SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K/A
Amendment No. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported, December 10, 1999)
December 16, 1999
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LOG ON AMERICA, INC.
(Exact name of Registrant as specified in charter)
Delaware 0-25761 05-0496586
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(State or other jurisdic- (Commission (IRS Employer
tion of incorporation) File Number) Identification No.)
3 Regency Plaza, Providence, Rhode Island 02903
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (401) 459-6298
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Item 2. Acquisition and Disposition of Assets
On December 10, 1999, Log On America, Inc. ("Registrant") completed the
sale of $5,000,000 in common stock to Nortel Networks Inc. ("Nortel") at a price
of $19.50 per share ("Shares"). The price of the Shares was based on the average
closing bid price of the Shares, as quoted on the Nasdaq National Market System
over the twenty (20) trading days immediately preceding the closing date of
December 2, 1999. The sale was made in accordance with the terms of a commitment
from Nortel to purchase the Shares and in addition to provide the Registrant
with a $45 million multiple advance term loan facility. The Shares are subject
to certain registration rights.
Item 7. Financial Statements and Exhibits
Attached hereto as Exhibit 99.1 is the Investment Agreement by and between
Log On America, Inc. and Nortel Networks Inc., dated as of December 10, 1999, in
connection with the transaction described in Item 2 of this Form 8-K.
Attached hereto as Exhibit 99.2 is the Registration Rights Agreement,
dated as of December 10, 1999, by and between Log On America, Inc.and Nortel
Networks Inc., in connection with the transaction described in Item 2 of this
Form 8-K.
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
LOG ON AMERICA, INC.
December 16, 1999 By:s/David R. Paolo
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David R. Paolo, President
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EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBIT TITLE
99.1 - Investment Agreement by and between Log On America, Inc. and Nortel
Networks Inc., dated as of December 10, 1999.
99.2 - Registration Rights Agreement, dated as of December 10, 1999, by and
between Log On America, Inc. and Nortel Networks Inc.
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Exhibit 99.1
INVESTMENT AGREEMENT
LOG ON AMERICA, INC.
This Investment Agreement (this "Agreement") is entered into as of
December 10, 1999 by and between Log On America, Inc., a Delaware corporation
(the "Company") and Nortel Networks Inc., a Delaware corporation (the
"Investor").
RECITALS
WHEREAS, the Company is engaged in business as an internet service
provider and competitive local exchange carrier;
WHEREAS, the Investor's affiliates provide technical support and
telecommunications equipment to the Company;
WHEREAS, the Company desires to sell, and the Investor desires to acquire
an aggregate of Two Hundred Fifty Six Thousand, Four Hundred and Ten (256,410)
shares of the Company's Common Stock $.01 par value (the "Securities") for the
purchase price set forth herein subject to the terms and conditions of this
Agreement and subject to the terms of a registration rights agreement
("Registration Rights Agreement") which will be entered into concurrently with
the execution of this Agreement;
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. Investment. On the closing date the Investor shall purchase
from the Company and the Company shall sell to the Investor, Two Hundred Fifty
Six Thousand Four Hundred and Ten(256,410) shares of the Securities (the
"Investment") at a price of $19.50 per share and Four Million Nine Hundred
Ninety Nine Thousand and Nine Hundred Ninety five Dollars ($4,999,995) in the
aggregate (the "Purchase Price"). The Purchase Price shall be paid by wire
transfer in immediately available funds to the account indicated at closing.
Section 2. Closing. The closing of the Investment will take place on
December 10, 1999 (the "Closing Date") (the "Closing"). At the Closing, subject
to the satisfaction or waiver of the conditions set forth in Section 6(a),
payment of the Purchase Price by the Investor will be made by wire transfer of
immediately available funds to an account designated by the Company and the
Company will issue to the Investor an appropriate certificate or certificates
representing 256,410 shares of the Company's Common Stock. The Closing may be
conducted by mail, facsimile and delivery service.
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Section 3. Representations and Warranties of the Company. The Company
represents and warrants to the Investor as follows and the Company acknowledges
that it has, full knowledge that the Investor intends to rely on such
representations and warranties:
3.1 Organization and Standing. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Company is qualified as a foreign corporation and is in
good standing in each jurisdiction in which the conduct of its business or the
assets and properties owned or leased by it require such qualification. The
Company has previously delivered to investors complete and correct copies of its
certificate of incorporation.
3.2 Authorization. The Company is fully authorized to execute
this Agreement, and to complete the transactions contemplated herein. All
corporate action on the part of the Company and its shareholders necessary for
the authorization, execution, delivery, and performance of all its obligations
under this Agreement, and for the authorization, issuance, and delivery of the
Common Stock being sold under this Agreement has been taken. This Agreement
constitutes the valid and binding obligation of the Company enforceable by the
Investor against the Company in accordance with its terms.
3.3 Binding Agreement. This Agreement has been duly executed
and delivered and constitutes a legal, valid and binding obligation enforceable
in accordance with its terms.
3.4 No Conflicts. The execution and delivery of this Agreement
and the issuance of the Securities to the Investor as contemplated hereby will
not (i) require any consent authorization or approval of or filing with any
governmental entity or third party, or (ii) result in any violation of, be in
conflict with or constitute a default under, the charter or by-laws of the
Company or any law, statute, regulation, ordinance, contract, agreement,
instrument, judgment, decree or order to which the Company is a party or by
which the Company is bound.
3.5 Compliance with Securities Laws. Subject to the accuracy
of the representations and warranties of the Investor contained in Section 4
hereof, the offer and sale of the Securities to the Investor hereunder
constitute transactions exempt from the registration and prospectus delivery
requirements of the Securities Act of 1933, as amended (the "1933 Act"), and any
applicable state securities and blue sky laws.
3.6 Brokers. The Company and the Investor has not dealt with
any broker, finder, commission agent or other similar person other than Credit
Suisse First Boston Corporation (the "Investment Bank") in connection with the
offer or sale of the securities to the Investor, and, except for the fees
payable to the Investment Bank, the Company and the Investor is under no
obligation to pay any broker's fee, finder's fee, or commission in connection
with such offer and sale.
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3.7 Access to Information. The Company has made available to
the Investor, during the course of this transaction and prior to the acquisition
of any Securities, the financial statements, registration statements and
quarterly reports as filed with the Securities and Exchange Commission and has
afforded the Investor the opportunity to ask questions of and receive answers
from representatives of the Company concerning the terms and conditions of the
Securities and the business, affairs, operations and finances of the Company and
any other matters relevant to the investment made hereunder.
3.8 Capitalization. The authorized capital stock of the
Company, as of the Closing Date, will consist of 125,000,000 shares of Common
Stock, $0.01 par value per share (the "Common Stock"), of which 8,013,383 shares
are issued and outstanding and 15,000,000 shares of undesignated Preferred
Stock, none of which are outstanding. Schedule 3.8 sets forth the name and, to
the Company's knowledge, the current address of each holder of more than 5% of
the outstanding shares of Common Stock. Of the Common Stock, 2,249,867 shares
are reserved for issuance pursuant to employee stock purchase or stock option
plans adopted by the Company for directors, officers and employees and prior
stock option grants. All of the outstanding shares of the Common Stock are duly
authorized and validly issued in accordance with applicable law, fully paid and
non-assessable. Except as set forth on Schedule 3.8 hereto, or as otherwise
contemplated by this Agreement, as of the date hereof there are, and immediately
following the Closing, there will be (i) no outstanding options, warrants,
agreements, conversion rights, preemptive rights or other rights to subscribe
for, purchase or acquire any issued or unissued shares of capital stock of the
Company, or any securities convertible or exchangeable for such stock, and (ii)
no restrictions upon the voting or transfer of any shares of capital stock of
the Company pursuant to its Certificate of Incorporation, Bylaws or other
governing documents or any agreement or other instruments to which it is a party
or by which it is bound, and (iii) there are no agreements to which the Company
is a party or of which the Company has knowledge regarding the issuance,
registration, voting or transfer of or obligation (contingent or otherwise) of
the Company to repurchase or otherwise acquire or retire or redeem any of its
outstanding shares of capital stock. No dividends are accrued but unpaid on any
capital stock of the Company.
3.9 Validity of Stock. The Common Stock, when issued, sold and
delivered in accordance with the terms of this Agreement, will be duly and
validly authorized and issued, fully paid, non-assessable and free and clear of
all encumbrances or restrictions on transfer except those imposed by applicable
securities laws, the Certificate of Incorporation, and this Agreement. All
existing Common Stock preemptive rights have been waived for purposes of the
issuance of the Common Stock to Investor.
3.10 Subsidiaries. Except as set forth on Schedule 3.10
hereto, the Company does not control, directly or indirectly, or own any equity
interest in, any other corporation, partnership, joint venture, association or
business entity.
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3.11 Financial Statements. The Company's financial statements
for the three months and nine months ended September 30, 1998 and 1999 and the
audited financial statements for the years ended December 31, 1997 and 1998, as
filed in the Company's filings with the SEC (collectively, the "Financial
Statements"), have been prepared in accordance with the books and records of the
Company and generally accepted accounting principles ("GAAP") (except the
interim financial statements are subject to normal and recurring year-end audit
adjustments which are not expected to be material in amount) and fairly and
accurately reflect the financial condition and the results of operations of the
Company as of the respective dates thereof or for the periods covered in
accordance with GAAP.
3.12 Absence of Undisclosed Liabilities. Except as provided in
the Financial Statements, the Company has no material debt, liability or
obligation, absolute or contingent (including without limitation obligations in
any capacity as guarantor or surety), other than obligations incurred in the
ordinary course of business since September 30, 1999 (the "Balance Sheet Date").
Without limiting the generality of the foregoing, the Company knows of no basis
for the assertion against the Company as of the date hereof of any material
liabilities (not reflected in the Financial Statements) of the Company.
3.13 Absence of Certain Changes. Except as set forth in
Schedule 3.13 and except as set forth in the Company's SEC filings, since the
Balance Sheet Date, the Company has not:
(i) suffered any material adverse change, whether or
not caused by any deliberate act or omission of the Company or any shareholder
of the Company, in its condition (financial or otherwise), operations, assets,
liabilities, business or prospects, taken as a whole;
(ii) contracted for the purchase of any capital assets
having a cost in excess of $100,000 or paid any capital expenditures in excess
of $100,000;
(iii) incurred any indebtedness for borrowed money or
issued or sold any debt securities in excess of $100,000;
(iv) incurred or discharged any liabilities or
obligations, except in the ordinary course of business;
(v) mortgaged, pledged or subjected to any security
interest, lien, lease or other charge or encumbrance any of its properties or
assets;
(vi) suffered any damage or destruction to or loss of
any assets (whether or not covered by insurance) that has materially and
adversely affected, or could reasonably be expected to, materially and adversely
affect, its business;
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(vii) acquired or disposed of any assets except in the
ordinary course of business;
(viii)waived any material rights or forgiven any
material claims;
(ix) lost, terminated or, to the Company's knowledge,
experienced any change in the relationship with any employee, customer or
supplier, which termination or change has materially and adversely affected, or
could reasonably be expected to materially and adversely affect, its business or
assets;
(x) loaned any money to any person or entity in
excess of $50,000;
(xi) redeemed, purchased or otherwise acquired, or
sold, granted or otherwise disposed of, directly or indirectly, any of its
capital stock or securities or any rights to acquire such capital stock or
securities, or agreed to change the terms and conditions of any such rights or
paid any dividends or made any distribution to the holders of the Company's
capital stock other than stock options granted to employees under the Company's
1999 Stock Option Plan; or
(xii) committed to do any of the foregoing.
3.14 Approvals. The Company has obtained or will obtain
prior to the Closing Date all necessary consents, authorizations, approvals and
orders from any federal, state or other relevant governmental authority and from
any individual, corporation, partnership, trust, incorporated or unincorporated
association, joint venture, joint stock company or other entity, and has made
all registrations, qualifications, designations, declarations or filings with
all federal, state, or other relevant governmental authorities, all as may be
required on the part of the Company in connection with the consummation of the
transactions contemplated by this Agreement, except for filings pursuant to
applicable securities laws which will be made after the Closing Date.
3.15 Title to Properties; Liens and Encumbrances.
(i) Except as disclosed on Schedule 3.15, the Company
has good and marketable title to its assets, including, without limitation,
those reflected on the September 30, 1999 balance sheet (other than those since
disposed of in the ordinary course of business), free and clear of all security
interests, liens, charges and other encumbrances, except for (i) liens for taxes
not yet due and payable or being contested in good faith in appropriate
proceedings, and (ii) encumbrances that are incidental to the conduct of their
respective businesses or ownership of property, not incurred in connection with
the borrowing of money or the obtaining of credit, and which do not in the
aggregate materially detract from the value of the assets affected or materially
impair their use by the Company. With respect to the assets of the Company that
are leased, the
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Company is in compliance with all material provisions of such leases. All
facilities, machinery, equipment, fixtures, vehicles and other properties owned,
leased or used by the Company are in good operating condition and repair, normal
wear and tear excepted, and are adequate and sufficient for the Company's
business.
(ii) The Company enjoys peaceful and undisturbed
possession under all real property leases under which the Company is operating,
and all such leases are valid and subsisting and none of them is in default.
(iii) The Company does not own any real property.
3.16 Patents, Trademarks and Other Intangible Assets.
(i) Schedule 3.16 hereto sets forth the true and
correct list of all registered patents, trademarks and copyrights (or
applications therefor) held by the Company. Except as set forth on Schedule
3.16, the Company possesses ownership or has the right to use all patents,
copyrights, trademarks, service marks, trade secrets and other proprietary
intellectual property rights necessary for the operation of its business except
where the failure of the Company to own or have such right to use such
intellectual property would not have a material adverse effect on the Company
(the "Intellectual Property"). To the Company's knowledge, the Company (a) is
not infringing upon the intellectual property rights of others in connection
with its business; (b) does not require the consent of any person which has not
been obtained to use the Intellectual Property; or (c) has not received any
written notice of conflict with respect to the intellectual property rights of
any other person or entity. All of the Intellectual Property is valid and
subsisting, has not been canceled, abandoned or otherwise terminated and, if
applicable, has been duly issued or filed. The employees and consultants of the
Company, who, either alone or in concert with others, developed, invested,
discovered, derived, programmed or designed any of the Company's owned
Intellectual Property have entered into written agreements to protect the
confidentiality of the Company's owned Intellectual Property and to assign to
the Company all rights therein.
(ii) The Company has no knowledge of any claim that, or
inquiry as to whether, any product, activity or operation of the Company
infringes upon or involves, or has resulted in the infringement of, any
proprietary right of any other person, corporation or other entity; and no
proceedings have been instituted, are pending or are threatened that challenge
the rights of the Company with respect thereto.
3.17 Trade Secrets and Customer Lists. The Company has the
right to use, free and clear of any claims or rights of others all trade
secrets, customer lists and proprietary information required for the marketing
of all merchandise and services formerly or presently sold or marketed by the
Company. To the Company's knowledge, it is not using, or in any way making use
of, any confidential information or trade secrets of any third party, including,
without limitation, any past or present employee of the Company.
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3.18 Tax Matters.
(i) All required foreign, federal, state, local and
other tax returns, notices and reports (including, without limitation, income,
property, sales, use, franchise, capital stock, excise, added value, employees'
income withholding, social security and unemployment tax returns) of the Company
have been accurately prepared in all material respects and duly and timely
filed, and all foreign, federal, state, local and other taxes required to be
paid with respect to the periods covered by such returns have been paid. The
Company is not and has not been delinquent in the payment of any tax, assessment
or governmental charge. The Company is not a party to any agreement, contract,
arrangement or plan that has resulted or would result, separately or in the
aggregate, in the payment of any "excess parachute payments" within the meaning
of Section 280G of the Code. The Company does not have and has not had a
permanent establishment in any foreign country, as defined in any applicable tax
treaty or convention between the United States and such foreign country.
(ii) The Company has not had any tax deficiency
proposed or assessed against it and has not executed any waiver of any statute
of limitations on the assessment or collection of any tax or governmental
charge. None of the Company's tax returns has ever been audited by governmental
authorities. No tax audit, action, suit, proceeding, investigation or claim is
now pending nor, to the best knowledge of the Company, threatened against the
Company, and no issue or question has been raised (and is currently pending) by
any taxing authority in connection with any of the Company's tax returns or
reports.
(iii) To the Company's knowledge, the reserves for
taxes, assessments and governmental charges reflected on the Balance Sheet are
and will be sufficient for the payment of all unpaid taxes and governmental
charges payable by the Company with respect to the period ended on the Balance
Sheet Date. Since the Balance Sheet Date, the Company has made adequate
provisions on its books of account for all taxes, assessments and governmental
charges with respect to business, properties and operations for such period. The
Company withheld or collected from each payment made to its employees, the
amount of all taxes (including, but not limited to, federal income taxes,
Federal Insurance Contribution Act taxes and Federal Unemployment Tax Act taxes)
required to be withheld or collected therefrom, and has paid the same to the
proper tax receiving officers or authorized depositories.
3.19 Litigation. No action, proceeding or investigation is
pending or threatened against the Company, or any of its properties before any
court, arbitration board or tribunal or administrative or other governmental
agency (including, without limitation, unfair labor practices or discrimination
charges or complaints), that might result, either individually or in the
aggregate, in any material adverse change in the business, prospects, condition,
affairs, operations, or assets of the Company or in any material liability on
the part of the Company. The foregoing includes, without limiting its
generality, actions pending or threatened involving the prior employment of any
of the Company's employees or use by any of them in connection with the
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Company's business of any information, property or techniques allegedly
proprietary to any of their former employers.
3.20 Insurance. The Company carries property, liability,
workers' compensation and such other types of insurance as is customary in the
Company's industry. A list of all insurance policies of the Company is set forth
in Schedule 3.20. All of such policies are valid and enforceable policies,
issued by insurers of recognized responsibility in amounts and against such
risks and losses as are customary in the Company's industry. All casualty
insurance is sufficient in amount to allow the Company to replace any of its
properties that might be damaged or destroyed.
3.21 Employee Benefit Plans.
(i) Schedule 3.21 contains a true and complete list of
any bonus, incentive, insurance (including any self-insured arrangements),
compensation plan, welfare, retirement, defined benefit, 401(k), pension, profit
sharing, salary reduction, deferred compensation, stock purchase, stock option,
workers' compensation, disability benefits, supplemental unemployment benefits
(including without limitation any "voluntary employees' beneficiary association"
as defined in Section 501(C)(9) of the Code) (as hereinafter defined), vacation,
holiday and sick pay or other similar benefit plans, programs or arrangements
(whether written or oral) (said plans, programs or arrangements being referred
to as the "Plans") in which any employees of the Company participate. All
obligations of the Company, whether arising by operation of law, by contract or
by past custom, for payment by it to trusts, retirement plans or other funds or
any governmental agency with respect to unemployment compensation benefits,
social security benefits or any other benefits for employees of the Company have
been paid or shall be paid by the Company at the time the Company is obligated
to make such payments. All benefits payable directly to the Company's employees
have been paid or shall be paid by the Company at the time the Company is
obligated to make such payments. All reasonably anticipated obligations of the
Company, whether arising by operation of law, by contract or by past custom, for
vacation and holiday pay, bonuses and other forms of compensation or benefits
which are or may become payable to employees or any of them have been paid, or
shall be paid, in accordance with the provisions of applicable laws,
regulations, benefit plans or policies.
(ii) All Plans, related trust agreements, annuity
contracts or other funding arrangements comply in all substantial respects and
the Company has administered and operated each such Plan, related trust
agreements, annuity contracts or other funding arrangements in substantial
compliance with the requirements of applicable law, including, without
limitation, the Employee Retirement Income Security Act of 1974 as amended
("ERISA"), and the Code, and no such Plan that is subject to Part 3 of Subtitle
B of Title I of ERISA has incurred any "accumulated funding deficiency" within
the meaning of Section 302 of ERISA or Section 412 of the Code, whether or not
waived.
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(iii) The Company does not maintain and is not required
to contribute to any multi-employer plan (as defined in Section 3(37) of ERISA)
for the benefit of employees or former employees of the Company. The Company
does not maintain a self-insured "multiple employer welfare arrangement" as
defined in Section 3(40) of ERISA.
(iv) The Pension Benefit Guaranty Corporation ("PBGC")
has not instituted proceedings to terminate any of the Company's defined benefit
plans and no condition exists that presents a risk that such proceedings shall
be instituted. There has been no "reportable event" within the meaning of
Section 4043(b) of ERISA with respect to any defined benefit plan and no defined
benefit plan has been terminated within the preceding six years or is expected
to be terminated. No liability (other than for the payment of premiums) to the
PBGC has been or is expected to be incurred by the Company or any officer,
director, shareholder or employee of the Company with respect to any defined
benefit plan.
(v) The Company has no liability with respect to any
transaction which relates to any Plan and which is in violation of Sections 404
or 406 of ERISA or constitutes a "prohibited transaction," as defined in Section
4975(c)(1) of the Code, and for which no exemption exists under Section 408 of
ERISA or Section 4975(c)(2) or (d) of the Code. To the Company's knowledge, the
Company has not participated in a violation of Part 4 of Title I, Subtitle B of
ERISA by any plan fiduciary of any Plan and has no unpaid civil penalty under
Section 502(1) of ERISA.
(vi) There is no material action, order, writ,
injunction, judgment or decree outstanding or claim, suit, litigation,
proceeding, arbitral action, governmental audit or investigation (including,
without limitation, any such audit or investigation by the Internal Revenue
Service, Department of Labor, or PBGC) relating to or seeking benefits under any
Plan that is pending or, to the Company's knowledge, threatened or anticipated
against the Company other than routine claims for benefits.
3.22 Material Contracts and Commitments.
(i) Material Contracts and Commitments. Except as
filed as exhibits to the Company's filings with the SEC or as set forth in
Schedule 3.22 , the Company has not entered into, nor is the capital stock, the
assets or the business of the Company bound by, whether or not in writing, any
(1) deed of trust securing a lien in any real
property owned by the Company;
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(2) security agreement granting a security
interest in connection with the Company's
incurrence of indebtedness for borrowed money;
(3) guaranty or suretyship agreement or
performance bond, in each case involving a
contingent obligation of the Company in excess
of $50,000;
(4) consulting or compensation agreement or
similar arrangement that is not an Employment
Agreement and that involves compensation
payable by the Company in excess of $50,000
annually or an agreement relating to the
election or retention in office of any
director or officer;
(5) debt instrument, loan agreement or other
obligation relating to indebtedness for
borrowed money;
(6) money lent or to be lent by the Company to
another in an amount in excess of $50,000;
(7) lease of real property, whether as lessor,
lessee, sublessor or sublessee ;
(8) lease of personal property, whether as lessor,
lessee, sublessor or sublessee involving lease
payments in an annual amount in excess of
$40,000;
(9) any agreement for the acquisition of services,
supplies, equipment or other personal property
(excluding leases of real or personal
property) and involving more than $100,000 in
the aggregate;
(10) contracts containing noncompetition covenants
restricting the Company's ability to compete;
(11) agreement providing for the purchase from a
supplier of all or substantially all of the
requirements of the Company of a particular
product or service; or
(12) agreement or commitment a copy of which would
be required to be filed with the SEC as an
exhibit to a
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registration statement on Form S-1, or a
successor form, pursuant to Paragraph 10 of
Item 601 of Regulation S-K, if the Company
were registering securities under the
Securities Act of 1933, as amended (the
"Securities Act").
All of the documents listed on Schedule 3.22 hereof and the contracts listed as
exhibits to the Company's filings with the SEC are hereinafter collectively
referred to as the "Commitments." To the knowledge of the Company, the
Commitments are in full force and effect and are valid and enforceable
obligations of the parties thereto in accordance with their respective terms
(except as may be limited by the laws of bankruptcy, insolvency or creditors
rights generally and subject to the enforceability and availability of equitable
remedies), and to the knowledge of the Company, no defenses, off-sets or
counterclaims have been asserted by any party thereto, nor has the Company
waived in writing any rights thereunder, except as described in Schedule 3.22.
The Company has not received written notice of any default with respect to any
Commitment.
(ii) No Cancellation or Termination of Commitments.
Except as contemplated hereby, the Company has not received written notice of
any plan or intention of any other party to any Commitment to exercise any right
to cancel or terminate any Commitment.
3.23 Conflict of Interest Transactions. Except as set forth on
Schedule 3.23, no director, member of management of the Company, or their
spouses or children (and to the best of our knowledge no shareholder) owns
directly or indirectly, on an individual or joint basis, any interests, has any
investment in or serves as an officer, partner or director in any corporation,
business or other person that is a customer, supplier or competitor of the
Company, or that has a material contract or arrangement with the Company or its
competitor, other than the ownership of less than one percent (1%) of the
securities of any company that are publicly traded on any national exchange or
over the counter market.
3.24 Environmental Matters. To the Company's knowledge,
neither the Company nor any of its assets is currently in material violation of,
or subject to any material existing, pending or threatened investigation or
inquiry by any governmental authority or to any remedial obligations under any
environmental laws, and this representation and warranty would continue to be
true and correct following disclosure to the applicable governmental authorities
of all relevant facts, conditions and circumstances, if any, pertaining to the
assets and operations of the Company. To the Company's knowledge, the assets of
the Company have never been used in a manner that would be in material violation
of any of the environmental laws. To the Company's knowledge, the Company is not
required to obtain any permits, licenses or similar authorizations to construct,
occupy, operate or use any buildings, improvements, fixtures and equipment owned
or leased by the Company by reason of any environmental laws. None of the assets
owned or leased by the Company are on any federal or state "Superfund" list or
subject to any environmentally related liens.
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3.25 No Bankruptcies. For the past five years, neither the
Company nor any of its officers, directors or its or their affiliates, have been
subject to criminal investigation, adjudication or conviction or have
voluntarily sought, consented to or acquiesced in the benefits of, or become the
subject of a proceeding under the Bankruptcy Code of the United States or any
other applicable liquidation, conservatorship, bankruptcy, moratorium,
rearrangement, receivership, insolvency, reorganization or similar debtor relief
laws from time to time in effect affecting the rights of creditors generally.
3.26 Year 2000 Compliance. To the Company's knowledge, the
computer systems used by the Company are Year 2000 compliant, meaning that such
systems will continue to function, and functionality and accuracy will not be
affected as a result of the run date or the dates being processed in the
twentieth or twenty-first century, including the advent of the Year 2000, or
from the extra day occurring in any leap year.
3.27 Legal Compliance. (a) the Company has all material
franchises, permits, licenses and other rights and privileges necessary to
permit them to own their respective properties and to conduct their respective
businesses as presently conducted and (b) the Company, and the business and
operations of the Company, have been and are being conducted in all material
respects in accordance with all applicable laws, rules and regulations
(including, without limitation, all employment, labor practices, safety and
health laws and regulations), and the Company is not in violation of any
judgment, order or decree. There is no existing law, rule, regulation or order
which would prohibit or restrict the Company from, or otherwise materially
adversely affect the Company in, conducting its business in any jurisdiction in
which it is now conducting business or, to the Company's knowledge, in which it
proposes to conduct business.
3.28 Disclosure. This Agreement and the exhibits and schedules
hereto do not contain any untrue statement of material fact or omit any material
fact necessary in order to make the statements therein not misleading. There is
no fact known to the Company that has not been disclosed to the Investor prior
to the date of this Agreement that materially and adversely affects the
business, assets, properties, prospects or condition (financial or otherwise) of
the Company, taken as a whole, or the ability of the Company to perform under
this Agreement or the other agreements contemplated hereby or to consummate the
transactions contemplated hereby or thereby.
Section 4. Representations and Warranties of the Investor. The Investor
hereby represents and warrants to the Company as follows:
(a) Review of Agreement. THE INVESTOR HAS READ CAREFULLY
AND UNDERSTANDS THIS AGREEMENT AND HAS CONSULTED THE INVESTOR'S OWN ATTORNEY,
ACCOUNTANT OR INVESTMENT ADVISER WITH RESPECT TO THE INVESTMENT CONTEMPLATED
HEREBY AND ITS SUITABILITY FOR THE INVESTOR.
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(b) Long-Term Investment. The Investor understands that the
Investor must bear the economic risk of its investment for an indefinite period
of time; that the Securities have not been registered under the 1933 Act and,
therefore, cannot be resold unless they are subsequently registered under the
1933 Act or unless exemption from such registration is available; that the
Investor is purchasing the Securities for investment for the account of the
Investor and not with a view toward resale or other distribution thereof, that
the Investor agrees not to resell or otherwise dispose of all or any part of the
Securities acquired by the Investor, except as permitted by law, including,
without limitation, any regulations under the 1933 Act ; and that Rule 144 under
the 1933 Act may not be available as a basis for exemption from registration of
any Securities thereunder until at least one (1) year from the date of
acquisition of the Securities.
(c) Accredited Investor. The Investor is an "accredited
investor" within the meaning of Regulation D promulgated under the 1933 Act.
Section 5. Restrictions on Transfer.
Legends. The Investor hereby agrees that each outstanding
certificate representing the Securities acquired hereunder shall bear the
following legend required by applicable securities laws:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED,
HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT (i)
PURSUANT TO A REGISTRATION STATEMENT UNDER THE
SECURITIES ACT WHICH HAS BECOME EFFECTIVE AND IS CURRENT
WITH RESPECT TO THESE SECURITIES, OR (ii) PURSUANT TO A
SPECIFIC EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT BUT ONLY UPON A HOLDER HEREOF FIRST
HAVING OBTAINED THE WRITTEN OPINION OF COUNSEL TO THE
CORPORATION, OR OTHER COUNSEL REASONABLY ACCEPTABLE TO
THE CORPORATION, THAT THE PROPOSED DISPOSITION IS
CONSISTENT WITH ALL APPLICABLE PROVISIONS OF THE
SECURITIES ACT AS WELL AS ANY APPLICABLE "BLUE SKY" OR
SIMILAR SECURITIES LAW."
Section 6. Conditions to Closing. The obligation of the Investor
hereunder to make the Investment and purchase the Securities therefore, is
subject to the satisfaction at or prior to the Closing of the following
conditions:
6.1 Representations and Warranties True. The representations
and warranties contained in Section 3 shall be true and accurate in all material
respects on and as of the Closing Date with the same effect as though made on
and as of such date.
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6.2 All Proceedings to be Satisfactory. All covenants and
agreements, corporate and other proceedings and actions to be taken by the
Company in connection with the transactions contemplated hereby and all
documents incident thereto shall be satisfactory in form and substance to the
Investor and its counsel, and the Investor and its counsel shall have received
all such counterpart originals or certified or other copies of such documents as
they reasonably may request.
6.3 Execution of Related Agreement. The Company and the
Investor shall have executed and delivered the Registration Rights Agreement.
6.4 Company Consents, etc. The Company shall have secured
all permits, consents and authorizations that shall be necessary or required
lawfully to consummate this Agreement and to issue the Common Stock to be
purchased by the Investor.
6.5 Compliance Certificates. The Company shall have
delivered to the Investor at the Closing an Officer's Certificate to the effect
that the representations and warranties of the Company continue to be true and
accurate in all material respects on the Closing Date, that all conditions
specified in this section have been fulfilled, that the Company shall have
performed and complied with all agreements and covenants contained in this
Agreement required to be performed or complied with by it prior to or at the
Closing, and that there has been no materially adverse change in the business,
affairs, prospects, operations or condition of the Company since the Balance
Sheet Date.
6.6 Legal Opinion. Counsel for the Company, Silverman,
Collura & Chernis, P.C., shall have delivered to the Investor a legal opinion,
dated as of the Closing Date and substantially in the form attached hereto as
Exhibit 6.6.
6.7 Company Deliveries. The Company shall have delivered to
the Investor (i) copies of the resolutions of the Company's Board of Directors
authorizing and approving this Agreement and all of the transactions and
agreements contemplated hereby and thereby, (ii) the Bylaws of the Company,
(iii) the Certificate of Incorporation and all amendments thereto of the
Company, and (iv) the names of the officer or officers of the Company authorized
to execute this Agreement and any and all documents, agreements and instruments
contemplated herein, all certified by the Secretary of the Company to be true,
correct, complete and in full force and effect and unmodified as of the Closing
Date; together with a certificate of existence and good standing for the Company
from the Delaware Secretary of State.
6.8 Due Diligence Completion. Investor and its legal counsel
and representatives shall have completed their due diligence review of the
Company, its books and records and other documents pertinent to the Company's
business, financial condition and results of
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operation; provided, however, any such due diligence review of the materials and
documents provided in that connection shall not affect the representations,
warranties or covenants contained in this Agreement.
Section 7. Affirmative Covenants. The Company agrees to comply with the
following covenants after the Closing:
(a) Financial Information. In the event the Company fails to
timely comply with the reporting obligations to the SEC, the Company will
deliver to Investor:
(i) within forty-five (45) days of the end of each
calendar quarter, quarterly and year-to-date balance
sheet and statements of income, changes in
stockholders equity, and cash flow prepared in
accordance with GAAP and certified by the Company's
Chief Financial Officer, except such financial
statements shall not contain normal and recurring
year-end audit adjustments;
(ii) within one hundred twenty (120) days after the
fiscal year end, an annual independent certified
audit from an outside accounting firm reasonably
designated by the Company, together with the annual
financial statements of the Company; and
(iii) as soon as practicable, but no later than thirty
(30) days after the beginning of each fiscal year,
beginning January 1, 2000, the Company shall provide
to the Investor a copy of the annual budget and plan
for such year which shall include, without
limitation, plans for incurrences of indebtedness
for borrowed money and projections regarding types
of sources of funds, monthly projected capital and
operating expense budgets and cash flow projections.
(b) Board Observer. If and when an employee of Nortel ceases
to serve as a member of the Board of Directors of the Company for any reason and
provided that at such time (and for so long as) the Investor continues to own at
least 90% of the Securities, the Investor may designate one person to serve as
an observer (an "Observer"). An observer shall be entitled (i) to receive the
same notice in respect of all meetings (both regular and special) of the Board
of Directors and each committee thereof as required to be furnished to members
of the Board of Directors or such committee by law or by the Certificate of
Incorporation or the Bylaws of the Company, (ii) to attend all meetings of the
Board of Directors and each committee thereof, (iii) to receive all information
and reports which are furnished to members of the Board of Directors and each
committee thereof,
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<PAGE>
and (iv) to participate in all discussions conducted at meetings of the Board of
Directors and each committee thereof. An Observer may share any information
gained from presence at such meetings with the Investor and its employees,
officers, directors, attorneys and advisors (collectively, the "Investor's
Representatives").
(c) Access to Information. The Company will permit the
Purchasers to inspect at the Purchasers' expense any of the properties or books
and records of the Company, and to discuss the affairs and condition of the
Company with representatives of the Company during normal business hours and
upon at least 24 hours prior notice to the Company, but no more frequent than
once each calendar quarter.
Section 8. Miscellaneous.
(a) This Agreement is governed by and construed in
accordance with the internal laws of the State of New York (excluding its
conflicts of laws principles).
(b) The representations and warranties contained in this
Agreement shall survive the execution, delivery and performance of this
Agreement.
(c) This Agreement or any term hereof may not be amended or
waived except with the written consent of the Company and the Investor.
(d) Unless otherwise specifically provided herein, all
communications under this Agreement shall be in writing and shall be deemed to
have been duly given (i) on the date of service if served personally on the
party to whom notice is to be given, (ii) on the day of transmission if sent by
facsimile transmission to the number given below, and telephonic confirmation of
receipt is obtained promptly after completion of transmission, (iii) on the day
after delivery to Federal Express or similar overnight courier, or (iv) on the
fifth day after mailing, if mailed to the party to whom notice is to be given,
by first class mail, registered or certified, postage prepaid, and properly
addressed, return receipt requested, to the party as follows:
If to the Company: Log On America, Inc.
3 Regency Plaza
Providence, Rhode Island 02903
Fax No.:401-459-6277
Attn: David Paolo, President
with a copy to: Silverman, Collura, Chernis & Balzano, P,C.
381 Park Avenue South Suite 1601
New York, NY 10016
Fax No. 212 779-8858
Attn: Peter Silverman
16
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If to the Investor: Nortel Networks Inc.
GMS 991 15 A40
2221 Lakeside Blvd.
Richardson, Texas 75082-4399
Fax No.: 972-684-3679
Attn: Paul D. Day, Vice President
Customer Finance
(e) This Agreement may be executed in two (2) or more
counterparts, and with counterpart signature pages, each of which shall be
deemed an original, and all of such counterparts together constitute but one (1)
and the same agreement. One (1) or more counterparts may be delivered by
facsimile with the same force and effect as an original.
IN WITNESS WHEREOF, the parties have executed this Investment Agreement as
of the date set forth above.
LOG ON AMERICA, INC.
By: s/David Paolo
-------------------------------
Name: David Paolo
Title: President
NORTEL NETWORK INC.
By: s/Paul D. Day
-------------------------------
Name: Paul D. Day
Title: VP, Customer Finance
17
Exhibit 99.2
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of
December 10, 1999, by and between LOG ON AMERICA, INC., a Delaware corporation
(the "Company"), and Nortel Networks Inc. (the "Holder").
WHEREAS, pursuant to the Investment Agreement, dated as of the date
hereof, between the Company, and the Holder, the Holder has been issued 256,410
shares of the common stock $.01 par value (the "Common Stock") of the Company;
WHEREAS, the Company has agreed to register the sale of the Common
Stock under the Securities Act of 1933, as amended.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
Section 1. Defined Terms; Effectiveness of Registration Rights.
1.1 Defined Terms. Capitalized terms used and not defined herein
shall have the respective meanings ascribed to them in the Investment Agreement.
In addition, the following terms shall have the following meanings:
"Governmental Body" means any federal, state, municipal or other
governmental body, department, commission, board, bureau, agency or
instrumentality, domestic or foreign.
"Inspectors" has the meaning attributed thereto in Section 5.
"Other Holders" means all holders of common stock other than Nortel
Networks Inc.
"Other Securities" has the meaning attributed thereto in Section
3.1.
"Person" means any individual, corporation, partnership, joint
venture, association, trust, unincorporated organization, business or other
legal entity.
"Records" has the meaning attributed thereto in Section 5.
"Registrable Securities" means: (i) the shares of Common Stock of
the Company issued or issuable to the Holder pursuant to the terms of the
Investment Agreement and (ii) any securities of the Company distributed with
respect to such shares of Common Stock.
"Registration Expenses" means all expenses incident to the Company's
performance of or compliance with the registration and other requirements set
forth in this Registration Rights Agreement including, without limitation, the
following: (i) the fees, disbursements and expenses of all counsel to the
Company and all accountants in connection with the registration statement, any
<PAGE>
preliminary prospectus or final prospectus, any other offering documents and
amendments and supplements thereto and the mailing and delivery of copies
thereof to underwriters and dealers; (ii) all expenses in connection with the
preparation, printing and filing of the registration statement, any preliminary
prospectus or final prospectus, any other offering document and amendments and
supplements thereto and the mailing and delivery of copies thereof to
underwriters and dealers; (iii) the cost of printing or producing any
agreement(s) among underwriters, underwriting agreement(s) and blue sky or legal
investment memoranda, any selling agreements and any other documents in
connection with the offering, sale or delivery of the Registrable Securities to
be disposed of; (iv) all expenses in connection with the qualification of the
Registrable Securities to be disposed of for offering and sale under state
securities laws, including the fees and disbursements of counsel for the
underwriters in connection with such qualification and in connection with any
blue sky and legal investment surveys; (v) the filing fees incident to securing
any required review by the National Association of Securities Dealers, Inc. of
the terms of the sale of the Registrable Securities to be disposed of; (vi) the
cost and charges of any transfer agent or registrar in connection with the
registration of exchange or transfer of the Registrable Securities to be
disposed of; and (vii) all stock exchange listing fees.
"Total Number of Includible Securities" has the meaning attributed
thereto in Section 3.1(b).
1.2 Effectiveness of Registration Rights. The registration rights
pursuant to Sections 2 and 3 hereof shall become effective upon the date hereof
and shall continue so long as any Holder or transferee of a Holder shall hold
Registrable Securities.
1.3 Registration Not Required. Notwithstanding anything herein to
the contrary, the Company shall not be obligated to effect any registration
pursuant to Section 2.1 or Section 3.1 hereof or to keep effective any
registration statement prepared and filed pursuant to Section 2.1 or Section 3.1
hereof, if, in the written opinion of counsel to the Company who shall be
reasonably satisfactory to the Holder or Holders intending to participate in
such registration and which opinion shall be concurred in by counsel to such
Holders, the intended method or methods of disposition of any Registrable
Securities by such Holders may be effected without registration under the
Securities Act of 1933, as amended and the rules and regulations promulgated
thereunder (the "Securities Act") and without restriction as to subsequent
trading.
Section 2. Registration on Request.
2.1 Notice. Upon written notice from the Holder requesting that the
Company effect the registration under the Securities Act of all or a portion of
the Registrable Securities beneficially owned by it, which notice shall specify
the intended method or methods of disposition of such Registrable Securities,
the Company shall use its best efforts to effect the registration as promptly as
practicable and without restriction as to subsequent trading, under the
Securities Act, of such Registrable Securities for disposition stated in the
request for registration received from the Holder : The Company shall be
obligated to register the Registrable Securities pursuant to this
2
<PAGE>
Section 2.1 on two (2) occasions only with respect to notices delivered by the
Holder to the Company requesting such registration.
2.2 Registration Expenses. The Company shall pay or cause to be paid
all Registration Expenses in connection with the exercise of registration rights
pursuant to this Section 2; provided however the Holder shall bear or pay its
pro rata share of underwriting discounts and commissions based on the number of
Registered Securities sold by the Holder.
Section 3. Piggyback Registration.
3.1 Notice and Registration. If the Company proposes to register any
of its voting securities ("Other Securities") for public sale under the
Securities Act, on a form and in a manner which would permit registration of
Registrable Securities for sale to the public under the Securities Act, it will
give prompt written notice to the Holder of its intention to do so, and upon the
written request of the Holder, delivered to the Company within 10 business days
after the giving of any such notice (which request shall specify the Registrable
Securities intended to be disposed of by the Holder, and the intended method of
disposition thereof), the Company will use its best efforts to effect, in
connection with the registration of the Other Securities, the registration under
the Securities Act of all Registrable Securities which the Company has been so
requested to register by the Holder, to the extent required to permit the
disposition (in accordance with the intended method or methods thereof as
aforesaid) of the Registrable Securities so to be registered, provided that:
(a) if, at any time after giving such written notice of its
intention to register any Other Securities and prior to the
effective date of the registration statement filed in connection
with such registration, the Company shall determine for any reason
not to register the Other Securities, the Company may, at its
election, give written notice of such determination to the Holder,
and thereupon the Company shall be relieved of its obligations to
register such Registrable Securities in connection with the
registration of such Other Securities (but not from its obligation
to pay Registration Expenses to the extent incurred in connection
therewith as provided in Section 3.2), without prejudice, however,
to the rights, if any, of the Holder immediately to request that
such registration be effected as a registration under Section 2;
(b) the Company will not be required to effect any
registration of Registrable Securities under this Section 3 if, and
to the extent that, the underwriters (or any managing underwriter)
shall advise the Company in writing that, in their reasonable
opinion, inclusion of such number of shares of Registrable
Securities will adversely affect the price or distribution of the
securities to be offered solely for the
3
<PAGE>
account of the Company. Such advice shall include a statement as to
the underwriters' (or any managing underwriter's) opinion as to the
number of shares which may be included without adversely affecting
the price or distribution of the securities solely for the account
of the Company (such total number of shares which such advice states
may be so included being the "Total Number of Includible
Securities"). The Company shall promptly furnish each Holder with a
copy of such written advice, and in such event the number of shares
as to which the underwriter believes may be sold shall first be
allocated to the Company and the remaining number of shares shall
then be allocated to the Holder.
(c) The Company shall not be required to effect any
registration of Registrable Securities under this Section 3
incidental to the registration of any of its securities in
connection with mergers, acquisitions, exchange offers, dividend
reinvestment plans or stock option or other employee benefit plans.
No registration of Registrable Securities effected under this Section 3 shall
relieve the Company of its obligation, if any, to effect the registration of
Registrable Securities pursuant to Section 2.
3.2 Registration Expenses. The Company will pay all Registration
Expenses in connection with any registration pursuant to this Section 3;
provided that with respect to any such registration, the Holder shall bear any
transfer taxes applicable to its Registrable Securities registered thereunder,
its pro rata share of all underwriting fees, commissions, discounts or other
compensation in respect of such Registrable Securities; and provided, further,
that in no event shall the Holder be required to pay any internal costs of the
Company.
Section 4. Registration Procedures.
4.1 Registration and Qualification.
(a) If and whenever the Company is required to use its best efforts
to effect the registration of any Registrable Securities under the Securities
Act as provided in Sections 2 and 3, the Company will promptly as is
practicable:
(i) prepare, file and use its best efforts to cause to become
effective a registration statement under the Securities Act
regarding the Registrable Securities to be offered;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus
4
<PAGE>
used in connection therewith as may be necessary to keep such
registration statement effective and to comply with the provisions
of the Securities Act with respect to the disposition of all
Registrable Securities until such time as all of such Registrable
Securities have been disposed of in accordance with the intended
methods of disposition by the Holder, as set forth in such
registration statement;
(iii) furnish to the Holder and to any underwriter of such
Registrable Securities such number of conformed copies of such
registration statement and of each such amendment and supplement
thereto (in the case of the Holder or any managing underwriter,
including all exhibits), such number of copies of the prospectus
included in such registration statement (including each preliminary
prospectus and any summary prospectus) or filed under the Securities
Act, in conformity with the requirements of the Securities Act, such
documents as may be incorporated by reference in such registration
statement, or prospectus, and such other documents, as the Holder or
such underwriter may reasonably request;
(iv) use its best efforts to register or qualify all
Registrable Securities covered by such registration statement under
such other securities or blue sky laws of such jurisdictions as the
Holder or any underwriter of such Registrable Securities shall
reasonably request, and do any and all other acts and things which
may be necessary or advisable to enable the Holder or any
underwriter to consummate the disposition in such jurisdictions of
its Registrable Securities covered by such registration statement,
except that the Company shall not for any such purpose be required
to qualify generally to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified, or to subject itself to
taxation in any such jurisdiction, or to consent to general service
of process in any such jurisdiction;
(v) in the case of any underwritten offering, furnish to the
Holder and the underwriters, addressed to them, (A) an opinion of
counsel for the Company, dated the date of the closing under the
underwriting agreement relating to any underwritten offering, in
form and substance satisfactory to the Holder, to the effect that
(a) a registration statement covering the Registrable Securities has
been filed with the Commission under the Securities Act and has been
made effective by order of the Commission, (b) such registration
statement and the prospectus contained therein comply in all
material respects with the requirements of the Securities Act, and
nothing has come to said counsel's attention which would cause it to
believe that
5
<PAGE>
either such registration statement or the prospectus contains any
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 in light of the circumstances under which they
were made not misleading, (c) a prospectus meeting the requirements
of the Securities Act is available for delivery, (d) no stop order
has been issued by the Commission suspending the effectiveness of
such registration statement and, to the best of counsel's knowledge,
no proceedings for the issuance of such a stop order are threatened
or contemplated, and (e) there has been compliance with the
applicable provisions of the securities or blue sky laws of each
jurisdiction in which the Company shall be required pursuant to
clause (iv) of this sentence to register or qualify such Registrable
Securities, assuming the accuracy and completeness of the
information furnished to such counsel with respect to each filing
relating to such laws, and (B) a comfort letter signed by the
independent public accountants who have certified the Company's
financial statements included in such registration statement, with
respect to events subsequent to the date of such financial
statement, as are customarily covered in accountants' letters,
delivered to underwriters in underwritten public offerings of
securities and such other matters as the Holders may reasonably
request;
(vi) at the expense of the Holder, give the Holder, any
underwriter(s), and one counsel or firm of counsel and one
accountant or firm of accountants representing the Holder the
opportunity to participate in the preparation of such registration
statement, each prospectus included therein or filed with the SEC,
and each amendment thereof or supplement thereto; and
(vii) immediately notify the Holder at any time when a
prospectus relating to a registration pursuant to Section 2 or 3 is
or was 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 or
included an untrue statement of a material fact or omits or omitted
to state any material fact required to be stated therein or
necessary, in the light of the circumstances then existing, to make
the statements therein not misleading, and at the request of the
Holder prepare and furnish to the Holder a reasonable number of
copies of a supplement of or an amendment of such prospectus as may
be necessary so that, as thereafter delivered to the purchasers of
such Registrable Securities, such prospectus shall not include an
untrue statement of a material
6
<PAGE>
fact or omit to state a material fact required to be stated therein
or necessary, in light of the circumstances then existing, to make
the statements therein not misleading; and
(viii) use reasonable efforts to do any and all other acts the
Holder may reasonably request and which are customary for a
registration of equity securities.
The Company may require the Holder to furnish such information regarding such
Holder and the distribution of such securities as the Company may from time to
time reasonably request in writing and as shall be required by law or by the
Commission in connection with any registration.
(b) The Holder agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section
4.1(a)(vi) hereof, the Holder shall use its best efforts to discontinue
forthwith disposition of Registrable Securities pursuant to the registration
statement covering such Registrable Securities until the Holder's receipt of the
copies of the supplemented or amended prospectus contemplated by Section
4.1(a)(vi) hereof.
4.2 Underwriting.
(a) If requested by the managing underwriter for any underwritten
offering of Registrable Securities pursuant to a registration requested
hereunder, the Company will enter into an underwriting agreement with the
underwriters for such offering, such agreement to contain such representations
and warranties by the Company and such other terms and provisions as are
customarily contained in underwriting agreements with respect to secondary
distributions, including, without limitation, indemnities and contribution to
the effect provided in Section 6 hereof and the provision of opinions of counsel
and accountants' letters to the effect provided in Section 4.1(a)(v) hereof.
Each Holder participating in the registration, as appropriate, shall be a party
to any such underwriting agreement and the representations and warranties by,
and the other agreements on the part of, the Company to and for the benefit of
such underwriters, shall also be made to and for the benefit of such Holders.
(b) In the event that any registration pursuant to Section 3 shall
involve, in whole or in part, an underwritten offering, the Company may require
the Registrable Securities requested to be registered pursuant to Section 3 by
any Holder to be included in such underwriting on the same terms and conditions
as shall be applicable to the Other Securities being sold through underwriters
under such registration. In any such case, the Holder shall be party to any such
underwriting agreement. Such agreements shall contain such representations,
warranties and covenants by the Holder, as appropriate, and such other terms and
provisions as are customarily contained in underwriting agreements with respect
to secondary distributions, including, without limitation, indemnities and
contribution to the effect provided in Section 6 hereof. The representations and
warranties in such underwriting agreement by, and the other agreements on the
part of, the Company to and for the benefit of such underwriters, shall also be
made for the benefit of the Holder.
7
<PAGE>
Section 5. Preparation: Reasonable Investigation. In connection with
the preparation and filing of each registration statement registering
Registrable Securities under the Securities Act, the Company will give the
Holder participating in the registration and the underwriters, if any, and their
respective counsel and accountants (collectively, the "Inspectors"), such
reasonable and customary access to its books and records (collectively, the
"Records") and such opportunities to discuss the business of the Company with
its officers and the independent public accountants who have certified its
financial statements as shall be necessary, in the opinion of the Holder and
such underwriters or their respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act. Records which the
Company reasonably determines to be confidential and which it notifies the
Inspectors in writing are confidential shall not be disclosed by the Inspectors
unless (i) the disclosure of such Records is necessary or appropriate to avoid
or correct a misstatement or omission in the registration statement, (ii) the
portion of the Records to be disclosed has otherwise become publicly known,
(iii) the information in such Records is to be used in connection with any
litigation or governmental investigation or hearing relating to any registration
statement or (iv) the release of such Records is ordered pursuant to a subpoena
or other order. Each Holder agrees that it will, upon learning that disclosure
of such Records is sought in a court of competent jurisdiction, give notice to
the Company.
Section 6. Indemnification and Contribution.
(a) Indemnification By the Company. The Company agrees to
indemnify and hold harmless each Person who participates as an underwriter, the
Holder participating in a registration pursuant to this Agreement, each of their
respective officers and directors and each Person, if any, who controls any such
underwriter or such Holder within the meaning of Section 15 of the Securities
Act as follows:
(i) against any and all loss, claim, damage and expense
whatsoever, as incurred, arising out of or caused by any untrue
statement or alleged untrue statement of a material fact contained
in any registration statement (or any amendment thereto) pursuant to
which Registrable Securities were registered under the Securities
Act, including all documents incorporated therein by reference, or
the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements
therein not misleading or arising out of any untrue statement or
alleged untrue statement of a material fact contained in any
preliminary or final prospectus (or any amendment or supplement
thereto) or the omission or alleged omission therefrom of a material
fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate
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amount paid in settlement of any litigation, or investigation or
proceeding by any Governmental Body commenced or threatened, or of
any claim whatsoever based upon any such untrue statement or
omission, if such settlement is effected with the written consent of
the Company; and
(iii) against any and all expense whatsoever, as incurred
(including fees and disbursements of counsel chosen by the Holders
or any underwriter), reasonably incurred in investigating, preparing
or defending against any litigation, or investigation or proceeding
by any Governmental Body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any
such expense is not paid under clause (i) or (ii) above;
provided, however, that this indemnity agreement does not apply to any loss,
liability, claim, damage or expense to the extent arising out of or caused by
any untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with written information furnished to the
Company by the Holder for use in a registration statement (or any amendment
thereto) or any prospectus (or any amendment or supplement thereto); and further
provided that this indemnity agreement does not apply to any loss, liability,
claim, damage or expense arising out of or caused by the Holder's continued
circulation, subsequent to the Holder's receipt of the notice described in
Section 4.1(a)(v) hereof, of a prospectus including the untrue statement of a
material fact or omission of a material fact as to which such notice was
provided.
(b) Indemnification by the Holder. The Holder agrees with respect to
each registration pursuant to this Agreement in which the Holder participates to
indemnify and hold harmless the Company and any underwriter, and each of their
respective directors and officers (including each officer of the Company who
signed the registration statement), and each Person, if any, who controls the
Company or any underwriter within the meaning of Section 15 of the Securities
Act and the Holder, against any and all loss, liability, claim, damage and
expense described in the indemnity contained in Section 6(a) hereof, as
incurred, with respect to untrue statements or omissions, or alleged untrue
statements or omissions, made in the registration statement (or any amendment
thereto) or any preliminary or final prospectus (or any amendment or supplement
thereto) in reliance upon and in conformity with written information furnished
to the Company by the Holder expressly for use in the registration statement or
such prospectus (or any amendment or supplement thereto); provided, however that
the Holder shall be liable under this paragraph for only that amount of losses,
claims, damages, and liabilities as does not exceed the proceeds to the Holder
as a result of the sale of Registerable Securities pursuant to such
registration.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action (including any
governmental action), such indemnified party
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will, if a claim in respect thereof is to be made against any indemnifying party
under this Section 6, 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 mutually satisfactory to the parties; provided, however,
that an indemnified party (together with all other indemnified parties which may
be represented without conflict by one counsel) shall have the right to retain
one separate 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 potential
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 prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 6, but the omission so to 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 6.
(d) If the indemnification provided for in this Section 6 is held by
a court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, liability, claim, damage, or expense referred to therein,
then the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such loss, liability, claim, damage, or expense 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 statements or omissions that resulted in such loss, liability, claim,
damage, or expense as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of the indemnified party shall be
determined 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.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in conflict
with the foregoing provisions, the provisions in the underwriting agreement
shall control.
(f) The obligations of the Company and Holders under this Section 6
shall survive the completion of any offering of Registrable Securities by the
Holder and otherwise.
Section 7. Transferability of Shares.
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(a) The shares of any Common Stock distributed to the Holder
pursuant to the Investment Agreement shall not be sold, assigned, transferred or
pledged except upon the conditions specified in this Section 7, which conditions
are intended to ensure compliance with the provisions of the Securities Act.
Each certificate representing Registrable Securities held by the Holder shall
(unless otherwise permitted by the provisions of Section 7(b)) be stamped or
otherwise imprinted with a legend in substantially the following form (in
addition to any legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT). SUCH SHARES MAY NOT BE
SOLD OR TRANSFERRED EXCEPT IN COMPLIANCE WITH THE REGISTRATION
REQUIREMENTS OF THE ACT, OR PURSUANT TO AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS.
(b) The Holder understands that, so long as the legend is required
to be imprinted on a certificate representing Registrable Securities, the
Company may maintain appropriate "stop transfer" orders with respect to such
Registrable Securities on its books and records and with those to whom it may
designate registrar and transfer functions.
(c) The Holder agrees to comply in all respects with the provisions
of this Section 7(c). Prior to any proposed sale, assignment, transfer or pledge
(a "Transfer"), of any Registrable Securities, unless there is in effect a
Registration Statement covering the proposed Transfer, the Holder shall give
written notice to the Company of its intention to effect such Transfer and the
name of the proposed transferee. Each such notice shall describe the manner and
circumstances of the proposed Transfer in sufficient detail, and, if requested
by the Company, shall be accompanied, at the Holder's expense, by either (i) an
unqualified written opinion of legal counsel who shall be, and whose legal
opinion shall be, reasonably satisfactory to the Company addressed to the
Company, to the effect that the proposed Transfer of the Registrable Securities
may be effected without registration under the Securities Act; provided however
that if the proposed Transfer would, in the opinion of such counsel, require
that the Company take action and/or execute and file with the Commission and/or
deliver to the Holder or any other person any form or document in order to
establish the entitlement of the Holder to take advantage of such method of
disposition, the Company agrees promptly to take any such action and/or execute
and file and/or deliver any such form or document, or (ii) a "no action" letter
from the Commission to the effect that the Transfer of such securities without
registration will not result in a recommendation by the staff of the Commission
that action be taken with respect thereto, whereupon the Holder of such
Registrable Securities shall be entitled to effectuate a Transfer of such
Registrable Securities in accordance with the terms of the notice delivered by
the Holder to the Company. Notwithstanding the foregoing, it is agreed that the
Company will not request an opinion of counsel for the Holder with respect to
Transfers made in reliance on Rule 144 under the Act , the existence of which
shall be determined in good faith by the Board of Directors of the Company;
however, the Holder shall deliver to the Company (i) copies of
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all forms customarily delivered or deliverable to brokers in connection with a
Transfer of securities, and (ii) a certificate of the Holder desiring to
Transfer such Registrable Securities containing such representations and
warranties to the Company as are customarily given to brokers in connection with
the Transfer of securities.
(d) Each certificate evidencing the Restricted Securities with
respect to which a Transfer as provided in this Section 7 has been effected,
shall bear, except if such Transfer is made pursuant to Rule 144 under the Act,
the appropriate restrictive legend set forth above, except that such certificate
shall not bear such restrictive legend if in the opinion of counsel for the
Holder and the Company such legend is not required in order to establish
compliance with any provision of the Act.
(e) At any time when the Holder desires to make sales of any
Registrable Securities in reliance on Rule 144 promulgated under the Securities
Act, the Company covenants and agrees that either there will be available
adequate current public information with respect to the Company as required by
paragraph (c) of said Rule 144 or the Company will use its best efforts to make
such information available without delay if such information is not available.
Without limiting the foregoing, the Company will timely file with the Commission
all reports required to be filed under Section 13 and 15(d) of the Securities
Exchange Act of 1934, as amended, and will promptly furnish to Holder so
requesting a written statement that the Company has complied with all such
reporting requirements.
(f) The Holder may assign its rights hereunder in connection with
any sale, assignment, transfer or pledge of Registrable Securities provided that
such assignee shall have agreed in writing, satisfactory in form and substance
to the Company and its counsel, to be bound hereby. From and after any such
assignment pursuant to this Section 7, references herein to the Holder shall
include such permitted assignee or assignees.
8. Rights Which May Be Granted to Subsequent Investors.
(a) Within the limitations prescribed by this Section 8(a), but not
otherwise, the Company may grant to subsequent investors in the Company rights
of piggyback registration (such as those provided in Section 3 hereof). Such
rights may only pertain to shares of Common Stock, including shares of Common
Stock into which any other securities may be converted. Such rights may be
granted with respect to (i) registrations actually requested by the Holder
pursuant to Section 2 hereof, but only in respect of that portion of any such
registration as remains after inclusion of all Registrable Securities requested
by Holder and (ii) registrations initiated by the Company, but only in respect
of that portion of such registration as is available under the limitations set
forth in Section 3.1(b) hereof (which limitations shall apply pro rata to the
Holders and all other persons participating in the registration) and such rights
shall be limited in all cases to sharing pro rata in the available portion of
the registration in question with Holder, such sharing to be based on the number
of shares of Common Stock held by the Holder and held by such other investors,
plus the number of shares of Common Stock into which other securities held by
such other investors are convertible,
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which are entitled to registration rights. With respect to registrations which
are for underwritten public offerings, "available portion" means the portion of
the underwritten shares which is available as specified in clauses (i) and (ii)
of the third sentence of this Section 8(a). Shares not included in such
underwriting shall not be registered.
(b) The Company may not grant to subsequent investors in the Company
rights of registration upon request (such as those provided in Section 2 hereof)
unless (i) such rights are limited to shares of Common Stock issued by the
Company to such investors or to shares of Common Stock issuable by the Company
upon the conversion of other securities issued by the Company to such investors,
(ii) such rights shall not become effective in the period commencing with the
effective date and for thirty (30) days after the effective date of the
registration pursuant to Section 2 hereof and (iii) such rights shall not be
more favorable than those granted to the Holder.
Section 9. Miscellaneous.
9.1 Severability. If any term, provision, covenant, restriction,
part or portion of this Agreement is held by a court of competent jurisdiction
to be invalid, void or unenforceable, or is otherwise legally impossible to
perform, the remainder of the terms, provisions, covenants, restrictions, parts
and portions of this Agreement shall remain in full force and effect.
9.2 Specific Enforcement. The parties hereto acknowledge and agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to specific performance of any covenant in this Agreement or an
injunction or injunctions to prevent or cure breaches of the provisions of this
Agreement, this being in addition to any other remedy to which they may be
entitled by law or equity.
9.3 Entire Agreement. This Agreement contains the entire
understanding of the parties with respect to the matters covered hereby and this
Agreement may be amended only by an agreement in writing executed by the parties
hereto.
9.4 Counterparts. This Agreement may be executed in by the parties
hereto in counterparts, each of which shall be deemed an original, but all of
which together constitute one and the same instrument.
9.5 Notices. All notices and other communications provided for
herein (including, without limitation, any waivers or consents under this
Agreement) shall be given or made by telecopy, telegraph, cable or otherwise in
writing (each communication given by any of such means to be deemed to be "in
writing" for purposes of this Agreement) and telecopied, telegraphed, cabled,
mailed or delivered to the intended recipient at the address for notices
specified below or, as to any party, at such other address as shall be
designated by such party in a notice to the other. Except as otherwise provided
in this Agreement, all such communications shall be deemed to have been duly
given (i) when delivered to the telegraph or cable office or personally
delivered or, (ii) in the case of
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transmission by telecopy, when telecopied (with confirmation) and mailed (with
same day post-mark) certified mail, return receipt requested or (iii) in the
case of a mailed notice, upon receipt, in each case given or addressed as
aforesaid.
if to the Company: Log On America, Inc.
3 Regency Plaza
Providence, Rhode Island 02903
Attn: David Paolo, President
Fax No. 401- 459-6277
with a copy to: Silverman, Collura, Chernis & Balzano, P,C.
381 Park Avenue South Suite 1601
New York, NY 10016
Attn: Peter Silverman
Fax No. 212-779-8858
If to Investor to: Nortel Networks Inc.
GM5991 15 A40
2221 Lakeside Blvd.
Richardson, TX 75082-4399
Attn: Paul D. Day, Vice President Customer Finance
Fax No. 972-684-3679
9.6 Waivers. Each party may waive in whole or in part any benefit
or right provided to it under this Agreement. No waiver by any party of any
default with respect to any provision, condition, requirement, or of any benefit
or right hereof shall be deemed to be a waiver of any other provision,
condition, requirement, benefit or right hereof; nor shall any delay or omission
of either party to exercise any right hereunder in any manner impair the
exercise of any such right accruing to it thereafter.
9.7 Submission to Jurisdiction . Any action with respect to any
claim arising out of or relating to this Agreement including any claim for
specific performance arising under Section 9.2 hereof may be brought in the
State, City and County of New York, and in furtherance thereof (a) each of the
Company and the Holder irrevocably consents and submits to the non-exclusive
jurisdiction of the Supreme Court of the State of New York for the County of New
York and the United State District Court for the Southern District of New York
and (b) each of the Company and the Holder irrevocably waives any objection
which it may have at any time to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement brought in any such
court, irrevocably waives any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum and further
irrevocably waives the right to object, with respect to such suit, action or
proceedings brought in any such court, that such court does not have
jurisdiction over such party.
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9.8 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
9.9 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the Company and the Holders, and their successors
and legal representatives. No rights to the benefit of any third parties are
intended to be created by any provision of this Agreement or any rights
hereunder except to the extent contemplated by Section 7 hereof.
9.10 Governing Law. This Agreement was negotiated and delivered in
the State of New York. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York applicable to
contracts made and to be performed entirely within such state.
9.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument. Execution and delivery of
this Agreement by exchange of facsimile copies bearing the facsimile signature
of a party hereto shall constitute a valid and binding execution and delivery of
this Agreement by such party. Such facsimile copies shall constitute enforceable
original documents.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officer as of the date set forth
at the head of this Registration Rights Agreement.
LOG ON AMERICA, INC.
By: /David Paolo
----------------------------
Name: David Paolo
Title: President
NORTEL NETWORKS INC.
By:
----------------------------
Paul D. Day,
VP, Customer Finance
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