination of Preemptive Rights.. . . . . . . . . . . . . . . 20
5.5 Transfer of Preemptive Rights. . . . . . . . . . . . . . . . . 20
5.6 Excluded Securities. . . . . . . . . . . . . . . . . . . . . . 20
6. RIGHT OF FIRST REFUSAL ON FOUNDER TRANSFERS . . . . . . . . . . . . . 21
6.1 Right of First Refusal on Founder Transfers. . . . . . . . . . 21
6.2 Exercise of Rights.. . . . . . . . . . . . . . . . . . . . . . 21
6.3 Issuance of Equity Securities to the Non-Selling Founders. . . 21
6.4 Issuance of Equity Securities to the Series B Holders. . . . . 21
6.5 Issuance of Equity Securities to the Company.. . . . . . . . . 22
6.6 No Participation.. . . . . . . . . . . . . . . . . . . . . . . 22
6.7 Termination of Right of First Refusal. . . . . . . . . . . . . 22
6.8 Exempt Securities. . . . . . . . . . . . . . . . . . . . . . . 22
7. RIGHT OF FIRST REFUSAL ON TRANSFERS BY SERIES A HOLDERS . . . . . . . 23
7.1 Right of First Refusal on Series A Transfers.. . . . . . . . . 23
7.2 Right of First Refusal on Transfers by Series A Holders. . . . 23
7.3 Company's Right to Purchase. . . . . . . . . . . . . . . . . . 23
7.4 Series A Holders' Right to Purchase. . . . . . . . . . . . . . 23
7.5 Series B Holders' Right to Purchase. . . . . . . . . . . . . . 24
7.6 Sale of Shares.. . . . . . . . . . . . . . . . . . . . . . . . 24
7.7 Termination of Right of First Refusal. . . . . . . . . . . . . 24
7.8 Exempt Transfers.. . . . . . . . . . . . . . . . . . . . . . . 24
8. VOTING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
ii.
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C> <C> <C>
8.1 Voting.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.2 Election of Directors. . . . . . . . . . . . . . . . . . . . . 25
8.3 Vacancies. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.4 Expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9. CO-SALE RIGHT.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.1 Sales by Stockholders. . . . . . . . . . . . . . . . . . . . . 25
9.2 Exempt Transfers.. . . . . . . . . . . . . . . . . . . . . . . 27
9.3 Termination of Co-Sale Rights. . . . . . . . . . . . . . . . . 27
9.4 Prohibited Transfers.. . . . . . . . . . . . . . . . . . . . . 27
10. APPROVED SALE.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.1 Voting of Shares.. . . . . . . . . . . . . . . . . . . . . . . 28
10.2 Drag-Along Provision.. . . . . . . . . . . . . . . . . . . . . 28
10.3 Forced Sale. . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.4 No Objections. . . . . . . . . . . . . . . . . . . . . . . . . 29
11. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
11.1 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 29
11.2 Successors and Assigns.. . . . . . . . . . . . . . . . . . . . 29
11.3 Severability.. . . . . . . . . . . . . . . . . . . . . . . . . 29
11.4 Subsequent Investors.. . . . . . . . . . . . . . . . . . . . . 29
11.5 Amendment and Waiver.. . . . . . . . . . . . . . . . . . . . . 29
11.6 Notices, Etc.. . . . . . . . . . . . . . . . . . . . . . . . . 30
11.7 Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . . 30
11.8 Injunctive Relief. . . . . . . . . . . . . . . . . . . . . . . 30
11.9 Titles and Subtitles.. . . . . . . . . . . . . . . . . . . . . 30
11.10 Complete Agreement.. . . . . . . . . . . . . . . . . . . . . . 30
11.11 Counterparts.. . . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
iii.
<PAGE>
JATO COMMUNICATIONS CORP.
AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
THIS AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT (the "AGREEMENT")
is made as of this 16th day of September, 1999, by and among JATO
COMMUNICATIONS CORP., a Delaware corporation (the "COMPANY"), the holders of
the Company's Common Stock listed on EXHIBIT A hereto (collectively, the
"COMMON HOLDERS"), the holders of the Company's Series B Preferred Stock
listed on EXHIBIT B hereto (the "SERIES B HOLDERS") and the holders of the
Company's Series C Preferred Stock listed on EXHIBIT C hereto (the "SERIES C
HOLDERS").
RECITALS
WHEREAS, in connection with the sale of the Company's Series B
Preferred Stock to the Series B Holders, the Company, the Common Holders and
the Series B Holders entered into a Stockholders' Agreement, dated as of
April 16, 1999 (the "PRIOR AGREEMENT") to provide for the future voting of
their shares of the Company's capital stock;
WHEREAS, the Series C Holders are purchasing shares of the Company's
Series C Preferred Stock (the "SERIES C STOCK") pursuant to that certain
Series C Preferred Stock Purchase Agreement, dated of even date herewith (the
"PURCHASE AGREEMENT");
WHEREAS, such Series C Holders were induced by the Company to
purchase the Series C Stock in part by the agreement of the Company, the
Stockholders and the Series B Holders to enter into this Agreement; and
WHEREAS, it is a condition precedent to the obligations of the
Series C Holders to purchase the Series C Stock pursuant to the Purchase
Agreement that the parties hereto enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein, the parties agree hereto as follows:
1. GENERAL
(a) AMENDMENT AND RESTATEMENT OF THE PRIOR AGREEMENT. The
undersigned parties who constitute the parties necessary to amend the Prior
Agreement hereby agree that, effective upon the date hereof, the Prior
Agreement is null and void and superseded by the rights and obligations set
forth in this Agreement.
2. DEFINITIONS.
(a) "COMMON SHARES" shall mean all shares of capital stock of the
Company registered in the names of the Common Holders or beneficially owned
by them as of the date hereof and any and all other securities of the Company
legally acquired by the Common Holders after the date hereof.
1
<PAGE>
(b) "INITIAL OFFERING" shall mean the Company's first firm
commitment underwritten public offering of its Common Stock registered under
the Securities Act of 1933.
(c) "INVESTORS" shall include the Common Holders, the Series B
Holders and the Series C Holders.
(d) "QUALIFIED PUBLIC OFFERING" shall mean a firm commitment
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933 covering the offer and sale of Common Stock
for the account of the Company in which (i) the per share price is at least
equal to the "Target Percentage" (as hereinafter defined) multiplied by the
then-effective Series B Conversion Price (the "SERIES B CONVERSION PRICE"),
determined in accordance with the Company's Restated Certificate of
Incorporation, as filed with the Secretary of State of the State of Delaware
(the "THRESHOLD PRICE"), (ii) the gross cash proceeds to the Company (before
underwriting discounts, commissions and fees) are at least $30,000,000 and
(iii) the shares of Common Stock are listed on any national securities
exchange or have been registered under Section 12(g) of the Securities
Exchange Act of 1934. As used herein, "TARGET PERCENTAGE" shall mean (A) an
amount equal to the product of 2.5 and $1.50 (as adjusted for stock
dividends, combinations, splits, recapitalizations and the like) prior to the
third anniversary of the date hereof and (B) an amount equal to the product
of 3.5 and $1.50 (as adjusted for stock dividends, combinations, splits,
recapitalizations and the like) on or after the third anniversary of the date
hereof.
(e) "SERIES B SHARES" shall mean all shares of capital stock of the
Company registered in the names of the Series B Holders or beneficially owned
by them as of the date hereof and any and all other securities of the Company
legally acquired by the Series B Holders after the date hereof (including but
not limited to all shares of Common Stock issued upon conversion of, or as
dividends or other rights with respect to, the Series B Stock).
(f) "SERIES C SHARES" shall mean all shares of capital stock of the
Company registered in the names of the Series C Holders or beneficially owned
by them as of the date hereof and any and all other securities of the Company
legally acquired by the Series C Holders after the date hereof (including but
not limited to all shares of Common Stock issued upon conversion of, or as
dividends or other rights with respect to, the Series C Stock).
(g) "SHARES" shall mean the Company's (i) Common Shares, (ii) the
Series B Shares and (iii) the Series C Shares.
3. APPROVED SALE.
(a) VOTING OF SHARES. The Common Holders, the Series B Holders and
the Series C Holders each agree to vote their respective Common Shares,
Series B Shares and Series C Shares in accordance with the provisions of this
Section 3.
(b) DRAG-ALONG PROVISION. At any time following the first
anniversary of the date of this Agreement, (i) the holders of more than
seventy-five percent (75%) of the Series B Shares then outstanding and (ii)
the holders of a majority of the outstanding capital stock of the Company
then outstanding (the "REQUISITE HOLDERS") shall have the option to compel a
sale of the Company or of all or substantially all of the Company's assets at
any time (a "DRAG-ALONG
2
<PAGE>
SALE"); PROVIDED, THAT, in the event that the holders of Series B Shares
constitute at least a majority of the outstanding capital stock of the
Company (on an as-converted basis) the provisions of Section 3(b)(ii) shall
not apply. The Drag-Along Right established by this Section 3(b) shall not
apply to, and shall terminate upon, the Company's consummation of an Initial
Offering.
(c) FORCED SALE. The Company hereby covenants and agrees that, if
the Company has not effected a Qualified Public Offering or obtained the
Minimum Trading Requirement (as defined below) prior to the fourth
anniversary of the date of this Agreement, the Company shall use commercially
reasonable efforts, including retaining an appropriate investment bank
reasonably satisfactory to a majority in interest of the Series B Holders, to
identify a suitable purchaser of the Company to be effected by means of a
merger, consolidation or sale of stock or assets, auction or otherwise at
such time (a "FORCED SALE," and, together with a Drag-Along Sale, an
"APPROVED SALE"). As used herein, the "MINIMUM TRADING REQUIREMENT" shall be
obtained following an Initial Offering on the business day following the end
of a one hundred eighty (180) consecutive day period during which the average
closing price of the Company's Common Stock on each such day exceeded the
Threshold Price.
(d) NO OBJECTIONS. Each Investor agrees that in the event of an
Approved Sale, it shall consent to and raise no objections against the
Approved Sale, and if the Approved Sale is structured as (i) a merger or
consolidation of the Company, or a sale of all or substantially all of the
Company's assets, each such Investor shall waive any dissenters' rights,
appraisal rights or similar rights in connection with such merger,
consolidation or asset sale or (ii) a sale of the stock of the Company, then
each such Investor shall agree to sell its respective Shares on the terms and
conditions approved by the Requisite Holders, PROVIDED, THAT, such terms do
not provide that the Series B Holders or Series C Holders would receive less
than the amount that would be distributed to such Series B Holders or Series
C Holders in the event of a liquidation of the Company in accordance with the
Company's Restated Certification of Incorporation. The Investors shall each
take all necessary and desirable actions approved by the Requisite Holders,
in connection with the consummation of the Approved Sale, including the
execution of such agreements and such instruments and other actions
reasonably necessary to (i) provide the representations, warranties,
indemnities, covenants, conditions, non-compete agreements, escrow agreements
and other provisions and agreements relating to such Approved Sale and (ii)
effectuate the allocation and distribution of the aggregate consideration
upon the Approved Sale.
4. RESTRICTIONS ON TRANSFER; LEGEND.
(a) RESTRICTIONS ON TRANSFER.
(i) Each Investor agrees not to make any disposition of all
or any portion of the Shares unless and until the transferee has agreed in
writing for the benefit of the Company to be bound by this Section 4(a)
unless and until:
(A) There is then in effect a registration
statement under the Securities Act of 1933 covering such proposed disposition
and such disposition is made in accordance with such registration statement;
or
3
<PAGE>
(B) (1) Such Investor shall have notified the
Company of the proposed disposition and shall have furnished the Company with
a detailed statement of the circumstances surrounding the proposed
disposition and (2) if reasonably requested by the Company, such Investor
shall have furnished the Company with an opinion of counsel, reasonably
satisfactory to the Company, that such disposition will not require
registration of such shares under the Securities Act of 1933 or any
applicable state securities or Blue Sky laws. It is agreed that the Company
will not require opinions of counsel for transactions made pursuant to Rule
144 except in unusual circumstances.
(C) Notwithstanding the provisions of paragraphs
(A) and (B) above, no such registration statement or opinion of counsel shall
be necessary for a transfer by an Investor which is (1) a partnership to any
or all of its partners or former partners, (2) a corporation to its
stockholders in accordance with their interest in the corporation, (3) a
limited liability company to its members or former members in accordance with
their membership interest, (4) by a trust to its beneficiaries in accordance
with their interests in the trust, (5) to the Investor's family member or
trust for the benefit of an individual Investor or (6) to an affiliate of the
Investor; PROVIDED, THAT, the transferee will be subject to the terms of this
Agreement to the same extent as if he were an original Investor hereunder;
and PROVIDED, FURTHER, HOWEVER, that such transfer is pursuant to an
exemption under the Securities Act of 1933.
PROVIDED, HOWEVER, that in connection with any such transfer or disposition
other than as described in paragraph (A) above, the transferee shall have
agreed in writing to be bound by the provisions of the Agreement.
(b) Each certificate representing Shares now or hereafter owned by
an Investor or issued to any person shall be endorsed with the following
legend:
FIRST LEGEND:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS AND UNTIL REGISTERED
UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED.
SECOND LEGEND:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS
AND CONDITIONS OF A CERTAIN AMENDED AND RESTATED STOCKHOLDERS'
AGREEMENT WHICH PLACES CERTAIN RESTRICTIONS ON THE SHARES
REPRESENTED HEREBY. ANY PERSON ACCEPTING ANY INTEREST IN SUCH SHARES
SHALL BE DEEMED TO AGREE TO AND SHALL BECOME BOUND BY ALL THE
PROVISIONS OF SUCH AGREEMENT. COPIES OF SUCH AGREEMENT MAY BE
OBTAINED WITHOUT CHARGE UPON WRITTEN REQUEST TO
4
<PAGE>
THE SECRETARY OF THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS."
(c) The Investors agree that the Company may instruct its transfer
agent to impose transfer restrictions on the shares represented by
certificates bearing the legend referred to in Section 4(b) above to enforce
the provisions of this Agreement and the Company agrees to promptly do so.
The Company agrees that, during the term of this Agreement, it will not
remove, and it will not permit to be removed, the legend from any certificate
and will place or cause to be placed the legend on any new certificate issued
to represent Common Shares. The legend shall be removed upon termination of
this Agreement.
5. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement shall be and construed and
enforced in accordance with the laws of the State of Colorado without regard
to its conflict-of-laws rules.
(b) ASSIGNS. Except as otherwise expressly provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors, and administrators of the parties
hereto and shall inure to the benefit of and be enforceable by each person
who shall be a holder of Shares from time to time.
(c) SEVERABILITY. In case any provision of the Agreement shall be
invalid, illegal, or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
(d) SUBSEQUENT INVESTORS. No person or persons ("SUBSEQUENT
INVESTORS") shall acquire, either by purchase or otherwise any shares of
capital stock of the Company subsequent to the date hereof, unless such
Subsequent Investors shall become a party to this Agreement and agree to be
bound by the provisions hereof. Such Subsequent Investors shall be considered
"Common Holders" for all purposes hereof and all shares of capital stock of
the Company held by such Subsequent Investors shall be deemed to be "Common
Shares" for all purposes hereof. Notwithstanding anything contrary contained
herein, if the Company shall issue any Common Shares as set forth in the
previous sentence, such Subsequent Investor may become a party to this
Agreement by executing and delivering an additional counterpart signature
page to this Agreement.
(e) AMENDMENT.
(i) Except as otherwise expressly provided, this Agreement
may be amended or modified only upon the written consent of the Company and
(A) the holders of a majority of the Series B Shares and Series C Shares or
share equivalents then outstanding and (B) the holders of a majority of the
Common Shares then outstanding; PROVIDED, HOWEVER, that the provisions of
Sections 3(b) and (c) shall not be amended without the consent of the holders
of a majority of the Series B Shares.
(B) Except as otherwise expressly provided, the obligations
of the Company and the rights of the Holders under this Agreement may be
waived only with the written consent
5
<PAGE>
of (A) the holders of a majority of the Series B Shares and Series C Shares
or share equivalents then outstanding and (B) the holders of a majority of
the Common Shares then outstanding.
(f) NOTICES. All notices required or permitted hereunder shall be
deemed effectively given: (i) upon personal delivery to the party to be
notified, (ii) when sent by confirmed telex or facsimile if sent during
normal business hours of the recipient; if not, then on the next business
day, (iii) upon receipt after having been sent by registered or certified
mail, return receipt requested, postage prepaid, or (iv) one (1) day after
deposit with a nationally recognized overnight courier, specifying next day
delivery, with written verification of receipt. All communications shall be
sent to the party to be notified at the address set forth on the signature
pages hereto or the exhibits hereto or at such other address as such party
may designate by ten (10) days' advance written notice to the other parties
hereto.
(g) ATTORNEYS' FEES. If legal action is brought to enforce or
interpret this Agreement, the prevailing party shall be entitled to recover
from the losing party all fees, costs and expenses of enforcing any rights of
such prevailing party under or with respect to this Agreement, including
without limitation, such reasonable fees and expenses of attorneys and
accountants, which shall include, without limitation, all fees, costs and
expenses of appeals.
(h) COMPLETE AGREEMENT. This Agreement constitutes the entire
agreement and supersedes all other prior and contemporaneous agreements and
undertakings, both written and oral, between the parties hereto with regard
to the subject matter hereof.
(i) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(j) TITLES AND SUBTITLES. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
(k) INJUNCTIVE RELIEF. It is acknowledged that it will be impossible
to measure in money the damages that would be suffered if the parties fail to
comply with certain of the obligations imposed on them by this Agreement and
that, in the event of any such failure, an aggrieved person will be
irreparably damaged and will not have an adequate remedy at law. Any such
person shall, therefore, be entitled to injunctive relief and/or specific
performance to enforce such obligations, and if any action should be brought
in equity to enforce any of such provisions of this Agreement, none of the
parties hereto shall raise the defense that there is an adequate remedy at
law.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
6
<PAGE>
IN WITNESS WHEREOF, the foregoing AMENDED AND RESTATED STOCKHOLDERS'
AGREEMENT is hereby executed as of the date first above written.
COMPANY:
JATO COMMUNICATIONS CORP.
1099 18th Street ------------------------------
Denver, Colorado 80202 Please Print Name of Investor
By: /s/ Brian E. Gast By:
------------------------------- ---------------------------
Name: Name:
----------------------------- -------------------------
Title: Title:
---------------------------- ------------------------
AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
<PAGE>
EXHIBIT A
COMMON HOLDERS
NAME AND ADDRESS:
Eliot Boyle
1099 18th Street, Suite 700
Denver, CO 80202
Patrick M. Green
1099 18th Street, Suite 700
Denver, CO 80202
Rex H. Humston
1099 18th Street, Suite 700
Denver, CO 80202
A-1
<PAGE>
EXHIBIT B
SERIES B HOLDERS
NAME AND ADDRESS:
Crest Communications Partners L.P.
320 Park Avenue
17th Floor
New York, NY 10022
Attn: Gregg Mockenhaupt
CEA Capital Partners USA, L.P.
17 State Street
35th Floor
New York, NY 10004
Attn: Steve McCall
CEA Capital Partners USA
CI, L.P.
17 State Street
35th Floor
New York, NY 10004
Attn: Steve McCall
ABN AMRO Capital (USA), Inc.
208 S. LaSalle Street
10th Floor
Chicago, IL 60604
Attn: Daniel Forman
I Eagle Trust
208 S. LaSalle Street
10th Floor
Chicago, IL 60604
Attn: Daniel Forman
ABN AMRO Incorporated
208 S. LaSalle Street
10th Floor
Chicago, IL 60604
Attn: Daniel Forman
B-1
<PAGE>
Access Technology Partners, L.P.
Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
Attn: Alex Sloan
Access Technology Partners Brokers Fund,
L.P.
Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
Attn: Alex Sloan
Hambrecht & Quist California
One Bush Street
San Francisco, CA 94104
Attn: Alex Sloan
Hambrecht & Quist Employee Venture Fund,
L.P. II
One Bush Street
San Francisco, CA 94104
Attn: Alex Sloan
H&Q JATO Communications
Investors, L.P.
Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
John P. Raeder, Jr. and Deborah M. Raeder,
as Joint Tenants
5625 S. Bellaire Ct.
Greenwood Village, CO 80121
Gilbert Family Trust
1211 Whispering Oaks
Danville, CA 94506
Attn: Dean Gilbert
Jeffrey D. Morgan
2883 Lee Hill Road
Boulder, CO 80302
Karin W. Morgan
2883 Lee Hill Road
Boulder, CO 80302
B-2
<PAGE>
Marty S. Clayman
2401 Shady Oak Place
Lexington, KY 40515
Robert J. Grubb
7259 Longview Drive
Niwot, CO 80503
Richard K. Coleman, Jr.
22 Viking Drive
Englewood, CO 80110
GC&H Investments
C/o Cooley Godward LLP
One Maritime Plaza
20th Floor
San Francisco, CA 94111
Attn: John Cardoza
Michael S. Grunwald
C/o Lehman Brothers
555 California Street
30th Floor
San Francisco, CA 94104
Mark T. Stolte
22595 Treetop Lane
Golden, CO 80401
Seybold Brothers Investments
4075 Hermitage Road
Colorado Springs, CO 80906
Attn: William Seybold
Leonard Allsup
1720 Wyncoop
Unit 203
Denver, CO 80202-1077
William J.B. Brady III
Credit Suisse First Boston
2400 Hanover Street
Palo Alto, CA 94304
B-3
<PAGE>
Stephen S. Hyde and Lorreen L.
George, joint tenants w/right of
survivorship
31 Broadmoor Avenue
Colorado Springs, CO 80906
Frank P. Quattrone and
Denise Foderavo, Trustees
Quattrone Family Trust UTA
DTD 9/14/91
Credit Suisse First Boston
2400 Hanover Street
Palo Alto, CA 94304
Ian C. and Susan D. Griffis
3519 E. Palmer Divide Road
Larkspur, CO 80118
Charles Calloway
1616 17th Street, Suite 600
Denver, CO 80202
Mark Mangiola
425 Broadway Street
Redwood City, CA 94063
Benefactor Funding Corp.
234 Columbine Street
Suite 240
Denver, CO 80206
Attn: Randy Carter
Richard & Julie K. Wham JTWROS
15 Polo Club Drive
Denver, CO 80209
Gerald H. Parrick III
25 Sandlewood Drive
Novato, CA 94945
Bruce E. Dines, Jr.
825 York Street
Denver, CO 80206
B-4
<PAGE>
Jill S. Dines
825 York Street
Denver, CO 80206
Katherine Dines
2000 Little Raven #1-C
Denver, CO 80202
Curtis J. Ahart
6090 Spruce Hill Court
Shorewood, MN 55331
Keith Bennett
16728 E. Prentice Circle
Aurora, CO 80015
B-5
<PAGE>
EXHIBIT C
SERIES C HOLDERS
NAME AND ADDRESS
Mayfield X, L.P.
2800 Sand Hill Road
Suite 250
Menlo Park, CA 94025
Attn: Todd Brooks
Mayfield Associates Fund IV, L.P.
2800 Sand Hill Road
Suite 250
Menlo Park, CA 94025
Attn: Todd Brooks
Mayfield Principals Fund, L.L.C.
2800 Sand Hill Road
Suite 250
Menlo Park, CA 94025
Attn: Todd Brooks
Crest Communications Partners L.P.
320 Park Avenue
17th Floor
New York, NY 10022
Attn: Gregg Mockenhaupt
CEA Capital Partners USA, L.P.
17 State Street
35th Floor
New York, NY 10004
Attn: Steve McCall
CEA Capital Partners USA CI, L.P.
17 State Street
35th Floor
New York, NY 10004
Attn: Steve McCall
ABN AMRO Capital (USA), Inc.
C-1
<PAGE>
NAME AND ADDRESS
208 S. LaSalle Street
10th Floor
Chicago, IL 60604
Attn: Daniel Foreman
I Eagle Trust
208 S. LaSalle Street
10th Floor
Chicago, IL 60604
Attn: Daniel Foreman
ABN AMRO Incorporated
208 S. LaSalle Street
10th Floor
Chicago, IL 60604
Attn: Daniel Foreman
Access Technology Partners, L.P.
Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
Attn: Alex Sloan
Access Technology Partners Brokers Fund,
L.P.
Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
Attn: Alex Sloan
Hambrecht & Quist California
Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
Attn: Alex Sloan
Hambrecht & Quist Employee Venture Fund,
L.P. II
Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
Attn: Alex Sloan
C-2
<PAGE>
NAME AND ADDRESS
H&Q JATO Communications Investors, L.P.
Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
Attn: Alex Sloan
TCI Satellite Entertainment, Inc.
8085 S. Chester Street
Suite 110
Englewood, CO 80112
Attn: Ken Carroll
Keith Bennett
16728 E. Prentice Circle
Aurora, CO 80015
Jeffrey D. Morgan
2883 Lee Hill Road
Boulder, CO 80302
Karin W. Morgan
2883 Lee Hill Road
Boulder, CO 80302
John P. Raeder, Jr. and Deborah
M. Raeder, as Joint Tenants
5625 S. Bellaire Ct.
Greenwood Village, CO 80121
Michael S. Grunwald
340 Lombard Street
Apt. A
San Francisco, CA 94133
C-3
<PAGE>
NAME AND ADDRESS
Gerald K. Dinsmore
c/o Jato Communications Corp.
1099 18th Street
Denver, CO 80202
Jerome C. Ramsey
506 Providence Drive
Castle Rock, CO 80104
Robert G. Vidal and Tina M. Vidal, as Joint Tenants
5 Snowy Owl Lane
Littleton, CO 80127
Gerard A. Maglio
5640 S. Bellaire Court
Greenwood Village, CO 80121
Rex Humston
6889 S. Salida Street
Foxfield, CO 80016
Ed Ziehm
864 Meadow Rose Lane
Castle Rock, CO 80104
C-4
<PAGE>
NAME AND ADDRESS
Trustee F.B.O. FWD Corporation Savings &
Profit Sharing Trust,
James M. Green, Segregated Account
c/o - James P. Cooney, President
Pension Inc., Trustee
136 N. Maple Avenue
Green Bay, WI 54303
COPY OF ANY CORRESPONDENCE TO :
James M. Green, Segregated Account
W8397 Cloverleaf Lake Road
Clintonville, WI 54929
Patrick M. Green
12098 W. 75th Place
Arvada, CO 80005
William D. Myers and Dana D. Myers, as
Joint Tenants
3822 South Sebring Court
Denver, CO 80237
Marty S. Clayman
2401 Shady Oak Place
Lexington, KY 40515
C-5
<PAGE>
Exhibit 10.27
INDEMNITY AGREEMENT
THIS AGREEMENT is made and entered into this ____ day of __________,
1999 by and between Jato Communications Corp., a Delaware corporation (the
"Corporation"), and _____________ ("Agent").
RECITALS
WHEREAS, Agent performs a valuable service to the Corporation in the
capacity as [OFFICER/DIRECTOR] of the Corporation;
WHEREAS, the stockholders of the Corporation have adopted bylaws (the
"Bylaws") providing for the indemnification of the directors, officers,
employees and other agents of the Corporation, including persons serving at the
request of the Corporation in such capacities with other corporations or
enterprises, as authorized by the Delaware General Corporation Law, as amended
(the "Code");
WHEREAS, the Bylaws and the Code, by their non-exclusive nature,
permit contracts between the Corporation and its agents, officers, employees and
other agents with respect to indemnification of such persons; and
WHEREAS, in order to induce Agent to continue to serve as
[OFFICER/DIRECTOR] of the Corporation, the Corporation has determined and agreed
to enter into this Agreement with Agent.
NOW, THEREFORE, in consideration of Agent's continued service as
[OFFICER/DIRECTOR] after the date hereof, the parties hereto agree as follows:
AGREEMENT
1. SERVICES TO THE CORPORATION. Agent will serve, at the will of the
Corporation or under separate contract, if any such contract exists, as
[OFFICER/DIRECTOR] of the Corporation or as a director, officer or other
fiduciary of an affiliate of the Corporation faithfully and to the best of
Agent's ability so long as Agent is duly elected and qualified in accordance
with the provisions of the Bylaws or other applicable charter documents of the
Corporation or such affiliate; provided, however, that Agent may at any time and
for any reason resign from such position (subject to any contractual obligation
that Agent may have assumed apart from this Agreement) and that the Corporation
or any affiliate shall have no obligation under this Agreement to continue Agent
in any such position.
2. INDEMNITY OF AGENT. The Corporation hereby agrees to hold harmless
and indemnify Agent to the fullest extent authorized or permitted by the
provisions of the Bylaws and the Code, as the same may be amended from time to
time (but, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than the Bylaws or the Code permitted
prior to adoption of such amendment).
1
<PAGE>
3. ADDITIONAL INDEMNITY. In addition to and not in limitation of the
indemnification otherwise provided for herein, and subject only to the
exclusions set forth in Section 4 hereof, the Corporation hereby further agrees
to hold harmless and indemnify Agent:
(A) against any and all expenses (including attorneys' fees),
witness fees, damages, judgments, fines and amounts paid in settlement and any
other amounts that Agent becomes legally obligated to pay by reason of any claim
or claims made against or by Agent in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative (including an action by or in the right of the
Corporation) to which Agent is, was or at any time becomes a party, or is
threatened to be made a party, by reason of the fact that Agent is, was or at
any time becomes a director, officer, employee or other agent of Corporation, or
is or was serving or at any time serves at the request of the Corporation as a
director, officer, employee or other agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise; and
(B) otherwise to the fullest extent as may be provided to Agent by
the Corporation under the non-exclusivity provisions of the Code and Section 43
of the Bylaws.
4. LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to
Section 3 hereof shall be paid by the Corporation:
(A) on account of any claim against Agent for an accounting of
profits made from the purchase or sale by Agent of securities of the Corporation
pursuant to the provisions of Section 16(b) of the Securities Exchange Act of
1934 and amendments thereto or similar provisions of any federal, state or local
statutory law;
(C) on account of Agent's conduct that was knowingly fraudulent or
deliberately dishonest or that constituted willful misconduct;
(D) on account of Agent's conduct that constituted a breach of
Agent's duty of loyalty to the Corporation or resulted in any personal profit or
advantage to which Agent was not legally entitled;
(E) for which payment actually is made to Agent under a valid and
collectible insurance policy or under a valid and enforceable indemnity clause,
bylaw or agreement, except in respect of any excess beyond payment under such
insurance, clause, bylaw or agreement;
(F) if indemnification is not lawful (and, in this respect, both
the Corporation and Agent have been advised that the Securities and Exchange
Commission believes that indemnification for liabilities arising under the
federal securities laws is against public policy and therefore is unenforceable
and that claims for indemnification should be submitted to appropriate courts
for adjudication); or
(G) in connection with any proceeding (or part thereof) initiated
by Agent, or any proceeding by Agent against the Corporation or its directors,
officers, employees or other agents, unless (i) such indemnification expressly
is required to be made by law, (ii) the proceeding was authorized by the Board
of Directors of the Corporation, (iii) such indemnification is provided
2
<PAGE>
by the Corporation, in its sole discretion, pursuant to the powers vested in the
Corporation under the Code, or (iv) the proceeding is initiated pursuant to
Section 9 hereof.
5. CONTINUATION OF INDEMNITY. All agreements and obligations of the
Corporation contained herein shall continue during the period Agent is a
director, officer, employee or other agent of the Corporation (or is or was
serving at the request of the Corporation as a director, officer, employee or
other agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise) and shall continue thereafter so long as Agent
shall be subject to any possible claim or threatened, pending or completed
action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative, by reason of the fact that Agent was serving in
the capacity referred to herein.
6. PARTIAL INDEMNIFICATION. Agent shall be entitled under this
Agreement to indemnification by the Corporation for a portion of the expenses
(including attorneys' fees), witness fees, damages, judgments, fines and amounts
paid in settlement and any other amounts that Agent becomes legally obligated to
pay in connection with any action, suit or proceeding referred to in Section 3
hereof even if not entitled hereunder to indemnification for the total amount
thereof, and the Corporation shall indemnify Agent for the portion thereof to
which Agent is entitled.
7. NOTIFICATION AND DEFENSE OF CLAIM. Not later than thirty (30) days
after receipt by Agent of notice of the commencement of any action, suit or
proceeding, Agent will, if a claim in respect thereof is to be made against the
Corporation under this Agreement, notify the Corporation of the commencement
thereof; but the omission so to notify the Corporation will not relieve it from
any liability which it may have to Agent otherwise than under this Agreement.
With respect to any such action, suit or proceeding as to which Agent notifies
the Corporation of the commencement thereof:
(A) the Corporation will be entitled to participate therein at its
own expense;
(B) except as otherwise provided below, the Corporation may, at its
option and jointly with any other indemnifying party similarly notified and
electing to assume such defense, assume the defense thereof, with counsel
reasonably satisfactory to Agent. After notice from the Corporation to Agent of
its election to assume the defense thereof, the Corporation will not be liable
to Agent under this Agreement for any legal or other expenses subsequently
incurred by Agent in connection with the defense thereof except for reasonable
costs of investigation or otherwise as provided below. Agent shall have the
right to employ separate counsel in such action, suit or proceeding but the fees
and expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of Agent; provided,
however, that the fees and expenses of Agent's separate counsel shall be borne
by the Corporation if (i) the employment of counsel by Agent has been authorized
by the Corporation, (ii) Agent reasonably shall have concluded that there may be
a conflict of interest between the Corporation and Agent in the conduct of the
defense of such action or (iii) the Corporation in fact shall not have employed
counsel to assume the defense of such action. The Corporation shall not be
entitled to assume the defense of any action, suit or proceeding brought by or
on behalf of the Corporation or as to which Agent shall have made the conclusion
provided for in clause (ii) above; and
3
<PAGE>
(C) the Corporation shall not be liable to indemnify Agent under
this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent, which shall not be unreasonably withheld.
The Corporation shall be permitted to settle any action except that it shall not
settle any action or claim in any manner which would impose any penalty or
limitation on Agent without Agent's written consent, which may be given or
withheld in Agent's sole discretion.
8. EXPENSES. Promptly following request therefor, the Corporation
shall advance, prior to the final disposition of any proceeding, all expenses
incurred by Agent in connection with such proceeding upon receipt of an
undertaking by or on behalf of Agent to repay such amounts if it shall be
determined ultimately that Agent is not entitled to be indemnified under the
provisions of this Agreement, the Bylaws, the Code or otherwise.
9. ENFORCEMENT. Any right to indemnification or advances granted by
this Agreement to Agent shall be enforceable by or on behalf of Agent in any
court of competent jurisdiction if (i) the claim for indemnification or advances
is denied, in whole or in part, or (ii) no disposition of such claim is made
within 90 days of request therefor. Agent, in such enforcement action, if
successful in whole or in part, also shall be entitled to be paid the expense of
prosecuting Agent's claim. It shall be a defense to any action for which a claim
for indemnification is made under Section 3 hereof (other than an action brought
to enforce a claim for expenses pursuant to Section 8 hereof, provided that the
required undertaking has been tendered to the Corporation) that Agent is not
entitled to indemnification because of the limitations set forth in Section 4
hereof. Neither the failure of the Corporation (including its Board of Directors
or its stockholders) to have made a determination prior to the commencement of
such enforcement action that indemnification of Agent is proper in the
circumstances, nor an actual determination by the Corporation (including its
Board of Directors or its stockholders) that such indemnification is improper
shall be a defense to the action or create a presumption that Agent is not
entitled to indemnification under this Agreement or otherwise.
10. SUBROGATION. In the event of payment under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Agent, who shall execute all documents required and shall
do all acts that may be necessary to secure such rights and to enable the
Corporation effectively to bring suit to enforce such rights.
11. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Agent by this
Agreement shall not be exclusive of any other right Agent may have or hereafter
acquire under any statute, provision of the Corporation's Certificate of
Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise, both as to action in Agent's official capacity and as to action in
another capacity while holding office.
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<PAGE>
12. SURVIVAL OF RIGHTS.
(A) The rights conferred on Agent by this Agreement shall continue
after Agent has ceased to be a director, officer, employee or other agent of the
Corporation or to serve at the request of the Corporation as a director,
officer, employee or other agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise and shall inure to the
benefit of Agent's heirs, executors and administrators.
(B) The Corporation shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Corporation, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform if no such succession
had taken place.
13. SEPARABILITY. Each of the provisions of this Agreement is a
separate and distinct agreement and independent of the others, so that if any
provision hereof shall be held to be invalid for any reason, such invalidity
contained herein or unenforceability shall not affect the validity or
enforceability of the other provisions hereof. Furthermore, if this Agreement
shall be invalidated in its entirety on any ground, then the Corporation
nevertheless shall indemnify Agent to the fullest extent provided by the Bylaws,
the Code or any other applicable law.
14. GOVERNING LAW. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Delaware.
15. AMENDMENT AND TERMINATION. No amendment, modification, termination
or cancellation of this Agreement shall be effective unless signed in writing by
both parties hereto.
16. IDENTICAL COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed for all purposes to be an
original but all of which together shall constitute this Agreement.
17. HEADINGS. The headings of the sections of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction hereof.
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<PAGE>
18. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given (i)
upon delivery if delivered by hand to the party to whom such communication was
directed or (ii) upon the third business day after the date on which such
communication was mailed if mailed by certified or registered mail with postage
prepaid:
(A) If to Agent, at the address indicated on the
signature page hereof.
(B) If to the Corporation, to
Jato Communications Corp.
1099 Eighteenth Street, Suite 2200
Denver, Colorado 80202
Attn: President
or to such other address as may have been furnished to Agent by the Corporation.
[The rest of this page is intentionally left blank.]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the day and year first above written.
JATO COMMUNICATIONS CORP.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
AGENT
------------------------------------
(Signature)
Agent Print Name and Address:
------------------------------------
------------------------------------
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<PAGE>
*** Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. Sections 200.80(b)(4),
200.83 and 240.24b-2
- -------------------------------------------------------------------------------
CREDIT AGREEMENT
DATED AS OF
JULY 14, 1999
AMONG
JATO OPERATING CORP.,
JATO COMMUNICATIONS CORP.,
THE LENDERS PARTY HERETO,
STATE STREET BANK AND
TRUST COMPANY,
AS COLLATERAL AGENT,
AND
LUCENT TECHNOLOGIES INC.,
AS ADMINISTRATIVE AGENT
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Section 1.01. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . .1
Section 1.02. Classification of Loans and Borrowings. . . . . . . . . . . . 21
Section 1.03. Terms Generally . . . . . . . . . . . . . . . . . . . . . . . 21
Section 1.04. Accounting Terms; GAAP. . . . . . . . . . . . . . . . . . . . 22
ARTICLE II The Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 2.01. Commitments . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 2.02. Loans and Borrowings. . . . . . . . . . . . . . . . . . . . . 22
Section 2.03. Requests for Borrowings . . . . . . . . . . . . . . . . . . . 23
Section 2.04. Funding of Borrowings . . . . . . . . . . . . . . . . . . . . 24
Section 2.05. Interest Elections. . . . . . . . . . . . . . . . . . . . . . 24
Section 2.06. Termination and Reduction of Commitments. . . . . . . . . . . 26
Section 2.07. Repayment of Loans; Evidence of Debt. . . . . . . . . . . . . 26
Section 2.08. Amortization of Loans . . . . . . . . . . . . . . . . . . . . 27
Section 2.09. Prepayment of Loans . . . . . . . . . . . . . . . . . . . . . 28
Section 2.10. Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 2.11. Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 2.12. Alternate Rate of Interest. . . . . . . . . . . . . . . . . . 30
Section 2.13. Increased Costs . . . . . . . . . . . . . . . . . . . . . . . 30
Section 2.14. Break Funding Payments; Prepayment Fees . . . . . . . . . . . 31
Section 2.15. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 2.16. Payments Generally; Pro Rata Treatment; Sharing of
Set-offs. . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 2.17. Mitigation Obligations; Replacement of Lenders. . . . . . . . 35
ARTICLE III Representations and Warranties. . . . . . . . . . . . . . . . . . . 36
Section 3.01. Organization; Powers. . . . . . . . . . . . . . . . . . . . . 36
Section 3.02. Authorization; Enforceability . . . . . . . . . . . . . . . . 36
Section 3.03. Governmental Approvals; No Conflicts. . . . . . . . . . . . . 36
Section 3.04. Financial Condition; No Material Adverse Change . . . . . . . 36
Section 3.05. Properties and Licenses . . . . . . . . . . . . . . . . . . . 37
Section 3.06. Litigation and Environmental Matters. . . . . . . . . . . . . 37
Section 3.07. Compliance with Laws and Agreements . . . . . . . . . . . . . 38
Section 3.08. Investment and Holding Company Status . . . . . . . . . . . . 38
-i-
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<S> <C>
Section 3.09. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 3.10. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 3.11. Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 3.12. Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 3.13. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 3.14. Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 3.15. Supply Agreement. . . . . . . . . . . . . . . . . . . . . . . 39
Section 3.16. Security Documents. . . . . . . . . . . . . . . . . . . . . . 39
Section 3.17. Year 2000 Readiness . . . . . . . . . . . . . . . . . . . . . 39
Section 3.18. Capitalization. . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE IV Conditions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 4.01. Effective Date. . . . . . . . . . . . . . . . . . . . . . . . 40
Section 4.02. Each Borrowing. . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE V Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . 43
Section 5.01. Financial Statements and Other Information. . . . . . . . . . 44
Section 5.02. Notices of Material Events. . . . . . . . . . . . . . . . . . 45
Section 5.03. Information Regarding Collateral. . . . . . . . . . . . . . . 46
Section 5.04. Existence; Conduct of Business. . . . . . . . . . . . . . . . 47
Section 5.05. Payment of Obligations. . . . . . . . . . . . . . . . . . . . 47
Section 5.06. Maintenance of Properties . . . . . . . . . . . . . . . . . . 47
Section 5.07. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 5.08. Books and Records; Inspection Rights. . . . . . . . . . . . . 48
Section 5.09. Compliance with Laws and Agreements . . . . . . . . . . . . . 48
Section 5.10. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . 49
Section 5.11. Further Assurances. . . . . . . . . . . . . . . . . . . . . . 49
Section 5.12. Casualty and Condemnation . . . . . . . . . . . . . . . . . . 49
Section 5.13. Interest Rate Protection. . . . . . . . . . . . . . . . . . . 49
Section 5.14. Execution of Pledge Agreement (Borrower); Subsidiary
Guarantors; Additional Security Documents . . . . . . . . . . 50
ARTICLE VI Negative Covenants. . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 6.01. Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 6.02. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
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Section 6.03. Fundamental Changes . . . . . . . . . . . . . . . . . . . . . 53
Section 6.04. Investments, Loans, Advances, Guarantees and
Acquisitions; Asset Sales. . . . . . . . . . . . . . . . . . .53
Section 6.05. Hedging Agreements. . . . . . . . . . . . . . . . . . . . . . 56
Section 6.06. Restricted Payments . . . . . . . . . . . . . . . . . . . . . 56
Section 6.07. Transactions with Affiliates. . . . . . . . . . . . . . . . . 57
Section 6.08. Restrictive Agreements. . . . . . . . . . . . . . . . . . . . 57
Section 6.09. Repayment of Indebtedness . . . . . . . . . . . . . . . . . . 57
Section 6.10. Limitation on Sale-Leaseback Transactions . . . . . . . . . . 57
Section 6.11. Senior Indebtedness to Total Capitalization . . . . . . . . . 57
Section 6.12. Consolidated Indebtedness to Total Capitalization . . . . . . 58
Section 6.13. Consolidated Indebtedness to Annualized EBITDA. . . . . . . . 58
Section 6.14. Senior Indebtedness to Annualized EBITDA. . . . . . . . . . . 59
Section 6.15. Annualized EBITDA to Consolidated Interest Expense. . . . . . 59
Section 6.16. Annualized EBITDA to Consolidated Debt Service. . . . . . . . 60
Section 6.17. Consolidated Gross Revenues . . . . . . . . . . . . . . . . . 60
Section 6.18. Minimum Subscribers . . . . . . . . . . . . . . . . . . . . . 61
Section 6.19. Consolidated Parent Indebtedness to Total Parent
Capitalization. . . . . . . . . . . . . . . . . . . . . . . . 62
Section 6.20. Consolidated Parent Indebtedness to Annualized Parent
EBITDA. . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 6.21. Use of Collateral . . . . . . . . . . . . . . . . . . . . . . 62
ARTICLE VII Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . 63
ARTICLE VIII The Agents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
ARTICLE IX Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 9.01. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 9.02. Waivers; Amendments . . . . . . . . . . . . . . . . . . . . . 68
Section 9.03. Expenses; Indemnity; Damage Waiver. . . . . . . . . . . . . . 69
Section 9.04. Successors and Assigns. . . . . . . . . . . . . . . . . . . . 70
Section 9.05. Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 9.06. Counterparts; Integration; Effectiveness. . . . . . . . . . . 73
Section 9.07. Severability. . . . . . . . . . . . . . . . . . . . . . . . . 73
Section 9.08. Right of Setoff . . . . . . . . . . . . . . . . . . . . . . . 73
Section 9.09. Governing Law; Jurisdiction; Consent to Service of
Process . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
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Section 9.10. WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . 74
Section 9.11. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 9.12. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 75
Section 9.13. Interest Rate Limitation. . . . . . . . . . . . . . . . . . . 75
</TABLE>
EXHIBITS:
Exhibit A Form of Assignment and Acceptance
Exhibit B Form of Guarantee Agreement
Exhibit C Form of Indemnity and Contribution Agreement
Exhibit D Form of Security Agreement (Borrower)
Exhibit E Form of Pledge Agreement (Borrower)
Exhibit F Form of Pledge Agreement (Parent)
Exhibit G Form of Landlord Letter
Exhibit H Form of Security Agreement (Parent)
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<PAGE>
CREDIT AGREEMENT, dated as of July 14, 1999, among JATO OPERATING CORP.,
a Delaware corporation, JATO COMMUNICATIONS CORP., a Delaware corporation, the
LENDERS party hereto, STATE STREET BANK AND TRUST COMPANY, as Collateral Agent,
and LUCENT TECHNOLOGIES INC., as Administrative Agent.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. DEFINED TERMS. As used in this Agreement, the
following terms have the meanings specified below:
"ABR", when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are bearing interest
at a rate determined by reference to the Alternate Base Rate.
"ADDITIONAL ASSETS" means any capital assets used or useful in the
business of the Borrower and the Subsidiaries.
"ADJUSTED LIBO RATE" means, with respect to any LIBOR Borrowing
for any Interest Period, an interest rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest
Period multiplied by (b) the Statutory Reserve Rate.
"ADMINISTRATIVE AGREEMENT" means the Financing and Management
Services Agreement, dated as of July 14, 1999, by and between the Parent and the
Borrower, as in effect on the date hereof.
"ADMINISTRATIVE AGENT" means Lucent, in its capacity as
administrative agent for the Lenders hereunder.
"ADMINISTRATIVE QUESTIONNAIRE" means an Administrative
Questionnaire in a form supplied by the Administrative Agent.
"AFFILIATE" means, with respect to a specified Person, another
Person that directly, or indirectly through one or more intermediaries, Controls
or is Controlled by or is under common Control with the Person specified.
"AGENTS" means the Administrative Agent and the Collateral Agent.
"ALTERNATE BASE RATE" means, for any day, a rate per annum equal
to the greater of (a) the Prime Rate in effect on such day and (b) the Federal
Funds Effective Rate in effect on such day [ * ]. Any change in the
Alternate Base Rate due to a change in the Prime Rate or the Federal Funds
Effective Rate shall be effective from and including the effective date of such
change in the Prime Rate or the Federal Funds Effective Rate, respectively.
* INDICATES CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
"ANNUALIZED EBITDA" means, as of any date of determination,
Consolidated EBITDA for the period of two fiscal quarters then most recently
ended times two.
"ANNUALIZED PARENT EBITDA" means, as of any date of determination,
Consolidated Parent EBITDA for the period of two fiscal quarters then most
recently ended times two.
"APPLICABLE RATE" means, for any day, with respect to any Loan,
the applicable rate per annum set forth below under the caption "ABR Spread" or
"Eurodollar Spread", as the case may be:
<TABLE>
<CAPTION>
ABR Spread Eurodollar Spread
--------------- ---------------- ---------------------
<S> <C> <C>
Tranche 1 Loans 3.5% 4.5%
Tranche 2 Loans 3.5% 4.5%
</TABLE>
"ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance
entered into by a Lender and an assignee (with the consent of the Borrower and
Administrative Agent if required by Section 9.04), and accepted by the
Administrative Agent, in the form of Exhibit A or any other form approved by the
Administrative Agent.
"AVAILABILITY PERIOD" means, in respect of the Tranche 1 Loans,
the Tranche 1 Availability Period and, in respect of the Tranche 2 Loans,
Tranche 2 Availability Period.
"BOARD" means the Board of Governors of the Federal Reserve System
of the United States of America.
"BORROWER" means Jato Operating Corp., a Delaware corporation.
"BORROWER-RELATED COLLATERAL" has the meaning set forth in the
Security Agreement (Parent).
"BORROWING" means a Loan or group of Loans of the same Class and
Type, made, converted or continued on the same date and, in the case of LIBOR
Loans, as to which a single Interest Period is in effect.
"BORROWING REQUEST" means a request by the Borrower for a
Borrowing in accordance with Section 2.03.
"BUSINESS DAY" means any day that is not a Saturday, Sunday or
other day on which commercial banks in New York City are authorized or required
by law to remain closed; PROVIDED that, when used in connection with a LIBOR
Loan, the term "BUSINESS DAY" shall also exclude any day on which banks are not
open for dealings in dollar deposits in the London interbank market.
"BUSINESS PLAN" means, for any fiscal year, the business plan of
the Borrower and the Subsidiaries for such fiscal year.
2
<PAGE>
"CAPITAL EXPENDITURES" means, for any period, the additions to
property, plant and equipment and other capital expenditures of the Borrower and
the Subsidiaries that are (or would be) set forth in a consolidated statement of
cash flows of the Borrower for such period prepared in accordance with GAAP.
"CAPITAL LEASE OBLIGATIONS" of any Person means the obligations of
such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
"CHANGE IN CONTROL" means (a) prior to the issuance and sale of
capital stock of the Parent pursuant to an initial public offering registered
under the Securities Act (i) the acquisition of beneficial ownership,
directly or indirectly, by any Person or group (within the meaning of the
Securities Exchange Act), other than the Founders or the Series B Investors,
of shares representing more than [ * ] of the aggregate ordinary voting
power represented by the issued and outstanding capital stock of the Parent;
(ii) occupation of a majority of the seats (other than vacant seats) on the
Board of Directors of the Parent by persons other than one person designated
by CEA Capital Partners USA, L.P., one person designated by Crest
Communications Partners, L.P., the chief executive officer of the Parent, one
person designated by the chief executive officer of the Parent and one person
designated by such other four persons; (iii) a majority of the persons
appointed by the Board of Directors of the Parent as Senior Officers as of
the date hereof shall cease to be Senior Officers; (iv) beneficial ownership,
directly or indirectly, by the Founders of less than [ * ] of the aggregate
ordinary voting power represented by the issued and outstanding capital stock
of the Parent; and (v) the failure of Brian Gast to be a member of the Board
of Directors of the Parent other than by reason of death or permanent
disability or removal for "cause," which shall include without limitation (A)
gross negligence or willful misconduct, (B) failure to perform diligently and
competently his duties as a director and as chief executive officer, or (C)
conviction of a felony; (b) following the issuance and sale of capital stock
of the Parent pursuant to an initial public offering registered under the
Securities Act, (i) the acquisition of beneficial ownership, directly or
indirectly, by any Person or group (within the meaning of Securities Exchange
Act) other than the Founders, of shares representing more than 50% of the
aggregate ordinary voting power represented by the issued and outstanding
capital stock of the Parent; or (ii) occupation of a majority of the seats
(other than vacant seats) on the Board of Directors of the Parent by Persons
who were neither (A) recommended by the Board of Directors of the Parent to
be elected by the stockholders of the Parent nor (B) appointed by directors
so nominated; or (c) the acquisition of ownership, directly or indirectly,
beneficially or of record, by any Person other than the Parent or a wholly
owned Subsidiary of any ownership or equity interest in the Borrower.
"CHANGE IN LAW" means (a) the adoption of any law, rule or
regulation after the date of this Agreement, (b) any change in any law, rule or
regulation or in the interpretation or application thereof by any Governmental
Authority after the date of this Agreement or (c) compliance by any Lender (or,
for purposes of Section 2.13(b), by any lending office of such Lender or by such
Lender's holding company, if any) with any request, guideline or directive
* INDICATES CONFIDENTIAL TREATMENT REQUESTED
3
<PAGE>
(whether or not having the force of law) of any Governmental Authority made or
issued after the date of this Agreement.
"CLASS", when used in reference to any Loan or Borrowing, refers
to whether such Loan, or the Loans comprising such Borrowing, are Tranche 1
Loans or Tranche 2 Loans.
"CODE" means the Internal Revenue Code of 1986, as amended from
time to time.
"COLLATERAL" means any and all "Collateral" as defined in the
Security Agreements.
"COLLATERAL AGENT" means State Street Bank and Trust Company, in
its capacity as collateral agent for the Secured Parties.
"COMMITMENT" means, with respect to each Lender, the commitment,
if any, of such Lender to make Loans hereunder during any Availability Period,
expressed as an amount representing the maximum principal amount of the Loans to
be made by such Lender hereunder, as such commitment may be (a) reduced from
time to time pursuant to Section 2.06 and (b) reduced or increased from time to
time pursuant to assignments by or to such Lender pursuant to Section 9.04. The
initial amount of each Lender's Commitment is set forth on Schedule 2.01, or in
the Assignment and Acceptance pursuant to which such Lender shall have assumed
its Commitment, as applicable. The initial aggregate amount of the Lenders'
Commitments is $50,000,000.
"CONSOLIDATED DEBT SERVICE" means, for any period, Consolidated
Interest Expense for such period plus any scheduled payments of principal of
Indebtedness of the Borrower and the Subsidiaries during such period.
"CONSOLIDATED EBITDA" means, for any period, Consolidated Net
Income for such period (adjusted to exclude all extraordinary items and
Non-Recurring Items), plus, without duplication and to the extent deducted from
revenues in determining Consolidated Net Income, the sum of (a) the aggregate
amount of Consolidated Interest Expense for such period, (b) the aggregate
amount of income tax expense for such period, and (c) all amounts attributable
to depreciation and amortization for such period plus, without duplication,
preferred stock dividends payable in cash in respect of any Disqualified Stock
of the Borrower or any Subsidiary for such period, all as determined on a
consolidated basis with respect to the Borrower and the Subsidiaries in
accordance with GAAP.
"CONSOLIDATED GROSS REVENUES" means, for any period, consolidated
gross revenues of the Borrower and the Subsidiaries attributable to sales of its
services to Subscribers (and in any event excluding all revenues arising from
the sales of equipment).
"CONSOLIDATED INDEBTEDNESS" means, as of any date of
determination, the aggregate principal amount of Indebtedness (including
Disqualified Stock) of the Borrower and the Subsidiaries outstanding as of such
date determined on a consolidated basis in accordance with GAAP.
4
<PAGE>
"CONSOLIDATED INTEREST EXPENSE" means, for any period, the sum of
(a) the interest expense, both expensed and capitalized (including the interest
component in respect of Capital Lease Obligations, but excluding any such
interest expense of any Person for any period that the income (or loss) of such
Person is excluded from the calculation of Consolidated Net Income by reason of
clause (b) of the definition of "Consolidated Net Income"), accrued by the
Borrower and the Subsidiaries during such period plus (b) preferred stock
dividends in respect of Disqualified Stock of the Borrower and the Subsidiaries
for such period, in each case determined on a consolidated basis in accordance
with GAAP.
"CONSOLIDATED NET INCOME" means, for any period, net income or
loss of the Borrower and the Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP; PROVIDED that there shall be
excluded (a) the income of any Person in which any other Person (other than the
Borrower or any Subsidiary or any director holding qualifying shares in
compliance with applicable law) has a joint interest, except to the extent of
the amount of dividends or other distributions (including distributions made as
a return of capital or repayment of principal of advances) actually paid to the
Borrower or any Subsidiary by such Person, and (b) the income (or loss) of any
Person accrued prior to the date it becomes a Subsidiary or is merged into or
consolidated with the Borrower or any Subsidiary or the date such Person's
assets are acquired by the Borrower or any Subsidiary.
"CONSOLIDATED PARENT EBITDA" means, for any period, Consolidated
Parent Net Income for such period (adjusted to exclude all extraordinary items
and Non-Recurring Parent Items), plus, without duplication and to the extent
deducted from revenues in determining Consolidated Parent Net Income, the sum of
(a) the aggregate amount of Consolidated Parent Interest Expense for such
period, (b) the aggregate amount of income tax expense for such period, and (c)
all amounts attributable to depreciation and amortization for such period plus,
without duplication, preferred stock dividends payable in cash in respect of any
Disqualified Stock of the Parent, the Borrower or any Subsidiary for such
period, all as determined on a consolidated basis with respect to the Parent,
the Borrower and the Subsidiaries in accordance with GAAP.
"CONSOLIDATED PARENT INDEBTEDNESS" means, as of any date of
determination, the aggregate principal amount of Indebtedness (including
Disqualified Stock) of the Parent, the Borrower and the Subsidiaries outstanding
as of such date determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED PARENT INTEREST EXPENSE" means, for any period, the
sum of (a) the interest expense, both expensed and capitalized (including the
interest component in respect of Capital Lease Obligations, but excluding any
such interest expense of any Person for any period that the income (or loss) of
such Person is excluded from the calculation of Consolidated Parent Net Income
by reason of clause (b) of the definition of "Consolidated Parent Net Income"),
accrued by the Parent, the Borrower and the Subsidiaries during such period plus
(b) preferred stock dividends in respect of Disqualified Stock of the Parent,
the Borrower and the Subsidiaries for such period, in each case determined on a
consolidated basis in accordance with GAAP.
"CONSOLIDATED PARENT NET INCOME" means, for any period, net income
or loss of the Parent, the Borrower and the Subsidiaries for such period
determined on a consolidated basis
5
<PAGE>
in accordance with GAAP; PROVIDED that there shall be excluded (a) the income of
any Person in which any other Person (other than the Parent, the Borrower or any
Subsidiary or any director holding qualifying shares in compliance with
applicable law) has a joint interest, except to the extent of the amount of
dividends or other distributions (including distributions made as a return of
capital or repayment of principal of advances) actually paid to the Parent, the
Borrower or any Subsidiary by such Person, and (b) the income (or loss) of any
Person accrued prior to the date it becomes a Subsidiary or is merged into or
consolidated with the Parent, the Borrower or any Subsidiary or the date such
Person's assets are acquired by the Parent, the Borrower or any Subsidiary.
"CONTROL" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ability to exercise voting power, by contract or
otherwise. "CONTROLLING" and "CONTROLLED" have meanings correlative thereto.
"DEFAULT" means any event or condition which constitutes an Event
of Default or which upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
"DISCLOSED MATTERS" means the actions, suits and proceedings and
the environmental matters disclosed in Schedule 3.06.
"DISQUALIFIED STOCK" means any capital stock of any Person which
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable or exercisable) or upon the happening of any event
(i) matures or is mandatorily redeemable pursuant to a sinking fund obligation
or otherwise, (ii) is convertible or exchangeable for Indebtedness or
Disqualified Stock, (iii) requires the payment of dividends other than dividends
payable solely in additional shares of capital stock of such Person (other than
Disqualified Stock) or (iv) is redeemable or subject to required repurchase at
the option of the holder thereof, in whole or in part.
"DOLLARS" or "$" refers to lawful money of the United States of
America.
"EFFECTIVE DATE" means the date on which the conditions specified
in Section 4.01 are satisfied (or waived in accordance with Section 9.02).
"ELIGIBLE INSTITUTION" means a commercial banking institution that
has a combined capital and surplus of not less than $500 million (or its
equivalent in foreign currency) whose debt is rated "A" or better by S&P or "A2"
or better by Moody's at the time as of which any investment or rollover therein
is made.
"ELIGIBLE PERSON" means (a) a commercial bank, an insurance
company or other similar financial institution or (b) any other entity which is
(or which is managed by a manager which manages funds which are) primarily
engaged in making, purchasing or otherwise investing in commercial loans or
extending, or investing in extensions of, credit for its own account in the
ordinary course of business; PROVIDED, HOWEVER, that in no event may any Person
be an Eligible Person if it is engaged in a Qualifying Business or if it is
Controlled by a Person that is engaged in a Qualifying Business.
6
<PAGE>
"ENVIRONMENTAL LAWS" means all laws, rules, regulations, codes,
ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by any Governmental Authority,
relating in any way to the environment, preservation or reclamation of natural
resources, the management, release or threatened release of any Hazardous
Material or to health and safety matters.
"ENVIRONMENTAL LIABILITY" means any liability, contingent or
otherwise (including any liability for damages, costs of environmental
remediation, fines, penalties or indemnities), of the Parent or any Subsidiary
directly or indirectly resulting from or based upon (a) violation of any
Environmental Law, (b) the generation, use, handling, transportation, storage,
treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous
Materials, (d) the release or threatened release of any Hazardous Materials into
the environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that, together with the Borrower, is treated as a single employer
under Section 414(b) or (c) of the Code or, solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
"ERISA EVENT" means (a) any "reportable event", as defined in
Section 4043 of ERISA or the regulations issued thereunder with respect to a
Plan (other than an event for which the 30-day notice period is waived); (b) the
existence with respect to any Plan of an "accumulated funding deficiency" (as
defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d)
of ERISA of an application for a waiver of the minimum funding standard with
respect to any Plan; (d) the incurrence by the Borrower or any of its ERISA
Affiliates of any liability under Title IV of ERISA with respect to the
termination of any Plan; (e) the receipt by the Borrower or any ERISA Affiliate
from the PBGC or a plan administrator of any notice relating to an intention to
terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f)
the incurrence by the Borrower or any of its ERISA Affiliates of any liability
with respect to the withdrawal or partial withdrawal from any Plan or
Multiemployer Plan; or (g) the receipt by the Borrower or any ERISA Affiliate of
any notice, or the receipt by any Multiemployer Plan from the Borrower or any
ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability
or a determination that a Multiemployer Plan is, or is expected to be, insolvent
or in reorganization, within the meaning of Title IV of ERISA.
"EVENT OF DEFAULT" has the meaning assigned to such term in
Article VII.
"EXCESS CASH FLOW" means, for any fiscal year of the Borrower, the
sum (without duplication) of the following (provided that Excess Cash Flow shall
be zero for any fiscal year that the sum of the following would otherwise be
less than zero):
7
<PAGE>
(a) Consolidated Net Income for such fiscal year, adjusted to
exclude any gains or losses attributable to Prepayment Events; PLUS
(b) depreciation, amortization and other non-cash charges or
losses deducted in determining such Consolidated Net Income for such fiscal year
(including any interest expense accrued for such fiscal year that is not payable
currently in cash to the extent deducted in determining Consolidated Net
Income); PLUS
(c) the sum of (i) the amount, if any, by which Net Working
Capital decreased during such fiscal year plus (ii) the amount, if any, by which
the consolidated deferred revenues of the Borrower and the Subsidiaries
increased during such fiscal year plus (iii) the aggregate principal amount of
Capital Lease Obligations and other Indebtedness incurred by the Borrower or any
of the Subsidiaries during such fiscal year to finance Capital Expenditures, to
the extent that principal payments in respect of such Indebtedness would not be
excluded from clause (f) below when made; MINUS
(d) the sum of (i) any non-cash gains included in determining
such Consolidated Net Income for such fiscal year plus (ii) the amount, if any,
by which Net Working Capital increased during such fiscal year plus (iii) the
amount, if any, by which the consolidated deferred revenues of the Borrower and
the Subsidiaries decreased during such fiscal year; minus
(e) Capital Expenditures for such fiscal year; minus
(f) the aggregate principal amount of Indebtedness, repaid or
prepaid by the Borrower and the Subsidiaries during such fiscal year, excluding
(i) Loans prepaid pursuant to Section 2.09(b) or (c), (ii) repayments or
prepayments of Indebtedness financed by incurring other Indebtedness, to the
extent that mandatory principal payments in respect of such other Indebtedness
would not be excluded from this clause (f) when made and (iii) Indebtedness
referred to in clause (ii) of Section 6.01.
"EXCLUDED TAXES" means, with respect to either Agent, any Lender
or any other recipient of any payment to be made by or on account of any
obligation of the Borrower hereunder, (a) income or franchise taxes imposed on
(or measured by) its net income by the United States of America, or by the
jurisdiction under the laws of which such recipient is organized or in which its
principal office is located or, in the case of any Lender, in which its
applicable lending office is located, (b) any branch profits taxes imposed by
the United States of America or any similar tax imposed by any other
jurisdiction in which the Borrower is located and (c) in the case of a Foreign
Lender (other than an assignee pursuant to a request by the Borrower under
Section 2.17(b)), any withholding tax that is imposed on amounts payable to such
Foreign Lender at the time such Foreign Lender becomes a party to this Agreement
(or designates a new lending office) or is attributable to such Foreign Lender's
failure to comply with Section 2.15(e), except to the extent that such Foreign
Lender (or its assignor, if any) was entitled, at the time of designation of a
new lending office (or assignment), to receive additional amounts from the
Borrower with respect to such withholding tax pursuant to Section 2.15(a).
"FEDERAL FUNDS EFFECTIVE RATE" means, for any day, the weighted
average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds
8
<PAGE>
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published on the next succeeding Business Day by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day that
is a Business Day, the average (rounded upwards, if necessary, to the next 1/100
of 1%) of the quotations for such day for such transactions received by the
Administrative Agent from three Federal funds brokers of recognized standing
selected by it.
"FINANCIAL OFFICER" means, with respect to any Person, the chief
executive officer, the chief financial officer, principal accounting officer,
treasurer or controller of such Person.
"FOREIGN LENDER" means any Lender that is organized under the laws
of a jurisdiction other than the United States of America, any State thereof or
the District of Columbia.
"FOUNDERS" means Brian Gast, Leonard Allsup, Bruce E. Dines, Rex
H. Humston and Patrick M. Green.
"GAAP" means, subject to Section 1.04, generally accepted
accounting principles in the United States of America.
"GOVERNMENTAL AUTHORITY" means the government of the United States
of America, any other nation or any political subdivision thereof, whether state
or local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.
"GUARANTEE" of or by any Person (the "GUARANTOR") means any
obligation, contingent or otherwise, of the guarantor guaranteeing or having the
economic effect of guaranteeing any Indebtedness or other obligation of any
other Person (the "PRIMARY OBLIGOR") in any manner, whether directly or
indirectly, and including any obligation of the guarantor, direct or indirect,
(a) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation or to purchase (or to advance or
supply funds for the purchase of) any security for the payment thereof, (b) to
purchase or lease property, securities or services for the purpose of assuring
the owner of such Indebtedness or other obligation of the payment thereof, (c)
to maintain working capital, equity capital or any other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation or (d) as an account party
in respect of any letter of credit or letter of guaranty issued to support such
Indebtedness or obligation; PROVIDED, that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of business.
"GUARANTEE AGREEMENT" means the Guarantee and Subordination
Agreement among the Parent, the Subsidiaries and the Administrative Agent,
substantially in the form of Exhibit B.
"HAZARDOUS MATERIALS" means all explosive or radioactive
substances or wastes and all hazardous or toxic substances, wastes or other
pollutants, including petroleum or petroleum distillates, asbestos or asbestos
containing materials, polychlorinated biphenyls, radon
9
<PAGE>
gas, infectious or medical wastes and all other substances or wastes of any
nature regulated pursuant to any Environmental Law.
"HEDGING AGREEMENT" means any interest rate protection agreement,
foreign currency exchange agreement, commodity price protection agreement or
other interest or currency exchange rate or commodity price hedging arrangement.
"INDEBTEDNESS" of any Person means, without duplication, (a) all
obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments, (c) all
obligations of such Person upon which interest charges are customarily paid, (d)
all obligations of such Person under conditional sale or other title retention
agreements relating to property acquired by such Person, (e) all obligations of
such Person in respect of the deferred purchase price of property or services
(excluding accounts payable incurred in the ordinary course of business that are
not overdue by more than 60 days), (f) all Indebtedness of others secured by (or
for which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on property owned or acquired by such
Person, whether or not the Indebtedness secured thereby has been assumed, (g)
all Guarantees by such Person of Indebtedness of others, (h) all Capital Lease
Obligations of such Person, (i) all obligations, contingent or otherwise, of
such Person as an account party in respect of letters of credit and letters of
guaranty, (j) all obligations, contingent or otherwise, of such Person in
respect of bankers' acceptances and (k) all Disqualified Stock of such Person.
The Indebtedness of any Person shall include the Indebtedness of any other
entity (including any partnership in which such Person is a general partner) to
the extent such Person is liable therefor as a result of such Person's ownership
interest in or other relationship with such entity, except to the extent the
terms of such Indebtedness provide that such Person is not liable therefor. The
amount outstanding at any time of any Indebtedness issued with original issue
discount is the face amount of such Indebtedness less the remaining unamortized
portion of the original issue discount of such Indebtedness at such time as
determined in conformity with GAAP.
"INDEMNIFIED TAXES" means Taxes other than Excluded Taxes.
"INDEMNITY AND CONTRIBUTION AGREEMENT" means the Indemnity,
Subrogation and Contribution Agreement among the Loan Parties and the
Administrative Agent, substantially in the form of Exhibit C.
"INTEREST ELECTION REQUEST" means a request by the Borrower to
convert or continue a Borrowing in accordance with Section 2.05.
"INTEREST PAYMENT DATE" means (a) with respect to any ABR Loan,
the last day of each March, June, September and December and (b) with respect to
any LIBOR Loan, the last day of the Interest Period applicable to the Borrowing
of which such Loan is a part and, in the case of a LIBOR Borrowing with an
Interest Period of more than three months' duration, each day prior to the last
day of such Interest Period that occurs at intervals of three months' duration
after the first day of such Interest Period.
"INTEREST PERIOD" means, with respect to any LIBOR Borrowing, the
period commencing on the date of such Borrowing and ending on the numerically
corresponding day in
10
<PAGE>
the calendar month that is one, two, three or six months thereafter, as the
Borrower may elect; PROVIDED, that (a) if any Interest Period would end on a day
other than a Business Day, such Interest Period shall be extended to the next
succeeding Business Day unless such next succeeding Business Day would fall in
the next calendar month, in which case such Interest Period shall end on the
next preceding Business Day and (b) any Interest Period that commences on the
last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the last calendar month of such Interest
Period) shall end on the last Business Day of the last calendar month of such
Interest Period. For purposes hereof, the date of a Borrowing initially shall be
the date on which such Borrowing is made and thereafter shall be the effective
date of the most recent conversion or continuation of such Borrowing.
"LANDLORD LETTER" means a letter in the form of Exhibit G or any
other letter approved by the Administrative Agent.
"LENDERS" means the Persons listed on Schedule 2.01 and any other
Person that shall have become a party hereto pursuant to an Assignment and
Acceptance, other than any such Person that ceases to be a party hereto pursuant
to an Assignment and Acceptance.
"LIBOR", when used in reference to any Loan or Borrowing, refers
to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Adjusted LIBO Rate.
"LIBO RATE" means, with respect to any LIBOR Borrowing for any
Interest Period, the rate appearing on Page 3750 of the Dow Jones Markets
Service (or on any successor or substitute page of such service, or any
successor to or substitute for such Service, providing rate quotations
comparable to those currently provided on such page of such Service, as
determined by the Administrative Agent from time to time for purposes of
providing quotations of interest rates applicable to dollar deposits in the
London interbank market) at approximately 11:00 a.m., London time, two Business
Days prior to the commencement of such Interest Period, as the rate for dollar
deposits with a maturity comparable to such Interest Period. In the event that
such rate is not available at such time for any reason, then the "LIBO RATE"
with respect to such LIBOR Borrowing for such Interest Period shall be the rate
at which dollar deposits of $5,000,000 and for a maturity comparable to such
Interest Period are offered by the principal London office of the Administrative
Agent (or, if the Administrative Agent at the time is not a commercial bank, any
commercial bank based in New York City selected by the Administrative Agent for
the purpose of quoting such rate, provided that such commercial bank has a
combined capital and surplus and undivided profits of not less than
$500,000,000) in immediately available funds in the London interbank market at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period.
"LICENSES" has the meaning set forth in Section 3.05(c).
"LIEN" means, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, hypothecation, encumbrance, charge or security interest in,
on or of such asset, (b) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or title retention agreement (or any
financing lease having substantially the same economic effect as any
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of the foregoing) relating to such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities.
"LOAN DOCUMENTS" means this Agreement, the Guarantee Agreement,
the Security Documents and the Indemnity and Contribution Agreement.
"LOAN PARTIES" means the Parent, the Borrower and the
Subsidiaries.
"LOANS" means the loans made or deemed made to the Borrower
pursuant to this Agreement.
"LUCENT" means Lucent Technologies Inc.
"LUCENT LENDER" means any Lender that is Lucent or an Affiliate of
Lucent.
"LUCENT PRODUCT" means any products or services purchased by the
Borrower pursuant to the Supply Agreement.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a)
the business, condition (financial or otherwise), operations, performance or
properties of the Parent, (b) the business, condition (financial or otherwise),
operations, performance or properties of the Borrower and the Subsidiaries,
taken as a whole, (c) the ability of the Parent, the Borrower or any other Loan
Party to perform any of its obligations under any Loan Document or (d) the
legality, validity, binding effect or enforceability of this Agreement or any
other Loan Document.
"MATERIAL INDEBTEDNESS" means Indebtedness (other than the Loans),
or obligations in respect of one or more Hedging Agreements, of any one or more
of the Loan Parties in an aggregate principal amount exceeding $500,000. For
purposes of determining Material Indebtedness, the "principal amount" of the
obligations of a Loan Party in respect of any Hedging Agreement at any time
shall be the maximum aggregate amount (giving effect to any netting agreements)
that such Loan Party would be required to pay if such Hedging Agreement were
terminated at such time.
"MATURITY DATE" means June 30, 2006.
"MOODY'S" means Moody's Investors Service, Inc.
"MULTIEMPLOYER PLAN" means a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
"NET PROCEEDS" means, with respect to any casualty or condemnation
event, (a) the cash proceeds received in respect of such event including (i) in
the case of a casualty, insurance proceeds, and (ii) in the case of a
condemnation or similar event, condemnation awards and similar payments, net of
(b) the sum of all reasonable fees and out-of-pocket expenses paid by the
Borrower and the Subsidiaries to third parties (other than Affiliates) in
connection with such event.
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"NET WORKING CAPITAL" means, at any date, (a) the consolidated
current assets of the Borrower and the Subsidiaries as of such date (excluding
cash and Permitted Investments) minus (b) the consolidated current liabilities
of the Borrower and the Subsidiaries as of such date (excluding current
liabilities in respect of Indebtedness), determined on a consolidated basis in
accordance with GAAP. Net Working Capital at any date may be a positive or
negative number. Net Working Capital increases when it becomes more positive or
less negative and decreases when it becomes less positive or more negative.
"NON-RECURRING ITEMS" means, for any period, (a) all non-recurring
items that do not involve any payment of cash by the Borrower or any Subsidiary
during such period or any future period and (b) non-recurring items set forth on
the Borrower's consolidated statement of operations for such period below the
operating income line in respect of (i) gains or losses on sales or dispositions
of assets outside the ordinary course of business, (ii) discontinued operations,
(iii) the effects of changes in accounting principles or methods, (iv)
write-downs on any investments of the Borrower or any Subsidiary in any Person
(other than the Borrower or a Subsidiary) and (v) any restructuring charges,
including the amount of any such restructuring charge to cover cash payouts to
laid-off employees of the Borrower or a Subsidiary.
"NON-RECURRING PARENT ITEMS" means, for any period, (a) all
non-recurring items that do not involve any payment of cash by the Parent, the
Borrower or any Subsidiary during such period or any future period and (b)
non-recurring items set forth on the Parent's consolidated statement of
operations for such period below the operating income line in respect of (i)
gains or losses on sales or dispositions of assets outside the ordinary course
of business, (ii) discontinued operations, (iii) the effects of changes in
accounting principles or methods, (iv) write-downs on any investments of the
Parent, the Borrower or any Subsidiary in any Person (other than the Parent, the
Borrower or a Subsidiary) and (v) any restructuring charges, including the
amount of any such restructuring charge to cover cash payouts to laid-off
employees of the Parent, the Borrower or a Subsidiary.
"OBLIGATIONS" means all obligations secured under the Loan
Documents.
"OTHER TAXES" means any and all present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies arising from any payment made under any Loan Document or from the
execution, delivery or enforcement of, or otherwise with respect to, any Loan
Document.
"PARENT" means Jato Communications Corp., a Delaware corporation.
"PARTIAL TERMINATION DATE" has the meaning set forth in the
Security Agreement (Parent).
"PAYMENT DATE" means September 30, 2002 and each Quarterly Date
thereafter ending on and including the Maturity Date.
"PBGC" means the Pension Benefit Guaranty Corporation referred to
and defined in ERISA and any successor entity performing similar functions.
"PENDING APPLICATIONS" has the meaning set forth in Section
3.05(c).
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"PERFECTION CERTIFICATE" means, with respect to the Borrower, a
certificate in the form of Exhibit A to the Security Agreement (Borrower), with
respect to any Subsidiary, a similar certificate in the form of the applicable
Security Document delivered by such Subsidiary and, with respect to the Parent,
a certificate in the form of Exhibit A to the Security Agreement (Parent) or any
other form approved by the Collateral Agent.
"PERMITTED ENCUMBRANCES" means:
(a) Liens imposed by law for taxes, assessments, governmental
charges or similar claims that are not yet due or are being contested in
compliance with Section 5.05;
(b) statutory or common law Liens of landlords and carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other similar
Liens, arising in the ordinary course of business and securing obligations that
are not yet delinquent or are being contested in compliance with Section 5.05;
(c) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security;
(d) Liens incurred or deposits made to secure the performance
of tenders, bids, leases, statutory or regulatory obligations, surety and appeal
bonds, government contracts, performance and return-of-money bonds and other
obligations of a like nature, in each case in the ordinary course of business,
and a bank's unexercised right of set-off with respect to deposits made in the
ordinary course;
(e) judgment liens in respect of judgments that do not
constitute an Event of Default under clause (k) of Article VII;
(f) easements, municipal and zoning ordinances, rights-of-way
and similar encumbrances on or defects or other irregularities of title to real
property imposed by law or arising in the ordinary course of business that do
not secure any monetary obligations and do not materially detract from the value
of the affected property or interfere with the ordinary conduct of business of
the Parent, the Borrower or any Subsidiary;
(g) interests of lessees under leases or subleases granted by
the Parent, the Borrower or a Subsidiary as lessor that do not materially
interfere with the ordinary course of business of the Parent or the Borrower and
the Subsidiaries, taken as a whole;
(h) interests of licensees under licenses or sublicenses
granted by the Parent, the Borrower or a Subsidiary as licensor that do not
materially interfere with the ordinary course of business of the Parent or the
Borrower and the Subsidiaries, taken as a whole;
(i) Liens encumbering property or assets under construction
arising from progress or partial payments made by a customer of the Parent, the
Borrower or a Subsidiary relating to such property or assets;
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(j) any interest or title of a lessor in any property subject
to any lease otherwise not entered into in violation of the Loan Documents;
(k) any interest or title of a licensor in any property subject
to any license otherwise not entered into in violation of the Loan Documents;
(l) Liens in favor of customs and revenue authorities arising
as a matter of law to secure payment of customs duties in connection with the
importation of goods; and
(m) Liens in favor of a Securities Intermediary pursuant to
such Securities Intermediary's customary customer account agreement; provided
that any such Liens shall at no time secure any Indebtedness or obligations
other than customary fees and charges payable to such Securities Intermediary.
PROVIDED, that the term "Permitted Encumbrances" shall not include any Lien
securing Indebtedness.
"PERMITTED EXPENSES" means Capital Expenditures (excluding Capital
Expenditures financed by the incurrence of Capital Lease Obligations) for
equipment and other property to be used by the Borrower in the telecommunication
network related to Lucent Product in an aggregate amount not exceeding three
percent (3%) of the Purchase Price, plus any fees paid or payable to Lucent
pursuant to Section 2.10.
"PERMITTED INVESTMENTS" means:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are backed by
the full faith and credit of the United States of America), in each case
maturing not more than 365 days after the date of acquisition thereof;
(b) commercial paper of a domestic issuer rated "A-1" or better
by S&P or "P-1" or better by Moody's maturing not more than 365 days after the
date of acquisition thereof;
(c) certificates of deposit, banker's acceptances and time
deposits maturing not more than 365 days after the date of acquisition thereof
issued or guaranteed by or placed with, and money market deposit accounts issued
or offered by, an Eligible Institution;
(d) master note or deposit arrangements with securities of the
types described in paragraphs (a), (b) and (c) above;
(e) money market preferred stock of a corporation organized
under the laws of a jurisdiction within the United States of America rated "AA"
or better by S&P or "Aa" or better by Moody's; PROVIDED HOWEVER, that any such
debt security that is rated by both such rating agencies shall be rated "AA" or
better by S&P or Moody's;
(f) fully collateralized repurchase agreements with a term of
not more than 30 days for securities described in clause (a) above and entered
into with an Eligible Institution; and
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(g) any fund investing exclusively in investments of the types
described in clauses (a) through (f) above.
"PERMITTED JURISDICTION" means a jurisdiction which is both a
Permitted Regulatory Jurisdiction and a Permitted UCC Jurisdiction.
"PERMITTED PREFERRED STOCK" means capital stock of the Borrower
(other than Disqualified Stock of the Borrower) of any class or classes (however
designated) that is preferred as to the payment of dividends, or as to the
distribution of assets upon any voluntary or involuntary liquidation or
dissolution of the Borrower, over shares of capital stock of any other class of
the Borrower.
"PERMITTED REGULATORY JURISDICTION" means a jurisdiction in which
all applicable Governmental Authorities have (i) certified the Borrower as a
competitive local exchange carrier (as defined in the Telecommunications Act of
1996); (ii) approved all interconnection agreements to which the Borrower is a
party relating to such jurisdiction; and (iii) approved the Borrower's tariff or
tariffs with respect to such jurisdiction; PROVIDED, HOWEVER, that any such
jurisdiction shall be a Permitted Regulatory Jurisdiction only if the Agents and
the Lenders shall have received an opinion of legal counsel for the Borrower in
form and substance reasonably satisfactory to the Administrative Agent as to
such matters.
"PERMITTED UCC JURISDICTION" means (i) the jurisdictions in which
the Borrower indicates in the certificate delivered pursuant to clause (i) of
Section 4.01 that the Borrower maintains or anticipates maintaining equipment at
any time the Loans are to be outstanding and (ii) any other jurisdiction in
which the Borrower or a Subsidiary indicates in a certificate delivered pursuant
to clause (b) of Section 5.03 or (in the case of a Subsidiary) in connection
with the execution and delivery of any Security Document pursuant to Section
5.14 that the Borrower or such Subsidiary maintains or anticipates maintaining
equipment at any time the Loans are to be outstanding; PROVIDED that (x) any
such jurisdiction described in clause (i) or (ii) of this definition shall be a
Permitted UCC Jurisdiction only if the certificate most recently delivered by
the Borrower or such Subsidiary pursuant to clause (i) of Section 4.01 (in the
case of the Borrower), in connection with the execution and delivery of any
Security Documents required to be delivered pursuant to Section 5.14 (in the
case of a Subsidiary) or pursuant to clause (b) of Section 5.03 (in the case of
the Borrower or any Subsidiary) certifies to the effect required under clause
(ii) of clause (b) of Section 5.03 with respect in such jurisdiction and (y) in
the case of any such other jurisdiction described in clause (ii) of this
definition, such other jurisdiction shall be a Permitted UCC Jurisdiction only
if the Collateral Agent shall have received an opinion of legal counsel for the
Borrower in form and substance reasonably satisfactory to the Collateral Agent
as to the actions taken in order for the Borrower or such Subsidiary to be able
to make the certifications required under clause (ii) of clause (b) of Section
5.03 and the validity and effectiveness of such actions, including without
limitation, their ability to withstand any challenge in a bankruptcy proceeding
and the priority of security interest created by the Security Documents on
equipment to be located in such jurisdiction.
"PERSON" means any natural person, corporation, limited liability
company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.
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"PLAN" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or
Section 412 of the Code or Section 302 of ERISA, and in respect of which the
Parent or the Borrower or any ERISA Affiliate is (or, if such plan were
terminated, would under Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA.
"PLEDGE AGREEMENT (BORROWER)" means the Pledge Agreement between
the Borrower and the Collateral Agent, substantially in the form of Exhibit E.
"PLEDGE AGREEMENT (PARENT)" means the Pledge Agreement between
the Parent and the Collateral Agent, substantially in the form of Exhibit F.
"PREPAYMENT EVENT" means any casualty or other insured damage to,
or any taking under power of eminent domain or by condemnation or similar
proceeding of, any property or asset of the Borrower or any Subsidiary after the
Effective Date; PROVIDED that (i) such events shall not constitute "Prepayment
Events" to the extent that the aggregate Net Proceeds from all such events are
less than $100,000 during any fiscal year of the Borrower and (ii) any such
event shall not constitute a "Prepayment Event" if the Borrower elects (by
notice to the Administrative Agent within five Business Days after receipt of
the Net Proceeds of such event) to apply the Net Proceeds of such event to
repair, restore or replace the affected property or asset or to reinvest such
Net Proceeds in Additional Assets as promptly as practicable, but in any event
within 90 days, after the receipt of the Net Proceeds of such event; PROVIDED
FURTHER that, if at the expiration of the 90-day period referred to in this
clause (ii) less than all the Net Proceeds of such event have been reinvested or
applied as provided therein, then a "Prepayment Event" shall be deemed to have
occurred at the expiration of such 90-day period with Net Proceeds equal to the
Net Proceeds that have not been so reinvested or applied.
"PRIME RATE" means the rate of interest per annum published from
time to time in the "Money Rates" column (or any successor column) of THE WALL
STREET JOURNAL as the prime rate or, if such rate shall cease to be so published
or is not available for any reason, the rate of interest publicly announced from
time to time by any "money center" bank based in New York City selected by the
Administrative Agent for the purpose of quoting such rate, provided such
commercial bank has a combined capital and surplus and undivided profits of not
less than $500,000,000. Each change in the Prime Rate shall be effective from
and including the date such change is published.
"PURCHASE PRICE" means amounts paid or payable for Lucent Product
pursuant to invoices delivered pursuant to the Supply Agreement.
"QUALIFYING BUSINESS" means the business of providing digital
connections to broadband networks and related telecommunications services and
products.
"QUARTERLY DATE" means the last day of each of March, June,
September and December.
"REGISTER" has the meaning set forth in Section 9.04.
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"RELATED PARTIES" means, with respect to any specified Person,
such Person's Affiliates and the respective directors, officers, employees,
agents and advisors of such Person and such Person's Affiliates.
"REPAYMENT" means, in respect of any Indebtedness, the direct or
indirect repayment, prepayment, redemption, purchase, acquisition, defeasance,
retirement or other satisfaction of the principal of such Indebtedness, in whole
or in part, whether optional or mandatory. "REPAY" has a meaning correlative
thereto.
"REQUIRED LENDERS" means, at any time, Lenders having outstanding
Loans and Commitments representing more than 50% of the sum of the total
outstanding Loans and Commitments at such time; PROVIDED that at any time that
Lucent Lenders have outstanding Loans and Commitments representing more than 50%
of the sum of all outstanding Loans and Commitments at such time, "Required
Lenders" means each of (i) the Lucent Lenders at such time and (ii) other
Lenders holding more than 50% of the outstanding Loans and Commitments
(excluding those held by Lucent Lenders) at such time.
"RESTRICTED PAYMENT" means (a) any dividend or other distribution
(whether in cash, securities or other property) with respect to any shares of
any class of capital stock of the Borrower or any Subsidiary (or until the
Partial Termination Date, the Parent), (b) any Repayment of any Subordinated
Indebtedness (or until the Partial Termination Date, any Repayment of any
Indebtedness of the Parent incurred pursuant to clause (vii) of Section 6.01) or
(c) any payment (whether in cash, securities or other property), including any
sinking fund or similar deposit, on account of the purchase, redemption,
retirement, acquisition, cancellation or termination of any shares of any class
of capital stock of the Borrower or any Subsidiary (or until the Partial
Termination Date, the Parent) or any option, warrant or other right to acquire
any such shares of capital stock of the Borrower or any Subsidiary ( or until
the Partial Termination Date, the Parent).
"S&P" means Standard & Poor's Ratings Services, a Division of the
McGraw-Hill Companies.
"SECURED PARTIES" means the Collateral Agent, the Administrative
Agent and the Lenders.
"SECURITIES ACCOUNT CONTROL AGREEMENT (BORROWER)" means the
Securities Account Control Agreement (Borrower) between the Borrower, the
Securities Intermediary (as defined therein) and the Collateral Agent,
substantially in the form of Exhibit G to the Securities Agreement (Borrower).
"SECURITIES ACCOUNT CONTROL AGREEMENT (PARENT)" means the
Securities Account Control Agreement (Parent) between the Parent, the Securities
Intermediary (as defined therein) and the Collateral Agent, substantially in the
form of Exhibit G to the Securities Agreement (Parent).
"SECURITIES ACT" means the Securities Act of 1933, as amended.
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"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended, and the rules of the Securities and Exchange Commission
thereunder as in effect from time to time.
"SECURITIES INTERMEDIARY" means any Person that is a party to a
Securities Account Control Agreement (Parent) or Securities Account Control
Agreement (Borrower) as the "Securities Intermediary" thereunder.
"SECURITY AGREEMENT (BORROWER)" means the Security Agreement
(Borrower) between the Borrower and the Collateral Agent, substantially in the
form of Exhibit D.
"SECURITY AGREEMENT (PARENT)" means the Security Agreement
(Parent) between the Parent and the Collateral, substantially in the form of
Exhibit H.
"SECURITY AGREEMENTS" means the Security Agreement (Borrower) and
the Security Agreement (Parent).
"SECURITY DOCUMENTS" means the Security Agreement (Borrower), the
Security Agreement (Parent), the Pledge Agreement (Borrower), the Pledge
Agreement (Parent), the Securities Account Control Agreement (Borrower) and the
Securities Account Control Agreement (Parent) and any other agreements delivered
pursuant to Section 5.14.
"SENIOR INDEBTEDNESS" means any Indebtedness of the Borrower or
any Subsidiary included in Consolidated Indebtedness that is not Subordinated
Indebtedness.
"SENIOR OFFICER" means any senior officer of the Parent having
substantial responsibilities for the management and supervision of the business,
operations and affairs of the Parent, including, with respect to finance, sales,
customer care, carrier relations, marketing, operations, technology and product
development.
"SERIES B INVESTORS" means the holders of the Series B Preferred
Stock of the Parent.
"STATUTORY RESERVE RATE" means a fraction (expressed as a
decimal), the numerator of which is the number one and the denominator of which
is the number one minus the aggregate of the maximum reserve percentages
(including any marginal, special, emergency or supplemental reserves) expressed
as a decimal established by the Board to which any Lender subject to regulation
by the Board is subject with respect to the Adjusted LIBO Rate, for eurocurrency
funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of
the Board). Such reserve percentages shall include those imposed pursuant to
such Regulation D. LIBOR Loans shall be deemed to constitute eurocurrency
funding and to be subject to such reserve requirements without benefit of or
credit for proration, exemptions or offsets that may be available from time to
time to any Lender under such Regulation D or any comparable regulation. The
Statutory Reserve Rate shall be adjusted automatically on and as of the
effective date of any change in any reserve percentage.
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"SUBORDINATED INDEBTEDNESS" of means any Indebtedness of the
Borrower owing to the Parent subordinated in right of payment to the payment of
the Obligations upon terms and conditions satisfactory to the Required Lenders.
"SUBSCRIBERS" means customers of the Borrower or any Subsidiary
obligated to pay cash for services of the Borrower or such Subsidiary at market
rates.
"SUBSIDIARY" means, with respect to any Person (the "PARENT") at
any date, any corporation, limited liability company, partnership, association
or other entity of which securities or other ownership interests representing
more than 50% of the equity or more than 50% of the ordinary voting power or, in
the case of a partnership, more than 50% of the general partnership interests
are, as of such date, owned, controlled or held by the parent or one or more
subsidiaries of the parent or by the parent and one or more subsidiaries of the
parent.
"SUBSIDIARY" means any subsidiary of the Borrower.
"SUPPLY AGREEMENT" means the Supply Agreement dated as of February
12, 1999 between Lucent and the Parent.
"TAXES" means any and all present or future taxes, levies,
imposts, duties, deductions, charges or withholdings imposed by any Governmental
Authority.
"TOTAL CAPITALIZATION" means, as of any date of determination, the
sum of (a) Consolidated Indebtedness as of such date plus (b) the amount of paid
in capital of the Borrower on such date determined on a consolidated basis in
accordance with GAAP plus (c), if positive, the retained earnings of the
Borrower on such date determined on a consolidated basis in accordance with
GAAP.
"TOTAL PARENT CAPITALIZATION" means, as of any date of
determination, the sum of (a) Consolidated Parent Indebtedness as of such date
plus (b) the amount of paid in capital of the Parent on such date determined on
a consolidated basis in accordance with GAAP plus (c), if positive, the retained
earnings of the Parent on such date determined on a consolidated basis in
accordance with GAAP.
"TRANCHE 1 AVAILABILITY PERIOD" means the period from and
including the Effective Date to but excluding the earlier of (i) the Tranche 1
Availability Termination Date and (ii) the date of termination of the Tranche 1
Commitment.
"TRANCHE 1 AVAILABILITY TERMINATION DATE" means the earlier of (i)
the date [ * ] after the Effective Date and (ii) the [ * ].
"TRANCHE 1 COMMITMENT" means the Commitment with respect to
Tranche 1 Loans in an amount not to exceed $[ * ].
"TRANCHE 1 LOANS" means Loans made or deemed made pursuant to this
Agreement during the Tranche 1 Availability Period.
* INDICATES CONFIDENTIAL TREATMENT REQUESTED
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"TRANCHE 2 AVAILABILITY PERIOD" means the period from and
including the Tranche 1 Availability Termination Date to but excluding the
earlier of (i) the Tranche 2 Availability Termination Date and the (ii) date of
termination of the Tranche 2 Commitment.
"TRANCHE 2 AVAILABILITY TERMINATION DATE" means the earlier of
(i) the date [ * ] after the Effective Date and (ii) the [ * ], unless
extended pursuant to Section 2.06(a).
"TRANCHE 2 COMMITMENT" means the Commitment with respect to
Tranche 2 Loans in an amount not to exceed $[ * ].
"TRANCHE 2 LOANS" means Loans made or deemed made pursuant to this
Agreement during the Tranche 2 Availability Period.
"TRANSACTIONS" means the execution, delivery and performance by
each Loan Party of the Loan Documents to which it is to be a party, the
borrowing of Loans and the use of the proceeds thereof.
"TYPE", when used in reference to any Loan or Borrowing, refers to
whether the rate of interest on such Loan, or on the Loans comprising such
Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate
Base Rate.
"WITHDRAWAL LIABILITY" means liability to a Multiemployer Plan as
a result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.
Section 1.02. CLASSIFICATION OF LOANS AND BORROWINGS. For
purposes of this Agreement, Loans may be classified and referred to by Class
(e.g., a "Tranche 1 Loan") or by Type (e.g., a "LIBOR Loan") or by Class and
Type (e.g., a "Tranche 1 LIBOR Loan"). Borrowings also may be classified and
referred to by Class (e.g., a "Tranche 1 Borrowing") or by Type (e.g., a "LIBOR
Borrowing") or by Class and Type (e.g., a "Tranche 1 LIBOR Borrowing").
Section 1.03. TERMS GENERALLY. The definitions of terms herein
shall apply equally to the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without
limitation." The word "will" shall be construed to have the same meaning and
effect as the word "shall." Unless the context requires otherwise (a) any
definition of or reference to any agreement, instrument or other document
herein shall be construed as referring to such agreement, instrument or other
document as from time to time amended, supplemented or otherwise modified
(subject to any restrictions on such amendments, supplements or modifications
set forth herein), (b) any reference herein to any Person shall be construed
to include such Person's successors and assigns, (c) the words "herein",
"hereof" and "hereunder", and words of similar import, shall be construed to
refer to this Agreement in its entirety and not to any particular provision
hereof, (d) all references herein to Articles, Sections, Exhibits and
Schedules shall be construed to refer to Articles and Sections of, and
Exhibits and Schedules to, this Agreement and (e) the words "asset" and
"property" shall be construed to have the same
* INDICATES CONFIDENTIAL TREATMENT REQUESTED
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meaning and effect and to refer to any and all tangible and intangible assets
and properties, including cash, securities, accounts, contract rights,
licenses and intellectual property.
Section 1.04. ACCOUNTING TERMS; GAAP. Except as otherwise
expressly provided herein, all terms of an accounting or financial nature shall
be construed in accordance with GAAP, as in effect from time to time; PROVIDED
that, if the Parent notifies the Administrative Agent that the Parent requests
an amendment to any provision hereof to eliminate the effect of any change
occurring after the date hereof in GAAP or in the application thereof on the
operation of such provision (or if the Administrative Agent notifies the Parent
that the Required Lenders request an amendment to any provision hereof for such
purpose), regardless of whether any such notice is given before or after such
change in GAAP or in the application thereof, then such provision shall be
interpreted on the basis of GAAP as in effect and applied immediately before
such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith.
ARTICLE II
THE LOANS
Section 2.01. COMMITMENTS. Subject to the terms and conditions
set forth herein, each Lender agrees to make Loans to the Borrower at any time
and from time to time during each Availability Period in an aggregate principal
amount not exceeding its Commitment at the time. Amounts repaid in respect of
Loans thereon may not be reborrowed.
Section 2.02. LOANS AND BORROWINGS.
(a) Each Loan shall be made as part of a Borrowing consisting
of Loans of the same Class and Type made by the Lenders ratably in accordance
with their respective Commitments. The failure of any Lender to make any Loan
required to be made by it shall not relieve any other Lender of its obligations
hereunder; PROVIDED that the Commitments of the Lenders are several and no
Lender shall be responsible for any other Lender's failure to make Loans as
required.
(b) Subject to Section 2.12, each Borrowing shall be comprised
entirely of LIBOR Loans or ABR Loans as the Borrower may request in accordance
herewith. Each Lender at its option may make any LIBOR Loan by causing any
domestic or foreign branch or Affiliate of such Lender to make such Loan;
PROVIDED that any exercise of such option shall not affect the obligation of the
Borrower to repay such Loan thereon in accordance with the terms of this
Agreement.
(c) At the commencement of each Interest Period for any LIBOR
Borrowing, such Borrowing shall be in an aggregate amount that is an integral
multiple of $100,000 and not less than $1,000,000. Borrowings of more than one
Type and Class may be outstanding at the same time; PROVIDED that there shall
not be more than six LIBOR Borrowings with respect to Tranche 1 Loans and six
LIBOR Borrowings with respect to Tranche 2 Loans outstanding at the same time.
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(d) Notwithstanding any other provision of this Agreement, the
Borrower shall not be entitled to request, or to elect to convert or continue,
any Borrowing as a LIBOR Borrowing if the Interest Period requested with respect
thereto would end after the Maturity Date for the Loans included in such
Borrowing.
Section 2.03. REQUESTS FOR BORROWINGS. To request a Borrowing,
the Borrower shall notify the Administrative Agent of such request by telephone
(a) in the case of a LIBOR Borrowing, not later than 11:00 a.m., New York City
time, three Business Days before the date of the proposed Borrowing or (b) in
the case of an ABR Borrowing, not later than 11:00 a.m., New York City time, one
Business Day before the date of the proposed Borrowing; PROVIDED that (i) the
Borrower may make only one request for a Borrowing in any single calendar month
(it being understood that all Borrowings made by the Borrower on the same date
shall be treated as a single request for a Borrowing for purposes of this
limitation) and (ii) if any Lucent Lender has a Commitment at the time of such
Borrowing and any portion of the proceeds of such Borrowing to be funded by such
Lucent Lender would be required to be funded by such Lucent Lender other than as
a credit against amounts owing to Lucent or an Affiliate of Lucent as provided
in Section 2.04, then the applicable Borrowing Request shall be made not later
than five Business Days before the date of the proposed Borrowing (in the case
of a LIBOR Borrowing) or three Business Days before the date of the proposed
Borrowing (in the case of an ABR Borrowing). Each such telephonic Borrowing
Request shall be irrevocable and shall be confirmed promptly by hand delivery or
telecopy to the Administrative Agent of a written Borrowing Request in a form
approved by the Administrative Agent and signed by the Borrower. Each such
telephonic and written Borrowing Request shall specify the following information
in compliance with Section 2.02:
(i) the aggregate amount of such Borrowing and a reasonably
detailed description of the use of the proceeds therefrom (and each
written Borrowing Request shall attach copies of all invoices to be paid
with such proceeds);
(ii the date of such Borrowing, which shall be a Business Day;
(iii) whether such Borrowing is to be a LIBOR Borrowing or an ABR
Borrowing;
(iv) in the case of a LIBOR Borrowing, the initial Interest
Period to be applicable thereto, which shall be a period contemplated by
the definition of the term "Interest Period"; and
(v) the location and number of the account or accounts to which
funds (if any) are to be disbursed, which shall comply with the
requirements of Section 2.04.
If no election as to the Type of Borrowing is specified, then the requested
Borrowing shall be an ABR Borrowing. If no Interest Period is specified with
respect to any requested LIBOR Borrowing, then the Borrower shall be deemed to
have selected an Interest Period of one month's duration. Promptly following
receipt of a Borrowing Request in accordance with this Section, the
Administrative Agent shall advise each Lender of the details thereof and of the
amount of such Lender's Loan to be made as part of the requested Borrowing.
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Section 2.04. FUNDING OF BORROWINGS.
(a) Each Lender shall make each Loan to be made by it hereunder
on the proposed date thereof by wire transfer of immediately available funds by
12:00 noon, New York City time, to the account of the Administrative Agent most
recently designated by it for such purpose by notice to the Lenders. The
Administrative Agent will make such Loans available to the Borrower by promptly
crediting the amounts so received, in like funds, to an account of the Borrower
designated by the Borrower in the applicable Borrowing Request. Notwithstanding
the foregoing, if the proceeds of any Borrowing are to be used to make any
payment to or for the account of Lucent or any Affiliate thereof (i) if any
Lucent Lender has a Commitment, then such Lucent Lender may make its Loan by
crediting the amount thereof against the payment obligations to Lucent or any
such Affiliate and shall be deemed to have made a Loan in the amount of such
credit and (ii) the Administrative Agent will make the Loans of the other
Lenders available to the Borrower by promptly crediting the amounts so received
from such other Lenders, in immediately available funds, to an account of Lucent
maintained with the Administrative Agent for such purpose, to the extent of the
proceeds of such Loans designated to be used to make payments to Lucent or any
of its Affiliates (after giving effect to any credits pursuant to clause (i)
above) and the balance, if any, of such proceeds shall be made available to the
Borrower as provided in the preceding sentence.
(b) Unless the Administrative Agent shall have received notice
from a Lender prior to the proposed date of any Borrowing that such Lender will
not make available to the Administrative Agent such Lender's share of such
Borrowing, the Administrative Agent may assume that such Lender has made such
share available on such date in accordance with paragraph (a) of this Section
and may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. In such event, if a Lender has not in fact made its share
of the applicable Borrowing available to the Administrative Agent, then the
applicable Lender and the Borrower severally agree to pay to the Administrative
Agent forthwith on demand such corresponding amount with interest thereon, for
each day from and including the date such amount is made available to the
Borrower to but excluding the date of payment to the Administrative Agent, at
(i) in the case of such Lender, the greater of the Federal Funds Effective Rate
and a rate determined by the Administrative Agent in accordance with banking
industry rules on interbank compensation or (ii) in the case of the Borrower,
the interest rate applicable to ABR Loans of the same Class. If such Lender
pays such amount to the Administrative Agent, then such amount shall constitute
such Lender's Loan included in such Borrowing. Nothing in this Section 2.04(b)
shall prejudice the Borrower's rights against any such defaulting Lender.
Section 2.05. INTEREST ELECTIONS.
(a) Each Borrowing initially shall be of the Type specified in
the applicable Borrowing Request and, in the case of a LIBOR Borrowing, shall
have an initial Interest Period as specified in such Borrowing Request.
Thereafter, the Borrower may elect to convert such Borrowing to a different Type
or to continue such Borrowing and, in the case of a LIBOR Borrowing, may elect
Interest Periods therefor, all as provided in this Section. The Borrower may
elect different options with respect to different portions of the affected
Borrowing, in which case each such portion shall be allocated ratably among the
Lenders holding the Loans
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comprising such Borrowing, and the Loans comprising each such portion shall
be considered a separate Borrowing.
(b) To make an election pursuant to this Section, the Borrower
shall notify the Administrative Agent of such election by telephone by the time
that a Borrowing Request would be required under Section 2.03 if the Borrower
were requesting a Borrowing of the Type resulting from such election to be made
on the effective date of such election. Each such telephonic Interest Election
Request shall be irrevocable and shall be confirmed promptly by hand delivery or
telecopy to the Administrative Agent of a written Interest Election Request in a
form approved by the Administrative Agent and signed by the Borrower.
(c) Each telephonic and written Interest Election Request shall
specify the following information in compliance with Section 2.02 and paragraph
(f) of this Section:
(i) the Borrowing to which such Interest Election Request
applies and, if different options are being elected with respect to
different portions thereof, the portions thereof to be allocated to each
resulting Borrowing (in which case the information to be specified
pursuant to clauses (iii) and (iv) below shall be specified for each
resulting Borrowing);
(ii) the effective date of the election made pursuant to such
Interest Election Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be a LIBOR Borrowing
or an ABR Borrowing; and
(iv) if the resulting Borrowing is a LIBOR Borrowing, the
Interest Period to be applicable thereto after giving effect to such
election, which shall be a period contemplated by the definition of the
term "Interest Period."
If any such Interest Election Request requests a LIBOR Borrowing but does not
specify an Interest Period, then the Borrower shall be deemed to have selected
an Interest Period of one month's duration.
(d) Promptly following receipt of an Interest Election Request,
the Administrative Agent shall advise each Lender of the details thereof and of
such Lender's portion of each resulting Borrowing.
(e) If the Borrower fails to deliver a timely Interest Election
Request with respect to a LIBOR Borrowing prior to the end of the Interest
Period applicable thereto, then, unless such Borrowing is repaid as provided
herein, at the end of such Interest Period such Borrowing shall be converted to
an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of
Default has occurred and is continuing, then, so long as an Event of Default is
continuing (i) no outstanding Borrowing may be converted to or continued as a
LIBOR Borrowing at the end of the then current Interest Period and (ii) unless
repaid, each LIBOR Borrowing shall be converted to an ABR Borrowing at the end
of the Interest Period applicable thereto.
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(f) A Borrowing of any Class may not be converted to or
continued as a LIBOR Borrowing if after giving effect thereto (i) the Interest
Period therefor would commence before and end after a date on which any
principal of the Loans of such Class is scheduled to be repaid and (ii) the sum
of the aggregate principal amount of outstanding LIBOR Borrowings of such Class
with Interest Periods ending on or prior to such scheduled repayment date plus
the aggregate principal amount of outstanding ABR Borrowings of such Class would
be less than the aggregate principal amount of Loans of such Class required to
be repaid on such scheduled repayment date.
Section 2.06. TERMINATION AND REDUCTION OF COMMITMENTS.
(a) Unless previously terminated, the Commitments with respect
to Tranche 1 Loans shall terminate on the Tranche 1 Availability Termination
Date and the Commitments with respect to Tranche 2 Loans shall terminate on the
Tranche 2 Availability Termination Date.
(b) On the date of each Loan made by any Lender such Lender's
Commitment shall be reduced by an amount equal to such Loan.
(c) If a prepayment would be required pursuant to paragraph (b)
or (c) of Section 2.09, all Commitments then in effect shall be reduced ratably
by an aggregate amount equal to the excess, if any, of the amount of the
required prepayment over the aggregate principal amount of Loans outstanding
immediately prior to giving effect to such prepayment.
(d) The Borrower may at any time terminate, or from time to
time reduce, the Commitments; PROVIDED that each reduction of the Commitments
pursuant to this paragraph (d) shall be in an amount that is an integral
multiple of $1,000,000 and not less than $1,000,000.
(e) The Borrower shall notify the Administrative Agent of any
election to terminate or reduce the Commitments under paragraph (d) of this
Section at least one Business Day prior to the effective date of such
termination or reduction, specifying such election and the effective date
thereof. Promptly following receipt of any such notice, the Administrative
Agent shall advise the Lenders of the contents thereof. Each notice delivered
by the Borrower pursuant to this Section shall be irrevocable. Any termination
or reduction of the Commitments shall be permanent. Each reduction of the
Commitments pursuant to paragraph (d) of this Section shall be made ratably
among the Lenders in accordance with their respective Commitments; PROVIDED that
the Borrower may, in its discretion, reduce the Commitments of Lucent Lenders
pursuant to such paragraph (d) without reducing the Commitments of other
Lenders.
Section 2.07. REPAYMENT OF LOANS; EVIDENCE OF DEBT.
(a) The Borrower hereby unconditionally promises to pay to the
Administrative Agent for the account of each Lender the then unpaid principal
amount of each Loan of such Lender as provided in Section 2.08.
(b) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing the indebtedness of the Borrower to
such Lender resulting from each Loan made by such Lender, including the amounts
of principal and interest payable and paid to such Lender from time to time
hereunder.
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(c) The Administrative Agent shall maintain accounts in which
it shall record (i) the amount of each Loan made hereunder, the Class and Type
thereof and the Interest Period applicable thereto, (ii) the amount of any
principal or interest due and payable or to become due and payable from the
Borrower to each Lender hereunder and (iii) the amount of any sum received by
the Administrative Agent hereunder for the account of the Lenders and each
Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to
paragraph (b) or (c) of this Section shall be PRIMA FACIE evidence of the
existence and amounts of the obligations recorded therein; PROVIDED that the
failure of any Lender or the Administrative Agent to maintain such accounts or
any error therein shall not in any manner affect the obligation of the Borrower
to repay the Loans in accordance with the terms of this Agreement.
(e) Any Lender may request that Loans of any Class made by it
be evidenced by a promissory note. In such event, the Borrower shall prepare,
execute and deliver to such Lender such a promissory note payable to the order
of such Lender (or, if requested by such Lender, to such Lender and its
registered assigns) and in a form approved by the Administrative Agent.
Thereafter, the Loans evidenced by such promissory note and interest thereon
shall at all times (including after assignment pursuant to Section 9.04) be
represented by one or more promissory notes in such form payable to the order of
the payee named therein (or, if such promissory note is a registered note, to
such payee and its registered assigns).
Section 2.08. AMORTIZATION OF LOANS.
(a) Subject to adjustment pursuant to paragraph (c) of this
Section, the Borrower shall repay Borrowings on each of the first four
Payment Dates in an aggregate amount equal to [ * ] of the sum of all Loans
made or deemed made hereunder (including amounts previously repaid or
prepaid), on each of the second four Payment Dates in an aggregate amount
equal to [ * ] of the sum of all Loans made or deemed made hereunder
(including amounts previously repaid or prepaid) and on each of the remaining
Payment Dates in an aggregate amount equal to [ * ] of the sum of all Loans
made or deemed made hereunder (including amounts previously repaid or
prepaid).
(b) To the extent not previously paid, all Loans of each Class
shall be due and payable on the Maturity Date with respect to Loans of such
Class.
(c) Any prepayment of a Borrowing of any Class shall be applied
to reduce ratably the subsequent scheduled repayments of the Borrowings of such
Class to be made pursuant to this Section; PROVIDED that any prepayment of a
Borrowing of any Class that is made pursuant to Section 2.09(a) shall be applied
to reduce the subsequent scheduled repayments of the Borrowings of such Class to
be made pursuant to this Section in reverse chronological order or, at the
election of any Lender with respect to any portion of such prepayment payable to
such Lender, to reduce ratably the subsequent scheduled repayments of the
Borrowings of such Class to be made pursuant to this Section.
(d) Prior to any repayment of any Borrowings of any Class
hereunder, the Borrower shall select the Borrowing or Borrowings of the
applicable Class to be repaid and shall
* INDICATES CONFIDENTIAL TREATMENT REQUESTED
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notify the Administrative Agent by telephone (confirmed by telecopy) of such
selection not later than 11:00 a.m., New York City time, three Business Days
before the scheduled date of such repayment; PROVIDED that each repayment of
Borrowings of any Class shall be applied to repay any outstanding ABR Borrowings
of such Class before any other Borrowings of such Class. If the Borrower fails
to make a timely selection of the Borrowing or Borrowings to be repaid, such
repayment shall be applied, first, to repay any outstanding ABR Borrowings of
the applicable Class and, second, to other Borrowings of the applicable Class in
the order of the remaining duration of their respective Interest Periods (the
Borrowing with the shortest remaining Interest Period to be repaid first). Each
repayment of a Borrowing shall be applied, ratably to the Loans included in the
repaid Borrowing. Repayments of Borrowings shall be accompanied by the payment
of accrued interest on the amount thereof.
Section 2.09. PREPAYMENT OF LOANS.
(a) The Borrower shall have the right at any time and from time
to time to prepay any Borrowing in whole or in part subject to the requirements
of this Section without penalty or premium (except as provided in Section 2.14
or 2.15).
(b) In the event and on each occasion that any Net Proceeds are
received by or on behalf of the Borrower or any Subsidiary in respect of any
Prepayment Event, the Borrower shall, within six Business Days after such Net
Proceeds are received, prepay Borrowings in an aggregate amount equal to such
Net Proceeds.
(c) Following the end of each fiscal year of the Borrower,
commencing with the fiscal year ending on or after the Effective Date, for
which there is any Excess Cash Flow, the Borrower shall prepay Borrowings in
an aggregate amount equal to [ * ]. Each prepayment pursuant to this
paragraph shall be made on or before the date on which financial statements
are delivered pursuant to Section 5.01 with respect to the fiscal year for
which Excess Cash Flow is being calculated (and in any event within 90 days
after the end of such fiscal year).
(d) Prior to any optional or mandatory prepayment of Borrowings
hereunder, the Borrower shall select the Borrowing or Borrowings to be prepaid
and shall specify such selection in the notice of such prepayment pursuant to
paragraph (e) of this Section; PROVIDED that each prepayment of Borrowings of
any Class shall be applied to prepay ABR Borrowings of such Class before any
other Borrowings of such Class. If optional or mandatory prepayment of
Borrowings made at a time when Borrowings of more than one Class are
outstanding, the Borrower shall select Borrowings to be prepaid so that the
aggregate amount of such prepayment is allocated among the Classes pro rata
based on the aggregate principal amount of outstanding Borrowings of each such
Class.
(e) The Borrower shall notify the Administrative Agent by
telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of
prepayment of a LIBOR Borrowing, not later than 1:00 p.m., New York City time,
three Business Days before the date of prepayment or (ii) in the case of
prepayment of an ABR Borrowing, not later than 11:00 a.m., New York City time,
one Business Day before the date of prepayment. Each such notice shall be
irrevocable and shall specify the prepayment date, the principal amount of each
Borrowing or
* INDICATES CONFIDENTIAL TREATMENT REQUESTED
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portion thereof to be prepaid and, in the case of a mandatory prepayment, a
reasonably detailed calculation of the amount of such prepayment. Promptly
following receipt of any such notice, the Administrative Agent shall advise the
Lenders of the contents thereof. Each partial prepayment of any Borrowing shall
be in an amount that is an integral multiple of $100,000 and not less than
$1,000,000, except as necessary to apply fully the required amount of a
mandatory prepayment. Each prepayment of a Borrowing shall be applied ratably to
the Loans included in the prepaid Borrowing. Prepayments of Borrowings shall be
accompanied by the payment of accrued interest on the amount prepaid.
Section 2.10. FEES.
(a) The Borrower agrees to pay to the Administrative Agent
for the account of each Lender (i) a commitment fee, which shall accrue (at
the rate per annum separately agreed) on the [ * ] of such Lender during
the period from and including the Effective Date to but excluding the date on
which the Tranche 1 Commitments terminate and (ii) a commitment fee, which
shall accrue (at a rate per annum separately agreed) on the [ * ] of such
Lender during the period from and including the [ * ] to but excluding the
date on which the [ * ] terminate. Accrued commitment fees shall be
payable in arrears on each Interest Payment Date and, in the case of
commitment fees in respect of [ * ], on the date on which the [ * ]
terminate and, in the case of commitment fees in respect of the [ * ], on
the date on which the [ * ] terminate, commencing on the first such date to
occur after the Effective Date. All commitment fees shall be computed on the
basis of a year of 360 days and shall be payable for the actual number of
days elapsed (including the first day but excluding the last day).
(b) The Borrower agrees to pay to Lucent, for its own account,
fees in the [ * ].
(c) The Borrower agrees to pay to the Administrative Agent (if
other than Lucent) and the Collateral Agent, for its own account, fees in the
[ * ].
(d) All fees payable hereunder shall be paid on the dates due,
in immediately available funds, (i) to the applicable Agent, (ii) to Lucent, in
the case of fees payable to it, or (iii) to the Administrative Agent, in the
case of commitment fees, for distribution to the Lenders entitled thereto. Fees
paid shall not be refundable under any circumstances.
Section 2.11. INTEREST.
(a) The Loans comprising each ABR Borrowing shall bear interest
at the Alternate Base Rate plus the Applicable Rate.
(b) The Loans comprising each LIBOR Borrowing shall bear
interest at the Adjusted LIBO Rate for the Interest Period in effect for such
Borrowing plus the Applicable Rate.
* INDICATES CONFIDENTIAL TREATMENT REQUESTED
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(c) Notwithstanding the foregoing if any principal of or
interest on any Loan or any fee or other amount payable by the Borrower
hereunder is not paid when due, whether at stated maturity, upon acceleration
or otherwise, such overdue amount shall bear interest, after as well as
before judgment, at a rate per annum equal to [ * ] plus the rate
applicable to ABR Loans as provided in paragraph (a) of this Section.
(d) All accrued interest on each Loan shall be payable in
arrears on each Interest Payment Date for such Loan; PROVIDED that (i) interest
accrued pursuant to paragraph (c) of this Section shall be payable [ * ],
(ii) in the event of any repayment or prepayment of any Loan, accrued interest
on the principal amount of such Loan repaid or prepaid shall be payable on the
date of such repayment or prepayment, or (iii) in the event of any conversion of
any Loan prior to the end of the current Interest Period therefor, accrued
interest on such Loan shall be payable on the effective date of such conversion.
(e) All interest hereunder shall be computed on the basis of a
year of 360 days, except that interest computed by reference to the Alternate
Base Rate at times when the Alternate Base Rate is based on the Prime Rate shall
be computed on the basis of a year of 365 days (or 366 days in a leap year), and
in each case shall be payable for the actual number of days elapsed (including
the first day but excluding the last day). The applicable Alternate Base Rate
or Adjusted LIBO Rate shall be determined in accordance with this Agreement by
the Administrative Agent, and such determination shall be conclusive absent
manifest error.
Section 2.12. ALTERNATE RATE OF INTEREST. If prior to the
commencement of any Interest Period for a LIBOR Borrowing:
(a) the Administrative Agent determines (which determination
shall be conclusive absent manifest error) that adequate and reasonable means do
not exist for ascertaining the Adjusted LIBO Rate for such Interest Period; or
(b) the Administrative Agent is advised by a majority in
interest of the Lenders participating in such Borrowing that the Adjusted LIBO
Rate for such Interest Period will not adequately and fairly reflect the cost to
such Lenders of making or maintaining their Loans included in such Borrowing for
such Interest Period;
then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Borrowing to, or
continuation of any Borrowing as, a LIBOR Borrowing shall be ineffective and
(ii) if any Borrowing Request requests a LIBOR Borrowing, such Borrowing shall
be made as an ABR Borrowing.
Section 2.13. INCREASED COSTS.
(a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets of, deposits with or for
the account of, or credit
* INDICATES CONFIDENTIAL TREATMENT REQUESTED
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extended by, any Lender (except any such reserve requirement reflected
in the Adjusted LIBO Rate); or
(ii) impose on any Lender or the London interbank market any
other condition affecting this Agreement or LIBOR Loans made by such
Lender;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any LIBOR Loan (or of maintaining its obligation
to make any such Loan) or to reduce the amount of any sum received or receivable
by such Lender hereunder (whether of principal, interest or otherwise), then the
Borrower will pay to such Lender such additional amount or amounts as will
compensate such Lender for such additional costs incurred or reduction suffered.
(b) If any Lender determines that any Change in Law regarding
capital requirements has or would have the effect of reducing the rate of return
on such Lender's capital or on the capital of such Lender's holding company, if
any, as a consequence of this Agreement or the Loans made by such Lender to a
level below that which such Lender or such Lender's holding company could have
achieved but for such Change in Law (taking into consideration such Lender's
policies and the policies of such Lender's holding company with respect to
capital adequacy), then from time to time the Borrower will pay to such Lender
such additional amount or amounts as will compensate such Lender or such
Lender's holding company for any such reduction suffered.
(c) A certificate of a Lender setting forth the amount or
amounts necessary to compensate such Lender or its holding company, as the case
may be, as specified in paragraph (a) or (b) of this Section and the basis
therefor shall be delivered to the Borrower by the applicable Lender (with a
copy to the Administrative Agent) and shall be conclusive absent manifest error
The Borrower shall pay such Lender the amount shown as due on any such
certificate within 30 days after receipt thereof.
(d) Failure or delay on the part of any Lender to demand
compensation pursuant to this Section shall not constitute a waiver of such
Lender's right to demand such compensation; PROVIDED that the Borrower shall not
be required to compensate a Lender pursuant to this Section for any increased
costs or reductions incurred more than 270 days prior to the date that such
Lender notifies the Borrower of the Change in Law giving rise to such increased
costs or reductions and of such Lender's intention to claim compensation
therefor; PROVIDED FURTHER that, if the Change in Law giving rise to such
increased costs or reductions is retroactive, then the 270-day period referred
to above shall be extended to include the period of retroactive effect thereof.
Section 2.14. BREAK FUNDING PAYMENTS; PREPAYMENT FEES. In the
event of (i) the payment of any principal of any LIBOR Loan other than on the
last day of an Interest Period applicable thereto (including as a result of an
Event of Default), (ii) the conversion of any LIBOR Loan other than on the last
day of the Interest Period applicable thereto, (iii) the failure to borrow,
convert, continue or prepay any Loan on the date specified in any notice
delivered pursuant hereto, or (iv) the assignment of any LIBOR Loan other than
on the last day of the Interest Period applicable thereto as a result of a
request by the Borrower pursuant to Section
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2.17, then, in any such event, the Borrower shall compensate each Lender for the
loss, cost and expense attributable to such event. In the case of a LIBOR Loan,
such loss, cost or expense to any Lender shall be deemed to include an amount
determined by such Lender to be the excess, if any, of (i) the amount of
interest which would have accrued on the principal amount of such Loan had such
event not occurred, at the Adjusted LIBO Rate that would have been applicable to
such Loan, for the period from the date of such event to the last day of the
then current Interest Period therefor (or, in the case of a failure to borrow,
convert or continue, for the period that would have been the Interest Period for
such Loan), over (ii) the amount of interest which would accrue on such
principal amount for such period at the interest rate which such Lender would
bid were it to bid, at the commencement of such period, for dollar deposits of a
comparable amount and period from other banks in the eurodollar market. A
certificate of any Lender setting forth any amount or amounts that such Lender
is entitled to receive pursuant to this paragraph shall be delivered to the
Borrower and shall be conclusive absent manifest error. The Borrower shall pay
such Lender the amount shown as due on any such certificate within 10 days after
receipt thereof.
Section 2.15. TAXES.
(a) Any and all payments by or on account of any obligation of
the Borrower hereunder or under any other Loan Document shall be made free and
clear of and without deduction for any Indemnified Taxes or Other Taxes;
PROVIDED that if the Borrower shall be required to deduct any Indemnified Taxes
or Other Taxes from such payments, then (i) the sum payable shall be increased
as necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section) the Administrative
Agent or Lender receives an amount equal to the sum it would have received had
no such deductions been made, (ii) the Borrower shall make such deductions and
(iii) the Borrower shall pay the full amount deducted to the relevant
Governmental Authority in accordance with applicable law.
(b) In addition, the Borrower shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.
(c) The Borrower shall indemnify the Administrative Agent and
each Lender, within 10 days after written demand therefor, for the full amount
of any Indemnified Taxes or Other Taxes paid by the Administrative Agent or such
Lender on or with respect to any payment by or on account of any obligation of
the Borrower hereunder or under any other Loan Document (including Indemnified
Taxes or Other Taxes imposed or asserted on or attributable to amounts payable
under this Section) and any penalties, interest and reasonable expenses arising
therefrom or with respect thereto, whether or not such Indemnified Taxes or
Other Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority. A certificate as to the amount of such payment
delivered to the Borrower by a Lender, or by the Administrative Agent on its own
behalf or on behalf of a Lender, shall be conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified
Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower
shall deliver to the Administrative Agent the original or a certified copy of a
receipt issued by such Governmental Authority evidencing such payment, a copy of
the return reporting such payment or other evidence of such payment reasonably
satisfactory to the Administrative Agent.
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(e) Each Foreign Lender shall deliver to the Borrower (with a
copy to the Administrative Agent) two copies of either United States Internal
Revenue Service Form 1001 or Form 4224, or, in the case of a Foreign Lender
claiming exemption from U.S. Federal withholding tax under Section 871(h) or
881(c) of the Code with respect to payments of "portfolio interest", a Form W-8,
or any subsequent versions thereof or successors thereto (and, if such Foreign
Lender delivers a Form W-8, a certificate representing that such Foreign Lender
is not a bank for purposes of Section 881(c) of the Code, is not a ten percent
(10%) shareholder of the Borrower (within the meaning of Section 871(h)(3)(B) of
the Code) and is not a controlled foreign corporation related to the Borrower
(within the meaning of Section 864(d)(4) of the Code)), properly completed and
duly executed by such Foreign Lender claiming complete exemption from, or
reduced rate of, U.S. Federal withholding tax on payments by the Borrower under
this Agreement or any other Loan Document. Such forms shall be delivered by
each Foreign Lender on or before the date it becomes a party to this Agreement
or designates a new lending office. In addition, each Foreign Lender shall
deliver such forms promptly upon the obsolescence, expiration or invalidity of
any form previously delivered by such Foreign Lender. Notwithstanding any other
provision of this Section 2.15, a Foreign Lender shall not be required to
deliver any form pursuant to this Section 2.15 that such Foreign Lender is not
legally able to deliver.
(f) If the Administrative Agent or a Lender determines, in its
sole discretion, that it has received a refund of any Taxes as to which it has
been indemnified by the Borrower pursuant to this Section 2.15, it shall pay
over such refund to the Borrower (but only to the extent of indemnity payments
made by the Borrower under this Section 2.15 with respect to the Taxes giving
rise to such refund), net of all reasonable out-of-pocket expenses of the
Administrative Agent or such Lender and without interest (other than any
interest paid by the relevant Governmental Authority with respect to such
refund); PROVIDED, HOWEVER, that the Borrower, upon the request of the
Administrative Agent or such Lender, agrees to repay the amount paid over to the
Borrower (plus any penalties, interest or other charges imposed by the relevant
Governmental Authority) to the Administrative Agent or such Lender in the event
the Administrative Agent or such Lender is required to repay such refund to such
Governmental Authority. Nothing contained in this Section 2.15 shall require
the Administrative Agent or any Lender to make available its tax returns (or any
other information relating to its Taxes which it deems confidential) to the
Borrower or any other Person.
Section 2.16. PAYMENTS GENERALLY; PRO RATA TREATMENT; SHARING OF
SET-OFFS.
(a) The Borrower shall make each payment required to be made by it
hereunder or under any other Loan Document (whether of principal, interest or
fees, or of amounts payable under Sections 2.13, 2.14 or 2.15, or otherwise)
prior to 12:00 noon, New York City time, on the date when due, in immediately
available funds, without set-off or counterclaim. Any amounts received after
such time on any date may, in the discretion of the Administrative Agent, be
deemed to have been received on the next succeeding Business Day for purposes of
calculating interest thereon. All such payments shall be made to the
Administrative Agent at The Chase Manhattan Bank, New York, New York, ABA no.
021000021, account no. 9101449099, phone no. (212) 552-2222 (or such other
account as the Administrative Agent shall from time to time specify by notice),
except that payments pursuant to Sections 2.10(b), 2.10(c), 2.13, 2.14, 2.15 and
9.03 shall be made directly to the Persons entitled thereto and payments
pursuant to
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other Loan Documents shall be made to the Persons specified therein. The
Administrative Agent shall distribute any such payments received by it for the
account of any other Person to the appropriate recipient promptly following
receipt thereof. If any payment under any Loan Document shall be due on a day
that is not a Business Day, the date for payment shall be extended to the next
succeeding Business Day, and, in the case of any payment accruing interest,
interest thereon shall be payable for the period of such extension. All payments
under each Loan Document shall be made in dollars.
(b) If at any time insufficient funds are received by and
available to the Administrative Agent to pay fully all amounts of principal,
interest and fees then due hereunder, such funds shall be applied (i) first,
towards payment of interest and fees then due hereunder, ratably among the
parties entitled thereto in accordance with the amounts of interest and fees
then due to such parties, and (ii) second, towards payment of principal then due
hereunder, ratably among the parties entitled thereto in accordance with the
amounts of principal then due to such parties.
(c) If any Lender shall, by exercising any right of set-off or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its Loans resulting in such Lender receiving payment of a
greater proportion of the aggregate amount of its Loans and accrued interest
thereon than the proportion received by any other Lender, then the Lender
receiving such greater proportion shall purchase (for cash at face value)
participations in the Loans of other Lenders to the extent necessary so that the
benefit of all such payments shall be shared by the Lenders ratably in
accordance with the aggregate amount of principal of and accrued interest on
their respective Loans; PROVIDED that (i) if any such participations are
purchased and all or any portion of the payment giving rise thereto is
recovered, such participations shall be rescinded and the purchase price
restored to the extent of such recovery, without interest, and (ii) the
provisions of this paragraph shall not be construed to apply to any payment made
by the Borrower pursuant to and in accordance with the express terms of this
Agreement or any payment obtained by a Lender as consideration for the
assignment of or sale of a participation in any of its Loans to any assignee or
participant, other than to the Borrower or any Subsidiary or Affiliate thereof
(as to which the provisions of this paragraph shall apply). The Borrower
consents to the foregoing and agrees, to the extent it may effectively do so
under applicable law, that any Lender acquiring a participation pursuant to the
foregoing arrangements may exercise against the Borrower rights of set-off and
counterclaim with respect to such participation as fully as if such Lender were
a direct creditor of the Borrower in the amount of such participation.
(d) Unless the Administrative Agent shall have received notice
from the Borrower prior to the date on which any payment is due to the
Administrative Agent for the account of the Lenders hereunder that the Borrower
will not make such payment, the Administrative Agent may assume that the
Borrower has made such payment on such date in accordance herewith and may, in
reliance upon such assumption, distribute to the Lenders the amount due. In
such event, if the Borrower has not in fact made such payment, then each of the
Lenders severally agrees to repay to the Administrative Agent forthwith on
demand the amount so distributed to such Lender with interest thereon, for each
day from and including the date such amount is distributed to it to but
excluding the date of payment to the Administrative Agent, at
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the greater of the Federal Funds Effective Rate and a rate determined by the
Administrative Agent in accordance with banking industry rules on interbank
compensation.
(e) Without limiting the generality of paragraph (a) above, the
Borrower's obligations to make each payment required to be made by it hereunder
or under any other Loan Document (whether of principal, interest, fees or
otherwise) shall be absolute and unconditional and shall not be subject to any
delay, reduction, set-off, counterclaim, defense or recoupment for any reason,
including any failure of any equipment or other assets acquired pursuant to the
Supply Agreement or any part thereof, or any dispute with, breach of
representation or warranty by or claim against any supplier, manufacturer,
installer, vendor or distributor, including Lucent. The provisions of this
paragraph shall not be construed as a waiver by the Parent or the Borrower of
any rights they may have under the Supply Agreement.
Section 2.17. MITIGATION OBLIGATIONS; REPLACEMENT OF LENDERS.
(a) If any Lender requests compensation under Section 2.13, or
if the Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.15,
then, if requested by the Borrower, such Lender shall use reasonable efforts to
designate a different lending office for funding or booking its Loans hereunder
or to assign its rights and obligations hereunder to another of its offices,
branches or affiliates, if, in the reasonable judgment of such Lender, such
designation or assignment (i) would eliminate or reduce amounts payable pursuant
to Section 2.13 or 2.15, as the case may be, in the future and (ii) would not
subject such Lender to any unreimbursed cost or expense and would not otherwise
be disadvantageous to such Lender. The Borrower hereby agrees to pay all
reasonable costs and expenses incurred by any Lender in connection with any such
designation or assignment made at the Borrower's request.
(b) If any Lender requests compensation under Section 2.13, or
if the Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.15,
then the Borrower may, at its sole expense and effort, upon notice to such
Lender and the Administrative Agent, require such Lender to assign and delegate,
without recourse (in accordance with and subject to the restrictions contained
in Section 9.04), all its interests, rights and obligations under this Agreement
to an assignee that shall assume such obligations (which assignee may be another
Lender, if a Lender accepts such assignment); PROVIDED that (i) the Borrower
shall have received the prior written consent of the Administrative Agent, which
consent shall not unreasonably be withheld, (ii) such Lender shall have received
payment of an amount equal to the outstanding principal of its Loans, and
accrued interest thereon, accrued fees and all other amounts payable to it
hereunder, from the assignee (to the extent of such outstanding principal and
accrued interest and fees) or the Borrower (in the case of all other amounts)
and (iii) such assignment will result in a reduction in such compensation or
payments. A Lender shall not be required to make any such assignment and
delegation if, prior thereto, as a result of a waiver by such Lender or
otherwise, the circumstances entitling the Borrower to require such assignment
and delegation cease to apply.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
Each of the Parent and the Borrower represents and warrants to the
Lenders that:
Section 3.01. ORGANIZATION; POWERS. Each of the Parent, the
Borrower and the Subsidiaries is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, has all
requisite company or corporate, as the case may be, power and authority to carry
on its business as now conducted and, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect, is qualified to do business in, and is in good
standing in, every jurisdiction where such qualification is required.
Section 3.02. AUTHORIZATION; ENFORCEABILITY. The Transactions to
be entered into by each Loan Party are within such Loan Party's corporate or
company, as the case may be, powers and have been duly authorized by all
necessary corporate or company, as the case may be, and, if required,
stockholder or member, as the case may be, action. This Agreement has been duly
executed and delivered by each of the Parent and the Borrower and constitutes,
and each other Loan Document to which any Loan Party is to be a party, when
executed and delivered by such Loan Party, will constitute, a legal, valid and
binding obligation of the Parent, the Borrower or such Loan Party (as the case
may be), enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors' rights generally and subject to general principles of equity,
regardless of whether considered in a proceeding in equity or at law.
Section 3.03. GOVERNMENTAL APPROVALS; NO CONFLICTS. The
Transactions (a) do not require any consent or approval of, registration or
filing with, or any other action by, any Governmental Authority, except such as
have been obtained or made and are in full force and effect and except filings
necessary to perfect Liens created under the Security Documents, (b) will not
violate any applicable law or regulation or the charter, by-laws or other
organizational documents of any Loan Party or any order of any Governmental
Authority, (c) will not violate or result in a default under any indenture,
agreement or other instrument evidencing or governing any Material Indebtedness
or any other material indenture, agreement or other instrument binding upon any
Loan Party or its assets, or give rise to a right thereunder to require any
payment to be made by any Loan Party, and (d) will not result in the creation or
imposition of any Lien on any asset of any Loan Party, except Liens created
under the Security Documents.
Section 3.04. FINANCIAL CONDITION; NO MATERIAL ADVERSE CHANGE.
(a) The Parent has heretofore furnished to the Lenders its
consolidated balance sheet and statements of income, stockholders equity and
cash flows as of and for the fiscal year ended December 31, 1998, and its
consolidated balance sheet and statements of income, stockholders equity and
cash flows as of and for the fiscal quarter ended March 31, 1999, each certified
by a Financial Officer of the Parent. Such financial statements present fairly,
in all material respects, the financial position and results of operations and
cash flows of the Parent and its consolidated subsidiaries as of such dates and
for such periods in accordance
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with GAAP, subject to year end audit adjustments. As of the date hereof, neither
the Parent nor the Borrower has liabilities in excess of $75,000 except as
disclosed on Schedule 3.04(a).
(b) Since December 31, 1998, there has been no material adverse
change in the business, condition (financial or otherwise), operations,
performance or properties of the Parent or the Borrower and the Subsidiaries,
taken as a whole.
Section 3.05. PROPERTIES AND LICENSES.
(a) Each of the Loan Parties has good title to, or valid
leasehold interests in, all the real and personal property material to its
business, except for minor defects in title that do not interfere with its
ability to conduct its business as currently conducted or to utilize such
properties for their intended purposes.
(b) Each of the Loan Parties owns, or is licensed to use, all
trademarks, tradenames, copyrights, patents and other intellectual property
material to its business, and the use thereof by the Loan Parties does not
infringe upon the rights of any other Person, except for any such infringements
that, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect.
(c) The certificates, licenses and approvals identified on
Schedule 3.05 (the "Licenses") are all the certificates, licenses and approvals
that have been issued or provided to the Parent or the Borrower by any
Governmental Authority having jurisdiction over the telecommunications business,
and each such License is in full force and effect and has not been revoked,
cancelled, suspended or modified in an adverse way. Schedule 3.05 also
accurately identifies and describes all applications ("Pending Applications")
that have been made by the Parent or the Borrower to obtain any certificates,
licenses or approvals from any Governmental Authority having jurisdiction over
the telecommunications business. The Parent and the Borrower are not aware of
any reason that any Governmental Authority would not approve the assignment to
the Borrower of any License owned by the Parent or the assignment or the
modification of any Pending Application made by the Parent so as to be made on
behalf of the Borrower or the assignment to the Borrower of any certificates,
licenses or approvals for which Pending Applications have been made. The
Parent, the Borrower and the Subsidiaries have all licenses and permits that are
material to the business of the Parent, the Borrower and the Subsidiaries except
for the License with respect to New Mexico, which may or may not be material.
Each license or permit that is material to the business of the Parent, the
Borrower and the Subsidiaries, is valid and in full force and effect, and the
Parent, the Borrower and the Subsidiaries are in compliance in all material
respects with the terms and conditions thereof.
Section 3.06. LITIGATION AND ENVIRONMENTAL MATTERS.
(a) There are no actions, suits or proceedings by or before any
arbitrator or Governmental Authority pending against or, to the knowledge of the
Parent or the Borrower, threatened against or affecting the Parent, the Borrower
or any of its Subsidiaries (i) as to which there is a reasonable possibility of
an adverse determination and that, if adversely determined, could reasonably be
expected, individually or in the aggregate, to result in a Material Adverse
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Effect (other than the Disclosed Matters) or (ii) that involve any of the Loan
Documents or the Transactions.
(b) Except with respect to any other matters that, individually
or in the aggregate, could not reasonably be expected to result in a Material
Adverse Effect, none of the Parent, the Borrower or any of its Subsidiaries (i)
has failed to comply with any Environmental Law or to obtain, maintain or comply
with any permit, license or other approval required under any Environmental Law,
(ii) has become subject to any Environmental Liability, (iii) has received
notice of any claim with respect to any Environmental Liability or (iv) knows of
any basis for any Environmental Liability.
Section 3.07. COMPLIANCE WITH LAWS AND AGREEMENTS. Each of the
Parent, the Borrower and its Subsidiaries is in compliance with all laws,
regulations and orders of any Governmental Authority applicable to it or its
property and all indentures, agreements and other instruments binding upon it or
its property, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect. No Default has occurred and is continuing. True and correct copies of
all material agreements to which the Parent, the Borrower or any Subsidiary is a
party or by which any of them or their properties is bound have been provided to
special counsel to Lucent.
Section 3.08. INVESTMENT AND HOLDING COMPANY STATUS. None of the
Loan Parties is (a) an "investment company" as defined in, or subject to
regulation under, the Investment Company Act of 1940 or (b) a "holding company"
as defined in, or subject to regulation under, the Public Utility Holding
Company Act of 1935.
Section 3.09. TAXES. Each of the Loan Parties has timely filed or
caused to be filed all Tax returns and reports required to have been filed and
has paid or caused to be paid all Taxes required to have been paid by it, except
(a) Taxes that are being contested in good faith by appropriate proceedings and
for which the applicable Loan Party has set aside on its books adequate reserves
or (b) the filing of local Tax returns and reports to the extent that the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.
Section 3.10. ERISA. Each Plan has been administered in
compliance with all applicable laws except for such instances of noncompliance
as have not resulted in and could not reasonably be expected to result in a
Material Adverse Effect. No ERISA Event has occurred or is reasonably expected
to occur that, when taken together with all other such ERISA Events for which
liability is reasonably expected to occur, could reasonably be expected to
result in a Material Adverse Effect. The present value of all accumulated
benefit obligations under each Plan (based on the assumptions used for purposes
of Statement of Financial Accounting Standards No. 87) did not, as of the date
of the most recent financial statements reflecting such amounts, exceed the fair
market value of the assets of such Plan, and the present value of all
accumulated benefit obligations of all underfunded Plans (based on the
assumptions used for purposes of Statement of Financial Accounting Standards No.
87) did not, as of the date of the most recent financial statements reflecting
such amounts, exceed the fair market value of the assets of all such underfunded
Plans.
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Section 3.11. DISCLOSURE. The Parent and the Borrower have
disclosed to the Lenders all agreements, instruments and corporate or other
restrictions to which any of the Loan Parties is subject that, individually or
in the aggregate, could reasonably be expected to result in a Material Adverse
Effect. None of the reports, financial statements, certificates or other
information furnished by or on behalf of any Loan Party to the Administrative
Agent or any Lender in connection with the negotiation of this Agreement or any
other Loan Document or delivered hereunder or thereunder (as modified or
supplemented by other information so furnished, including the Parent's publicly
available filings with the Securities and Exchange Commission) contains any
material misstatement of fact or omits to state any material fact necessary to
make the statements therein, taken as a whole, in the light of the circumstances
under which they were made, not misleading; PROVIDED that, with respect to
projected financial information, the Parent and the Borrower represent only that
such information was prepared in good faith based upon assumptions believed to
be reasonable at the time. The Borrower has furnished to the Administrative
Agent a true and correct copy of the Administrative Agreement, and such
agreement is in full force and effect on the date hereof.
Section 3.12. SUBSIDIARIES. Schedule 3.12 sets forth as of the
date of this Agreement the name of, and the ownership interest of the Borrower
in, each Subsidiary of the Borrower.
Section 3.13. INSURANCE. Schedule 3.13 sets forth a description
of all insurance maintained by or on behalf of the Borrower and its Subsidiaries
as of the date of this Agreement. As of the date of this Agreement, all
premiums in respect of such insurance have been paid.
Section 3.14. LABOR MATTERS. As of the date hereof, there are no
strikes, lockouts or slowdowns against any Loan Party pending or, to the
knowledge of the Parent or the Borrower, threatened. The hours worked by and
payments made to employees of the Loan Parties have not been in violation of the
Fair Labor Standards Act or any other applicable Federal, state, local or
foreign law dealing with such matters. All payments due from any Loan Party, or
for which any claim may be made against any Loan Party, on account of wages and
employee health and welfare insurance and other benefits, have been paid or
accrued as a liability on the books of the applicable Loan Party. The
consummation of the Transactions will not give rise to any right of termination
or right of renegotiation on the part of any union under any collective
bargaining agreement to which any Loan Party is bound.
Section 3.15. SUPPLY AGREEMENT. The Supply Agreement is in full
force and effect and except as disclosed in Schedule 3.15 no payment default or
any other default that (with or without notice or the passage of time or both)
would permit Lucent to terminate the Supply Agreement has occurred and is
continuing under the Supply Agreement. The Borrower has not terminated, nor
taken any action which could result in the termination of, the Supply Agreement.
Section 3.16. SECURITY DOCUMENTS. The representations and
warranties in each Security Document are true and correct.
Section 3.17. YEAR 2000 READINESS. Any reprogramming required to
permit the proper functioning, in and following the year 2000, of (a) the
computer systems of the Parent, the
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Borrower and the Subsidiaries and (b) equipment of the Parent, the Borrower and
the Subsidiaries containing embedded microchips and the testing of all such
systems and equipment, as so reprogrammed, will be completed by November 30,
1999, except to the extent that failure to do so would not have a Material
Adverse Effect. The cost to the Parent, the Borrower and the Subsidiaries of
such reprogramming and testing and of the reasonably foreseeable consequences of
year 2000 to the Parent, the Borrower and the Subsidiaries (including
reprogramming errors) could not reasonably be expected to have a Material
Adverse Effect. The Parent, the Borrower and the Subsidiaries have used
commercially reasonable efforts to identify all possible failures of the systems
or equipment of their material suppliers, vendors and customers and to assess
the impact of any such failures on the business, condition (financial or
otherwise), operations, performance or properties of the Parent, the Borrower
and the Subsidiaries .
Section 3.18. CAPITALIZATION.
(a) There are no shareholders agreements, voting trusts,
proxies or other agreements, commitments or understandings of any character to
which the Parent, the Borrower or any of its Subsidiaries is a party or by which
the Parent, the Borrower or any of its Subsidiaries is bound with respect to the
voting of any shares of capital stock of the Parent or any of its Subsidiaries.
(b) All securities issued by the Parent, the Borrower or any of
its Subsidiaries have been offered, issued, sold and delivered, in compliance
with, or pursuant to exemptions from, the Securities Act, and the rules and
regulations of the Securities and Exchange Commission thereunder, and all other
laws of any jurisdiction, and the rules and regulations of any Governmental
Authority, applicable to the offering, issuance, sale or delivery of securities
Neither the Parent nor any of its Subsidiaries is required to file, nor has it
filed, any information with the Securities and Exchange Commission pursuant to
the Securities Exchange Act. Neither the Parent, the Borrower nor any of its
Subsidiaries has registered any securities under the Securities Act. No holder
of securities of the Parent, the Borrower or any of its Subsidiaries has any
contractual right to require the Parent, the Borrower or any of its Subsidiaries
to include any such securities in any registration statement under the
Securities Act.
ARTICLE IV
CONDITIONS
Section 4.01. EFFECTIVE DATE. The obligations of the Lenders to
make the initial Loans hereunder shall not become effective until the date on
which each of the following conditions is satisfied (or waived in accordance
with Section 9.02):
(a) The Administrative Agent (or its counsel) shall have
received from each party hereto either (i) a counterpart of this Agreement
signed on behalf of such party or (ii) written evidence satisfactory to the
Administrative Agent (which may include telecopy transmission of a signed
signature page of this Agreement) that such party has signed a counterpart of
this Agreement.
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(b) The Administrative Agent shall have received a favorable
written opinion (addressed to the Agents and the Lenders, dated the Effective
Date and addressing such matters relating to the Loan Parties, the Loan
Documents and the Transactions as the Administrative Agent shall reasonably
request, in each case in form and substance reasonably satisfactory to the
Administrative Agent) of each of (i) Cooley Godward LLP, counsel for the Parent
and the Borrower, (ii) Kelley Drye & Warren, LLP, special communications counsel
to the Parent and the Borrower, and (iii) Orrick, Herrington & Sutcliffe LLP,
special counsel for Lucent. The Parent and the Borrower hereby request their
counsel referred to in clauses (i) and (ii) of this paragraph to deliver such
opinions.
(c) The Administrative Agent shall have received such documents
and certificates as the Administrative Agent or its counsel may reasonably
request relating to the organization, existence and good standing of the Loan
Parties, the authorization of the Transactions and any other legal matters
relating to the Loan Parties, the Loan Documents or the Transactions, all in
form and substance satisfactory to the Administrative Agent and its counsel.
(d) The Administrative Agent shall have received a certificate,
dated the Effective Date and signed by the Chief Executive Officer, President, a
Vice President or a Financial Officer of each of the Parent and the Borrower,
confirming compliance with the conditions set forth in paragraphs (a), (b) and
(c) of Section 4.02.
(e) The Agents and Lucent shall be satisfied that all fees and
other amounts due and payable to them hereunder on or prior to the Effective
Date, including, to the extent invoiced, reimbursement or payment of all
expenses required to be reimbursed or paid by the Borrower hereunder or under
any other Loan Document, have been paid or will be paid from the proceeds of a
Borrowing to be made on the Effective Date.
(f) The Lenders shall be reasonably satisfied with the
corporate and legal structure and capitalization of the Parent, the Borrower and
the Subsidiaries, including the charter and by-laws of the Parent, the Borrower
and each Subsidiary and each agreement or instrument evidencing Indebtedness.
(g) The Administrative Agent shall have received (i)
counterparts of the Guarantee Agreement signed on behalf of the Parent and each
Subsidiary, and (ii) counterparts of the Indemnity and Contribution Agreement
signed on behalf of each Loan Party.
(h) The Collateral Agent shall have received (i) counterparts
of the Security Documents (other than the Pledge Agreement (Borrower))signed on
behalf of the Loan Party that is a party thereto and (ii) evidence satisfactory
to the Required Lenders that all documents and instruments, including Uniform
Commercial Code financing statements, required by law or reasonably requested by
the Collateral Agent to be filed, registered or recorded to create or perfect
the Liens intended to be created under the Security Documents, and to protect
the respective ownership interests of the Parent, the Borrower and the
Subsidiaries in (and the Liens of the Security Documents on) all Collateral,
have been so filed, registered or recorded.
(i) The Collateral Agent shall have received a completed
Perfection Certificate from each of the Borrower and the Parent, dated the
Effective Date and signed by a
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Financial Officer of the Borrower and the Parent, respectively, together with
all attachments contemplated thereby, including (i) the results of a search of
the Uniform Commercial Code (or equivalent) filings made with respect to the
Borrower and the Parent in the jurisdictions contemplated by the Perfection
Certificate and (ii) copies of the financing statements (or similar documents)
disclosed by such search and evidence reasonably satisfactory to the Collateral
Agent that the Liens indicated by such financing statements (or similar
documents) are permitted by Section 6.02 or have been released.
(j) The Administrative Agent shall have received evidence
satisfactory to it that the insurance required by Section 5.07 is in effect and
that the Collateral Agent has been named as an additional insured and loss payee
under all insurance policies to be maintained with respect to the properties of
the Borrower constituting the Collateral.
(k) The Lenders shall have received the most recent Business
Plan, including financial projections, and there shall have been no material
adverse changes in the Business Plan compared to the information disclosed to
Lucent prior to the date of execution of this Agreement.
(l) The Lenders (i) shall have been given access to the
management, records, books of account, contracts and properties of the Loan
Parties and shall have received such financial, business and other information
regarding the Loan Parties as the Lenders shall have reasonably requested and
(ii) shall have completed their due diligence review of the Loan Parties and
shall be reasonably satisfied with the results of such review.
(m) The Administrative Agent shall have received evidence
reasonably satisfactory to it that the Subsidiaries hold all material
governmental approvals reasonably necessary to conduct their respective
businesses.
(n) The Parent shall have received cash equity contributions of
at least $15,000,000 from various investors and the Borrower shall have received
cash equity contributions of at least $15,000,000 from the Parent; PROVIDED,
HOWEVER, that the Parent may pay certain construction and engineering costs on
behalf of the Borrower for an aggregate amount not exceeding $1,416,559.50 in
lieu of contributing cash in an equal amount; PROVIDED, FURTHER, the Parent
shall have delivered a certificate of one of its Financial Officers to the
Administrative Agent certifying that any such costs were incurred in an arm's
length transaction and that the Borrower otherwise would have been required to
pay such costs in order to implement the Business Plan.
(o) Each holder of an equity interest in the Parent exceeding
5% of outstanding equity shall be reasonably acceptable to the Lenders.
The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding.
Notwithstanding the foregoing, the obligations of the Lenders to make Loans
hereunder shall not become effective unless each of the foregoing conditions is
satisfied (or waived pursuant to Section 9.02) at or prior to 3:00 p.m., New
York City time, on August 15, 1999 (and, in the event such conditions are not so
satisfied or waived, the Commitments shall terminate at such time).
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Section 4.02. EACH BORROWING. The obligation of each Lender to
make a Loan on the occasion of any Borrowing is subject to the satisfaction of
the following conditions:
(a) At the time of and immediately after giving effect to such
Borrowing, the representations and warranties of the Loan Parties set forth in
the Loan Documents shall be true and correct in all respects (or, in the case of
any representation or warranty that is not qualified as to materiality, in all
material respects) on and as of the date of such Borrowing (or, in the case of
any representation and warranty that expressly relates to an earlier date, on
and as of such earlier date).
(b) At the time of and immediately after giving effect to such
Borrowing no Default shall have occurred and be continuing.
(c) At the time of and immediately after giving effect to such
Borrowing, the Supply Agreement shall be in full force and effect, no payment
default shall have occurred and be continuing and no other default that (with or
without notice or the passage of time or both) would permit Lucent to terminate
the Supply Agreement and with respect to which Lucent has notified the Borrower
shall have occurred and be continuing under the Supply Agreement.
(d) With respect to any Tranche 2 Loans, at the time of and
immediately after giving effect to such Borrowing, the aggregate amount of
all Tranche 2 Loans outstanding shall be equal to or less than [ * ] of the
aggregate amount of paid in capital and Subordinated Indebtedness in excess
of $[ * ].
(e) The Lucent Product of which the Purchase Price is to be
paid with the proceeds of such Borrowing is intended to be used in a Permitted
Jurisdiction.
Each Borrowing shall be deemed to constitute a representation and warranty by
the Borrower on the date thereof as to the matters specified in paragraphs (a),
(b), (c), (d) and (e) of this Section. For purposes of this Section 4.02, the
condition set forth in Section 4.02(a), to the extent that it relates to the
representation of the Parent and the Borrower that no default (excluding payment
defaults) that (with or without notice or the passage of time or both) would
permit Lucent to terminate the Supply Agreement has occurred and is continuing,
shall not be deemed unsatisfied at the time of any Borrowing unless Lucent has
notified the Borrower that such a default has occurred.
ARTICLE V
AFFIRMATIVE COVENANTS
Until the Commitments have expired or been terminated and the
principal of and interest on each Loan and all fees payable hereunder shall have
been paid in full, each of the Parent and the Borrower covenants and agrees with
the Lenders that:
* INDICATES CONFIDENTIAL TREATMENT REQUESTED
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Section 5.01. FINANCIAL STATEMENTS AND OTHER INFORMATION. The
Parent and the Borrower will furnish to the Administrative Agent:
(a) within 120 days after the end of each fiscal year of the
Parent, the audited consolidated balance sheet of the Parent and its
consolidated subsidiaries and related statements of operations, stockholders'
equity and cash flows as of the end of and for such year, setting forth in each
case in comparative form the figures for the previous fiscal year, all reported
on by Arthur Andersen LLP or other independent public accountants of recognized
national standing (without a "going concern" or like qualification or exception
and without any qualification or exception as to the scope of such audit) to the
effect that such consolidated financial statements present fairly in all
material respects the financial condition and results of operations of the
Parent and its consolidated subsidiaries on a consolidated basis in accordance
with GAAP consistently applied;
(b) within 45 days after the end of each of the first three
fiscal quarters of each fiscal year of the Parent and its consolidated
subsidiaries, the consolidated balance sheet of the Parent and its consolidated
subsidiaries and related statements of operations and cash flows as of the end
of and for such fiscal quarter and the then elapsed portion of the fiscal year,
setting forth in each case in comparative form the figures for the corresponding
period or periods of (or, in the case of the balance sheet, as of the end of)
the previous fiscal year, all certified by one of its Financial Officers as
presenting fairly in all material respects the financial condition and results
of operations of the Parent and its consolidated subsidiaries on a consolidated
basis in accordance with GAAP consistently applied, subject to normal year-end
audit adjustments and the absence of footnotes;
(c) within 120 days after the end of each fiscal year of the
Borrower, the consolidated balance sheet of the Borrower and its consolidated
Subsidiaries and related statements of operations, stockholders' equity and cash
flows as of the end of and for such year, setting forth in each case in
comparative form the figures for the previous fiscal year, all certified by one
of its Financial Officers as presenting fairly in all material respects the
financial condition and results of operations of the Borrower and its
consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied;
(d) within 45 days after the end of each of the first three
fiscal quarters of each fiscal year of the Borrower and its consolidated
Subsidiaries, the consolidated balance sheet of the Borrower and its
consolidated Subsidiaries and related statements of operations and cash flows as
of the end of and for such fiscal quarter and the then elapsed portion of the
fiscal year, setting forth in each case in comparative form the figures for the
corresponding period or periods of (or, in the case of the balance sheet, as of
the end of) the previous fiscal year, all certified by one of its Financial
Officers as presenting fairly in all material respects the financial condition
and results of operations of the Borrower and its consolidated Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied, subject to
normal year-end audit adjustments and the absence of footnotes;
(e) concurrently with any delivery of the Parent's and
Borrower's financial statements under clause (a) , (b), (c) and (d) above, a
certificate of a Financial Officer of each of the Parent and the Borrower (i)
certifying as to whether a Default has occurred and, if a Default
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has occurred, specifying the details thereof and any action taken or proposed to
be taken with respect thereto, (ii) setting forth reasonably detailed
calculations demonstrating compliance with Sections 6.11 through 6.20 and (iii)
stating whether any change in GAAP or in the application thereof that materially
affects the Parent's or the Borrower's financial statements accompanying such
certificate (it being understood that any change that would affect compliance
with any covenant set forth herein or the Applicable Rate shall be considered
material) has occurred since the date of the Parent's or the Borrower's audited
financial statements referred to in Section 3.04 and, if any such change has
occurred, specifying the effect of such change on the financial statements
accompanying such certificate (it being understood that such certificate may
also satisfy the requirements of Section 5.03(b) and (c), but any such
certificate intended to satisfy both those requirements and the requirements of
this clause (e) shall be delivered to both the Administrative Agent and the
Collateral Agent);
(f) concurrently with any delivery of financial statements
under clause (a) or (c) above, a certificate of the accounting firm that
reported on such financial statements stating whether they obtained knowledge
during the course of their examination of such financial statements of any
Default (which certificate may be limited to the extent required by accounting
rules or guidelines);
(g) promptly after the same become available but in any event
within 120 days after the end of each fiscal year of the Borrower, an annual
operating and cash flow budget in reasonable detail for the current fiscal year
and updated financial projections through the fiscal year during which the
Maturity Date is scheduled to occur;
(h) promptly after the same become publicly available, copies
of all periodic and other reports, proxy statements and other materials filed by
the Parent, the Borrower or any Subsidiary with the Securities and Exchange
Commission, or any Governmental Authority succeeding to any or all of the
functions of said Commission, or with any national securities exchange, or
financial information or other material information distributed by the Parent or
the Borrower to either of their shareholders generally, as the case may be; and
(i) promptly following any request therefor, such other
information regarding the operations, business affairs and financial condition
of the Parent, the Borrower or any Subsidiary, or compliance with the terms of
any Loan Document, as either Agent or any Lender may reasonably request.
Section 5.02. NOTICES OF MATERIAL EVENTS.
(a) The Borrower will furnish to the Administrative Agent, the
Collateral Agent and each Lender written notice of the following promptly upon
obtaining knowledge thereof:
(i) the occurrence of any Default;
(ii) the filing or commencement of any action, suit or
proceeding by or before any arbitrator or Governmental Authority against
or affecting the Parent, the Borrower or any Affiliate thereof that, if
adversely determined, could reasonably be expected to result in a
Material Adverse Effect; and
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(iii) any other development that results in, or could reasonably
be expected to result in, a Material Adverse Effect.
(b) The Borrower will furnish to the Administrative Agent and
the Collateral Agent written notice of the occurrence of any Prepayment Event
promptly after the occurrence of such event.
(c) Each notice delivered under this Section shall be
accompanied by a statement of a Financial Officer or other executive officer of
the Borrower setting forth the details of the event or development requiring
such notice and any action taken or proposed to be taken with respect thereto.
Section 5.03. INFORMATION REGARDING COLLATERAL.
(a) The Borrower will furnish to the Collateral Agent prompt
written notice of any change (i) in corporate name of the Borrower or any
Subsidiary or in any trade name used to identify any such Person in the conduct
of its business or in the ownership of its properties, (ii) in the location of
the chief executive office of the Borrower or any Subsidiary, its principal
place of business or any asset constituting Collateral (other than the
installation of any asset constituting Collateral in a jurisdiction in which all
Uniform Commercial Code financing statements (including fixture filings, if
applicable) and other appropriate filings, recordings or registrations,
containing a description of the Collateral have been filed of record in each
governmental, municipal or other appropriate office in such jurisdiction to the
extent necessary to perfect the security interests under the Security Documents,
(iii) in the identity or corporate structure of the Borrower or any Subsidiary
or (iv) in the Federal Taxpayer Identification Number of the Borrower or any
Subsidiary. The Borrower agrees not to effect or permit any change referred to
in the preceding sentence unless all filings have been made under the Uniform
Commercial Code or otherwise that are required in order for the Collateral Agent
to continue at all times following such change to have a valid, legal and
perfected security interest in all the Collateral.
(b) Each year, at the time of delivery of annual financial
statements for the Borrower with respect to the preceding fiscal year pursuant
to clause (c) of Section 5.01, the Borrower will and will cause each Subsidiary
to deliver to the Collateral Agent a certificate of a Financial Officer of the
Borrower or such Subsidiary (i) setting forth the information required pursuant
to Sections 1 and 2 of the Perfection Certificate with respect to the Borrower
or such Subsidiary or confirming that there has been no change in such
information since the date of the Perfection Certificate delivered on the
Effective Date or the date of the most recent certificate delivered pursuant to
this Section and (ii) certifying that all Uniform Commercial Code financing
statements (including fixture filings, as applicable) or other appropriate
filings, recordings or registrations, including all refilings, rerecordings and
reregistrations, containing a description of the Collateral have been filed of
record in each governmental, municipal or other appropriate office in each
jurisdiction identified pursuant to clause (i) above to the extent necessary to
protect and perfect the security interests under the Security Documents for a
period of not less than 18 months after the date of such certificate (except as
noted therein with respect to any continuation statements to be filed within
such period).
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(c) Each year, at the time of delivery of annual financial
statements for the Parent with respect to the preceding fiscal year pursuant to
clause (a) of Section 5.01, the Parent will deliver to the Collateral Agent a
certificate of a Financial Officer of the Parent (i) setting forth the
information required pursuant to Sections 1 and 2 of the Perfection Certificate
with respect to the Parent (and following the Partial Termination Date, only the
information required pursuant to Sections 1 and 2(a), (b) and (c) of the
Perfection Certificate of the Parent) or confirming that there has been no
change in such information since the date of the Perfection Certificate
delivered on the Effective Date or the date of the most recent certificate
delivered pursuant to this Section and (ii) certifying that all Uniform
Commercial Code financing statements (including fixture filings, as applicable)
or other appropriate filings, recordings or registrations, including all
refilings, rerecordings and reregistrations, containing a description of the
Collateral have been filed of record in each governmental, municipal or other
appropriate office in each jurisdiction identified pursuant to clause (i) above
to the extent necessary to protect and perfect the security interests under the
Security Documents for a period of not less than 18 months after the date of
such certificate (except as noted therein with respect to any continuation
statements to be filed within such period).
Section 5.04. EXISTENCE; CONDUCT OF BUSINESS. Each of the Parent
and the Borrower will, and will cause each of the Subsidiaries to, do or cause
to be done all things necessary to preserve, renew and keep in full force and
effect its legal existence and the rights, licenses, permits, privileges and
franchises material to the conduct of the business of the Parent, the Borrower
and the Subsidiaries, taken as a whole; PROVIDED that the foregoing shall not
prohibit any merger, consolidation, liquidation or dissolution permitted under
Section 6.03.
Section 5.05. PAYMENT OF OBLIGATIONS. Each of the Parent and the
Borrower will, and will cause each of the Subsidiaries to, pay its Indebtedness
and other obligations, including Tax liabilities, before the same shall become
delinquent or in default, except where (i) the validity or amount thereof is
being contested in good faith by appropriate proceedings, (ii) the Parent, the
Borrower or such Subsidiary has set aside on its books adequate reserves with
respect thereto in accordance with GAAP, (iii) such contest effectively suspends
collection of the contested obligation and the enforcement of any Lien securing
such obligation and (iv) the failure to make payment pending the resolution of
such contest could not reasonably be expected to result in a Material Adverse
Effect.
Section 5.06. MAINTENANCE OF PROPERTIES. Each of the Parent and
the Borrower will, and will cause each of the Subsidiaries to, keep and maintain
all Collateral, and all other property material to the conduct of the business
of the Parent, the Borrower and the Subsidiaries, taken as a whole, in good
working order and condition, ordinary wear and tear excepted, PROVIDED, that
this Section 5.06 shall not prevent sales permitted under Sections 6.03 and
6.04.
Section 5.07. INSURANCE.
(a) Each of the Parent and the Borrower will, and will cause
each of the Subsidiaries to, maintain, with financially sound and reputable
insurance companies with AM Best's rating of A minus (A-) or better, All-Risk
property insurance for the full replacement value of all property and other
insurance, including public liability insurance against claims for personal
injury, death or property damage occurring upon, about or in connection with the
use of
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any properties owned, occupied or controlled by it as well as such other
insurance as may be required by law.
(b) All policies of All-Risk property insurance maintained by
or for the benefit of the Borrower with respect to the Collateral shall be (i)
maintained in an amount not less than the full replacement value of all property
thereof, with deductibles or self insured retention not exceeding $75,000, and
(ii) endorsed or otherwise amended to include a "standard" or "New York"
lender's loss payable endorsement, in favor of and satisfactory to the
Collateral Agent, which endorsement shall provide that the insurance carrier
shall pay all proceeds otherwise payable to any Loan Party under such policies
directly to the Collateral Agent. All such policies also shall provide that
none of the Borrower, the Administrative Agent, the Collateral Agent nor any
other party shall be a coinsurer thereunder and shall contain a "Replacement
Cost Endorsement", without any deduction for depreciation, "mortgagee's
interest"/"breach of warranty coverage" and such other provisions as the
Administrative Agent or the Collateral Agent may reasonably require from time to
time to protect the interests of the Lenders. Each such policy also shall
provide that it shall not be canceled (i) by reason of nonpayment of premium
except upon not less than 10 days' prior written notice thereof by the insurer
to the Administrative Agent and the Collateral Agent (giving the Administrative
Agent and the Collateral Agent the right to cure defaults in the payment of
premiums) or (ii) for any other reason except upon not less than 30 days' prior
written notice thereof by the insurer to the Administrative Agent and the
Collateral Agent. The Borrower shall deliver to the Administrative Agent and
the Collateral Agent, upon not less than 30 days' prior written notice to the
cancellation, modification or nonrenewal of any such policy of insurance, a copy
of a renewal or replacement policy (or other evidence of renewal of a policy
previously delivered to the Administrative Agent and the Collateral Agent)
together with evidence satisfactory to the Administrative Agent and the
Collateral Agent of payment of the premium therefor.
(c) The Borrower shall notify the Administrative Agent and the
Collateral Agent immediately whenever any separate insurance concurrent in form
or contributing in the event of loss with that required to be maintained under
this Section is taken out by any Loan Party, and shall promptly deliver to the
Administrative Agent and the Collateral Agent a duplicate original copy of such
policy or policies.
Section 5.08. BOOKS AND RECORDS; INSPECTION RIGHTS. Each of the
Parent and the Borrower will, and will cause each of the Subsidiaries to, keep
proper books of record and account in which full, true and correct entries are
made of all material dealings and transactions in relation to their business and
activities. Each of the Parent and the Borrower will, and will cause each of
the Subsidiaries to, permit any representatives designated by either Agent or
any Lender, at such Agent's or Lender's expense (unless an Event of Default has
occurred and is continuing, in which case at Borrower's expense) upon reasonable
prior notice, to visit and inspect its properties, to examine and make extracts
from its books and records, and to discuss its affairs, finances and condition
with its officers and independent accountants, all at such reasonable times and
as often as reasonably requested. Any such inspection shall be subject to the
confidentiality restrictions set forth in Section 9.12.
Section 5.09. COMPLIANCE WITH LAWS AND AGREEMENTS. Each of the
Parent and the Borrower will, and will cause each of the Subsidiaries to, comply
with all laws, rules,
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regulations and orders of any Governmental Authority (including ERISA and all
Environmental Laws) applicable to it or its property and all indentures,
agreements and other instruments binding upon it or its property, except where
the failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.
Section 5.10. USE OF PROCEEDS. The proceeds of the Loans will be
used solely to make payments of the Purchase Price and Permitted Expenses
including up to $200,000 to cover the value of equipment shipped to the Borrower
prior to the date of this Agreement and which will be included under the Supply
Agreement.
Section 5.11. FURTHER ASSURANCES. Each of the Parent and the
Borrower will, and will cause each other Loan Party to, execute any and all
further documents, financing statements, agreements and instruments, and take
all such further actions (including the filing and recording of financing
statements, fixture filings and other documents), which may be required under
any applicable law, or which either Agent or the Required Lenders may reasonably
request, to effectuate the transactions contemplated by the Loan Documents or to
grant, preserve, protect or perfect the Liens created or intended to be created
by the Security Documents or the validity or priority of any such Lien, all at
the expense of the Borrower. The Borrower also agrees to provide to either
Agent, upon request, evidence reasonably satisfactory to such Agent as to the
perfection and priority of the Liens created or intended to be created by the
Security Documents.
Section 5.12. CASUALTY AND CONDEMNATION.
(a) The Borrower will furnish to the Agents and the Lenders
prompt notice of any casualty or other damage to any portion of the Collateral
having a value in excess of $50,000 or the commencement of any action or
proceeding for the taking of any Collateral or any part thereof or interest
therein under power of eminent domain or by condemnation or similar proceeding.
(b) If any event described in paragraph (a) of this Section
results in Net Proceeds (whether in the form of insurance proceeds, condemnation
award or otherwise), the Collateral Agent is authorized to collect such Net
Proceeds and, if received by the Parent, the Borrower or any other Subsidiary,
such Net Proceeds shall be paid over to the Collateral Agent. All such Net
Proceeds retained by or paid over to the Collateral Agent shall be held by the
Collateral Agent and released from time to time to pay the costs of repairing,
restoring or replacing the affected property in accordance with the terms of
this Agreement and the applicable provisions of the Security Documents, subject
to the provisions of the Security Documents regarding application of such Net
Proceeds during a Default.
(c) If any Net Proceeds retained by or paid over to the
Collateral Agent as provided above continue to be held by the Collateral Agent
on the date that any prepayment is due pursuant to Section 2.09(b) in respect of
the event resulting in such Net Proceeds, then such Net Proceeds shall be
applied to prepay Borrowings as provided in Section 2.09(b).
Section 5.13. INTEREST RATE PROTECTION. If at any time, the
Borrower or any Subsidiary shall agree to enter into or maintain or shall enter
into any Hedging Agreement in order to limit the interest cost risk to the
Borrower and Subsidiaries related to any Indebtedness
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other than the Loans, the Borrower will from time to time thereafter enter into
and maintain in effect one or more Hedging Agreements with respect to the
Indebtedness represented by the Loans reasonably satisfactory to the Required
Lenders on terms and conditions comparable to such other Hedging Agreement. The
Borrower agrees upon request to consult from time to time with the
Administrative Agent regarding the advisability of entering into Hedging
Agreements.
Section 5.14. EXECUTION OF PLEDGE AGREEMENT (BORROWER); SUBSIDIARY
GUARANTORS; ADDITIONAL SECURITY DOCUMENTS.
(a) Upon the formation the first Subsidiary to be formed or the
acquisition by the Borrower of a Person that as a result becomes the first
Subsidiary, the Borrower will (i) deliver an executed counterpart of the Pledge
Agreement (Borrower) signed on behalf of the Borrower to the Collateral Agent,
(ii) cause legal counsel to deliver opinions as to the enforceability thereof,
the creation and perfection of Liens thereunder and such other matters as the
Collateral Agent and the Required Lenders reasonably may request, and (iii) take
all other actions as the Collateral Agent or the Required Lenders reasonably may
require in connection therewith.
(b) If any Subsidiary of the Borrower is formed or acquired
after the date hereof, the Borrower will notify the Administrative Agent and the
Lenders thereof and will cause such Subsidiary to become a party to the
Guarantee Agreement and the Indemnity and Contribution Agreement promptly, and
in any event within five Business Days, thereafter. At the time of such
formation or acquisition, the Borrower (i) will cause such Subsidiary to enter
into a pledge agreement, security agreement or other additional Security
Documents in favor of the Collateral Agent, in form and substance satisfactory
to the Required Lenders, to obtain all necessary consents and to take all other
actions necessary or appropriate to create and perfect Liens upon the assets of
such Subsidiary, (ii) will cause legal counsel to deliver opinions as to the
enforceability of such Security Documents, the creation and perfection of Liens
thereunder and such other matters as the Collateral Agent and the Required
Lenders reasonably may request, (iii) cause any Persons other than the Borrower
that owns or will acquire any equity interest in such Subsidiary to enter into a
pledge agreement in favor of the Collateral Agent, in form and substance
satisfactory to the Required Lenders, to obtain all necessary consents and to
take all other actions necessary or appropriate to create and perfect Liens upon
such equity interest, and (iv) will take, or cause such Person and its officers,
to take such other actions as the Collateral Agent or the Required Lenders
reasonably may require in connection therewith.
ARTICLE VI
NEGATIVE COVENANTS
Until the Commitments have expired or terminated and the principal
of and interest on each Loan and all fees payable hereunder have been paid in
full, each of the Parent and the Borrower covenants and agrees with the Lenders
that:
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Section 6.01. Indebtedness. The Borrower and until the Partial
Termination Date, the Parent will not, and neither the Parent nor the Borrower
will permit any Subsidiary to, create, incur, assume or permit to exist any
Indebtedness, except:
(i) Indebtedness created under the Loan Documents;
(ii) subject to Section 6.04, Indebtedness of the Borrower to
any Subsidiary, and of any Subsidiary to the Borrower or any other
Subsidiary;
(iii) Indebtedness outstanding on the date hereof and set forth
on Schedule 6.01;
(iv) Indebtedness of the Borrower or any Subsidiary incurred
after the date of this Agreement to finance the acquisition of any
equipment, inventory or general intangibles, or the acquisition,
improvement or construction of any real property, by Borrower or such
Subsidiary (other than assets constituting Collateral or other assets the
removal or loss of which would adversely affect the value of any assets
constituting Collateral), including Capital Lease Obligations and any
Indebtedness assumed in connection with the acquisition of any such
assets or secured by a Lien on any such assets prior to the acquisition
thereof; PROVIDED that (A) any Indebtedness described in this clause (iv)
incurred in connection with any particular acquisition, improvement or
construction shall be incurred prior to or within 90 days after the
acquisition or the completion of such improvement or construction, as the
case may be, (B) any Indebtedness described in this clause (iv) incurred
in connection with any particular acquisition, improvement or
construction shall not exceed the cost of such acquisition, improvement
or construction and (C) the aggregate amount of all Indebtedness
described in this clause (iv) and Indebtedness set forth on Schedule 6.01
shall not any time exceed the lesser of (I) $[ * ] and (II) the
[ * ];
(v) Indebtedness of the Borrower incurred to refinance any
Indebtedness referred to in clause (iii) or (iv) above, Indebtedness of
any Subsidiary incurred to refinance any Indebtedness of such Subsidiary
referred to in clause (iii) or (iv) above, and until the Partial
Termination Date, Indebtedness of the Parent incurred to refinance any
Indebtedness referred to in clause (viii) below; PROVIDED that (A) the
principal amount of any Indebtedness described in this clause (v) shall
not exceed the principal amount of, plus accrued interest and any
prepayment premiums applicable to, the Indebtedness refinanced thereby,
(B) any Indebtedness described in this clause (v) shall have a scheduled
maturity date that is on or after the scheduled maturity date of the
Indebtedness refinanced thereby, (C) any Indebtedness described in this
clause (v) shall have a weighted average life to maturity that is equal
to or longer than the remaining weighted average life to maturity of the
Indebtedness refinanced thereby (determined immediately prior to giving
effect to such refinancing), (D) any Indebtedness described in this
clause (v) shall not include any provisions that may require mandatory
Repayment thereof prior to scheduled maturity, other than scheduled
repayments taken into account in determining compliance with clause (C)
above and other provisions that are not materially more burdensome than
any such provisions included in the Indebtedness refinanced thereby,
* INDICATES CONFIDENTIAL TREATMENT REQUESTED
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and (D) any Indebtedness described in this clause (v) shall not be
secured by any Lien other than Liens on assets securing the Indebtedness
being refinanced thereby and shall not be Guaranteed by any Subsidiary
other than any Subsidiary that Guaranteed the Indebtedness being
refinanced;
(vi) Subordinated Indebtedness;
(vii) until the Partial Termination Date, Indebtedness of the
Parent subordinated in right of payment to the payment of the Obligations
upon terms and conditions satisfactory to the Required Lenders; and
(viii) until the Partial Termination Date, Indebtedness of the
Parent incurred after the date of this Agreement to finance the
acquisition of any equipment, inventory or general intangibles, or the
acquisition, improvement or construction of any real property, by Parent
(other than assets constituting Collateral or other assets the removal or
loss of which would adversely affect the value of any assets constituting
Collateral), including Capital Lease Obligations and any Indebtedness
assumed in connection with the acquisition of any such assets or secured
by a Lien on any such assets prior to the acquisition thereof; PROVIDED
that (A) any Indebtedness described in this clause (viii) incurred in
connection with any particular acquisition, improvement or construction
shall be incurred prior to or within 90 days after the acquisition or the
completion of such improvement or construction, as the case may be, (B)
any Indebtedness described in this clause (viii) incurred in connection
with any particular acquisition, improvement or construction shall not
exceed the cost of such acquisition, improvement or construction and (C)
the aggregate amount of all Indebtedness described in this clause (viii)
shall not any time exceed $[ * ].
Section 6.02. LIENS. The Borrower and until the Partial
Termination Date, the Parent will not, and neither the Parent nor the Borrower
will permit any Subsidiary to, create, incur, assume or permit to exist any Lien
on any property or asset now owned or hereafter acquired by it, or assign or
sell any income or revenues (including accounts receivable) or rights in respect
of any thereof, except:
(i) Liens created under the Security Documents;
(ii) Permitted Encumbrances;
(iii) any Lien on any property or asset of the Parent, the
Borrower or any Subsidiary existing on the date hereof and set forth in
Schedule 6.02; PROVIDED that (A) such Lien shall not apply to any other
property or asset of the Parent, the Borrower or any Subsidiary and (B)
such Lien shall secure only those obligations which it secures on the
date hereof; and
(iv) Liens on equipment, inventory, general intangibles or real
property (other than assets constituting Collateral or other assets that
become accessions to assets constituting Collateral or the removal or
loss of which would adversely affect the value of any assets constituting
Collateral) acquired, constructed or improved by the Parent, the Borrower
or a Subsidiary; provided that (A) such Liens secure only Indebtedness
* INDICATES CONFIDENTIAL TREATMENT REQUESTED
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permitted by clause (iv) (or until the Partial Termination Date, clause
(viii)) of Section 6.01 or a refinancing thereof permitted by clause (v)
of Section 6.01, (B) such Liens and the Indebtedness secured thereby are
incurred prior to or within 90 days after such acquisition, construction
or improvement of such equipment, inventory, general intangibles or real
property, (C) the Indebtedness secured thereby does not exceed 100% of
the cost of acquiring such equipment, inventory or general intangibles or
acquiring, constructing or improving such real property and (D) such
Liens shall not apply to any other property or assets of the Borrower or
any Subsidiary (or until the Partial Termination Date, the Parent).
Notwithstanding the foregoing, the Borrower will not, and it will not permit any
Subsidiary to, create, incur, assume or permit to exist any Lien on any
Collateral consisting of equipment acquired under the Supply Agreement except
(i) Liens created under the Security Documents and (ii) Liens described in the
definition of clauses (a) and (b) of Permitted Encumbrances.
Section 6.03. FUNDAMENTAL CHANGES.
(a) Neither the Parent nor the Borrower will, and neither of
them will permit any Subsidiary to, merge into or consolidate with any other
Person, or permit any other Person to merge into or consolidate with it, or
sell, transfer, lease or otherwise dispose of (in one transaction or in a series
of transactions) all or substantially all of its assets, or all or substantially
all of the stock of any of its Subsidiaries (in each case, whether now owned or
hereafter acquired), or liquidate or dissolve, except that, if at the time
thereof and immediately after giving effect thereto no Default shall have
occurred and be continuing (i) the Parent may merge with or into any other
Person so long as the Parent is the surviving entity, (ii) the Borrower may
merge with or into any other Person so long as the Borrower is the surviving
entity and remains a wholly owned subsidiary of the Parent, (iii) any Subsidiary
may merge with or into any other wholly owned Subsidiary in a transaction in
which the surviving entity is a Subsidiary and any Subsidiary may merge with or
into Borrower in a transaction in which the Borrower is the surviving entity,
(iv) any Subsidiary may sell, transfer, lease or otherwise dispose of its assets
to the Borrower or to another Subsidiary and (v) any Subsidiary may liquidate or
dissolve if the Borrower determines in good faith that such liquidation or
dissolution is in its best interests and is not disadvantageous to the Lenders.
(b) Neither the Parent nor the Borrower will, and neither of
them will permit any Subsidiary to, and the Parent will not permit any of its
other subsidiaries, to engage to any material extent in any business other than
a Qualifying Business and any businesses incidental, related or ancillary to, or
which are entered into as a means of facilitating or enhancing, any of the
foregoing.
Section 6.04. INVESTMENTS, LOANS, ADVANCES, GUARANTEES AND
ACQUISITIONS; ASSET SALES.
(a) The Borrower will not, and neither the Parent nor the
Borrower will permit any Subsidiary to, purchase, hold or acquire (including
pursuant to any merger with any Person that was not a wholly owned Subsidiary
prior to such merger) any capital stock, evidences of indebtedness or other
securities (including any option, warrant or other right to
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acquire any of the foregoing) of, make or permit to exist any loans or advances
to, Guarantee any obligations of, or make or permit to exist any investment or
any other interest in, any other Person, or purchase or otherwise acquire (in
one transaction or a series of transactions) any assets of any other Person
constituting a business unit, except:
(i) Permitted Investments;
(ii) investments by the Borrower in the capital stock of the
Subsidiaries and investments by any Subsidiary in the capital stock of
other Subsidiaries;
(iii) loans or advances made by the Borrower to any Subsidiary or
made by any Subsidiary to the Borrower or any other Subsidiary; PROVIDED
that any such Indebtedness shall be subordinated to the Obligations of
the Borrower or the Subsidiary, as applicable, pursuant to a written
subordination agreement in form and substance satisfactory to the
Required Lenders;
(iv) investments received in connection with the bankruptcy or
reorganization of, or settlement of delinquent accounts and disputes
with, customers and suppliers, in each case in the ordinary course of
business;
(v) (A) payroll, travel and similar advances made in the
ordinary course of business that are expected at the time such advances
are made ultimately to be treated as expenses in accordance with GAAP and
(B) other loans and advances by the Borrower or any Subsidiary to their
respective directors, officers or employees in an aggregate principal
amount not exceeding $400,000 at any one time outstanding;
(vi) investments existing on the date hereof and set forth on
Schedule 6.04; and
(vii) Guarantees pursuant to the Loan Documents.
(b) The Borrower will not, and neither the Parent nor the
Borrower will permit any Subsidiary to, sell, transfer, lease or otherwise
dispose of any asset, including any capital stock of or ownership interest in
any other Person owned by it, and the Borrower will not permit any Subsidiary to
issue (other than to the Borrower or a wholly owned Subsidiary) any additional
shares of its capital stock or other ownership interest in such Subsidiary,
except:
(i) transfers constituting investments permitted by paragraph
(a) of this Section or Restricted Payments permitted by Section 6.06;
(ii) sales, transfers and dispositions to the Borrower or a
Subsidiary;
(iii) sales, transfers and dispositions of obsolete, uneconomic
or surplus assets made when no Default has occurred and is continuing;
(iv) dispositions of inventory (other than equipment) in the
ordinary course of business; and
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(v) non-exclusive licenses of software to customers of the
Borrower or any Subsidiary in the ordinary course of business.
PROVIDED that all sales, transfers, leases and other dispositions permitted
hereby (other than pursuant to clause (iii) above) shall be made for fair value
and solely for cash consideration.
(c) Until the Partial Termination Date, the Parent will not
purchase, hold or acquire (including pursuant to any merger with any Person that
was not a wholly owned subsidiary prior to such merger) any capital stock,
evidences of indebtedness or other securities (including any option, warrant or
other right to acquire any of the foregoing) of, make or permit to exist any
loans or advances to, Guarantee any obligations of, or make or permit to exist
any investment or any other interest in, any other Person, or purchase or
otherwise acquire (in one transaction or a series of transactions) any assets of
any other Person constituting a business unit, except:
(i) Permitted Investments;
(ii) investments in the capital stock of the Borrower or the
Subsidiaries;
(iii) loans or advances made to the Borrower or any Subsidiary;
(iv) investments in the capital stock of or other equity
interests in, and loans and advances to, any Person (other than the
Borrower and the Subsidiaries) provided that the aggregate amount of such
investments, loans and advances made shall not exceed the amount of the
aggregate net cash proceeds of the issuance and sale after the date
hereof by the Parent of any of its capital stock or any Indebtedness
incurred pursuant to Section 6.01(vii).
(v) investments received in connection with the bankruptcy or
reorganization of, or settlement of delinquent accounts and disputes
with, customers and suppliers, in each case in the ordinary course of
business;
(vi) (A) payroll, travel and similar advances made in the
ordinary course of business that are expected at the time such advances
are made ultimately to be treated as expenses in accordance with GAAP and
(B) other loans and advances by the Parent to its directors, officers or
employees, PROVIDED that the aggregate principal amount of loans and
advances of the type described under this clause (vi) and Section
6.04(a)(v) at any one time outstanding shall not exceed $400,000;
(vii) Guarantees by the Parent of the obligations (other than
Indebtedness) of any subsidiary of the Parent required by any
Governmental Authority in connection with the application by such
subsidiary for certification as a competitive local exchange carrier; and
(viii) Guarantees by the Parent pursuant to the Loan Documents.
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(d) Until the Partial Termination Date, the Parent will not
sell, transfer, lease or otherwise dispose of any asset, including any capital
stock of or ownership interest in any other Person owned by it, except:
(i) transfers constituting investments permitted by paragraph
(c) of this Section;
(ii) sales, transfers and dispositions to the Borrower or a
Subsidiary;
(iii) sales, transfers and dispositions of obsolete, uneconomic
or surplus assets made when no Default has occurred and is continuing;
(iv) dispositions of inventory (other than equipment) in the
ordinary course of business; and
(v) non-exclusive licenses of software to customers of the
Parent in the ordinary course of business;
PROVIDED that all sales, transfers, leases and other dispositions permitted
pursuant to clauses (i) and (iv) above shall be made for fair value and solely
for cash consideration and all sales, transfers, leases and other dispositions
permitted pursuant to clause (ii) shall be made solely for capital stock or
Indebtedness of the Borrower.
(e) The Parent will not sell, transfer, lease or otherwise
dispose of any capital stock, ownership interest or other investment in the
Borrower owned by it, or permit the Borrower to issue any capital stock to any
Person other than the Parent.
Section 6.05. HEDGING AGREEMENTS. The Borrower will not, and
neither the Parent nor the Borrower will permit any Subsidiary to, enter into
any Hedging Agreement, other than Hedging Agreements required by Section 5.13
and other Hedging Agreements entered into in the ordinary course of business to
hedge or mitigate risks to which the Borrower or any Subsidiary is exposed in
the conduct of its business or the management of its liabilities.
Section 6.06. RESTRICTED PAYMENTS. The Borrower will not, and
neither the Parent nor the Borrower will permit any Subsidiary to, declare or
make, or agree to pay or make, directly or indirectly, any Restricted Payment,
except (i) the Borrower may make Restricted Payments to the Parent (x) in
additional shares of its common stock or Permitted Preferred Stock (including
options, warrants and other rights to purchase shares of such common stock or
Permitted Preferred Stock), and (y) in cash in an amount not exceeding any
amount that shall be then due and payable by the Borrower in respect of any
Subordinated Indebtedness, provided that any such Restricted Payment may be made
only to the extent that such amount then due and payable may be paid by the
Borrower in compliance with the subordination agreement applicable to the
payment of such Subordinated Indebtedness, and (ii) Subsidiaries may make
Restricted Payments to the Borrower or other wholly owned Subsidiaries. Until
the Partial Termination Date, the Parent will not declare or make, or agree to
pay or make, directly or indirectly, any Restricted Payment.
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Section 6.07. TRANSACTIONS WITH AFFILIATES. The Borrower will
not, and neither the Parent nor the Borrower will permit any Subsidiary to,
sell, lease or otherwise transfer any property or assets to, or purchase, lease
or otherwise acquire any property or assets from, or otherwise engage in any
other transactions with, any of its Affiliates, except (a) transactions that are
at prices and on terms and conditions not less favorable to the Borrower or such
Subsidiary than could be obtained on an arm's-length basis from unrelated third
parties, (b) transactions between or among the Borrower and the Subsidiaries not
involving any other Affiliate; and (c) pursuant to the Administrative
Agreement.
Section 6.08. RESTRICTIVE AGREEMENTS. The Borrower will not, and
neither the Parent nor the Borrower will permit any Subsidiary to, directly or
indirectly, enter into, incur or permit to exist any agreement or other
arrangement that prohibits, restricts or imposes any condition upon the ability
of any Subsidiary to pay dividends or other distributions with respect to any
shares of its capital stock or to make or repay loans or advances to the
Borrower or to Guarantee Indebtedness of the Borrower; PROVIDED that (a) the
foregoing shall not apply to restrictions and conditions imposed by law or by
any Loan Document and (b) the foregoing shall not apply to restrictions and
conditions existing on the date hereof identified on Schedule 6.08 (but shall
apply to any extension or renewal of, or any amendment or modification expanding
the scope of, any such restriction or condition).
Section 6.09. REPAYMENT OF INDEBTEDNESS. The Borrower will not
make any Repayment in respect of any Subordinated Indebtedness in violation of
the subordination agreement applicable to the payment of such Subordinated
Indebtedness.
Section 6.10. LIMITATION ON SALE-LEASEBACK TRANSACTIONS. The
Borrower will not, and neither the Parent nor the Borrower will permit any
Subsidiary to, enter into any arrangement, directly or indirectly, whereby it
shall sell or transfer any property, real or personal, used or useful in its
business, whether now owned or hereafter acquired, and thereafter rent or lease
such property or other property that it intends to use for substantially the
same purpose or purposes as the property sold or transferred, except for any
such sale of any fixed or capital asset that is made for cash consideration in
an amount not less than the cost of such fixed or capital asset and is
consummated within 90 days after the Borrower or such Subsidiary acquires or
completes the construction of such fixed or capital asset.
Section 6.11. SENIOR INDEBTEDNESS TO TOTAL CAPITALIZATION.
Neither the Parent nor the Borrower will permit the ratio of Senior Indebtedness
to Total Capitalization at any time during any period set forth below to be
greater than the ratio set forth below opposite such period:
Period Ratio
------ -----
On or after the Effective Date, but prior to [ * ]
March 31, 2001
On or after March 31, 2001, but prior to [ * ]
* INDICATES CONFIDENTIAL TREATMENT REQUESTED
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Period Ratio
------ -----
June 30, 2003
On or after June 30, 2003, but prior to [ * ]
December 31, 2003
On or after December 31, 2003, but prior [ * ]
to March 31, 2004
On or after March 31, 2004, but prior [ * ]
to June 30, 2004
On or after June 30, 2004, but prior [ * ]
to March 30, 2005
On or after March 30, 2005 [ * ]
Section 6.12. CONSOLIDATED INDEBTEDNESS TO TOTAL CAPITALIZATION.
Neither the Parent nor the Borrower will permit the ratio of Consolidated
Indebtedness to Total Capitalization at any time during any period set forth
below to be greater than the ratio set forth below opposite such period:
Period Ratio
------ -----
On or after the Effective Date, but prior [ * ]
to March 31, 2000
On or after March 31, 2000, but prior [ * ]
to March 31, 2001
On or after March 31, 2001, but prior [ * ]
to June 30, 2003
On or after June 30, 2003 [ * ]
Section 6.13. CONSOLIDATED INDEBTEDNESS TO ANNUALIZED EBITDA.
Neither the Parent nor the Borrower will permit the ratio of (a) Consolidated
Indebtedness to (b) Annualized EBITDA at any time during any period set forth
below to be greater than the ratio set forth below opposite such period:
Period Ratio
------ -----
On or after September 30, 2001, but prior [ * ]
* INDICATES CONFIDENTIAL TREATMENT REQUESTED
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Period Ratio
------ -----
to December 31, 2001
On or after December 31, 2001, but prior [ * ]
to September 30, 2002
On or after September 30, 2002, but prior [ * ]
to December 31, 2002
On or after December 31, 2002 [ * ]
Section 6.14. SENIOR INDEBTEDNESS TO ANNUALIZED EBITDA. Neither
the Parent nor Borrower will permit the ratio of (a) Senior Indebtedness to (b)
Annualized EBITDA at any time during any period set forth below to be greater
than the ratio set forth below opposite such period:
Period Ratio
------ -----
On or after June 30, 2001, but prior to [ * ]
September 30, 2001
On or after September 30, 2001, but prior [ * ]
to December 31, 2001
On or after December 31, 2001, but prior [ * ]
to September 30, 2002
On or after September 30, 2002, but prior [ * ]
to December 31, 2002
On or after December 31, 2002, but prior [ * ]
to June 30, 2003
On or after June 30, 2003 [ * ]
Section 6.15. ANNUALIZED EBITDA TO CONSOLIDATED INTEREST EXPENSE.
Neither the Parent nor the Borrower will permit the ratio of (a) Annualized
EBITDA to (b) Consolidated Interest Expense for the period of four fiscal
quarters then most recently ended at any time during any period set forth below
to be less than the ratio set forth below opposite such period:
Period Ratio
------ -----
On or after June 30, 2001, but prior to [ * ]
* INDICATES CONFIDENTIAL TREATMENT REQUESTED
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Period Ratio
------ -----
September 30, 2001
On or after September 30, 2001, but prior [ * ]
to December 31, 2001
On or after December 31, 2001, but prior [ * ]
to September 30, 2002
On or after September 30, 2002, but prior [ * ]
to June 30, 2004
On or after June 30, 2004 [ * ]
Section 6.16. ANNUALIZED EBITDA TO CONSOLIDATED DEBT SERVICE.
Neither the Parent nor the Borrower will permit the ratio of (a) Annualized
EBITDA to (b) Consolidated Debt Service for the period of four fiscal quarters
then most recently ended at any time during any period set forth below to be
less than the ratio set forth below opposite such period:
Period Ratio
------ -----
On or after June 30, 2001, but prior to [ * ]
September 30, 2001
On or after September 30, 2001, but prior [ * ]
to December 31, 2001
On or after December 31, 2001 [ * ]
Section 6.17. CONSOLIDATED GROSS REVENUES. Neither the Parent nor
the Borrower will permit Consolidated Gross Revenues for any 12-calendar month
period ended on any date set forth below to be less than the amount set forth
below opposite such date:
December 31, 1999 [ * ]
March 31, 2000 [ * ]
June 30, 2000 [ * ]
September 30, 2000 [ * ]
December 31, 2000 [ * ]
* INDICATES CONFIDENTIAL TREATMENT REQUESTED
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March 31, 2001 [ * ]
June 30, 2001 [ * ]
September 30, 2001 [ * ]
December 31, 2001 [ * ]
March 31, 2002 [ * ]
June 30, 2002 [ * ]
September 30, 2002 [ * ]
December 31, 2002 [ * ]
Section 6.18. MINIMUM SUBSCRIBERS. Neither the Parent nor the
Borrower will permit the minimum number of Subscribers as of any date set forth
below to be less than the number set forth opposite such date:
Date Number
---- ------
September 30, 1999 [ * ]
December 31, 1999 [ * ]
March 31, 2000 [ * ]
June 30, 2000 [ * ]
September 30, 2000 [ * ]
December 31, 2000 [ * ]
March 31, 2001 [ * ]
June 30, 2001 [ * ]
September 30, 2001 [ * ]
December 31, 2001 [ * ]
March 31, 2002 [ * ]
June 30, 2002 [ * ]
September 30, 2002 [ * ]
* INDICATES CONFIDENTIAL TREATMENT REQUESTED
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December 31, 2002 [ * ]
Section 6.19. CONSOLIDATED PARENT INDEBTEDNESS TO TOTAL PARENT
CAPITALIZATION. The Parent will not permit the ratio (a) of Consolidated Parent
Indebtedness to (b) Total Parent Capitalization at any time during any period
set forth below to be greater than the ratio set forth below opposite such
period:
Period Ratio
------ -----
On or after the Effective Date, but
prior to March 31, 2000 [ * ]
On or after March 31, 2000, but
prior to June 30, 2001 [ * ]
On or after June 30, 2001, but
prior to June 30, 2003 [ * ]
On or after June 30, 2003 [ * ]
Section 6.20. CONSOLIDATED PARENT INDEBTEDNESS TO ANNUALIZED
PARENT EBITDA. The Parent will not permit the ratio of (a) Consolidated
Parent Indebtedness to (b) Annualized Parent EBITDA at any time during any
period set forth below to exceed the ratio set forth below opposite such
period:
Period Ratio
------ -----
On or after September 30, 2001, but
prior to June 30, 2002 [ * ]
On or after June 30, 2002, but
prior to June 30, 2003 [ * ]
On or after June 30, 2003 [ * ]
Section 6.21. USE OF COLLATERAL.
(a) Except as otherwise provided in clause (b) of this Section
6.21, neither the Parent nor the Borrower will permit, and neither of them will
permit any Subsidiary to permit, any tangible asset constituting Collateral to
be located (i) outside a Permitted UCC Jurisdiction, (ii) outside the possession
of the Borrower or a Subsidiary or (iii) on any property not (A) owned by the
Borrower or a Subsidiary or (B) leased by the Borrower or a Subsidiary (or
subject to an
* INDICATES CONFIDENTIAL TREATMENT REQUESTED
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interconnection agreement granting rights to the Borrower or Subsidiary
substantially similar to a lease) from a Person that has not delivered a
Landlord Letter to the Agents.
(b) The Parent or the Borrower may permit, and either of them
may permit any Subsidiary to permit, (i) Collateral other than Lucent Product to
be in the possession of or located on property owned or leased by the Parent (or
subject to an interconnection agreement granting rights to the Parent
substantially similar to a lease) until the Partial Termination Date; (ii)
Borrower-Related Collateral to be in the possession of the Parent and located on
property owned or leased by the Parent; and (iii) Collateral other than Lucent
Product to be located at the principal office of the Parent and the Borrower
without the delivery by the lessor of such property of a Landlord Letter to the
Agents.
(c) This Section 6.21 shall not be construed to prohibit (i)
the return of any asset constituting Collateral to the vendor thereof for
repairs, services, modifications or other similar purposes or (ii) the storage
of any asset constituting Collateral in any warehouse or similar facility.
(d) Neither the Parent nor the Borrower will permit any asset
constituting Collateral to be located outside a Permitted UCC Jurisdiction
unless (i) the Parent or the Borrower shall have notified the Lenders thereof
reasonably in advance of any such assets being transferred outside the Permitted
UCC Jurisdiction and (ii) the Required Lenders shall be reasonably satisfied
that (A) the laws of the jurisdiction in which such assets are to be located
adequately protect the interests of the Lenders in such Collateral, (B) the
security interests in such Collateral granted under the Security Documents will
continue to be adequately protected and perfected, (C) there are not any
material risks relating to the political or economic stability of the
jurisdiction in which such Collateral is to be located or the Person that will
possess such Collateral in such jurisdiction, and (D) the location of such
Collateral in such jurisdiction is not otherwise materially disadvantageous to
the Lenders. The Borrower shall deliver to the Lenders, with a copy to the
Agents, such legal opinions and other documentation as either Agent or the
Required Lenders shall reasonably request in connection with their consideration
or approval of any proposed transfer of Collateral outside a Permitted UCC
Jurisdiction.
ARTICLE VII
EVENTS OF DEFAULT
If any of the following events ("EVENTS OF DEFAULT") shall occur:
(a) the Borrower shall fail to pay any principal of any Loan
when and as the same shall become due and payable, whether at the due date
thereof or at a date fixed for prepayment thereof or otherwise;
(b) the Borrower shall fail to pay any interest on any Loan or
any fee or any other amount (other than an amount referred to in clause (a) of
this Article) payable under this Agreement, when and as the same shall become
due and payable, and such failure shall continue unremedied for a period of five
days (in the case of interest or fees) or five days after notice thereof from
the Administrative Agent or any Lender (in the case of any such other amount);
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(c) any representation or warranty made or deemed made by or on
behalf of any Loan Party in or in connection with any Loan Document or any
amendment or modification thereof or waiver thereunder, or in any report,
certificate, financial statement or other document furnished pursuant to or in
connection with any Loan Document or any amendment or modification thereof or
waiver thereunder, shall prove to have been incorrect in any respect (or, in the
case of any representation or warranty that is not qualified as to materiality,
in any material respect) when made or deemed made;
(d) the Parent or the Borrower shall fail to observe or perform
any covenant, condition or agreement contained in Section 5.02(a)(i), 5.04 (with
respect to the legal existence of the Parent or the Borrower and subject to the
proviso contained therein) or 5.10 or in Article VI;
(e) any Loan Party shall fail to observe or perform any
covenant, condition or agreement contained in any Loan Document (other than
those specified in clause (a), (b) or (d) of this Article), and such failure
shall continue unremedied for a period of 30 days after notice thereof from the
Administrative Agent to the Borrower (which notice will be given at the request
of any Lender);
(f) any Loan Party shall fail to make any payment (whether of
principal or interest and regardless of amount) in respect of any Material
Indebtedness, when and as the same shall become due and payable (after giving
effect to any period of grace expressly applicable thereto);
(g) any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that enables or
permits (after giving effect to any period of grace expressly applicable
thereto) the holder or holders of any Material Indebtedness or any trustee or
agent on its or their behalf to cause any Material Indebtedness to become due,
or to require the prepayment, repurchase, redemption or defeasance thereof,
prior to its scheduled maturity; PROVIDED that this clause (g) shall not apply
to secured Indebtedness that becomes due as a result of the voluntary sale or
transfer of the property or assets securing such Indebtedness;
(h) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed seeking (i) liquidation, reorganization or
other relief in respect of the Parent, the Borrower or any Subsidiary or its
debts, or of a substantial part of its assets, under any Federal, state or
foreign bankruptcy, insolvency, receivership or similar law now or hereafter in
effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for the Parent, the Borrower or any Subsidiary
or for a substantial part of its assets, and, in any such case, such proceeding
or petition shall continue undismissed for 60 days or an order or decree
approving or ordering any of the foregoing shall be entered;
(i) the Parent, the Borrower or any Subsidiary shall (i)
voluntarily commence any proceeding or file any petition seeking liquidation,
reorganization or other relief under any Federal, state or foreign bankruptcy,
insolvency, receivership or similar law now or hereafter in effect, (ii) consent
to the institution of, or fail to contest in a timely and appropriate manner,
any proceeding or petition described in clause (h) of this Article, (iii) apply
for or consent to the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for the
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Parent, the Borrower or any Subsidiary or for a substantial part of its assets,
(iv) file an answer admitting the material allegations of a petition filed
against it in any such proceeding, (v) make a general assignment for the benefit
of creditors or (vi) take any action for the purpose of effecting any of the
foregoing;
(j) the Parent, the Borrower or any Subsidiary shall become
unable, admit in writing its inability or fail generally to pay its debts as
they become due;
(k) one or more judgments for the payment of money in an
aggregate amount in excess of $500,000 shall be rendered against the Parent, the
Borrower or any Subsidiary or any combination thereof and the same shall remain
undischarged for a period of 30 consecutive days during which execution shall
not be effectively stayed, or any action shall be legally taken by a judgment
creditor to attach or levy upon any assets of the Parent, the Borrower or any
Subsidiary to enforce any such judgment;
(l) any Lien on any material portion of the Collateral
purported to be created under the Security Documents shall cease to be, or shall
be asserted by the Parent, the Borrower or any Subsidiary not to be, a valid and
perfected Lien on any Collateral, with the priority required by the Security
Documents, except as a result of the sale or other disposition of the applicable
Collateral in a transaction permitted under the Loan Documents;
(m) a Change in Control shall occur;
(n) the loss, revocation, suspension or material impairment of
any license or agreement (or combination of licenses and agreements) of (i) the
Parent or (ii) the Borrower and the Subsidiaries shall occur that results in or
could reasonably be expected to result in a Material Adverse Effect; or
(o) an ERISA Event shall have occurred that when taken together
with all other ERISA Events that have occurred, could reasonably be expected to
result in a Material Adverse Effect; then, and in every such event (other than
an event with respect to the Borrower described in clause (h) or (i) of this
Article), and at any time thereafter during the continuance of such event, the
Administrative Agent may, and at the request of the Required Lenders shall, by
notice to the Borrower, take either or both of the following actions, at the
same or different times: (i) terminate the Commitments, and thereupon the
Commitments shall terminate immediately, and (ii) declare the Loans then
outstanding to be due and payable in whole (or in part, in which case any
principal not so declared to be due and payable may thereafter be declared to be
due and payable), and thereupon the principal of the Loans so declared to be due
and payable, together with accrued interest thereon and all fees and other
obligations of the Borrower accrued hereunder, shall become due and payable
immediately, without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrower; and in case of any event with
respect to the Borrower described in clause (h) or (i) of this Article, the
Commitments shall automatically terminate and the principal of the Loans then
outstanding, together with accrued interest thereon and all fees and other
obligations of the Borrower accrued hereunder, shall automatically become due
and payable, without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrower.
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ARTICLE VIII
THE AGENTS
Each of the Lenders hereby irrevocably appoints each Agent as its
agent and authorizes each Agent to take such actions on its behalf and to
exercise such powers as are delegated to such Agent by the terms of the Loan
Documents, together with such actions and powers as are reasonably incidental
thereto.
Any Person serving as an Agent hereunder shall have the same
rights and powers in its capacity as a Lender as any other Lender and may
exercise the same as though it were not an Agent, and such Person and its
Affiliates may accept deposits from, lend money to and generally engage in any
kind of business with the Parent or any Subsidiary or other Affiliate thereof as
if it were not an Agent hereunder.
Neither Agent shall have any duties or obligations except those
expressly set forth in the Loan Documents. Without limiting the generality of
the foregoing, (a) neither Agent shall be subject to any fiduciary or other
implied duties, regardless of whether a Default has occurred and is continuing,
(b) neither Agent shall have any duty to take any discretionary action or
exercise any discretionary powers, except discretionary rights and powers
expressly contemplated by the Loan Documents that such Agent is required to
exercise in writing by the Required Lenders (or such other number or percentage
of the Lenders as shall be necessary under the circumstances as provided in
Section 9.02), and (c) except as expressly set forth in the Loan Documents,
neither Agent shall have any duty to disclose, and shall not be liable for the
failure to disclose, any information relating to the Parent or any of its
Subsidiaries that is communicated to or obtained by the Person serving as Agent
or any of its Affiliates in any capacity. Neither Agent shall be liable for any
action taken or not taken by it with the consent or at the request of the
Required Lenders (or such other number or percentage of the Lenders as shall be
necessary under the circumstances as provided in Section 9.02) or in the absence
of its own gross negligence or willful misconduct. Each Agent shall be deemed
not to have knowledge of any Default unless and until written notice thereof is
given to such Agent by a Loan Party or a Lender, and neither Agent shall be
responsible for or have any duty to ascertain or inquire into (i) any statement,
warranty or representation made in or in connection with any Loan Document, (ii)
the contents of any certificate, report or other document delivered thereunder
or in connection therewith, (iii) the performance or observance of any of the
covenants, agreements or other terms or conditions set forth in any Loan
Document, (iv) the validity, enforceability, effectiveness or genuineness of any
Loan Document or any other agreement instrument or document, or (v) the
satisfaction of any condition set forth in Article IV or elsewhere in any Loan
Document, other than to confirm receipt of items expressly required to be
delivered to such Agent.
Each Agent shall be entitled to rely upon, and shall not incur any
liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing believed by it to be genuine
and to have been signed or sent by the proper Person. Each Agent also may rely
upon any statement made to it orally or by telephone and believed by it to be
made by the proper Person, and shall not incur any liability for relying
thereon. Each Agent may consult with legal counsel (who may be counsel for the
Parent or the Borrower), independent accountants and other experts selected by
it, and shall not be liable for any action
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taken or not taken by it in accordance with the advice of any such counsel,
accountants or experts.
Each Agent may perform any and all its duties and exercise its
rights and powers by or through any one or more sub-agents appointed by such
Agent. Each Agent and any such sub-agent may perform any and all its duties and
exercise its rights and powers through their respective Related Parties. The
exculpatory provisions of the preceding paragraphs shall apply to any such
sub-agent and to the Related Parties of each Agent and any such sub-agent, and
shall apply to their respective activities in connection with the syndication of
the credit facilities provided for herein as well as activities as Agent.
Subject to the appointment and acceptance of a successor Agent as
provided in this paragraph, an Agent may resign at any time by notifying the
Lenders and the Borrower. Upon any such resignation, the Required Lenders shall
have the right to appoint a successor with the approval of the Borrower (which
approval shall not be unreasonably withheld or delayed and, if an Event of
Default has occurred and is continuing, shall not be required). If no successor
shall have been so appointed by the Required Lenders and shall have accepted
such appointment within 30 days after the retiring Agent gives notice of its
resignation, then the retiring Agent may, on behalf of the Lenders, appoint a
successor Agent with the approval of the Borrower (which approval shall not be
unreasonably withheld or delayed and, if an Event of Default has occurred and is
continuing, shall not be required) which shall be a bank with an office in New
York, New York, or an Affiliate of any such bank. Upon the acceptance of its
appointment as Agent hereunder by a successor, such successor shall succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder. The fees payable by the Borrower to a successor Agent
shall be the same as those payable to its predecessor unless otherwise agreed
between the Borrower and such successor. After an Agent's resignation
hereunder, the provisions of this Article and Section 9.03 shall continue in
effect for the benefit of such retiring Agent, its sub-agents and their
respective Related Parties in respect of any actions taken or omitted to be
taken by any of them while it was acting as Agent.
Each Lender acknowledges that it has, independently and without
reliance upon either Agent or any other Lender and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon either Agent or any other Lender
and based on such documents and information as it shall from time to time deem
appropriate, continue to make its own decisions in taking or not taking action
under or based upon this Agreement, any other Loan Document or related agreement
or any document furnished hereunder or thereunder.
ARTICLE IX
MISCELLANEOUS
Section 9.01. NOTICES. Except in the case of notices and other
communications expressly permitted to be given by telephone, all notices and
other communications provided for
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herein shall be in writing and shall be delivered by hand or overnight courier
service, mailed by certified or registered mail or sent by telecopy, as follows:
(a) if to the Borrower or the Parent, to it at 1099 18th
Street, Suite 700, Denver, Colorado 80202 (Telecopy No. (303) 226-8305);
(b) if to the Collateral Agent, to it at 2 Avenue de Lafayette,
Boston, Massachusetts 02111-174, Attention of Global Investor Services Group
Corporate Trust (Telecopy No. (617) 662-1465);
(c) if to the Administrative Agent, to it at 283 King George
Road, Warren, New Jersey 07059, Attention of Assistant Treasurer-Project Finance
(Telecopy No. (908) 559-1711);
(d) if to Lucent, to it at 283 King George Road, Warren, New
Jersey 07059, Attention of Assistant Treasurer-Project Finance (Telecopy No.
(908) 559-1711); and
(e) if to any other Lender, to it at its address (or telecopy
number) set forth in its Administrative Questionnaire.
Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt.
Section 9.02. WAIVERS; AMENDMENTS.
(a) No failure or delay by either Agent or any Lender in
exercising any right or power hereunder or under any other Loan Document shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or further exercise thereof or the
exercise of any other right or power. The rights and remedies of the Agents and
the Lenders hereunder and under the other Loan Documents are cumulative and are
not exclusive of any rights or remedies that they would otherwise have. No
waiver of any provision of any Loan Document or consent to any departure by any
Loan Party therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) of this Section, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. Without limiting the generality of the foregoing, the making of a Loan
shall not be construed as a waiver of any Default, regardless of whether an
Agent or any Lender may have had notice or knowledge of such Default at the
time.
(b) Neither this Agreement nor any other Loan Document nor any
provision hereof or thereof may be waived, amended or modified except, in the
case of this Agreement, pursuant to an agreement or agreements in writing
entered into by the Parent, the Borrower and the Required Lenders or, in the
case of any other Loan Document, pursuant to an agreement or agreements in
writing entered into by the applicable Agent and the Loan Party or Loan Parties
that are parties thereto with the consent of the Required Lenders; PROVIDED that
no such agreement shall (i) increase the Commitment of any Lender without the
written consent of such
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Lender, (ii) reduce the principal amount of any Loan or reduce the rate of
interest on such Loan, or reduce any fees payable hereunder, without the written
consent of each Lender affected thereby, (iii) postpone the scheduled date of
payment of the principal amount of any Loan or any interest thereon, or any fees
payable hereunder, or reduce the amount of, waive or excuse any such payment, or
postpone the scheduled date of expiration of any Commitment, without the written
consent of each Lender affected thereby, (iv) change Section 2.16(b) or (c) in a
manner that would alter the pro rata sharing of payments required thereby,
without the written consent of each Lender, (v) change any of the provisions of
this Section or the definition of "Required Lenders" or any other provision of
any Loan Document specifying the number or percentage of Lenders required to
waive, amend or modify any rights thereunder or make any determination or grant
any consent thereunder, without the written consent of each Lender, (vi) release
all or any substantial part of the Collateral from the Liens of the Security
Documents (except as expressly provided therein), without the written consent of
each Lender, (vii) release the Parent or any Guarantor Subsidiary from its
Guarantee under the Guarantee Agreement (except as expressly provided in the
Guarantee Agreement) or limit or condition its obligations thereunder, without
the written consent of each Lender, or (viii) change any provisions of any Loan
Document in a manner that by its terms adversely affects the rights in respect
of payments due to Lenders holding Loans of any Class differently than those
holding Loans of any other Class, without the written consent of Lenders holding
a majority in interest of the outstanding Loans of each affected Class and, in
the case of a Class with respect to which the Availability Period has not ended,
a majority in interest of the Commitments (in addition to any other consents
required by this sentence); PROVIDED FURTHER that no such agreement shall amend,
modify or otherwise affect the rights or duties of either Agent without the
prior written consent of such Agent.
Section 9.03. EXPENSES; INDEMNITY; DAMAGE WAIVER.
(a) Each of the Parent and the Borrower shall pay (i) all costs
and expenses incurred by Lucent and each Agent, including the reasonable fees,
charges and disbursements of counsel for Lucent or the Agents, in connection
with the negotiation, preparation, execution and delivery of the Loan Documents
(including, in the case of Lucent, expenses incurred in connection with its due
diligence activities) and (ii) all costs and expenses incurred by either Agent
or any Lender, including the reasonable fees, charges and disbursements of any
counsel for either Agent or any Lender, in connection with (A) the enforcement
or protection of its rights in connection with the Loan Documents, including its
rights under this Section, or in connection with the Loans made hereunder,
including all such costs and expenses incurred during any workout, restructuring
or negotiations in respect of such Loans, and (B) in the case of Lucent and the
Agents, the administration of, and any amendments, modifications, waivers or
supplements of or to the provisions of, any of the Loan Documents.
(b) Each of the Parent and the Borrower shall indemnify each
Agent and each Lender, and each Related Party of any of the foregoing Persons
(each such Person being called an "INDEMNITEE") against, and hold each
Indemnitee harmless from, any and all losses, claims, damages, liabilities and
related expenses, including the reasonable fees, charges and disbursements of
any counsel for any Indemnitee, incurred by or asserted against any Indemnitee
arising out of, in connection with, or as a result of (i) the execution or
delivery of any Loan Document or any other agreement or instrument contemplated
hereby, the performance by the parties to the Loan Documents of their respective
obligations thereunder or the consummation of
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the Transactions or any other transactions contemplated hereby, (ii) any Loan or
the use of the proceeds therefrom, (iii) any actual or alleged presence or
release of Hazardous Materials on or from any property owned or operated by the
Parent, the Borrower or any of the Subsidiaries or at which any Collateral is
located, or any Environmental Liability related in any way to the Parent, the
Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether based on contract, tort or any other theory and regardless of whether
any Indemnitee is a party thereto; PROVIDED that such indemnity shall not, as to
any Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses have resulted from the gross negligence or
willful misconduct of such Indemnitee.
(c) To the extent that the Parent and the Borrower fail to pay
any amount required to be paid by it to either Agent under paragraph (a) or (b)
of this Section, each Lender severally agrees to pay to such Agent such Lender's
pro rata share (determined as of the time that the applicable unreimbursed
expense or indemnity payment is sought) of such unpaid amount; PROVIDED that the
unreimbursed expense or indemnified loss, claim, damage, liability or related
expense, as the case may be, was incurred by or asserted against such Agent in
its capacity as such. For purposes hereof, a Lender's "pro rata share" shall be
determined based upon its share of the sum of the total outstanding Loans and
Commitments at the time.
(d) To the extent permitted by applicable law, neither the
Parent nor the Borrower shall assert, and each of them hereby waives, any claim
against any Indemnitee, on any theory of liability, for special, indirect,
consequential or punitive damages (as opposed to direct or actual damages)
arising out of, in connection with, or as a result of, this Agreement or any
agreement or instrument contemplated hereby, the Transactions, any Loan or the
use of the proceeds thereof.
(e) All amounts due under this Section shall be payable not
later than 30 days after written demand therefor.
Section 9.04. SUCCESSORS AND ASSIGNS.
(a) The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns permitted hereby, except that neither the Parent nor the Borrower may
assign or otherwise transfer any of its rights or obligations hereunder without
the prior written consent of each Lender (and any attempted assignment or
transfer by the Borrower without such consent shall be null and void). Nothing
in this Agreement, expressed or implied, shall be construed to confer upon any
Person (other than the parties hereto, their respective successors and assigns
permitted hereby and, to the extent expressly contemplated hereby, the Related
Parties of each of the Agents and the Lenders) any legal or equitable right,
remedy or claim under or by reason of this Agreement.
(b) Any Lender may, without the consent of the Parent or the
Borrower, assign to one or more Eligible Persons all or a portion of its rights
and obligations under this Agreement (including all or a portion of its
Commitment and the Loans at the time owing to it); PROVIDED that (i) except in
the case of an assignment to Lucent or a Lender or to an Affiliate of Lucent or
a Lender, the Administrative Agent must give its prior written consent to such
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assignment (which consent shall not be unreasonably withheld or delayed and,
while an Event of Default has occurred and is continuing, shall not be
required), (ii) except in the case of an assignment to Lucent, a Lender or an
Affiliate of Lucent or a Lender or an assignment of the entire remaining amount
of the assigning Lender's Commitment or entire remaining Loans of any Class, the
amount of the Commitment and Loans of such Class of the assigning Lender subject
to each such assignment (determined as of the date the Assignment and Acceptance
with respect to such assignment is delivered to the Administrative Agent) shall
not be less than $1,000,000 unless the Borrower otherwise consents, (iii) each
partial assignment shall be made as an assignment of a proportionate part of all
the assigning Lender's rights and obligations under this Agreement, except that
this clause (iii) shall not be construed to prohibit the assignment of a
proportionate part of all of the assigning Lender's rights and obligations in
respect of (A) one or more Classes of Loans, (B) one or more Classes of Loans
separately from (or without assigning) Commitments or (C) Commitments separately
from (or without assigning) Loans, (iv) the parties to each assignment shall
execute and deliver to the Administrative Agent an Assignment and Acceptance,
together with a processing fee of $5,000, and (v) the assignee, if it shall not
be a Lender, shall deliver to the Administrative Agent an Administrative
Questionnaire. Subject to acceptance and recording thereof pursuant to
paragraph (d) of this Section, from and after the effective date specified in
each Assignment and Acceptance the assignee thereunder shall be a party hereto
and, to the extent of the interest assigned by such Assignment and Acceptance,
have the rights and obligations of a Lender under this Agreement, and the
assigning Lender thereunder shall, to the extent of the interest assigned by
such Assignment and Acceptance, be released from its obligations under this
Agreement (and, in the case of an Assignment and Acceptance covering all of the
assigning Lender's rights and obligations under this Agreement, such Lender
shall cease to be a party hereto but shall continue to be entitled to the
benefits of Sections 2.13, 2.14, 2.15 and 9.03). Any assignment or transfer by
a Lender of rights or obligations under this Agreement that does not comply with
this paragraph shall be treated for purposes of this Agreement as a sale by such
Lender of a participation in such rights and obligations in accordance with
paragraph (e) of this Section.
(c) The Administrative Agent, acting for this purpose as an
agent of the Borrower, shall maintain at one of its offices a copy of each
Assignment and Acceptance delivered to it and a register for the recordation of
the names and addresses of the Lenders, and the Commitments of, and principal
amount of the Loans owing to, each Lender pursuant to the terms hereof from time
to time (the "REGISTER"). The entries in the Register shall be conclusive, and
the Borrower, the Agents and the Lenders may treat each Person whose name is
recorded in the Register pursuant to the terms hereof as a Lender hereunder for
all purposes of this Agreement, notwithstanding notice to the contrary. The
Register shall be available for inspection by the Borrower and any Lender, at
any reasonable time and from time to time upon reasonable prior notice.
(d) Upon its receipt of a duly completed Assignment and
Acceptance executed by an assigning Lender and an assignee, the assignee's
completed Administrative Questionnaire (unless the assignee shall already be a
Lender hereunder) and the processing fee referred to in clause (v) of paragraph
(b) of this Section, subject to the Borrower's right to consent to such
assignment to the extent provided in paragraph (b)(ii) of this Section and the
Administrative Agent's right to consent to such assignment to the extent
provided in paragraph (b) of this Section, the Administrative Agent shall accept
such Assignment and Acceptance and
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record the information contained therein in the Register. No assignment shall be
effective for purposes of this Agreement unless it has been recorded in the
Register as provided in this paragraph.
(e) Any Lender may, without the consent of the Borrower or the
Administrative Agent, sell participations to one or more Eligible Persons (a
"PARTICIPANT") in all or a portion of such Lender's rights and obligations under
this Agreement (including all or a portion of its Commitments and the Loans
owing to it); PROVIDED that (i) such Lender's obligations under this Agreement
shall remain unchanged, (ii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations and (iii) the
Borrower, the Agents and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement. Any agreement or instrument pursuant to which
a Lender sells such a participation shall provide that such Lender shall retain
the sole right to enforce the Loan Documents and to approve any amendment,
modification or waiver of any provision of the Loan Documents; PROVIDED that
such agreement or instrument may provide that such Lender will not, without the
consent of the Participant, agree to any amendment, modification or waiver
described in the first proviso to Section 9.02(b) that affects such Participant
Subject to paragraph (f) of this Section, the Borrower agrees that each
Participant shall be entitled to the benefits of Sections 2.13, 2.14 and 2.15 to
the same extent as if it were a Lender and had acquired its interest by
assignment pursuant to paragraph (b) of this Section provided that such
Participant agrees to be subject to Sections 2.15(f) and 2.17 as though it was a
Lender. To the extent permitted by law, each Participant also shall be entitled
to the benefits of Section 9.08 as though it were a Lender, provided such
Participant agrees to be subject to Section 2.16(c) as though it were a Lender.
(f) A Participant that would be a Foreign Lender if it were a
Lender shall not be entitled to the benefits of Section 2.15 unless the Borrower
is notified of the participation sold to such Participant and such Participant
agrees, for the benefit of the Borrower, to comply with Section 2.15(e) as
though it were a Lender.
(g) Any Lender may at any time pledge or assign a security
interest in all or any portion of its rights under this Agreement to secure
obligations of such Lender, including any pledge or assignment to secure
obligations to a Federal Reserve Bank, and this Section shall not apply to any
such pledge or assignment of a security interest; PROVIDED that no such pledge
or assignment of a security interest shall release a Lender from any of its
obligations hereunder or substitute any such pledgee or assignee for such Lender
as a party hereto.
Section 9.05. SURVIVAL. All covenants, agreements,
representations and warranties made by the Loan Parties in the Loan Documents
and in the certificates or other instruments delivered in connection with or
pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the other parties hereto and shall survive the
execution and delivery of the Loan Documents and the making of any Loans,
regardless of any investigation made by any such other party or on its behalf
and notwithstanding that either Agent or any Lender may have had notice or
knowledge of any Default or incorrect representation or warranty at the time any
credit is extended hereunder, and shall continue in full force and effect as
long as the principal of or any accrued interest on any Loan or any fee or any
other amount payable under this Agreement is outstanding and unpaid and so long
as the
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Commitments have not expired or terminated. The provisions of Sections 2.13,
2.14, 2.15 and 9.03 and Article VIII shall survive and remain in full force and
effect regardless of the consummation of the transactions contemplated hereby,
the repayment of the Loans, the expiration or termination of the Commitments or
the termination of this Agreement or any provision hereof.
Section 9.06. COUNTERPARTS; INTEGRATION; EFFECTIVENESS. This
Agreement may be executed in counterparts (and by different parties hereto on
different counterparts), each of which shall constitute an original, but all of
which when taken together shall constitute a single contract. This Agreement,
the other Loan Documents and any separate letter agreements with respect to (i)
the agreement of the Parent and the Borrower to cooperate with Lucent with
respect to marketing, selling or syndicating Loans and Commitments or with
respect to fees payable to Lucent or either Agent and (ii) the agreement of the
Parent and the Borrower with the Collateral Agent and Lucent as to the identity
of the Senior Officers of the Parent on the date hereof, constitute the entire
contract among the parties relating to the subject matter hereof and supersede
any and all previous agreements and understandings, oral or written, relating to
the subject matter hereof. Except as provided in Section 4.01(a), this
Agreement shall become effective when it shall have been executed by the
Administrative Agent and when the Administrative Agent shall have received
counterparts hereof which, when taken together, bear the signatures of each of
the other parties hereto, and thereafter shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
Delivery of an executed counterpart of a signature page of this Agreement by
telecopy shall be effective as delivery of a manually executed counterpart of
this Agreement.
Section 9.07. SEVERABILITY. Any provision of this Agreement held
to be invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
Section 9.08. RIGHT OF SETOFF. If an Event of Default shall have
occurred and be continuing, each Lender and each of its Affiliates is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other obligations at any time
owing by such Lender or Affiliate to or for the credit or the account of the
Borrower against any of and all the obligations of the Borrower now or hereafter
existing under this Agreement held by such Lender, irrespective of whether or
not such Lender shall have made any demand under this Agreement and although
such obligations may be unmatured. The rights of each Lender under this Section
are in addition to other rights and remedies (including other rights of setoff)
which such Lender may have.
Section 9.09. GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF
PROCESS.
(a) This Agreement shall be construed in accordance with and
governed by the law of the State of New York.
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(b) Each of the Parent and the Borrower hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of the Supreme Court of the State of New York sitting in New York
County and of the United States District Court of the Southern District of New
York, and any appellate court from any thereof, in any action or proceeding
arising out of or relating to any Loan Document, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement or any other Loan Document shall
affect any right that either Agent or any Lender may otherwise have to bring any
action or proceeding relating to this Agreement or any other Loan Document
against the Parent, the Borrower or their properties in the courts of any
jurisdiction.
(c) Each of the Parent and the Borrower hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement or
any other Loan Document in any court referred to in paragraph (b) of this
Section. Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the maintenance
of such action or proceeding in any such court.
(d) Each of the Parent and the Borrower hereby irrevocably
appoints and designates CT Corporation System, whose address is 1633 Broadway,
New York, New York 10019, or any other person having and maintaining a place of
business in the State of New York whom the Parent or the Borrower may from time
to time hereafter designate (having given 30 days' notice thereof to the
Administrative Agent, each Lender and the Collateral Agent), as the true and
lawful attorney and duly authorized agent for acceptance of service of legal
process of the Parent and the Borrower. Without prejudice to the foregoing,
each party to this Agreement irrevocably consents to service of process in the
manner provided for notices in Section 9.01. Nothing in this Agreement or any
other Loan Document will affect the right of any party to this Agreement to
serve process in any other manner permitted by law.
Section 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.
74
<PAGE>
Section 9.11. HEADINGS. Article and Section headings and the
Table of Contents used herein are for convenience of reference only, are not
part of this Agreement and shall not affect the construction of, or be taken
into consideration in interpreting, this Agreement.
Section 9.12. CONFIDENTIALITY. Each of the Agents and the Lenders
agrees to maintain the confidentiality of the Information (as defined below) and
not use the Information for any purpose not contemplated by this Agreement,
except that Information may be disclosed (a) to its and its Affiliates'
directors, officers, employees and agents, including accountants, legal counsel
and other advisors (it being understood that the Persons to whom such disclosure
is made will be informed of the confidential nature of such Information and
instructed to keep such Information confidential), (b) to the extent requested
by any regulatory authority, (c) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process, (d) to any other party
to this Agreement, (e) in connection with the exercise of any remedies hereunder
or any suit, action or proceeding relating to this Agreement or any other Loan
Document or the enforcement of rights hereunder or thereunder, (f) subject to an
agreement containing provisions substantially the same as those of this Section,
to any assignee of or Participant in, or any prospective assignee of or
Participant in, any of its rights or obligations under this Agreement, (g) with
the consent of the Parent or the Borrower or (h) to the extent such Information
(i) becomes publicly available other than as a result of a breach of this
Section or (ii) becomes available to either Agent or any Lender on a
nonconfidential basis from a source other than the Parent or the Borrower. For
the purposes of this Section, "INFORMATION" means all information received from
the Parent or the Borrower relating to the Parent, the Borrower or their
businesses, other than any such information that is publicly available or
available to either Agent or any Lender on a nonconfidential basis prior to
disclosure by the Parent or the Borrower, provided that such information is
identified at the time of delivery as confidential. Any Person required to
maintain the confidentiality of Information as provided in this Section shall be
considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information.
Section 9.13. INTEREST RATE LIMITATION. Notwithstanding anything
herein to the contrary, if at any time the interest rate applicable to any Loan,
together with all fees, charges and other amounts which are treated as interest
on such Loan under applicable law (collectively the "CHARGES"), shall exceed the
maximum lawful rate (the "MAXIMUM RATE") which may be contracted for, charged,
taken, received or reserved by the Lender holding such Loan in accordance with
applicable law, the rate of interest payable in respect of such Loan hereunder,
together with all Charges payable in respect thereof, shall be limited to the
Maximum Rate and, to the extent lawful, the interest and Charges that would have
been payable in respect of such Loan but were not payable as a result of the
operation of this Section shall be cumulated and the interest and Charges
payable to such Lender in respect of other Loans or periods shall be increased
(but not above the Maximum Rate therefor) until such cumulated amount, and if
lawful, together with interest thereon at the Federal Funds Effective Rate to
the date of repayment, shall have been received by such Lender.
(Signatures Follow on Next Page)
75
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective authorized officers as of the day and
year first above written.
JATO OPERATING CORP.
By: /s/ Brian E. Gast
----------------------------------
Name:
Title:
JATO COMMUNICATIONS CORP.
By: /s/ Brian E. Gast
----------------------------------
Name:
Title:
STATE STREET BANK AND TRUST COMPANY,
individually and as Collateral Agent,
By: /s/ Gary Dougherty
----------------------------------
Name:
Title:
LUCENT TECHNOLOGIES INC., individually
and as Administrative Agent,
By: /s/ Leslie L. Rogers
----------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
[FORM OF ASSIGNMENT AND ACCEPTANCE]
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement, dated as of July 14,
1999 (as the same may be amended, supplemented or otherwise modified from time
to time, the "CREDIT AGREEMENT"), among JATO COMMUNICATIONS CORP., a Delaware
corporation ("PARENT"), JATO OPERATING CORP., a Delaware corporation (the
"BORROWER"), the Lenders party thereto, STATE STREET BANK AND TRUST COMPANY, as
Collateral Agent, and LUCENT TECHNOLGIES INC., as Administrative Agent.
Capitalized terms used herein but not defined herein shall have the meanings
assigned to such terms in the Credit Agreement.
1. The Assignor sells and assigns, without recourse, to the
Assignee, and the Assignee hereby purchases and assumes, without recourse, from
the Assignor, effective as of the Effective Date set forth below, the interests
set forth below (the "ASSIGNED INTEREST") in the Assignor's rights and
obligations under the Credit Agreement, including, without limitation, the
percentages and amounts set forth on the reverse hereof of (a) the Commitments
of the Assignor on the Effective Date and (b) the Loans and Borrowings owing to
the Assignor that are outstanding on the Effective Date. The Assignee hereby
acknowledges receipt of a copy of the Credit Agreement. From and after the
Effective Date (a) the Assignee shall be a party to and be bound by the
provisions of the Credit Agreement and, to the extent of the interests assigned
by this Assignment and Acceptance, have the rights and obligations of a Lender
thereunder and under the Loan Documents and (b) the Assignor shall, to the
extent of the interests assigned by this Assignment and Acceptance, relinquish
its rights and be released from its obligations under the Credit Agreement (and
in the event that this Assignment and Acceptance covers all or the remaining
portion of the Assignor's rights and obligations under the Credit Agreement, the
Assignor shall cease to be a party thereto but shall continue to be entitled to
the benefits of Sections 2.13, 2.15, 2.19 and 9.05 thereof, as well as to any
fees accrued for its account and not yet paid).
2. This Assignment and Acceptance is being delivered to the
Administrative Agent together with (a) if the Assignee is organized under the
laws of a jurisdiction outside the United States, the forms specified in Section
2.15 of the Credit Agreement, duly completed and executed by such Assignee, (b)
if the Assignee is not already a Lender under the Credit Agreement, an
Administrative Questionnaire and (c) a processing and recordation fee of
$[____________].
3. This Agreement and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of New York.
A-1
<PAGE>
Date of Assignment:
Legal Name of Assignee:
Legal Name of Assignor:
Assignee's Address for Notices
Effective Date of Assignment (may not be fewer than five Business
Days after the Date of Assignment):
<TABLE>
<CAPTION>
PERCENTAGE ASSIGNED OF
FACILITY AND COMMITMENTS
THEREUNDER (SET FORTH TO
AT LEAST EIGHT DECIMALS,
AS A PERCENTAGE OF THE
FACILITY AND THE
AGGREGATE COMMITMENTS OF
COMMITMENT PRINCIPAL AMOUNTASSIGNED ALL LENDERS THEREUNDER)
- ---------- ------------------------ -----------------------
<S> <C> <C>
Loans :
Tranche 1: $ %
Tranche 2: $ %
Loan Commitments:
Tranche 1: $ %
Tranche 2: $ %
</TABLE>
A-2
<PAGE>
The terms set forth above are hereby agreed to:
[ ]
-----------------------
as Assignor,
By:
----------------------------------
Name:
Title:
[ ]
---------------------------
as Assignee,
By:
----------------------------------
Name:
Title:
Consented to by (if required under
Section 9.04(b)(ii) of the Credit
Agreement):
LUCENT TECHNOLOGIES INC.,
as Administrative Agent
By:
----------------------------------
Name:
Title:
A-3
<PAGE>
EXHIBIT B
[FORM OF GUARANTEE AGREEMENT]
GUARANTEE AND SUBORDINATION AGREEMENT
GUARANTEE AND SUBORDINATION AGREEMENT dated as of July 14, 1999, by JATO
COMMUNICATIONS CORP., a Delaware corporation (together with its successors,
the "Parent"), and the subsidiaries of the Borrower (as defined below) listed
on the signature pages hereof (each of the Parent and such subsidiaries,
together with its successors, a "Guarantor" and collectively, the
"Guarantors"), in favor of STATE STREET BANK AND TRUST COMPANY, as collateral
agent (together with its successors in such capacity, the "Collateral Agent").
WITNESSETH:
WHEREAS, Jato Operating Corp., a Delaware corporation (together with its
successors, the "Borrower"), the Parent, certain lenders (the "Lenders"),
State Street Bank and Trust Company, as Collateral Agent, and Lucent
Technologies Inc., as administrative agent (the "Administrative Agent") have
entered into a Credit Agreement dated as of July 14, 1999, (as the same may
be amended, restated or supplemented and in effect from time to time, the
"Credit Agreement"), providing, subject to the terms and conditions thereof,
for the making of loans by the Lenders to the Borrower;
WHEREAS, the Borrower is a wholly owned Subsidiary of the Parent and
each Guarantor (other than Parent) is a subsidiary of the Borrower;
WHEREAS, the obligations of the Lenders to make Loans under the Credit
Agreement that each Guarantor execute and deliver a guarantee and
subordination agreement whereby such Guarantor shall guarantee the payment
when due of all principal, interest and other amounts that shall be at any
time payable by the Borrower under the Credit Agreement or any other Loan
Document; and
WHEREAS, the Guarantors are willing to guarantee the obligations of the
Borrower to pay any amounts under the Credit Agreement and the other Loan
Documents;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. Terms defined in the Credit Agreement and not
otherwise defined herein have, as used herein, the respective meanings
provided for therein.
SECTION 2. REPRESENTATIONS AND WARRANTIES. Each Guarantor represents
as to itself that:
(a) Such Guarantor (i) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization; (ii) has all requisite corporate
<PAGE>
power, and has all governmental licenses, authorizations, consents and
approvals necessary to own its assets and carry on its business as now being
or as proposed to be conducted, except in the case of such licenses,
authorizations, consents and approvals, where the failure to obtain them
would not have a material adverse effect on its condition (financial or
otherwise), business, operations or prospects and (iii) is qualified to do
business in all jurisdictions in which the nature of the business conducted
by it makes such qualification necessary and where failure so to qualify
would have a material adverse effect on its condition (financial or
otherwise), business, operations or prospects.
(b) Such Guarantor has all necessary corporate power and authority to
execute, deliver and perform its obligations under this Guarantee Agreement;
the execution, delivery and performance by such Guarantor of this Guarantee
Agreement has been duly authorized by all necessary corporate action; and
this Guarantee Agreement has been duly and validly executed and delivered by
such Guarantor and constitutes the legal, valid and binding obligation of
such Guarantor, enforceable in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization or moratorium or other similar laws relating to the
enforcement of creditors' rights generally and by general equitable
principles.
(c) Neither the execution and delivery by such Guarantor of the Loan
Documents to which it is party nor compliance with the terms and provisions
thereof by such Guarantor will conflict with or result in a breach of, or
require any consent under, the certificate of incorporation or by-laws of
such Guarantor or any applicable law or regulation, or any order, writ,
injunction or decree of any court or governmental authority or agency, or any
agreement or instrument to which such Guarantor is a party or by which it is
bound or to which it is subject, or constitute a default under any such
agreement or instrument, or (except for the Liens created pursuant to, or
permitted by, the Security Documents) result in the creation or imposition of
any Lien upon any of the revenues or assets of such Guarantor pursuant to the
terms of any such agreement or instrument.
(d) There are no legal or arbitral proceedings or any proceedings by or
before any governmental or regulatory authority or agency, now pending or, to
the knowledge of such Guarantor, threatened against or affecting such
Guarantor as to which there is a reasonable possibility of an adverse
determination and that, if adversely determined, could reasonably be
expected, individually or in the aggregate, to result in a Material Adverse
Effect (other than Disclosed Matters).
(e) Such Guarantor has obtained all authorizations, approvals and
consents of, and has made all filings and registrations with, any
governmental or regulatory authority or agency and any third party necessary
for the consummation of the transactions contemplated hereby and the
execution, delivery or performance by it of any Loan Document to which it is
a party, or for the validity or enforceability thereof, except for filing and
recordings of the Liens created pursuant to, or permitted by, the Security
Documents.
SECTION 3. THE GUARANTEE. Each Guarantor hereby unconditionally
guarantees the full and punctual payment of the principal of and interest
(including interest accruing at the then applicable rate provided in the
Credit Agreement after the maturity of the Loans thereunder and interest
accruing at the then applicable rate provided in the Credit Agreement after
the filing of
2
<PAGE>
any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to any Loan Party thereunder
whether or not a claim for post-filing or post-petition interest is allowed
in such proceeding) on the Loans payable by the Borrower under the Credit
Agreement, when and as due, whether at maturity, by acceleration, upon one or
more dates set for prepayment or otherwise, and (b) all other amounts payable
by the Borrower from time to time to any of the Secured Parties under the
Credit Agreement and the other Loan Documents, whether on account of
principal, interest, reimbursement obligations, fees, indemnities, costs,
expenses or otherwise (including all fees and disbursements of counsel to any
of the Secured Parties that are required to be paid by the Borrower pursuant
to the terms of the Credit Agreement or any other Loan Document). Upon
failure by the Borrower to pay punctually any such amount, each Guarantor
agrees that it shall forthwith on demand pay the amount not so paid at the
place and in the manner specified in the Credit Agreement or the relevant
other Loan Document, as the case may be.
SECTION 4. GUARANTEE UNCONDITIONAL. The obligations of each Guarantor
hereunder shall be unconditional and absolute and, without limiting the
generality of the foregoing, shall not be released, discharged or otherwise
affected by:
(i) any extension, renewal, settlement, compromise, waiver or
release in respect of any obligation of the Borrower under the Credit
Agreement or any other Loan Document or any obligation of any Guarantor
hereunder or under any Security Document, by operation of law or otherwise;
(ii) any modification or amendment of or supplement to the Credit
Agreement or any other Loan Document;
(iii) any release, non-perfection or invalidity of any direct or
indirect security for any obligation of the Borrower under the Credit
Agreement or any other Loan Document or any obligation of the Guarantor
hereunder or under any Security Document;
(iv) any change in the corporate existence, structure or
ownership of the Borrower, or any insolvency, bankruptcy, reorganization or
other similar proceeding affecting the Borrower or its assets or any
resulting release or discharge of any obligation of the Borrower contained in
the Credit Agreement or any other Loan Document;
(v) the existence of any claim, set-off or other rights which
any Guarantor may have at any time against the Borrower, any of the Secured
Parties or any other Person, whether in connection herewith or any unrelated
transactions, PROVIDED that nothing herein shall prevent the assertion of any
such claim by separate suit or compulsory counterclaim;
(vi) any invalidity or unenforceability relating to or against
the Borrower for any reason of the Credit Agreement or any other Loan
Document or any provision of applicable law or regulation purporting to
prohibit the payment by the Borrower of the principal of or interest on any
Loan (except as otherwise expressly provided in Section 9.13 of the Credit
Agreement) or any other amount payable by the Borrower under the Credit
Agreement or any other Loan Document; or
3
<PAGE>
(vii) any other act or omission to act or delay of any kind by the
Borrower, any Guarantor, any of the Secured Parties or any other Person or
any other circumstance whatsoever which might, but for the provisions of this
paragraph, constitute a legal or equitable discharge of each Guarantor's
obligations hereunder.
SECTION 5. DISCHARGE ONLY UPON PAYMENT IN FULL; REINSTATEMENT IN
CERTAIN CIRCUMSTANCES. Each Guarantor's obligations hereunder shall remain
in full force and effect until the principal of and interest on the Loans and
all other amounts payable by the Borrower under the Credit Agreement and any
other Loan Documents shall have been paid in full and the Commitments under
the Credit Agreement shall have terminated or expired. If at any time any
payment of the principal of or interest on any Loan or any other amount
payable by the Borrower under the Credit Agreement or any other Loan Document
is rescinded or must be otherwise restored or returned upon the insolvency,
bankruptcy or reorganization of the Borrower or otherwise, the Guarantor's
obligations hereunder with respect to such payment shall be reinstated as
though such payment had been due but not made at such time.
SECTION 6. WAIVER BY GUARANTOR. Each Guarantor waives acceptance
hereof, presentment, demand, protest and, to the fullest extent permitted by
law, any notice not provided for herein, as well as any requirement that at
any time any action be taken or any recourse exhausted by any Person against
the Borrower, any Guarantor hereunder, or any other Person.
SECTION 7. STAY OF ACCELERATION. If acceleration of the time for
payment of any amount payable by the Borrower under the Credit Agreement is
stayed upon the insolvency, bankruptcy or reorganization of the Borrower, all
such amounts otherwise subject to acceleration under the terms of the Credit
Agreement nonetheless shall be payable by any Guarantor hereunder forthwith
on demand by the Collateral Agent made at the request of the Required Lenders.
SECTION 8. LIMITATION ON GUARANTORS' OBLIGATIONS. Notwithstanding
anything to the contrary set forth herein, the obligations of each Guarantor
hereunder shall be limited to an aggregate amount equal to the largest amount
that would not render its obligations hereunder subject to avoidance under
Section 548 of the United States Bankruptcy Code or any applicable provisions
of comparable U.S. state law.
SECTION 9. SUBORDINATION.
(a) Each Guarantor agrees that the payment by the Borrower or any other
Guarantor of any indebtedness in favor of such Guarantor (the "Subordinated
Lender") shall be subordinated and subject to the prior payment in full of
all amounts payable by the Borrower or such other Guarantor under the Credit
Agreement or this Guarantee Agreement, as the case may be, and any other Loan
Document to which the Borrower or such Guarantor is a party ("Senior Debt")
upon the terms of this Section.
(b) Upon any distribution of assets of the Borrower or a Guarantor to
creditors upon a liquidation or dissolution of the Borrower or such Guarantor
or in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to the Borrower or such Guarantor or its property, (i)
the Secured Parties shall be entitled to receive payment in full of all
Senior Debt
4
<PAGE>
before the Subordinated Lender shall be entitled to receive any payment of
principal of or interest on or any other amounts in respect of Indebtedness
of the Borrower or such Guarantor in favor of the Subordinated Lender (the
"Subordinated Debt"); and (ii) until payment in full of the Senior Debt, any
distribution of assets of any kind or character to which the Subordinated
Lender would otherwise be entitled shall be paid by the Borrower or such
Guarantor or by any receiver, trustee in bankruptcy, liquidating trustee,
agents or other person making such payment or distribution to, or if received
by the Borrower or such Guarantor, shall be held for the benefit of and shall
be forthwith paid or delivered to, the Collateral Agent for distribution to
the Secured Parties.
(c) If the Subordinated Lender does not file proper claims or proofs of
claim in the form required in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Borrower or such Guarantor
or its property prior to 45 days before the expiration of the time to file
such claims, then (a) upon the request of the Collateral Agent, the
Subordinated Lender shall file such claims and proofs of claim in respect of
this instrument and execute and deliver such powers of attorney, assignments
and other instruments as are required to enable the Secured Parties to
enforce any and all claims upon or in respect of the Subordinated Debt and to
collect and receive any and all payments or distributions which may be
payable or deliverable at any time upon or in respect of Subordinated Debt,
and (b) whether or not the Subordinated Lender shall take the action
described in the preceding clause (a) the Collateral Agent and the other
Secured Parties shall nevertheless be deemed to have such powers of attorney
as may be necessary for them to file appropriate claims and proofs of claim
and otherwise exercise the powers described above.
(d) No right of any Secured Party to enforce the terms of this Section
shall be impaired by any act or failure to act by the Borrower or any
Guarantor. Neither the terms of this Section nor the rights of the rights of
the Secured Parties hereunder shall be affected by any extension, renewal or
modification of the terms of, or the granting of any security in respect of,
any Senior Debt or any exercise or nonexercise of any right, power or remedy
with respect thereto.
(e) After all Senior Debt is paid in full and until Subordinated Debt
is paid in full, the Subordinated Lender shall be subrogated to the rights of
the Secured Parties in respect of the Senior Debt.
(f) Nothing in this Section shall (i) impair, as between the Borrower
or such Guarantor and the Subordinated Lender, the obligation of the Borrower
or such Guarantor, which is absolute and unconditional, to pay the principal
of and interest on Subordinated Debt in accordance with its terms; (ii)
affect the relative rights of the Subordinated Lender and creditors of the
Borrower or such Guarantor other than the Secured Parties; or (iii) prevent
the Subordinated Lender from exercising its available remedies upon an event
of default under the Subordinated Debt, subject to the rights of the Secured
Parties to receive cash, property or other assets otherwise payable to the
Subordinated Lender to the extent set forth in this Section.
SECTION 10. NOTICES. All notices and other communications hereunder to
any party hereto shall be given or made in the manner provided in the Credit
Agreement to such party at its address set forth therein, or in the case of
5
<PAGE>
any Guarantor other than the Parent, in care of the Borrower at its address
set forth therein, or in the case of any party hereto, to such other address
as such party may have provided by notice to the other parties hereto.
SECTION 11. NO WAIVERS. No failure or delay by the Collateral Agent or
any Lender in exercising any right, power or privilege hereunder shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies provided in this
Guarantee Agreement, the Credit Agreement and the Security Documents shall be
cumulative and not exclusive of any rights or remedies provided by law.
SECTION 12. SUCCESSORS AND ASSIGNS. This Guarantee Agreement is in
favor of the Collateral Agent for the benefit of the Secured Parties and
their respective successors and assigns and, in the event of an assignment of
the Loans or other amounts payable under the Credit Agreement or the other
Loan Documents, the rights hereunder, to the extent applicable to the
indebtedness so assigned, may be transferred with such indebtedness. This
Guarantee Agreement shall be binding upon each Guarantor and its successors
and assigns.
SECTION 13. CHANGES IN WRITING. Neither this Guarantee Agreement nor
any provision hereof may be changed, waived, discharged or terminated orally,
but only in writing signed by each Guarantor and the Collateral Agent with
the consent of the Required Lenders.
SECTION 14. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY
TRIAL; SERVICE OF PROCESS.
(a) This Agreement shall be construed in accordance with and governed
by the law of the State of New York.
(b) Each of the Guarantors hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of the
Supreme Court of the State of New York sitting in New York County and of the
United States District Court of the Southern District of New York, and any
appellate court from any thereof, in any action or proceeding arising out of
or relating to this Guarantee Agreement, or for recognition or enforcement of
any judgment, and each of the parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the
extent permitted by law, in such Federal court. Each of the parties hereto
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law. Nothing in this Guarantee Agreement
shall affect any right that any Secured Party may otherwise have to bring any
action or proceeding relating to this Guarantee Agreement against any
Guarantor or its properties in the courts of any jurisdiction.
(c) Each of the Guarantors hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter have to the laying of venue of any
suit, action or proceeding arising out of or relating to this Agreement in
any court referred to in paragraph (b) of this Section. Each of the parties
hereto hereby irrevocably waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
6
<PAGE>
(d) Each of the Guarantors hereby irrevocably appoints and designates
CT Corporation System, whose address is 1633 Broadway, New York, New York
10019, or any other person having and maintaining a place of business in the
State of New York whom the Guarantor may from time to time hereafter
designate (having given 30 days' notice thereof to the Collateral Agent), as
the true and lawful attorney and duly authorized agent for acceptance of
service of legal process of the Guarantor. Without prejudice to the
foregoing, each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 10. Nothing in this
Agreement or any other Loan Document will affect the right of any party to
this Agreement to serve process in any other manner permitted by law.
SECTION 15. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF
ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER
PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION.
SECTION 16. WAIVER OF IMMUNITY. To the extent that any Guarantor has or
hereafter may acquire any immunity from jurisdiction of any court or from any
legal process (whether through service or notice, attachment prior to
judgment, attachment in aid or execution, or otherwise) with respect to
itself or its property, such Guarantor hereby irrevocably waives such
immunity in respect of its obligations hereunder and under the other
Financing Documents to the extent permitted by applicable law and, without
limiting the generality of the foregoing, agrees that the waivers set forth
in this Section shall have effect to the fullest extent permitted under the
Foreign Sovereign Immunities Act of 1976 of the United States of America and
are intended to be irrevocable for purposes of such Act.
(Signatures Follow on Next Page)
7
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee
Agreement to be duly executed by its authorized officer as of the day and
year first above written.
GUARANTORS:
JATO COMMUNICATIONS CORP.
By:
---------------------------------------
Name:
Title:
------------------------------
By:
---------------------------------------
Name:
Title:
<PAGE>
EXHIBIT C
[FORM OF INDEMNITY, SUBROGATION
AND CONTRIBUTION AGREEMENT]
INDEMNITY, SUBROGATION
AND CONTRIBUTION AGREEMENT
INDEMNITY, SUBROGATION and CONTRIBUTION AGREEMENT, dated as of July 14,
1999, among JATO COMMUNICATIONS CORP., a Delaware corporation (the "PARENT"),
JATO OPERATING CORP., a Delaware corporation, as borrower (the "BORROWER"),
each of the subsidiaries of the Borrower party hereto (collectively, the
"SUBSIDIARY GUARANTORS"), and STATE STREET BANK AND TRUST COMPANY, as
collateral agent (the "COLLATERAL AGENT") for the Administrative Agent and
the Lenders (such term and each other capitalized term used but not defined
herein having the respective meanings given them in the Credit Agreement,
dated as of July 14, 1999 (as the same may be amended, supplemented or
otherwise modified from time to time, the "CREDIT AGREEMENT"), among the
Borrower, the Parent, the Lenders party thereto, the Collateral Agent, and
Lucent Technologies Inc., as administrative agent (the "ADMINISTRATIVE
AGENT").
The Lenders have agreed to make Loans pursuant to, and upon the
terms and subject to the conditions specified in, the Credit Agreement. Each
of the Subsidiary Guarantors has agreed to guarantee, among other things, all
the obligations of the Borrower under the Credit Agreement.
The obligations of the Lenders to make the Loans under the Credit
Agreement are conditioned upon, among other things, the execution and
delivery by the Subsidiary Guarantors of an indemnity, subrogation and
contribution agreement in the form hereof (this "AGREEMENT") to support the
due and punctual payment of, with respect to each Subsidiary Guarantor, its
obligations as obligor or guarantor in respect of (a) the principal of and
interest (including interest accruing at the then applicable rate provided in
the Credit Agreement after the maturity of the Loans thereunder and interest
accruing at the then applicable rate provided in the Credit Agreement after
the filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, relating to any Loan Party
thereunder whether or not a claim for post-filing or post-petition interest
is allowed in such proceeding) on the Loans payable by the Borrower under the
Credit Agreement, when and as due, whether at maturity, by acceleration, upon
one or more dates set for prepayment or otherwise, and (b) all other amounts
payable by the Borrower from time to time to any of the Secured Parties under
the Credit Agreement or any other Loan Document, whether on account of
principal, interest, reimbursement obligations, fees, indemnities, costs,
expenses or otherwise (including all fees and disbursements of counsel to any
of the Secured Parties that are required to be paid by the Borrower pursuant
to the terms of the Credit Agreement or such other Loan Document) (all of the
foregoing obligations collectively, the "OBLIGATIONS").
<PAGE>
Accordingly, the Parent and the Borrower, each Subsidiary Guarantor
and the Collateral Agent agree as follows:
SECTION 1. INDEMNITY AND SUBROGATION. In addition to all such
rights of indemnity and subrogation as the Subsidiary Guarantors may have
under applicable law (but subject to Section 3), the Parent and the Borrower
agree that (a) in the event a payment shall be made by any Subsidiary
Guarantor under the Guarantee Agreement, the Parent and the Borrower shall
indemnify such Subsidiary Guarantor for the full amount of such payment and
such Subsidiary Guarantor shall be subrogated to the rights of the person to
whom such payment shall have been made to the extent of such payment and (b)
in the event any assets of any Subsidiary Guarantor shall be sold pursuant to
any applicable security agreement or similar instrument or agreement to
satisfy a claim of any Secured Party, the Parent and the Borrower shall
indemnify such Subsidiary Guarantor in an amount equal to the greater of the
book value or the fair market value of the assets so sold.
SECTION 2. CONTRIBUTION AND SUBROGATION. Each Subsidiary
Guarantor agrees (subject to Section 3) that in the event a payment shall be
made by any Subsidiary Guarantor under the Guarantee Agreement or assets of
any Subsidiary Guarantor shall be sold pursuant to any applicable security
agreement or similar instrument or agreement to satisfy a claim of any
Secured Party, and such Subsidiary Guarantor (the "CLAIMING SUBSIDIARY
GUARANTOR") shall not have been indemnified by the Parent or the Borrower as
provided in Section 1, each other Subsidiary Guarantor (a "CONTRIBUTING
SUBSIDIARY GUARANTOR") shall indemnify the Claiming Subsidiary Guarantor in
an amount equal to the amount of such payment or the greater of the book
value or the fair market value of such assets, as the case may be, multiplied
by a fraction of which the numerator shall be the net worth of the
Contributing Subsidiary Guarantor on the date of the claim and the
denominator shall be the aggregate net worth of all the Subsidiary Guarantors
on the date of the claim. Any Contributing Subsidiary Guarantor making any
payment to a Claiming Subsidiary Guarantor pursuant to this Section 2 shall
be subrogated to the rights of such Claiming Subsidiary Guarantor under
Section 1 to the extent of such payment.
SECTION 3. SUBORDINATION. Notwithstanding any provision of this
Agreement to the contrary, all rights of the Subsidiary Guarantors under
Sections 1 and 2 and all other rights of indemnity, contribution or
subrogation under applicable law or otherwise shall be fully subordinated to
the indefeasible payment in full of the Obligations. No failure on the part
of the Parent, the Borrower or any Subsidiary Guarantor to make the payments
required by Sections 1 and 2 (or any other payments required under applicable
law or otherwise) shall in any respect limit the obligations and liabilities
of any other Subsidiary Guarantor with respect to the Guarantee Agreement,
and each Subsidiary Guarantor shall remain liable for the full amount of the
obligations that such Subsidiary Guarantor has otherwise guaranteed.
SECTION 4. TERMINATION. This Agreement shall terminate when all
the Obligations have been indefeasibly paid in full, and the Lenders have no
further Commitments under the Credit Agreement.
SECTION 5. CONTINUED EFFECTIVENESS. The Parent, the Borrower and
each Subsidiary Guarantor further agree that this Agreement shall continue to
be effective or be reinstated, as the case may be, if at any time the payment
of any Obligation, or any part thereof,
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<PAGE>
by the Parent, the Borrower or any Subsidiary Guarantor is rescinded or must
otherwise be restored upon the bankruptcy or reorganization of the Parent,
the Borrower, any Subsidiary Guarantor or otherwise.
SECTION 6. GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF
PROCESS.
(a) This Agreement shall be construed in accordance with and
governed by the law of the State of New York.
(b) Each of the Parent, the Borrower and each Subsidiary Guarantor
hereby irrevocably and unconditionally submits, for itself and its property,
to the nonexclusive jurisdiction of the Supreme Court of the State of New
York sitting in New York County and of the United States District Court of
the Southern District of New York, and any appellate court from any thereof,
in any action or proceeding arising out of or relating to this Agreement, or
for recognition or enforcement of any judgment, and each of the parties
hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in such
New York State or, to the extent permitted by law, in such Federal court.
Each of the parties hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Nothing in this
Agreement shall affect any right any party hereto may otherwise have to bring
any action or proceeding relating to this Agreement against any party hereto
or its properties in the courts of any jurisdiction.
(c) Each of the Parent, the Borrower and each Subsidiary Guarantor
hereby irrevocably and unconditionally waives, to the fullest extent it may
legally and effectively do so, any objection which it may now or hereafter
have to the laying of venue of any suit, action or proceeding arising out of
or relating to this Agreement in any court referred to in paragraph (b) of
this Section. Each of the parties hereto hereby irrevocably waives, to the
fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
(d) Each of the Parent, the Borrower and each Subsidiary Guarantor
hereby irrevocably appoints and designates CT Corporation System, whose
address is 1633 Broadway, New York, New York 10019, or any other person
having and maintaining a place of business in the State of New York whom the
Parent, the Borrower or the Subsidiary Guarantor may from time to time
hereafter designate (having given 30 days' notice thereof to the other
parties hereto), as the true and lawful attorney and duly authorized agent
for acceptance of service of legal process of such Person. Without prejudice
to the foregoing, each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 8. Nothing
in this Agreement or any other Loan Document will affect the right of any
party to this Agreement to serve process in any other manner permitted by law.
SECTION 7. WAIVERS; AMENDMENT.
(a) No failure or delay of any Secured Party or any Guarantor in
exercising any power or right hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right or power or any
abandonment or discontinuance of steps to enforce
3
<PAGE>
such a right or power preclude any other or further exercise thereof or the
exercise of any other right or power. The rights and the remedies of the
Secured Parties under the Loan Documents are cumulative and are not exclusive
of any rights or remedies that they would otherwise have. No waiver of any
provisions of this Agreement or consent to any departure by any Subsidiary
Guarantor therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) below, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given.
No notice or demand on any Subsidiary Guarantor in any case shall entitle
such Subsidiary Guarantor to any other or further notice or demand in similar
or other circumstances.
(b) Except for the operation of Section 15 of this Agreement,
neither this Agreement nor any provision hereof may be waived, amended or
modified except pursuant to a written agreement entered into between the
Subsidiary Guarantors and the Collateral Agent, with the prior written
consent of the Required Lenders.
SECTION 8. NOTICES. All notices and other communications to any
party hereto hereunder shall be given or made in the manner provided in the
Credit Agreement to such party at its address set forth therein, or in the
case of any Subsidiary Guarantor, in care of the Borrower at its address set
forth therein, or in the case of any party hereto, to such other address as
such party may have provided by notice to the other parties hereto.
SECTION 9. BINDING AGREEMENT; ASSIGNMENTS. This Agreement shall
become effective as to any of the Parent, the Borrower and the Subsidiary
Guarantors when a counterpart hereof executed on behalf of such Person shall
have been delivered to the Collateral Agent and a counterpart hereof shall
have been executed on behalf of the Collateral Agent, and thereafter shall be
binding upon such person and the Collateral Agent and their respective
successors and permitted assigns, and shall inure to the benefit of the
Agents and the Lenders, and their respective successors and permitted
assigns, except that no such person shall have the right to assign its rights
hereunder or any interest herein (and any such attempted assignment shall be
void), except as expressly contemplated by this Agreement or the other Loan
Documents.
SECTION 10. SUCCESSORS AND ASSIGNS. Whenever in this Agreement any
of the parties hereto is referred to, such reference shall be deemed to
include the successors and permitted assigns of such party, and all
covenants, promises and agreements by or on behalf of each of the Parent, the
Borrower, each Subsidiary Guarantor and the Collateral Agent that are
contained in this Agreement shall bind and inure to the benefit of their
respective successors and permitted assigns.
SECTION 11. SURVIVAL OF AGREEMENT; SEVERABILITY.
(a) All covenants, agreements, representations and warranties made
by each of the Parent, the Borrower and each Subsidiary Guarantor herein and
in any certificates or other instruments prepared or delivered in connection
with or pursuant to this Agreement or any other Loan Document shall be
considered to have been relied upon by the Secured Parties and each
Subsidiary Guarantor and shall survive the making by the Lenders of the Loans
and the execution and delivery to the Lenders of the Loan Documents,
regardless of any investigation made by the Lenders or on their behalf, and
shall continue in full force and effect as long as the
4
<PAGE>
principal of or any accrued interest on any Loan or any fee or any other
amount payable under, or in respect of, this Agreement or under any of the
other Loan Documents is outstanding and unpaid and so long as the Commitments
have not been terminated.
(b) If any provision hereof is invalid and unenforceable in any
jurisdiction, then, to the fullest extent permitted by law, (i) the other
provisions hereof shall remain in full force and effect in such jurisdiction
and shall be liberally construed in favor of the Collateral Agent and the
other Secured Parties in order to carry out the intentions of the parties
hereto as nearly as may be possible; and (ii) the invalidity or
unenforceability of any provision hereof in any jurisdiction shall not affect
the validity or enforceability of such provision in any other jurisdiction.
SECTION 12. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but all of
which, when taken together, shall constitute but one instrument.
SECTION 13. RULES OF INTERPRETATION. The rules of interpretation
specified in Section 1.03 of the Credit Agreement shall be applicable to this
Agreement.
SECTION 14. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY HERETO (A)
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 14.
SECTION 15. ADDITIONAL SUBSIDIARY GUARANTORS. Pursuant to Section
5.14 of the Credit Agreement, each Subsidiary (an "ADDITIONAL SUBSIDIARY")
that was not in existence or not a subsidiary on the date thereof is required
to enter into this Agreement as a Subsidiary Guarantor upon becoming a
subsidiary. Upon execution and delivery, after the date hereof, by the
Collateral Agent and an Additional Subsidiary of an instrument in the form of
Annex 1, such Additional Subsidiary shall become a Subsidiary Guarantor
hereunder with the same force and effect as if originally named as a
Subsidiary Guarantor hereunder. The execution and delivery of any such
instrument shall not require the consent of any Subsidiary Guarantor
hereunder. The rights and obligations of each Subsidiary Guarantor hereunder
shall remain in full force and effect notwithstanding the addition of any
Additional Subsidiary as a party to this Agreement.
5
<PAGE>
SECTION 16. HEADINGS. Article and Section headings used herein are
for convenience of reference only, are not part of this Agreement and are not
to affect the construction of, or to be taken into consideration in
interpreting, this Agreement.
(Signatures Follow on Next Page)
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indemnity,
Subrogation and Contribution Agreement to be executed by their duly
authorized officers as of the date first appearing above.
JATO COMMUNICATIONS CORP.
By:
------------------------------------
Name:
Title:
JATO OPERATING CORP.
By:
------------------------------------
Name:
Title:
STATE STREET BANK AND TRUST COMPANY, as Collateral
Agent
By
-------------------------------------
Name:
Title:
<PAGE>
SCHEDULE I
TO INDEMNITY SUBROGATION
AND CONTRIBUTION AGREEMENT
SUBSIDIARY GUARANTORS
None.
<PAGE>
ANNEX I TO
INDEMNITY, SUBROGATION
AND CONTRIBUTION AGREEMENT
SUPPLEMENT NO. _____, dated as of [__________________], to the
Indemnity, Subrogation and Contribution Agreement, dated as of as of July 14,
1999 (the "INDEMNITY, SUBROGATION AND CONTRIBUTION AGREEMENT"), among JATO
COMMUNICATIONS CORP., a Delaware corporation (the "PARENT"), JATO OPERATING
CORP., a Delaware corporation (the "BORROWER"), each of the Subsidiary
Guarantors (each capitalized term used but not defined having the meaning
given it in the Indemnity, Subrogation and Contribution Agreement or the
Credit Agreement (defined below)) party thereto and STATE STREET BANK AND
TRUST COMPANY, as Collateral Agent (the "COLLATERAL AGENT") for the Lenders.
A. Reference is made to the Credit Agreement, dated as of July
14, 1999 (as the same may be amended, supplemented or otherwise modified from
time to time, the "CREDIT AGREEMENT"), among the Borrower, the Parent, the
Lenders party thereto, the Collateral Agent, and Lucent Technologies Inc., as
the Administrative Agent.
B. Certain Subsidiary Guarantors, among others, have entered into
the Indemnity, Subrogation and Contribution Agreement in order to induce the
Lenders to make Loans pursuant to, and upon the terms and subject to the
conditions specified in, the Credit Agreement. Pursuant to Section 5.14 of
the Credit Agreement, promptly after its creation or acquisition, each
Additional Subsidiary is required to become a party to the Indemnity,
Subrogation and Contribution Agreement as a Subsidiary Guarantor. Section 15
of the Indemnity, Subrogation and Contribution Agreement provides that
Additional Subsidiaries may become Subsidiary Guarantors under the Indemnity,
Subrogation and Contribution Agreement by execution and delivery of an
instrument in the form of this Supplement. The undersigned (the "NEW
SUBSIDIARY GUARANTOR") is an Additional Subsidiary and is executing this
Supplement in accordance with the requirements of the Credit Agreement to
become a Subsidiary Guarantor under the Indemnity, Subrogation and
Contribution Agreement in order to induce the Lenders to make additional
Loans and as consideration for Loans previously made.
Accordingly, the Collateral Agent and the New Subsidiary Guarantor
agree as follows:
SECTION 1. In accordance with Section 15 of the Indemnity,
Subrogation and Contribution Agreement, the New Subsidiary Guarantor by its
signature below becomes a Subsidiary Guarantor under the Indemnity,
Subrogation and Contribution Agreement with the same force and effect as if
originally named therein as a Subsidiary Guarantor and the New Subsidiary
Guarantor hereby agrees to all the terms and provisions of the Indemnity,
Subrogation and Contribution Agreement applicable to it as a Subsidiary
Guarantor thereunder. Each reference to a "Subsidiary Guarantor" in the
Indemnity, Subrogation and Contribution Agreement shall be deemed to include
the New Subsidiary Guarantor. The Indemnity, Subrogation and Contribution
Agreement is hereby incorporated herein by reference.
<PAGE>
SECTION 2. The New Subsidiary Guarantor represents and warrants to
the Lenders and the Agents that this Supplement has been duly authorized,
executed and delivered by it and constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms, subject to
the effects of applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally and equitable principles of general applicability.
SECTION 3. This Supplement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which,
when taken together, shall constitute but one instrument. This Supplement
shall become effective when the Collateral Agent shall have received
counterparts of this Supplement that, when taken together, bear the
signatures of the New Subsidiary Guarantor and the Collateral Agent.
SECTION 4. Except as expressly supplemented hereby, the Indemnity,
Subrogation and Contribution Agreement shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. If any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect,
neither party hereto shall be required to comply with such provision for so
long as such provision is held to be invalid, illegal or unenforceable, but
the validity, legality and enforceability of the remaining provisions
contained herein and in the Indemnity, Subrogation and Contribution Agreement
shall not in any way be affected or impaired. The parties hereto shall
endeavor in good faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 7. All notices and other communications hereunder to any
party to the Indemnity, Subrogation and Contribution Agreement shall be given
or made in the manner provided in the Credit Agreement to such party at its
address set forth therein, or in the case of any New Subsidiary Guarantor, in
care of the Borrower at its address set forth therein, or in the case of any
party hereto, to such other address as such party may have provided by notice
to the other parties hereto.
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<PAGE>
IN WITNESS WHEREOF, the New Subsidiary Guarantor and the Collateral
Agent have duly executed this Supplement to the Indemnity, Subrogation and
Contribution Agreement as of the day and year first above written.
[NAME OF NEW SUBSIDIARY
GUARANTOR]
By:
------------------------------------
Name:
Title:
STATE STREET BANK AND TRUST COMPANY, as Collateral
Agent
By:
------------------------------------
Name
Title:
3
<PAGE>
EXHIBIT D
[FORM OF SECURITY AGREEMENT (BORROWER)]
SECURITY AGREEMENT (BORROWER)
This SECURITY AGREEMENT (BORROWER), dated as of July 14, 1999, is made
between JATO OPERATING CORP., a Delaware corporation (with its successors,
the "Company") and STATE STREET BANK AND TRUST COMPANY, as Collateral Agent
for the Administrative Agent and the Lenders (each term as defined below)
(with its successors in such capacity, the "Collateral Agent").
WITNESSETH:
WHEREAS, the Company, Jato Communications Corp. (the "Parent"), certain
lenders (the "Lenders"), the Collateral Agent, and Lucent Technologies Inc.,
as administrative agent (the "Administrative Agent"), are parties to a Credit
Agreement dated as of July 14, 1999 (as the same may be amended, restated or
supplemented and in effect from time to time, the "Credit Agreement"),
providing, subject to the terms and conditions thereof, for extensions of
credit to be made by the Lenders to the Company;
WHEREAS, in order to induce the Lenders and the Administrative Agent to
enter into the Credit Agreement, the Company has agreed to grant a continuing
security interest in and to the Collateral (as defined below) to secure its
obligations under the Loan Documents (as defined below), including, without
limitation, its obligations under the Credit Agreement; and
WHEREAS, the Lenders have appointed the Collateral Agent to act as their
collateral agent in connection with the foregoing transactions;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. Terms defined in the Credit Agreement and
not otherwise defined herein have, as used herein, the respective meanings
provided for therein. The following additional terms, as used herein, have
the following respective meanings:
"ACCOUNTS" means all "ACCOUNTS" (as defined in the UCC) now owned or
hereafter acquired by the Company and shall also mean and include all
accounts receivable, contract rights, book debts, notes, drafts and other
obligations or indebtedness owing to the Company arising from the sale, lease
or exchange of goods or other property by it or the performance of services
by it or both (including, without limitation, any such obligation which might
be characterized as an account, contract right or general intangible under
the Uniform Commercial Code in effect in any jurisdiction) and all of the
Company's rights in, to and under all purchase orders for goods, services or
other property, and all of the Company's rights to any goods,
<PAGE>
services or other property represented by any of the foregoing (including
returned or repossessed goods and unpaid sellers' rights of rescission,
replevin, reclamation and rights to stoppage in transit) and all monies due
to or to become due to the Company under all contracts for the sale, lease or
exchange of goods or other property or the performance of services by it or
both (whether or not yet earned by performance on the part of the Company),
in each case whether now in existence or hereafter arising or acquired
including, without limitation, the right to receive the proceeds of said
purchase orders and contracts and all collateral security and guarantees of
any kind given by any Person with respect to any of the foregoing.
"COLLATERAL" has the meaning set forth in Section 3(a).
"COLLATERAL ACCOUNT" has the meaning set forth in Section 5(a).
"COPYRIGHT LICENSE" means any agreement now or hereafter in existence
granting to the Company, or pursuant to which the Company has granted to any
other Person, any right to use, copy, reproduce, distribute, prepare
derivative works, display or publish any records or other materials on which
a Copyright is in existence or may come into existence.
"COPYRIGHT SECURITY AGREEMENT" means a Copyright Security Agreement
executed and delivered by the Company in favor of the Collateral Agent, for
the benefit of the Secured Parties, substantially in the form of Exhibit D
hereto, as the same may be amended from time to time.
"COPYRIGHTS" means all the following: (i) all copyrights under the laws
of the United States or any other country (whether or not the underlying
works of authorship have been published), all registrations and recordings
thereof, all intellectual property rights to works of authorship (whether or
not published), and all applications for copyrights under the laws of the
United States or any other country, including, without limitation,
registrations, recordings and applications in the United States Copyright
Office or in any similar office or agency of the United States, any State
thereof or any other country or any political subdivision thereof, (ii) all
reissues, renewals and extensions thereof, (iii) all claims for, and rights
to sue for, past or future infringements of any of the foregoing, and (iv)
all income, royalties, damages and payments now or hereafter due or payable
with respect to any of the foregoing, including, without limitation, damages
and payments for past or future infringements thereof.
"DEPOSIT ACCOUNTS" shall mean all deposit accounts (as defined in the
UCC) of the Company including, without limitation, any demand, time, savings,
passbook or like account maintained by the Company with any bank, savings and
loan association, credit union or like organization, and all money, cash and
cash equivalents of the Company, whether or not deposited in any such deposit
account, and all certificates and instruments, if any, from time to time
representing, evidencing or deposited into such accounts.
"DOCUMENTS" means all "DOCUMENTS" (as defined in the UCC) or other
receipts covering, evidencing or representing goods, now owned or hereafter
acquired, by the Company.
"EQUIPMENT" means all "EQUIPMENT" (as defined in the UCC) now owned or
hereafter acquired by the Company, including, without limitation, all motor
vehicles, trucks, and trailers other than equipment acquired in connection
with Indebtedness of the type permitted under Section 6.01(iv) of the Credit
Agreement.
2
<PAGE>
"EXCLUDED CONTRACTS" shall mean one or more contracts which by their
terms would be breached by the grant of the security interests created
therein pursuant to the terms of this Agreement or with respect to which the
granting of a security interest is prohibited under applicable law (it being
understood and agreed, however, that notwithstanding the foregoing, all
rights to payment for money due or to become due pursuant to any Excluded
Contract shall be subject to the security interests created pursuant to this
Agreement).
"GENERAL INTANGIBLES" means all "GENERAL INTANGIBLES" (as defined in the
UCC) now owned or hereafter acquired by the Company, including, without
limitation, (i) all obligations or indebtedness owing to the Company (other
than Accounts) from whatever source arising, (ii) all Copyright Licenses,
Copyrights, Patent Licenses, Patents, Trademark Licenses, Trademarks, rights
in intellectual property, goodwill, trade names, service marks, trade
secrets, permits and licenses, (iii) all rights or claims in respect of
refunds for taxes paid and (iv) all rights in respect of any pension plan or
similar arrangement maintained for employees of any member of the Loan
Parties other than general intangibles acquired in connection with
Indebtedness of the type permitted under Section 6.01(iv) of the Credit
Agreement.
"INSTRUMENTS" means all "INSTRUMENTS", "CHATTEL PAPER" or "LETTERS OF
CREDIT" (each as defined in the UCC) evidencing, representing, arising from
or existing in respect of, relating to, securing or otherwise supporting the
payment of, any of the Accounts, including (but not limited to) promissory
notes, drafts, bills of exchange and trade acceptances, now owned or
hereafter acquired by the Company, but Instruments shall exclude Instruments
representing Indebtedness to the extent pledged pursuant to the Pledge
Agreement (Borrower).
"INVENTORY" means all "INVENTORY" (as defined in the UCC), now owned or
hereafter acquired by the Company, wherever located, and shall also mean and
include, without limitation, all raw materials and other materials and
supplies, work-in-process and finished goods and any products made or
processed therefrom and all substances, if any, commingled therewith or added
thereto other than inventory acquired in connection with Indebtedness of the
type permitted under Section 6.01(iv) of the Credit Agreement.
"INVESTMENT PROPERTY" shall mean and include all of the Company's
investment property (as defined in the UCC) and all of the Company's other
securities (whether certificated or uncertificated), security entitlements,
financial assets, securities accounts, commodity contracts, and commodity
accounts (as each such term is defined in the UCC), including all
substitutions and additions thereto, all dividends, distributions and sums
distributable or payable from, upon, or in respect of such property, and all
rights and privileges incident to such property, but Investment Property
shall exclude the Company's interest in its Subsidiaries to the extent
pledged pursuant to the Pledge Agreement (Borrower).
"LICENSES" means any license, approval or other authorization issued by
the Federal Communications Commission or any state public utility commission
or any other Governmental Authority having jurisdiction over the
telecommunications business.
"LIQUID INVESTMENTS" means an investment meeting the criteria set forth
in Section 5(e).
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"LOCKBOX ACCOUNT" means a "Lockbox Account" established under a Lockbox
Agreement.
"LOCKBOX AGREEMENT" means a Lockbox Agreement among the Company, the
Collateral Agent and a Lockbox Bank substantially in the form of Exhibit F
hereto or otherwise in form and substance reasonably satisfactory to the
Collateral Agent.
"LOCKBOX BANK" means a "money center" commercial bank selected by the
Company and satisfactory to the Collateral Agent, and each such other bank as
may from time to time enter into a Lockbox Agreement.
"PATENT LICENSE" means any agreement now or hereafter in existence
granting to the Company, or pursuant to which the Company has granted to any
other Person, any right with respect to any Patent or any invention now or
hereafter in existence, whether patentable or not, whether a patent or
application for patent is in existence on such invention or not, and whether
a patent or application for patent on such invention may come into existence,
including, without limitation, the agreements identified in Schedule I to
Exhibit B hereto.
"PATENTS" means all the following: (i) all letters patent and design
letters patent of the United States or any other country and all applications
for letters patent and design letters patent of the United States or any
other country, including, without limitation, applications in the United
States Patent and Trademark Office or in any similar office or agency of the
United States, any State thereof or any other country or any political
subdivision thereof, including, without limitation, those described in
Schedule I to Exhibit B hereto, (ii) all reissues, divisions, continuations,
continuations-in-part, renewals and extensions thereof, (iii) all claims for,
and rights to sue for, past or future infringements of any of the foregoing
and (iv) all income, royalties, damages and payments now or hereafter due or
payable with respect to any of the foregoing, including, without limitation,
damages and payments for past or future infringements thereof.
"PATENT SECURITY AGREEMENT" means a Patent Security Agreement executed
and delivered by the Company in favor of the Collateral Agent, for the
benefit of the Secured Parties, substantially in the form of Exhibit B
hereto, as the same may be amended from time to time.
"PERFECTION CERTIFICATE" means a certificate substantially in the form
of Exhibit A hereto, completed and supplemented with the schedules and
attachments contemplated thereby to the satisfaction of the Collateral Agent,
and duly executed by any authorized officer of the Company.
"PERMITTED LIENS" means the Security Interests and the other Liens on
the Collateral permitted to be created, assumed or exist pursuant to Section
6.02 of the Credit Agreement.
"PROCEEDS" means all proceeds of, and all other profits, products,
rentals or receipts, in whatever form, arising from the collection, sale,
lease, exchange, assignment, licensing or other disposition of, or other
realization upon, collateral, including, without limitation, all claims of
the Company against third parties for loss of, damage to or destruction of,
or for proceeds payable under, or unearned premiums with respect to, policies
of insurance in respect of, any collateral,
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and any condemnation or requisition payments with respect to any collateral,
in each case whether now existing or hereafter arising.
"SECURED OBLIGATIONS" means the obligations secured under this
Agreement, including (a) all principal of and interest (including, without
limitation, any interest which accrues after the commencement of any case,
proceeding or other action relating to the bankruptcy, insolvency or
reorganization of the Company, whether or not allowed or allowable as a claim
in any such case, proceeding or other action) on any Loan to the Company
under the Credit Agreement; (b) all other amounts payable by the Company
hereunder or under any other Loan Document; and (c) any renewals or
extensions of any of the foregoing.
"SECURED PARTIES" means (i) the Lenders, (ii) the Administrative Agent
and (iii) the Collateral Agent.
"SECURITY INTERESTS" means the security interests granted pursuant to
Section 3, as well as all other security interests created or assigned as
additional security for the Secured Obligations pursuant to the provisions of
this Agreement.
"TRADEMARK LICENSE" means any agreement now or hereafter in existence
granting to the Company, or pursuant to which the Company has granted to any
other Person, any right to use any Trademark, including, without limitation,
the agreements identified on Schedule I to Exhibit C hereto.
"TRADEMARKS" means all of the following: (i) all trademarks, trade
names, corporate names, company names, business names, fictitious business
names, trade styles, service marks, logos, brand names, trade dress, prints
and labels on which any of the foregoing have appeared or appear, package and
other designs, and any other source or business identifiers, and general
intangibles of like nature, and the rights in any of the foregoing which
arise under applicable law, (ii) the goodwill of the business symbolized
thereby or associated with each of them, (iii) all registrations and
applications in connection therewith, including, without limitation,
registrations and applications in the United States Patent and Trademark
Office or in any similar office or agency of the United States, any State
thereof or any other country or any political subdivision thereof, (iv) all
reissues, extensions and renewals thereof, (v) all claims for, and rights to
sue for, past or future infringements of any of the foregoing and (vi) all
income, royalties, damages and payments now or hereafter due or payable with
respect to any of the foregoing, including, without limitation, damages and
payments for past or future infringements thereof.
"TRADEMARK SECURITY AGREEMENT" means a Trademark Security Agreement
executed and delivered by the Company in favor of the Collateral Agent, for
the benefit of the Secured Parties, substantially in the form of Exhibit C
hereto, as the same may be amended from time to time.
"UCC" means the Uniform Commercial Code as in effect on the date hereof
in the State of New York; PROVIDED that if by reason of mandatory provisions
of law, the perfection or the effect of perfection or non-perfection of the
Security Interest in any Collateral is governed by the Uniform Commercial
Code as in effect in a jurisdiction other than New York, "UCC" means the
Uniform Commercial Code as in effect in such other jurisdiction for purposes
of the provisions hereof relating to such perfection or effect of perfection
or non-perfection.
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SECTION 2. REPRESENTATIONS AND WARRANTIES. The Company represents
and warrants as follows:
(a) The Company has good and marketable title to all of the Collateral,
free and clear of any Liens other than the Permitted Liens. All actions have
been taken that are necessary under the UCC to perfect its interest in any
Accounts in which it has an interest, as against its assignors and creditors
of its assignors.
(b) The Company has not performed any acts which might prevent the
Collateral Agent from enforcing any of the terms of this Agreement or which
would limit the Collateral Agent in any such enforcement. Other than
financing statements or other similar or equivalent documents or instruments
with respect to the Security Interests and Permitted Liens, no financing
statement, mortgage, security agreement or similar or equivalent document or
instrument covering all or any part of the Collateral is on file or of record
in any jurisdiction in which such filing or recording would be effective to
perfect a Lien on such Collateral. No Collateral is in the possession of any
Person (other than the Company) asserting any claim thereto or security
interest therein, except that the Collateral Agent or its designee may have
possession of Collateral as contemplated hereby.
(c) Not later than the date of the first borrowing under the Credit
Agreement, the Company shall deliver the Perfection Certificate to the
Collateral Agent. The information set forth therein shall be correct and
complete. Not later than 60 days following the date of the first Borrowing,
the Company shall furnish to the Collateral Agent file search reports from
each filing office set forth in Schedule 7 to the Perfection Certificate or
other evidence satisfactory to the Collateral Agent, acting on behalf of the
Required Lenders confirming the filing information set forth in such Schedule.
(d) The Security Interests constitute valid security interests under
the UCC securing the Secured Obligations to the extent that a security
interest may be created in the Collateral under the UCC. When the Patent
Security Agreement and the Trademark Security Agreement have been filed with
the United States Patent and Trademark Office, the Security Interests shall
constitute perfected security interests in all right, title and interest of
the Company in Patents or Trademarks, prior to all other Liens and rights of
others therein except for Permitted Liens to the extent that a perfected
security interest may be created in such Collateral under the U.S. Patent Act
or the Lanham Act. When the Copyright Security Agreement has been filed with
the United States Copyright Office, the Security Interests shall constitute
perfected security interests in all right, title and interest of the Company
in Copyrights, prior to all other Liens and rights of others therein except
for the Permitted Liens to the extent that a perfected security interest may
be created in such Collateral under the U.S. Copyright Act.
(e) Other than those listed on Schedule I to the Copyright Security
Agreement, Schedule I to the Trademark Security Agreement, and Schedule I to
the Patent Security Agreement delivered on the date hereof (as the same may
be modified from time to time), the Company has no Copyright Licenses,
Copyrights, Patent Licenses, Patents, Trademark Licenses or Trademarks.
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SECTION 3. THE SECURITY INTERESTS. (a) In order to secure the full
and punctual payment of the Secured Obligations in accordance with the terms
thereof, and to secure the performance of all of the obligations of the
Company hereunder and under the other Loan Documents, the Company hereby
pledges, hypothecates, assigns by way of security, transfers and grants to
the Collateral Agent for the ratable benefit of the Secured Parties a
continuing security interest in and to all right, title and interest of the
Company in and to the following property, whether now owned or existing or
hereafter acquired or arising and regardless of where located (all being
collectively referred to as the "Collateral"):
(i) Accounts;
(ii) Inventory;
(iii) General Intangibles;
(iv) Documents;
(v) Instruments;
(vi) Equipment;
(vii) Investment Property;
(viii) Deposit Accounts;
(ix) The Collateral Account, all cash deposited therein from time
to time, the Liquid Investments made pursuant to Section 5(e) and other
monies and property of any kind of the Company in the possession or under the
control of the Collateral Agent;
(x) All books and records (including, without limitation,
customer lists, marketing information, credit files, price lists, operating
records, vendor and supplier price lists, sales literature, computer
programs, printouts and other computer materials and records) of the Company
pertaining to any of the Collateral;
(xi) All Proceeds of, attachments or accessions to, or
substitutions for, all or any of the Collateral described in clauses (i)
through (x) hereof;
PROVIDED, HOWEVER, the Collateral shall not include any Excluded Contracts.
(b) The Security Interests are granted as security only and shall not
subject the Collateral Agent or any other Secured Party to, or transfer or in
any way affect or modify, any obligation or liability of the Company with
respect to any of the Collateral or any transaction in connection therewith.
(c) Notwithstanding anything herein or in the other Loan Documents to
the contrary, to the extent this Agreement or any other Security Document
purports to grant to the Collateral Agent a Lien in any License held directly
or indirectly by the Company or any of its Subsidiaries, now owned or
hereafter acquired, the Collateral Agent shall only have a Lien in
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such Licenses at such times and to the extent that a Lien in such Licenses is
permitted under applicable law; PROVIDED, that any such Lien shall to the
extent permitted by applicable law be deemed effective as of the later of (i)
the Effective Date or (ii) the date on which the Company was assigned, or
acquired control over, the applicable License.
SECTION 4. FURTHER ASSURANCES; COVENANTS. (a) (i) The Company
will not establish or change (A) the location of its chief executive office
or its chief place of business or (B) except for sales in the ordinary course
of business, the locations where it keeps or holds any Collateral or records
relating thereto from the applicable location described in the Perfection
Certificate unless it shall have given the Collateral Agent notice thereof
and an opinion of counsel with respect thereto in accordance with Section
4(k). The Company shall not in any event change the location of any
Collateral if such change would cause the Security Interests in such
Collateral to lapse or cease to be perfected.
(ii) The Company will not change its name, identity or corporate
structure (except as expressly permitted in the Credit Agreement) in any
manner unless it shall have given the Collateral Agent prior notice thereof
and delivered an opinion of counsel with respect thereto in accordance with
Section 4(k).
(b) The Company will, from time to time, at its expense, execute,
deliver, file and record any statement, assignment, instrument, document,
agreement or other paper and take any other action (including, without
limitation, any filings with the United States Patent and Trademark Office
(including without limitation, a Patent Security Agreement and a Trademark
Security Agreement), any filings with the United States Copyright Office
(including without limitation a Copyright Security Agreement), any filings of
financing or continuation statements under the UCC and any filings in, or
agreements governed by the laws of, any foreign jurisdictions) that from time
to time may be necessary or desirable, or that the Collateral Agent
reasonably may request, in order to create, preserve, upgrade in rank (to the
extent required hereby), perfect, confirm or validate the Security Interests
or to enable the Collateral Agent and the other Secured Parties to obtain the
full benefits of this Agreement, or to enable the Collateral Agent to
exercise and enforce, or facilitate the exercise and enforcement of, any of
its rights, powers and remedies hereunder with respect to any of the
Collateral. To the extent permitted by law, the Company hereby authorizes
the Collateral Agent to execute and file financing statements or continuation
statements without the Company's signature appearing thereon. The Company
agrees that a carbon, photographic or other reproduction of this Agreement or
of a financing statement is sufficient as a financing statement. The Company
shall pay the costs of, or incidental to, any recording or filing of any
financing or continuation statements concerning the Collateral.
(c) If any Collateral is at any time in the possession or control of
any warehouseman, bailee or any of the Company's agents or processors, the
Company shall, upon the request of the Collateral Agent acting on the
instructions of the Required Lenders, notify such warehouseman, bailee, agent
or processor of the Security Interests created hereby and instruct such
Person to hold all such Collateral for the Collateral Agent's account subject
to the Collateral Agent's instructions.
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(d) The Company shall keep full and accurate books and records relating
to the Collateral, and stamp or otherwise mark such books and records in such
manner as the Required Lenders may reasonably request in order to reflect the
Security Interests. The Company shall provide the Collateral Agent with
reasonable access to such books and records during normal business hours in
accordance with Section 5.08 of the Credit Agreement.
(e) The Company will immediately deliver and pledge each Instrument
constituting Collateral to the Collateral Agent (other than checks and drafts
constituting payments in respect of Accounts, as to which the provisions of
Section 5(b) shall apply), in each case appropriately endorsed to the
Collateral Agent; PROVIDED that so long as no Event of Default (as defined
under the Credit Agreement) shall have occurred and be continuing, the
Company may retain any Instruments (i) that in the aggregate have a principal
or face amount of $1,000 or less or (ii) in which a security interest has
been and continues to be effectively created and perfected in favor of the
Collateral Agent under the other Security Documents, and the Collateral Agent
shall, promptly upon request of the Company, make appropriate arrangements
for making any Instrument pledged by the Company and delivered to the
Collateral Agent available to it for purposes of presentation, collection or
renewal (any such arrangement to be effected, to the extent deemed
appropriate to the Collateral Agent, against trust receipt or like document).
All certificates or instruments representing or evidencing Investment
Property (other than Investment Property held by a securities intermediary, a
commodities intermediary or another financial intermediary) shall be
delivered to and held by or on behalf of the Collateral Agent, for the
ratable benefit of the Secured Parties, pursuant hereto and shall be in
suitable form for transfer by delivery, duly endorsed and shall be
accompanied by undated duly executed instruments of transfer or assignment in
blank, with signatures appropriately guaranteed, and accompanied in each case
by any required transfer tax stamps, all in form and substance satisfactory
to the Collateral Agent. With respect to any Investment Property held by a
securities intermediary, commodity intermediary or other financial
intermediary of any kind, the Company shall execute and deliver, and shall
cause any such intermediary to execute and deliver, a securities control
agreement ("Securities Control Agreement") among the Company, the Collateral
Agent, and such intermediary substantially in the form of Exhibit G which
provides, among other things, for the intermediary's agreement that it will
comply with such entitlement orders, and apply any value distributed on
account o any Investment Property maintained in an account with such
intermediary, as directed by the Collateral Agent without further consent by
the Company. The Collateral Agent shall have the right, at any time in its
discretion and without notice to the Company after the occurrence and during
the continuance of an Event of Default, to cause any or all of the Investment
Property to be transferred of record into the name of the Collateral Agent or
its nominee.
(f) The Company shall use its best efforts to cause to be collected
from its account debtors, as and when due, any and all amounts owing under or
on account of each Account constituting Collateral (including, without
limitation, Accounts which are delinquent, such Accounts to be collected in
accordance with lawful collection procedures) and to apply forthwith upon
receipt thereof all such amounts as are so collected to the outstanding
balance of such Account. Unless an Event of Default (as defined under the
Credit Agreement) has occurred and is continuing and the Collateral Agent is
exercising its rights hereunder to collect Accounts, the Company may allow in
the ordinary course of business as adjustments to amounts owing under its
Accounts constituting Collateral (i) an extension or renewal of the time or
times of payment,
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or settlement for less than the total unpaid balance, which the Company finds
appropriate in accordance with sound business judgment and (ii) a refund or
credit due as a result of returned or damaged merchandise or deficient
service, all in accordance with the Company's ordinary course of business
consistent with its historical collection practices. The costs and expenses
(including, without limitation, reasonable attorney's fees) of collection,
whether incurred by the Company or the Collateral Agent, shall be borne by
the Company.
(g) Upon the occurrence and during the continuance of any Event of
Default under the Credit Agreement, upon the request of the Required Lenders
acting through the Collateral Agent, the Company will promptly notify (and
the Company hereby authorizes the Collateral Agent so to notify) each account
debtor in respect of any Account or Instrument constituting Collateral that
such Collateral has been assigned to the Collateral Agent hereunder, and that
any payments due or to become due in respect of such Collateral are to be
made directly to the Collateral Agent or its designee.
(h) The Company shall, (i) as soon as practicable after the date
hereof, in the case of Equipment now owned constituting goods in which a
security interest is perfected by a notation on the certificate of title or
similar evidence of the ownership of such goods (unless such security
interest may otherwise be perfected and is so perfected), and (ii) within 10
days of acquiring any other similar Equipment, in each case, (a) having a
value in excess of $25,000 or (b) having a value in excess of $10,000, if the
aggregate of all such items owned by the Company at any time is greater than
$50,000, deliver to the Collateral Agent any and all certificates of title,
applications for title or similar evidence of ownership of such Equipment and
shall cause the Collateral Agent to be named as lienholder on any such
certificate of title or other evidence of ownership. The Company shall
promptly inform the Collateral Agent of any additions to or deletions from
such Equipment in excess of $10,000. The Company shall not permit any items
of Equipment to become a fixture to real estate..
(i) The Company will, promptly upon request, provide to the Collateral
Agent all information and evidence it may reasonably request concerning the
Collateral, and in particular the Accounts, to enable the Collateral Agent to
enforce the provisions of this Agreement.
(j) The Company shall notify the Collateral Agent immediately if it
knows, or has reason to know, that any application or registration relating
to any Material Copyright, Material Patent or Material Trademark may become
abandoned, or of any adverse determination or development (including, without
limitation, the institution of, or any such determination or development in,
any proceeding in the United States Copyright Office, the United States
Patent and Trademark Office, or any court) regarding the Company's ownership
of any Material Copyright, Material Patent or Material Trademark, its right
to register or patent the same, or to keep and maintain the same. For
purposes of this Section 4(j), "Material Patent", "Material Trademark" and
"Material Copyright" shall mean one or more Copyrights, Patents or
Trademarks, respectively, which individually has a fair market value in
excess of $10,000 or are individually or in the aggregate otherwise material
to the business of the Company. In the event that any right to any
Copyright, Copyright License, Patent, Patent License, Trademark or Trademark
License is infringed, misappropriated or diluted by a third party, the
Company shall notify the Collateral Agent promptly after it learns thereof
and shall, unless the Company shall reasonably determine that any such action
would be of negligible economic value, promptly sue
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for infringement, misappropriation or dilution and to recover any and all
damages for such infringement, misappropriation or dilution, and take such
other actions as the Company shall reasonably deem appropriate under the
circumstances to protect such Copyright, Copyright License, Patent, Patent
License, Trademark or Trademark License. In no event shall the Company,
either itself or through any agent, employee or licensee, file an application
for the registration of any Copyright with the United States Copyright Office
or any Material Patent or Material Trademark with the United States Patent
and Trademark Office, or with any similar office or agency in any other
country or any political subdivision thereof, unless not less than 30 days
prior thereto it informs the Collateral Agent, and, upon request of the
Collateral Agent, executes and delivers any and all agreements, instruments,
documents and papers the Collateral Agent may request to evidence the
Security Interests in such Copyright, Patent or Trademark and the goodwill
and general intangibles of the Company relating thereto or represented
thereby, and the Company hereby constitutes the Collateral Agent its
attorney-in-fact to execute and file all such writings for the foregoing
purposes, all acts of such attorney being hereby ratified and confirmed; such
power, being coupled with an interest, shall be irrevocable until the Secured
Obligations are paid in full.
(k) Not more than four months nor less than 10 days prior to each date
on which the Company proposes to take any action contemplated by Section
4(a)(i) or (ii), the Company shall, at its cost and expense, cause to be
delivered to the Secured Parties an opinion of counsel satisfactory to the
Collateral Agent (the Company's general counsel being deemed to be
satisfactory unless the Collateral Agent notifies the Company otherwise), to
the effect of Exhibit E hereto and in a form and substance reasonably
satisfactory to the Administrative Agent, to the effect that all financing
statements and amendments or supplements thereto, continuation statements and
other documents required to be recorded or filed in order to perfect and
protect the Security Interests for a period, specified in such opinion,
continuing until a date not earlier than eighteen months from the date of
such opinion, against all creditors of and purchasers from the Company have
been filed in each filing office necessary for such purpose and that all
filing fees and taxes, if any, payable in connection with such filings have
been paid in full (except as noted therein with respect to any continuation
statements to be filed within such period).
SECTION 5. COLLATERAL ACCOUNT AND LOCKBOX ACCOUNT. If requested by the
Collateral Agent at any time following the occurrence of an Event of Default
(whether or not such Event of Default is subsequently cured), the following
provisions of this Section shall become effective and the Company shall take
all necessary action to give effect thereto:
(a) The Company shall establish with the Collateral Agent or a
commercial bank designated by the Collateral Agent a cash collateral account
(such account, together with any additional account so established for such
purpose from time to time, the "Collateral Account") in the name and under
the control of the Collateral Agent into which there shall be deposited from
time to time the cash proceeds of the Collateral required to be delivered to
the Collateral Agent pursuant to subsection (d) of this Section 5 or any
other provision of this Agreement or any other Loan Document. Any income
received by the Collateral Agent with respect to the balance from time to
time standing to the credit of the Collateral Account, including any interest
or capital gains on Liquid Investments, shall remain, or be deposited, in the
Collateral Account. All right, title and interest in and to the cash amounts
on deposit from time to time in the Collateral Account together with any
Liquid Investments from time to time made pursuant to
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subsection (e) of this Section shall vest in the Collateral Agent, shall
constitute part of the Collateral hereunder and shall not constitute payment
of the Secured Obligations until applied thereto as hereinafter provided.
(b) The Company shall deliver to the Collateral Agent counterparts of
the Lockbox Agreement executed and delivered on behalf of the Company and the
Lockbox Bank. The Company shall instruct all account debtors and other
Persons obligated in respect of all Accounts to make all payments in respect
of such Accounts constituting Collateral directly to the Lockbox Bank (by
instructing that such payments be remitted to the Post Office Box referred to
in the Lockbox Agreement with the Lockbox Bank). In addition to the
foregoing, the Company agrees that if the proceeds of any Collateral
hereunder (including the payments made in respect of such Accounts) shall be
received by it, the Company shall as promptly as possible deposit such
proceeds into the Lockbox Account. Until so deposited, all such proceeds
shall be held in trust by the Company for and as the property of the
Collateral Agent and the Secured Parties and shall not be commingled with any
other funds or property of the Company.
(c) The balance from time to time standing to the credit of the Lockbox
Account shall, except upon the occurrence and continuation of an Event of
Default (as defined under the Credit Agreement), be distributed to the
Company upon the order of the Company. Amounts on deposit in the Lockbox
Account shall, except upon the occurrence and continuation of an Event of
Default, be invested and re-invested from time to time in Permitted
Investments as the Company shall determine.
(d) Upon the occurrence and continuation of an Event of Default (as
defined under the Credit Agreement), the Collateral Agent shall, if so
instructed by the Required Lenders, (i) deliver a Stop Transfer Notice (as
defined in the Lockbox Agreement) to the Lockbox Bank and instruct the
Lockbox Bank to transfer to the Collateral Account all funds then and
thereafter standing to the credit of the Lockbox Account with the Lockbox
Bank and (ii) apply or cause to be applied (subject to collection) any or all
of the balance from time to time standing to the credit of the Collateral
Account and such Lockbox Account in the manner specified in Section 9.
(e) Amounts on deposit in the Collateral Account and, during the
continuance of an Event of Default, the Lockbox Account shall be invested and
re-invested from time to time in such Liquid Investments as the Company shall
determine, which Liquid Investments shall be held in the name and be under
the control of the Collateral Agent, provided that, if an Event of Default
has occurred and is continuing, the Collateral Agent shall, if instructed by
the Required Lenders, liquidate any such Liquid Investments and apply or
cause to be applied the proceeds thereof to the payment of the Secured
Obligations in the manner specified in Section 9. For this purpose, (i) each
Liquid Investment shall mature within 30 days after it is acquired by the
Collateral Agent and (ii) in order to provide the Collateral Agent, for the
benefit of the Secured Parties, with a perfected security interest therein,
each Liquid Investment shall be either:
(i) evidenced by negotiable certificates or instruments, or
if non-negotiable then issued in the name of the Collateral Agent, which
(together with any appropriate instruments of transfer) are delivered to,
and held by, the Collateral Agent or an agent thereof (which shall not be
the Company or any of its Affiliates) in the State of New York or the
Commonwealth of Massachusetts; or
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(ii) in book-entry form and issued by the United States and
subject to pledge under applicable state law and Treasury regulations and
as to which (in the opinion of counsel to the Collateral Agent) appropriate
measures shall have been taken for perfection of the Security Interests.
SECTION 6. GENERAL AUTHORITY. The Company hereby irrevocably appoints the
Collateral Agent its true and lawful attorney, with full power of substitution,
in the name of the Company, the Collateral Agent, the Secured Parties or
otherwise, for the sole use and benefit of the Collateral Agent and the other
Secured Parties, but at the Company's expense, to the extent permitted by law to
exercise, at any time and from time to time while an Event of Default (as
defined under the Credit Agreement) has occurred and is continuing, all or any
of the following powers with respect to all or any of the Collateral:
(i) to demand, sue for, collect, receive and give acquittance for
any and all monies due or to become due thereon or by virtue thereof,
(ii) to settle, compromise, compound, prosecute or defend any action
or proceeding with respect thereto,
(iii) to sell, transfer, assign or otherwise deal in or with the same
or the proceeds or avails thereof, as fully and effectually as if the
Collateral Agent were the absolute owner thereof, and
(iv) to extend the time of payment of any or all thereof and to make
any allowance and other adjustments with reference thereto;
PROVIDED that the Collateral Agent shall give the Company not less than ten
days' prior written notice of the time and place of any sale or other intended
disposition of any of the Collateral, except any Collateral which is perishable
or threatens to decline speedily in value or is of a type customarily sold on a
recognized market. To the extent permitted by law, the Company agrees that such
notice constitutes "reasonable notification" within the meaning of Section
9-504(3) of the UCC.
SECTION 7. REMEDIES UPON EVENT OF DEFAULT. (a) If any Event of
Default under the Credit Agreement has occurred and is continuing, the
Collateral Agent may, in accordance with the written instructions of the
Required Lenders, exercise on behalf of the Secured Parties all rights of a
secured party under the UCC (whether or not in effect in the jurisdiction
where such rights are exercised) and, in addition, the Collateral Agent may,
without being required to give any notice, except as herein provided or as
may be required by mandatory provisions of law, (i) withdraw all cash and
Liquid Investments in the Collateral Account and apply such monies, Liquid
Investments and other cash, if any, then held by it as Collateral as
specified in Section 9 and (ii) if there shall be no such monies, Liquid
Investments or cash or if such monies, Liquid Investments or cash shall be
insufficient to pay all the Secured Obligations in full, sell the Collateral
or any part thereof at public or private sale, for cash, upon credit or for
future delivery, and at such price or prices as the Collateral Agent may deem
satisfactory. The Collateral Agent or any other Secured Party may be the
purchaser of any or all of the Collateral so sold at any public sale (or, if
the Collateral is of a type customarily sold in a recognized market or is of
a
13
<PAGE>
type which is the subject of widely distributed standard price quotations, at
any private sale) and thereafter hold the same, absolutely, free from any
right or claim of whatsoever kind. The Company will execute and deliver such
documents and take such other action as the Collateral Agent deems necessary
or advisable in order that any such sale may be made in compliance with law.
Upon any such sale the Collateral Agent shall have the right to deliver,
assign and transfer to the purchaser thereof the Collateral so sold. Each
purchaser at any such sale shall hold the Collateral so sold to it
absolutely, free from any claim or right of whatsoever kind, including any
equity or right of redemption of the Company which may be waived, and the
Compan, to the extent permitted by law, hereby specifically waives all rights
of redemption, stay or appraisal which it has or may have under any law now
existing or hereafter adopted. The notice (if any) of such sale required by
Section 6 shall (1) in case of a public sale, state the time and place fixed
for such sale, and (2) in the case of a private sale, state the day after
which such sale may be consummated. Any such public sale shall be held at
such time or times within ordinary business hours and at such place or places
as the Collateral Agent may fix in the notice of such sale. At any such sale
the Collateral may be sold in one lot as an entirety or in separate parcels,
as the Collateral Agent may determine. The Collateral Agent shall not be
obligated to make any such sale pursuant to any such notice. The Collateral
Agent may, without notice or publication, adjourn any public or private sale
or cause the same to be adjourned from time to time by announcement at the
time and place fixed for the sale, and such sale may be made at any time or
place to which the same may be so adjourned. In case of any sale of all or
any part of the Collateral on credit or for future delivery, the Collateral
so sold may be retained by the Collateral Agent until the selling price is
paid by the purchaser thereof, but the Collateral Agent shall not incur any
liability in case of the failure of such purchaser to take up and pay for the
Collateral so sold and, in case of any such failure, such Collateral may
again be sold upon like notice. The Collateral Agent, instead of exercising
the power of sale herein conferred upon it, may in accordance with the
instructions of the Required Lenders proceed by a suit or suits at law or in
equity to foreclose the Security Interests and sell the Collateral, or any
portion thereof, under a judgment or decree of a court or courts of competent
jurisdiction.
(b) For the purpose of enforcing any and all rights and remedies under
this Agreement the Collateral Agent may (i) require the Company to, and the
Company agrees that it will, at its expense and upon the request of the
Collateral Agent, forthwith assemble all or any part of the Collateral as
directed by the Collateral Agent and make it available at a place designated
by the Collateral Agent which is, in the opinion of the Collateral Agent,
reasonably convenient to the Collateral Agent and the Company, whether at the
premises of the Company or otherwise, (ii) to the extent permitted by
applicable law, enter, with or without process of law and without breach of
the peace, any premise where any of the Collateral is or may be located, and
without charge or liability to it seize and remove such Collateral from such
premises, (iii) have access to and use the Company's books and records
relating to the Collateral and (iv) prior to the disposition of the
Collateral, store or transfer it without charge in or by means of any storage
or transportation facility owned or leased by the Company, process, repair or
recondition it or otherwise prepare it for disposition in any manner and to
the extent the Collateral Agent reasonably deems appropriate and, in
connection with such preparation and disposition, use without charge any
copyright, trademark, trade name, patent or technical process used by the
Company.
14
<PAGE>
(c) Without limiting the generality of the foregoing, if any Event of
Default (as defined under the Credit Agreement) has occurred and is
continuing,
(i) the Collateral Agent may license, or sublicense, whether
general, special or otherwise, and whether on an exclusive or non-exclusive
basis, any Copyrights, Patents or Trademarks included in the Collateral
throughout the world for such term or terms, on such conditions and in such
manner as the Collateral Agent shall in its sole discretion determine;
(ii) the Collateral Agent may (without assuming any obligations or
liability thereunder), at any time and from time to time, in its sole
discretion, enforce (and shall have the exclusive right to enforce) against
any licensee or sublicensee all rights and remedies of the Company in, to
and under any Copyright Licenses, Patent Licenses or Trademark Licenses
included in the Collateral and take or refrain from taking any action under
any thereof, and the Company hereby releases the Collateral Agent and each
of the other Secured Parties from, and agrees to hold the Collateral Agent
and each of the other Secured Parties free and harmless from and against
any claims and expenses arising out of, any lawful action so taken or
omitted to be taken with respect thereto; and
(iii) upon request by the Collateral Agent, the Company will execute
and deliver to the Collateral Agent a power of attorney, in form and
substance satisfactory to the Collateral Agent, for the implementation of
any lease, assignment, license, sublicense, grant of option, sale or other
disposition of a Copyright, Patent or Trademark included in the Collateral
or any action related thereto. In the event of any such disposition
pursuant to this Section, the Company shall supply its know-how and
expertise relating to the manufacture and sale of the products bearing
Trademarks or the products or services made or rendered in connection with
Patents, and its customer lists and other records relating to such Patents
or Trademarks and to the distribution of said products, to the Collateral
Agent.
(d) Notwithstanding anything to the contrary contained herein or any
other Loan Document, neither the Collateral Agent nor any Secured Party
shall, without first obtaining the approval of a Governmental Authority, take
any action pursuant to this Agreement or any other Loan Document which would
constitute or result in an assignment of any License held by the Company or a
transfer of control of the Company if such assignment or transfer would
require, under the existing applicable law, the prior approval of such
Governmental Authority. The Company agrees to take, and the Company agrees
to cause each of its Subsidiaries to take, in each case upon the occurrence
and during the continuance of an Event of Default, any action that the
Collateral Agent may reasonably request in order to obtain from any
Governmental Authority such approval as may be necessary to enable the
Collateral Agent to assign or transfer control of the Licenses pursuant to
this Agreement, the Loan Documents and each other agreement, instrument and
document delivered to the Collateral Agent in connection herewith and
therewith, including specifically, at the expense of the Company, the use of
the Company's and each of its Subsidiaries' commercially reasonable efforts
to assist in obtaining approval of such Governmental Authority for any action
or transaction contemplated by this Agreement for which such approval is or
shall be required by law, and specifically, without limitation, upon request,
to prepare, sign and file with such Governmental Authority, the assignor's or
transferor's portion of
15
<PAGE>
any application or applications for consent to the assignment of any License
or transfer of control necessary or appropriate under the rules and
regulations of such Governmental Authority for approval of any sale or sales
of any of the Collateral by or on behalf of the Collateral Agent.
SECTION 8. LIMITATION ON DUTY OF COLLATERAL AGENT IN RESPECT OF
COLLATERAL. Beyond the exercise of reasonable care in the custody thereof,
the Collateral Agent shall have no duty as to any Collateral in its
possession or control or in the possession or control of any agent or bailee
or any income thereon or as to the preservation of rights against prior
parties or any other rights pertaining thereto. The Collateral Agent shall
be deemed to have exercised reasonable care in the custody of the Collateral
in its possession if the Collateral is accorded treatment substantially equal
to that which it accords its own property, and shall not be liable or
responsible for any loss or damage to any of the Collateral, or for any
diminution in the value thereof, by reason of the act or omission of any
warehouseman, carrier, forwarding agency, consignee or other agent or bailee
selected by the Collateral Agent in good faith; PROVIDED, HOWEVER, nothing in
this Section 8 shall be deemed to prejudice any rights of the Company against
such warehouseman, carrier, forwarding agency, consignee or other agent or
bailee.
SECTION 9. APPLICATION OF PROCEEDS. Upon the occurrence and
during the continuance of an Event of Default (as defined under the Credit
Agreement), the proceeds of any sale of, or other realization upon, all or
any part of the Collateral and any cash held in the Collateral Account shall
be applied by the Collateral Agent in accordance with the Credit Agreement.
SECTION 10. APPOINTMENT OF CO-COLLATERAL AGENTS. At any time or
times, in order to comply with any legal requirement in any jurisdiction, the
Collateral Agent may appoint another bank or trust company or one or more
other persons, either to act as co-agent or co-agents, jointly with the
Collateral Agent, or to act as separate agent or agents on behalf of the
Secured Parties with such power and authority as may be necessary for the
effectual operation of the provisions hereof and may be specified in the
instrument of appointment.
SECTION 11. EXPENSES. In the event that the Company fails to
comply with the provisions of the Loan Documents or this Agreement, such that
the value of any Collateral or the validity, perfection, rank or value of any
Security Interest is thereby diminished or potentially diminished or put at
risk, the Collateral Agent if requested by the Required Lenders (i) shall
deliver written notice of such non-compliance to the Company requesting that
it cure such non-compliance, and (ii) if within ten Business Days after
delivery of such notice the Company has failed to cure such non-compliance,
the Collateral Agent may, but shall not be required to, effect such
compliance on behalf of the Company, and the Company shall reimburse the
Collateral Agent for the reasonable costs thereof on demand. All insurance
expenses and all expenses of protecting, storing, warehousing, appraising,
insuring, handling, maintaining and shipping the Collateral, any and all
excise, property, sales, and use taxes imposed by any state, federal, or
local authority on any of the Collateral, or in respect of periodic
appraisals and inspections of the Collateral to the extent the same may
reasonably be requested by the Required Lenders acting through the Collateral
Agent from time to time, or in respect of the sale or other disposition
thereof, shall be borne and paid by the Company; and if the Company fails to
promptly pay any portion thereof when due, except, if no Event of Default (as
defined under the Credit Agreement) has occurred and is continuing, with
respect to taxes which are being contested as permitted by
16
<PAGE>
Section 5.05 of the Credit Agreement, the Collateral Agent or any other
Secured Party may, at its option, but shall not be required to, pay the same
and charge the Company's account therefor, and the Company agrees to
reimburse the Collateral Agent or such Secured Party therefor on demand. All
reasonable sums so paid or incurred by the Collateral Agent or any other
Secured Party for any of the foregoing and any and all other sums for which
the Company may become liable hereunder and all costs and expenses (including
attorneys' fees, legal expenses and court costs) reasonably incurred by the
Collateral Agent or any other Secured Party in enforcing or protecting the
Security Interests or any of their rights or remedies under this Agreement,
shall, together with interest thereon for each day until paid at the
Alternate Base plus the Applicable Rate plus interest at a rate per annum
equal to two percent (2%) for such day, be additional Secured Obligations
hereunder.
SECTION 12. TERMINATION OF SECURITY INTERESTS; RELEASE OF
COLLATERAL. (a) Upon the repayment in full of all Secured Obligations and the
termination of the Commitments, the Security Interests shall terminate and
all rights to the Collateral shall revert to the Company.
(b) At any time and from time to time prior to such termination of the
Security Interests, the Collateral Agent shall release the Collateral in
accordance with Section 5(c) hereof.
(c) If any Collateral is sold, leased, exchanged, assigned or otherwise
disposed of, or with respect to which on option has been granted, in
accordance with and as permitted under the Credit Agreement, the Security
Interests created hereby in such item (but not in any Proceeds arising from
such sale or exchange) shall cease immediately without any further action on
the part of the Collateral Agent.
(d) Upon any such termination of the Security Interests or release of
Collateral, the Collateral Agent will, at the expense of the Company, execute
and deliver to the Company such documents as the Company shall reasonably
request to evidence the termination of the Security Interests or the release
of such Collateral, as the case may be.
SECTION 13. NOTICES. All notices, approvals, requests, demands
and other communications hereunder shall be given in accordance with Section
9.01 of the Credit Agreement.
SECTION 14. WAIVERS, NON-EXCLUSIVE REMEDIES. No failure on the
part of the Collateral Agent to exercise, and no delay in exercising and no
course of dealing with respect to, any right under this Agreement or any
other Loan Document shall operate as a waiver thereof, nor shall any single
or partial exercise by the Collateral Agent of any right under this Agreement
or any other Loan Document preclude any other or further exercise thereof or
the exercise of any other right. The rights in this Agreement or the Loan
Documents are cumulative and are not exclusive of any other remedies provided
by law.
SECTION 15. SUCCESSORS AND ASSIGNS. This Agreement is for the
benefit of the Collateral Agent and the other Secured Parties and their
successors and assigns, and in the event of an assignment of all or any of
the Secured Obligations, the rights hereunder, to the extent applicable to
the indebtedness so assigned, may be transferred with such indebtedness.
This Agreement shall be binding on the Company and its successors and assigns
and the rights of the
17
<PAGE>
Company hereunder shall inure to the benefit of the Company's successors and
permitted assigns.
SECTION 16. CHANGES IN WRITING. Neither this Agreement nor any
provision hereof may be changed, waived, discharged or terminated orally, but
only in writing signed by the Company and the Collateral Agent with the
consent of the Required Lenders.
SECTION 17. SEVERABILITY. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by
law, (i) the other provisions hereof shall remain in full force and effect in
such jurisdiction and shall be liberally construed in favor of the Collateral
Agent and the other Secured Parties in order to carry out the intentions of
the parties hereto as nearly as may be possible; and (ii) the invalidity or
unenforceability of any provision hereof in any jurisdiction shall not affect
the validity or enforceability of such provision in any other jurisdiction.
SECTION 18. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and
the same instrument and any of the parties hereto may execute this Agreement
by signing any such counterpart.
SECTION 19. GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF
PROCESS. (a) This Agreement shall be construed in accordance with and
governed by the law of the State of New York.
(b) The Company hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of the Supreme
Court of the State of New York sitting in New York County and of the United
States District Court of the Southern District of New York, and any appellate
court from any thereof, in any action or proceeding arising out of or
relating to any Loan Document, or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the
extent permitted by law, in such Federal court. Each of the parties hereto
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law. Nothing in this Agreement or any
other Loan Document shall affect any right that either Agent or any Lender
may otherwise have to bring any action or proceeding relating to this
Agreement or any other Loan Document against the Parent, the Borrower or
their properties in the courts of any jurisdiction.
(c) The Company hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or any other Loan
Document in any court referred to in paragraph (b) of this Section. Each of
the parties hereto hereby irrevocably waives, to the fullest extent permitted
by law, the defense of an inconvenient forum to the maintenance of such
action or proceeding in any such court.
(d) Each of the Parent and the Borrower hereby irrevocably appoints and
designates CT Corporation System, whose address is 1633 Broadway, New York,
New York 10019, or any other person having and maintaining a place of
business in the State of New York whom the
18
<PAGE>
Parent or the Borrower may from time to time hereafter designate (having
given 30 days' notice thereof to the Administrative Agent, each Lender and
the Collateral Agent), as the true and lawful attorney and duly authorized
agent for acceptance of service of legal process of the Parent and the
Borrower. Without prejudice to the foregoing, each party to this Agreement
irrevocably consents to service of process in the manner provided for notices
in Section 9.01 of the Credit Agreement. Nothing in this Agreement or any
other Loan Document will affect the right of any party to this Agreement to
serve process in any other manner permitted by law.
SECTION 20. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF
ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER
PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION.
SECTION 21. WAIVER OF IMMUNITY. To the extent that the Company has
or hereafter may acquire any immunity from jurisdiction of any court or from
any legal process (whether through service or notice, attachment prior to
judgment, attachment in aid or execution, or otherwise) with respect to
itself or its property, the Company hereby irrevocably waives such immunity
in respect of its obligations hereunder and under the other Loan Documents to
the extent permitted by applicable law and, without limiting the generality
of the foregoing, agrees that the waivers set forth in this Section shall
have effect to the fullest extent permitted under the Foreign Sovereign
Immunities Act of 1976 of the United States of America and are intended to be
irrevocable for purposes of such Act.
(Signatures Follow on Next Page)
19
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement (Borrower) to be duly executed by their respective authorized
officers as of the day and year first above written.
JATO OPERATING CORP.
By:
------------------------------------
Name:
Title:
STATE STREET BANK AND TRUST COMPANY, as
Collateral Agent
By:
------------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
TO
SECURITY
AGREEMENT
PERFECTION CERTIFICATE
The undersigned, [____________], Chief Executive Officer of JATO
OPERATING CORP., a Delaware corporation (the "Company"), hereby certifies
with reference to the Security Agreement (Borrower), dated as of July 14,
1999, between the Company and State Street Bank and Trust Company, as
Collateral Agent (terms defined therein or as provided therein being used
herein as therein defined), to the Administrative Agent and each Lender as
follows:
SECTION 1. NAMES.
(a) The exact corporate name of the Company as it appears in its
certificate of incorporation is as follows: [___________________]
(b) The Company has not had any other corporate name since its
organization.
(c) Except as set forth in Schedule 1, the Company has not changed
its identity or corporate structure in any way within the past five years.
(d) The following is a list of all other names (including trade
names or similar appellations) used by the Company or any of its divisions
or other business units at any time during the past five years:
[___________________]
SECTION 2. CURRENT LOCATIONS. As of the date hereof, (a) the chief
executive office of the Company is located at the following address:
NAME MAILING ADDRESS
---------------------------------------------
(b) The following are all the locations where the Company maintains
any books or records relating to any Accounts:
NAME MAILING ADDRESS
---------------------------------------------
(c) The following are all the places of business of the Company not
identified above:
NAME MAILING ADDRESS
---------------------------------------------
Exhibit A-1
<PAGE>
(d) The following are all the locations not identified above where
the Company maintains any Inventory:
NAME MAILING ADDRESS
---------------------------------------------
(e) The following are all the locations not identified above where
the Company maintains or contemplates maintaining at any time when the
Loans are to be outstanding any Equipment:
NAME MAILING ADDRESS
---------------------------------------------
(f) The following are the names and addresses of all Persons other
than the Company which have possession of any of the Company's Inventory:
NAME MAILING ADDRESS
---------------------------------------------
(g) The following are the names and addresses of all Persons other
than the Company which have possession of any of the Company's Investment
Property:
NAME MAILING ADDRESS
---------------------------------------------
SECTION 3. PRIOR LOCATIONS.
(a) Set forth below is the information required by subparagraphs
(a), (b) and (c) of paragraph 2 with respect to each location or place of
business maintained by the Company at any time during the past five years:
(b) Set forth below is the information required by subparagraphs
(d) and (e) of paragraph 2 with respect to each location or bailee where or
with whom Inventory has been lodged at any time during the past four
months:
SECTION 4. UNUSUAL TRANSACTIONS. All Accounts have been originated by
the Company and all Inventory and Equipment has been acquired by the Company
in the ordinary course of its business.
SECTION 5. FILE SEARCH REPORTS. Attached hereto as Schedule 5(a) is a
true copy of a file search report from the Uniform Commercial Code filing
officer in each jurisdiction identified in paragraph 2 or 3 above with
respect to each name set forth in paragraph 1. Attached hereto as Schedule
5(b) is a true copy of each financing statement or other filing identified in
such file search reports.
SECTION 6. UCC FILINGS. (a) A duly signed financing statement on Form
UCC- 1 in substantially the form of Schedule 6 hereto has been duly delivered
to the Collateral Agent for
Exhibit A-2
<PAGE>
filing in the Uniform Commercial Code filing office in each jurisdiction
identified in paragraph 2 hereof.
Attached hereto as Schedule 6(b) is a true copy of each such filing duly
acknowledged by the filing officer.
SECTION 7. SCHEDULE OF FILINGS. Attached hereto as Schedule 7 is a
schedule setting forth filing information with respect to the filings
described in paragraph 6 above.
SECTION 8. FILING FEES. All filing fees and taxes payable in
connection with the filings described in paragraph 6 above have been paid.
IN WITNESS WHEREOF, I have hereunto set my hand this _____ day of [_________],
1999.
---------------------------------
Name:
Title
Exhibit A-3
<PAGE>
SCHEDULE 1
CHANGE IN CORPORATE STRUCTURE
<PAGE>
SCHEDULE 6(b)
UCC FILINGS
<PAGE>
SCHEDULE 7
SCHEDULE OF FILINGS
<PAGE>
EXHIBIT B
TO
SECURITY
AGREEMENT
PATENT SECURITY AGREEMENT
(PATENTS, PATENT APPLICATIONS AND PATENT LICENSES)
WHEREAS, JATO OPERATING CORP., a Delaware corporation (herein
referred to as "Grantor") owns the Patents (as defined in the Security
Agreement referred to below) (including design patents and applications for
patents) listed on Schedule I annexed hereto, and is a party to the Patent
Licenses (as defined in the Security Agreement referred to below) identified
in Schedule I annexed hereto;
WHEREAS, Grantor, Jato Communications Corp., certain lenders, State
Street Bank and Trust Company, as Collateral Agent, and Lucent Technologies
Inc., as administrative agent, are parties to a Credit Agreement of even date
herewith (as the same may be amended and in effect from time to time among
said parties and such lenders (the "Lenders") as may from time to time be
parties thereto, the "Credit Agreement");
WHEREAS, pursuant to the terms of the Security Agreement (Borrower)
of even date herewith (as said Agreement may be amended and in effect from
time to time, the "Security Agreement") between Grantor and State Street Bank
and Trust Company, as collateral agent for the Secured Parties referred to
therein (in such capacity, together with its successors in such capacity,
"Grantee"), Grantor has granted to Grantee for the benefit of such Secured
Parties a continuing security interest in substantially all the assets of
Grantor, including all right, title and interest of Grantor in, to and under
the Patent Collateral (as defined herein) whether now owned or existing or
hereafter acquired or arising, to secure the Secured Obligations (as defined
in the Security Agreement);
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantor does hereby grant to
Grantee a continuing security interest in all of Grantor's right, title and
interest in, to and under the following (all of the following items or types
of property being herein collectively referred to as the "Patent
Collateral"), whether now owned or existing or hereafter acquired or arising:
(i) each Patent (including each design patent and patent
application), including, without limitation, each Patent (including each
design patent and patent application) referred to in Schedule I annexed
hereto;
(ii) each Patent License, including, without limitation, each Patent
License identified in Schedule I annexed hereto; and
Exhibit B-1
<PAGE>
(iii) all proceeds of and revenues from the foregoing, including,
without limitation, all proceeds of and revenues from any claim by Grantor
against third parties for past, present or future infringement of any
Patent (including any design patent), including, without limitation, any
Patent referred to in Schedule I annexed hereto (including, without
limitation, any such Patent issuing from any application referred to in
Schedule I annexed hereto), and all rights and benefits of Grantor under
any Patent License, including, without limitation, any Patent License
identified in Schedule I annexed hereto.
Grantor hereby irrevocably constitutes and appoints Grantee and any
officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full power and authority in the name of Grantor
or in its name, from time to time, in Grantee's discretion, so long as any
Event of Default (as defined in the Credit Agreement) has occurred and is
continuing, to take with respect to the Patent Collateral any and all
appropriate action which Grantor might take with respect to the Patent
Collateral and to execute any and all documents and instruments which may be
necessary or desirable to carry out the terms of this Patent Security
Agreement and to accomplish the purposes hereof.
Except to the extent not prohibited in the Security Agreement, Grantor
agrees not to sell, license, exchange, assign or otherwise transfer or
dispose of, or grant any rights with respect to, or mortgage or otherwise
encumber, any of the foregoing Patent Collateral.
This security interest is granted in conjunction with the security
interests granted to Grantee pursuant to the Security Agreement. Grantor
does hereby further acknowledge and affirm that the rights and remedies of
Grantee with respect to the security interest in the Patent Collateral made
and granted hereby are more fully set forth in the Security Agreement, the
terms and provisions of which are incorporated by reference herein as if
fully set forth herein.
IN WITNESS WHEREOF, Grantor has caused this Patent Security Agreement to
be duly executed by its officer thereunto duly authorized as of the ____ day
of _____________, _____.
JATO OPERATING CORP.
By:
-----------------------------------
Name:
Title:
Acknowledged:
STATE STREET BANK AND TRUST COMPANY,
as Collateral Agent
By:
--------------------------------
Name:
Title:
Exhibit B-2
<PAGE>
SCHEDULE I
TO PATENT
SECURITY
AGREEMENT
PATENTS
A. U.S. PATENTS AND DESIGN PATENTS
I.D. NO. PATENT NO, ISSUE DATE TITLE
B. U. S. PATENT APPLICATIONS
SERIAL NO. DATE FILE TITLE
<PAGE>
EXHIBIT C
TO
SECURITY
AGREEMENT
TRADEMARK SECURITY AGREEMENT
(TRADEMARKS, TRADEMARK REGISTRATIONS, TRADEMARK
APPLICATIONS AND TRADEMARK LICENSES)
WHEREAS, JATO OPERATING CORP., a Delaware corporation (herein referred
to as "Grantor"), owns the Trademarks (as defined in the Security Agreement
referred to below) listed on Schedule I annexed hereto, and is a party to the
Trademark Licenses (as defined in the Security Agreement referred to below)
identified in Schedule 1 annexed hereto;
WHEREAS, Grantor, Jato Communications Corp., certain lenders, State
Street Bank and Trust Company, as Collateral Agent, and Lucent Technologies
Inc., as administrative agent, are parties to a Credit Agreement of even date
herewith (as the same may be amended and in effect from time to time among
said parties and such lenders (the "Lenders") as may from time to time be
parties thereto, the "Credit Agreement");
WHEREAS, pursuant to the terms of the Security Agreement (Borrower) of
even date herewith (as said Agreement may be amended and in effect from time
to time, the "Security Agreement") between Grantor and State Street Bank and
Trust Company, as collateral agent for the Secured Parties referred to
therein (in such capacity, together with its successors in such capacity,
"Grantee"), Grantor has granted to Grantee for the benefit of such Secured
Parties a security interest in substantially all the assets of Grantor,
including all right, title and interest of Grantor in, to and under the
Trademark Collateral (as defined herein), whether now owned or existing or
hereafter acquired or arising, to secure the Secured Obligations (as defined
in the Security Agreement);
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantor does hereby grant to
Grantee a continuing security interest in all of Grantor's right, title and
interest in, to and under the following (all of the following items or types
of property being herein collectively referred to as the "Trademark
Collateral"), whether now owned or existing or hereafter acquired or arising:
(i) each Trademark, including, without limitation, each Trademark
application referred to in Schedule I annexed hereto, and all of the
goodwill of the business connected with the use of, or symbolized by, each
such Trademark;
(ii) each Trademark License, including, without limitation, each
Trademark License identified in Schedule I annexed hereto, and all of the
goodwill of the business connected with the use of, or symbolized by, each
Trademark licensed pursuant thereto; and
Exhibit C-1
<PAGE>
(iii) all proceeds of and revenues from the foregoing, including,
without limitation, all proceeds of and revenues from any claim by Grantor
against third parties for past, present or future unfair competition with,
or violation of intellectual property rights in connection with or injury
to, or infringement or dilution of, any Trademark, including, without
limitation, any Trademark referred to in Schedule I hereto, and all rights
and benefits of Grantor under any Trademark License, including, without
limitation, any Trademark License identified in Schedule I hereto, or for
injury to the goodwill associated with any of the foregoing.
Grantor hereby irrevocably constitutes and appoints Grantee and any
officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full power and authority in the name of Grantor
or in its name, from time to time, in Grantee's discretion, so long as any
Event of Default (as defined in the Credit Agreement) has occurred and is
continuing, to take with respect to the Trademark Collateral any and all
appropriate action which Grantor might take with respect to the Trademark
Collateral and to execute any and all documents and instruments which may be
necessary or desirable to carry out the terms of this Trademark Security
Agreement and to accomplish the purposes hereof.
Except to the extent not prohibited in the Security Agreement, Grantor
agrees not to sell, license, exchange, assign or otherwise transfer or
dispose of, or grant any rights with respect to, or mortgage or otherwise
encumber, any of the foregoing Trademark Collateral.
This security interest is granted in conjunction with the security
interests granted to Grantee pursuant to the Security Agreement. Grantor
does hereby further acknowledge and affirm that the rights and remedies of
Grantee with respect to the security interest in the Trademark Collateral
made and granted hereby are more fully set forth in the Security Agreement,
the terms and provisions of which are incorporated by reference herein as if
fully set forth herein.
IN WITNESS WHEREOF, Grantor has caused this Trademark Security Agreement
to be duly executed by its officer thereunto duly authorized as of the ____
day of ___________, ____.
JATO OPERATING CORP.
By:
--------------------------------
Name:
Title:
Acknowledged:
STATE STREET BANK AND TRUST COMPANY,
as Collateral Agent
By:
-----------------------------
Name:
Title:
Exhibit C-2
<PAGE>
SCHEDULE I
TO
TRADEMARK
SECURITY
AGREEMENT
U.S. TRADEMARKS AND TRADEMARK REGISTRATIONS
A. U.S. TRADEMARKS AND TRADEMARK REGISTRATIONS
REG. NO. REG. DATE MARK
-------- --------- ----
B. U.S. TRADEMARK APPLICATIONS
SERIAL NO. DATE FILED MARK
---------- ---------- ----
EXCLUSIVE TRADEMARK LICENSES
PARTIES
NAME OF DATE OF
AGREEMENT LICENSOR LICENSEE AGREEMENT SUBJECT MATTER
--------- -------- -------- --------- --------------
<PAGE>
EXHIBIT D TO
SECURITY
AGREEMENT
COPYRIGHT SECURITY AGREEMENT
(COPYRIGHTS, COPYRIGHT REGISTRATIONS, COPYRIGHT
APPLICATIONS AND COPYRIGHT LICENSES)
WHEREAS, JATO OPERATING CORP., a Delaware corporation (herein referred
to as "Grantor") owns the Copyrights (as defined in the Security Agreement
referred to below) listed on Schedule I annexed hereto, and is a party to the
Copyright Licenses (as defined in the Security Agreement referred to below)
identified in Schedule I annexed hereto;
WHEREAS, Grantor, Jato Communications Corp., certain lenders, State
Street Bank and Trust Company, as Collateral Agent, and Lucent Technologies
Inc., as administrative agent, are parties to a Credit Agreement of even date
herewith (as the same may be amended and in effect from time to time among
said parties and such lenders (the "Lenders") as may from time to time be
parties thereto, the "Credit Agreement");
WHEREAS, pursuant to the terms of the Security Agreement (Borrower) of
even date herewith (as said Agreement may be amended and in effect from time
to time, the "Security Agreement") between Grantor and State Street Bank and
Trust Company, as collateral agent for the Secured Parties referred to
therein (in such capacity, together with its successors in such capacity, the
"Grantee"), Grantor has granted to Grantee for the benefit of such Secured
Parties a security interest in substantially all the assets of the Grantor,
including all right, title and interest of Grantor in, to and under the
Copyright Collateral (as defined herein), whether now owned or existing or
hereafter acquired or arising, to secure the Secured Obligations (as defined
in the Security Agreement);
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantor does hereby grant to
Grantee a continuing security interest in all of Grantor's right, title and
interest in, to and under the following (all of the following items or types
of property being herein collectively referred to as the "Copyright
CoIlateral"), whether now owned or existing or hereafter acquired or arising:
(i) each Copyright, including, without limitation, each Copyright
referred to in Schedule I annexed hereto;
(ii) each Copyright License, including, without limitation, each
Copyright License identified in Schedule I annexed hereto; and
(iii) all proceeds of and revenues from the foregoing, including,
without limitation, all proceeds of and revenues from any claim by Grantor
against third parties for past, present or future infringement of any
Copyright, including, without limitation, any Copyright referred to in
Schedule I annexed hereto, and all rights and benefits of
Exhibit D-1
<PAGE>
Grantor under any Copyright License, including, without limitation, any
Copyright License identified in Schedule I annexed hereto.
Grantor hereby irrevocably constitutes and appoints Grantee and any
officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full power and authority in the name of Grantor
or in its name, from time to time, in Grantee's discretion, so long as any
Event of Default (as defined in the Credit Agreement) has occurred and is
continuing, to take with respect to the Copyright Collateral any and all
appropriate action which Grantor might take with respect to the Copyright
Collateral and to execute any and all documents and instruments which may be
necessary or desirable to carry out the terms of this Copyright Security
Agreement and to accomplish the purposes hereof.
Except to the extent not prohibited in the Security Agreement, Grantor
agrees not to sell, license, exchange, assign or otherwise transfer or
dispose of, or grant any rights with respect to, or mortgage or otherwise
encumber, any of the foregoing Copyright Collateral.
This security interest is granted in conjunction with the security
interests granted to Grantee pursuant to the Security Agreement. Grantor
does hereby further acknowledge and affirm that the rights and remedies of
Grantee with respect to the security interest in the Copyright Collateral
made and granted hereby are more fully set forth in the Security Agreement,
the terms and provisions of which are incorporated by reference herein as if
fully set forth herein.
IN WITNESS WHEREOF, Grantor has caused this Copyright Security Agreement
to be duly executed by its officer thereunto duly authorized as of the
_____day of _______, _____.
JATO OPERATING CORP.
By:
---------------------------------
Name:
Title:
Acknowledged:
STATE STREET BANK AND TRUST COMPANY,
as Collateral Agent
By:
-----------------------------
Name:
Title:
Exhibit D-2
<PAGE>
SCHEDULE I
TO
COPYRIGHT
SECURITY
AGREEMENT
COPYRIGHTS AND COPYRIGHT REGISTRATION
REGISTRATION NO. REG. DATE TITLE
---------------- --------- -----
COPYRIGHT APPLICATIONS
SERIAL NO. DATE FILED TITLE
---------- ---------- -----
COPYRIGHT LICENSES
PARTIES
NAME OF DATE OF SUBJECT
AGREEMENT LICENSOR LICENSEE AGREEMENT MATTER
--------- -------- -------- --------- ------
<PAGE>
EXHIBIT E TO
SECURITY
AGREEMENT
OPINION OF
COUNSEL FOR THE COMPANY
The Security Agreement creates and constitutes as security for the
Secured Obligations (as defined in the Security Agreement and including any
future obligations which are Secured Obligations), in favor of the Collateral
Agent for the ratable benefit of the Secured Parties, a valid security
interest in all right, title and interest of the Company in the Collateral
and all right, title and interest of the Company in the Collateral Account.
The security interests of the Collateral Agent in all right, title and
interest of the Company in the Collateral created by the Security Agreement
constitute perfected security interests under the Uniform Commercial Code, as
in effect in the State of New York ("UCC"), the United States Copyright Act
("CA"), the United States Patent Act ("PA") and the United States Trademark
Act ("TA"), to the extent that a security interest therein may be perfected
under the UCC, the CA, the PA or the TA. Insofar as the priority thereof is
governed by the UCC, the priority of the security interests created by the
Security Agreement in the Collateral in which the Company has rights on the
date hereof will be the same with respect to Loans made or deemed made
pursuant to the Credit Agreement after the date hereof, except to the extent
that any priority may be affected by any security interest, lien or other
encumbrance imposed by law in favor of any government or governmental
authority or agency. Unless otherwise specifically defined herein, each term
defined herein has the meaning assigned to such term in the Security
Agreement.
With respect to the enforceability of the Security Documents, we express
no opinion as to the availability of specific performance. Moreover, our
opinion with respect to the enforceability of the Security Documents is
subject to the further qualification that certain remedial provisions thereof
may be limited by the law of the State of New York and applicable law of the
United States of America, but such laws do not, in our opinion, make the
remedies afforded thereby inadequate for the practical realization of the
benefits of the security intended to be provided thereby.
Exhibit E-1
<PAGE>
EXHIBIT F TO
SECURITY
AGREEMENT
LOCKBOX AGREEMENT
LOCKBOX AGREEMENT, dated as of [___________], [_____], among JATO
OPERATING CORP., a Delaware corporation (the "Company"), STATE STREET BANK
AND TRUST COMPANY, as Collateral Agent under the Security Agreement referred
to below (the "Collateral Agent"), and [______________] (the "Lockbox Bank").
WITNESSETH:
WHEREAS, the Company and the Collateral Agent have entered into a
Security Agreement (Borrower), dated as of July 14, 1999 (as the same may be
amended from time to time, the "Security Agreement") under which the Company
has granted a continuing security interest in and to the Collateral (as
defined in the Security Agreement) to secure its obligations under the Loan
Documents (defined as provided in the Security Agreement);
WHEREAS, pursuant to the Security Agreement, the Company has agreed to
instruct certain obligors to make payments to (the "Post Office Box"); and
WHEREAS, the Company has requested that the Lockbox Bank establish and
maintain a bank account as further described herein, and the Lockbox Bank is
willing to establish and maintain such account pursuant to this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained and for other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto agree as follows:
SECTION 1. POST OFFICE BOX; DEPOSITS INTO THE LOCK BOX ACCOUNT. (a) The
Lockbox Bank shall have unrestricted and exclusive access to the Post Office
Box for the purpose of collecting mail for delivery and deposit into the
Lockbox Account (as defined below) (even though addressed to the Company) and
shall collect the mail delivered thereto on each business day in accordance
with the Lockbox Bank's regular collection schedule.
(b) The contents of the mail collected from the Post Office Box,
whether consisting of cash, checks, drafts, bills of exchange, money orders
or other instruments or documents, shall be promptly deposited by the Lockbox
Bank into the Lockbox Account. The term "Lockbox Account" means account no.
[____________] opened and maintained by the Lockbox Bank for the Company.
(c) The Lockbox Bank shall prepare one photocopy of the front and back
of each check, draft, bill of exchange, money order or other instrument or
document (collectively, hereinafter called the "checks"; individually, a
"check") with the date of deposit to be shown on the bottom edge thereof.
Attachments received with payments, such as detachable stubs,
Exhibit F-1
<PAGE>
together with any correspondence and the individual envelope, are to be
affixed to the photocopy of the check. All of the above instruments will be
delivered by the Lockbox Bank to the Company on a same day basis.
(d) The Lockbox Bank shall endorse all checks which appear to be in
order for deposit into the Lockbox Account and shall process each item under
the same terms and conditions as would apply if the Lockbox Bank or the
Company had made the deposit directly. The Lockbox Bank shall endorse all
such checks as follows:
"DEPOSIT TO THE ACCOUNT OF AND WITHOUT PREJUDICE TO THE WITHIN
NAMED PAYEE LOCKBOX SERVICES"
This endorsement may be made by use of a payee endorsement stamp.
(e) Undated checks may be dated by the Lockbox Bank to agree with the
postmark date and included in the regular deposit. Checks incorrectly made
out, where numerical and written amounts differ, are to be deposited for the
written amount only. Checks bearing no signature are to be stamped with a
"Kindly Refer to Maker" stamp and processed. Third-party checks may be
deposited into the Lockbox Account if properly endorsed.
(f) Checks bearing the legend "Payment in Full" or words of similar
import, either typed or handwritten, and checks that the Lockbox Bank, in its
normal banking practices and in its sole discretion, decides to submit to the
special attention of the Company or the Collateral Agent, shall be withheld
from the clearing system and sent to the Company or, at any time after
receipt by the Lockbox Bank of written notice from (which notice may be
delivered only upon the occurrence and during the continuation of an Event of
Default (as defined in the Credit Agreement)) the Collateral Agent, to the
entity designated in a written notice from the Collateral Agent. Should the
Lockbox Bank by reason of the exercise of its judgment, or through
inadvertence or oversight, process any of the checks covered by this Section
1(f) for collection and credit such checks to the Lockbox Account, the
Company and the Collateral Agent agree that the Lockbox Bank shall incur no
responsibility or liability.
(g) The details representing deposited items, adding machine tapes,
advice of credit, etc., together with all other materials rejected for
various reasons, and so marked, shall be sent by the Lockbox Bank to the
Company or, at any time after receipt by the Lockbox Bank of written notice
(which notice may be delivered only upon the occurrence and during the
continuation of an Event of Default (as defined in the Credit Agreement))
from the Collateral Agent, to the entity designated in a written notice from
the Collateral Agent. Checks returned unpaid because of uncollected or
insufficient funds shall be redeposited without advice. Checks returned a
second time shall be charged to the Lockbox Account and mailed with
appropriate advice to the Company or, at any time after receipt by the
Lockbox Bank of written notice (which notice may be delivered only upon the
occurrence and during the continuation of an Event of Default (as defined in
the Credit Agreement)) from the Collateral Agent, to the entity designated in
a written notice from the Collateral Agent.
Exhibit F-2
<PAGE>
(h) The Lockbox Bank shall maintain a microfilm record of each check
included in the Lockbox Account in accordance with the Lockbox Bank's normal
lockbox procedures. This film shall be available for use by the Company and
the Collateral Agent.
(i) The Company shall deposit such amounts into the Lockbox Account as
are required to be so deposited pursuant to Section 5 of the Security
Agreement.
SECTION 2. THE LOCKBOX ACCOUNT AND TRANSFERS THEREFROM. (a) Unless and
until the Lockbox Bank receives notice (which notice may be delivered only
upon the occurrence and during the continuation of an Event of Default (as
defined in the Credit Agreement)) from the Collateral Agent that the
provisions of Section 2(b) are to be implemented, which notice shall be
effective upon receipt by the Lockbox Bank (a "Stop Transfer Notice"), the
Lockbox Bank will debit the Lockbox Account in accordance with the Company's
instructions.
(b) After receipt by the Lockbox Bank of a Stop Transfer Notice, the
Lockbox Bank will cease debiting the Lockbox Account in accordance with the
Company's instructions (but may continue to debit the Lockbox Account in
accordance with Section 1(g)) and will disburse funds from the Lockbox
Account only in accordance with instructions from the Collateral Agent.
SECTION 3. MISCELLANEOUS. (a) The Company hereby agrees to immediately
notify its account debtors which have not already been notified to send all
their remittances to the Post Office Box.
(b) The Lockbox Bank's compensation for providing the services
contemplated herein shall be as mutually agreed between the Company and the
Lockbox Bank from time to time.
(c) The Lockbox Bank undertakes to perform only such duties as are
expressly set forth herein and are normally undertaken by the Lockbox Bank in
connection with its lockbox processing. Notwithstanding any other provision
of this Agreement, it is agreed by the parties to this Agreement that the
Lockbox Bank shall not be liable for any action taken by the Lockbox Bank or
any of its directors, officers, agents or employees in accordance with this
Agreement except for the Lockbox Bank's (or any director's, officer's,
agent's or employee's) gross negligence or willful misconduct. In no event
shall the Lockbox Bank be liable for losses or delays resulting from acts of
God, force majeure, computer malfunctions, interruptions of communication
facilities, labor difficulties or other causes beyond the Lockbox Bank's
reasonable control or for indirect, special or consequential damages.
(d) All notices or other written communications hereunder shall be sent:
in the case of the Lockbox Bank, to:
--------------------
--------------------
--------------------
--------------------
Exhibit F-3
<PAGE>
in the case of the Company, to:
--------------------
--------------------
--------------------
--------------------
in the case of the Collateral Agent, to:
--------------------
--------------------
--------------------
--------------------
(e) The Lockbox Bank shall not assert, claim or endeavor to exercise
any right of set-off or banker's lien against any funds which may at any time
be deposited in the Lockbox Account, or any items or proceeds thereof that
come into the Lockbox Bank's possession in connection with this Agreement,
except to the extent otherwise provided in the last sentence of Section 1(g)
and except for fees payable pursuant to Section 3(b).
(f) During the term of the Security Agreement, this Agreement may be
terminated only by the Lockbox Bank, and then only upon written notice to the
other parties; PROVIDED that such termination shall not be effective until
the earlier of (i) such time as a successor bank shall have been appointed
and shall have accepted the responsibilities, duties and obligations of the
Lockbox Bank under this Agreement and (ii) 5:00 P.M. (New York time) on the
60th day after receipt of such written notice. In the event that the Lockbox
Bank receives remittances following such termination, it will forward such
remittances to such successor bank (or, if no successor bank has been
appointed and shall have accepted the responsibilities, duties and
obligations of the Lockbox Bank under this Agreement, then as directed by the
Collateral Agent) and the Company shall compensate the Lockbox Bank for such
services at the price agreed to pursuant to Section 3(b) hereof.
(g) Neither this Agreement nor any provision hereof may be changed,
amended, modified or waived orally, but only by an instrument in writing
signed by the parties hereto.
(h) This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
(i) This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and assigns.
(j) This Agreement may be executed in any number of counterparts which
together shall constitute one and the same instrument.
(k) The Company agrees to pay, indemnify and hold the Lockbox Bank
harmless from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever (including,
Exhibit F-4
<PAGE>
without limitation, legal fees) with respect to the performance of this
Agreement by the Lockbox Bank or of its directors, officers, agents or
employees, unless arising from its or such natural persons' own gross
negligence or willful misconduct. The provisions of this paragraph shall
survive termination of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
JATO OPERATING CORP.
By:
-------------------------------
Name:
Title:
[BANK]
By:
-------------------------------
Name:
Title:
STATE STREET BANK AND TRUST
COMPANY, as Collateral Agent
By:
-------------------------------
Name:
Title:
Exhibit F-5
<PAGE>
EXHIBIT G
TO SECURITY AGREEMENT
[FORM OF SECURITIES CONTROL ACCOUNT AGREEMENT]
Exhibit G-1
<PAGE>
EXHIBIT G TO
SECURITY
AGREEMENT
(BORROWER)
[FORM OF SECURITIES ACCOUNT CONTROL AGREEMENT (BORROWER)]
SECURITIES ACCOUNT CONTROL AGREEMENT (BORROWER)
This SECURITIES ACCOUNT CONTROL AGREEMENT (BORROWER) (the
"AGREEMENT"), dated as of July 14, 1999, by and among Jato Operating Corp., a
Delaware corporation (the "BORROWER"), Lehman Brothers Inc. (the "SECURITIES
INTERMEDIARY"), and State Street Bank and Trust Company, as Collateral Agent
(the "COLLATERAL AGENT") for the benefit of the Secured Parties (as defined
in the Credit Agreement referred to below). Capitalized terms not otherwise
defined herein shall have the meanings set forth in the Credit Agreement,
dated as of July 14, 1999, among the Borrower, Jato Communications Corp., the
lenders party thereto, the Collateral Agent and Lucent Technologies Inc., as
Administrative Agent, as amended, supplemented and modified from time to time
(the "CREDIT AGREEMENT"), and references herein to the "UCC" are references
to the Uniform Commercial Code as in effect in the State of New York.
WHEREAS, pursuant to the Security Agreement (Borrower), the
Borrower has granted a security interest in substantially all of its assets;
and
WHEREAS, the Security Agreement (Borrower) requires the
Borrower and the Securities Intermediary to enter into this Agreement;
NOW THEREFORE, the parties hereto hereby agree, for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, as follows:
1. ESTABLISHMENT OF SECURITIES ACCOUNT. The Securities
Intermediary hereby confirms that the Securities Intermediary has established
account number 833-33166-1-3 under the name "Jato Operating Corp. pledge
account for State Street Bank and Trust Company, as Collateral Agent"
(together with any successor accounts, the "SECURITIES ACCOUNT") for the
Borrower.
2. TREATMENT OF THE SECURITIES ACCOUNT.
(a) The Securities Account is, and shall be treated as, a
"securities account" within the meaning of Section 8-501 of the UCC.
(b) The Securities Account is an account to which financial
assets are or may be credited.
<PAGE>
(c) The Securities Intermediary shall treat the Collateral
Agent as (i) entitled to exercise the rights that comprise any financial
asset credited to the Securities Account, and (ii) the "entitlement holder"
(within the meaning of Section 8-102 of the UCC), for the benefit of the
Secured Parties, with respect to the Securities Account on the books and
records of the Securities Intermediary.
(d) All property delivered to the Securities Intermediary
shall be promptly credited to the Securities Account.
(e) All securities or other property (other than cash)
capable of being issued or registered in the name of a Person or in bearer
form underlying any financial assets credited to the Securities Account shall
be registered in the name of "Jato Operating Corp. pledge account for State
Street Bank and Trust Company, as Collateral Agent" or indorsed to the
Securities Intermediary or in blank, and in no case shall any such financial
asset credited to the Securities Account be registered in the name of the
Borrower, payable to the order of the Borrower or specially indorsed to the
Borrower, except as provided in Section 5 hereof.
3. "FINANCIAL ASSETS" ELECTION. Each item of property
(whether investment property, financial asset, security, instrument or cash
or any other property of any kind) credited to the Securities Account shall
be treated as a "financial asset" (within the meaning of Section 8-102(a)(9)
of the UCC) under Article 8 of the UCC.
4. CONTROL BY COLLATERAL AGENT. Upon receipt of a Notice
of Exclusive Control, the Securities Intermediary shall: (i) comply with all
notifications it receives directing it to transfer or redeem any financial
asset in the Securities Account (each an "ENTITLEMENT ORDER") originated by
the Collateral Agent without further consent by the Borrower; and (ii) take
directions with respect to the Securities Account from the Collateral Agent.
5. BORROWER'S RIGHTS IN THE SECURITIES ACCOUNT.
(a) Except as otherwise provided in this Section 5, the
Securities Intermediary shall comply with Entitlement Orders originated by
the Borrower without further consent by the Collateral Agent.
(b) If the Securities Intermediary shall have received from
the Collateral Agent a notice of exclusive control substantially in the form
of Exhibit A attached (a "NOTICE OF EXCLUSIVE CONTROL"), the Securities
Intermediary shall cease:
(i) complying with Entitlement Orders or other
directions concerning the Securities Account originated by the Borrower;
and
(ii) distributing to the Borrower earnings, income,
dividends, interest, or other distributions on investment property,
instruments, money, or other property credited to the Securities Account.
(c) The Collateral Agent hereby agrees, solely for the benefit
of the Borrower and its successors and assigns, that the Collateral Agent will
not issue a Notice of Exclusive
2
<PAGE>
Control or any Entitlement Order unless an Event of Default has occurred and
is continuing on such date.
(d) Notwithstanding any contrary provisions hereof, unless
and until the Securities Intermediary receives a Notice of Exclusive Control
from the Collateral Agent, (i) the Borrower shall have the right to (1) trade
and exercise rights over the Securities Account, including Entitlement Orders
that would require the Securities Intermediary to make a delivery to or for
the account of the Borrower or any other Person and (2) originate Entitlement
Orders with respect to the Securities Account and (ii) the Securities
Intermediary shall handle, invest, disburse and dispose of all financial
assets credited to the Securities Account in accordance with Entitlement
Orders or other directions originated by the Borrower.
(e) Upon receipt of a Notice of Exclusive Control, the
Securities Intermediary shall cease complying with any Entitlement Orders
originated by the Borrower that would require the Securities Intermediary to
make a delivery to or for the account of the Borrower or any other Person,
except where the Collateral Agent has confirmed in writing that such delivery
is acceptable to the Collateral Agent.
6. SECURITY INTERMEDIARY'S LIEN. The Securities
Intermediary agrees that, except for payment of its fees, commissions and
settlement of open orders, it will not assert any lien, encumbrance, claim or
right against the Securities Account or any asset carried in the Securities
Account.
7. SECURITIES INTERMEDIARY'S RESPONSIBILITY.
(a) The Securities Intermediary shall not be liable to the
Collateral Agent (for the benefit of the Secured Parties) for complying with
Entitlement Orders from the Borrower that are received by the Securities
Intermediary before the Securities Intermediary receives and has a reasonable
opportunity to act on a Notice of Exclusive Control.
(b) The Securities Intermediary shall not be liable to the
Borrower for complying with a Notice of Exclusive Control or with Entitlement
Orders originated by the Collateral Agent, even if the Borrower notifies the
Securities Intermediary that the Collateral Agent is not legally entitled to
issue the Entitlement Order or Notice of Exclusive Control.
(c) This Agreement does not create any obligation of the
Securities Intermediary except for those expressly set forth in this
Agreement. In particular, the Securities Intermediary need not investigate
whether the Collateral Agent is entitled under the Collateral Agent's
agreements with the Borrower to give an Entitlement Order or a Notice of
Exclusive Control. The Securities Intermediary may rely on notices and
communications that it believes were given by the appropriate party.
8. STATEMENTS, CONFIRMATIONS, AND NOTICES OF ADVERSE
CLAIMS. The Securities Intermediary shall provide to the Collateral Agent
duplicate copies of all statements, confirmations and other communications
sent by the Securities Intermediary to the Borrower. Except for the claims
and interests of the Collateral Agent (for the benefit of the Secured
Parties) and of the Borrower, the Securities Intermediary does not know of
any claim to, or interest in, the Securities Account or in any financial
assets credited thereto. If any person asserts any lien,
3
<PAGE>
encumbrance or adverse claim (including any writ, garnishment, judgment,
warrant of attachment, execution or similar process) against the Securities
Account or in any financial asset credited thereto, the Securities
Intermediary shall notify the Collateral Agent and the Borrower thereof
promptly after becoming aware thereof.
9. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF THE
SECURITIES INTERMEDIARY. The Securities Intermediary hereby represents,
warrants and covenants that:
(a) The Securities Account has been or shall be established
as described in Section 1 above, and the Securities Account shall be
maintained in the manner set forth herein until termination of this
Agreement. The Securities Intermediary shall not change the name or account
numbers of the Securities Account without the prior written consent of the
Collateral Agent.
(b) No financial asset is registered in the name of the
Borrower, or payable to the Borrower's order, or specifically indorsed to the
Borrower, except to the extent that such financial asset has been indorsed to
the Securities Intermediary or in blank. Except as otherwise provided in
Section 5 hereof, no financial asset shall be registered in the name of the
Borrower or payable to the Borrower's order or specially indorsed to the
Borrower, except to the extent that such financial asset has been indorsed to
the Securities Intermediary or in blank.
(c) This Agreement is the valid and legally binding
obligation of the Securities Intermediary.
(d) Other than this Agreement, (i) the Securities
Intermediary has not entered into, and until the termination of this
Agreement shall not enter into, any agreement with any other Person relating
to the Securities Account and/or any financial assets credited thereto
pursuant to which it has agreed to comply with Entitlement Orders of such
Person; and (ii) the Securities Intermediary has not entered into any other
agreement with the Borrower or the Collateral Agent purporting to limit or
condition the obligation of the Securities Intermediary to comply with
Entitlement Orders as set forth in Section 4 and Section 5 hereof; provided
that, the Collateral Agent acknowledges that the Securities Account is
managed on a discretionary basis by the Securities Intermediary on behalf of
the Borrower.
10. INDEMNITY. The Borrower hereby indemnifies and agrees
to defend and hold harmless the Securities Intermediary, its officers,
directors, employees, and agents against claims, liabilities, and expenses
arising out of this Agreement (including attorneys' fees and disbursements),
except to the extent that such claims, liabilities, or expenses are caused by
or arise from the Securities Intermediary's gross negligence or willful
misconduct.
11. GOVERNING LAW. This Agreement and the Securities
Account shall be governed by the laws of the State of New York. Regardless of
any provisions in any other agreement, for purposes of the UCC, New York
shall be deemed to be the jurisdiction of the Securities Intermediary with
respect to the Securities Account and Entitlement Orders related thereto.
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12. CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL.
(a) THE BORROWER IRREVOCABLY CONSENTS THAT ANY LEGAL ACTION
OR PROCEEDING BY THE COLLATERAL AGENT AGAINST IT UNDER, ARISING OUT OF OR IN
ANY MANNER RELATING TO THIS AGREEMENT OR ANY TRANSACTION RELATED HERETO MAY
BE BROUGHT IN ANY COURT OF THE STATE OF NEW YORK, COUNTY OF NEW YORK, OR IN
THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK. THE
BORROWER, BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT, EXPRESSLY AND
IRREVOCABLY ASSENTS AND SUBMITS TO THE PERSONAL JURISDICTION OF ANY OF SUCH
COURTS IN ANY SUCH ACTION OR PROCEEDING. AS AN ALTERNATIVE METHOD OF
SERVICE, THE BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF ANY
COMPLAINT, SUMMONS, NOTICE OR OTHER PROCESS RELATING TO ANY SUCH ACTION OR
PROCEEDING BY DELIVERY THEREOF TO IT BY HAND OR BY MAIL IN THE MANNER
PROVIDED FOR IN SECTION 17 HEREOF. THE BORROWER HEREBY EXPRESSLY AND
IRREVOCABLY WAIVES ANY CLAIM OR DEFENSE IN ANY SUCH ACTION OR PROCEEDING
BASED ON ANY ALLEGED LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM
NON CONVENIENS OR ANY SIMILAR BASIS. THE BORROWER SHALL NOT BE ENTITLED IN
ANY SUCH ACTION OR PROCEEDING TO ASSERT ANY DEFENSE GIVEN OR ALLOWED UNDER
THE LAWS OF ANY STATE OTHER THAN THE STATE OF NEW YORK UNLESS SUCH DEFENSE IS
ALSO GIVEN OR ALLOWED BY THE LAWS OF THE STATE OF NEW YORK. NOTHING IN THIS
SECTION 12 SHALL AFFECT OR IMPAIR IN ANY MANNER OR TO ANY EXTENT THE RIGHT OF
THE COLLATERAL AGENT OR ANY OTHER SECURED PARTY TO COMMENCE LEGAL PROCEEDINGS
OR OTHERWISE PROCEED AGAINST THE BORROWER IN ANY JURISDICTION OR TO SERVE
PROCESS IN ANY MANNER PERMITTED BY LAW.
(b) EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR ANY TRANSACTION RELATING HERETO.
13. ENTIRE AGREEMENT. This Agreement is the entire
agreement, and supersedes any prior agreements and contemporaneous oral
agreements, of the parties concerning its subject matter.
14. AMENDMENTS. No amendment or modification of this
Agreement or waiver of any right hereunder shall be binding on any party
hereto unless it is in writing and is signed by all of the parties hereto.
15. SEVERABILITY. To the extent a provision of this
Agreement is unenforceable, this Agreement shall be construed, to the maximum
extent permitted by applicable law, as if the unenforceable provision were
omitted.
16. SUCCESSORS. The terms of this Agreement shall be
binding upon, and shall inure to the benefit of, the parties hereto and their
respective successors and assigns.
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17. NOTICES. All notices and other communications required
or permitted to be given hereunder shall be in writing, shall be addressed as
provided below and shall be considered as properly given (a) if delivered in
person, (b) if mailed by first class United States mail, postage prepaid,
registered or certified with return receipt requested or (c) if sent by
prepaid facsimile transmission confirmed by telephone. Notice so given shall
be effective upon receipt by the addressee, except that communication or
notice so transmitted by facsimile transmission and confirmed by telephone
shall be deemed to have been validly and effectively given on the day (if a
Business Day and, if not, on the next following Business Day) on which it is
transmitted by facsimile and confirmed by telephone before 4:00 p.m.,
recipient's time, and if transmitted by facsimile and confirmed by telephone
after that time, on the next following Business Day; PROVIDED, HOWEVER, that
if any notice is tendered to an addressee and the delivery thereof is refused
by such addressee, such notice shall be effective upon such tender. Any
party shall have the right to change its address for notice hereunder to any
other location within the continental United States by giving of thirty (30)
days' notice to the other parties in the manner set forth hereinabove. Any
communications between the parties hereto or notices provided herein may be
given to the following addresses:
(1) Collateral Agent: State Street Bank and Trust Company
2 Avenue de Lafayette
Boston, MA 02111-174
Attention: Global Investor Services Group
Corporate Trust
Telecopy No.: (617) 662-1465
Copy to: Lucent Technologies Inc.
283 King George Road
Warren, NJ 07059
Attention: Assistant Treasurer - Project Finance
Telecopy No.: (908) 559-1711
(2) Borrower: Jato Operating Corp.
1099 18th Street
Suite 800
Denver, CO 80202
Attention: Vice President of Finance
Telecopy No.: (303) 226-8305
Copy to: Cooley Godward LLP
2595 Canyon Boulevard
Suite 250
Boulder, CO 80302
Attention: Rex R. O'Neal, Esq.
Telecopy No.: (303) 546-4099
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(3) Securities
Intermediary: Lehman Brothers Inc.
555 California Street
30th Floor
San Francisco, CA 94104
Attention: William E. Welsh III, Branch Manager
Telecopy No.: (415) 263-4400
18. TERMINATION. The rights and powers granted herein to
the Collateral Agent have been granted in order to perfect its security
interests in the Securities Account for the benefit of the Secured Parties,
are powers coupled with an interest and shall be affected neither by the
bankruptcy of the Borrower nor by the lapse of time. The obligations of the
Securities Intermediary hereunder shall continue in effect until the security
interests of the Collateral Agent for the benefit of the Secured Parties in
the Securities Account have been terminated and the Collateral Agent has
notified the Securities Intermediary of such termination in writing.
19. COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which, when so executed and delivered, shall be an
original, but all such counterparts shall together constitute but one and the
same instrument.
20. HEADINGS. Section headings have been inserted in this
Agreement as a matter of convenience for reference only, and it is agreed
that such section headings are not a part of this Agreement and shall not be
used in the interpretation of any provision of this Agreement.
(Signatures Follow on Next Page)
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Securities
Account Control Agreement to be duly executed by their duly authorized
representatives as of the day and year first above written.
JATO OPERATING CORP.
By:
-------------------------------
Name:
Title:
STATE STREET BANK AND TRUST COMPANY,
as Collateral Agent
By:
-------------------------------
Name:
Title:
LEHMAN BROTHERS INC.,
as Securities Intermediary
By:
-------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
[Letterhead of the Collateral Agent]
[Date]
Lehman Brothers Inc.
555 California Street
30th Floor
San Francisco, CA 94104
Attention: William E. Welsh III, Branch Manager
Notice of Exclusive Control
Ladies and Gentlemen:
As referenced in the Securities Account Control Agreement
(Borrower), dated as of July 14, 1999, among Jato Operating Corp., Lehman
Brothers, Inc. and State Street Bank and Trust Company, as Collateral Agent
(a copy of which is attached), we hereby give you notice of our exclusive
control over securities account number 833-33166-1-3 (the "SECURITIES
ACCOUNT") and all financial assets, cash and instruments credited thereto.
You are hereby instructed not to accept any direction, instruction or
entitlement order with respect to the Securities Account or the financial
assets, cash and instruments credited thereto from any person other than the
undersigned.
You are instructed to deliver a copy of this notice by
facsimile transmission to Jato Operating Corp.
Very truly yours,
STATE STREET BANK AND TRUST
COMPANY, as Collateral Agent
By:
--------------------------
Title
<PAGE>
EXHIBIT E
[FORM OF PLEDGE AGREEMENT (BORROWER)]
PLEDGE AGREEMENT
(BORROWER)
This PLEDGE AGREEMENT (BORROWER), dated as of July 14, 1999, is made
between JATO OPERATING CORP., a Delaware corporation (with its successors,
the "PLEDGOR") and STATE STREET BANK AND TRUST COMPANY, as collateral agent
for and on behalf of and for the benefit of itself, the Administrative Agent
(as hereinafter defined) and the Lenders (as hereinafter defined), including
without limitation itself in its capacity at any time or from time to time as
a Lender (as hereinafter defined) (with its successors in such capacity, the
"COLLATERAL AGENT").
W I T N E S S E T H:
WHEREAS, the Pledgor owns all of the common stock of
[____________], a [____________] corporation (with its successors, the
"SUBSIDIARY"); and
WHEREAS, the Pledgor, Jato Communications Corp., the
Lenders, State Street Bank and Trust Company, as Collateral Agent, and Lucent
Technologies Inc., as administrative agent (the "ADMINISTRATIVE AGENT"), are
parties to a Credit Agreement, dated as of July 14, 1999, (as the same may be
amended, supplemented, restated or replaced from time to time, the "CREDIT
AGREEMENT"), providing, subject to the terms and conditions thereof, for
making Loans by the Lenders to the Pledgor; and
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. Terms defined in the Credit
Agreement and not otherwise defined herein have, as used herein, the
respective meanings provided for therein. The following additional terms as
used herein, have the following respective meanings:
"COLLATERAL" has the meaning assigned to such term in
Section 3(a).
"COLLATERAL ACCOUNT" has the meaning set forth in the
Security Agreement.
"EVENT OF DEFAULT" or "EVENTS OF DEFAULT" has any meaning
assigned to such terms(s) in the Credit Agreement.
"ISSUER" means (1) the Subsidiary and (ii) each other
direct subsidiary of the Pledgor that shall hereafter become, in accordance
with Section 4, an "ISSUER" for purposes of this Pledge Agreement.
<PAGE>
"LENDERS" and "LIEN" have the meanings assigned to such
terms in the Credit Agreement.
"PLEDGED INSTRUMENTS" means (i) the intercompany notes, if
any, listed on Exhibit A hereto and (ii) any instrument required to be
pledged to the Collateral Agent pursuant to Section 3(b).
"PLEDGED SECURITIES" means the Pledged Instruments and the
Pledged Stock.
"PLEDGED STOCK" means the Subsidiary Shares and any other
capital stock or securities required to be pledged to the Collateral Agent
pursuant to Section 3(b), and in respect of which such pledge or the Security
Interests or both has not been released pursuant to Section 14 or other terms
or provisions of this Pledge Agreement.
"REQUIRED LENDERS" has the meaning assigned to such term in
the Credit Agreement.
"SECURED OBLIGATIONS" means, collectively:
(i) the Secured Obligations (as defined in the
Security Agreement); and
(ii) the Pledgor's obligations under this Pledge
Agreement.
"SECURED PARTIES" means, collectively (i) the Lenders, (ii)
the Administrative Agent and (iii) the Collateral Agent.
"SECURITY AGREEMENT" means the Security Agreement (Borrower),
dated as of July 14, 1999, between tile Pledgor and the Collateral Agent, as the
same may be modified, amended, supplemented, restated or replaced and
supplemented and in effect from time to time.
"SECURITY INTERESTS" means the security interests in the
Collateral granted hereunder securing the Secured Obligations.
"SUBSIDIARY SHARES" means, in aggregate, (a) the [________]
shares in the capital stock of the Subsidiary owned by the Pledgor, which share
as at the date hereof is represented by certificate No. [___] issued by the
Subsidiary and registered in the name of the Pledgor.
"UCC" means the Uniform Commercial Code of the State of New
York.
Unless otherwise defined herein, or unless the context
otherwise requires, all terms used herein which are defined in the UCC as in
effect on the date hereof shall have the meanings ascribed thereto in the UCC.
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<PAGE>
SECTION 2. REPRESENTATIONS AND WARRANTIES. The Pledgor
represents and warrants as follows:
(a) TITLE TO PLEDGED SECURITIES. The Pledgor owns all of
the Pledged Securities, free and clear of any Liens other than the Security
Interests. All of the Pledged Stock has been duly authorized and validly
issued, is fully paid and nonassessable (if applicable), and is subject to no
options to purchase or similar rights of any person, and constitutes all and
not less than all the Pledgor's securities of any class in the capital of
each Issuer. The Pledgor is not and agrees that it will not become a party to
or otherwise bound by any agreement, other than this Pledge Agreement or any
of the Loan Documents, which might affect or restrict in any manner the
rights of the Collateral Agent or the other Secured Parties or both or any
present or future holder of any of the Pledged Stock with respect thereto.
(b) VALIDITY, PERFECTION AND PRIORITY OF SECURITY
INTERESTS. Upon the delivery in New York of the Pledged Instruments and the
certificates representing the Pledged Stock to the Collateral Agent in
accordance with Section 3 hereof, the Collateral Agent will have valid and
perfected security interests in the Collateral subject to no prior Lien. If
the Collateral is held in New, York. then no registration, recordation or
filing with any governmental body, agency or official is required under New
York law in connection with the execution or delivery of this Pledge
Agreement or necessary for the validity or enforceability hereof or for the
perfection or enforcement of' the Security Interests (other than filing of
appropriate financing statements in New York pursuant to the UCC). Neither
the Pledgor nor the Subsidiary has performed or will perform any acts which
might prevent the Collateral Agent from enforcing any of the terms and
conditions of this Pledge Agreement or which would limit the Collateral Agent
in any such enforcement.
SECTION 3. THE SECURITY INTERESTS. In order to secure the
full and punctual payment of the Secured Obligations in accordance with the
terms thereof, and to secure the performance of all the obligations of the
Pledgor hereunder:
(a) The Pledgor hereby assigns, transfers and pledges to
the Collateral Agent for the benefit of itself and the other Secured Parties
and grants to the Collateral Agent for the benefit of itself and the other
Secured Parties a security interest in the Pledged Securities, and all of its
rights and privileges with respect thereto, all renewals thereof,
substitutions therefor and accretions thereto, all proceeds, income and
profits thereon, and all dividends (in cash or specie) and other payments and
distributions with respect thereto and all securities and certificates
therefor which shall be from time to time held by the Collateral Agent in
safe custody (all such securities, renewals thereof, accretions thereto,
proceeds thereof and income therefrom, collectively but excluding any
Collateral released or distributable from time to time pursuant to Sections
6, Section 14 or other terms or provisions of this Pledge Agreement, the
"COLLATERAL"), as general and continuing collateral security and as a pledge,
assignment and transfer, all the foregoing being subject to the Pledgor's
rights under Sections 6 and 7. Contemporaneously with the execution and
delivery hereof, the Pledgor is delivering the Pledged Instruments and the
certificates representing the Pledged Stock
(b) Subject to Section 6, in the event that (i) any Issuer
other than the Subsidiary at any time issues shares of capital stock of any
class to the Pledgor, (ii) any Issuer at
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<PAGE>
any time issues to the Pledgor any Collateral in addition to the Subsidiary
Shares, including without limitation shares of any class or series in its
capital issued in respect of any new equity investment or other consideration
of any kind from the Pledgor, or any additional or substitute certificates
and/or shares of capital stock of any class, including without limitation any
certificates and/or shares representing a stock dividend, a stock split or a
distribution in connection with any reclassification, increase, reduction or
return of capital or issued in connection with any recapitalization or any
reorganization, options or rights, whether as an addition to, in substitution
or exchange for the Subsidiary Shares, any of the Pledged Securities or other
Collateral, or otherwise, or (iii) any Issuer at any time issues any note or
substitute note, or owes any other Indebtedness to the Pledgor, the Pledgor
shall accept the same as agent for and hold the same in trust for the benefit
of the Secured Parties and deliver the same forthwith to the Collateral Agent
in the exact form received, with the endorsement in blank of the Pledgor
accompanied by stock powers executed by the Pledgor when necessary or
appropriate, in the opinion of and in form and substance satisfactory to, the
Collateral Agent, acting reasonably, to be held by the Collateral Agent as
additional security for the Secured Obligations, and such shall thereupon be
deemed included in the Collateral for all purposes of this Pledge Agreement
and made subject to the Security Interests, and the Pledgor will immediately
pledge to and deposit with the Collateral Agent certificates representing all
such shares and such note or an instrument evidencing such other Indebtedness
or such other Collateral as additional security for the Secured Obligations.
All such shares, notes and instruments constitute Pledged Securities and are
subject to all provisions of this Pledge Agreement.
(c) The Security Interests are granted as security only and
shall not subject the Collateral Agent or any Secured Party to, or transfer
or in any way affect or modify, any obligation or liability of the Pledgor or
the Issuers with respect to any of the Collateral or any transaction in
connection therewith.
(d) All Pledged Instruments delivered to the Collateral
Agent by the Pledgor pursuant hereto shall be endorsed in suitable form for
transfer by endorsement and delivery by the Collateral Agent, and accompanied
by any required transfer tax stamps, all in form and Substance satisfactory
to the Collateral Agent. All certificates representing Pledged Stock
delivered to the Collateral Agent by the Pledgor pursuant hereto shall be in
suitable form for transfer by delivery, or shall be accompanied by duly
executed instruments of transfer or assignment or contract notes, where
applicable, in blank, and accompanied by any required transfer tax stamps,
all in form and substance satisfactory to the Collateral Agent.
SECTION 4. FILING FURTHER ASSURANCES.
(a) The Pledgor agrees that it will, in such manner and
form as the Collateral Agent may require, execute, deliver, file and record
any financing statement, specific assignment or other paper and take any
other action that the Collateral Agent reasonably may determine to be
necessary or desirable in order to create, preserve, perfect or validate any
Security Interest or to enable the Collateral Agent to exercise and enforce
its rights hereunder with respect to any of the Collateral. Without limiting
the generality of the foregoing, whenever any person other than the
Subsidiary shall become a subsidiary of the Pledgor, such subsidiary shall
automatically become an Issuer and the Pledgor shall, if requested by the
Collateral Agent, promptly deliver to the Collateral Agent an opinion of
counsel to the Pledgor covering such matters relating to the
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<PAGE>
validity, perfection and priority of the Security Interests in the Pledged
Securities of such Issuer as the Collateral Agent shall reasonably request.
(b) The Pledgor agrees that it shall notify the Collateral
Agent in writing at least twenty (20) days prior to any change of name of the
Pledgor.
SECTION 5. FORM OF SHARES. The certificates representing
any of the Pledged Stock or other shares included in the Collateral at any
time shall be free of any restrictive or cautionary legends other than with
respect to the Securities Act of 1933 or blue sky laws.
SECTION 6. RIGHT TO RECEIVE DISTRIBUTIONS ON COLLATERAL.
(a) So long as no Event of Default shall at any applicable
time have occurred and be continuing, the Pledgor shall have the right to
receive all dividends (in cash or specie), interest, returns of capital and
other payments or distributions made upon or with respect to, and all options
and rights issued in connection with, the Collateral.
(b) The Collateral Agent shall, upon the occurrence and
during the continuance of an Event of Default, have the right to receive (for
deposit in the Collateral Account, if cash) and to retain as Collateral
hereunder all dividends (in cash or specie), interest and other payments and
distributions made upon or with respect to the Collateral and the Pledgor
shall take all such action as the Collateral Agent may deem necessary or
appropriate to give effect to such right. All such dividends, interest and
other payments and distributions which are received by the Pledgor, upon the
occurrence and during the continuance of an Event of Default, shall be
received in trust for the benefit of the Collateral Agent and the other
Secured Parties and, if the Collateral Agent so directs, upon the occurrence
and during the continuance of an Event of Default, shall be segregated from
other funds of the Pledgor and shall, forthwith upon demand by the Collateral
Agent during the continuance of an Event of Default, be paid over to the
Collateral Agent as Collateral in the same form as received (with any
necessary endorsement, and accompanied by any necessary stock powers executed
by the Pledgor). After all Events of Default have been cured, the Collateral
Agent's right to retain dividends, interest and other payments and
distributions under this Section 6 shall cease and the Collateral Agent shall
pay over to the Pledgor any such Collateral retained by the Collateral Agent
during the continuance of an Event of Default.
SECTION 7. RIGHT TO VOTE PLEDGED STOCK. Unless an Event of
Default shall have occurred and be continuing, the Pledgor shall have the
right, from time to time, to vote and to give consents, ratifications and
waivers with respect to the Pledged Stock.
If an Event of Default shall have occurred and be
continuing, then the Collateral Agent shall have the right to the extent
permitted or recognized by law, and the Pledgor shall take all such action as
may be necessary or appropriate to give effect to such right, to vote and to
give consents, ratifications and waivers, and take any other action with
respect to any or all of the Pledged Stock with the same force and effect as
if the Collateral Agent were the absolute and sole owner thereof.
SECTION 8. GENERAL AUTHORITY. The Pledgor hereby
irrevocably (to the extent permitted or recognized by law) appoints the
Collateral Agent its true and lawful attorney, with
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<PAGE>
full power of substitution, in the name of the Pledgor, the Collateral Agent
and the other Secured Parties or otherwise, for the sole use and benefit of
the Collateral Agent and the other Secured Parties to the extent permitted or
recognized by law, to exercise, at any time and from time to time while an
Event of Default has occurred and is continuing, all or any of the following
powers with respect to all or any of the Collateral:
(i) to demand, sue for, collect, receive and give
acquittance for any and all moneys due or to become due upon
or by virtue thereof,
(ii) to settle, compromise, compound, prosecute or
defend any action or proceeding with respect thereto,
(iii) to sell, transfer, assign or otherwise deal in
or with the same or the proceeds or avails thereof, as fully
and effectually as if the Collateral Agent were the absolute
owner thereof, and
(iv) to extend the time of payment of any or all
thereof and to make any allowance and other adjustments with
reference thereto;
PROVIDED that the Collateral Agent shall give the Pledgor not less than
fifteen days' prior written notice of the time and place of any sale or other
intended disposition of any of the Collateral except any Collateral which
threatens to decline speedily in value or is of a type customarily sold on a
recognized market.
SECTION 9. REMEDIES UPON EVENT OF DEFAULT.
(a) If any Event of Default shall have occurred and be
continuing, the Collateral Agent may exercise on behalf of the Secured
Parties all the rights of a secured party under the UCC and, in addition, the
Collateral Agent may, without obligation to resort to other security under
any other Security Documents or to recourse against any other guarantor
(including without limitation the Subsidiary), surety or other person liable,
and without being required to give any notice, except as herein provided or
as may be required by mandatory provisions of applicable law, (a) apply the
cash, if any, then held by it as Collateral as specified in Section 12, and
(b) if there shall be no such cash or if such cash shall be insufficient to
pay all the Secured Obligations in full, sell the Collateral or any parts
thereof at public or private sale or at any broker's board or on any
securities exchange, for cash, upon credit or for future delivery, and at
such price or prices as the Collateral Agent, acting reasonably, may deem
satisfactory. The Collateral Agent or any other Secured Party may be the
purchaser of any or all of the Collateral so sold at any public sale (or, if
the Collateral is of a type customarily sold in a recognized market or is of
a type which is the subject of widely distributed standard price quotations
at any private sale) and thereafter hold the same, absolutely, free from any
equity or right of redemption, or other right or claim of whatsoever kind.
(b) Notwithstanding anything to the contrary contained
herein or any other Loan Document, neither the Collateral Agent nor any
Secured Party shall, without first obtaining approval of a Governmental
Authority, take any action pursuant to this Pledge Agreement or any other
Loan Document which would constitute or result in an assignment of any
License held by the Pledgor or any of its Subsidiaries, or which would
constitute a transfer of control of any
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Subsidiary that holds a License (including without limitation, any voting of
the Pledged Stock), if such assignment or transfer would require, under the
existing applicable law, the prior approval of such Governmental Authority.
The Pledgor agrees to take, and the Pledgor agrees to cause each of its
Subsidiaries to take, in each case upon the occurrence and during the
continuance of an Event of Default, any action that the Collateral Agent may
reasonably request in order to obtain from any Governmental Authority such
approval as may be necessary to enable the Collateral Agent to transfer the
Pledged Securities pursuant to this Pledge Agreement, the Loan Documents and
each other agreement, instrument and document delivered to the Collateral
Agent in connection herewith and therewith, including specifically, at the
expense of the Pledgor, the use of the Pledgor's and each of its
Subsidiaries' commercially reasonable efforts to assist in obtaining approval
of such Governmental Authority for any action or transaction contemplated by
this Agreement for which such approval is or shall be required by law, and
specifically, without limitation, upon request, to prepare, sign and file
with such Governmental Authority, the assignor's or transferor's portion of
any application or applications for consent to the transfer of any Pledged
Securities necessary or appropriate under the rules and regulations of such
Governmental Authority for approval of any sale or sales of any of the
Collateral by or on behalf of the Collateral Agent or any assumption by the
Collateral Agent of voting rights relating thereto effected in accordance
with the terms of this Agreement.
SECTION 10. EXPENSES. The Pledgor agrees that it will
forthwith upon demand pay the following amounts:
(i) the amount of any taxes which the Collateral
Agent may have been required to pay by reason of the Security
Interests or to free any of the Collateral from any Lien
thereon, and
(ii) the amount of any and all out-of-pocket
expenses, including the reasonable fees and disbursements of
counsel and of any other experts employed to evaluate, protect
or realize the value of the Collateral, which the Collateral
Agent may incur in connection with (w) the administration or
enforcement of this Pledge Agreement, including such expenses
as are incurred to preserve the value of the Collateral and
the validity, perfection, rank and value of any Security
Interest, (x) the collection, sale or other disposition of any
of the Collateral, (y) the exercise by the Collateral Agent of
any of the rights conferred upon it hereunder or (z) any
Default or Event of Default.
Any such amount not paid on demand shall bear interest for
each day until paid at the Alternate Base Rate plus the Applicable Rate plus
two percent (2%) per annum for such day.
SECTION 11. LIMITATION ON DUTY OF COLLATERAL AGENT IN
RESPECT OF COLLATERAL. Beyond the exercise of reasonable care in the custody
thereof, the Collateral Agent shall not have any duty as to any Collateral in
its possession or control or in the possession or control of any agent or
bailee or any proceeds thereof or as to the preservation of rights against
prior parties or any other rights pertaining thereto. The Collateral Agent
shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is
accorded treatment substantially equal to that which it accords its own
property, and shall not be liable or responsible for any loss or damage to
any of the Collateral, or for any diminution in
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the value thereof, by reason of the act or omission of any agent or bailee
selected by the Collateral Agent, as the case may be, in good faith. Without
limitation of the foregoing, and except as specifically provided for in this
Pledge Agreement, or otherwise as might be required by applicable laws, the
Collateral Agent and the other Secured Parties shall have no duty to send any
notices, perform any services, vote, pay, exercise any options or make any
elections with respect to, or pay any taxes or charges associated with, or
otherwise take any other action of any kind with respect to the Collateral.
SECTION 12. APPLICATION OF PROCEEDS. Upon the occurrence
and during the continuance of an Event of Default, the proceeds of any sale
of, or other realization upon, all or any parts of the Collateral and any
cash held shall be applied by the Collateral Agent in payment of the Secured
Obligations, in accordance with the Credit Agreement.
SECTION 13. APPOINTMENT OF CO-COLLATERAL AGENTS. At any
time or times, in order to comply with any legal requirement in any
jurisdiction, the Collateral Agent may appoint another bank or trust company
or one or more other persons, either to act as co-collateral agent or
co-collateral agents, jointly with the Collateral Agent, or to act as
separate collateral agent or collateral agents on behalf of the Secured
Parties with such power and authority as may be necessary for the effectual
operation of the provisions hereof and may be specified in the instrument of
appointment.
SECTION 14. TERMINATION OF SECURITY INTERESTS; RELEASE OF
COLLATERAL.
(a) Upon the repayment in full of all Secured Obligations
and the termination of the Commitments under the Credit Agreement, the
Security Interests shall terminate and all rights to the Collateral shall
revert to the Pledgor.
(b) At any time and from time to time prior to such
termination of the Security Interests, the Collateral Agent may release all
or any part of the Collateral in accordance with the Credit Agreement,
whereupon the Security Interests in such released Collateral shall terminate
and the rights to such released Collateral shall revert to the Pledgor.
(c) Upon any such termination of the Security Interest or
release of Collateral, the Collateral Agent will, at the expense of the
Pledgor, execute and deliver to the Pledgor such documents as the Pledgor
shall reasonably request to evidence the termination of the Security
Interests or the release of such Collateral, as the case may be.
SECTION 15. NOTICES. All notices, requests and other
communications to any party hereunder shall be given in accordance with
Section 9.01 of the Credit Agreement.
SECTION 16. WAIVERS, NON-EXCLUSIVE REMEDIES. No failure on
the part of the Collateral Agent to exercise, and no delay in exercising and
no course of dealing with respect to, any right under this Pledge Agreement
shall operate as a waiver thereof, nor shall any single or partial exercise
by the Collateral Agent of any right under the Credit Agreement or this
Pledge Agreement preclude any other or further exercise thereof or the
exercise of any other right. The rights in this Pledge Agreement and the
Credit Agreement are cumulative and are not exclusive of any other remedies
provided by law.
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SECTION 17. SUCCESSORS AND ASSIGNS. This Pledge Agreement
is for the benefit of the Collateral Agent and the other Secured Parties and
their successors and assigns, and in the event of an assignment of all or any
of the Secured Obligations, the rights hereunder, to the extent applicable to
the indebtedness so assigned, may be transferred with such indebtedness. This
Pledge Agreement shall be binding on the Pledgor and its assigns and the
rights of the Pledgor hereunder shall inure to the benefit of the Pledgor's
permitted assigns.
SECTION 18. CHANGES IN WRITING. Neither this Pledge
Agreement nor any provision hereof may be changed, waived, discharged or
terminated orally, but only in writing signed by Pledgor and the Collateral
Agent with the consent of the Required Lenders (or in the case of Section 14,
all of the Lenders).
SECTION 19. ATTACHMENT. The Security Interests are intended
to attach and take effect forthwith upon the execution of this Pledge
Agreement and Pledgor acknowledges that value has been given and that the
Pledgor has rights in the Collateral. With respect to any Collateral which is
in addition to, or which is a renewal, replacement or substitution for any of
the Collateral (as constituted on the date hereto) the Security Interests
created hereby are intended to attach and take effect at the time of such
addition, renewal, replacement or substitution, and the Pledgor represents
and warrants that it shall have rights in such Collateral at the time of such
addition, renewal, replacement or substitution, as the case may be.
SECTION 20. GOVERNING LAW. THIS PLEDGE AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
SECTION 21. SEVERABILITY. If any provision hereof is
invalid or unenforceable in any jurisdiction, then, to the fullest extent
permitted by law, (i) the other provisions hereof shall remain in full force
and effect in such jurisdiction in order to carry out the intentions of the
parties hereto as nearly as may be possible; and (ii) the invalidity or
unenforceability of any provision hereof in any jurisdiction shall not affect
the validity or enforceability of such provision in any other jurisdiction.
SECTION 22. COUNTERPARTS. This Pledge Agreement may be
executed in any number of counterparts, all of which taken together shall
constitute one and the same instrument and any of the parties hereto may
execute this Pledge Agreement by signing any such counterpart.
(Signatures Follow on Next Page)
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IN WITNESS WHEREOF, the par-ties hereto have caused this Pledge
Agreement (Borrower) to be duly executed by their respective authorized
officers as of the day and year first above written.
JATO OPERATING CORP.
By:
---------------------------------
Name:
Title:
STATE STREET BANK AND TRUST
COMPANY, as Collateral Agent
By:
---------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
INTERCOMPANY NOTES
<PAGE>
Exhibit F
PLEDGE AGREEMENT
(PARENT)
This PLEDGE AGREEMENT (PARENT), dated as of July 14, 1999, is made
between JATO COMMUNICATIONS CORP., a Delaware corporation (with its
successors, the "PLEDGOR") and STATE STREET BANK AND TRUST COMPANY, as
collateral agent for and on behalf of and for the benefit of itself, the
Administrative Agent (as hereinafter defined) and the Lenders (as hereinafter
defined), including without limitation itself in its capacity at any time or
from time to time as a Lender (as hereinafter defined) (with its successors
in such capacity, the "COLLATERAL AGENT").
W I T N E S S E T H:
WHEREAS, the Pledgor owns all of the common stock of Jato Operating
Corp., a corporation organized under the laws of Delaware (with its
successors, the "SUBSIDIARY"); and
WHEREAS, the Subsidiary, the Pledgor, the Lenders, State Street
Bank and Trust Company, as Collateral Agent, and Lucent Technologies Inc., as
administrative agent (the "ADMINISTRATIVE AGENT"), are parties to a Credit
Agreement, dated as of July 14, 1999 (as the same may be amended,
supplemented, restated or replaced from time to time, the "CREDIT
AGREEMENT"), providing, subject to the terms and conditions thereof, for
making Loans by the Lenders to the Subsidiary; and
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. Terms defined in the Credit Agreement and
not otherwise defined herein have, as used herein, the respective meanings
provided for therein. The following additional terms as used herein, have
the following respective meanings:
"COLLATERAL" has the meaning assigned to such term in Section 3(a).
"COLLATERAL ACCOUNT" has the meaning set forth in the Security
Agreement.
"EVENT OF DEFAULT" or "EVENTS OF DEFAULT" has any meaning assigned
to such term(s) in the Credit Agreement.
"LENDERS" and "LIEN" have the meanings assigned to such terms in
the Credit Agreement.
<PAGE>
"PLEDGED INSTRUMENTS" means (i) the intercompany notes, if any,
listed on Exhibit A hereto and (ii) any instrument required to be pledged to
the Collateral Agent pursuant to Section 3(b).
"PLEDGED SECURITIES" means the Pledged Instruments and the Pledged
Stock.
"PLEDGED STOCK" means the Subsidiary Shares and any other capital
stock or securities required to be pledged to the Collateral Agent pursuant
to Section 3(b), and in respect of which such pledge or the Security
Interests or both has not been released pursuant to Section 14 or other terms
or provisions of this Pledge Agreement.
"REQUIRED LENDERS" has the meaning assigned to such term in the
Credit Agreement.
"SECURED OBLIGATIONS" means, collectively:
(i) all amounts payable by the Pledgor under any Loan Document;
and
(ii) the Pledgor's obligations under this Pledge Agreement.
"SECURED PARTIES" means, collectively (i) the Lenders, (ii) the
Administrative Agent and (iii) the Collateral Agent.
"SECURITY AGREEMENT" means the Security Agreement (Parent), dated
as of July 14, 1999, between the Pledgor and the Collateral Agent, as the
same may be modified, amended, supplemented, restated or replaced and
supplemented and in effect from time to time.
"SECURITY INTERESTS" means the security interests in the Collateral
granted hereunder securing the Secured Obligations.
"SUBSIDIARY SHARES" means the 1,100 shares in the capital stock of
the Subsidiary owned by the Pledgor, which shares as at the date hereof are
represented by certificates Nos. CS-1 and CS-2 issued by the Subsidiary and
registered in the name of the Pledgor.
"UCC" means the Uniform Commercial Code of the State of New York.
Unless otherwise defined herein, or unless the context otherwise
requires, all terms used herein which are defined in the UCC as in effect on
the date hereof shall have the meanings ascribed thereto in the UCC.
SECTION 2. REPRESENTATIONS AND WARRANTIES. The Pledgor represents
and warrants as follows:
(a) TITLE TO PLEDGED SECURITIES. The Pledgor owns all of the
Pledged Securities, free and clear of any Liens other than the Security
Interests. All of the Pledged Stock has been duly authorized and validly
issued, is fully paid and nonassessable (if applicable), and is subject to no
options to purchase or similar rights of any person, and constitutes all and
not less than all the Pledgor's securities of any class in the capital of the
Subsidiary. The Pledgor is
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not and agrees that it will not become a party to or otherwise bound by any
agreement, other than this Pledge Agreement or any of the Loan Documents,
which might affect or restrict in any manner the rights of the Collateral
Agent or the other Secured Parties or both or any present or future holder of
any of the Pledged Stock with respect thereto.
(b) VALIDITY, PERFECTION AND PRIORITY OF SECURITY INTERESTS. Upon
the delivery in New York or Massachusetts of the Pledged Instruments and the
certificates representing the Pledged Stock to the Collateral Agent in
accordance with Section 3 hereof, the Collateral Agent will have valid and
perfected security interests in the Collateral subject to no prior Lien. If
the Collateral is held in Massachusetts, then no registration, recordation or
filing with any governmental body, agency or official is required in
connection with the execution or delivery of this Pledge Agreement or
necessary for the validity or enforceability hereof or for the perfection or
enforcement of the Security Interests. Neither the Pledgor nor the
Subsidiary has performed or will perform any acts which might prevent the
Collateral Agent from enforcing any of the terms and conditions of this
Pledge Agreement or which would limit the Collateral Agent in any such
enforcement.
SECTION 3. THE SECURITY INTERESTS. In order to secure the full and
punctual payment of the Secured Obligations in accordance with the terms
thereof, and to secure the performance of all the obligations of the Pledgor
hereunder:
(a) The Pledgor hereby assigns, transfers and pledges to the
Collateral Agent for the benefit of itself and the other Secured Parties and
grants to the Collateral Agent for the benefit of itself and the other
Secured Parties a security interest in the Pledged Securities, and all of its
rights and privileges with respect thereto, all renewals thereof,
substitutions therefor and accretions thereto, all proceeds, income and
profits thereon, and all dividends (in cash or specie) and other payments and
distributions with respect thereto and all securities and certificates
therefor which shall be from time to time held by the Collateral Agent in
safe custody (all such securities, renewals thereof, accretions thereto,
proceeds thereof and income therefrom, collectively but excluding any
Collateral released or distributable from time to time pursuant to Section 6,
Section 14 or other terms or provisions of this Pledge Agreement, the
"COLLATERAL"), as general and continuing collateral security and as a pledge,
assignment and transfer, all the foregoing being subject to the Pledgor's
rights under Sections 6 and 7. Contemporaneously with the execution and
delivery hereof, the Pledgor is delivering the Pledged Instruments and the
certificates representing the Pledged Stock.
(b) Subject to Section 6, in the event that the Subsidiary (i) at
any time issues to the Pledgor any Collateral in addition to the Subsidiary
Shares, including without limitation shares of any class or series in its
capital issued in respect of any new equity investment or other consideration
of any kind from the Pledgor, or any additional or substitute certificates
and/or shares of capital stock of any class, including without limitation any
certificates and/or shares representing a stock dividend, a stock split or a
distribution in connection with any reclassification, increase, reduction or
return of capital or issued in connection with any recapitalization or any
reorganization, options or rights, whether as an addition to, in substitution
or exchange for the Subsidiary Shares, any of the Pledged Securities or other
Collateral, or otherwise, or (ii) at any time issues any note or substitute
note, or owes any other Indebtedness to the Pledgor, the Pledgor shall accept
the same as agent for and hold the same in trust for the
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benefit of the Secured Parties and deliver the same forthwith to the
Collateral Agent in the exact form received, with the endorsement in blank of
the Pledgor accompanied by stock powers executed by the Pledgor when
necessary or appropriate, in the opinion of and in form and substance
satisfactory to, the Collateral Agent, acting reasonably, to be held by the
Collateral Agent as additional security for the Secured Obligations, and such
shall thereupon be deemed included in the Collateral for all purposes of this
Pledge Agreement and made subject to the Security Interests, and the Pledgor
will immediately pledge to and deposit with the Collateral Agent certificates
representing all such shares and such note or an instrument evidencing such
other Indebtedness or such other Collateral as additional security for the
Secured Obligations. All such shares, notes and instruments constitute
Pledged Securities and are subject to all provisions of this Pledge Agreement.
(c) The Security Interests are granted as security only and shall
not subject the Collateral Agent or any Secured Party to, or transfer or in
any way affect or modify, any obligation or liability of the Pledgor or the
Subsidiary with respect to any of the Collateral or any transaction in
connection therewith.
(d) All Pledged Instruments delivered to the Collateral Agent by
the Pledgor pursuant hereto shall be endorsed in suitable form for transfer
by endorsement and delivery by the Collateral Agent, and accompanied by any
required transfer tax stamps, all in form and substance satisfactory to the
Collateral Agent. All certificates representing Pledged Stock delivered to
the Collateral Agent by the Pledgor pursuant hereto shall be in suitable form
for transfer by delivery, or shall be accompanied by duly executed
instruments of transfer or assignment or contract notes, where applicable, in
blank, and accompanied by any required transfer tax stamps, all in form and
substance satisfactory to the Collateral Agent.
SECTION 4. FILING FURTHER ASSURANCES. (a) The Pledgor agrees
that it will, in such manner and form as the Collateral Agent may require,
execute, deliver, file and record any financing statement, specific
assignment or other paper and take any other action that the Collateral Agent
reasonably may determine to be necessary or desirable in order to create,
preserve, perfect or validate any Security Interest or to enable the
Collateral Agent to exercise and enforce its rights hereunder with respect to
any of the Collateral.
(b) The Pledgor agrees that it shall notify the Collateral Agent
in writing at least twenty (20) days prior to any change of name of the
Pledgor.
SECTION 5. FORM OF SHARES. The certificates representing any of
the Pledged Stock or other shares included in the Collateral at any time
shall be free of any restrictive or cautionary legends other than with
respect to the Securities Act of 1933 or state blue sky laws.
SECTION 6. RIGHT TO RECEIVE DISTRIBUTIONS ON COLLATERAL. (a) So
long as no Event of Default shall at any applicable time have occurred and be
continuing, the Pledgor shall have the right to receive all dividends (in
cash or specie), interest, returns of capital and other payments or
distributions made upon or with respect to, and all options and rights issued
in connection with, the Collateral.
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(b) The Collateral Agent shall, upon the occurrence and during the
continuance of an Event of Default, have the right to receive (for deposit in
the Collateral Account, if cash) and to retain as Collateral hereunder all
dividends (in cash or specie), interest and other payments and distributions
made upon or with respect to the Collateral and the Pledgor shall take all
such action as the Collateral Agent may deem necessary or appropriate to give
effect to such right. All such dividends, interest and other payments and
distributions which are received by the Pledgor, upon the occurrence and
during the continuance of an Event of Default, shall be received in trust for
the benefit of the Collateral Agent and the other Secured Parties and, if the
Collateral Agent so directs, upon the occurrence and during the continuance
of an Event of Default, shall be segregated from other funds of the Pledgor
and shall, forthwith upon demand by the Collateral Agent during the
continuance of an Event of Default, be paid over to the Collateral Agent as
Collateral in the same form as received (with any necessary endorsement, and
accompanied by any necessary stock powers executed by the Pledgor). After
all Events of Default have been cured, the Collateral Agent's right to retain
dividends, interest and other payments and distributions under this Section 6
shall cease and the Collateral Agent shall pay over to the Pledgor any such
Collateral retained by the Collateral Agent during the continuance of an
Event of Default.
SECTION 7. RIGHT TO VOTE PLEDGED STOCK. Unless an Event of Default
shall have occurred and be continuing, the Pledgor shall have the right, from
time to time, to vote and to give consents, ratifications and waivers with
respect to the Pledged Stock.
If an Event of Default shall have occurred and be continuing, then
the Collateral Agent shall have the right to the extent permitted or
recognized by law, and the Pledgor shall take all such action as may be
necessary or appropriate to give effect to such right, to vote and to give
consents, ratifications and waivers, and take any other action with respect
to any or all of the Pledged Stock with the same force and effect as if the
Collateral Agent were the absolute and sole owner thereof.
SECTION 8. GENERAL AUTHORITY. The Pledgor hereby irrevocably (to
the extent permitted or recognized by law) appoints the Collateral Agent its
true and lawful attorney, with full power of substitution, in the name of the
Pledgor, the Collateral Agent and the other Secured Parties or otherwise, for
the sole use and benefit of the Collateral Agent and the other Secured
Parties to the extent permitted or recognized by law, to exercise, at any
time and from time to time while an Event of Default has occurred and is
continuing, all or any of the following powers with respect to all or any of
the Collateral:
(i) to demand, sue for, collect, receive and give acquittance
for any and all moneys due or to become due upon or by virtue thereof,
(ii) to settle, compromise, compound, prosecute or defend any
action or proceeding with respect thereto,
(iii) to sell, transfer, assign or otherwise deal in or with
the same or the proceeds or avails thereof, as fully and effectually
as if the Collateral Agent were the absolute owner thereof, and
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(iv) to extend the time of payment of any or all thereof and to
make any allowance and other adjustments with reference thereto;
PROVIDED that the Collateral Agent shall give the Pledgor not less than
fifteen days' prior written notice of the time and place of any sale or other
intended disposition of any of the Collateral except any Collateral which
threatens to decline speedily in value or is of a type customarily sold on a
recognized market.
SECTION 9. REMEDIES UPON EVENT OF DEFAULT.
(a) If any Event of Default shall have occurred and be continuing,
the Collateral Agent may exercise on behalf of the Secured Parties all the
rights of a secured party under the UCC and, in addition, the Collateral
Agent may, without obligation to resort to other security under any other
Security Documents or to recourse against any other guarantor (including
without limitation the Subsidiary or any other Guarantor Subsidiary), surety
or other person liable, and without being required to give any notice, except
as herein provided or as may be required by mandatory provisions of
applicable law, (a) apply the cash, if any, then held by it as Collateral as
specified in Section 12, and (b) if there shall be no such cash or if such
cash shall be insufficient to pay all the Secured Obligations in full, sell
the Collateral or any parts thereof at public or private sale or at any
broker's board or on any securities exchange, for cash, upon credit or for
future delivery, and at such price or prices as the Collateral Agent, acting
reasonably, may deem satisfactory. The Collateral Agent or any other Secured
Party may be the purchaser of any or all of the Collateral so sold at any
public sale (or, if the Collateral is of a type customarily sold in a
recognized market or is of a type which is the subject of widely distributed
standard price quotations at any private sale) and thereafter hold the same,
absolutely, free from any equity or right of redemption, or other right or
claim of whatsoever kind.
(b) Notwithstanding anything to the contrary contained herein or
any other Loan Document, neither the Collateral Agent nor any Secured Party
shall, without first obtaining approval of a Governmental Authority, take any
action pursuant to this Pledge Agreement or any other Loan Document which
would constitute or result in an assignment of any License held by the
Pledgor, the Subsidiary or any of its subsidiaries, or which would constitute
a transfer of control of the Subsidiary or any of its subsidiaries that hold
a License (including without limitation, any voting of the Pledged Stock), if
such assignment or transfer would require, under the existing applicable law,
the prior approval of such Governmental Authority. The Pledgor agrees to
take, and the Pledgor agrees to cause the Subsidiary and each of its
subsidiaries to take, in each case upon the occurrence and during the
continuance of an Event of Default, any action that the Collateral Agent may
reasonably request in order to obtain from any Governmental Authority such
approval as may be necessary to enable the Collateral Agent to transfer the
Pledged Securities pursuant to this Pledge Agreement, the Loan Documents and
each other agreement, instrument and document delivered to the Collateral
Agent in connection herewith and therewith, including specifically, at the
expense of the Pledgor, the use of the Pledgor's and the Subsidiary's and
each of its subsidiaries' commercially reasonable efforts to assist in
obtaining approval of such Governmental Authority for any action or
transaction contemplated by this Agreement for which such approval is or
shall be required by law, and specifically, without limitation, upon request,
to prepare, sign and file with such Governmental Authority, the assignor's or
transferor's portion of any application or applications for consent to the
transfer of
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any Pledged Securities necessary or appropriate under the rules and
regulations of such Governmental Authority for approval of any sale or sales
of any of the Collateral by or on behalf of the Collateral Agent or any
assumption by the Collateral Agent of voting rights relating thereto effected
in accordance with the terms of this Agreement.
SECTION 10. EXPENSES. The Pledgor agrees that it will forthwith
upon demand pay the following amounts:
(i) the amount of any taxes which the Collateral Agent may have
been required to pay by reason of the Security Interests or to free
any of the Collateral from any Lien thereon, and
(ii) the amount of any and all out-of-pocket expenses, including
the reasonable fees and disbursements of counsel and of any other
experts employed to evaluate, protect or realize the value of the
Collateral, which the Collateral Agent may incur in connection with
(w) the administration or enforcement of this Pledge Agreement,
including such expenses as are incurred to preserve the value of the
Collateral and the validity, perfection, rank and value of any
Security Interest, (x) the collection, sale or other disposition of
any of the Collateral, (y) the exercise by the Collateral Agent of any
of the rights conferred upon it hereunder or (z) any Default or Event
of Default.
Any such amount not paid on demand shall bear interest for each day
until paid at the Alternate Base Rate plus the Applicable Rate plus two
percent (2%) per annum for such day.
SECTION 11. LIMITATION ON DUTY OF COLLATERAL AGENT IN RESPECT OF
COLLATERAL. Beyond the exercise of reasonable care in the custody thereof,
the Collateral Agent shall not have any duty as to any Collateral in its
possession or control or in the possession or control of any agent or bailee
or any proceeds thereof or as to the preservation of rights against prior
parties or any other rights pertaining thereto. The Collateral Agent shall
be deemed to have exercised reasonable care in the custody and preservation
of the Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which it accords its own property, and shall not
be liable or responsible for any loss or damage to any of the Collateral, or
for any diminution in the value thereof, by reason of the act or omission of
any agent or bailee selected by the Collateral Agent, as the case may be, in
good faith. Without limitation of the foregoing, and except as specifically
provided for in this Pledge Agreement, or otherwise as might be required by
applicable laws, the Collateral Agent and the other Secured Parties shall
have no duty to send any notices, perform any services, vote, pay, exercise
any options or make any elections with respect to, or pay any taxes or
charges associated with, or otherwise take any other action of any kind with
respect to the Collateral.
SECTION 12. APPLICATION OF PROCEEDS. Upon the occurrence and
during the continuance of an Event of Default, the proceeds of any sale of,
or other realization upon, all or any parts of the Collateral and any cash
held shall be applied by the Collateral Agent in payment of the Secured
Obligations, in accordance with the Credit Agreement.
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SECTION 13. APPOINTMENT OF CO-COLLATERAL AGENTS. At any time or
times, in order to comply with any legal requirement in any jurisdiction, the
Collateral Agent may appoint another bank or trust company or one or more
other persons, either to act as co-collateral agent or co-collateral agents,
jointly with the Collateral Agent, or to act as separate collateral agent or
collateral agents on behalf of the Secured Parties with such power and
authority as may be necessary for the effectual operation of the provisions
hereof and may be specified in the instrument of appointment.
SECTION 14. TERMINATION OF SECURITY INTERESTS; RELEASE OF
COLLATERAL.
(a) Upon the repayment in full of all Secured Obligations and the
termination of the Commitments under the Credit Agreement, the Security
Interests shall terminate and all rights to the Collateral shall revert to
the Pledgor.
(b) At any time and from time to time prior to such termination of
the Security Interests, the Collateral Agent may release all or any part of
the Collateral in accordance with the Credit Agreement, whereupon the
Security Interests in such released Collateral shall terminate and the rights
to such released Collateral shall revert to the Pledgor.
(c) Upon any such termination of the Security Interest or release
of Collateral, the Collateral Agent will, at the expense of the Pledgor,
execute and deliver to the Pledgor such documents as the Pledgor shall
reasonably request to evidence the termination of the Security Interests or
the release of such Collateral, as the case may be.
SECTION 15. NOTICES. All notices, requests and other
communications to any party hereunder shall be given in accordance with
Section 9.01 of the Credit Agreement.
SECTION 16. WAIVERS, NON-EXCLUSIVE REMEDIES. No failure on the
part of the Collateral Agent to exercise, and no delay in exercising and no
course of dealing with respect to, any right under this Pledge Agreement
shall operate as a waiver thereof, nor shall any single or partial exercise
by the Collateral Agent of any right under the Credit Agreement or this
Pledge Agreement preclude any other or further exercise thereof or the
exercise of any other right. The rights in this Pledge Agreement and the
Credit Agreement are cumulative and are not exclusive of any other remedies
provided by law.
SECTION 17. SUCCESSORS AND ASSIGNS. This Pledge Agreement is for
the benefit of the Collateral Agent and the other Secured Parties and their
successors and assigns, and in the event of an assignment of all or any of
the Secured Obligations, the rights hereunder, to the extent applicable to
the indebtedness so assigned, may be transferred with such indebtedness.
This Pledge Agreement shall be binding on the Pledgor and its assigns and the
rights of the Pledgor hereunder shall inure to the benefit of the Pledgor's
permitted assigns.
SECTION 18. CHANGES IN WRITING. Neither this Pledge Agreement nor
any provision hereof may be changed, waived, discharged or terminated orally,
but only in writing signed by Pledgor and the Collateral Agent with the
consent of the Required Lenders (or in the case of Section 14, all of the
Lenders).
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SECTION 19. ATTACHMENT. The Security Interests are intended to
attach and take effect forthwith upon the execution of this Pledge Agreement
and Pledgor acknowledges that value has been given and that the Pledgor has
rights in the Collateral. With respect to any Collateral which is in
addition to, or which is a renewal, replacement or substitution for any of
the Collateral (as constituted on the date hereto) the Security Interests
created hereby are intended to attach and take effect at the time of such
addition, renewal, replacement or substitution, and the Pledgor represents
and warrants that it shall have rights in such Collateral at the time of such
addition, renewal, replacement or substitution, as the case may be.
SECTION 20. GOVERNING LAW. THIS PLEDGE AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
SECTION 21. SEVERABILITY. If any provision hereof is invalid or
unenforceable in any jurisdiction, then, to the fullest extent permitted by
law, (i) the other provisions hereof shall remain in full force and effect in
such jurisdiction in order to carry out the intentions of the parties hereto
as nearly as may be possible; and (ii) the invalidity or unenforceability of
any provision hereof in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction.
SECTION 22. COUNTERPARTS. This Pledge Agreement may be executed
in any number of counterparts, all of which taken together shall constitute
one and the same instrument and any of the parties hereto may execute this
Pledge Agreement by signing any such counterpart.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement (Parent) to be duly executed by their respective authorized
officers as of the day and year first above written.
JATO COMMUNICATIONS CORP.
By:
---------------------------------
Name:
Title:
STATE STREET BANK AND TRUST COMPANY, as
Collateral Agent
By:
---------------------------------
Title:
<PAGE>
EXHIBIT A
INTERCOMPANY NOTES
None
<PAGE>
EXHIBIT G
[On Southwestern Bell Telephone Company letterhead]
STATE STREET BANK AND TRUST COMPANY,
as Collateral Agent (the "Collateral Agent"),
LUCENT TECHNOLOGIES INC.,
as Administrative Agent (the "Administrative Agent"), and
The Lenders (the "Lenders")
Under that certain Credit Agreement
Among the Collateral Agent, the Administrative Agent,
The Lenders, Jato Communications Corp. and Jato Operating Corp.:
SOUTHWESTERN BELL TELEPHONE COMPANY ("SWBT") is the
owner and landlord of certain real property and the
improvements thereon (the "Premises"), including
SWBT's Central Offices, within its seven-state
region. Pursuant to that certain Interconnection
Agreement between SWBT and JATO Communications Corp.
(together with its subsidiary, JATO Operating Corp.,
and its other subsidiaries, "JATO") made as of
_______________ ("Interconnection Agreement"),
related SWBT tariffs and applicable law, JATO has the
right to place certain of its own personal property
or equipment (collectively, "Equipment") on some or
all of the Premises from time to time. Equipment thus
placed by JATO on the Premises from time to time is
deemed, as between SWBT and JATO, to be the personal
property of JATO even though it may be placed on or
affixed to the Premises.
SWBT represents and warrants that it does not now
assert, claim or possess, and SWBT agrees that it
shall not hereafter assert, claim or possess, any
right, title or interest in, to and under any
Equipment placed or to be placed by JATO on the
Premises under the Interconnection Agreement and
related SWBT tariffs. SWBT will not oppose, subject
to the procedures set forth herein, any reasonable
attempt by the Collateral Agent or any Lender, or any
successor in interest or assignee or agent of any
such person (the "Secured Parties"), to exercise any
legal right any Secured Party may have with respect
to the Equipment, including, without limitation, to
take possession and dispose of the Equipment. In the
event that a Secured Party has cause to exercise any
of its legal rights in the Equipment and intends to
reclaim possession of all or part of the Equipment,
then upon 30 business days prior written
<PAGE>
notice to SWBT, or other mutually agreed period in
unusual circumstances, SWBT will remove, at JATO's
expense, any specified Equipment from its Central
Offices or other Premises and will make such
Equipment available to a Secured Party from a safe
and secure storage location where possession of the
Equipment may be transferred from SWBT to the
Secured Party.
Without limiting the foregoing, any right or interest
in the Equipment which SWBT now has or may hereafter
acquire because of the location or installation of
the Equipment on the Premises or otherwise
(including, without limitation, any claim by SWBT or
any party holding a lien on, or security interest in,
the Premises that claims a lien on, or security
interest in, the Equipment as a fixture attached to
the Premises) is hereby made subject, subordinate and
inferior to the right, title and interest of Secured
Parties in and to the Equipment, whether such right,
title and interest is now existing or hereafter
created. This letter shall not prohibit SWBT from
bringing any legal actions against JATO for
non-payment of charges otherwise due; provided that
no legal action shall be taken that results in the
creation of any lien on, or security interest in, or
would otherwise interfere with the rights of JATO or
any Secured Party in, any Equipment now or hereafter
placed by JATO on the Premises under the
Interconnection Agreement and related SWBT tariffs.
This letter is furnished by SWBT solely at JATO's
request and to facilitate the efforts of JATO to
finance the purchase of equipment that JATO proposes
to place on the Premises pursuant to JATO's rights
under the Interconnection Agreement, related SWBT
tariffs and applicable law, and this letter is not
intended to alter, and shall not have the effect of
altering, the rights and obligations of either JATO
or SWBT under their existing contractual and other
arrangements.
Sincerely,
----------------------------------------------------
By SOUTHWESTERN BELL, TELEPHONE COMPANY On Behalf of
Itself, its Successors and Assigns [name, title and
date]
<PAGE>
EXHIBIT H
[FORM OF SECURITY AGREEMENT (PARENT)]
SECURITY AGREEMENT (PARENT)
This SECURITY AGREEMENT (PARENT), dated as of July 14, 1999, is made
between JATO COMMUNICATIONS CORP., a Delaware corporation (with its
successors, the "Company"), and STATE STREET BANK AND TRUST COMPANY, as
Collateral Agent for the Administrative Agent and the Lenders (each term as
defined below) (with its successors in such capacity, the "Collateral Agent").
W I T N E S S E T H:
WHEREAS, the Company, Jato Operating Corp. (the "Borrower"), certain
lenders (the "Lenders"), the Collateral Agent, and Lucent Technologies Inc.,
as administrative agent (the "Administrative Agent"), are parties to a Credit
Agreement, dated as of July 14, 1999 (as the same may be amended, restated or
supplemented and in effect from time to time, the "Credit Agreement"),
providing, subject to the terms and conditions thereof, for extensions of
credit to be made by the Lenders to the Borrower;
WHEREAS, in order to induce the Lenders and the Administrative Agent
to enter into the Credit Agreement, the Company has agreed to grant a
continuing security interest in and to the Collateral (as defined below) to
secure the Borrower's and its obligations under the Loan Documents (as
defined below), including, without limitation, the Borrower's and its
obligations under the Credit Agreement; and
WHEREAS, the Lenders have appointed the Collateral Agent to act as
their collateral agent in connection with the foregoing transactions;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. Terms defined in the Credit Agreement and
not otherwise defined herein have, as used herein, the respective meanings
provided for therein. The following additional terms, as used herein, have
the following respective meanings:
"ACCOUNTS" means all "ACCOUNTS" (as defined in the UCC) now owned or
hereafter acquired by the Company and shall also mean and include all
accounts receivable, contract rights, book debts, notes, drafts and other
obligations or indebtedness owing to the Company arising from the sale, lease
or exchange of goods or other property by it or the performance of services
by it or both (including, without limitation, any such obligation which might
be characterized as an account, contract right or general intangible under
the Uniform Commercial
<PAGE>
Code in effect in any jurisdiction) and all of the Company's rights in, to
and under all purchase orders for goods, services or other property, and all
of the Company's rights to any goods, services or other property represented
by any of the foregoing (including returned or repossessed goods and unpaid
sellers' rights of rescission, replevin, reclamation and rights to stoppage
in transit) and all monies due to or to become due to the Company under all
contracts for the sale, lease or exchange of goods or other property or the
performance of services by it or both (whether or not yet earned by
performance on the part of the Company), in each case whether now in
existence or hereafter arising or acquired including, without limitation, the
right to receive the proceeds of said purchase orders and contracts and all
collateral security and guarantees of any kind given by any Person with
respect to any of the foregoing.
"BORROWER-RELATED COLLATERAL" means all Accounts, General Intangibles
and Instruments representing obligations of the Borrower to the Company or
other rights of the Company in respect of the Borrower, all books and records
of the Company pertaining to any such Accounts, General Intangibles and
Instruments and all Proceeds of or substitutions for any such Accounts,
General Intangibles and Instruments.
"COLLATERAL" has the meaning set forth in Section 3(a).
"COLLATERAL ACCOUNT" has the meaning set forth in Section 5(a).
"COPYRIGHT LICENSE" means any agreement now or hereafter in existence
granting to the Company, or pursuant to which the Company has granted to any
other Person, any right to use, copy, reproduce, distribute, prepare
derivative works, display or publish any records or other materials on which
a Copyright is in existence or may come into existence.
"COPYRIGHT SECURITY AGREEMENT" means a Copyright Security Agreement
executed and delivered by the Company in favor of the Collateral Agent, for
the benefit of the Secured Parties, substantially in the form of Exhibit D
hereto, as the same may be amended from time to time.
"COPYRIGHTS" means all the following: (i) all copyrights under the
laws of the United States or any other country (whether or not the underlying
works of authorship have been published), all registrations and recordings
thereof, all intellectual property rights to works of authorship (whether or
not published), and all applications for copyrights under the laws of the
United States or any other country, including, without limitation,
registrations, recordings and applications in the United States Copyright
Office or in any similar office or agency of the United States, any State
thereof or any other country or any political subdivision thereof, (ii) all
reissues, renewals and extensions thereof, (iii) all claims for, and rights
to sue for, past or future infringements of any of the foregoing, and (iv)
all income, royalties, damages and payments now or hereafter due or payable
with respect to any of the foregoing, including, without limitation, damages
and payments for past or future infringements thereof.
"DEPOSIT ACCOUNTS" shall mean all deposit accounts (as defined in the
UCC) of the Company including, without limitation, any demand, time, savings,
passbook or like account maintained by the Company with any bank, savings and
loan association, credit union or like organization, and all money, cash and
cash equivalents of the Company, whether or not
2
<PAGE>
deposited in any such deposit account, and all certificates and instruments,
if any, from time to time representing, evidencing or deposited into such
accounts.
"DOCUMENTS" means all "DOCUMENTS" (as defined in the UCC) or other
receipts covering, evidencing or representing goods, now owned or hereafter
acquired, by the Company.
"EQUIPMENT" means all "EQUIPMENT" (as defined in the UCC) now owned or
hereafter acquired by the Company, including, without limitation, all motor
vehicles, trucks, and trailers other than equipment acquired in connection
with Indebtedness of the type permitted under Section 6.01(viii) of the
Credit Agreement.
"EXCLUDED CONTRACTS" shall mean one or more contracts which by their
terms would be breached by the grant of the security interests created
therein pursuant to the terms of this Agreement or with respect to which the
granting of a security interest is prohibited under applicable law (it being
understood and agreed, however, that notwithstanding the foregoing, all
rights to payment for money due or to become due pursuant to any Excluded
Contract shall be subject to the security interests created pursuant to this
Agreement).
"GENERAL INTANGIBLES" means all "GENERAL INTANGIBLES" (as defined in
the UCC) now owned or hereafter acquired by the Company, including, without
limitation, (i) all obligations or indebtedness owing to the Company (other
than Accounts) from whatever source arising, (ii) all Copyright Licenses,
Copyrights, Patent Licenses, Patents, Trademark Licenses, Trademarks, rights
in intellectual property, goodwill, trade names, service marks, trade
secrets, permits and licenses, (iii) all rights or claims in respect of
refunds for taxes paid and (iv) all rights in respect of any pension plan or
similar arrangement maintained for employees of any member of the Loan
Parties other than general intangibles acquired in connection with
Indebtedness of the type permitted under Section 6.01(viii) of the Credit
Agreement.
"INSTRUMENTS" means all "INSTRUMENTS", "CHATTEL PAPER" or "LETTERS OF
CREDIT" (each as defined in the UCC) evidencing, representing, arising from
or existing in respect of, relating to, securing or otherwise supporting the
payment of, any of the Accounts, including (but not limited to) promissory
notes, drafts, bills of exchange and trade acceptances, now owned or
hereafter acquired by the Company, but Instruments shall exclude Instruments
representing Indebtedness owing to the Company by any of its subsidiaries
other than the Borrower or to the extent pledged pursuant to the Pledge
Agreement (Parent).
"INVENTORY" means all "INVENTORY" (as defined in the UCC), now owned
or hereafter acquired by the Company, wherever located, and shall also mean
and include, without limitation, all raw materials and other materials and
supplies, work-in-process and finished goods and any products made or
processed therefrom and all substances, if any, commingled therewith or added
thereto other than inventory acquired in connection with Indebtedness of the
type permitted under Section 6.01(viii) of the Credit Agreement.
"INVESTMENT PROPERTY" shall mean and include all of the Company's
investment property (as defined in the UCC) and all of the Company's other
securities (whether certificated or uncertificated), security entitlements,
financial assets, securities accounts, commodity contracts, and commodity
accounts (as each such term is defined in the UCC), including all
substitutions
3
<PAGE>
and additions thereto, all dividends, distributions and sums distributable or
payable from, upon, or in respect of such property, and all rights and
privileges incident to such property, but Investment Property shall exclude
the Company's interest in its subsidiaries other than the Borrower or to the
extent pledged pursuant to the Pledge Agreement (Parent).
"LIQUID INVESTMENTS" means an investment meeting the criteria set
forth in Section 5(e).
"LICENSES" means any license, approval or other authorization issued
by the Federal Communications Commission or any state public utility
commission or any other Governmental Authority having jurisdiction over the
telecommunications business.
"LOCKBOX ACCOUNT" means a "Lockbox Account" established under a
Lockbox Agreement.
"LOCKBOX AGREEMENT" means a Lockbox Agreement among the Company, the
Collateral Agent and a Lockbox Bank substantially in the form of Exhibit F
hereto or otherwise in form and substance reasonably satisfactory to the
Collateral Agent.
"LOCKBOX BANK" means a "money center" commercial bank selected by the
Company and satisfactory to the Collateral Agent, and each such other bank as
may from time to time enter into a Lockbox Agreement.
"PARTIAL TERMINATION DATE" means the date on or prior to which (i) the
Company shall have assigned or transferred to the Borrower all of the
Company's right, title and interest in the Licenses described on Schedule
3.05 to the Credit Agreement, in all interconnection agreements approved
pursuant to or related to such Licenses, all Accounts created through the
conduct by the Company of its business pursuant to such Licenses and all of
the Company's other assets, properties and rights related to the past or
future conduct of the business contemplated to be conducted by the licensee
pursuant to such Licenses and (ii) the chief executive officer of the Company
shall have delivered a certificate to the Collateral Agent to the effect that
all necessary approvals of Governmental Authorities of such assignments and
transfers have been obtained and all such assignments and transfers have been
effected.
"PATENT LICENSE" means any agreement now or hereafter in existence
granting to the Company, or pursuant to which the Company has granted to any
other Person, any right with respect to any Patent or any invention now or
hereafter in existence, whether patentable or not, whether a patent or
application for patent is in existence on such invention or not, and whether
a patent or application for patent on such invention may come into existence,
including, without limitation, the agreements identified in Schedule I to
Exhibit B hereto.
"PATENTS" means all the following: (i) all letters patent and design
letters patent of the United States or any other country and all applications
for letters patent and design letters patent of the United States or any
other country, including, without limitation, applications in the United
States Patent and Trademark Office or in any similar office or agency of the
United States, any State thereof or any other country or any political
subdivision thereof, including, without limitation, those described in
Schedule I to Exhibit B hereto, (ii) all reissues, divisions, continuations,
continuations-in-part, renewals and extensions thereof, (iii) all claims for,
and rights to sue for, past or future infringements of any of the foregoing
and (iv) all income,
4
<PAGE>
royalties, damages and payments now or hereafter due or payable with respect
to any of the foregoing, including, without limitation, damages and payments
for past or future infringements thereof.
"PATENT SECURITY AGREEMENT" means a Patent Security Agreement executed
and delivered by the Company in favor of the Collateral Agent, for the
benefit of the Secured Parties, substantially in the form of Exhibit B
hereto, as the same may be amended from time to time.
"PERFECTION CERTIFICATE" means a certificate substantially in the form
of Exhibit A hereto, completed and supplemented with the schedules and
attachments contemplated thereby to the satisfaction of the Collateral Agent,
and duly executed by any authorized officer of the Company.
"PERMITTED LIENS" means the Security Interests and the other Liens on
the Collateral of the type permitted to be created, assumed or exist pursuant
to Section 6.02 of the Credit Agreement.
"PROCEEDS" means all proceeds of, and all other profits, products,
rentals or receipts, in whatever form, arising from the collection, sale,
lease, exchange, assignment, licensing or other disposition of, or other
realization upon, collateral, including, without limitation, all claims of
the Company against third parties for loss of, damage to or destruction of,
or for proceeds payable under, or unearned premiums with respect to, policies
of insurance in respect of, any collateral, and any condemnation or
requisition payments with respect to any collateral, in each case whether now
existing or hereafter arising.
"SECURED OBLIGATIONS" means the obligations secured under this
Agreement, including (a) all principal of and interest (including, without
limitation, any interest which accrues after the commencement of any case,
proceeding or other action relating to the bankruptcy, insolvency or
reorganization of the Company, whether or not allowed or allowable as a claim
in any such case, proceeding or other action) on any Loan to the Borrower
under the Credit Agreement; (b) all other amounts payable by the Company or
the Borrower hereunder or under any other Loan Document; and (c) any renewals
or extensions of any of the foregoing.
"SECURED PARTIES" means (i) the Lenders, (ii) the Administrative Agent
and (iii) the Collateral Agent.
"SECURITY INTERESTS" means the security interests granted pursuant to
Section 3, as well as all other security interests created or assigned as
additional security for the Secured Obligations pursuant to the provisions of
this Agreement.
"TRADEMARK LICENSE" means any agreement now or hereafter in existence
granting to the Company, or pursuant to which the Company has granted to any
other Person, any right to use any Trademark, including, without limitation,
the agreements identified on Schedule I to Exhibit C hereto.
"TRADEMARKS" means all of the following: (i) all trademarks, trade
names, corporate names, company names, business names, fictitious business
names, trade styles, service marks, logos, brand names, trade dress, prints
and labels on which any of the foregoing have appeared
5
<PAGE>
or appear, package and other designs, and any other source or business
identifiers, and general intangibles of like nature, and the rights in any of
the foregoing which arise under applicable law, (ii) the goodwill of the
business symbolized thereby or associated with each of them, (iii) all
registrations and applications in connection therewith, including, without
limitation, registrations and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country or any political subdivision thereof, (iv)
all reissues, extensions and renewals thereof, (v) all claims for, and rights
to sue for, past or future infringements of any of the foregoing and (vi) all
income, royalties, damages and payments now or hereafter due or payable with
respect to any of the foregoing, including, without limitation, damages and
payments for past or future infringements thereof.'
"TRADEMARK SECURITY AGREEMENT" means a Trademark Security Agreement
executed and delivered by the Company in favor of the Collateral Agent, for
the benefit of the Secured Parties, substantially in the form of Exhibit C
hereto, as the same may be amended from time to time.
"UCC" means the Uniform Commercial Code as in effect on the date
hereof in the State of New York; PROVIDED that if by reason of mandatory
provisions of law, the perfection or the effect of perfection or
non-perfection of the Security Interest in any Collateral is governed by the
Uniform Commercial Code as in effect in a jurisdiction other than New York,
"UCC" means the Uniform Commercial Code as in effect in such other
jurisdiction for purposes of the provisions hereof relating to such
perfection or effect of perfection or non-perfection.
SECTION 2. REPRESENTATIONS AND WARRANTIES. The Company represents
and warrants as follows:
(a) The Company has good and marketable title to all of the
Collateral, free and clear of any Liens other than the Permitted Liens. All
actions have been taken that are necessary under the UCC to perfect its
interest in any Accounts in which it has an interest, as against its
assignors and creditors of its assignors.
(b) The Company has not performed any acts which might
prevent the Collateral Agent from enforcing any of the terms of this
Agreement or which would limit the Collateral Agent in any such enforcement.
Other than financing statements or other similar or equivalent documents or
instruments with respect to the Security Interests and Permitted Liens, no
financing statement, mortgage, security agreement or similar or equivalent
document or instrument covering all or any part of the Collateral is on file
or of record in any jurisdiction in which such filing or recording would be
effective to perfect a Lien on such Collateral. No Collateral is in the
possession of any Person (other than the Company) asserting any claim thereto
or security interest therein, except that the Collateral Agent or its
designee may have possession of Collateral as contemplated hereby.
(c) Not later than the date of the first borrowing under the
Credit Agreement, the Company shall deliver the Perfection Certificate to the
Collateral Agent. The information set forth therein shall be correct and
complete. Not later than 60 days following the date of the first Borrowing,
the Company shall furnish to the Collateral Agent file search reports from
each filing office set forth in Schedule 7 to the Perfection Certificate or
other evidence satisfactory to the
6
<PAGE>
Collateral Agent, acting on behalf of the Required Lenders confirming the
filing information set forth in such Schedule.
(d) The Security Interests constitute valid security
interests under the UCC securing the Secured Obligations to the extent that a
security interest may be created in the Collateral under the UCC. When the
Patent Security Agreement and the Trademark Security Agreement have been
filed with the United States Patent and Trademark Office, the Security
Interests shall constitute perfected security interests in all right, title
and interest of the Company in Patents or Trademarks, prior to all other
Liens and rights of others therein except for Permitted Liens, to the extent
that a perfected security interest may be created in such Collateral under
the U.S. Patent Act or the Lanham Act. When the Copyright Security Agreement
has been filed with the United States Copyright Office, the Security
Interests shall constitute perfected security interests in all right, title
and interest of the Company in Copyrights, prior to all other Liens and
rights of others therein except for the Permitted Liens to the extent a
perfected security interest may be created in such Collateral under the U.S.
Copyright Act..
(e) Other than those listed on Schedule I to the Copyright
Security Agreement, Schedule I to the Trademark Security Agreement, and
Schedule I to the Patent Security Agreement delivered on the date hereof (as
the same may be modified from time to time), the Company has no Copyright
Licenses, Copyrights, Patent Licenses, Patents, Trademark Licenses or
Trademarks.
SECTION 3. THE SECURITY INTERESTS. (a) In order to secure the
full and punctual payment of the Secured Obligations in accordance with the
terms thereof, and to secure the performance of all of the obligations of the
Company hereunder and under the other Loan Documents, the Company hereby
pledges, hypothecates, assigns by way of security, transfers and grants to
the Collateral Agent for the ratable benefit of the Secured Parties a
continuing security interest in and to all right, title and interest of the
Company in and to the following property, whether now owned or existing or
hereafter acquired or arising and regardless of where located (all being
collectively referred to as the "Collateral"):
(i) Accounts;
(ii) Inventory;
(iii) General Intangibles;
(iv) Documents;
(v) Instruments;
(vi) Equipment;
(vii) Investment Property;
(viii) Deposit Accounts;
7
<PAGE>
(ix) The Collateral Account, all cash deposited
therein from time to time, the Liquid Investments made pursuant to Section
5(e) and other monies and property of any kind of the Company in the
possession or under the control of the Collateral Agent;
(x) All books and records (including, without
limitation, customer lists, marketing information, credit files, price lists,
operating records, vendor and supplier price lists, sales literature,
computer programs, printouts and other computer materials and records) of the
Company pertaining to any of the Collateral;
(xi) All Proceeds of, attachments or accessions to, or
substitutions for, all or any of the Collateral described in clauses (i)
through (x) hereof;
PROVIDED, HOWEVER, the Collateral shall not include any Excluded Contracts.
(b) The Security Interests are granted as security only and
shall not subject the Collateral Agent or any other Secured Party to, or
transfer or in any way affect or modify, any obligation or liability of the
Company with respect to any of the Collateral or any transaction in
connection therewith.
(c) Notwithstanding anything herein or in the other Loan
Documents to the contrary, to the extent this Agreement or any other Security
Document purports to grant to the Collateral Agent a Lien in any License held
directly or indirectly by the Company, the Borrower or any of the Borrower's
subsidiaries, now owned or hereafter acquired, the Collateral Agent shall
only have a Lien in such Licenses at such times and to the extent that a Lien
in such Licenses is permitted under applicable law; PROVIDED, that any such
Lien shall to the extent permitted by applicable law be deemed effective as
of the later of (i) the Effective Date or (ii) the date on which the Company
was assigned, or acquired control over, the applicable License.
SECTION 4. FURTHER ASSURANCES; COVENANTS. (a)(i) The Company will
not establish or change (A) the location of its chief executive office or its
chief place of business or (B) except for sales in the ordinary course of
business, the locations where it keeps or holds any Collateral or records
relating thereto from the applicable location described in the Perfection
Certificate unless it shall have given the Collateral Agent notice thereof
and an opinion of counsel with respect thereto in accordance with Section
4(k). The Company shall not in any event change the location of any
Collateral if such change would cause the Security Interests in such
Collateral to lapse or cease to be perfected.
(ii) The Company will not change its name, identity or
corporate structure (except as expressly permitted in the Credit Agreement)
in any manner unless it shall have given the Collateral Agent prior notice
thereof and delivered an opinion of counsel with respect thereto in
accordance with Section 4(k).
(b) The Company will, from time to time, at its expense,
execute, deliver, file and record any statement, assignment, instrument,
document, agreement or other paper and take any other action (including,
without limitation, any filings with the United States Patent and Trademark
Office (including without limitation, a Patent Security Agreement and a
Trademark Security Agreement), any filings with the United States Copyright
Office (including without limitation a Copyright Security Agreement), any
filings of financing or continuation statements
8
<PAGE>
under the UCC and any filings in, or agreements governed by the laws of, any
foreign jurisdictions) that from time to time may be necessary or desirable,
or that the Collateral Agent reasonably may request, in order to create,
preserve, upgrade in rank (to the extent required hereby), perfect, confirm
or validate the Security Interests or to enable the Collateral Agent and the
other Secured Parties to obtain the full benefits of this Agreement, or to
enable the Collateral Agent to exercise and enforce, or facilitate the
exercise and enforcement of, any of its rights, powers and remedies hereunder
with respect to any of the Collateral. To the extent permitted by law, the
Company hereby authorizes the Collateral Agent to execute and file financing
statements or continuation statements without the Company's signature
appearing thereon. The Company agrees that a carbon, photographic or other
reproduction of this Agreement or of a financing statement is sufficient as a
financing statement. The Company shall pay the costs of, or incidental to,
any recording or filing of any financing or continuation statements
concerning the Collateral.
(c) If any Collateral is at any time in the possession or
control of any warehouseman, bailee or any of the Company's agents or
processors, the Company shall, upon the request of the Collateral Agent
acting on the instructions of the Required Lenders, notify such warehouseman,
bailee, agent or processor of the Security Interests created hereby and
instruct such Person to hold all such Collateral for the Collateral Agent's
account subject to the Collateral Agent's instructions.
(d) The Company shall keep full and accurate books and
records relating to the Collateral, and stamp or otherwise mark such books
and records in such manner as the Required Lenders may reasonably request in
order to reflect the Security Interests. The Company shall provide the
Collateral Agent with reasonable access to such books and records during
normal business hours in accordance with Section 5.08 of the Credit Agreement.
(e) The Company will immediately deliver and pledge each
Instrument constituting Collateral to the Collateral Agent (other than checks
and drafts constituting payments in respect of Accounts, as to which the
provisions of Section 5(b) shall apply), in each case appropriately endorsed
to the Collateral Agent; PROVIDED that so long as no Event of Default (as
defined under the Credit Agreement) shall have occurred and be continuing,
the Company may retain any Instruments (i) that in the aggregate have a
principal or face amount of $1,000 or less or (ii) in which a security
interest has been and continues to be effectively created and perfected in
favor of the Collateral Agent under the other Security Documents, and the
Collateral Agent shall, promptly upon request of the Company, make
appropriate arrangements for making any Instrument pledged by the Company and
delivered to the Collateral Agent available to it for purposes of
presentation, collection or renewal (any such arrangement to be effected, to
the extent deemed appropriate to the Collateral Agent, against trust receipt
or like document). Until the Partial Termination Date, all certificates or
instruments representing or evidencing Investment Property (other than
Investment Property held by a securities intermediary, a commodities
intermediary or another financial intermediary) shall be delivered to and
held by or on behalf of the Collateral Agent, for the ratable benefit of the
Secured Parties, pursuant hereto and shall be in suitable form for transfer
by delivery, duly endorsed and shall be accompanied by undated duly executed
instruments of transfer or assignment in blank, with signatures appropriately
guaranteed, and accompanied in each case by any required transfer tax stamps,
all in form and substance satisfactory to the Collateral Agent. Until the
Partial Termination Date,
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with respect to any Investment Property held by a securities intermediary,
commodity intermediary or other financial intermediary of any kind, the
Company shall execute and deliver, and shall cause any such intermediary to
execute and deliver, a securities control agreement ("Securities Control
Agreement") among the Company, the Collateral Agent, and such intermediary
substantially in the form of Exhibit G which provides, among other things,
for the intermediary's agreement that it will comply wth such entitlement
orders, and apply any value distributed on account of any Investment Property
maintained in an account with such intermediary, as directed by the
Collateral Agent without further consent by the Company. Until the Partial
Termination Date, the Collateral Agent shall have the right, at any time in
its discretion and without notice to the Company after the occurrence and
during the continuance of an Event of Default, to cause any or all of the
Investment Property to be transferred of record into the name of the
Collateral Agent or its nominee.
(f) The Company shall use its best efforts to cause to be
collected from its account debtors, as and when due, any and all amounts
owing under or on account of each Account constituting Collateral (including,
without limitation, Accounts which are delinquent, such Accounts to be
collected in accordance with lawful collection procedures) and to apply
forthwith upon receipt thereof all such amounts as are so collected to the
outstanding balance of such Account. Unless an Event of Default (as defined
under the Credit Agreement) has occurred and is continuing and the Collateral
Agent is exercising its rights hereunder to collect Accounts, the Company may
allow in the ordinary course of business as adjustments to amounts owing
under its Accounts constituting Collateral (i) an extension or renewal of the
time or times of payment, or settlement for less than the total unpaid
balance, which the Company finds appropriate in accordance with sound
business judgment and (ii) a refund or credit due as a result of returned or
damaged merchandise or deficient service, all in accordance with the
Company's ordinary course of business consistent with its historical
collection practices. The costs and expenses (including, without limitation,
reasonable attorney's fees) of collection, whether incurred by the Company or
the Collateral Agent, shall be borne by the Company.
(g) Upon the occurrence and during the continuance of any
Event of Default under the Credit Agreement, upon the request of the Required
Lenders acting through the Collateral Agent, the Company will promptly notify
(and the Company hereby authorizes the Collateral Agent so to notify) each
account debtor in respect of any Account or Instrument constituting
Collateral that such Collateral has been assigned to the Collateral Agent
hereunder, and that any payments due or to become due in respect of such
Collateral are to be made directly to the Collateral Agent or its designee.
(h) Until the Partial Termination Date, the Company shall,
(i) as soon as practicable after the date hereof, in the case of Equipment
now owned constituting goods in which a security interest is perfected by a
notation on the certificate of title or similar evidence of the ownership of
such goods (unless such security interest may otherwise be perfected and is
so perfected), and (ii) within 10 days of acquiring any other similar
Equipment, in each case, (a) having a value in excess of $25,000 or (b)
having a value in excess of $10,000, if the aggregate of all such items owned
by the Company at any time is greater than $50,000, deliver to the Collateral
Agent any and all certificates of title, applications for title or similar
evidence of ownership of such Equipment and shall cause the Collateral Agent
to be named as lienholder on any such certificate of title or other evidence
of ownership. Until the Partial Termination Date,
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the Company shall promptly inform the Collateral Agent of any additions to or
deletions from such Equipment in excess of $10,000. Until the Partial
Termination Date, the Company shall not permit any item of Equipment to
become a fixture to real estate.
(i) The Company will, promptly upon request, provide to the
Collateral Agent all information and evidence it may reasonably request
concerning the Collateral, and in particular the Accounts, to enable the
Collateral Agent to enforce the provisions of this Agreement.
(j) Until the Partial Termination Date: The Company shall
notify the Collateral Agent immediately if it knows, or has reason to know,
that any application or registration relating to any Material Copyright,
Material Patent or Material Trademark may become abandoned, or of any adverse
determination or development (including, without limitation, the institution
of, or any such determination or development in, any proceeding in the United
States Copyright Office, the United States Patent and Trademark Office, or
any court) regarding the Company's ownership of any Material Copyright,
Material Patent or Material Trademark, its right to register or patent the
same, or to keep and maintain the same. For purposes of this Section 4(j),
"Material Patent", "Material Trademark" and "Material Copyright" shall mean
one or more Copyrights, Patents or Trademarks, respectively, which
individually has a fair market value in excess of $10,000 or are individually
or in the aggregate otherwise material to the business of the Company. In
the event that any right to any Copyright, Copyright License, Patent, Patent
License, Trademark or Trademark License is infringed, misappropriated or
diluted by a third party, the Company shall notify the Collateral Agent
promptly after it learns thereof and shall, unless the Company shall
reasonably determine that any such action would be of negligible economic
value, promptly sue for infringement, misappropriation or dilution and to
recover any and all damages for such infringement, misappropriation or
dilution, and take such other actions as the Company shall reasonably deem
appropriate under the circumstances to protect such Copyright, Copyright
License, Patent, Patent License, Trademark or Trademark License. In no event
shall the Company, either itself or through any agent, employee or licensee,
file an application for the registration of any Copyright with the United
States Copyright Office or any Material Patent or Material Trademark with the
United States Patent and Trademark Office, or with any similar office or
agency in any other country or any political subdivision thereof, unless not
less than 30 days prior thereto it informs the Collateral Agent, and, upon
request of the Collateral Agent, executes and delivers any and all
agreements, instruments, documents and papers the Collateral Agent may
request to evidence the Security Interests in such Copyright, Patent or
Trademark and the goodwill and general intangibles of the Company relating
thereto or represented thereby, and the Company hereby constitutes the
Collateral Agent its attorney-in-fact to execute and file all such writings
for the foregoing purposes, all acts of such attorney being hereby ratified
and confirmed; such power, being coupled with an interest, shall be
irrevocable until the Secured Obligations are paid in full.
(k) Not more than four months nor less than 10 days prior to
each date on which the Company proposes to take any action contemplated by
Section 4(a)(i) or (ii), the Company shall, at its cost and expense, cause to
be delivered to the Secured Parties an opinion of counsel satisfactory to the
Collateral Agent (the Company's general counsel being deemed to be
satisfactory unless the Collateral Agent notifies the Company otherwise), to
the effect of Exhibit E hereto and in a form and substance reasonably
satisfactory to the Administrative Agent, to the
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effect that all financing statements and amendments or supplements thereto,
continuation statements and other documents required to be recorded or filed
in order to perfect and protect the Security Interests for a period,
specified in such opinion, continuing until a date not earlier than eighteen
months from the date of such opinion, against all creditors of and purchasers
from the Company have been filed in each filing office necessary for such
purpose and that all filing fees and taxes, if any, payable in connection
with such filings have been paid in full (except as noted therein with
respect to any continuation statements to be filed within such period).
SECTION 5. COLLATERAL ACCOUNT AND LOCKBOX ACCOUNT. If requested by
the Collateral Agent at any time following the occurrence of an Event of
Default (whether or not such Event of Default is subsequently cured), the
following provisions of this Section shall become effective and the Company
shall take all necessary action to give effect thereto:
(a) The Company shall establish with the Collateral Agent or
a commercial bank designated by the Collateral Agent a cash collateral
account (such account, together with any additional account so established
for such purpose from time to time, the "Collateral Account") in the name and
under the control of the Collateral Agent into which there shall be deposited
from time to time the cash proceeds of the Collateral required to be
delivered to the Collateral Agent pursuant to subsection (d) of this Section
5 or any other provision of this Agreement or any other Loan Document. Any
income received by the Collateral Agent with respect to the balance from time
to time standing to the credit of the Collateral Account, including any
interest or capital gains on Liquid Investments, shall remain, or be
deposited, in the Collateral Account. All right, title and interest in and to
the cash amounts on deposit from time to time in the Collateral Account
together with any Liquid Investments from time to time made pursuant to
subsection (e) of this Section shall vest in the Collateral Agent, shall
constitute part of the Collateral hereunder and shall not constitute payment
of the Secured Obligations until applied thereto as hereinafter provided.
(b) The Company shall deliver to the Collateral Agent
counterparts of the Lockbox Agreement executed and delivered on behalf of the
Company and the Lockbox Bank. The Company shall instruct all account debtors
and other Persons obligated in respect of all Accounts constituting
Collateral to make all payments in respect of such Accounts directly to the
Lockbox Bank (by instructing that such payments be remitted to the Post
Office Box referred to in the Lockbox Agreement with the Lockbox Bank). In
addition to the foregoing, the Company agrees that if the proceeds of any
Collateral hereunder (including the payments made in respect of such
Accounts) shall be received by it, the Company shall as promptly as possible
deposit such proceeds into the Lockbox Account. Until so deposited, all such
proceeds shall be held in trust by the Company for and as the property of the
Collateral Agent and the Secured Parties and shall not be commingled with any
other funds or property of the Company.
(c) The balance from time to time standing to the credit of
the Lockbox Account shall, except upon the occurrence and continuation of an
Event of Default (as defined under the Credit Agreement), be distributed to
the Company upon the order of the Company. Amounts on deposit in the Lockbox
Account shall, except upon the occurrence and continuation of an Event of
Default, be invested and re-invested from time to time in Permitted
Investments as the Company shall determine.
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(d) Upon the occurrence and continuation of an Event of
Default (as defined under the Credit Agreement), the Collateral Agent shall,
if so instructed by the Required Lenders, (i) deliver a Stop Transfer Notice
(as defined in the Lockbox Agreement) to the Lockbox Bank and instruct the
Lockbox Bank to transfer to the Collateral Account all funds then and
thereafter standing to the credit of the Lockbox Account with the Lockbox
Bank and (ii) apply or cause to be applied (subject to collection) any or all
of the balance from time to time standing to the credit of the Collateral
Account and such Lockbox Account in the manner specified in Section 9.
(e) Amounts on deposit in the Collateral Account and, during
the continuance of an Event of Default, the Lockbox Account shall be invested
and re-invested from time to time in such Liquid Investments as the Company
shall determine, which Liquid Investments shall be held in the name and be
under the control of the Collateral Agent, provided that, if an Event of
Default has occurred and is continuing, the Collateral Agent shall, if
instructed by the Required Lenders, liquidate any such Liquid Investments and
apply or cause to be applied the proceeds thereof to the payment of the
Secured Obligations in the manner specified in Section 9. For this purpose,
(i) each Liquid Investment shall mature within 30 days after it is acquired
by the Collateral Agent and (ii) in order to provide the Collateral Agent,
for the benefit of the Secured Parties, with a perfected security interest
therein, each Liquid Investment shall be either:
(i) evidenced by negotiable certificates or
instruments, or if non-negotiable then issued in the name of the Collateral
Agent, which (together with any appropriate instruments of transfer) are
delivered to, and held by, the Collateral Agent or an agent thereof (which
shall not be the Company or any of its Affiliates) in the State of New York
or the Commonwealth of Massachusetts; or
(ii) in book-entry form and issued by the United
States and subject to pledge under applicable state law and Treasury
regulations and as to which (in the opinion of counsel to the Collateral
Agent) appropriate measures shall have been taken for perfection of the
Security Interests.
SECTION 6. GENERAL AUTHORITY. The Company hereby irrevocably
appoints the Collateral Agent its true and lawful attorney, with full power
of substitution, in the name of the Company, the Collateral Agent, the
Secured Parties or otherwise, for the sole use and benefit of the Collateral
Agent and the other Secured Parties, but at the Company's expense, to the
extent permitted by law to exercise, at any time and from time to time while
an Event of Default (as defined under the Credit Agreement) has occurred and
is continuing, all or any of the following powers with respect to all or any
of the Collateral:
(i) to demand, sue for, collect, receive and give
acquittance for any and all monies due or to become due thereon or by
virtue thereof,
(ii) to settle, compromise, compound, prosecute or defend
any action or proceeding with respect thereto,
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(iii) to sell, transfer, assign or otherwise deal in or
with the same or the proceeds or avails thereof, as fully and effectually
as if the Collateral Agent were the absolute owner thereof, and
(iv) to extend the time of payment of any or all thereof
and to make any allowance and other adjustments with reference thereto;
PROVIDED that the Collateral Agent shall give the Company not less than ten
days' prior written notice of the time and place of any sale or other
intended disposition of any of the Collateral, except any Collateral which is
perishable or threatens to decline speedily in value or is of a type
customarily sold on a recognized market. To the extent permitted by law, the
Company agrees that such notice constitutes "reasonable notification" within
the meaning of Section 9-504(3) of the UCC.
SECTION 7. REMEDIES UPON EVENT OF DEFAULT. (a) If any Event of
Default under the Credit Agreement has occurred and is continuing, the
Collateral Agent may, in accordance with the written instructions of the
Required Lenders, exercise on behalf of the Secured Parties all rights of a
secured party under the UCC (whether or not in effect in the jurisdiction
where such rights are exercised) and, in addition, the Collateral Agent may,
without being required to give any notice, except as herein provided or as
may be required by mandatory provisions of law, (i) withdraw all cash and
Liquid Investments in the Collateral Account and apply such monies, Liquid
Investments and other cash, if any, then held by it as Collateral as
specified in Section 9 and (ii) if there shall be no such monies, Liquid
Investments or cash or if such monies, Liquid Investments or cash shall be
insufficient to pay all the Secured Obligations in full, sell the Collateral
or any part thereof at public or private sale, for cash, upon credit or for
future delivery, and at such price or prices as the Collateral Agent may deem
satisfactory. The Collateral Agent or any other Secured Party may be the
purchaser of any or all of the Collateral so sold at any public sale (or, if
the Collateral is of a type customarily sold in a recognized market or is of
a type which is the subject of widely distributed standard price quotations,
at any private sale) and thereafter hold the same, absolutely, free from any
right or claim of whatsoever kind. The Company will execute and deliver such
documents and take such other action as the Collateral Agent deems necessary
or advisable in order that any such sale may be made in compliance with law.
Upon any such sale the Collateral Agent shall have the right to deliver,
assign and transfer to the purchaser thereof the Collateral so sold. Each
purchaser at any such sale shall hold the Collateral so sold to it
absolutely, free from any claim or right of whatsoever kind, including any
equity or right of redemption of the Company which may be waived, and the
Company, o the extent permitted by law, hereby specifically waives all rights
of redemption, stay or appraisal which it has or may have under any law now
existing or hereafter adopted. The notice (if any) of such sale required by
Section 6 shall (1) in case of a public sale, state the time and place fixed
for such sale, and (2) in the case of a private sale, state the day after
which such sale may be consummated. Any such public sale shall be held at
such time or times within ordinary business hours and at such place or places
as the Collateral Agent may fix in the notice of such sale. At any such sale
the Collateral may be sold in one lot as an entirety or in separate parcels,
as the Collateral Agent may determine. The Collateral Agent shall not be
obligated to make any such sale pursuant to any such notice. The Collateral
Agent may, without notice or publication, adjourn any public or private sale
or cause the same to be adjourned from time to time by announcement at the
time and place fixed for the sale, and such sale may be made at any time or
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place to which the same may be so adjourned. In case of any sale of all or
any part of the Collateral on credit or for future delivery, the Collateral
so sold may be retained by the Collateral Agent until the selling price is
paid by the purchaser thereof, but the Collateral Agent shall not incur any
liability in case of the failure of such purchaser to take up and pay for the
Collateral so sold and, in case of any such failure, such Collateral may
again be sold upon like notice. The Collateral Agent, instead of exercising
the power of sale herein conferred upon it, may in accordance with the
instructions of the Required Lenders proceed by a suit or suits at law or in
equity to foreclose the Security Interests and sell the Collateral, or any
portion thereof, under a judgment or decree of a court or courts of competent
jurisdiction.
(b) For the purpose of enforcing any and all rights and
remedies under this Agreement the Collateral Agent may (i) require the
Company to, and the Company agrees that it will, at its expense and upon the
request of the Collateral Agent, forthwith assemble all or any part of the
Collateral as directed by the Collateral Agent and make it available at a
place designated by the Collateral Agent which is, in the opinion of the
Collateral Agent, reasonably convenient to the Collateral Agent and the
Company, whether at the premises of the Company or otherwise, (ii) to the
extent permitted by applicable law, enter, with or without process of law and
without breach of the peace, any premise where any of the Collateral is or
may be located, and without charge or liability to it seize and remove such
Collateral from such premises, (iii) have access to and use the Company's
books and records relating to the Collateral and (iv) prior to the
disposition of the Collateral, store or transfer it without charge in or by
means of any storage or transportation facility owned or leased by the
Company, process, repair or recondition it or otherwise prepare it for
disposition in any manner and to the extent the Collateral Agent reasonably
deems appropriate and, in connection with such preparation and disposition,
use without charge any copyright, trademark, trade name, patent or technical
process used by the Company.
(c) Without limiting the generality of the foregoing, if any
Event of Default (as defined under the Credit Agreement) has occurred and is
continuing,
(i) the Collateral Agent may license, or sublicense,
whether general, special or otherwise, and whether on an exclusive or
non-exclusive basis, any Copyrights, Patents or Trademarks included in
the Collateral throughout the world for such term or terms, on such
conditions and in such manner as the Collateral Agent shall in its sole
discretion determine;
(ii) the Collateral Agent may (without assuming any
obligations or liability thereunder), at any time and from time to time,
in its sole discretion, enforce (and shall have the exclusive right to
enforce) against any licensee or sublicensee all rights and remedies of
the Company in, to and under any Copyright Licenses, Patent Licenses or
Trademark Licenses included in the Collateral and take or refrain from
taking any action under any thereof, and the Company hereby releases the
Collateral Agent and each of the other Secured Parties from, and agrees
to hold the Collateral Agent and each of the other Secured Parties free
and harmless from and against any claims and expenses arising out of, any
lawful action so taken or omitted to be taken with respect thereto; and
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(iii) upon request by the Collateral Agent, the Company
will execute and deliver to the Collateral Agent a power of attorney, in
form and substance satisfactory to the Collateral Agent, for the
implementation of any lease, assignment, license, sublicense, grant of
option, sale or other disposition of a Copyright, Patent or Trademark
included in the Collateral or any action related thereto. In the event
of any such disposition pursuant to this Section, the Company shall
supply its know-how and expertise relating to the manufacture and sale of
the products bearing Trademarks or the products or services made or
rendered in connection with Patents, and its customer lists and other
records relating to such Patents or Trademarks and to the distribution of
said products, to the Collateral Agent.
(d) Notwithstanding anything to the contrary contained
herein or any other Loan Document, neither the Collateral Agent nor any
Secured Party shall, without first obtaining the approval of a Governmental
Authority, take any action pursuant to this Agreement or any other Loan
Document which would constitute or result in an assignment of any License
held by the Company or a transfer of control of the Company if such
assignment or transfer would require, under the existing applicable law, the
prior approval of such Governmental Authority. The Company agrees to take,
and the Company agrees to cause the Borrower and each of its Subsidiaries to
take, in each case upon the occurrence and during the continuance of an Event
of Default, any action that the Collateral Agent may reasonably request in
order to obtain from any Governmental Authority such approval as may be
necessary to enable the Collateral Agent to assign or transfer control of the
Licenses pursuant to this Agreement, the Loan Documents and each other
agreement, instrument and document delivered to the Collateral Agent in
connection herewith and therewith, including specifically, at the expense of
the Company, the use of the Company's and the Borrower's and each of its
Subsidiaries' commercially reasonable efforts to assist in obtaining approval
of such Governmental Authority for any action or transaction contemplated by
this Agreement for which such approval is or shall be required by law, and
specifically, without limitation, upon request, to prepare, sign and file
with such Governmental Authority, the assignor's or transferor's portion of
any application or applications for consent to the assignment of any License
or transfer of control necessary or appropriate under the rules and
regulations of such Governmental Authority for approval of any sale or sales
of any of the Collateral by or on behalf of the Collateral Agent.
SECTION 8. LIMITATION ON DUTY OF COLLATERAL AGENT IN RESPECT OF
COLLATERAL. Beyond the exercise of reasonable care in the custody thereof,
the Collateral Agent shall have no duty as to any Collateral in its
possession or control or in the possession or control of any agent or bailee
or any income thereon or as to the preservation of rights against prior
parties or any other rights pertaining thereto. The Collateral Agent shall
be deemed to have exercised reasonable care in the custody of the Collateral
in its possession if the Collateral is accorded treatment substantially equal
to that which it accords its own property, and shall not be liable or
responsible for any loss or damage to any of the Collateral, or for any
diminution in the value thereof, by reason of the act or omission of any
warehouseman, carrier, forwarding agency, consignee or other agent or bailee
selected by the Collateral Agent in good faith; PROVIDED, HOWEVER, nothing in
this Section 8 shall be deemed to prejudice any rights of the Company against
such warehouseman, carrier, forwarding agency, consignee or other agent or
bailee.
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SECTION 9. APPLICATION OF PROCEEDS. Upon the occurrence and during
the continuance of an Event of Default (as defined under the Credit
Agreement), the proceeds of any sale of, or other realization upon, all or
any part of the Collateral and any cash held in the Collateral Account shall
be applied by the Collateral Agent in accordance with the Credit Agreement.
SECTION 10. APPOINTMENT OF CO-COLLATERAL AGENTS. At any time or
times, in order to comply with any legal requirement in any jurisdiction, the
Collateral Agent may appoint another bank or trust company or one or more
other persons, either to act as co-agent or co-agents, jointly with the
Collateral Agent, or to act as separate agent or agents on behalf of the
Secured Parties with such power and authority as may be necessary for the
effectual operation of the provisions hereof and may be specified in the
instrument of appointment.
SECTION 11. EXPENSES. In the event that the Company fails to comply
with the provisions of the Loan Documents or this Agreement, such that the
value of any Collateral or the validity, perfection, rank or value of any
Security Interest is thereby diminished or potentially diminished or put at
risk, the Collateral Agent if requested by the Required Lenders (i) shall
deliver written notice of such non-compliance to the Company requesting that
it cure such non-compliance, and (ii) if within ten Business Days after
delivery of such notice the Company has failed to cure such non-compliance,
the Collateral Agent may, but shall not be required to, effect such
compliance on behalf of the Company, and the Company shall reimburse the
Collateral Agent for the reasonable costs thereof on demand. All insurance
expenses and all expenses of protecting, storing, warehousing, appraising,
insuring, handling, maintaining and shipping the Collateral, any and all
excise, property, sales, and use taxes imposed by any state, federal, or
local authority on any of the Collateral, or in respect of periodic
appraisals and inspections of the Collateral to the extent the same may
reasonably be requested by the Required Lenders acting through the Collateral
Agent from time to time, or in respect of the sale or other disposition
thereof, shall be borne and paid by the Company; and if the Company fails to
promptly pay any portion thereof when due, except, if no Event of Default (as
defined under the Credit Agreement) has occurred and is continuing, with
respect to taxes which are being contested as permitted by Section 5.05 of
the Credit Agreement, the Collateral Agent or any other Secured Party may, at
its option, but shall not be required to, pay the same and charge the
Company's account therefor, and the Company agrees to reimburse the
Collateral Agent or such Secured Party therefor on demand. All reasonable
sums so paid or incurred by the Collateral Agent or any other Secured Party
for any of the foregoing and any and all other sums for which the Company may
become liable hereunder and all costs and expenses (including attorneys'
fees, legal expenses and court costs) reasonably incurred by the Collateral
Agent or any other Secured Party in enforcing or protecting the Security
Interests or any of their rights or remedies under this Agreement, shall,
together with interest thereon for each day until paid at the Alternate Base
plus the Applicable Rate plus interest at a rate per annum equal to two
percent (2%) for such day, be additional Secured Obligations hereunder.
SECTION 12. TERMINATION OF SECURITY INTERESTS; RELEASE OF
COLLATERAL. (a) Upon the repayment in full of all Secured Obligations and
the termination of the Commitments, the Security Interests shall terminate
and all rights to the Collateral shall revert to the Company. Upon the
Partial Termination Date, the Security Interests in all Collateral other than
Borrower-Related Collateral shall terminate and all rights in the Collateral
other than Borrower-Related Collateral shall revert to the Company.
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(b) At any time and from time to time prior to such
termination of the Security Interests, the Collateral Agent shall release the
Collateral in accordance with Section 5(c) hereof.
(c) If any Collateral is sold, leased, exchanged, assigned
or otherwise disposed of, or with respect to which on option has been
granted, in accordance with and as permitted under the Credit Agreement, the
Security Interests created hereby in such item (but not in any Proceeds
arising from such sale or exchange) shall cease immediately without any
further action on the part of the Collateral Agent.
(d) Upon any such termination of the Security Interests or
release of Collateral, the Collateral Agent will, at the expense of the
Company, execute and deliver to the Company such documents as the Company
shall reasonably request to evidence the termination of the Security
Interests or the release of such Collateral, as the case may be.
SECTION 13. NOTICES. All notices, approvals, requests, demands and
other communications hereunder shall be given in accordance with Section 9.01
of the Credit Agreement.
SECTION 14. WAIVERS, NON-EXCLUSIVE REMEDIES. No failure on the part
of the Collateral Agent to exercise, and no delay in exercising and no course
of dealing with respect to, any right under this Agreement or any other Loan
Document shall operate as a waiver thereof, nor shall any single or partial
exercise by the Collateral Agent of any right under this Agreement or any
other Loan Document preclude any other or further exercise thereof or the
exercise of any other right. The rights in this Agreement or the Loan
Documents are cumulative and are not exclusive of any other remedies provided
by law.
SECTION 15. SUCCESSORS AND ASSIGNS. This Agreement is for the
benefit of the Collateral Agent and the other Secured Parties and their
successors and assigns, and in the event of an assignment of all or any of
the Secured Obligations, the rights hereunder, to the extent applicable to
the indebtedness so assigned, may be transferred with such indebtedness.
This Agreement shall be binding on the Company and its successors and assigns
and the rights of the Company hereunder shall inure to the benefit of the
Company's successors and permitted assigns.
SECTION 16. CHANGES IN WRITING. Neither this Agreement nor any
provision hereof may be changed, waived, discharged or terminated orally, but
only in writing signed by the Company and the Collateral Agent with the
consent of the Required Lenders.
SECTION 17. SEVERABILITY. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by
law, (i) the other provisions hereof shall remain in full force and effect in
such jurisdiction and shall be liberally construed in favor of the Collateral
Agent and the other Secured Parties in order to carry out the intentions of
the parties hereto as nearly as may be possible; and (ii) the invalidity or
unenforceability of any provision hereof in any jurisdiction shall not affect
the validity or enforceability of such provision in any other jurisdiction.
18
<PAGE>
SECTION 18. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and
the same instrument and any of the parties hereto may execute this Agreement
by signing any such counterpart.
SECTION 19. GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF
PROCESS. (a) This Agreement shall be construed in accordance with and
governed by the law of the State of New York.
(b) The Company hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of the
Supreme Court of the State of New York sitting in New York County and of the
United States District Court of the Southern District of New York, and any
appellate court from any thereof, in any action or proceeding arising out of
or relating to any Loan Document, or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the
extent permitted by law, in such Federal court. Each of the parties hereto
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law. Nothing in this Agreement or any
other Loan Document shall affect any right that either Agent or any Lender
may otherwise have to bring any action or proceeding relating to this
Agreement or any other Loan Document against the Parent, the Borrower or
their properties in the courts of any jurisdiction.
(c) The Company hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter have to the laying of venue of any
suit, action or proceeding arising out of or relating to this Agreement or
any other Loan Document in any court referred to in paragraph (b) of this
Section. Each of the parties hereto hereby irrevocably waives, to the
fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
(d) Each of the Parent and the Borrower hereby irrevocably
appoints and designates CT Corporation System, whose address is 1633
Broadway, New York, New York 10019, or any other person having and
maintaining a place of business in the State of New York whom the Parent or
the Borrower may from time to time hereafter designate (having given 30 days'
notice thereof to the Administrative Agent, each Lender and the Collateral
Agent), as the true and lawful attorney and duly authorized agent for
acceptance of service of legal process of the Parent and the Borrower.
Without prejudice to the foregoing, each party to this Agreement irrevocably
consents to service of process in the manner provided for notices in Section
9.01 of the Credit Agreement. Nothing in this Agreement or any other Loan
Document will affect the right of any party to this Agreement to serve
process in any other manner permitted by law.
SECTION 20. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER
19
<PAGE>
BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A)
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.
SECTION 21. WAIVER OF IMMUNITY. To the extent that the Company has
or hereafter may acquire any immunity from jurisdiction of any court or from
any legal process (whether through service or notice, attachment prior to
judgment, attachment in aid or execution, or otherwise) with respect to
itself or its property, the Company hereby irrevocably waives such immunity
in respect of its obligations hereunder and under the other Loan Documents to
the extent permitted by applicable law and, without limiting the generality
of the foregoing, agrees that the waivers set forth in this Section shall
have effect to the fullest extent permitted under the Foreign Sovereign
Immunities Act of 1976 of the United States of America and are intended to be
irrevocable for purposes of such Act.
(Signatures Follow on Next Page)
20
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement (Parent) to be duly executed by their respective authorized
officers as of the day and year first above written.
JATO COMMUNICATIONS CORP
By:
-------------------------------------
Name:
Title:
STATE STREET BANK AND TRUST COMPANY,
as Collateral Agent
By:
-------------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
TO
SECURITY
AGREEMENT
PERFECTION CERTIFICATE
The undersigned, [ ], Chief Executive Officer of
JATO COMMUNICATIONS CORP., a Delaware corporation (the "Company"), hereby
certifies with reference to the Security Agreement (Parent), dated as of July
14, 1999, between the Company and State Street Bank and Trust Company, as
Collateral Agent (terms defined therein or as provided therein being used
herein as therein defined), to the Administrative Agent and each Lender as
follows:
SECTION 1. NAMES.
(a) The exact corporate name of the Company as it appears in its
certificate of incorporation is as follows: [____________________________]
(b) The Company has not had any other corporate name since its
organization.
(c) Except as set forth in Schedule 1, the Company has not changed
its identity or corporate structure in any way within the past five years.
(d) The following is a list of all other names (including trade
names or similar appellations) used by the Company or any of its divisions or
other business units at any time during the past five years: [_________________]
SECTION 2. CURRENT LOCATIONS. As of the date hereof, (a) the chief
executive office of the Company is located at the following address:
NAME MAILING ADDRESS
---- ---------------
(b) The following are all the locations where the Company
maintains any books or records relating to any Accounts:
NAME MAILING ADDRESS
---- ---------------
Exhibit A-1
<PAGE>
(c) The following are all the places of business of the Company
not identified above:
NAME MAILING ADDRESS
---- ---------------
(d) The following are all the locations not identified above
where the Company maintains any Inventory:
NAME MAILING ADDRESS
---- ---------------
(e) The following are all the locations not identified above
where the Company maintains any Equipment or contemplates maintaining at any
time when the Loans are to be outstanding:
NAME MAILING ADDRESS
---- ---------------
(f) The following are the names and addresses of all Persons
other than the Company which have possession of any of the Company's Inventory:
NAME MAILING ADDRESS
---- ---------------
(g) The following are the names and addresses of all Persons
other than the Company which have possession of any of the Company's Investment
Property:
NAME MAILING ADDRESS
---- ---------------
Exhibit A-2
<PAGE>
SECTION 3. PRIOR LOCATIONS.
(a) Set forth below is the information required by subparagraphs
(a), (b) and (c) of paragraph 2 with respect to each location or place of
business maintained by the Company at any time during the past five years:
(b) Set forth below is the information required by subparagraphs
(d) and (e) of paragraph 2 with respect to each location or bailee where or
with whom Inventory has been lodged at any time during the past four months:
SECTION 4. UNUSUAL TRANSACTIONS. All Accounts have been originated
by the Company and all Inventory and Equipment has been acquired by the
Company in the ordinary course of its business.
SECTION 5. FILE SEARCH REPORTS. Attached hereto as Schedule 5(a) is
a true copy of a file search report from the Uniform Commercial Code filing
officer in each jurisdiction identified in paragraph 2 or 3 above with
respect to each name set forth in paragraph 1. Attached hereto as Schedule
5(b) is a true copy of each financing statement or other filing identified in
such file search reports.
SECTION 6. UCC FILINGS. (a) A duly signed financing statement on
Form UCC-1 in substantially the form of Schedule 6 hereto has been duly
delivered to the Collateral Agent for filing in the Uniform Commercial Code
filing office in each jurisdiction identified in paragraph 2 hereof.
Attached hereto as Schedule 6(b) is a true copy of each such filing duly
acknowledged by the filing officer.
SECTION 7. SCHEDULE OF FILINGS. Attached hereto as Schedule 7 is a
schedule setting forth filing information with respect to the filings
described in paragraph 6 above.
SECTION 8. FILING FEES. All filing fees and taxes payable in
connection with the filings described in paragraph 6 above have been paid.
Exhibit A-3
<PAGE>
IN WITNESS WHEREOF, I have hereunto set my hand this _________ day of
[_____________________], 1999.
----------------------------------
Name:
Title:
Exhibit A-4
<PAGE>
SCHEDULE 1
CHANGE IN CORPORATE STRUCTURE
<PAGE>
SCHEDULE 6(b)
UCC FILINGS
<PAGE>
SCHEDULE 7
SCHEDULE OF FILINGS
<PAGE>
EXHIBIT B
TO
SECURITY
AGREEMENT
PATENT SECURITY AGREEMENT
(PATENTS, PATENT APPLICATIONS AND PATENT LICENSES)
WHEREAS, JATO COMMUNICATIONS CORP., a Delaware corporation (herein
referred to as "Grantor") owns the Patents (as defined in the Security
Agreement referred to below) (including design patents and applications for
patents) listed on Schedule I annexed hereto, and is a party to the Patent
Licenses (as defined in the Security Agreement referred to below) identified
in Schedule I annexed hereto;
WHEREAS, Grantor, Jato Operating Corp., certain lenders, State Street
Bank and Trust Company, as Collateral Agent, and Lucent Technologies Inc., as
administrative agent, are parties to a Credit Agreement of even date herewith
(as the same may be amended and in effect from time to time among said
parties and such lenders (the "Lenders") as may from time to time be parties
thereto, the "Credit Agreement");
WHEREAS, pursuant to the terms of the Security Agreement (Parent) of
even date herewith (as said Agreement may be amended and in effect from time
to time, the "Security Agreement") between Grantor and State Street Bank and
Trust Company, as collateral agent for the Secured Parties referred to
therein (in such capacity, together with its successors in such capacity,
"Grantee"), Grantor has granted to Grantee for the benefit of such Secured
Parties a continuing security interest in substantially all the assets of
Grantor, including all right, title and interest of Grantor in, to and under
the Patent Collateral (as defined herein) whether now owned or existing or
hereafter acquired or arising, to secure the Secured Obligations (as defined
in the Security Agreement);
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantor does hereby grant to
Grantee a continuing security interest in all of Grantor's right, title and
interest in, to and under the following (all of the following items or types
of property being herein collectively referred to as the "Patent
Collateral"), whether now owned or existing or hereafter acquired or arising:
(i) each Patent (including each design patent and patent
application), including, without limitation, each Patent (including each
design patent and patent application) referred to in Schedule I annexed
hereto;
(ii) each Patent License, including, without limitation,
each Patent License identified in Schedule I annexed hereto; and
(iii) all proceeds of and revenues from the foregoing,
including, without limitation, all proceeds of and revenues from any
claim by Grantor against third
Exhibit B-1
<PAGE>
parties for past, present or future infringement of any Patent (including
any design patent), including, without limitation, any Patent referred to
in Schedule I annexed hereto (including, without limitation, any such
Patent issuing from any application referred to in Schedule I annexed
hereto), and all rights and benefits of Grantor under any Patent License,
including, without limitation, any Patent License identified in Schedule I
annexed hereto.
Until the Partial Termination Date, Grantor hereby irrevocably
constitutes and appoints Grantee and any officer or agent thereof, with full
power of substitution, as its true and lawful attorney-in-fact with full
power and authority in the name of Grantor or in its name, from time to time,
in Grantee's discretion, so long as any Event of Default (as defined in the
Credit Agreement) has occurred and is continuing, to take with respect to the
Patent Collateral any and all appropriate action which Grantor might take
with respect to the Patent Collateral and to execute any and all documents
and instruments which may be necessary or desirable to carry out the terms of
this Patent Security Agreement and to accomplish the purposes hereof.
Until the Partial Termination Date, except to the extent not prohibited
in the Security Agreement, Grantor agrees not to sell, license, exchange,
assign or otherwise transfer or dispose of, or grant any rights with respect
to, or mortgage or otherwise encumber, any of the foregoing Patent Collateral.
This security interest is granted in conjunction with the security
interests granted to Grantee pursuant to the Security Agreement. Grantor
does hereby further acknowledge and affirm that the rights and remedies of
Grantee with respect to the security interest in the Patent Collateral made
and granted hereby are more fully set forth in the Security Agreement, the
terms and provisions of which are incorporated by reference herein as if
fully set forth herein.
IN WITNESS WHEREOF, Grantor has caused this Patent Security Agreement to
be duly executed by its officer thereunto duly authorized as of the _________
day of _____________________, _________.
JATO COMMUNICATIONS CORP.
By:
-------------------------------------
Name:
Title:
Exhibit B-2
<PAGE>
Acknowledged:
STATE STREET BANK AND TRUST COMPANY,
as Collateral Agent
By:
--------------------------------
Name:
Title:
Exhibit B-3
<PAGE>
SCHEDULE I
TO PATENT
SECURITY
AGREEMENT
PATENTS
A. U.S. PATENTS AND DESIGN PATENTS
I.D. NO. PATENT NO. ISSUE DATE TITLE
B. U. S. PATENT APPLICATIONS
SERIAL NO. DATE FILE TITLE
<PAGE>
EXHIBIT C
TO
SECURITY
AGREEMENT
TRADEMARK SECURITY AGREEMENT
(TRADEMARKS, TRADEMARK REGISTRATIONS, TRADEMARK
APPLICATIONS AND TRADEMARK LICENSES)
WHEREAS, JATO COMMUNICATIONS CORP., a Delaware corporation (herein
referred to as "Grantor"), owns the Trademarks (as defined in the Security
Agreement referred to below) listed on Schedule I annexed hereto, and is a
party to the Trademark Licenses (as defined in the Security Agreement
referred to below) identified in Schedule 1 annexed hereto;
WHEREAS, Grantor, Jato Operating Corp., certain lenders, State Street
Bank and Trust Company, as Collateral Agent, and Lucent Technologies Inc., as
administrative agent, are parties to a Credit Agreement of even date herewith
(as the same may be amended and in effect from time to time among said
parties and such lenders (the "Lenders") as may from time to time be parties
thereto, the "Credit Agreement");
WHEREAS, pursuant to the terms of the Security Agreement (Parent) of
even date herewith (as said Agreement may be amended and in effect from time
to time, the "Security Agreement") between Grantor and State Street Bank and
Trust Company, as collateral agent for the Secured Parties referred to
therein (in such capacity, together with its successors in such capacity,
"Grantee"), Grantor has granted to Grantee for the benefit of such Secured
Parties a security interest in substantially all the assets of Grantor,
including all right, title and interest of Grantor in, to and under the
Trademark Collateral (as defined herein), whether now owned or existing or
hereafter acquired or arising, to secure the Secured Obligations (as defined
in the Security Agreement);
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantor does hereby grant to
Grantee a continuing security interest in all of Grantor's right, title and
interest in, to and under the following (all of the following items or types
of property being herein collectively referred to as the "Trademark
Collateral"), whether now owned or existing or hereafter acquired or arising:
(i) each Trademark, including, without limitation, each
Trademark application referred to in Schedule I annexed hereto, and all
of the goodwill of the business connected with the use of, or symbolized
by, each such Trademark;
(ii) each Trademark License, including, without
limitation, each Trademark License identified in Schedule I annexed
hereto, and all of the goodwill of the
Exhibit C-1
<PAGE>
business connected with the use of, or symbolized by, each Trademark
licensed pursuant thereto; and
(iii) all proceeds of and revenues from the foregoing,
including, without limitation, all proceeds of and revenues from any
claim by Grantor against third parties for past, present or future unfair
competition with, or violation of intellectual property rights in
connection with or injury to, or infringement or dilution of, any
Trademark, including, without limitation, any Trademark referred to in
Schedule I hereto, and all rights and benefits of Grantor under any
Trademark License, including, without limitation, any Trademark License
identified in Schedule I hereto, or for injury to the goodwill associated
with any of the foregoing.
Until the Partial Termination Date, Grantor hereby irrevocably
constitutes and appoints Grantee and any officer or agent thereof, with full
power of substitution, as its true and lawful attorney-in-fact with full
power and authority in the name of Grantor or in its name, from time to time,
in Grantee's discretion, so long as any Event of Default (as defined in the
Credit Agreement) has occurred and is continuing, to take with respect to the
Trademark Collateral any and all appropriate action which Grantor might take
with respect to the Trademark Collateral and to execute any and all documents
and instruments which may be necessary or desirable to carry out the terms of
this Trademark Security Agreement and to accomplish the purposes hereof.
Until the Partial Termination Date, except to the extent not prohibited
in the Security Agreement (Parent), Grantor agrees not to sell, license,
exchange, assign or otherwise transfer or dispose of, or grant any rights
with respect to, or mortgage or otherwise encumber, any of the foregoing
Trademark Collateral.
This security interest is granted in conjunction with the security
interests granted to Grantee pursuant to the Security Agreement. Grantor
does hereby further acknowledge and affirm that the rights and remedies of
Grantee with respect to the security interest in the Trademark Collateral
made and granted hereby are more fully set forth in the Security Agreement,
the terms and provisions of which are incorporated by reference herein as if
fully set forth herein.
IN WITNESS WHEREOF, Grantor has caused this Trademark Security Agreement
to be duly executed by its officer thereunto duly authorized as of the ______
day of _____________________, ________.
JATO COMMUNICATIONS CORP.
By:
-----------------------------------
Name:
Title:
Exhibit C-2
<PAGE>
Acknowledged:
STATE STREET BANK AND TRUST COMPANY,
as Collateral Agent
By:
--------------------------------------
Name:
Title:
Exhibit C-3
<PAGE>
SCHEDULE I
TO
TRADEMARK
SECURITY
AGREEMENT
U.S. TRADEMARKS AND TRADEMARK REGISTRATIONS
A. U.S. TRADEMARKS AND TRADEMARK REGISTRATIONS
REG. NO. REG. DATE MARK
-------- --------- ----
B. U.S. TRADEMARK APPLICATIONS
SERIAL NO. DATE FILED MARK
---------- ---------- ----
EXCLUSIVE TRADEMARK LICENSES
PARTIES
NAME OF DATE OF
AGREEMENT LICENSOR LICENSEE AGREEMENT SUBJECT MATTER
--------- -------- -------- --------- --------------
<PAGE>
EXHIBIT D TO
SECURITY
AGREEMENT
COPYRIGHT SECURITY AGREEMENT
(COPYRIGHTS, COPYRIGHT REGISTRATIONS, COPYRIGHT
APPLICATIONS AND COPYRIGHT LICENSES)
WHEREAS, JATO COMMUNICATIONS CORP., a Delaware corporation (herein
referred to as "Grantor") owns the Copyrights (as defined in the Security
Agreement referred to below) listed on Schedule I annexed hereto, and is a
party to the Copyright Licenses (as defined in the Security Agreement
referred to below) identified in Schedule I annexed hereto;
WHEREAS, Grantor, Jato Operating Corp., certain lenders, State Street
Bank and Trust Company, as Collateral Agent, and Lucent Technologies Inc., as
administrative agent, are parties to a Credit Agreement of even date herewith
(as the same may be amended and in effect from time to time among said
parties and such lenders (the "Lenders") as may from time to time be parties
thereto, the "Credit Agreement");
WHEREAS, pursuant to the terms of the Security Agreement (Parent) of
even date herewith (as said Agreement may be amended and in effect from time
to time, the "Security Agreement") between Grantor and State Street Bank and
Trust Company, as collateral agent for the Secured Parties referred to
therein (in such capacity, together with its successors in such capacity, the
"Grantee"), Grantor has granted to Grantee for the benefit of such Secured
Parties a security interest in substantially all the assets of the Grantor,
including all right, title and interest of Grantor in, to and under the
Copyright Collateral (as defined herein), whether now owned or existing or
hereafter acquired or arising, to secure the Secured Obligations (as defined
in the Security Agreement);
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantor does hereby grant to
Grantee a continuing security interest in all of Grantor's right, title and
interest in, to and under the following (all of the following items or types
of property being herein collectively referred to as the "Copyright
CoIlateral"), whether now owned or existing or hereafter acquired or arising:
(i) each Copyright, including, without limitation, each
Copyright referred to in Schedule I annexed hereto;
(ii) each Copyright License, including, without
limitation, each Copyright License identified in Schedule I annexed
hereto; and
(iii) all proceeds of and revenues from the foregoing,
including, without limitation, all proceeds of and revenues from any
claim by Grantor against third
Exhibit D-1
<PAGE>
parties for past, present or future infringement of any Copyright,
including, without limitation, any Copyright referred to in Schedule I
annexed hereto, and all rights and benefits of Grantor under any Copyright
License, including, without limitation, any Copyright License identified
in Schedule I annexed hereto.
Until the Partial Termination Date, Grantor hereby irrevocably
constitutes and appoints Grantee and any officer or agent thereof, with full
power of substitution, as its true and lawful attorney-in-fact with full
power and authority in the name of Grantor or in its name, from time to time,
in Grantee's discretion, so long as any Event of Default (as defined in the
Credit Agreement) has occurred and is continuing, to take with respect to the
Copyright Collateral any and all appropriate action which Grantor might take
with respect to the Copyright Collateral and to execute any and all documents
and instruments which may be necessary or desirable to carry out the terms of
this Copyright Security Agreement and to accomplish the purposes hereof.
Until the Partial Termination Date, except to the extent not prohibited
in the Security Agreement, Grantor agrees not to sell, license, exchange,
assign or otherwise transfer or dispose of, or grant any rights with respect
to, or mortgage or otherwise encumber, any of the foregoing Copyright
Collateral.
This security interest is granted in conjunction with the security
interests granted to Grantee pursuant to the Security Agreement. Grantor
does hereby further acknowledge and affirm that the rights and remedies of
Grantee with respect to the security interest in the Copyright Collateral
made and granted hereby are more fully set forth in the Security Agreement,
the terms and provisions of which are incorporated by reference herein as if
fully set forth herein.
IN WITNESS WHEREOF, Grantor has caused this Copyright Security Agreement
to be duly executed by its officer thereunto duly authorized as of the _____ day
of __________________, ______.
JATO COMMUNICATIONS CORP.
By:
----------------------------------
Name:
Title:
Exhibit D-2
<PAGE>
Acknowledged:
STATE STREET BANK AND TRUST COMPANY,
as Collateral Agent
By:
----------------------------------
Name:
Title:
Exhibit D-3
<PAGE>
SCHEDULE I
TO
COPYRIGHT
SECURITY
AGREEMENT
COPYRIGHTS AND COPYRIGHT REGISTRATION
REGISTRATION NO. REG. DATE TITLE
---------------- --------- -----
COPYRIGHT APPLICATIONS
SERIAL NO. DATE FILED TITLE
---------- ---------- -----
COPYRIGHT LICENSES
PARTIES
NAME OF DATE OF
AGREEMENT LICENSOR LICENSEE AGREEMENT SUBJECT MATTER
--------- -------- -------- --------- --------------
<PAGE>
EXHIBIT E TO
SECURITY
AGREEMENT
OPINION OF
COUNSEL FOR THE COMPANY
The Security Agreement creates and constitutes as security for the
Secured Obligations (as defined in the Security Agreement and including any
future obligations which are Secured Obligations), in favor of the Collateral
Agent for the ratable benefit of the Secured Parties, a valid security
interest in all right, title and interest of the Company in the Collateral
and all right, title and interest of the Company in the Collateral Account.
The security interests of the Collateral Agent in all right, title and
interest of the Company in the Collateral created by the Security Agreement
constitute perfected security interests under the Uniform Commercial Code, as
in effect in the State of New York ("UCC"), the United States Copyright Act
("CA"), the United States Patent Act ("PA") and the United States Trademark
Act ("TA"), to the extent that a security interest therein may be perfected
under the UCC, the CA, the PA or the TA. Insofar as the priority thereof is
governed by the UCC, the priority of the security interests created by the
Security Agreement in the Collateral in which the Company has rights on the
date hereof will be the same with respect to Loans made or deemed made
pursuant to the Credit Agreement after the date hereof, except to the extent
that any priority may be affected by any security interest, lien or other
encumbrance imposed by law in favor of any government or governmental
authority or agency. Unless otherwise specifically defined herein, each term
defined herein has the meaning assigned to such term in the Security
Agreement.
With respect to the enforceability of the Security Documents, we express
no opinion as to the availability of specific performance. Moreover, our
opinion with respect to the enforceability of the Security Documents is
subject to the further qualification that certain remedial provisions thereof
may be limited by the law of the State of New York and applicable law of the
United States of America, but such laws do not, in our opinion, make the
remedies afforded thereby inadequate for the practical realization of the
benefits of the security intended to be provided thereby.
Exhibit E-1
<PAGE>
EXHIBIT F TO
SECURITY
AGREEMENT
LOCKBOX AGREEMENT
LOCKBOX AGREEMENT, dated as of [_________________], [____________],
among JATO COMMUNICATIONS CORP., a Delaware corporation (the "Company"),
STATE STREET BANK AND TRUST COMPANY, as Collateral Agent under the Security
Agreement referred to below (the "Collateral Agent"), and [________________]
(the "Lockbox Bank").
W I T N E S S E T H :
WHEREAS, the Company and the Collateral Agent have entered into a
Security Agreement (Parent), dated as of July 14, 1999 (as the same may be
amended from time to time, the "Security Agreement") under which the Company
has granted a continuing security interest in and to the Collateral (as
defined in the Security Agreement) to secure its obligations under the Loan
Documents (defined as provided in the Security Agreement);
WHEREAS, pursuant to the Security Agreement, the Company has agreed to
instruct certain obligors to make payments to (the "Post Office Box"); and
WHEREAS, the Company has requested that the Lockbox Bank establish and
maintain a bank account as further described herein, and the Lockbox Bank is
willing to establish and maintain such account pursuant to this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained and for other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto agree as follows:
SECTION 1. POST OFFICE BOX; DEPOSITS INTO THE LOCK BOX ACCOUNT. (a)
The Lockbox Bank shall have unrestricted and exclusive access to the Post
Office Box for the purpose of collecting mail for delivery and deposit into
the Lockbox Account (as defined below) (even though addressed to the Company)
and shall collect the mail delivered thereto on each business day in
accordance with the Lockbox Bank's regular collection schedule.
(b) The contents of the mail collected from the Post Office Box,
whether consisting of cash, checks, drafts, bills of exchange, money orders
or other instruments or documents, shall be promptly deposited by the Lockbox
Bank into the Lockbox Account. The term "Lockbox Account" means account no.
[___________________] opened and maintained by the Lockbox Bank for the
Company.
(c) The Lockbox Bank shall prepare one photocopy of the front and
back of each check, draft, bill of exchange, money order or other instrument
or document (collectively,
Exhibit F-1
<PAGE>
hereinafter called the "checks"; individually, a "check") with the date of
deposit to be shown on the bottom edge thereof. Attachments received with
payments, such as detachable stubs, together with any correspondence and the
individual envelope, are to be affixed to the photocopy of the check. All of
the above instruments will be delivered by the Lockbox Bank to the Company on
a same day basis.
(d) The Lockbox Bank shall endorse all checks which appear to be
in order for deposit into the Lockbox Account and shall process each item
under the same terms and conditions as would apply if the Lockbox Bank or the
Company had made the deposit directly. The Lockbox Bank shall endorse all
such checks as follows:
"DEPOSIT TO THE ACCOUNT OF AND WITHOUT
PREJUDICE TO THE WITHIN NAMED PAYEE
LOCKBOX SERVICES"
This endorsement may be made by use of a payee endorsement stamp.
(e) Undated checks may be dated by the Lockbox Bank to agree with
the postmark date and included in the regular deposit. Checks incorrectly
made out, where numerical and written amounts differ, are to be deposited for
the written amount only. Checks bearing no signature are to be stamped with
a "Kindly Refer to Maker" stamp and processed. Third-party checks may be
deposited into the Lockbox Account if properly endorsed.
(f) Checks bearing the legend "Payment in Full" or words of
similar import, either typed or handwritten, and checks that the Lockbox
Bank, in its normal banking practices and in its sole discretion, decides to
submit to the special attention of the Company or the Collateral Agent, shall
be withheld from the clearing system and sent to the Company or, at any time
after receipt by the Lockbox Bank of written notice from (which notice may be
delivered only upon the occurrence and during the continuation of an Event of
Default (as defined in the Credit Agreement)) the Collateral Agent, to the
entity designated in a written notice from the Collateral Agent. Should the
Lockbox Bank by reason of the exercise of its judgment, or through
inadvertence or oversight, process any of the checks covered by this Section
1(f) for collection and credit such checks to the Lockbox Account, the
Company and the Collateral Agent agree that the Lockbox Bank shall incur no
responsibility or liability.
(g) The details representing deposited items, adding machine
tapes, advice of credit, etc., together with all other materials rejected for
various reasons, and so marked, shall be sent by the Lockbox Bank to the
Company or, at any time after receipt by the Lockbox Bank of written notice
(which notice may be delivered only upon the occurrence and during the
continuation of an Event of Default (as defined in the Credit Agreement))
from the Collateral Agent, to the entity designated in a written notice from
the Collateral Agent. Checks returned unpaid because of uncollected or
insufficient funds shall be redeposited without advice. Checks returned a
second time shall be charged to the Lockbox Account and mailed with
appropriate advice to the Company or, at any time after receipt by the
Lockbox Bank of written notice (which notice may be delivered only upon the
occurrence and during the continuation of an Event of Default (as defined in
the Credit Agreement)) from the Collateral Agent, to the entity designated in
a written notice from the Collateral Agent.
Exhibit F-2
<PAGE>
(h) The Lockbox Bank shall maintain a microfilm record of each
check included in the Lockbox Account in accordance with the Lockbox Bank's
normal lockbox procedures. This film shall be available for use by the
Company and the Collateral Agent.
(i) The Company shall deposit such amounts into the Lockbox
Account as are required to be so deposited pursuant to Section 5 of the
Security Agreement.
SECTION 2. THE LOCKBOX ACCOUNT AND TRANSFERS THEREFROM. (a) Unless
and until the Lockbox Bank receives notice (which notice may be delivered
only upon the occurrence and during the continuation of an Event of Default
(as defined in the Credit Agreement)) from the Collateral Agent that the
provisions of Section 2(b) are to be implemented, which notice shall be
effective upon receipt by the Lockbox Bank (a "Stop Transfer Notice"), the
Lockbox Bank will debit the Lockbox Account in accordance with the Company's
instructions.
(b) After receipt by the Lockbox Bank of a Stop Transfer Notice,
the Lockbox Bank will cease debiting the Lockbox Account in accordance with
the Company's instructions (but may continue to debit the Lockbox Account in
accordance with Section 1(g)) and will disburse funds from the Lockbox
Account only in accordance with instructions from the Collateral Agent.
SECTION 3. MISCELLANEOUS. (a) The Company hereby agrees to
immediately notify its account debtors which have not already been notified
to send all their remittances to the Post Office Box.
(b) The Lockbox Bank's compensation for providing the services
contemplated herein shall be as mutually agreed between the Company and the
Lockbox Bank from time to time.
(c) The Lockbox Bank undertakes to perform only such duties as are
expressly set forth herein and are normally undertaken by the Lockbox Bank in
connection with its lockbox processing. Notwithstanding any other provision
of this Agreement, it is agreed by the parties to this Agreement that the
Lockbox Bank shall not be liable for any action taken by the Lockbox Bank or
any of its directors, officers, agents or employees in accordance with this
Agreement except for the Lockbox Bank's (or any director's, officer's,
agent's or employee's) gross negligence or willful misconduct. In no event
shall the Lockbox Bank be liable for losses or delays resulting from acts of
God, force majeure, computer malfunctions, interruptions of communication
facilities, labor difficulties or other causes beyond the Lockbox Bank's
reasonable control or for indirect, special or consequential damages.
(d) All notices or other written communications hereunder shall be
sent:
in the case of the Lockbox Bank, to:
-------------------------
-------------------------
-------------------------
-------------------------
Exhibit F-3
<PAGE>
in the case of the Company, to:
-------------------------
-------------------------
-------------------------
-------------------------
in the case of the Collateral Agent, to:
-------------------------
-------------------------
-------------------------
-------------------------
(e) The Lockbox Bank shall not assert, claim or endeavor to
exercise any right of set-off or banker's lien against any funds which may at
any time be deposited in the Lockbox Account, or any items or proceeds
thereof that come into the Lockbox Bank's possession in connection with this
Agreement, except to the extent otherwise provided in the last sentence of
Section 1(g) and except for fees payable pursuant to Section 3(b).
(f) During the term of the Security Agreement, this Agreement may
be terminated only by the Lockbox Bank, and then only upon written notice to
the other parties; PROVIDED that such termination shall not be effective
until the earlier of (i) such time as a successor bank shall have been
appointed and shall have accepted the responsibilities, duties and
obligations of the Lockbox Bank under this Agreement and (ii) 5:00 P.M. (New
York time) on the 60th day after receipt of such written notice. In the
event that the Lockbox Bank receives remittances following such termination,
it will forward such remittances to such successor bank (or, if no successor
bank has been appointed and shall have accepted the responsibilities, duties
and obligations of the Lockbox Bank under this Agreement, then as directed by
the Collateral Agent) and the Company shall compensate the Lockbox Bank for
such services at the price agreed to pursuant to Section 3(b) hereof.
(g) Neither this Agreement nor any provision hereof may be
changed, amended, modified or waived orally, but only by an instrument in
writing signed by the parties hereto.
(h) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
(i) This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns.
(j) This Agreement may be executed in any number of counterparts
which together shall constitute one and the same instrument.
Exhibit F-4
<PAGE>
(k) The Company agrees to pay, indemnify and hold the Lockbox Bank
harmless from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever (including, without
limitation, legal fees) with respect to the performance of this Agreement by
the Lockbox Bank or of its directors, officers, agents or employees, unless
arising from its or such natural persons' own gross negligence or willful
misconduct. The provisions of this paragraph shall survive termination of
this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
JATO COMMUNICATIONS CORP.
By:
------------------------------------
Name:
Title:
[BANK]
By:
------------------------------------
Name:
Title:
STATE STREET BANK AND TRUST COMPANY,
as Collateral Agent
By:
------------------------------------
Name:
Title:
Exhibit F-5
<PAGE>
EXHIBIT G
TO SECURITY AGREEMENT
[FORM OF SECURITIES ACCOUNT CONTROL AGREEMENT]
Exhibit G-1
<PAGE>
EXHIBIT G TO
SECURITY AGREEMENT
(PARENT)
[FORM OF SECURITIES ACCOUNT CONTROL AGREEMENT (PARENT)]
SECURITIES ACCOUNT CONTROL AGREEMENT (PARENT)
This SECURITIES ACCOUNT CONTROL AGREEMENT (PARENT) (the
"AGREEMENT"), dated as of July 14, 1999, by and among Jato Communications
Corp., a Delaware corporation (the "PARENT"), Lehman Brothers Inc. (the
"SECURITIES INTERMEDIARY"), and State Street Bank and Trust Company, as
Collateral Agent (the "COLLATERAL AGENT") for the benefit of the Secured
Parties (as defined in the Credit Agreement referred to below). Capitalized
terms not otherwise defined herein shall have the meanings set forth in the
Credit Agreement, dated as of July 14, 1999, among Jato Operating Corp., the
Parent, the lenders party thereto, the Collateral Agent and Lucent
Technologies Inc., as Administrative Agent, as amended, supplemented and
modified from time to time (the "CREDIT AGREEMENT"), and references herein to
the "UCC" are references to the Uniform Commercial Code as in effect in the
State of New York.
WHEREAS, pursuant to the Security Agreement (Parent), the Parent
has granted a security interest in substantially all of its assets; and
WHEREAS, the Security Agreement (Parent) requires the Parent and
the Securities Intermediary to enter into this Agreement;
NOW THEREFORE, the parties hereto hereby agree, for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, as follows:
1. ESTABLISHMENT OF SECURITIES ACCOUNT. The Securities
Intermediary hereby confirms that the Securities Intermediary has established
account number 833-79146-11394 under the name "Jato Communications Corp.
pledge account for State Street Bank and Trust Company, as Collateral Agent"
(together with any successor accounts, the "SECURITIES ACCOUNT") for the
Parent.
2. TREATMENT OF THE SECURITIES ACCOUNT.
(a) The Securities Account is, and shall be treated as, a
"securities account" within the meaning of Section 8-501 of the UCC.
(b) The Securities Account is an account to which financial assets
are or may be credited.
(c) The Securities Intermediary shall treat the Collateral Agent
as (i) entitled to exercise the rights that comprise any financial asset
credited to the Securities Account, and (ii) the "entitlement holder" (within
the meaning of Section 8-102 of the UCC), for the benefit of the
<PAGE>
Secured Parties, with respect to the Securities Account on the books and
records of the Securities Intermediary.
(d) All property delivered to the Securities Intermediary shall be
promptly credited to the Securities Account.
(e) All securities or other property (other than cash) capable of
being issued or registered in the name of a Person or in bearer form
underlying any financial assets credited to the Securities Account shall be
registered in the name of "Jato Communications Corp. pledge account for State
Street Bank and Trust Company, as Collateral Agent" or indorsed to the
Securities Intermediary or in blank, and in no case shall any such financial
asset credited to the Securities Account be registered in the name of the
Parent, payable to the order of the Parent or specially indorsed to the
Parent, except as provided in Section 5 hereof.
3. "FINANCIAL ASSETS" ELECTION. Each item of property (whether
investment property, financial asset, security, instrument or cash or any
other property of any kind) credited to the Securities Account shall be
treated as a "financial asset" (within the meaning of Section 8-102(a)(9) of
the UCC) under Article 8 of the UCC.
4. CONTROL BY COLLATERAL AGENT. Upon receipt of a Notice of
Exclusive Control, the Securities Intermediary shall: (i) comply with all
notifications it receives directing it to transfer or redeem any financial
asset in the Securities Account (each an "ENTITLEMENT ORDER") originated by
the Collateral Agent without further consent by the Parent; and (ii) take
directions with respect to the Securities Account from the Collateral Agent.
5. PARENT'S RIGHTS IN THE SECURITIES ACCOUNT.
(a) Except as otherwise provided in this Section 5, the Securities
Intermediary shall comply with Entitlement Orders originated by the Parent
without further consent by the Collateral Agent.
(b) If the Securities Intermediary shall have received from the
Collateral Agent a notice of exclusive control substantially in the form of
Exhibit A attached (a "NOTICE OF EXCLUSIVE CONTROL"), the Securities
Intermediary shall cease:
(i) complying with Entitlement Orders or other directions
concerning the Securities Account originated by the Parent; and
(ii) distributing to the Parent earnings, income, dividends,
interest, or other distributions on investment property, instruments,
money, or other property credited to the Securities Account.
(c) The Collateral Agent hereby agrees, solely for the benefit of
the Parent and its successors and assigns, that the Collateral Agent will not
issue a Notice of Exclusive Control or any Entitlement Order unless an Event
of Default has occurred and is continuing on such date.
2
<PAGE>
(d) Notwithstanding any contrary provisions hereof, unless and
until the Securities Intermediary receives a Notice of Exclusive Control from
the Collateral Agent, (i) the Parent shall have the right to (1) trade and
exercise rights over the Securities Account and (2) originate Entitlement
Orders with respect to the Securities Account, including Entitlement Orders
that would require the Securities Intermediary to make a delivery to or for
the account of the Parent or any other Person and (ii) the Securities
Intermediary shall handle, invest, disburse and dispose of all financial
assets credited to the Securities Account in accordance with Entitlement
Orders or other directions originated by the Parent.
(e) Upon receipt of a Notice of Exclusive Control, the Securities
Intermediary shall cease complying with any Entitlement Orders originated by
the Parent that would require the Securities Intermediary to make a delivery
to or for the account of the Parent or any other Person, except where the
Collateral Agent has confirmed in writing that such delivery is acceptable to
the Collateral Agent.
6. SECURITIES INTERMEDIARY'S LIEN. The Securities Intermediary
agrees that, except for the payment of its fees, commissions and settlement
of open orders, it will not assert any lien, encumbrance, claim or right
against the Securities Account or any asset carried in the Securities Account.
7. SECURITIES INTERMEDIARY'S RESPONSIBILITY.
(a) The Securities Intermediary shall not be liable to the
Collateral Agent (for the benefit of the Secured Parties) for complying with
Entitlement Orders from the Parent that are received by the Securities
Intermediary before the Securities Intermediary receives and has a reasonable
opportunity to act on a Notice of Exclusive Control.
(b) The Securities Intermediary shall not be liable to the Parent
for complying with a Notice of Exclusive Control or with Entitlement Orders
originated by the Collateral Agent, even if the Parent notifies the
Securities Intermediary that the Collateral Agent is not legally entitled to
issue the Entitlement Order or Notice of Exclusive Control.
(c) This Agreement does not create any obligation of the
Securities Intermediary except for those expressly set forth in this
Agreement. In particular, the Securities Intermediary need not investigate
whether the Collateral Agent is entitled under the Collateral Agent's
agreements with the Parent to give an Entitlement Order or a Notice of
Exclusive Control. The Securities Intermediary may rely on notices and
communications that it believes were given by the appropriate party.
8. STATEMENTS, CONFIRMATIONS, AND NOTICES OF ADVERSE CLAIMS. The
Securities Intermediary shall provide to the Collateral Agent duplicate
copies of all statements, confirmations and other communications sent by the
Securities Intermediary to the Parent. Except for the claims and interests
of the Collateral Agent (for the benefit of the Secured Parties) and of the
Parent, the Securities Intermediary does not know of any claim to, or
interest in, the Securities Account or in any financial assets credited
thereto. If any person asserts any lien, encumbrance or adverse claim
(including any writ, garnishment, judgment, warrant of attachment, execution
or similar process) against the Securities Account or in any financial asset
3
<PAGE>
credited thereto, the Securities Intermediary shall notify the Collateral
Agent and the Parent thereof promptly after becoming aware thereof.
9. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF THE SECURITIES
INTERMEDIARY. The Securities Intermediary hereby represents, warrants and
covenants that:
(a) The Securities Account has been or shall be established as
described in Section 1 above, and the Securities Account shall be maintained
in the manner set forth herein until termination of this Agreement. The
Securities Intermediary shall not change the name or account numbers of the
Securities Account without the prior written consent of the Collateral Agent.
(b) No financial asset is registered in the name of the Parent, or
payable to the Parent's order, or specifically indorsed to the Parent, except
to the extent that such financial asset has been indorsed to the Securities
Intermediary or in blank. Except as otherwise provided in Section 5 hereof,
no financial asset shall be registered in the name of the Parent or payable
to the Parent's order or specially indorsed to the Parent, except to the
extent that such financial asset has been indorsed to the Securities
Intermediary or in blank.
(c) This Agreement is the valid and legally binding obligation of
the Securities Intermediary.
(d) Other than this Agreement, (i) the Securities Intermediary has
not entered into, and until the termination of this Agreement shall not enter
into, any agreement with any other Person relating to the Securities Account
and/or any financial assets credited thereto pursuant to which it has agreed
to comply with Entitlement Orders of such Person; and (ii) the Securities
Intermediary has not entered into any other agreement with the Parent or the
Collateral Agent purporting to limit or condition the obligation of the
Securities Intermediary to comply with Entitlement Orders as set forth in
Section 4 and Section 5 hereof; provided that, the Collateral Agent
acknowledges that the Security Account is managed on a discretionary basis by
the Securities Intermediary on behalf of the Parent.
10. INDEMNITY. The Parent hereby indemnifies and agrees to defend
and hold harmless the Securities Intermediary, its officers, directors,
employees, and agents against claims, liabilities, and expenses arising out
of this Agreement (including attorneys' fees and disbursements), except to
the extent that such claims, liabilities, or expenses are caused by or arise
from the Securities Intermediary's gross negligence or willful misconduct.
11. GOVERNING LAW. This Agreement and the Securities Account
shall be governed by the laws of the State of New York. Regardless of any
provisions in any other agreement, for purposes of the UCC, New York shall be
deemed to be the jurisdiction of the Securities Intermediary with respect to
the Securities Account and Entitlement Orders related thereto.
12. CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL.
(a) THE PARENT IRREVOCABLY CONSENTS THAT ANY LEGAL ACTION OR
PROCEEDING BY THE COLLATERAL AGENT AGAINST IT UNDER,
4
<PAGE>
ARISING OUT OF OR IN ANY MANNER RELATING TO THIS AGREEMENT OR ANY TRANSACTION
RELATED HERETO MAY BE BROUGHT IN ANY COURT OF THE STATE OF NEW YORK, COUNTY
OF NEW YORK, OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT
OF NEW YORK. THE PARENT, BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT,
EXPRESSLY AND IRREVOCABLY ASSENTS AND SUBMITS TO THE PERSONAL JURISDICTION OF
ANY OF SUCH COURTS IN ANY SUCH ACTION OR PROCEEDING. AS AN ALTERNATIVE
METHOD OF SERVICE, THE PARENT FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF
ANY COMPLAINT, SUMMONS, NOTICE OR OTHER PROCESS RELATING TO ANY SUCH ACTION
OR PROCEEDING BY DELIVERY THEREOF TO IT BY HAND OR BY MAIL IN THE MANNER
PROVIDED FOR IN SECTION 17 HEREOF. THE PARENT HEREBY EXPRESSLY AND
IRREVOCABLY WAIVES ANY CLAIM OR DEFENSE IN ANY SUCH ACTION OR PROCEEDING
BASED ON ANY ALLEGED LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM
NON CONVENIENS OR ANY SIMILAR BASIS. THE PARENT SHALL NOT BE ENTITLED IN ANY
SUCH ACTION OR PROCEEDING TO ASSERT ANY DEFENSE GIVEN OR ALLOWED UNDER THE
LAWS OF ANY STATE OTHER THAN THE STATE OF NEW YORK UNLESS SUCH DEFENSE IS
ALSO GIVEN OR ALLOWED BY THE LAWS OF THE STATE OF NEW YORK. NOTHING IN THIS
SECTION 12 SHALL AFFECT OR IMPAIR IN ANY MANNER OR TO ANY EXTENT THE RIGHT OF
THE COLLATERAL AGENT OR ANY OTHER SECURED PARTY TO COMMENCE LEGAL PROCEEDINGS
OR OTHERWISE PROCEED AGAINST THE PARENT IN ANY JURISDICTION OR TO SERVE
PROCESS IN ANY MANNER PERMITTED BY LAW.
(b) EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT
TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY TRANSACTION RELATING HERETO.
13. ENTIRE AGREEMENT. This Agreement is the entire agreement, and
supersedes any prior agreements and contemporaneous oral agreements, of the
parties concerning its subject matter.
14. AMENDMENTS. No amendment or modification of this Agreement or
waiver of any right hereunder shall be binding on any party hereto unless it
is in writing and is signed by all of the parties hereto.
15. SEVERABILITY. To the extent a provision of this Agreement is
unenforceable, this Agreement shall be construed, to the maximum extent
permitted by applicable law, as if the unenforceable provision were omitted.
16. SUCCESSORS. The terms of this Agreement shall be binding
upon, and shall inure to the benefit of, the parties hereto and their
respective successors and assigns.
17. NOTICES. All notices and other communications required or
permitted to be given hereunder shall be in writing, shall be addressed as
provided below and shall be considered as properly given (a) if delivered in
person, (b) if mailed by first class United States mail,
5
<PAGE>
postage prepaid, registered or certified with return receipt requested or (c)
if sent by prepaid facsimile transmission confirmed by telephone. Notice so
given shall be effective upon receipt by the addressee, except that
communication or notice so transmitted by facsimile transmission and
confirmed by telephone shall be deemed to have been validly and effectively
given on the day (if a Business Day and, if not, on the next following
Business Day) on which it is transmitted by facsimile and confirmed by
telephone before 4:00 p.m., recipient's time, and if transmitted by facsimile
and confirmed by telephone after that time, on the next following Business
Day; PROVIDED, HOWEVER, that if any notice is tendered to an addressee and
the delivery thereof is refused by such addressee, such notice shall be
effective upon such tender. Any party shall have the right to change its
address for notice hereunder to any other location within the continental
United States by giving of thirty (30) days' notice to the other parties in
the manner set forth hereinabove. Any communications between the parties
hereto or notices provided herein may be given to the following addresses:
(1) Collateral Agent: State Street Bank and Trust Company
2 Avenue de Lafayette
Boston, MA 02111-174
Attention: Global Investor Services Group
Corporate Trust
Telecopy No.: (617) 664-1465
Copy to: Lucent Technologies Inc.
283 King George Road
Warren, NJ 07059
Attention: Assistant Treasurer - Project
Finance
Telecopy No.: (908) 559-1711
(2) Parent: Jato Communications Corp.
1099 18th Street
Suite 800
Denver, CO 80202
Attention: Vice President of Finance
Telecopy No.: (303) 226-8305
Copy to: Cooley Godward LLP
2595 Canyon Boulevard
Suite 250
Boulder, CO 80302
Attention: Rex R. O'Neal, Esq.
Telecopy No.: (303) 546-4099
6
<PAGE>
(3) Securities
Intermediary: Lehman Brothers Inc.
555 California Street
30th Floor
San Francisco, CA 94104
Attention: William E. Welsh III, Branch
Manager
Telecopy No.: (415) 263-4400
18. TERMINATION. The rights and powers granted herein to the
Collateral Agent have been granted in order to perfect its security interests
in the Securities Account for the benefit of the Secured Parties, are powers
coupled with an interest and shall be affected neither by the bankruptcy of
the Parent nor by the lapse of time. The obligations of the Securities
Intermediary hereunder shall continue in effect until the Partial Termination
Date and the Collateral Agent has notified the Securities Intermediary of
such event in writing.
19. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts,
each of which, when so executed and delivered, shall be an original, but all
such counterparts shall together constitute but one and the same instrument.
20. HEADINGS. Section headings have been inserted in this
Agreement as a matter of convenience for reference only, and it is agreed
that such section headings are not a part of this Agreement and shall not be
used in the interpretation of any provision of this Agreement.
(Signatures Follow on Next Page)
7
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Securities Account
Control Agreement to be duly executed by their duly authorized
representatives as of the day and year first above written.
JATO COMMUNICATIONS CORP.
By
--------------------------------
Name:
Title:
STATE STREET BANK AND TRUST COMPANY,
as Collateral Agent
By:
--------------------------------
Name:
Title:
LEHMAN BROTHERS INC.,
as Securities Intermediary
By:
--------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
[Letterhead of the Collateral Agent]
[Date]
LEHMAN BROTHERS INC.
555 California Street
30th Floor
San Francisco, CA 94104
Attention: William E. Welsh, Branch Manager
Notice of Exclusive Control
Ladies and Gentlemen:
As referenced in the Securities Account Control Agreement (Parent),
dated as of July 14, 1999, among Jato Communications Corp., Lehman Brothers
Inc. and State Street Bank and Trust Company, as Collateral Agent (a copy of
which is attached), we hereby give you notice of our exclusive control over
securities account number 833-79146-11394 (the "SECURITIES ACCOUNT") and all
financial assets, cash and instruments credited thereto. You are hereby
instructed not to accept any direction, instruction or entitlement order with
respect to the Securities Account or the financial assets, cash and
instruments credited thereto from any person other than the undersigned.
You are instructed to deliver a copy of this notice by facsimile
transmission to Jato Communications Corp.
Very truly yours,
STATE STREET BANK AND TRUST COMPANY, as Collateral
Agent
By:
--------------------------------
Title
<PAGE>
HI COUNTRY WIRE & TELEPHONE, LTD
PURCHASE AGREEMENT
This Agreement is made between Hi Country Wire & Telephone, Ltd., a
Colorado Corporation ("Hi Country") and Jato Communications ("Customer"), whose
address is 1099 18th Street, #700, Denver, CO 80202 ("the Premises") who agree
as follows:
1. EQUIPMENT AND PREMISES: Hi Country shall sell telecommunications
equipment ("Equipment") and sub-license the associated software (together
referred to as "System") listed on SCHEDULE 1 which is attached hereto and
Customer shall purchase said Equipment.
2. PRICE, PAYMENT TERMS AND SCHEDULING:
(a) The price to be paid by Customer to Hi Country for the Equipment,
the System and its installation by Hi Country (which price includes
the software license fee) shall be $18,451.98. State and local tax
and other taxes shall be in addition to said price.
(b) Customers shall pay said $1,617.95 per month plus sales tax as
follows: 12 months of said payment to commence on April 1, 1999
through March 30, 2000. Title to the equipment, system, licenses and
other goods purchased hereunder, shall not pass to Customer until all
sums due hereunder have been paid in full.
(c) Customer shall sign the attached UCC-1 Security Agreement and
Financing Statement at the time it signs this agreement.
3. CHANGES: Customer shall have the right to request any addition
to or deletion of any equipment or software to be provided by Customer by this
Agreement at any time provided such request is in writing. If Customer and Hi
Country do not reach an Agreement in writing as to the price to be paid by
Customer for the requested addition or deletion, then there shall be no such
change to the contract. The terms of this Agreement, including the limited
warranty, shall apply to any Equipment or software added by this provision.
Such warranty shall terminate when the limited warranty for the original System
expires. If Customer requests that an inventory be performed, at Customer's
discretion within ten working days after cutover date, the parties shall jointly
meet and inspect the System for the purpose of determining whether Hi Country
has provided the Equipment and software set forth in SCHEDULE 1.
4. NOTICES: The individual authorized to receive notices pursuant
to the Agreement and to authorize changes to this Agreement shall be:
Customer: Jato Communications
1099 18th Street, 700
Denver, CO 80202
Herein Country : Bob Whitfield Sr., President; Hi Country Wire & Telephone,
Ltd.,
6275 Simms Street
Arvada, Colorado 80004
5. ATTACHMENTS: The following attachments are incorporated herein
by reference:
(a) SCHEDULE 1 - List of Equipment Purchased and Purchase Price;
(b) SCHEDULE 2 - Maintenance Agreement Under Warranty
(c) SCHEDULE 3 - UCC-1 Security Agreement and Financing Statement
(customer shall deliver two copies to Hi Country)
PAGE 1
<PAGE>
6. LIMITATION OF LIABILITY: Neither party shall be liable to the
other for:
(a) Any acts of any subcontractor or supplier;
(b) Any incidental or consequential damages, damages for loss of
business or loss of profit;
(c) Any damage or injury for which there is workers' compensation
coverage or other insurance coverage for the items claimed by the
injured party.
(d) Any damage resulting from access or repair by persons other than
Hi Country.
7. INSURANCE AND REGULATIONS: Each party certifies that it is
compliant with the law for Worker's Compensation insurance. Upon written
request by Customer, Hi Country agrees to execute a certificate of compliance
with shall certify compliant with any applicable federal, state and/or local was
or regulations, including but not limited to FLSA, EEOC, OSHA, ERISA and any
Economic Control Statues or Regulations. Each party shall indemnify and hold
harmless the other, its officer and directors, employees and agents from any
loss, cost or damage that may arise as a result of any actual violation of any
federal, state or local laws referred to in this paragraph. Each party shall
indemnify and hold the other harmless and bear the cost of remedy if it's
Premises or equipment do not comply with all applicable federal, state and local
laws, ordinances and regulations.
8. INSTALLATION:
(a) Customer shall provide (1) access, easements, and consents
necessary to install or service the System; (2) necessary floor plans,
space for the System and accessible wiring location free of asbestos
and other hazardous chemicals and environmental hazards as provided by
federal law or regulation; (3) dedicated electronic source or
electronic circuits, power and isolated ground wiring; (4) suitable
operating environment as may be required by any manufacturers
specifications; (5) raceway, conduit, holes and wire-ways.
(b) Hi Country shall perform; (1) all software programming so that
the system complies with manufacturer's specifications for operation;
(2) develop and program user models; and (3) program the System to
operational parameters. Customer shall provide information to Hi
Country regarding the type of uses, their locations, user names, and
special applications required by this contract. Hi Country shall
translate this formation into the software codes entered into the
Systems software. The work by Hi Country described in this
subparagraph (b) is dependent upon the individual needs of employees
of Customer and if not satisfactory to Customer, the parties shall
reach an Agreement as to the manner of making the System operate
properly within manufactures specifications.
(c) Hi Country represents and warrants that its manufacturers System
specifications shall conform to all local, state and federal laws,
rules and regulations.
(d) Hi Country shall provide the necessary end-user training and
administrator training as outlined in SCHEDULE 1 attached hereto.
(e) Hi Country represents and warrants that it has the right to enter
into this Agreement and to make the transfer of information hereunder,
including all necessary rights and licenses for the System.
(f) During the installation process if an unforeseen occurrence which
is not provided for in this Agreement and which is not under Hi
Country's control renders it impossible for Hi Country to
PAGE 2
<PAGE>
install the system or which renders the system inoperable, Hi Country
may terminate this agreement without liability to Customer.
(g) If, within one year of cutover, any event occurs that is not
preventable by Customer destroys the system and if Customer in writing
requests Hi Country to restore Customer's System to an operational
status and if Hi Country and Customer agree in writing upon the cost
to Customer, Hi Country shall provide Customer with a replacement
System within two days. Customer and Hi Country shall agree upon the
cost to Customer of the overtime, expedited shipment, equipment
software, and labor charges of Hi Country.
(h) All material and equipment sold by Hi Country to Customer are
specially manufactured goods for Customer.
(i) Hi Country shall be responsible for coordination with U S West
Communications and other network service providers if requested by
Customer.
9. LIMITED WARRANTY:
(a) For a period of one year from the cutover date ("warranty
period") Hi Country warrants that the System shall be free from
defects in materials and workmanship and shall perform in conformance
with specifications contained in the manufacturers warranty provided
with the Equipment. If the System fails to perform within said one
year, Hi Country shall, repair the System or components of the System,
(including parts and labor) at Hi Country's expense.
(b) Customer's sole and exclusive remedy for breach of warranty or Hi
Country's failure to perform shall be as set forth above in
subparagraph (a) immediately preceding. Hi Country's obligations to
remedy failures of the particular part or equipment described in the
notice to Hi Country that were discovered during the warranty period
shall continue until the System is operating according the terms of
this Agreement provided Customer notifies Hi Country in writing during
the warranty period. Repair and replacement parts shall be new for
the first 90 days of the warranty period and shall be new or like new
for the remainder fo the warranty period.
(c) Hi Country shall not be liable for any long distance charges,
toll charges or any other expense to Customer caused by unauthorized
usage, fraud, theft, or by any person not authorized by Hi Country.
(d) The limited warranty contained in this agreement from Hi Country
to Customer excludes repairs or replacements, whether made necessary
by Customer or by a third party that are attributable to misuse,
negligence, accident, theft, abuse fluctuations in electric current,
power surges, shorts, fire, water, flood, temperature variation beyond
that recommended in the manufacturer's documentation to Customer or
manufacturer's specifications, wind, storms, lightening or any act of
God, access to repair or work on the system by any person who is not
authorized by Hi Country. Hi Country shall perform repairs
necessitated by any excluded cause at Customer's request provided that
rates and charges for such repairs are approved in writing by
Customer.
(e) In addition to the above described warranty services, Hi Country
shall respond to Customer request to perform service during the
warranty period as outlined in SCHEDULE 2, MAINTENANCE AGREEMENT UNDER
WARRANTY. If there is a conflict between this Agreement and the
SCHEDULE 2 Agreement, then the provisions of this Purchase Agreement
shall prevail.
PAGE 3
<PAGE>
10. Except for the limited warranty specifically stated in writing in
this agreement, Hi Country gives no other express or implied warranty and gives
no warranty for a particular purpose nor warranty of MERCHANTIBILITY and the
system is sold "AS IS" without any warranty or representation except as
contained herein in this agreement.
11. ACCEPTANCE:
(a) All materials and workmanship may be subject to inspection and
testing by Customer prior to acceptance.
(b) After the System cutover date Hi Country shall notify Customer
that the System is ready for inspection and testing. Customer
reserves the right to reject any System component that is not in good
working order or not in accordance with the manufacturer's
specifications. The "acceptance date" shall be 30 days after the
cutover date unless the Customer notifies Hi Country in writing that
the system is not in good working order or does not comply with
manufacturer's specifications or does not comply with this contract.
In such event the acceptance date shall be the date when Hi Country
takes such steps so the system meets manufacturer's specifications.
All notices or complaints about unsatisfactory matters shall be in
writing signed by the Customer.
(c) If Customer does not notify Hi Country in writing of any defects
in the System within thirty days of the cutover date, the System shall
be deemed be in compliance with all manufacturer's specifications and
in compliance with all warranties by Hi Country and in compliance with
this Agreement.
12. TERM AND TERMINATION:
(a) This Agreement commences on the date it is signed by both parties
and the signed agreement is communication (by fax, mailing or
delivery) to both parties and, unless terminated earlier pursuant to
the terms of this Agreement, shall continue in force until completion
of the services.
(b) If Customer fails to pay any sums when due and fails to cure the
nonpayment within ten days after written demand or fails to perform
any other obligation hereunder and fails to cure such other default
within thirty days after written notice by Hi Country, which notice
specifies the exact nature and extent of Customer's failure to
perform, Hi Country may, in its discretion cease installing the System
and receive payment for work performed and the equipment described
herein or may exercise any rights under any security agreement or any
rights at law or equity.
(c) If Hi Country fails to perform any obligation under this
Agreement and fails to cure such default within thirty days after
written notice from Customer specifying the exact nature and extent of
Hi Country's failure to perform, Customer may take possession of the
System and finish the work by whatever method Customer deems
expedient. In such event, Hi Country shall be entitled to receive
payment for all of the equipment and that amount of the labor under
the contract performed by Hi Country which is in proportion to the
total amount of work to be done to perform the contract.
13. MISCELLANEOUS:
(a) This Agreement is not assignable by Customer or Hi Country
without the prior written consent of the other party.
(b) The waiver by either party of any default shall not operate as a
waiver of any subsequent default.
PAGE 4
<PAGE>
(c) If the parties sign a UCC Security Agreement and Financing
Statement describing the equipment sold hereunder as its collateral,
its provisions shall be incorporated by reference thereto the same as
if fully stated herein.
(d) This Agreement is not assignable by Customer or Hi Country
without the prior written consent of the other party. Hi Country may
hire subcontractors to perform installation tasks.
(e) This Agreement is made and governed by the law of the State of
Colorado. The sums due to Hi Country shall be paid at the office of
Hi Country in Jefferson County, Colorado, Colorado. Any litigation or
lawsuit shall be filed in and tried only in Jefferson County, Colorado
and in no other state or country.
(f) In the event of any nonpayment by Customer of any sums when they
are due by the terms of this Agreement, such sums shall accrue
interest at the rat of 18% per annum.
(g) This Agreement constitutes the entire Agreement and understanding
between the parties. No modification of any of the terms of this
Agreement shall be valid unless in writing and signed by a duly
authorized officer of each party.
Date:____________________________
Customer name:
Hi Country Wire & Telephone, Ltd.
/s/ Brian E. Gast /s/ Robert Whitfield
- -------------------------------- ---------------------------------
By (name) By (name)
Title: Title:
ATTACH
(a) SCHEDULE 1 - LIST OF EQUIPMENT PURCHASED AND PURCHASE PRICE:
(b) SCHEDULE 2 MAINTENANCE AGREEMENT UNDER WARRANTY
(c) SCHEDULE 3 - UCC-1 SECURITY AGREEMENT AND FINANCING STATEMENT
(CUSTOMER SHALL DELIVER TWO COPIES TO HI COUNTRY):
PAGE 5
<PAGE>
HI COUNTRY
WIRE & TELEPHONE
FOR:
JATO COMMUNICATIONS
ATTACHMENT A
1 MERIDIAN OPTION 11E PBX
1 ENHANCED BUSINESS SOFTWARE W/ACD
1 T1 TRUNK PACK
1 T1 CSU CARD
1 T1 CLOCK CONTROLLER CARD
1 M2616 CENTRAL ANSWERING MACHINE
12 M2008 DIGITAL SETS W/DISPLAY
9 M2008HF & DISP DIGITAL SETS
2 16 PORT DIGITAL STATION PORTS
2 16 PORT ANALOG STATION PORTS
2 8 PORT UNIVERSAL TRUNK PACKS
1 DEC 510 TERMINAL
1 PARALLEL PRINTER
1 REMOTE ACCESS MODEM
1 SYSTEM WALL FIELD
8 M2616 DISPLAY SETS
4 M2216 ACD SETS
1 KEY LAMP MODULE
1 INTERALIA MOH ANNOUNCER
5 PMA HEADSET AMP'S
2 PROFILE OTH HEADSETS
3 PROFILE EARLOOP HEADSETS
1 UPS W/BATTERY
6275 SIMMS STREET - SUITE 207 - ARVADA, COLORADO 80004
303-467-9143 - 303-467-5521 FAX
e-mail - [email protected]
<PAGE>
HI COUNTRY WIRE & TELEPHONE LTD.
6275 Simms Street, Suite 207
Arvada, Colorado 80004
(303) 467-9143
LEASE AGREEMENT
<TABLE>
<CAPTION>
LESSEE ACCOUNT NO. 3038040222
<S><C>
- --------------------------------------------------------------------------------------------------------------------------
NAME JATO COMMUNICATIONS
- --------------------------------------------------------------------------------------------------------------------------
ADDRESS 1099 10th STREET, SUITE 700
- --------------------------------------------------------------------------------------------------------------------------
CITY DENVER COUNTY DENVER STATE CO ZIP 80202
- --------------------------------------------------------------------------------------------------------------------------
PHONE # (303) 8040222 CONTACT
- --------------------------------------------------------------------------------------------------------------------------
LEASE TERMS
- --------------------------------------------------------------------------------------------------------------------------
TERM (IN MONTHS) ADVANCE RENTAL (+TAX) MONTHLY RENTAL (+TAX) END OF LEASE PURCHASE OPTION
12 n/a $1617.95 + tax FMV XXX $1 Other
- --------------------------------------------------------------------------------------------------------------------------
SYSTEM DESCRIPTION
QTY. MODEL DESCRIPTION COST
1 NORTEL MERIDIAN OPTION 11 TELEPHONE SYSTEM WITH VOICE MAIL PER ATTACHMENT A $18,451.98
- --------------------------------------------------------------------------------------------------------------------------
EQUIPMENT LOCATION 1099 10th STREET, SUITE 700, DENVER, CO 80202
- --------------------------------------------------------------------------------------------------------------------------
CITY DENVER COUNTY DENVER STATE CO ZIP 80202
- --------------------------------------------------------------------------------------------------------------------------
CONTACT
- --------------------------------------------------------------------------------------------------------------------------
PHONE # (303) 804-0222
- --------------------------------------------------------------------------------------------------------------------------
SUPPLIER TOTAL SYSTEM COST $18,451.98
- --------------------------------------------------------------------------------------------------------------------------
NAME HI COUNTRY WIRE & TELEPHONE LTD BUYOUT & OTHER CHARGES 1.00
- --------------------------------------------------------------------------------------------------------------------------
ADDRESS 6275 SIMMS STREET, SUITE 207 TAX (IF APPLICABLE)
- --------------------------------------------------------------------------------------------------------------------------
CITY ARVADA STATE/ZIP CO 80202 TOTAL COST
- --------------------------------------------------------------------------------------------------------------------------
SEE REVERSE SIDE OF LEASE FOR ADDITIONAL TERMS AND CONDITIONS.
This Lease will not be binding on This Lease is non-cancellable, and
Lessor until it is accepted below. Lessee agrees that this Lease is the
entire agreement with Lessor.
Lessor LESSEE
______________________________________
BY X
______________________________________
BY /s/ PRINT NAME
____________________________________ ______________________________________
</TABLE>
<PAGE>
PROPOSAL
HI COUNTRY WIRE
& TELEPHONE LTD.
6275 SIMMS STREET #207
ARVADA, COLORADO 80004
(303)467-9143
<TABLE>
<S><C>
- ----------------------------------------------------------------------------------
PROPOSAL SUBMITTED TO PHONE DATE
JATO COMMUNICATIONS (303) 297-8909 04/02/99
STREET JOB NAME
1099 18th STREET, SUITE 700 SAME
CITY, STATE and ZIP CODE JOB LOCATION
DENVER, CO 80231 SAME
ATTENTION: FAX#
ELLIOTT BOYLE (303)297-8905
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
The Propose hereby to furnish material and labor - Complete in accordance with
specifications below, for the sum undetermined amount due to move and
installation of telephone equipment to new site. Payment to be made as follows:
Net thirty days
- ----------------------------------------------------------------------------------
Note this proposal may be withdrawn by Hi Country if not accepted within
10 days. Authorized Signature
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
All material is guaranteed to be as specified. All work to be completed in a
workmanlike manner according to standard practices. Any alteration or deviation
from specifications below involving extra costs will be executed only upon
written orders, and will become an extra charge over and above the estimate.
All agreements contingent upon strikes, accidents or delays beyond our control.
Owner to carry fire, tornado and other necessary insurance. Our workers are
fully covered by Workmen's Compensation Insurance. Litigation and disputes of
this contract shall be held in Jefferson County, Colorado.
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
We hereby submit specifications and estimates for: Installation, programming
and training on Nortel Option 11 telephone system with Octel Voice Mail.
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Hi Country Wire & Telephone Ltd. proposes to:
PICK UP NORTEL OPTION 11 TELEPHONE SYSTEM WITH
OCTEL VOICEMAIL AND APPROX 34 TELEPHONE SETS
FROM CENTENNIAL COMMUNICATIONS AT 1600 WYNKOOP
AT 12:00PM ON THE 15TH DAY OF APRIL, 1999 AND DELIVER TO
1099 18TH STREET, #700, DENVER, CO.
INSTALLATION AND PROGRAMMING OF ABOVE EQUIPMENT
PER CUSTOMERS REQUEST. TRAINING TO BE PERFORMED ON
THE 16TH DAY OF APRIL PER CUSTOMERS REQUEST.
ABOVE REQUEST TO BE DONE ON A TIME AND MATERIALS
BASIS. HOURLY RATE TO BE AT $60.00 PER HOUR FOR WORK
PERFORMED PRIOR TO MAY 1, 1999. THE INSTALLATION, TRAINING
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
ACCEPTANCE AT PROPOSAL - The above prices, specifications and conditions are
satisfactory and are hereby accepted. You are authorized to do the work as
specified. Payment will be made as outlined above.
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Date of Acceptance: 4-2-99 Signature /s/
- ----------------------------------------------------------------------------------
</TABLE>
<PAGE>
*** Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. Sections 200.80(b)(4),
200.83 and 240.24b-2
AGREEMENT
BETWEEN
JATO COMMUNICATIONS CORPORATION
AND
LUCENT TECHNOLOGIES INC.
The mailing, delivery or negotiation of this Agreement by Lucent, Jato or its
their respective agents or attorneys shall not be deemed an offer by Lucent
or Jato to enter into any transaction or to enter into any other
relationship, whether on the terms contained herein or on any other terms.
This Agreement shall not be binding upon Lucent or Jato, nor shall Lucent or
Jato have any obligations or liabilities or any rights with respect thereto,
or with respect to the transactions contemplated by the Agreement, unless and
until the Agreement has been approved by the executive officers and/or Board
of Directors of Lucent and Jato and Lucent and Jato have executed and
delivered this Agreement. Until such execution and delivery of this
Agreement, Lucent or Jato may terminate all negotiation and discussion of the
subject matter hereof, without cause and for any reason, without recourse or
liability.
<PAGE>
TABLE OF CONTENTS
GENERAL AGREEMENT
<TABLE>
<S> <C>
1. ARTICLE I GENERAL TERMS AND CONDITIONS...............................1
1.1 DEFINITIONS:.........................................................1
1.2 TERM OF AGREEMENT:...................................................3
1.3 SCOPE:...............................................................3
1.4 CUSTOMER RESPONSIBILITY:.............................................4
1.5 ORDERS:..............................................................4
1.6 CHANGES IN CUSTOMER'S ORDERS:........................................5
1.7 CHANGES IN PRODUCTS:.................................................5
1.8 PRICES:..............................................................5
1.9 INVOICES AND TERMS OF PAYMENT:.......................................6
1.10 PURCHASE MONEY SECURITY INTEREST:....................................7
1.11 TAXES:...............................................................8
1.12 TRANSPORTATION AND PACKING:..........................................8
1.13 TITLE AND RISK OF LOSS:..............................................8
1.14 WARRANTY:............................................................8
1.15 INFRINGEMENT:.......................................................10
1.16 CUSTOMER'S REMEDIES:................................................11
1.17 USE OF INFORMATION:.................................................11
1.18 DOCUMENTATION:......................................................12
1.19 NOTICES:............................................................12
1.20 FORCE MAJEURE:......................................................12
1.21 ASSIGNMENT:.........................................................13
1.22 TERMINATION OF AGREEMENT FOR BREACH:................................13
1.23 ARBITRATION:........................................................13
1.24 NON-SOLICITATION:...................................................14
1.25 INDEPENDENT CONTRACTOR:.............................................14
1.26 RELEASES VOID:......................................................14
1.27 PUBLICITY:..........................................................14
1.28 CONFIDENTIALITY OF AGREEMENT:.......................................14
1.29 AMENDMENTS:.........................................................14
1.30 SEVERABILITY:.......................................................14
1.31 WAIVER:.............................................................15
1.32 SURVIVAL:...........................................................15
1.33 SECTION HEADINGS:...................................................15
</TABLE>
<PAGE>
<TABLE>
<S> <C>
1.34 CHOICE OF LAW:......................................................15
2. ARTICLE II PROVISIONS APPLICABLE TO LICENSED MATERIALS..............16
2.1 LICENSE FOR LICENSED MATERIALS:.....................................16
2.2 CHANGES IN LICENSED MATERIALS:......................................16
2.3 CANCELLATION OF LICENSE:............................................16
3. ARTICLE III ENTIRE AGREEMENT:.......................................17
3.1 ENTIRE AGREEMENT....................................................17
</TABLE>
<PAGE>
This Data Networking Sales Agreement Number LNM99PK000005L (hereinafter
"General Agreement" or "Agreement'" is made effective as of the date of last
signature ("Effective Date") by and between Jato Communications Corporation,
a Delaware corporation, with offices located at 1099 18th Street, Suite 700,
Denver, Colorado 80202 (hereinafter "Customer"), and Lucent Technologies
Inc., a Delaware corporation, acting through its Data Networking Systems
Group with offices located at 600 Mountain Avenue, Murray Hill, New Jersey
07974 (hereinafter "Seller").
WHEREAS, Seller desires to supply to Customer and Customer desires to procure
from Seller the products and services described herein, pursuant to the terms
and conditions contained herein.
NOW, THEREFORE, in consideration of the mutual promises herein contained and
other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties intending to be lawfully bound agree as
follows:
1. ARTICLE I
GENERAL TERMS AND CONDITIONS
1.1 DEFINITIONS:
For the purpose of this Agreement, the following definitions will apply.
(a) "Affiliate" of a corporation means its Subsidiaries, any company of
which it is a Subsidiary, and other Subsidiaries of such company.
(b) "Customer Price List" means Seller's published "Ordering and Price
Guides" or other price notification releases furnished by Seller for
the purpose of communicating Seller's prices or pricing related
information to Customer; however, this does not include Firm Price
Quotes.
(c) "Cutover" means the verification by Seller and Customer of actual usage
over the installed Products. This function occurs after Turnover and is
not performed by Seller unless specifically requested by Customer and
is usually covered under a separate Professional Services Agreement.
(d) "Definition of Services" means the template jointly developed by
Customer and Seller of Services to be provided or performed by Seller
for Customer. Customer and Seller shall agree to the Services to be
performed or provided. Customer shall, then, issue a Statement of Work
("SOW") from which Seller will confirm prices for work to be performed
or provided.
(e) "Delivery Date" means the date required under this Agreement by which
all deliverables ordered by Customer are to be delivered to the
destination specified in the Purchase Order.
(f) "Designated Processor" means the Product for which licenses to Use
Licensed Materials are granted.
(g) "Firmware" means a combination of (1) hardware and (2) Software
represented by a pattern of bits contained in such Hardware.
(h) "Fit" means physical size or mounting arrangement (e.g., electrical or
mechanical connections).
(i) "Form" means physical shape.
Lucent Technologies Proprietary
Use Pursuant to Company Instructions
1
<PAGE>
(j) "Function" means the technical operation or process the Product
performs.
(k) "Hazardous Materials" means material designated as a "hazardous
chemical substance or mixture" pursuant to Section 6 of the Toxic
Substance Control Act; a "hazardous material" as defined in the
Hazardous Materials Transportation Act (49 U.S.C.1801,et seq.)
"hazardous substance" as defined in the Occupational Safety and Health
Act Hazard Communication Standard (29 CFR 1910.1200) or as defined in
the Comprehensive Governmental Response, Compensation and Liability
Act, 42 U.S.C. 9601 (14), or other pollutant or contaminant.
(l) "Installation Complete Date" means the date on which OS Software,
transmission systems Software, and/or hardware is installed by Seller
at the location specified in the order and determined by Seller to be
ready for Use by Customer.
(m) "Licensed Materials" means the Software and Related Documentation for
which licenses are granted by Seller under this Agreement; no Source
Code versions of Software are included in Licensed Materials.
(n) "OS Software" means the object code Software, for operations systems,
embodied in any medium, including firmware.
(o) "Pricing/Discount Schedule" means a published schedule or spreadsheet
of prices mutually agreed upon by the parties in writing for specific
Lucent or OEM Products, Licensed Materials and Services provided by
Seller. Such pricing schedule shall include negotiated discounts
applicable to the Agreement.
(p) "Product" means equipment hardware, and parts thereof, but the term
does not mean Software whether or not such Software is part of
Firmware.
(q) "Purchase Order" means an order provided by Customer to Seller
detailing the specific Products, Licensed Materials and Services to be
ordered. Customer will reference the corresponding Statement of Work
including the work site location, ship to and bill to address,
requested completion dates, quantity of Products and Licensed
Materials, as described in more detail in Section 1.5.
(r) "Related Documentation" means materials useful in connection with
Software such as, but not limited to, flowcharts, logic diagrams and
listings, program descriptions and Specifications.
(s) "Services" means any engineering, installation or repair services to be
performed by Seller under this Agreement, but the term "Services" does
not include any services provided by the Professional Services Division
of Seller's Network Systems Group unless otherwise expressly agreed to
in writing by the parties.
(t) "Software" means a computer program consisting of a set of logical
instructions and tables of information that guide the functioning of a
processor. Such program may be contained in any medium whatsoever,
including hardware containing a pattern of bits, representing such
program. However, the term "Software" does not mean or include such
medium.
(u) "Source Code" means any version of Software incorporating high-level or
assembly language that generally is not directly executable by a
processor.
(v) "Specifications" means Seller's or its vendor's technical
specifications for particular Products or Software furnished hereunder.
Lucent Technologies Proprietary
Use Pursuant to Company Instructions
2
<PAGE>
(w) "Statement of Work" ("SOW") means the detailed description of the
actual Services such as installation, staging, maintenance and
monitoring, to be performed for Customer by Seller which includes the
expected completion dates of such Services. Seller will confirm prices
with Customer based upon the work detailed therein and Customer will
issued a Purchase Order to Seller for applicable Products, Licensed
Materials and Services to complete the Statement of Work (SOW).
(x) "Subsidiary" means any corporation in which Customer owns more than
fifty percent (50%) of the eligible voting stock; such corporation
shall be deemed to be a Subsidiary of such Customer only as long as
such ownership or control exists.
(y) "Turnover" means, with respect to Products and Software to be installed
by Seller, the point at which Seller has completed the installation and
notifies Customer that the installation is completed and that Seller
has confirmed that the installed Product and/or Software comply with
Seller's Specifications.
This term does not mean Cutover, which is separately defined herein.
(z) "Use," with respect to Licensed Materials means loading the Licensed
Materials, or any portion thereof, into a Designated Processor for
execution of the instructions and tables contained in such Licensed
Materials.
1.2 TERM OF AGREEMENT:
The term of this Agreement shall commence on the Effective Date and shall
continue in effect thereafter for a period of three (3) years ("Term").
1.3 SCOPE:
(a) The terms and conditions of this Agreement shall apply to all
transactions occurring during the Term whereby Data Networking Systems
Products, Licensed Materials or Services are provided by Seller to
Customer. Except as expressly stated in this Agreement, this Agreement
shall not apply to any products, licensed materials or services offered
for supply by any other group (e.g. Microelectronics, Business
Communications Systems) within Lucent. By placing orders with Seller,
including change and/or addition orders, or using any Products,
Licensed Materials, or Services provided hereunder, Customer agrees to
be bound to the terms of this Agreement. Customer understands and
agrees that all Products, Licensed Materials, or Services furnished by
Seller to Customer pursuant to this Agreement shall be for Customer's
own internal use in the United States only.
(b) This Agreement shall apply to all transactions occurring during the
Term whereby Seller agrees to provide to Customer certain products
manufactured by and purchased from Copper Mountain, Inc. and other OEM
equipment purchased through Seller. The terms and conditions related to
the Other Equipment Manufacturer (OEM) agreement between Seller and
Copper Mountain, Inc. are detailed in a separate purchase agreement.
(c) The terms and conditions of this Agreement apply to Services performed
by Seller for Customer under this agreement including the Definition of
Services and other work plans and processes, such as Statement of Work
(SOW) and Purchase Order, agreed to by both Seller and Customer.
(d) Seller and Customer have agreed to fund a co-marketing arrangement as
outlined in a separate co-marketing agreement.
Lucent Technologies Proprietary
Use Pursuant to Company Instructions
3
<PAGE>
(e) All Firm Price Quotes made by Seller to Customer shall incorporate the
terms and conditions of this Agreement. Any conflicting terms and
conditions of a Firm Price Quote, signed by an authorized
representative of Seller and Customer and dated after the effective
date of this Agreement, will supersede the comparable pricing terms of
this Agreement. Only an officer of Customer shall be an authorized
representative of Customer.
1.4 CUSTOMER RESPONSIBILITY:
Customer shall, at no charge to Seller, provide Seller with such technical
information, data, technical support or assistance as may reasonably be
required by Seller to fulfill its obligations under this Agreement, any
subordinate agreement or order. If Customer falls to provide the technical
information, data, support or assistance, within a reasonable timeframe,
Seller shall be discharged from any such obligation. Notice of all such
requests for information must be provided to Customer in writing 30 days or
as soon as is reasonably possible prior to when Seller requires the
designated information. All technical information and data provided by
Customer shall be subject to the confidentiality obligations set forth in
Section 1.17 below.
1.5 ORDERS:
(a) All Purchase Orders submitted by Customer for Products, Licensed
Materials, and Services shall incorporate and be subject to the terms
and conditions of this Agreement. Any Purchase Order submitted pursuant
to a Firm Price Quote shall include such Firm Price Quote number. All
Purchase Orders, including electronic orders, shall contain the
information as detailed below:
(i) Complete and correct ship to and bill to address;
(ii) The quantity and type of Products, Licensed Materials, and
Services being ordered;
(iii) The price;
(iv) The requested Delivery Date in accordance with Seller's
standard delivery intervals for the applicable Products,
Licensed Materials, and Services being ordered. In the event a
non standard delivery interval has been mutually agreed to by
the parties, reference to the specific document agreeing to
the interval needs to be included;
(v) The requested completion date in accordance with Seller's
standard completion date intervals for the applicable
Products, Licensed Materials, and Services being ordered;
(vi) Reference to this Agreement;
The requested Delivery Date of any Purchase Order must be in accordance
with Sellers published standard order intervals in effect on the date
of receipt of order by Seller. Seller reserves the right to change such
standard order intervals without notification to Customer but only with
respect to future orders. Changes in intervals will be provided to
Customer at time Purchase Order is placed to Seller by Customer. Seller
agrees that it will comply with the standard order intervals in effect.
No change in the standard order intervals shall affect Purchase Orders
submitted prior to the change to the standard order intervals. Purchase
Orders submitted electronically shall be binding on Customer
notwithstanding the absence of a signature. All Purchase Orders are
subject to acceptance by Seller. All Purchase Orders not rejected
within five (5) business days of receipt will be deemed to be accepted.
Seller reserves the right to place any order on hold, delay shipment,
and/or reject any order due to, but not limited to the breach or
default by Customer of its obligations under this Agreement or
Customer's insufficient credit limits
Lucent Technologies Proprietary
Use Pursuant to Company Instructions
4
<PAGE>
including Customer's inability to sustain adequate financing.
Customer shall be notified in writing of any such action within
five (5) business days of the receipt of any Purchase Order.
However, upon the occurrence of a force majure event, Seller will
notify Customer as soon as reasonably possible. Terms and conditions
on Customer's purchase order which are inconsistent with the
provisions of this Agreement and any pre-printed terms and conditions
on Customer's purchase order shall be ineffective, void and of no
force and effect. Orders shall be sent to the following address:
Lucent Technologies Inc.
Customer Service
6701 Roswell Road
Building D - 3rd Floor
Atlanta, GA 30328-2501
1.6 CHANGES IN CUSTOMER'S ORDERS:
Changes by Customer to a Purchase Order which has been previously accepted by
Seller (a "Change Order") are subject to acceptance by Seller. Change Orders
shall be treated as an amendment or modification to the original Purchase
Order, upon agreement between Seller and Customer, and shall follow Seller's
change order process. In the event Seller accepts a Change Order and such
change affects Seller's ability to meet its obligations under the original
order, any price (or discount, if applicable), Delivery Date or Services
completion date quoted by Seller with respect to such original Purchase Order
is subject to change only for those items changed or impacted by the
requested change on the original Purchase Order. Seller will provide to
Customer written quotations and expected completion dates for any requested
Change Orders within five (5) calendar days from receipt of the Change Order.
1.7 CHANGES IN PRODUCTS:
Prior to accepting any Purchase Orders, Seller may at any time make changes
in the Products. Furthermore, with respect to Purchase Orders calling for
shipment more than thirty (30) days outside of Seller's normal shipping
interval for the Products, unless Customer has agreed that the Purchase Order
is non-cancelable. Seller may modify the Product(s) drawings and
Specifications or may substitute Products of later design, provided that
Seller gives Customer prompt written notice of such modifications or
substitutions and Customer has not within five (5) business days after
receipt of such notice notified Seller of its intent to make the Purchase
Order non-cancelable. Seller agrees that such modifications or substitutions
of Products will not impact upon Form, Fit, or Function under normal and
proper use of the ordered Product as provided in Seller's Specifications.
With respect to all changes, modifications, and substitutions of Licensed
Materials, and changes, modifications and substitutions of Products that do
impact the Form, Fit, or Function of the ordered Product, Seller shall notify
Customer in writing at least thirty (30) days prior to the date the changes
become effective. For products provided through an OEM arrangement and
Customer's purchase of such product through Seller is based upon that
arrangement, Seller will notify Customer and discuss with Customer proposed
changes that affect such purchases prior to making material changes in the
product or the relationship with such OEM. In the event the Customer objects
to any change, modification or substitution of Products and Licensed
Materials, Customer shall notify Seller within thirty (30) days from the date
of its notice from Seller. Upon receipt of notice, Seller shall not furnish
changed, modified or substituted Products or Licensed Materials to Customer
on any orders in process.
1.8 PRICES:
(i) To the extent Customer's order is subject to a Firm Price Quote made by
Seller, prices, fees and charges (hereinafter "Prices") shall be as set
forth in Seller's Firm Price Quote. In no event shall
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Prices, whether subject to a Firm Price Quote or otherwise, exceed the prices
agreed upon in the Customer's Pricing/Discount Schedule.
(ii) Except as expressly stated in this Agreement, in all other cases Prices
shall be those contained in Customer's price discount schedule. Prices
for Products and license fees for Licensed Materials to be shipped, or
Services to be performed beyond the published shipping interval will be
based upon the date required for order entry by Seller in accordance
with Customer's requested date and applying the Price from the
Customer's price discount schedule in effect as of that date.
(iii) Seller may amend its Prices, other than those subject to Firm Price
Quotes and those on the Customer's Pricing/Discount Schedule. Seller
agrees to provide thirty (30) days written notice of any increase in
Prices.
(iv) Seller reserves the right to remove any product from the price discount
schedule upon at least ninety (90) prior written notice to Customer.
(V) SELLER ACKNOWLEDGES THE STRATEGIC RELATIONSHIP BETWEEN CUSTOMER AND
SELLER AND CUSTOMER'S EXPECTATION OF [ * ]. IN FURTHERANCE THEREOF,
SELLER AGREES TO DO THE FOLLOWING:
(a) SELLER SHALL NOTIFY CUSTOMER IN WRITING OF ANY [ * ] FOR THE
PRODUCTS COVERED BY THIS AGREEMENT AND SHALL OFFER SUCH
PRODUCTS TO CUSTOMER AT [ * ]. THE NEW PRICES SHALL BE
EFFECTIVE WITH RESPECT TO PRODUCTS DELIVERED AFTER THE
EFFECTIVE DATE OF THE NEW PRICE LIST.
(b) UPON NOTICE BY CUSTOMER THAT THE PRICES TO CUSTOMER HAVE
BECOME [ * ], SELLER AGREES TO NEGOTIATE IN GOOD
FAITH WITH CUSTOMER WITH A VIEW TOWARD [ * ] TAKING INTO
CONSIDERATION THE OTHER TERMS OF THIS AGREEMENT AND THE
RELATIONSHIP OF THE PARTIES.
(c) UPON NOTICE BY CUSTOMER THAT IT BELIEVES THAT THE [ * ] AND
OTHER TERMS, CONDITIONS AND CIRCUMSTANCES WHICH WOULD HAVE A
BEARING ON [ * ] WARRANTIES, ALLOCATION OF RISKS, SPECIAL
SERVICES, ETC.) AGREED TO BY SELLER AND ANOTHER CUSTOMER FOR
THE SAME OR SIMILAR PRODUCTS ARE [ * ] THAN APPLICABLE TO
CUSTOMER, SELLER AGREES TO REVIEW THE ENTIRE ARRANGEMENT WITH
THE OTHER CUSTOMER IN GOOD FAITH. IF, IN SELLER'S GOOD FAITH
JUDGMENT SELLER DETERMINES THAT THE ENTIRE ARRANGEMENT WITH
THE OTHER CUSTOMER ARE [ * ] THEN SELLER SHALL OFFER
A COMPARABLE ARRANGEMENT TO CUSTOMER. CUSTOMER UNDERSTANDS
THAT THE TERMS AND CONDITIONS OF SELLER'S AGREEMENTS WITH ITS
CUSTOMERS ARE TREATED IN CONFIDENCE BY SELLER AND SELLER SHALL
NOT BE OBLIGATED TO DISCLOSE THE TERMS AND CONDITIONS OF ANY
AGREEMENT THAT SELLER HAS WITH ANY OF ITS CUSTOMERS EITHER IN
THE EXECUTION OF THIS CLAUSE NOR IN ANY LEGAL OR OTHER
PROCEEDING BROUGHT TO ENFORCE THIS CLAUSE AND SELLER'S FAILURE
TO DISCLOSE SUCH SHALL NOT HAVE ANY EVIDENTIARY BEARING IN ANY
SUCH HEARING. SELLER'S GOOD FAITH DETERMINATION WITH RESPECT
TO FAVORABILITY AND COMPARABILITY SHALL BE CONCLUSIVE.
1.9 INVOICES AND TERMS OF PAYMENT:
(a) Payment for Products, Licensed Materials and Services (including
transportation charges and taxes, if applicable) will be due net 30
from the date of Seller's invoice. For orders which Seller is
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responsible for installation, the payment will be invoiced upon
Turnover or as soon thereafter as practical. For furnish only orders
the payment will be invoiced upon shipment or as soon as practical
thereafter. In either case the final payment is due for receipt by
Seller net 30.
(b) For Products, Licensed Materials and Services (including transportation
charges and taxes, if applicable) that are not required to be paid in
advance, Seller will invoice Customer, all amounts due for Products and
Licensed Materials upon shipment and all amounts due for Services, upon
completion of Services or, in either event, as soon as practical
thereafter. Customer shall pay such invoiced amounts for receipt by
Lucent net 30 from the invoice date.
(c) Customer shall pay all amounts due Seller hereunder using check of
immediately available funds or Electronic Funds Transfer ("EFT")
whether amounts have been invoiced by Seller. EFT payments by Customer
shall be made to the following account of Seller or such other account
as is subsequently designated by Seller in writing and, concurrent with
the EFT payment, Customer shall fax a copy of the remittal to Seller's
Manager Cash Operations at 770-750-4288.
Chase Manhattan Bank
New York, New York
Account Name: Lucent Technologies Inc.
ACCT. 910144-9099
ABA 021000021
(d) If Customer fails to pay any invoiced amount when due, the invoiced
amount shall be subject to a late payment charge at the rate of one and
one half percent (1-1/2%) per month, or portion thereof, of the amount
due (but not to exceed the maximum lawful rate). Customer agrees to pay
Seller's reasonable attorneys' fees and other costs incurred by Seller
in the collection of any amounts invoiced hereunder.
(e) Customer agrees to review all invoices furnished by Seller hereunder
upon receipt and, to use commercially reasonable efforts to notify
Seller of any billing discrepancies within ten (10) days of receipt of
the applicable invoice. Such inquiries can be directed to Seller in
writing or by telephone. Inquiries shall be made to the telephone
number or, if in writing, to the address identified on the invoice.
1.10 PURCHASE MONEY SECURITY INTEREST:
CUSTOMER AND SELLER ARE IN THE PROCESS OF NEGOTIATING FINANCING ARRANGEMENTS
WHEREBY SELLER WILL BE PROVIDING FINANCING FOR PURCHASES MADE BY CUSTOMER
HEREUNDER. THE PARTIES AGREE THAT THE TERMS OF THE FINANCING ARRANGEMENTS, IF
CONCLUDED, SHALL SUPERSEDE THIS SECTION. UNTIL SUCH ARRANGEMENTS ARE CONCLUDED,
OR IN THE EVENT THAT CUSTOMER ELECTS TO MAKE PURCHASES HEREUNDER OUTSIDE OF SUCH
FINANCING ARRANGEMENTS, THIS SECTION SHALL APPLY.
(a) Seller reserves and Customer agrees that Seller shall have a purchase
money security interest in Products and Licensed Materials supplied to
Customer by Seller under this Agreement until any and all payments and
charges due Seller under this Agreement related to such Products or
Licensed Materials, including, without limitation, shipping and
installation charges, are paid in full. Seller shall have the right at
any time during the Term upon, written notice to Customer, to file in
any state or local jurisdiction such financing statements (e.g., UCC-1
financing statements) as Seller deems necessary to perfect its purchase
money security interest hereunder. Upon request by Seller, Customer
hereby agrees to execute all documents necessary to secure and perfect
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Seller's purchase money security interest hereunder, including without
limitation UCC-1, Power of Attorney, if required, to appoint Seller as
Customer's attorney-in-fact for purposes of executing and filing such
financing statements, or such other documents Seller deems reasonably
necessary. Customer also agrees that this Agreement may be filed by
Seller in any state or local jurisdiction as a financing statement (or
as other evidence of the Seller's purchase money security interest).
(b) In addition to any other remedy available to Seller as provided herein,
by common law and by statute, Seller may exercise its right to reclaim
all Products and Licensed Materials sold to Customer pursuant to
UCC-2-702 or such other applicable provision as it may exist from state
to state, upon discovery of Customer's insolvency, provided Seller
demands in writing reclamation of such goods before ten (10) days after
receipt of such goods by Customer, or if such ten (10) day period
expires after the commencement of a bankruptcy case, before twenty (20)
days after receipt of such goods by the Customer.
1.11 TAXES:
Customer shall be liable for all taxes and related charges, however
designated, imposed upon or based upon its provision, sale, license or Use of
Products, Licensed Materials or Services levied upon the sale, excluding
taxes on Seller's net income, unless Customer provides Seller with a valid
tax exempt certificate. Seller's failure to collect taxes in accordance
herewith shall not be deemed to be an authorization to resell Products or
Services or sublicense Licensed Materials. Seller is responsible for all
collection and remittance of applicable taxes at the time of Customer payment.
1.12 TRANSPORTATION AND PACKING:
Seller, in accordance with its normal practices, shall arrange for prepaid
transportation to destinations in the contiguous United States and shall
invoice actual transportation charges to Customer. All transportation charges
invoiced to Customer shall be at the actual costs charged by the
transportation carrier and no price or cost mark up will be added by Seller.
Premium transportation will be used only at Customer's request. Seller shall
pack Products for delivery in the contiguous United States, in accordance
with its standard practices for domestic shipments. Where, in order to meet
Customer's requests, Seller packs Products in other than its normal manner or
for destinations outside the contiguous United States, Customer shall pay the
additional charges for such packing and transportation.
1.13 TITLE AND RISK OF LOSS:
Title to Products only and risk of loss to Products and Licensed Materials
shall pass to Customer upon delivery to the Customer. Title to all Licensed
Materials (whether or not part of Firmware) furnished by Seller, and all
copies thereof made by Customer, including translations, compilations and
partial copies are, and shall remain, the property of Seller. Customer shall
notify Seller promptly of any claim with respect to loss which occurs while
Seller has the risk of loss and shall cooperate in every reasonable way to
facilitate the settlement of any claim. For purposes of this section,
"delivery" shall mean the point at which Seller or Seller's supplier or agent
turns over possession of the Product or Licensed Materials to Customer,
Customer's employee, Customer's designated carrier, Customer's warehouse, or
other Customer's agent and not necessarily the final destination shown on the
order.
1.14 WARRANTY:
(a) Seller warrants to Customer only, that during the applicable warranty
period, which shall in no event be less than ninety (90) days from the
date of delivery, (i)Seller's manufactured Products (exclusive of
Software) will be free from defects in material and workmanship and
will conform to
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Seller's Specifications for such Products; (ii)Licensed Materials
developed by Seller will be free from those defects which materially
affect function or performance in accordance with Seller's
Specifications; and (iii) Services will be performed in a workmanlike
manner and in accordance with good usage and accepted practices in the
community in which Services are provided. With respect to Products or
Licensed Materials or partial assembly of Products furnished by Seller
but neither manufactured by Seller nor purchased by Seller pursuant to
its procurement Specifications ("Vendor Items"), Seller, to the extent
permitted, does hereby assign to Customer the warranties given to
Seller by its vendor(s) of such Vendor Items.
(b) If, under normal and proper use, a defect or non-conformity appears in
Seller's manufactured Products or Licensed Materials during the
applicable warranty period and Customer promptly notifies Seller in
writing of such defect or non-conformance and follows Seller's
instructions regarding return of defective or non-conforming Product or
Licensed Materials, Seller, at its option, will either repair, replace
or correct the same without charge at its manufacturing or repair
facility or provide a full refund or credit based on the original
purchase price or license fee. If engineering or installation Services
prove not to be performed as warranted within a three (3) month period
commencing on the date of completion of the Services, Seller, at its
option, either will correct the defect or non-conforming Services or
render a full refund or credit based on the original charges for the
Services. No Product or Licensed Materials will be accepted for repair
or replacement without the written authorization of and in accordance
with instructions of Seller. Seller shall pay all costs and expenses
associated with (i) removal and reinstallation of the Product or
Licensed Materials, (ii) transportation expenses associated with
returning such Product or Licensed Materials to Seller, and (iii)
transportation of the repaired or replaced Product or Licensed
Materials to any United States destination designated by Customer
(collectively, the "Return Costs"). If Seller determines, in good
faith, that returned Product or Licensed Materials are not defective,
Customer shall pay Seller's costs of handling, inspecting, testing and
transportation and, if applicable, travel and related expenses and
shall reimburse Seller for all Return Costs previously paid by Seller.
In repairing or replacing any Product, part of Product, or Licensed
Materials medium under this warranty, Seller may use either new,
remanufactured, reconditioned, refurbished or functionally equivalent
Products or parts. Replaced Products or parts shall become Seller's
property.
(c) With respect to Seller's manufactured Products which Seller has
ascertained are not readily returnable for repair, Seller, at its
option, may elect to repair or replace the Products at Customer's site
and shall pay all costs and expenses associated therewith, including
but not limited to restoring the site after completion of the repairs
or replacement.
(d) Seller makes no warranty with respect to defective conditions or
non-conformities resulting from any of the following: Customer's
modifications, misuse, neglect, accident or abuse; Customer's improper
wiring, repairing, splicing, alteration, installation, storage or
maintenance; use by Customer in a manner not in accordance with
Seller's or its vendor's Specifications, or operating instructions or
failure of Customer to apply previously applicable Seller's
modifications or corrections. In addition, Seller makes no warranty
with respect to Products which have had their serial numbers or month
and year of manufacture removed, altered and with respect to expendable
items that could not be reasonably inspected and replaced by Customer,
including, without limitation, fuses, light bulbs, motor brushes and
the like. No warranty is made that Software will run uninterrupted or
error free, and in addition Seller makes no warranty with respect to
defects related to Customer's data base errors.
(e) THE FOREGOING WARRANTIES ARE EXCLUSIVE AND ARE IN LIEU OF ALL OTHER
EXPRESS AND IMPLIED WARRANTIES, INCLUDING BUT NOT LIMITED TO WARRANTIES
OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. CUSTOMER'S
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SOLE AND EXCLUSIVE REMEDY SHALL BE SELLER'S OBLIGATION TO REPAIR,
REPLACE, CREDIT, OR REFUND AS SET FORTH ABOVE IN THIS WARRANTY.
1.15 INFRINGEMENT:
(a) In the event of any claim, action, proceeding or suit by a third party
against Customer alleging an infringement of any United States patent,
United States copyright, or United States trademark, or a violation in
the United States of any trade secret or proprietary rights by reason
of the use, in accordance with Sellers Specifications, of any Product
or Licensed Materials furnished by Seller to Customer under this
Agreement, Seller, at its expense, will defend Customer, subject to the
conditions and exceptions stated below. Seller will reimburse Customer
for any cost, expense or attorneys' fees, incurred at Seller's written
request or authorization, and will indemnify Customer against any
liability assessed against Customer by final judgment on account of
such infringement or violation arising out of such use.
(b) If Customer's use shall be enjoined or in Seller's opinion is likely to
be enjoined, Seller will, at its expense and at its option, either (1)
replace the enjoined Product or Licensed Materials furnished pursuant
to this Agreement with a suitable substitute free of any infringement;
(2) modify it so that it will be free of the infringement; or (3)
procure for Customer a license or other right to use it. If none of the
foregoing options are practical, Seller will remove the enjoined
Product or Licensed Materials and refund to Customer any amounts paid
to Seller therefor less a reasonable charge for any actual period of
use by Customer.
(c) Customer shall give Seller prompt written notice of all such claims,
actions, proceedings or suits alleging infringement or violation and
Seller shall have full and complete authority to assume the sole
defense thereof, including appeals, and to settle same. Customer shall,
upon Seller's request and at Seller's expense, furnish all information
and assistance available to Customer and cooperate in every reasonable
way to facilitate the defense and/or settlement of any such claim,
action, proceeding or suit.
(d) No undertaking of Seller under this section shall extend to any such
alleged infringement or violation to the extent that it: (1) arises
from adherence to design modifications, specifications, drawings, or
written instructions which Seller is directed by Customer to follow,
but only if such alleged infringement or violation does not reside in
corresponding commercial Product or Licensed Materials of Sellers
design or selection; or (2) arises from adherence to instructions to
apply Customer's trademark, trade name or other company identification;
or (3) resides in a product or licensed materials which are not of
Seller's origin and which are furnished by Customer to Seller for use
under this Agreement; or (4) relates to uses of Product or Licensed
Materials provided by Seller in combinations with other Product or
Licensed Materials, furnished either by Seller or others, which
combination was not installed, recommended or otherwise approved by
Seller, where the Product or Licensed Materials would not infringe if
not deployed in such combination. In the foregoing cases numbered (1)
through (4), Customer will defend and save Seller harmless, subject to
the same terms and conditions and exceptions stated above, with respect
to the Seller's rights and obligations under this section.
(e) The liability of Seller and Customer with respect to any and all
claims, actions, proceedings or suits by third parties alleging
infringement of patents, trademarks or copyrights or violation of trade
secrets or proprietary rights because of, or in connection with, any
Products or Licensed Materials furnished pursuant to this Agreement
shall be limited to the specific undertakings contained in this
section.
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1.16 CUSTOMER'S REMEDIES:
(a) CUSTOMER'S EXCLUSIVE REMEDIES AND THE ENTIRE LIABILITY OF SELLER, ITS
AFFILIATES AND THEIR EMPLOYEES, AND AGENTS, AND ITS SUPPLIERS FOR ANY
CLAIM, LOSS, DAMAGE OR EXPENSE OF CUSTOMER OR ANY OTHER ENTITY ARISING
OUT OF THIS AGREEMENT, OR THE USE OR PERFORMANCE OF ANY PRODUCT,
LICENSED MATERIALS, OR SERVICES, WHETHER IN AN ACTION FOR OR ARISING
OUT OF BREACH OF CONTRACT, TORT, INCLUDING NEGLIGENCE, INDEMNITY, OR
STRICT LIABILITY, SHALL BE AS FOLLOWS:
1) FOR INFRINGEMENT -- THE REMEDY SET FORTH IN THE "INFRINGEMENT"
SECTION;
2) FOR THE NON-PERFORMANCE OF PRODUCTS, SOFTWARE, AND SERVICES
DURING THE WARRANTY PERIOD -- THE REMEDY SET FORTH IN THE
APPLICABLE "WARRANTY" SECTION;
3) FOR TANGIBLE PROPERTY DAMAGE AND PERSONAL INJURY CAUSED BY
SELLER'S NEGLIGENCE -- THE AMOUNT OF THE PROVEN DIRECT
DAMAGES;
4) FOR EVERYTHING OTHER THAN AS SET FORTH ABOVE -- THE AMOUNT OF
THE PROVEN DIRECT DAMAGES NOT TO EXCEED $100,000.00 per
occurrence PLUS AWARDED COUNSEL FEES AND COSTS.
(b) NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, SELLER, ITS
AFFILIATES AND THEIR EMPLOYEES, AND AGENTS, AND ITS SUPPLIERS SHALL NOT
BE LIABLE FOR ANY INCIDENTAL, INDIRECT, OR CONSEQUENTIAL DAMAGES OR
LOST PROFITS, REVENUES OR SAVINGS ARISING OUT OF THIS AGREEMENT, OR THE
USE OR PERFORMANCE OF ANY PRODUCT, LICENSED MATERIALS, OR SERVICES,
WHETHER IN AN ACTION FOR OR ARISING OUT OF BREACH OF CONTRACT, TORT,
INCLUDING NEGLIGENCE, OR STRICT LIABILITY. THIS SECTION, 1.16(B), SHALL
SURVIVE FAILURE OF AN EXCLUSIVE OR LIMITED REMEDY.
(c) CUSTOMER SHALL GIVE SELLER PROMPT WRITTEN NOTICE OF ANY CLAIM. ANY
ACTION OR PROCEEDING AGAINST SELLER MUST BE BROUGHT WITHIN TWENTY-FOUR
(24) MONTHS AFTER THE CAUSE OF ACTION ACCRUES.
1.17 USE OF INFORMATION:
All technical and business information in whatever form recorded which bears
a legend or notice restricting its use, copying, or dissemination or, if not
in tangible form, is described as being proprietary or confidential at the
time of disclosure and is subsequently summarized in a writing so marked and
delivered to the receiving party within thirty (30) days of disclosure to the
receiving party (all hereinafter designated "Information") shall remain the
property of the furnishing party. The furnishing party grants the receiving
party the right to use such Information only for purposes expressly permitted
in this section. Such Information (1) shall not be reproduced or copied, in
whole or part, except for use as authorized in this Agreement; and (2) shall,
together with any full or partial copies thereof, be returned or destroyed
when no longer needed. Moreover, when Seller is the receiving party, Seller
shall use such Information only for the purpose of performing under this
Agreement, and when Customer is the receiving party, Customer shall use such
Information only (1) to order; (2) to evaluate the Products, Licensed
Materials or Services; or (3) to install, operate and maintain the particular
Products or Licensed Materials for which it was originally furnished. Unless
the furnishing party consents in writing, such Information, except for that
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part, if any, which is known to the receiving party free of any confidential
obligation, or which becomes generally known to the public through acts not
attributable to the receiving party, shall be held in confidence by the
receiving party. The receiving party may disclose such Information to other
persons, upon the furnishing party's prior written authorization, but solely
to perform acts which this section expressly authorizes the receiving party
to perform itself and further provided such other person agrees in writing (a
copy of which writing will be provided to the furnishing party at its
request) to the same conditions respecting use of Information contained in
this section and to any other reasonable conditions requested by the
furnishing party.
1.18 DOCUMENTATION:
Seller shall furnish to Customer, at no additional charge, one (1) copy of
the documentation for Products and/or one (1) copy of the Related
Documentation for Software licensed to Customer. Such documentation shall be
that which is customarily provided by Seller to its customers at no
additional charge. Such documentation shall be sufficient to enable Customer
to operate and maintain such Products and Software in accordance with
Seller's qualifications. Such documentation shall be provided either prior
to, included with, or shortly after shipment of Products and/or Software from
Seller to Customer. Additional copies of such documentation are available at
prices set forth in Seller's Customer Price Lists.
1.19 NOTICES:
(a) Any notice, demand or other communication (other than an order)
required, or which may be given, under this Agreement shall, unless
specifically otherwise provided in this Agreement, be in writing and
shall be given or made by nationally recognized overnight courier
service, confirmed facsimile, or certified mail, return receipt
requested and shall be addressed to the respective parties as follows:
If to Seller:
Lucent Technologies Inc.
Global Commercial Markets
5555 Oakbrook Parkway, Suite 5136B
Norcross, Georgia 30093
Attn: Contract Manager
If to Customer:
Jato Communications Corporation
1099 18' Street, Suite 800
Denver, Colorado 80202
Attn: Rex Humston
Any such notice shall be effective upon receipt. Each party may change its
designated representative who is to receive communications and notices and/or
the applicable address for such communications and notices by giving written
notice thereof to the other party provided herein.
1.20 FORCE MAJEURE:
Except for payment obligations, neither party shall be held responsible for
any delay or failure in performance to the extent that such delay or failure
is caused by fires, strikes, embargoes, explosions, earthquakes, floods,
wars, water, the elements, labor disputes, government requirements, civil or
military
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authorities, acts of God or by the public enemy, inability to secure raw
materials or transportation facilities, acts or omissions of carriers or
suppliers, or other causes beyond its reasonable control whether or not
similar to the foregoing.
1.21 ASSIGNMENT:
Except as provided in this section, neither party shall assign this Agreement
or any right or interest under this Agreement, nor delegate any work or
obligation to be performed under this Agreement, (an "assignment") without
the other party's prior written consent. Any attempted assignment in
contravention of this section shall be void and ineffective. Nothing shall
preclude a party from employing a subcontractor in carrying out its
obligations under this Agreement. A party's use of such subcontractor shall
not release the party from its obligations under this Agreement.
Notwithstanding the foregoing, Seller has the right to assign this Agreement
and to assign its rights and delegate its duties under this Agreement, in
whole or in part, at any time and Customer's consent, to any present or
future subsidiary or "Affiliate" of Seller or to any combination of the
foregoing. Such assignment or delegation shall release Seller from any
further obligation or liability thereon. Seller shall give Customer prompt
written notice of the assignment. For the purposes of this section, the term
"Agreement" includes this Agreement, any subordinate agreement placed under
this Agreement and any order placed under this Agreement or subordinate
agreement.
1.22 TERMINATION OF AGREEMENT FOR BREACH:
In the event either party is in material breach or default of the terms of
this Agreement and such breach or default continues for a period of ten (10)
days with respect to payment obligations or thirty (30) days with respect to
any other obligations after the receipt of written notice from the other
party, then the party not in breach or default shall have the right to
terminate this Agreement without any charge, obligation or liability except
for Products or Licensed Materials already delivered and Services already
performed. The party not in breach or default shall provide full cooperation
to the other party in every reasonable way to facilitate the remedy of the
breach or default hereunder within the applicable cure period.
Notwithstanding the foregoing, if the nature of the material breach or
default is such that it is not a payment obligation and it is incapable of
cure within the foregoing thirty (30) day period, then the thirty (30) day
cure period may be extended for a reasonable period of time (in no event to
exceed an additional thirty (30) days), provided that the party in breach or
default is proceeding diligently and in good faith to effectuate a cure.
1.23 ARBITRATION:
If a dispute arises out of or relates to this Agreement, or its breach, the
parties agree to escalate such dispute to their respective senior executives
for good faith negotiations seeking a mutually agreeable resolution. This
demand for escalation shall be in writing and notice shall be served in
accordance with the notice provision of this Agreement. If the dispute is not
resolved through such escalation within fifteen (15) days after the date of
escalation, either party shall have the right to submit the dispute to a sole
mediator selected by the parties or, at any time at the option of a party, to
mediation by the American Arbitration Association ("AAA"). If not thus
resolved, it shall be referred to a sole arbitrator selected by the parties
within thirty (30) days of the mediation or, in the absence of such
selection, to AAA arbitration which shall be governed by the United States
Arbitration Act, and judgment on the award may be entered in any court having
jurisdiction. The arbitrator may determine issues of arbitrability, but may
not award punitive damages or limit, expand or otherwise modify the terms of
this Agreement. The parties, their representatives, other participants and
the mediator and arbitrator shall hold the existence, content and result of
mediation and arbitration in confidence, except as such disclosure may be
necessary for the purpose of recording or otherwise acting upon the
arbitrator's award.
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1.24 NON-SOLICITATION:
During the term of this Agreement and for a period of one (1) year from the
termination of this Agreement or a Statement of Work, the parties agree not
to solicit any employee of the other party who is directly involved with the
delivery of Services under this Agreement, except upon the prior written
consent of the affected party.
1.25 INDEPENDENT CONTRACTOR:
All work performed by either party under this Agreement shall be performed as
an independent contractor and not as an agent of the other, and no persons
furnished by the performing party shall be considered the employees or agents
of the other.
1.26 RELEASES VOID:
Neither party shall require releases or waivers of any personal rights from
representatives or employees of the other in connection with visits to its
premises, nor shall such parties plead such releases or waivers in any action
or proceeding.
1.27 PUBLICITY:
Neither party shall issue or release for publication any articles,
advertising, or publicity material relating to Products, Licensed Materials,
or Services under this Agreement or mentioning or implying the name,
trademarks, logos, trade name, service mark or other company identification
of the other party or any of its Affiliates or any of its personnel without
the prior written consent of the other party. Notwithstanding the foregoing,
the parties will prepare and issue a joint press release in connection with
the execution of this Agreement.
1.28 CONFIDENTIALITY OF AGREEMENT:
Notwithstanding the obligations contained in Section 1.17 (Use of
Information) of this Agreement the parties shall keep all provisions of this
Agreement and any order submitted hereunder (including, without limitation,
prices and pricing related information) confidential except as reasonably
necessary for performance by the parties hereunder and except to the extent
disclosure may be required by applicable laws or regulations, in which latter
case, the party required to make such disclosure shall promptly inform the
other prior to such disclosure in sufficient time to enable such other party
to make known any objections it may have to such disclosure. The disclosing
party shall take all reasonable steps and exercise all reasonable efforts
directed by Seller to secure a protective order, seek confidential treatment,
or otherwise assure that this Agreement and/or any order will be withheld
from the public record.
1.29 AMENDMENTS:
Any supplement, modification or waiver of any provision of this Agreement
must be in writing and signed by authorized representatives of both parties.
1.30 SEVERABILITY:
If any portion of this Agreement is found to be invalid or unenforceable, the
parties agree that the remaining portions shall remain in effect. The parties
further agree that in the event such invalid or unenforceable portion is an
essential part of this Agreement, they will immediately begin negotiations
for a replacement.
Lucent Technologies Proprietary
Use Pursuant to Company Instructions
14
<PAGE>
1.31 WAIVER:
If either party fails to enforce any right or remedy available under this
Agreement, that failure shall not be construed as a waiver of any right or
remedy with respect to any other breach or failure by the other party.
1.32 SURVIVAL:
The rights and obligations of the parties which by their nature would
continue beyond the termination cancellation, or expiration of this
Agreement, shall survive such termination, cancellation or expiration.
1.33 SECTION HEADINGS:
The section headings in this Agreement are inserted for convenience only and
are not intended to affect the meaning or interpretation of this Agreement.
1.34 CHOICE OF LAW:
The construction and interpretation of, and the rights and obligations of the
parties pursuant to this Agreement, shall be governed by the laws of the
State of New York without regard to its conflict of laws provision.
Lucent Technologies Proprietary
Use Pursuant to Company Instructions
15
<PAGE>
2. ARTICLE II
PROVISIONS APPLICABLE TO LICENSED MATERIALS
2.1 LICENSE FOR LICENSED MATERIALS:
(a) Upon delivery of Licensed Materials pursuant to this Agreement, Seller
grants to Customer a personal, nontransferable, and nonexclusive
license to Use Licensed Materials in the United States for its own
business operations. No license is granted to Customer to Use the
Licensed Materials outside the United States or to sublicense such
Licensed Materials furnished by Seller without prior written approval
from Seller. Customer shall not reverse engineer, decompile or
disassemble Software furnished as object code to generate corresponding
Source Code. Unless otherwise agreed in writing by Seller, Customer
shall not modify Software furnished by Seller under this Agreement.
Notwithstanding the above, Customer is granted a further right to
sublicense its end-users to use the Software in connection with the
performance of Customer's services.
(b) Customer shall not copy Software embodied in Firmware. Customer shall
not make any copies of any other Licensed Materials except as necessary
in connection with the rights granted hereunder. Customer shall
reproduce and include any Seller copyright and proprietary notice on
all such necessary copies of the Licensed Materials. Customer shall
also mark all media containing such copies with a warning that the
Licensed Materials are subject to restrictions contained in an
agreement between Seller and Customer and that such Licensed Materials
are the property of Seller. Customer shall maintain records of the
number and location of all copies of the Licensed Materials. Customer
shall take appropriate action, by instruction, agreement, or otherwise,
with the persons permitted access to the Licensed Materials so as to
enable Customer to satisfy its obligations under this Agreement. If
Customer's license is canceled or terminated, Customer shall return all
copies of such Licensed Materials to Seller or follow written
disposition instructions provided by Seller.
2.2 CHANGES IN LICENSED MATERIALS:
Prior to shipment, Seller at its option may at any time modify the
Specifications relating to its Licensed Materials, provided the
modifications, under normal and proper Use, do not materially reduce or
adversely affect the Use, Function, or performance of the ordered Licensed
Materials. Unless otherwise agreed in writing, such substitution shall not
result in any additional charges to Customer with respect to licenses for
which Seller has quoted fees to Customer.
2.3 CANCELLATION OF LICENSE:
Notwithstanding any other section in this Agreement to the contrary, if
Customer fails to comply with any of the material terms and conditions of
this Agreement with respect to the Use of Licensed Materials, and such
failure is not corrected within thirty (30) days of receipt of written notice
thereof by Customer, Seller, upon written notice to Customer, may cancel any
affected license for Licensed Materials without further notification.
Lucent Technologies Proprietary
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3. ARTICLE III
ENTIRE AGREEMENT:
3.1 ENTIRE AGREEMENT.
The terms and conditions contained in this General Agreement supersede all
prior oral or written understandings between the parties with respect to the
subject matter hereof and constitute the entire agreement between the parties
with respect to such subject matter. The preprinted terms and conditions on
Customer's purchase orders or Seller's sales forms are deleted. The typed or
handwritten provisions of an order which are consistent with the terms of
this General Agreement along with the terms of this General Agreement shall
constitute the entire Agreement between the parties relating to said order.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives on the date(s) indicated.
JATO COMMUNICATIONS CORPORATION LUCENT TECHNOLOGIES INC.
By: /s/ Brian E. Gast By: /s/ S. Tim Gropp
--------------------------- ---------------------------
Name: Brian E. Gast Name: S. Tim Gropp
------------------------ ------------------------
Title: Customer Team Vice
Title: President President, West
----------------------- ------------------------
Date: 2-12-99 Date:
------------------------ ------------------------
Lucent Technologies Proprietary
Use Pursuant to Company Instructions
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*** Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. Sections 200.80(b)(4),
200.83 and 240.24b-2
AMENDMENT ONE
TO
GENERAL AGREEMENT
BETWEEN
JATO COMMUNICATIONS CORPORATION
AND
LUCENT TECHNOLOGIES, INC
This Amendment Number One ("Amendment") is made this 20th day of August,
1999, by and between JATO Communications Corporation, with offices located at
1099 18th Street, Suite 2200, Denver, CO 80202 ("Customer") and Lucent
Technologies, Inc., a Delaware Corporation with offices located at 600
Mountain Avenue, Murray Hill, New Jersey 07974 ("Seller") (collectively known
as the "Parties").
WHEREAS, Customer and Seller have previously entered into a General Agreement
Number LNM99PK000005L effective February 15, 1999 ("General Agreement"); and
WHEREAS, Seller and Customer have agreed to fund a co-marketing arrangement;
and
NOW THEREFORE, in consideration of the premises contained herein and other
good and valuable consideration,, the receipt and sufficiency of which are
hereby acknowledged, the Parties hereto agree to incorporate this Amendment
One into the General Agreement as follows.
1. TERM
This Amendment shall be coterminous with the General Agreement, unless
earlier terminated as provided by this Amendment or the General Agreement,
and shall remain in effect for so long as the General Agreement remains in
effect. The term of this Amendment shall be referred to as the "Term."
2. SCOPE
The terms and conditions of this Amendment incorporate by reference and
attach hereto the General Agreement except as expressly modified,
supplemented, or deleted herein. Any such modifications, supplements, or
deletions shall apply only to this Amendment and shall not apply to any other
agreement, unless so provided therein. In the event of any conflict between
the terms of this Amendment and the General Agreement, the terms and
conditions of this Amendment shall apply only to the Products and Licensed
Materials herein.
3. MARKETING DEVELOPMENT FUND
Section 1.35, MARKETING DEVELOPMENT FUND, is hereby added in its entirety as
follows:
"1.35. MARKETING DEVELOPMENT FUND
Seller agrees to create a Marketing Development Fund ("MDF") of [ * ]. Said
allocation shall be calculated by Seller pursuant to the guidelines set forth
in the attached Exhibit A and shall be retroactive back to the
* INDICATES CONFIDENTIAL TREATMENT REQUESTED
1
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effective date of the General Agreement. Any amounts allocated to the MDF
hereunder shall be subject in all respects to and may be utilized by Customer
only in accordance with the MDF guidelines in Exhibit A to and must be used
prior to term expiration or forfeited.*
4. MODIFICATIONS
Section 1.19, NOTICES, is hereby amended as follows to change Seller's point
of notification:
*If to Seller Lucent Technologies, Inc.
8400 E. Prentice Avenue, 9th Floor
Englewood, CO 80111
ATTN: Contract Manager
5. ENTIRE AGREEMENT
This Amendment, together with exhibits attached hereto and made a part of the
General Agreement constitute the entire agreement between the Parties with
respect to the subject matter hereof and supersede all prior oral and written
communications, agreements, and understandings of the Parties on such subject
matter.
IN WITNESS WHEREOF, the Parties hereto have caused this Amendment One to be
executed by their duly authorized officers or representatives on the date(s)
indicated.
JATO COMMUNICATIONS CORPORATION LUCENT TECHNOLOGIES, INC.
By: /s/ Gerard A. Maglio By: /s/ J. P. Goodman
-------------------------- ------------------------
Name: Gerard A. Maglio Name: J. P. Goodman
------------------------ ----------------------
Title: VP Marketing Title: Sales VP
----------------------- ---------------------
Date: 8/20/99 Date: 8/24/99
----------------------- ---------------------
2
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EXHIBIT A
MARKETING DEVELOPMENT FUND GUIDELINES
1. MARKETING DEVELOPMENT FUND
The Marketing Development Fund (MDF) is a cooperative approach to
marketing and promotion. The program provides assistance for
pre-approved market development and promotional activities executed by
authorized Lucent Technologies Global Service Provider (GSP) customers to
stimulate Customer's marketing and business activity.
1.1 MDF FUNDING
- Funding is based on the year's purchases of products only.
- For customers to be eligible for MDF, a written marketing plan must
be jointly approved by the Lucent Technologies GSP Marketing
Administrator and sales organization and the customer's marketing
and sales organization prior to submission of any MDF reimbursement
claims.
- Proper MDF forms shall be submitted by the customer along with
supporting documentation for pre-approval. After approval, copies of
original paid invoices are submitted. MDF reimbursements are issued
as cash payments or credits to be applied to current or future
Lucent Technologies invoices.
- MDF reimbursements apply to marketing activity within the approval
plan only, and only up to the current accrued MDF balance.
- MDF payments are made quarterly.
1.2 IT'S A FIVE STEP PROCESS
1. Jointly prepare a Marketing Development Business Plan. This plan
must at a minimum include:
- Marketing opportunities or projects designed to stimulate
marketing and business activities
- Forecasts of new revenues produced with corresponding cost
summaries, and
- Specific "measurements of success."
2. Submit a completed MDF Submittal Form for pre-approval.
3. When the project is completed, the approved MDF Submittal Form will
be returned to Lucent Technologies along with PAID invoices and
substantiating documents.
4. The MDF program administrator will process the reimbursement claim,
verify that funding is available, and, if so, forward the approval
documentation to the customer with a credit memo.
5. When submitted by the customer, the amount of the credit memo will
be credited to the customer's account.
1.3 ANSWERS TO YOUR QUESTIONS ...
Your primary MDF contact with Lucent Technologies is your Account
Representative. Your Representative can provide whatever assistance
you may need in providing direction and planning marketing
strategies.
1
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Lucent Technologies has appointed a Marketing Development Fund
Administrator who handles day-to-day details of tracking and
coordinating reimbursement claims within Lucent Technologies.
1.4 ACTIVITIES ELIGIBLE FOR MDF REIMBURSEMENT
1.4.1 DIRECT MARKETING
Direct marketing may include advertising, e.g. print ads and radio
spots, collateral salesware, catalogs, trade show fees, Lucent
Technologies product displays, direct mail and telemarketing
programs and other pre-approved activities. MDF funds may be
utilized to assist with individual company customization of direct
marketing materials, including development, printing, and one-time
production costs on authorized mailings.
1.4.2 EVENTS
MDF allowances may be used to off-set Lucent Technologies
sponsorship of events such as technology forums, conferences,
seminars, trade shows or other business related activities.
Pre-approval requests must clearly demonstrate goals and objectives
of the event. Reimbursement claims must include a list of any other
co-sponsors, a copy of guest invitations to the event, detailed
event cost estimates, and a full description of the participation,
involvement, and activity by the Lucent Technologies Representative
who would attend or support the event.
1.4.3 DATABASE ACQUISITION
MDF can be utilized to fund a variety of pre-approved database
tools such as market-based automated pricing tools (which could
include basic Centrex rates, standard features, and ISDN rates and
features), and Marketing Information Databases (such as MKIS) for
client prospecting, lead generation and infrastructure modeling.
1.4.4 SALES INCENTIVE PROGRAMS
Incentive programs to stimulate marketing and business activities
are designed and administered by the customers. A jointly
established target for service activity penetration must be in
effect and tracked for the duration of the program. Proposed
incentive programs must conform to the following guidelines:
- An outline of procedures to administer, track and audit the
program is provided.
- Estimated program costs, award descriptions and values are
identified.
- A complete program activity description with specific
time-frames is established.
- A list of participating Account Executives and Sales Managers
and their incentive program objectives is submitted to Lucent
Technologies.
1.4.5 MDF PERSONNEL
Under the MDF program, the Lucent Technologies customer may fund
technical consultants and/or marketing sales consultant personnel
to implement marketing and sales programs to stimulate marketing
and business activity. All pre-approved personnel funded by MDF
must be dedicated 100% to stimulating Lucent Technologies product
sales. All expenses must conform to standard Lucent Technologies
voucher guidelines. All expenses require pre-approval and must
include overall project concept, opportunity identification,
program cost, and a detailed action plan with measurable milestones
and start-stop dates. MDF payments for personnel are made quarterly.
2
<PAGE>
*** Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. Sections 200.80(b)(4),
200.83 and 240.24b-2
AMENDMENT TWO
TO
GENERAL AGREEMENT
BETWEEN
JATO COMMUNICATIONS CORPORATION
AND
LUCENT TECHNOLOGIES, INC.
This Amendment Number Two ("Amendment") is made this 24th day of August 1999,
by and between JATO Communications Corporation, with offices located at 1099
18th Street, Suite 2200, Denver, CO 80202 ("Customer") and Lucent
Technologies, Inc., a Delaware Corporation with offices located at 600
Mountain Avenue, Murray Hill, New Jersey 07974 ("Seller") (collectively known
as the "Parties").
WHEREAS, Customer and Seller have previously entered into a General Agreement
Number LNM99PK000005L effective February 15, 1999 and Amendment One dated
August 9, 1999 ("General Agreement"), and
NOW THEREFORE, in consideration of the premises contained herein and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Parties hereto agree to incorporate this Amendment
Two into the General Agreement as follows,
1. TERM
This Amendment shall be coterminous with the General Agreement, unless
earlier terminated as provided by this Amendment or the General Agreement,
and shall remain in effect for so long as the General Agreement remains in
effect. The term of this Amendment shall be referred to as the "Term."
2. SCOPE
The terms and conditions of this Amendment incorporate by reference and
attach hereto the General Agreement except as expressly modified,
supplemented or deleted herein. Any such modifications, supplements, or
deletions shall apply only to this Amendment and shall not apply to any other
agreement, unless so provided therein. In the event of any conflict between
the terms of this Amendment and the General Agreement, the terms and
condition of this Amendment shall apply only to the Products and Licensed
Materials herein.
3. AGREEMENT MODIFICATIONS
Article III, Entire Agreement, is hereby changed to Article VI, Entire
Agreement.
JATO amendment II 1 08/24/99
Lucent Technologies Proprietary
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Article III, Provisions Applicable To Installation And Other Services, is
hereby added in its entirety as attached.
Article IV, Provisions Applicable to Maintenance, is hereby added in its
entirety as attached.
Article V, Provisions Applicable to Network Management Services.
4. ENTIRE AGREEMENT
This Amendment, together with attachments and made a part of the General
Agreement constitute the entire agreement between the Parties with respect to
the subject matter hereof and supersede all prior oral and written
communications, agreements, and understandings of the Parties on such subject
matter.
IN WITNESS WHEREOF, the Parties hereto have caused this Amendment Two to be
executed by their duly authorized officers or representatives on the date(s)
indicated.
JATO COMMUNICATIONS CORPORATION LUCENT TECHNOLOGIES, INC.
By: /s/ Rex Humston By: /s/ J.P. Goodman
-------------------------------- ----------------------------
Name: Rex Humston Name: J.P. Goodman
------------------------------ --------------------------
Title: VP & CTO Title: Sales VP
----------------------------- -------------------------
Date: 8-24-99 Date: 8/24/99
----------------------------- -------------------------
JATO amendment II 2 08/24/99
Lucent Technologies Proprietary
Use Pursuant to Company Instructions
<PAGE>
ARTICLE III
PROVISIONS APPLICABLE TO INSTALLATION AND OTHER SERVICES
GENERAL: The provisions of this Article III shall serve as the
Statement of Work (SOW) for and shall apply to the Services ordered by
Customer and furnished by Seller under this Agreement.
3.1 SITE REQUIREMENTS:
(a) Customer is solely responsible for ensuring that the installation site
is compliant with any site requirements identified by Seller for the
installation and/or operation of any Products, Licensed Materials, or
Services furnished by Seller under this Agreement. Such site
requirements shall include, without limitation, those site requirements
set forth in this Article. Seller agrees to cooperate with Customer to
ensure compliance with all site requirements, provided that such
cooperation shall not require Seller to incur any out-of-pocket costs
unless the parties expressly agree otherwise in writing.
(b) Customer shall be solely responsible for ensuring that the installation
site complies with all applicable laws, orders, and regulations of
federal, state and local governmental entities including, without
limitation, those relating to environmental conditions.
(c) Notwithstanding anything contained in this Agreement to the contrary,
Seller shall have no liability to Customer, its employees, agents, and
customers for any delay by Seller in completion of any installation or
other Service to be provided by Seller under this Agreement if such
delay is attributable to the failure by Customer to comply with any
site requirements or to provide any other items which are the
responsibility of Customer under this Article Ill.
(d) The site requirements which are solely the Customer's responsibility
shall include but are not limited to the following:
- Co-Location implementations will be based on a standard
configuration, specified by Customer in conjunction with
Lucent, to include; electronic equipment (such as ATM
concentrators, DSLAM, routers, etc.), equipment racks,
cabling, and ancillary materials. Site specific requirements
will be identified by Customer and adapted to specific
configurations.
- All implementations must be in compliance with the Co-Location
Agreements between Customer and the ILEC for each site. It is
Customer's responsibility to review and apply the requirements
of these agreements to the Co-Location implementations.
- It is the intent of Customer to implement cageless
installations wherever possible, and caged and virtual
installations only when necessary due to the availability of
ILEC facilities, scheduling and costs.
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Lucent Technologies Proprietary
Use Pursuant to Company Instructions
<PAGE>
Customer will perform all engineering functions associated with the
implementation of their network, including but not limited to the
following list:
- Develop and maintain floor plans, wiring and installation
drawings
- Develop and maintain instructions to guide Lucent
installation forces
- Understand and intemperate ILEC interconnect agreement
- Develop long range plans for hardware evaluation and
selection / substitutions
- Collect site survey information to identify equipment rack
layout (ILEC provided and/or Lucent installed), cable routes,
cable distances, verify MDF frame, DSX bay, BDFB, and CO
grounding positions and availability.
- Identify changes to the standard configuration drawings and
Bill of Materials
- Develop and maintain site-specific bill of materials (BOM's)
and CAD drawings.
- Develop and maintain appropriate technical documentation.
- Determine Content and filing requirements of Co-Location
agreements with ILECs.
- Placement of Purchase Order(s) for Co-Location sites will
begin the Implementation processes by Lucent.
3.2 ADDITIONAL ITEMS TO BE PROVIDED BY CUSTOMER
In the event the site survey conducted by the parties pursuant to
the site acceptance meeting criteria established determines that the
necessary requirements are not met at the commencement of the installation of
the Products and the Customer needs to arrange for alterations and/or
repairs, the order will be placed on hold until such time as requirements are
met. During such interval, Seller reserves the right to determine any
schedule and price impacts
3.2.1 ADDITIONAL RESPONSIBILITIES OF CUSTOMER
(a) In addition to other deliverables and requirements of Customer defined
herein, Customer shall:
- Develop Installation Specifications, Test Verification Procedures
and final Co-Location Cage Installation Checklist.
- Participate in ILEC MOP meetings (only when needed).
- Provide required assistance to Seller to gain access to
Co-Location facilities.
- Perform verification testing of remote access to site equipment.
- Sign off on the final Co-Location Cage Installation Checklist.
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3.3 ITEMS TO BE FURNISHED BY SELLER
3.3.1 SERVICES:
(a) The following items will be furnished by Seller (as required by the
conditions of the particular Services ordered by Customer):
- Implementation Services for the installation of Customer
network equipment and communications facilities in ILEC
Central Office co-location facilities (CO), and offsite
co-location facilities (collectively referred to as
Co-Locations.) This includes:
- Procurement of Customer network equipment supplied
and/or OEM'ed through Lucent Technologies.
- Materials and logistics management of network
equipment and associated components.
- Kitting of network equipment and associated
components.
- Installation of network equipment and associated
components.
- Project management of all of the above
Implementation Services processes, tasks and
deliverables.
- Maintenance services of Customer network equipment and
communications facilities per the terms and conditions of
separate definition of services.
- Network monitoring of Customer network equipment and
communications facilities per the terms and conditions of
separate definition of services.
- Program management and coordination of all services provided
by Seller to Customer. Seller Program Management Deliverables
include:
- Establishment and maintenance of a complete list of
specific deliverables as described in this Agreement.
- Create a comprehensive schedule based on Customer's
rollout plan for all Seller deliverables, including
linkages and hand-offs between Customer, NetCare (a
division of Seller's), and other involved third parties.
This includes Order Acceptance and processing, manufacture
of equipment, kitting, installation and testing.
- Track implementation status against plan. Coordinate
with Customer for priority installation
- Document and implement a Change Control Plan (rollout
schedule, site/city priority changes, staging
implications, etc.) to maintain the integrity of the
project. This Change Control Plan will include a change
control procedure to document changes during the project.
These changes may result in schedule accelerations or
delays as well as monetary increases or decreases with
respect to overall project results.
- Maintain Action Item Register
- Implement Jeopardy Plan
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<PAGE>
- Provide a Project Communications Plan that will provide
weekly progress reports on items such as: jeopardy
escalation issues, weekly status meetings, action item
resolution and schedule status.
- Implement a bi-monthly executive meeting to communicate
pertinent issues at a project executive level.
- Provide Completion Notices to customer on a site-by-site
basis.
- Participate in ILEC MOP meetings.
(b) WAREHOUSING, DELIVERY, RECEIPT & ON-SITE STORAGE OF EQUIPMENT AND
GENERAL CLEANING Seller's personnel will be on-site at the time the Products
are delivered. Such personnel will accept the Products, unpack for inventory
purposes and inspect such Products for damage. Seller will resolve all
shipping errors, inventory discrepancies and damage issues. This function
shall be performed in an area previously designated for the storage and
unpacking of equipment and Product(s). Such area will be selected based on a
location that minimizes movement of material and personnel through the work
site. In the event storage is limited or inadequate, as determined by Seller,
temporary storage facilities such as trailers or containers may be required.
Any fees associated with the procurement of temporary storage facilities are
not included in Seller's quoted prices and shall be solely the responsibility
of the Customer as per customer approval. Materials such as plywood or
masonite will be utilized as necessary, to prevent cable reels, iron work and
other heavy objects from damaging floors, walls and doors. Seller shall
perform general cleaning of the equipment and storage areas (e.g. clearing
floors of debris, packing material, etc.) on a regular basis throughout the
installation period. Rubbish shall be disposed of at Seller's expense and in
compliance with local requirements.
(c) HARDWARE ASSEMBLY Hardware assemblies and overhead cable rack, iron work
and conduit (collectively "Components") will be delivered for specific bays
and cabinets as identified in the firm price quote provided by Seller to
Customer. Unless included herein or under separate agreement. additions of
these components to provide access to other locations (i.e. power rooms,
computer rooms, distributing frames not located with Products, or Products
located on separate floors) will be specifically excluded from the
installation services. Such additions will only be included in the
installation services for an additional charge. Seller will place and secure
all ordered products in the location specified in the engineering
specifications.
(d) INSTALLATION Seller installation crews will construct the configuration
per Customer supplied installation instructions, drawings and check lists.
Installation will verify that the system or individual components power up,
Installation will perform the following services:
- Receive packaged materials for installation at the Co-Location
- Schedule on-site Technician for Hardware Installation
- Unpack, Inspect, and Inventory Equipment
- Installation of rack equipment per specifications
- Connection to facilities power supply per specifications
- Verify successful power-up and diagnostics per specifications
- Connect and verify all cables and connections (10baseT, serial, etc.)
per specifications
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- Dressing of all cabling per specifications
- Termination of customer's circuits on equipment per design
specifications
- Label all circuit numbers on both ends per specifications
- Provide information for ILEC MOPs
- Update documentation with site specific information
- Site clean up following installation
- Disposal of all packing materials and waste
- Completion of Final Co-Location Cage Installation Checklists as
developed by Customer
(e) MATERIAL LOGISTICS AND KITTING Material logistics and kitting includes
all of the ordering, materials logistics and pre-installation preparation of
the equipment and materials for installation at Customer specified
Co-Location sites. Kitting will be based upon a standard configurations
specified by Customer. Specific changes to the standard configuration
requested by Customer will be defined in the Purchase Order, including
addition or subtraction of equipment and/or services. Customer will determine
site specific requirements that may also result in changes to the standard
configurations.
Lucent will perform these tasks:
- Ordering of all equipment and materials based upon the bills of
materials (BOM's) as specified in the Customer PO for installation at
Customer specified sites.
- Ordering of any cabling, equipment racks or ancillary materials varying
from the standard configuration that must be adapted to meet site
specific requirements as identified by Customer.
- Record configuration, mode/serial numbers, and shipping information.
- Packaging of all equipment racks, electronic equipment, cables and
ancillary materials.
- Shipment of all the above materials to the Co-Location site for
installation.
- Development and implementation of all materials logistics and kitting
processes, procedures, documentation and quality assurance monitoring.
(f) CABLE AND WIRE Seller will wire, attach, terminate and affix all cable
and wire including fiber optic cables supplied with purchased Products. This
may include but is not limited to mechanical wire wrapping, soldering,
crimping, plugging in of pre-terminated cables or polishing of fiber optics
for purchased Product. Seller will run alarm cabling, terminate and test for
the identified equipment including Customer provided environmental scan
points of fire detection and door entry which are less than fifty (50) feet
away and pre-terminated. Seller will verify all copper wiring placed by the
Seller for continuity to detect and analyze opens, shorts, reversals, and
incorrect wiring. Where pairs, quads or groupings are indicated, the grouping
will be verified. Seller will ensure the functionality and integrity of all
fiber directly associated with the installed Products and the fiber optic
cables installed by Seller Within the building structure. Seller will "Dress"
all cabling and wiring and provide physical protection. Seller will properly
protect cables at all "break-off" locations, such as the vertical turns from
the overhead cable rack to bay frame work.
JATO article III 5 08/24/99
Lucent Technologies Proprietary
Use Pursuant to Company Instructions
<PAGE>
(g) REPRESENTATION Represent Customer at each ILEC site acceptance meeting
utilizing site acceptance criteria as developed by Customer.
(h) DOA PARTS REPLACEMENT Seller is responsible for dead on arrival
materials.
(i) EXECUTIVE REVIEW MEETINGS Seller's Sales Director and Program Manager
designated for Customer Will monitor the installation process on a weekly
basis and update Customer on an ongoing basis as needed. A monthly executive
review meeting will be set up to Cover any issues, concerns, or hems that
need to be escalated with the Customer.
3.4 ACCEPTANCE
(a) All installation Services shall be considered complete and ready for
acceptance by Customer on turnover for warranty provisions. Upon completion
of the installation, Seller will submit to Customer a notice of completion
or, if Customer has elected advance-turnover of subsystems, a notice of
completion of advance-turnover.
(b) Customer shall promptly make b final inspection of substantial conformance
with the Specifications and do everything necessary to expedite acceptance
of the job. Seller will promptly correct any defects for which it is
responsible. All work will be considered as fully accepted unless Seller
receives notification to the contrary within thirty (30) days after
submitting its notice of completion. Notwithstanding the foregoing,
Customer shall be deemed to have accepted any Products and Licensed
Materials upon the placement of the same into service.
3.5 WORK OR SERVICES PERFORMED BY OTHERS:
Work or services performed at the site by Customer or its other
vendors or contractors shall not interfere with Seller's performance of
Services. Seller shall have no responsibility or liability with respect to
such work or services performed by others. If Customer or its other vendors
or contractors fail to timely complete the site readiness or if Customer's or
its other vendors' or contractors' work interferes with Seller's performance,
the scheduled completion date of Seller's Services under this Agreement shall
be extended as necessary to compensate for such delay or interference.
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ARTICLE IV
(MAINTENANCE - DEFINITION OF SERVICES)
ATTACHMENT A
SERVICE LEVEL AGREEMENT
All service levels, for non-performance, shall be reviewed [ * ] and shall
be computed [ * ]. SLA credits have been defined based on the Service Level
Agreement ("SLA") for the site. The level of the defined credits directly
relates to the critical nature of each node within the Jato network. Events
shall be reviewed on a [ * ]. At the end of [ * ], all SLA credits shall
be expunged and the SLA credits shall start anew. In the event SLA Credits
are issued [ * ], where three or more events occur in [ * ], in addition
to the SLA Credits provided for herein, customer may terminate this
Agreement, upon sixty (60) days written notice based on non-performance. In
the event Lucent has not met the defined service level for the site the
following SLA credits shall apply:
[ * ] SERVICE LEVEL AGREEMENT FOR THOSE SITES IDENTIFIED WITH A CUSTOMER
PROVIDED AND SELLER ACCEPTED PURCHASE ORDER - PRICING SCHEDULE OR ANY
ADDITIONAL SITES MUTUALLY AGREED UPON:
EVENT 1: NO SLA CREDIT.
EVENT 2: [ * ] OF THE ANNUAL SERVICES CHARGES FOR ALL SITES
WITH A CUSTOMER PROVIDED AND SELLER ACCEPTED PURCHASE ORDER.
EVENT 3: [ * ] OF THE ANNUAL SERVICES CHARGES FOR ALL SITES
WITH A CUSTOMER PROVIDED AND SELLER ACCEPTED PURCHASE ORDER.
EVENT 4: [ * ] OF THE ANNUAL SERVICES CHARGES FOR ALL SITES
WITH A CUSTOMER PROVIDED AND SELLER ACCEPTED PURCHASE ORDER.
EVENT 5: EXECUTIVE MEETING SHALL BE HELD BETWEEN BOTH COMPANIES TO
DETERMINE CONTINUATION OF THE AGREEMENT. THE VICE
PRESIDENT, WORLDWIDE NETCARE SALES AND VICE PRESIDENT,
WORLDWIDE NETCARE OPERATIONS SHALL REPRESENT LUCENT
TECHNOLOGIES.
JATO article IV attachment A 1 08/24/99
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* INDICATES CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
NEXT DAY SERVICE LEVEL REQUEST:
EVENT 1: NO SLA CREDIT.
EVENT 2: $[ * ] SERVICES CREDIT.
EVENT 3: $[ * ] SERVICES CREDITED.
EVENT 4: $[ * ] SERVICES CREDITED.
EVENT 5: $[ * ] SERVICES CREDITED.
EVENT 6: EXECUTIVE MEETING SHALL BE HELD BETWEEN BOTH COMPANIES TO
DETERMINE CONTINUATION OF THE AGREEMENT. THE VICE
PRESIDENT, WORLDWIDE NETCARE SALES AND VICE PRESIDENT,
WORLDWIDE NETCARE OPERATIONS SHALL REPRESENT LUCENT
TECHNOLOGIES.
Non-performance, which triggers an event, is defined by the following
criteria: Jato expects the field technician to be ON TIME, carrying the
PROPER TOOLS, and COMPETENT to resolve the problem until there is a CLOSED
TICKET.
DEFINITIONS:
ON TIME means the technician will arrive on site within the
specified response time for the site/equipment.
PROPER TOOLS means the technician has the correct hardware
replacement requested at the time of the maintenance dispatch
and all required tools to replace the faulty hardware.
COMPETENT means that the field technician is skilled to
replace the faulty hardware without effecting the performance
of additional equipment on site. The technician should be
competent to interface with the appropriate Service Provider
in resolution of circuit issues, work with a DSX-1 and DSX-3
panels, and to replace DC powered equipment.
CLOSED TICKET means that the technician has completed entering
the trouble cause and resolution information, time and travel,
and parts requirements information into the trouble ticketing
system and has manually closed the ticket.
SLA CREDITS WILL BE APPLIED TO NEXT SCHEDULED INVOICE.
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* INDICATES CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
ARTICLE IV
PROVISIONS APPLICABLE TO MAINTENANCE SERVICES OF SELLER
GENERAL: The provisions of this Article IV shall serve as the Statement of
Work (SOW) for and shall apply to the services ordered by Customer and
furnished by Seller under this Agreement.
4.0 MAINTENANCE SERVICES
Seller will maintain the Seller provided data networking equipment and other
vendor equipment, as mutually agreed upon.
Seller will furnish the following items.,
- Maintenance Services
- Full system support
- Problem management and resolution
- Dispatch
- Equipment replacement
- Software maintenance updates
- Customer initiated service escalation
- Hardware maintenance
- Preventative hardware maintenance
4.1 HOURS OF COVERAGE AND RESPONSE TIME OBJECTIVES:
The hours of coverage and response objectives for a Seller Technologies
Customer Engineer dispatched to the Customer site are as follows:
<TABLE>
<CAPTION>
PRODUCT MODEL DESCRIPTION COVERAGE RESPONSE
<S> <C> <C> <C> <C>
LUCENT AC 60,120 ATM SWITCH [ * ] [ * ]
COPPER CF200 CE200 DSLAM [ * ] [ * ]
MOUNTAIN
TURNSTONE 600000/3/4 CX100 [ * ] [ * ]
WTI RSM-800DC/288DC REMOTE SITE MANAGER and RACK [ * ] [ * ]
MOUNT MODEM, -48VDC
CISCO 2514 CISCO 2514-DC, [ * ] [ * ]
CISCO 2507-DC CISCO 2505-DC, 8 PORT HUB, 2- [ * ] [ * ]
PORT ASYNC/SYNC
GDC 010B226- SPECTRACOM 2000 CHASSIS, [ * ] [ * ]
002/76P016-001 -48VDC with T1/FT1 DSU/CSU
MODULE
</TABLE>
*[ * ], including holidays
**[ * ], excluding holidays
Holidays are defined as New Year's Day, Memorial Day. Independence
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* INDICATES CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
Day, Labor Day, Thanksgiving Day and the day after Thanksgiving, and
Christmas Day.
The response objective for a Seller Technologies Customer Engineer dispatched
to the Customer site is to arrive within [ * ] of the time the request for
dispatch was received by Seller provided that the site is within 50 miles of
the Seller Service Support Center (SSC) and that service is provided during
the contracted hours of coverage. This on-site response objective is from the
time of field Technician dispatch, and does not include any remote diagnosis
that may be required to determine the cause of the failure and the
appropriate resolution.
FAILURE TO MEET CONTRACTED RESPONSE TIMES:
For those sites where response time is contracted, should a Seller Technician
not arrive onsite within the contracted time of dispatch, Seller shall
provide remedy in accordance with the Service Level Agreement (ATTACHMENT A)
attachment to this Definition of Services.
4.2 FULL SYSTEM SUPPORT:
This service provides telephone access to the Seller Customer Assistance
Center (CAC.) and onsite response with spare parts from the Seller
Technologies SSC located near the Customer site. Since Seller is providing
Network Management Services to Customer, Seller will contact the CAC for any
required assistance and/or dispatch. The CAC can also be accessed directly by
Customer by calling the 24 hour hotline number 1-800-WE2-CARE. The direct
service activities provided by the CAC include consultation service, problem
management and problem resolution.
4.3 PROBLEM MANAGEMENT AND RP-SOLUTION
The CAC fields requests for assistance and dispatch under the Full System
Support service. Problem management and resolution involves specific steps
appropriate to the nature of the problem.
- PROBLEM DIAGNOSIS AND CAUSE ISOLATION - The first step includes
troubleshooting actions to identify the cause of the problem and
to separate software-related problems from those caused by
hardware. Seller may, with Customer's permission, remotely access
the Customer network product to assist in the diagnosis of
troubles.
- TROUBLE RESOLUTION - Once the problem has been located, diagnosed
and its cause identified, the CAC will recommend appropriate
actions to resolve the problem.
- RESOLUTION MANAGEMENT - The CAC, working with the Sellers Network
Management Center, will manage the resolution of Customer's
request for assistance to Customer's satisfaction, even when it
necessitates engaging other Seller Technologies or vendor support
groups to acquire the needed expertise. The CAC will continue to
assume responsibility for managing the problem until it is
resolved or until there is mutual agreement that the problem
belongs to another support group for resolution.
4.4 SOFTWARE MAINTENANCE UPDATES
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* INDICATES CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
Software maintenance updates contain the changes made to correct or enhance
functionality or performance. They apply only to current generics or releases
of the supported Seller Products.
- OCCASIONAL UPDATES - Software Maintenance Updates sent in response
to problem reports received at the CAC as part of a software
maintenance service.
- CUMULATIVE SOFTWARE MAINTENANCE UPDATES - Cumulative updates
contain all previously developed corrections and selected
enhancements when necessary to keep software current.
4.5 CUSTOMER INITIATED SERVICE ESCALATION
Customer can escalate any problem to the CAC management by calling the CAC
hotline number. The CAC manager will work out a mutually acceptable Plan of
Resolution. The CAC manager will then monitor the execution of the plan and
keep Customer informed of progress.
4.6 HARDWARE MAINTENANCE
If the reported problem is hardware-caused, services are provided locally by
the Seller Technologies SSC nearest Customer's location. For all covered
hardware problems, a Seller Technologies Customer Engineer will be
dispatched. Seller is responsible to maintain adequate levels of hardware
spares in order to meet SLA objectives. Seller is responsible for cost of all
replacement parts and spares.
4.7 PREVENTIVE HARDWARE MAINTENANCE
Preventive Maintenance is performed in accordance with the manufacturer's
recommendations. Preventive maintenance will be performed during the selected
hours of coverage at a mutually agreed upon schedule.
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<PAGE>
ARTICLE V
PROVISIONS APPLICABLE TO NETWORK MANAGEMENT SERVICES
GENERAL: The provisions of this Article V shall serve as the statement of
work (SOW) for and shall apply to the services ordered by Customer and
furnished by Seller under this Agreement.
5.0 SCOPE OF SERVICES
5.0.1 INTRODUCTION
Customer is requesting Seller Network Management Services to support their
service data network. This Definition of Services (DOS) details the
associated activities Customer is requesting Seller to provide for management
of this network. After a final review Seller will produce a Customer
Operations Support Plan to detail service delivery processes. Associated
pricing agreed to by Customer and Seller will be requested and provided in a
separate price schedule. The following sections outline the engagement scope,
deliverable details, and responsibilities of Seller and Customer.
5.0.2 PROJECT SCOPE
In an effort to clarify the services, requested by Customer and to be
delivered by Seller, this document will outline those network management
services to be performed by Seller. All information contained in this
document refers to network management services for the following Customer
network elements: Lucent AC 60/120, Lucent CE200, WTI, Cisco routes,
Spectracom GDC, Turnstone CX100 and other equipment as specified and agreed
upon by Customer and Seller.
Specific areas outside this DOS's scope are:
- Tasks not specifically identified in the Definition of Services in
this document.
- Services not specifically identified in the Definition of Services in
this document.
5.1 DEFINITION OF SERVICES
The following table outlines the major services to be performed by Seller for
this DOS (detailed descriptions are outlined in subsequent paragraphs of this
document):
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<TABLE>
<CAPTION>
TABLE 1
PRODUCT FAULT MANAGEMENT CONFIRMATION RECOVERY PERFORMANCE REPORTING
- ------------------------- ---------------- --------------------- ----------------------
<S> <C> <C> <C>
Lucent AC 60, 120 Yes Yes No
Lucent CE 200 Yes Yes No
Turnstone CX100 Yes Yes No
CISCO 2514 Router Yes No No
CISCO 2507 Router Yes No No
</TABLE>
5.1.1 NETCARE NETWORK MANAGEMENT SERVICE CENTER
The NetCare Network Management Services Center (NMSC) is operational 7 days a
week, 24 hours a day, to support critical customer networks. The performance
and productivity of the NMSC Technicians is greatly enhanced through the use
of internally and externally sourced software tools. For example, the NMSC
service request record system stores extensive information on customer
equipment, networks, and locations. NMSC and Field Technicians can input and
access real-time service request information using this system. This
information sharing capability enables Lucent Technicians to coordinate their
testing and repair efforts minimizing resolution time and customer impact.
Our service tracking system includes diverse functionality, allowing
Technicians to perform in-band and out-of-band testing without needing to
switch between tools - a feature increasing productivity and accuracy.
Using a base platform which includes HP OpenView and Seagate Nerve Center
Pro, Bell Laboratories engineers have developed a state-based artificial
intelligence capability which independently verifies and filters network
events. The collected data presents NMSC Technicians with a specific issue to
investigate, along with complete information about the problem.
NetCare Service engineers' combination of experience, training, and advanced
tools, allows NMSC Technicians to remotely resolve approximately 75 % of our
customers' network problems remotely - without dispatching an onsite
Technician. By vastly reducing onsite dispatches, our average problem
resolution time is less than 1.5 hours, average circuit availability above
99.5 %, and customer satisfaction survey ratings of good to excellent
averaging 95%.
5.1.2 MANAGING YOUR SERVICES
NetCare NMS will assign a Service Implementation Manager (SIM) to the
Customer account. The SIM will become familiar with the specifics of your
network and configurations. While providing coordination of the NetCare NMS
staff, the SIM will measure the Customer is provided all necessary
information and support to implement contracted services. When the SIM has
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<PAGE>
verified your devices and services are operating properly, your account will
be migrated to a NetCare NMSC Operations Service Manager for continued
monitoring and service.
5.3 NETWORK FAULT MANAGEMENT SERVICES
5.3.1 STANDARD SERVICES
The NMSC will pro-vide real-time, 24 hour a day, seven day a week fault
management of Customer network elements (per Table 1) using the NMSC's SNMP
Network Management System. This service requires a dedicated circuit to
connect Customer network with the NetCare NMSC. NetCare will provide this
circuit as described herein. The NetCare NMSC will serve as Customer single
point of contact for all network management activities pursuant to this
Agreement
5.3.2 FAULT ISOLATION AND RESOLUTION SERVICES
SNMP Fault Management
This service provides real-time fault management for Customer SNMP compatible
devices using our base platform as described in the NETCARE NETWORK
MANAGEMENT SERVICE CENTER section of this document. The service utilizes
Customer dedicated access line to the NetCare NMSC to provide constant
monitoring of network devices under our care to assure they are operational.
The network management system polls and registers traps and alarms generated
by managed devices automatically creating a service request record.
Trouble Reporting Process
Depending on the type of fault, a trouble will either be reported via a:
1. Trap forwarded to the NMSC monitoring platform by a monitored device.
2. Manual call to the NMSC.
To manually initiate a service request, the Customer team member will contact
the NMSC at 800-336-9498 and provide either the network address or device name
and your three or four character customer code. All service requests reported
via telephone or SNMP alerts (monitored by the NMSC platform) will be logged and
tracked by the NetCare NMSC. When the NetCare Technician calls to update status
or close a service request, we will use the Data Maintenance Operations System
(DMOS) service request record number.
Fault Isolation and Resolution
The NetCare NMSC will initiate trouble diagnosis, isolation, and resolution
activities for the faulty network device or refer the service request to the
appropriate organization (third party vendor or within Lucent Technologies).
The type of device and circuit trouble will determine the tests to be
performed. The NMSC will diagnose and resolve trouble conditions from
Customer AC120 interface to the CE200 local loop line interface when SNMP
alerts are sent from these network devices to the NMSC SNMP Network
Management System or when a service request is
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<PAGE>
reported to NetCare directly by the Customer. The NetCare NMSC will manage
these service requests to resolution. The NMSC is not responsible for
monitoring, diagnosing, or resolving transport facility, customer local loop,
and/or customer promise equipment problems.
The dispatch of repair personnel (pursuant to the terms and conditions of this
Agreement) is governed by and limited to the terms and conditions of the
appropriate service organization's maintenance agreement with the Customer. The
NetCare NMSC will keep the Customer informed concerning service request
resolution progress whenever a significant change or event has occurred in the
status of the service request ticket. Disruptive testing will not be initiated
unless coordinated with and agreed to by the Customer. When a service request
has exceeded mutually agreed upon time limits (as defined in the Seller's
Customer Operation Support Plan), the NetCare NMSC will escalate to the next
appropriate level of management responsible for resolving the service request,
and will continue to escalate until the request is resolved. The NMSC will
provide the Customer with progress reports (as defined in the Seller's Customer
Operations Support Plan).
The NetCare NMS Technician may refer the problem to a third party vendor for
resolution, depending on the problem and the services you have contracted, and
will manage the third party vendor until the problem is resolved (commonly
referred to as Agency). The Technician will also provide status updates at
agreed upon intervals, and escalate any issues not meeting agreed to
requirements. Once resolved, the Customer will be advised of the problem
resolution, and with Customer concurrence the service request record will be
closed and stored in our database.
5.3.3 NETCARE NETWORK MANAGEMENT SUPPORT CENTER RESPONSIBILITIES
1. Maintain a network profile at the NMSC and update the profile with
changes taking place in Customer network. The NetCare NMSC
Add/Change/Delete form and/or Seller installation plans will be the
vehicle for the Customer to convey information to the NetCare NMSC.
2. For contracted devices, the NetCare NMSC will filter incoming SNMP
traps, disregard irrelevant traps, and act upon consequential traps.
The NMSC will coordinate with Customer Network Operations Organization
to review trouble activities.
3. For contracted devices, the NetCare NMSC will refer service requests to
the appropriate vendor (as described above). The NetCare service
request record will remain open until service request resolution.
Should further diagnosis be required, NetCare will work with the vendor
to resolve the service request
4. The NMSC will have one hour from the creation of a service request
(whether generated through the NMSC platform or via a manually
generated call from the Customer) to determine the need for a Seller's
field maintenance dispatch for contacted managed network elements. At
the one hour mark, the Seller's NetCare NMSC will initiate a field
dispatch request 100% of the time unless contributing factors do not
warrant a field dispatch. For these types of service requests, the
Seller's NetCare NMSC will coordinate with the Customer's Network
Operations Center to gain concurrence. The joint Customer/Seller team
will monitor performance on a minimum of a monthly basis.
5. Web based monthly network status reports will summarize network
troubles, resolutions, and monthly service transaction totals.
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6. NetCare will provide a dedicated circuit from the NetCare NMSC platform
to the Customer defined network ingress point.
CUSTOMER RESPONSIBILITIES
1. Provide Seller accurate information regarding the network to be managed
including the number and types of devices (manufacturer and model).
2. Monitored devices added or deleted from the network must be reported to
the NMSC. The NetCare NMSC will be unable to provide service on devices
added to Customer network until written notification is received
requesting their addition. Deleted devices will continue to be invoiced
until such written notification is received. The information for adds
and deletes will comply with the format of the NetCare NMSC
Add/Change/Delete form
3. Customer will provide escalation contacts and telephone numbers to the
NetCare NMSC.
4. Customer will provide the NetCare NMSC with a detailed and current
network drawing prior to network management turn-up.
5. Customer will assign all IP addresses.
6. NetCare requires a dial-line to all network elements managed by the
NMSC to ensure 7x24 access. Customer will be responsible for providing
monitored device dial-lines and the associated dial-line fees. Without
this dial-line, if inband access is lost, NetCare cannot be held
accountable for continuous 7x24 hour delivery of the services outlined
in this Definition of Services and the associated Service Level
Agreements (SLA).
5.4 NETWORK CONFIGURATION RECOVERY
The NetCare NMSC will provide configuration recovery for Customer network
devices (per Table 1, for those devices under contract). The device back-up
schedules and number of images stored will be outlined in the Seller's
Customer Operations Support Plan. This information will be available, should
it be needed, to replace lost configurations as a result of device/network
failure or disaster. Upon Customer request, NetCare will load the appropriate
stored configuration into the affected device(s), and verify successful
completion. Affected network devices, which may have been physically damaged
or Impairment must first be repaired and verified operable by the NetCare
NMSC.
5.0 NETWORK PERFORMANCE REPORTING
The NetCare NMSC will remotely obtain and report performance data from the
Customer's network elements supporting remote access and retrieval of element
performance information (for those devices under contract). The NetCare NMSC
will not provide analysis of this data. This information will be forwarded to
Customer Network Engineering Team for analysis. The monthly reporting of
performance data will commence 45 days after the NetCare NMSC begins managing
Customer network.
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<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 21.1
LIST OF SUBSIDIARIES
Name of Subsidiary Date of Formation State of Formation Percentage Owned
<S> <C> <C> <C>
Jato Operating Corp. 04/14/99 Delaware 100%
Jato Operating Two Corp. 05/18/99 Delaware 100%
Jato Communications Corp. of Virginia 06/22/99 Virginia 100%
</TABLE>
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated June 18, 1999, on the consolidated financial statements of Jato
Communications Corp. as of December 31, 1998 and for the period from June 12,
1998 (date of inception) to December 31, 1998, and to all references to our
Firm included in this registration statement.
/s/ Arthur Andersen LLP
Denver, Colorado,
December 23, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JATO
COMMUNICATION CORP.'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD FROM JUNE
12, 1998 (DATE OF INCEPTION) THROUGH DECEMBER 31, 1998 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 7-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JUN-12-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 SEP-30-1999
<CASH> 1,270 29,517
<SECURITIES> 0 0
<RECEIVABLES> 0 42
<ALLOWANCES> 0 175
<INVENTORY> 0 0
<CURRENT-ASSETS> 1,282 29,898
<PP&E> 58 20,442
<DEPRECIATION> (1) (140)
<TOTAL-ASSETS> 1,366 52,267
<CURRENT-LIABILITIES> 284 3,161
<BONDS> 0 9,449
0 0
1,301 49,035
<COMMON> 63 68
<OTHER-SE> (282) (9,446)
<TOTAL-LIABILITY-AND-EQUITY> 1,366 52,267
<SALES> 0 44
<TOTAL-REVENUES> 0 44
<CGS> 0 0
<TOTAL-COSTS> 405 7,004
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (9) (300)
<INCOME-PRETAX> (396) (6,704)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (396) (6,704)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (396) (6,704)
<EPS-BASIC> (0.07) (0.47)
<EPS-DILUTED> (0.07) (0.47)
</TABLE>
