<PAGE>
As filed with the Securities and Exchange Commission on April 28, 1999
Registration No. 333--74679
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
NETWORK ACCESS SOLUTIONS CORPORATION
(Exact name of registrant as specified in its charter)
100 Carpenter Drive
Sterling, Virginia 20164
(703) 742-7700
(Address of principal executive offices)
Delaware 4813 54-1738938
(State or other jurisdiction (Primary standard industrial (I.R.S. employer
of incorporation or classification code number) identification
organization) number)
-------------------
Jonathan P. Aust
President and Chief Executive Officer
Network Access Solutions Corporation
100 Carpenter Drive
Sterling, Virginia 20164
(703) 742-7700
(Name, address, including zip code and telephone number, including area code
of agent for service)
-------------------
Copies to:
Edwin M. Martin, Jr., Esquire Scott M. Wornow, Esquire
Nancy A. Spangler, Esquire Paul, Hastings, Janofsky & Walker LLP
Piper & Marbury L.L.P. 399 Park Avenue, 31st Floor
1200 19th Street, N.W. New York, New York 10022
Washington, D.C. 20036 (212) 318-6000
(202) 861-3900
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
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, as amended (the "Securities Act") 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, 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 this Form is a post-effective amendment filed pursuant to Rule 462(d)
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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<TABLE>
<CAPTION>
Title of Each Class of Securities To Proposed Maximum Aggregate Amount of
Be Registered Offering Price (1) Registration Fee (2)
- --------------------------------------------------------------------------------------
<S> <C> <C>
Shares of Common Stock, par value
$.001................................ $100,000,000 $ 0
</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act.
(2) A registration fee of $27,800 was paid at the time of the initial filing
of this registration statement.
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, 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>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
13. Other Expenses of Issuance and Distribution
The following table sets forth the various expenses payable by the
Registrant in connection with the sale and distribution of the securities
offered hereby, other than underwriting discounts and commissions. All of the
amounts shown are estimated except the Securities and Exchange Commission
registration fee, the National Association Securities Dealers, Inc. filing fee
and the Nasdaq National Market listing fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.............. $27,800
National Association of Securities Dealers, Inc. filing fee...... 12,000
Nasdaq National Market listing fee............................... *
Transfer agent's and registrar's fees............................ *
Printing expenses................................................ *
Legal fees and expenses.......................................... *
Accounting fees and expenses..................................... *
Blue Sky filing fees and expenses................................ *
Miscellaneous expenses........................................... *
-------
Total.......................................................... *
=======
</TABLE>
- ---------------------
* To be filed by amendment.
14. Indemnification of Officers and Directors
Section 145 of the Delaware General Corporation Law ("Section 145") permits
indemnification of directors, officers, agents and controlling persons of a
corporation under certain conditions and subject to certain limitations. The
Registrant's Bylaws include provisions to require the Registrant to indemnify
its directors and officers to the fullest extent permitted by Section 145,
including circumstances in which indemnification is otherwise discretionary.
Section 145 also empowers the Registrant to purchase and maintain insurance
that protects its officers, directors, employees and agents against any
liabilities incurred in connection with their service in such positions.
At present, there is no pending litigation or proceeding involving a
director or officer of the Registrant as to which indemnification is being
sought nor is the Registrant aware of any threatened litigation that may result
in claims for indemnification by any officer or director.
The form of Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification by the Underwriters of the Registrant
and its directors and officers, and by the Registrant of the Underwriters, for
certain liabilities arising under the Securities Act.
II-1
<PAGE>
15. Recent Sales of Unregistered Securities
The following information relates to securities issued or sold by the
Registrant within the last three years. During that time, the Registrant has
issued unregistered securities in the transactions described below. Securities
issued in such transactions were offered and sold in reliance upon the
exemption from registration under Section 4(2) of the Securities Act, relating
to sales by an issuer not involving any public offering, or under Rule 701
under the Securities Act. The sales of securities were made without the use of
an underwriter and the certificates evidencing the shares bear a restrictive
legend permitting the transfer thereof only upon registration of the shares or
an exemption under the Act.
(1) In August 1998 the Registrant issued 260,000 shares of Common Stock to an
employee at a price of $0.50 per share in exchange for services rendered.
(2) In August 1998 the Registrant issued 9,800,000 shares of Common Stock to a
group of four accredited investors at a purchase price of $0.0005 per share
for an aggregate price of $4,900.
(3) In August 1998 the Registrant issued 10,000,000 shares of Series A
Preferred Stock to a group of four accredited investors, at a purchase
price of $1.00 per share for an aggregate price of $10,000,000.
(4) Between July 1998 and April 1999, the Registrant issued options exercisable
for an aggregate of 4,000,200 shares of Common Stock at an exercise price
of $0.20 per share.
(5) In April 1999 the Registrant issued options to one of its directors
exercisable for an aggregate of 111,111 shares of Common Stock at an
exercise price of $15 per share, subject to adjustment.
16. Exhibits and Financial Statement Schedules
(a)Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
1.1 Form of Underwriting Agreement
3.1* Amended and Restated Certificate of Incorporation of the Company
3.2* Amended and Restated By-Laws of the Company
4.1* Specimen stock certificate for shares of Common Stock of the
Company
5.1** Opinion of Piper & Marbury L.L.P., regarding legality of
securities being registered
10.1+ Master Equipment Lease Agreement dated November 17, 1998, by and
between the Company and Paradyne Credit Corporation
10.2+ Purchase and Sale Agreement dated as of October 16, 1998, by and
between the Company and Ascend Communications, Inc.
10.3 Master Lease Agreement dated October 9, 1998, by and between the
Company and Ascend Credit Corporation
10.4 Promissory Note dated October 16, 1998, by and between the Company
and Ascend Communications, Inc.
10.5* Commercial Lease dated February 24, 1997, by and between the
Company, Sterling/Gunston Limited Partnership and Bernstein
Management Corporation
10.5.1* First Lease Amendment dated June 26, 1998, by and between the
Company and Sterling/Gunston LLC
10.5.2* Third Lease Amendment dated February 1, 1999, by and between the
Company and Sterling/Gunston LLC
10.6* Sublease dated August 31, 1998, by and between the Company and
U.S. Interactive, Inc.
10.7* Letter of Intent dated March 2, 1999 by and between the Company
and Trans Dulles Center, Inc.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
10.8* Employment Agreement dated as of August 16, 1998, by and between
the Company and
Jonathan P. Aust
10.9* Employment Agreement dated as of July 13, 1998, by and between the
Company and
Christopher J. Melnick
10.10* Employment Agreement dated as of July 13, 1998, by and between the
Company and Scott G. Yancey, Jr.
10.11* Employment Agreement dated as of August 18, 1998, by and between
the Company and James A. Aust
10.12* Employment Agreement dated as of March 1, 1999, by and between the
Company and John J. Hackett
10.13* 1998 Stock Incentive Plan, as amended
10.14* Incentive Stock Option Grant Agreement dated July 23, 1998, by and
between the Company and Scott G. Yancey, Jr., as amended
10.15* Incentive Stock Option Grant Agreement dated July 23, 1998, by and
between the Company and Christopher J. Melnick, as amended
10.16* Incentive Stock Option Grant Agreement dated November 1, 1998, by
and between the Company and James A. Aust
10.17* Incentive Stock Option Grant Agreement dated March 30, 1999, by
and between the Company and John J. Hackett
10.18* Deferred Compensation Agreement dated June 1, 1997, by and between
the Company and
Jonathan P. Aust
10.19* Deferred Compensation Agreement dated June 1, 1997, by and between
the Company and
James A. Aust
10.20* Repurchase Agreement dated August 6, 1998, by and between the
Company and Longma M. Aust, Jonathan P. Aust, James A. Aust and
Stephen L. Aust
10.21* Investor Rights Agreement dated August 6, 1998, by and between the
Company, Spectrum Equity Investors II, L.P., SEA 1998 II, L.P.,
FBR Technology Venture Partners L.P. and W2 Venture Partners, LLC,
as amended
10.22* Series A Preferred Stock Purchase Agreement dated August 6, 1998,
by and between the Company, Spectrum Equity Investors II, L.P.,
SEA 1998 II, L.P., FBR Technology Venture Partners L.P. and W2
Venture Partners, LLC
10.23* Note Purchase Agreement dated March 31, 1999, by and between the
Company, Spectrum Equity Investors II, L.P. and FBR Technology
Venture Partners L.P.
10.24* Convertible Note dated March 31, 1999, by and between the Company
and Spectrum Equity Investors II, L.P.
10.25* Convertible Note dated March 31, 1999, by and between the Company
and FBR Technology Venture Partners L.P.
10.26** Nonqualified Stock Option Grant Agreement dated April 1, 1999, by
and between the Company and Dennis R. Patrick
10.27** Deed of Lease dated April 8, 1999, by and between the Company and
TransDulles Center, Inc.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
11.1* Statement of computation of loss per share
23.1* Consent of PricewaterhouseCoopers, LLP
23.2** Consent of Piper & Marbury L.L.P. (included as part of Exhibit
5.1)
24.1* Power of Attorney
27* Financial Data Schedule
</TABLE>
- ---------------------
* Previously filed.
** To be filed by amendment.
+ Information has been omitted from this exhibit pursuant to a request for
confidential treatment filed with the Securities and Exchange Commission.
(b) Financial Statement Schedules:
Schedules have been omitted because the information required to be shown in
the schedules is not applicable or is included elsewhere in our financial
statements or the notes thereto.
17. Undertakings
The undersigned Registrant hereby undertakes to provide to the underwriter
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
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions of its Certificate of Incorporation or
Bylaws or the Delaware General Corporation Law or otherwise, the Registrant has
been advised 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. 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 Securities Act and will be governed
by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted form 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 Securities 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,
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-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Company has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Sterling, Virginia, on
the 28th day of April, 1999.
NETWORK ACCESS SOLUTIONS CORPORATION
/s/ Jonathan P. Aust
By: _________________________________
Jonathan P. Aust
President, Chief Executive Officer
and Chairman of the Board of
Directors
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Name Title Date
<S> <C> <C>
/s/ Jonathan P. Aust President, Chief
- ------------------------------------- Executive Officer April 28,
Jonathan P. Aust and Chairman of the 1999
Board of Directors
(Principal Executive
Officer)
Chief Financial
* Officer and Director April 28,
- ------------------------------------- (Principal 1999
Scott G. Yancey, Jr. Accounting and
Financial Officer)
* Chief Operating
- ------------------------------------- Officer and Director April 28,
Christopher J. Melnick 1999
* Director
- ------------------------------------- April 28,
Brion B. Applegate 1999
Director
- -------------------------------------
Dennis R. Patrick
*By: /s/ Jonathan P. Aust
- -------------------------------------
Jonathan P. Aust
Attorney-in-Fact
</TABLE>
II-5
<PAGE>
Exhibit Index
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
1.1 Form of Underwriting Agreement
3.1* Amended and Restated Certificate of Incorporation of the Company
3.2* Amended and Restated By-Laws of the Company
4.1* Specimen stock certificate for shares of Common Stock of the
Company
5.1** Opinion of Piper & Marbury L.L.P., regarding legality of
securities being registered
10.1+ Master Equipment Lease Agreement dated November 17, 1998, by and
between the Company and Paradyne Credit Corporation
10.2+ Purchase and Sale Agreement dated as of October 16, 1998, by and
between the Company and Ascend Communications, Inc.
10.3 Master Lease Agreement dated October 9, 1998, by and between the
Company and Ascend Credit Corporation
10.4 Promissory Note dated October 16, 1998, by and between the Company
and Ascend Communications, Inc.
10.5* Commercial Lease dated February 24, 1997, by and between the
Company, Sterling/Gunston Limited Partnership and Bernstein
Management Corporation
10.5.1* First Lease Amendment dated June 26, 1998, by and between the
Company and Sterling/Gunston LLC
10.5.2* Third Lease Amendment dated February 1, 1999, by and between the
Company and Sterling/Gunston LLC
10.6* Sublease dated August 31, 1998, by and between the Company and
U.S. Interactive, Inc.
10.7* Letter of Intent dated March 2, 1999 by and between the Company
and Trans Dulles Center, Inc.
10.8* Employment Agreement dated as of August 16, 1998, by and between
the Company and
Jonathan P. Aust
10.9* Employment Agreement dated as of July 13, 1998, by and between the
Company and
Christopher J. Melnick
10.10* Employment Agreement dated as of July 13, 1998, by and between the
Company and Scott G. Yancey, Jr.
10.11* Employment Agreement dated as of August 18, 1998, by and between
the Company and James A. Aust
10.12* Employment Agreement dated as of March 1, 1999, by and between the
Company and
John J. Hackett
10.13* 1998 Stock Incentive Plan, as amended
10.14* Incentive Stock Option Grant Agreement dated July 23, 1998, by and
between the Company and Scott G. Yancey, Jr., as amended
10.15* Incentive Stock Option Grant Agreement dated July 23, 1998, by and
between the Company and Christopher J. Melnick, as amended
10.16* Incentive Stock Option Grant Agreement dated November 1, 1998, by
and between the Company and James A. Aust
10.17* Incentive Stock Option Grant Agreement dated March 30, 1999, by
and between the Company and John J. Hackett
10.18* Deferred Compensation Agreement dated June 1, 1997, by and between
the Company and
Jonathan P. Aust
10.19* Deferred Compensation Agreement dated June 1, 1997, by and between
the Company and
James A. Aust
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
10.20* Repurchase Agreement dated August 6, 1998, by and between the
Company and Longma M. Aust, Jonathan P. Aust, James A. Aust and
Stephen C. Aust
10.21* Investor Rights Agreement dated August 6, 1998, by and between the
Company, Spectrum Equity Investors II, L.P., SEA 1998 II, L.P.,
FBR Technology Venture Partners L.P. and W2 Venture Partners, LLC,
as amended
10.22* Series A Preferred Stock Purchase Agreement dated August 6, 1998,
by and between the Company, Spectrum Equity Investors II, L.P.,
SEA 1998 II, L.P., FBR Technology Venture Partners L.P. and W2
Venture Partners, LLC
10.23* Note Purchase Agreement dated March 31, 1999, by and between the
Company, Spectrum Equity Investors II, L.P. and FBR Technology
Venture Partners L.P.
10.24* Convertible Note dated March 31, 1999, by and between the Company
and Spectrum Equity Investors II, L.P.
10.25* Convertible Note dated March 31, 1999, by and between the Company
and FBR Technology Venture Partners L.P.
10.26** Nonqualified Stock Option Grant Agreement dated April 1, 1999, by
and between the Company and Dennis R. Patrick
10.27** Deed of Lease dated April 8, 1999, by and between the Company and
TransDulles Center, Inc.
11.1* Statement of computation of loss per share
23.1* Consent of PricewaterhouseCoopers, LLP
23.2** Consent of Piper & Marbury L.L.P. (included as part of Exhibit 5.1
hereto)
24.1* Power of Attorney (included in signature pages)
27* Financial Data Schedule
</TABLE>
- ---------------------
* Previously filed.
** To be filed by amendment.
+ Information has been omitted from this exhibit pursuant to a request for
confidential treatment filed with the Securities and Exchange Commission.
II-7
<PAGE>
Exhibit 1.1
__________ Shares
NETWORK ACCESS SOLUTIONS CORPORATION
Common Stock
UNDERWRITING AGREEMENT
______________________
__________, 1999
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BEAR, STEARNS & CO. INC.
J.P. MORGAN & CO.
As representatives of the
several Underwriters
named in Schedule I hereto
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
Dear Ladies and Gentlemen:
NETWORK ACCESS SOLUTIONS CORPORATION, a Delaware corporation (the
"Company"), proposes to issue and sell ____________ shares of its Common Stock,
par value $.001 per share (the "Firm Shares") to the several underwriters named
in Schedule I hereto (the "Underwriters"). The Company also proposes to issue
and sell to the several Underwriters not more than an additional _______ shares
of its Common Stock, par value $.001 per share (the "Additional Shares") if
requested by the Underwriters as provided in Section 2
<PAGE>
hereof. The Firm Shares and the Additional Shares are hereinafter referred to
collectively as the "Shares". The shares of common stock of the Company to be
outstanding after giving effect to the sales contemplated hereby are hereinafter
referred to as the "Common Stock".
SECTION 1. Registration Statement and Prospectus. The Company has prepared
and filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively, the
"Act"), a registration statement on Form S-1, including a prospectus, relating
to the Shares. The registration statement, as amended at the time it became
effective, including all exhibits thereto and the information (if any) deemed to
be part of the registration statement at the time of effectiveness pursuant to
Rule 430A under the Act, is hereinafter referred to as the "Registration
Statement"; and the prospectus in the form first used to confirm sales of Shares
is hereinafter referred to as the "Prospectus". If the Company has filed or is
required pursuant to the terms hereof to file a registration statement pursuant
to Rule 462(b) under the Act registering additional shares of Common Stock (a
"Rule 462(b) Registration Statement"), then, unless otherwise specified, any
reference herein to the term "Registration Statement" shall be deemed to include
such Rule 462(b) Registration Statement.
SECTION 2. Agreements to Sell and Purchase and Lock-Up Agreements. On the
basis of the representations and warranties contained in this Agreement, and
subject to its terms and conditions, the Company agrees to issue and sell, and
each Underwriter agrees, severally and not jointly, to purchase from the Company
at a price per Share of $______ (the "Purchase Price") the number of Firm Shares
set forth opposite the name of such Underwriter in Schedule I hereto.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to issue
and sell the Additional Shares and the Underwriters shall have the right to
purchase, severally and not jointly, up to _______ Additional Shares from the
Company at the Purchase Price. Additional Shares may be purchased solely for the
purpose of covering over-allotments made in connection with the offering of the
Firm Shares. The Underwriters may exercise their right to purchase Additional
Shares in whole or in part from time to time by giving written notice thereof to
the Company within 30 days after the date of this Agreement. You shall give any
such notice on behalf of the Underwriters and such notice shall specify the
aggregate number of Additional Shares to be purchased pursuant to such exercise
and the date for payment and delivery thereof, which date shall be a
2
<PAGE>
business day (i) no earlier than two business days after such notice has been
given (and, in any event, no earlier than the Closing Date (as hereinafter
defined)) and (ii) no later than ten business days after such notice has been
given. If any Additional Shares are to be purchased, each Underwriter, severally
and not jointly, agrees to purchase from the Company the number of Additional
Shares (subject to such adjustments to eliminate fractional shares as you may
determine) which bears the same proportion to the total number of Additional
Shares to be purchased from the Company as the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I bears to the total number of
Firm Shares.
The Company hereby agrees not to (i) offer, pledge, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase, or otherwise transfer or
dispose of, directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock or (ii) enter
into any swap or other arrangement that transfers all or a portion of the
economic consequences associated with the ownership of any Common Stock
(regardless of whether any of the transactions described in clause (i) or (ii)
is to be settled by the delivery of Common Stock, or such other securities, in
cash or otherwise), except to the Underwriters pursuant to this Agreement, for a
period of 180 days after the date of the Prospectus without the prior written
consent of Donaldson, Lufkin & Jenrette Securities Corporation. Notwithstanding
the foregoing, during such period (i) the Company may grant stock options
pursuant to the Company's 1998 Stock Incentive Plan and (ii) the Company may
issue shares of Common Stock upon the exercise of an option or warrant or the
conversion of a security outstanding on the date hereof. The Company also agrees
not to file any registration statement with respect to any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock for a period of 180 days after the date of the Prospectus without
the prior written consent of Donaldson, Lufkin & Jenrette Securities
Corporation. The Company shall, prior to or concurrently with the execution of
this Agreement, deliver an agreement executed by (i) each of the directors and
officers of the Company and (ii) each stockholder listed on Annex I hereto to
the effect that such person will not, during the period commencing on the date
such person signs such agreement and ending 180 days after the date of the
Prospectus, without the prior written consent of Donaldson, Lufkin & Jenrette
Securities Corporation, (A) engage in any of the transactions described in the
first sentence of this paragraph or (B) make any demand for, or exercise any
right with respect to, the registration of any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock.
3
<PAGE>
SECTION 3. Terms of Public Offering. The Company is advised by you that the
Underwriters propose (i) to make a public offering of their respective portions
of the Shares as soon after the execution and delivery of this Agreement as in
your judgment is advisable and (ii) initially to offer the Shares upon the terms
set forth in the Prospectus.
SECTION 4. Delivery and Payment. The Shares shall be represented by
definitive certificates and shall be issued in such authorized denominations and
registered in such names as Donaldson, Lufkin & Jenrette Securities Corporation
shall request no later than two business days prior to the Closing Date (as
defined below) or the applicable Option Closing Date (as defined below), as the
case may be. The Company shall deliver the Shares, with any transfer taxes
thereon duly paid by the Company, to Donaldson, Lufkin & Jenrette Securities
Corporation through the facilities of The Depository Trust Company ("DTC"), for
the respective accounts of the several Underwriters, against payment to the
Company of the Purchase Price therefore by wire transfer of Federal or other
funds immediately available in New York City. The certificates representing the
Shares shall be made available for inspection not later than 9:30 A.M., New York
City time, on the business day prior to the Closing Date or the applicable
Option Closing Date, as the case may be, at the office of DTC or its designated
custodian (the "Designated Office"). The time and date of delivery and payment
for the Firm Shares shall be 9:00 A.M., New York City time, on ________, 1999 or
such other time on the same or such other date as Donaldson, Lufkin & Jenrette
Securities Corporation and the Company shall agree in writing. The time and date
of delivery for the Firm Shares are hereinafter referred to as the "Closing
Date". The time and date of delivery and payment for any Additional Shares to be
purchased by the Underwriters shall be 9:00 A.M., New York City time, on the
date specified in the applicable exercise notice given by you pursuant to
Section 2 or such other time on the same or such other date as Donaldson, Lufkin
& Jenrette Securities Corporation and the Company shall agree in writing. The
time and date of delivery for any Additional Shares are hereinafter referred to
as an "Option Closing Date".
The documents to be delivered on the Closing Date or any Option Closing
Date on behalf of the parties hereto pursuant to Section 8 of this Agreement
shall be delivered at the offices of Donaldson, Lufkin & Jenrette Securities
Corporation, 227 Park Avenue, New York, New York 10172, Attention: Syndicate
Department, and the Shares shall be delivered at the Designated Office, all on
the Closing Date or such Option Closing Date, as the case may be.
SECTION 5. Agreements of the Company. The Company agrees with you:
4
<PAGE>
(a) To advise you immediately and, if requested by you, to confirm such
advice in writing, (i) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus or for
additional information, (ii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or any post-effective
amendment thereto or of the suspension of qualification of the Shares for
offering or sale in any jurisdiction, or the initiation, or the threatening, of
any proceeding for such purposes, (iii) when any amendment to the Registration
Statement becomes effective, (iv) if the Company is required to file a Rule
462(b) Registration Statement after the effectiveness of this Agreement, when
the Rule 462(b) Registration Statement has become effective and (v) of the
happening of any event during the period referred to in Section 5(d) below which
makes any statement of a material fact made in the Registration Statement or the
Prospectus untrue or which requires any additions to or changes in the
Registration Statement or the Prospectus in order to make the statements therein
not misleading. If at any time the Commission shall propose to issue or issue
any stop order suspending the effectiveness of the Registration Statement, the
Company will use its best efforts to prevent the issuance, or obtain the
withdrawal or lifting, of such order at the earliest possible time.
(b) To furnish to you five signed copies of the Registration Statement as
first filed with the Commission and of each amendment to it, including all
exhibits, and to furnish to you and each Underwriter designated by you such
number of conformed copies of the Registration Statement as so filed and of each
amendment to it, without exhibits, as you may reasonably request.
(c) To prepare the Prospectus, the form and substance of which shall be
satisfactory to you, and to file the Prospectus in such form with the Commission
within the applicable period specified in Rule 424(b) under the Act; during the
period specified in Section 5(d) below, not to file any further amendment to the
Registration Statement and not to make any amendment or supplement to the
Prospectus of which you shall not previously have been advised or to which you
shall reasonably object after being so advised; and, during such period, to
prepare and file with the Commission, promptly upon your reasonable request, any
amendment to the Registration Statement or amendment or supplement to the
Prospectus which may be necessary or advisable in connection with the
distribution of the Shares by you, and to use its best efforts to cause any such
amendment to the Registration Statement to become promptly effective.
(d) Prior to 10:00 A.M., New York City time, on the first business day
after the date of this Agreement and from time to time thereafter for such
period
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as in the opinion of counsel for the Underwriters a prospectus is required by
law to be delivered in connection with sales by an Underwriter or a dealer, to
furnish in New York City to each Underwriter and any dealer as many copies of
the Prospectus (and of any amendment or supplement to the Prospectus) as such
Underwriter or dealer may reasonably request.
(e) If during the period specified in Section 5(d), any event shall occur
or condition shall exist as a result of which, in the opinion of counsel for the
Underwriters, it becomes necessary to amend or supplement the Prospectus in
order to make the statements therein, in the light of the circumstances when the
Prospectus is delivered to a purchaser, not misleading, or if, in the opinion of
counsel for the Underwriters, it is necessary to amend or supplement the
Prospectus to comply with applicable law, forthwith to prepare and file with the
Commission an appropriate amendment or supplement to the Prospectus so that the
statements in the Prospectus, as so amended or supplemented, will not in the
light of the circumstances when it is so delivered, be misleading, or so that
the Prospectus will comply with applicable law, and to furnish to each
Underwriter and to any dealer as many copies thereof as such Underwriter or
dealer may reasonably request.
(f) Prior to any public offering of the Shares, to cooperate with you and
counsel for the Underwriters in connection with the registration or
qualification of the Shares for offer and sale by the several Underwriters and
by dealers under the state securities or Blue Sky laws of such jurisdictions as
you may request, to continue such registration or qualification in effect so
long as required for distribution of the Shares and to file such consents to
service of process or other documents as may be necessary in order to effect
such registration or qualification; provided, however, that the Company shall
not be required in connection therewith to qualify as a foreign corporation in
any jurisdiction in which it is not now so qualified or to take any action that
would subject it to general consent to service of process or taxation other than
as to matters and transactions relating to the Prospectus, the Registration
Statement, any preliminary prospectus or the offering or sale of the Shares, in
any jurisdiction in which it is not now so subject.
(g) To mail and make generally available to its stockholders as soon as
practicable an earnings statement covering the twelve-month period ending
__________, 1999 that shall satisfy the provisions of Section 11(a) of the Act,
and to advise you in writing when such statement has been so made available.
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(h) During the period of three years after the date of this Agreement, to
furnish to you as soon as available copies of all reports or other
communications furnished to the record holders of Common Stock or furnished to
or filed with the Commission or any national securities exchange on which any
class of securities of the Company is listed and such other publicly available
information concerning the Company and its subsidiaries as you may reasonably
request.
(i) Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, to pay or cause to be paid all
expenses incident to the performance of its obligations under this Agreement,
including: (i) the fees, disbursements and expenses of the Company's counsel and
the Company's accountants in connection with the registration and delivery of
the Shares under the Act and all other fees and expenses in connection with the
preparation, printing, duplication, filing and distribution of the Registration
Statement (including financial statements and exhibits), any preliminary
prospectus, the Prospectus and all amendments and supplements to any of the
foregoing, including the mailing and delivering of copies thereof to the
Underwriters and dealers in the quantities specified herein, (ii) all costs and
expenses related to the transfer and delivery of the Shares to the Underwriters,
including any transfer or other taxes payable thereon, (iii) all costs of
printing or producing this Agreement and any other agreements or documents in
connection with the offering, purchase, sale or delivery of the Shares, (iv) all
expenses in connection with the registration or qualification of the Shares for
offer and sale under the securities or Blue Sky laws of the several states and
all costs of printing or producing any Preliminary and Supplemental Blue Sky
Memoranda in connection therewith (including the filing fees and fees and
disbursements of counsel for the Underwriters in connection with such
registration or qualification and memoranda relating thereto), (v) the filing
fees and disbursements of counsel for the Underwriters in connection with the
review and clearance of the offering of the Shares by the National Association
of Securities Dealers, Inc., (vi) all fees and expenses in connection with the
preparation and filing of the registration statement on Form 8-A relating to the
Common Stock and all costs and expenses incident to the listing of the Shares on
the Nasdaq National Market, (vii) the cost of printing certificates representing
the Shares, (viii) the costs and charges of any transfer agent, registrar and/or
depositary and (ix) all other costs and expenses incident to the performance of
the obligations of the Company hereunder for which provision is not otherwise
made in this Section.
(j) To use its best efforts to list for quotation the Shares on the Nasdaq
National Market and to maintain the listing of the Shares on the Nasdaq National
Market for a period of three years after the date of this Agreement.
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(k) To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by the Company prior to
the Closing Date or any Option Closing Date, as the case may be, and to satisfy
all conditions precedent to the delivery of the Shares.
(l) If the Registration Statement at the time of the effectiveness of this
Agreement does not cover all of the Shares, to file a Rule 462(b) Registration
Statement with the Commission registering the Shares not so covered in
compliance with Rule 462(b) by 10:00 P.M., New York City time, on the date of
this Agreement and to pay to the Commission the filing fee for such Rule 462(b)
Registration Statement at the time of the filing thereof or to give irrevocable
instructions for the payment of such fee pursuant to Rule 111(b) under the Act.
SECTION 6. Representations and Warranties of the Company. The Company
represents and warrants to each Underwriter that:
(a) The Registration Statement has become effective (other than any Rule
462(b) Registration Statement to be filed by the Company after the effectiveness
of this Agreement); any Rule 462(b) Registration Statement filed after the
effectiveness of this Agreement will become effective no later than 10:00 P.M.,
New York City time, on the date of this Agreement; and no stop order suspending
the effectiveness of the Registration Statement is in effect, and no proceedings
for such purpose are pending before or threatened by the Commission.
(b) (i) The Registration Statement (other than any Rule 462(b) Registration
Statement to be filed by the Company after the effectiveness of this Agreement),
when it became effective, did not contain and, as amended, if applicable, will
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, (ii) the Registration Statement (other than any Rule 462(b)
Registration Statement to be filed by the Company after the effectiveness of
this Agreement) and the Prospectus comply and, as amended or supplemented, if
applicable, will comply in all material respects with the Act, (iii) if the
Company is required to file a Rule 462(b) Registration Statement after the
effectiveness of this Agreement, such Rule 462(b) Registration Statement and any
amendments thereto, when they become effective (A) will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading and
(B) will comply in all material respects with the Act and (iv) the Prospectus
does not contain and, as amended or supplemented, if applicable, will not
contain any untrue statement of
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a material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except that the representations and warranties set forth
in this paragraph do not apply to statements or omissions in the Registration
Statement or the Prospectus based upon information relating to any Underwriter
furnished to the Company in writing by such Underwriter through you expressly
for use therein.
(c) Each preliminary prospectus filed as part of the registration statement
as originally filed or as part of any amendment thereto, or filed pursuant to
Rule 424 under the Act, complied when so filed in all material respects with the
Act, and did not contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except that the representations and warranties set forth
in this paragraph do not apply to statements or omissions in any preliminary
prospectus based upon information relating to any Underwriter furnished to the
Company in writing by such Underwriter through you expressly for use therein.
(d) The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware and has the corporate
power and authority to carry on its business as described in the Prospectus and
to own, lease and operate its properties. The Company is duly qualified and is
in good standing as a foreign corporation authorized to do business in each
jurisdiction in which the nature of its business or its ownership or leasing of
property requires such qualification, except where the failure to be so
qualified would not have a material adverse effect on the business, prospects,
financial condition or results of operations of the Company (a "Material Adverse
Effect"). The Company does not presently own or control, directly or indirectly,
any interest in any other corporation, partnership, trust, joint venture,
association, or other entity.
(e) There are no outstanding subscriptions, rights, warrants, options,
calls, convertible securities, commitments of sale or liens granted or issued by
the Company relating to or entitling any person to purchase or otherwise to
acquire any shares of the capital stock or other equity interest of the Company,
except as otherwise disclosed in the Registration Statement.
(f) All the outstanding shares of capital stock of the Company have been
duly authorized and validly issued and are fully paid, non-assessable and not
subject to any preemptive or similar rights. The Shares have been duly
authorized
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and, when issued and delivered to the Underwriters against payment therefor as
provided by this Agreement, will be validly issued, fully paid and
non-assessable, and the issuance of such Shares will not be subject to any
preemptive or similar rights.
(g) The authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus.
(h) The Company is not in violation of its charter or by-laws or in default
in the performance of any obligation, agreement, covenant or condition contained
in any indenture, loan agreement, mortgage, lease or other agreement or
instrument that is material to the Company, to which the Company is a party or
by which the Company or any of its assets or properties is bound. There exists
no condition that, with notice, the passage of time or otherwise would
constitute a default under any such agreement or instrument, except for any such
condition which would not reasonably be expected to have a Material Adverse
Effect.
(i) The execution, delivery and performance of this Agreement by the
Company, the compliance by the Company with all the provisions hereof and the
consummation of the transactions contemplated hereby will not (i) require any
consent, approval, authorization or other order of, or qualification or filing
with, any foreign or domestic court or governmental body or agency, including,
without limitation, the Federal Communications Commission (the "FCC") (except
such as may be required under the securities or Blue Sky laws of the various
states and except those that have already been obtained or made), (ii) conflict
with or constitute a breach of any of the terms or provisions of, or a default
under, the charter or by-laws of the Company or any indenture, loan agreement,
mortgage, lease or other agreement or instrument that is material to the
Company, to which the Company is a party or by which the Company or any of its
assets or properties is bound, (iii) violate or conflict with any applicable
law, statute, ordinance or any rule, regulation, judgment, order, decision, writ
or decree of any foreign or domestic court or any governmental body or agency
having jurisdiction over the Company or any of its assets or properties or (iv)
result in the suspension, termination, adverse modification or revocation of any
Authorization (as defined below) of the Company or any other impairment of the
rights of the holder of any such Authorization.
(j) There are no legal or governmental actions, suits, complaints,
inquiries, investigations or proceedings pending or threatened to which the
Company is or could be a party or to which any of its assets or properties or
Authorizations could be subject that are required to be described in the
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Registration Statement or the Prospectus and are not so described, nor are there
any domestic or foreign statutes, laws, ordinances, rules, regulations,
contracts or other documents, or judicial or administrative proceedings that are
required to be described in the Registration Statement or the Prospectus or to
be filed as exhibits to the Registration Statement that are not so described or
filed as required.
(k) The Company has not violated any foreign, federal, state or local law
or regulation relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), any provisions of the Employee Retirement
Income Security Act of 1974, as amended, any provisions of the Foreign Corrupt
Practices Act, or the rules and regulations promulgated thereunder, or any
provisions of the Communications Act of 1934, as amended, including the
Telecommunications Act of 1996 (the "Communications Act"), except for such
violations which, singly or in the aggregate, would not have a Material Adverse
Effect.
(l) (i) The Company has such permits, licenses, certificates,
registrations, consents, exemptions, franchises, authorizations and other
approvals (each, an "Authorization") of, and has made all filings with and
notices to, all domestic and foreign governmental or regulatory authorities and
self-regulatory organizations and all courts and other tribunals, including,
without limitation, under any applicable Environmental Laws, and pursuant to the
Communications Act, and state laws and regulations applicable to intrastate
telecommunications, as are necessary or required to own, lease, license and
operate its properties and to conduct its business in the manner currently
conducted, except where the failure to obtain such Authorization or to make such
filing would not have a Material Adverse Effect. Each such Authorization is
valid and in full force and effect and the Company is in compliance with all the
terms and conditions thereof and with the rules and regulations of the
authorities and governing bodies having jurisdiction with respect thereto,
except where such failure to be valid and in full force and effect or to be in
compliance, the occurrence of any such event or the presence of any such
restriction would not, singly or in the aggregate, have a Material Adverse
Effect. To the Company's knowledge, no event has occurred (including, without
limitation, the receipt of any notice from any authority or governing body)
which allows or, after notice or lapse of time or both, would allow, revocation,
suspension, adverse modification or termination of any such Authorization or
results or, after notice or lapse of time or both, would result in any other
material impairment of the rights of the holder of any such Authorization; and
such Authorizations contain no restrictions that are
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burdensome to the Company or that are subject to conditions outside of the
ordinary course.
(ii) The Company has obtained competitive local exchange carrier ("CLEC")
authorization or regulatory approval to provide CLEC services in each of the
following states: Delaware, Massachusetts, New York, Pennsylvania and Virginia.
No such regulatory approval has been withdrawn, modified or suspended and, to
the Company's knowledge, no such regulatory approval is the subject of any legal
challenge (except as disclosed in the Registration Statement).
(m) There are no costs or liabilities associated with Environmental Laws
(including, without limitation, any capital or operating expenditures required
for clean-up, closure of properties or compliance with Environmental Laws or any
Authorization, any related constraints on operating activities and any potential
liabilities to third parties) which would, singly or in the aggregate, have a
Material Adverse Effect.
(n) This Agreement has been duly authorized, executed and delivered by the
Company and is enforceable against it in accordance with its terms, except
insofar as indemnification and contribution provisions may be limited by
applicable law or equitable principles and subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization or other laws affecting the
rights of creditors generally and subject to general principles of equity.
(o) PricewaterhouseCoopers LLP are independent public accountants with
respect to the Company as required by the Act.
(p) The financial statements included in the Registration Statement and the
Prospectus (and any amendment or supplement thereto), together with the related
schedules and notes, present fairly the financial position, results of
operations and cash flows of the Company on the basis stated therein at the
respective dates or for the respective periods to which they apply. Such
financial statements and related schedules and notes have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved, except as disclosed therein. The supporting
schedules, if any, included in the Registration Statement present fairly in
accordance with generally accepted accounting principles the information
required to be stated therein. The other financial and statistical information
and data set forth in the Registration Statement and the Prospectus (and any
amendment or supplement thereto) are, in all material respects, accurately
presented and prepared on a basis consistent with such financial statements and
the books and records of the Company.
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(q) The pro forma financial data of the Company set forth in the
Registration Statement and the Prospectus (and any supplement or amendment
thereto) have been prepared on a basis consistent with the historical financial
statements of the Company, give effect to the assumptions used in the
preparation thereof on a reasonable basis and in good faith and present fairly
the historical and proposed transactions contemplated by the Registration
Statement and the Prospectus. Such pro forma financial statements have been
prepared in accordance with the applicable requirements of Rule 11-02 of
Regulation S-X promulgated by the Commission.
(r) The Company is not and, after giving effect to the offering and sale of
the Shares and the application of the proceeds thereof as described in the
Prospectus, will not be, an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended.
(s) There are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the Company to
file a registration statement under the Act with respect to any securities of
the Company except as described in the Registration Statement, and no person has
the right to require the Company to include any securities with the Shares
registered pursuant to the Registration Statement.
(t) Since the respective dates as of which information is given in the
Prospectus, and except as set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement), (i)
there has not occurred any material adverse change or any development involving
a prospective material adverse change in the condition, financial or otherwise,
or the earnings, business, management or operations of the Company, (ii) there
has not been any material adverse change or any development involving a
prospective material adverse change in the capital stock or in the long-term
debt of the Company and (iii) the Company has not incurred any material
liability or obligation, direct or contingent.
(u) The Common Stock (including the Shares) is registered pursuant to
Section 12(g) of the Securities Exchange Act of 1934 (the "Exchange Act") and is
listed for quotation on the Nasdaq National Market. The Company has taken no
action designed to, or likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act or delisting the Common
Stock from the Nasdaq National Market, nor has the Company received any
notification that the Commission or the Nasdaq National Market is contemplating
terminating such registration or listing.
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(v) The Company has good and marketable title to all personal property
owned by it which is material to the business of the Company, in each case free
and clear of all liens, encumbrances and defects except such as are described in
the Prospectus or such as do not materially affect the value of such property
and do not interfere with the use made and proposed to be made of such property
by the Company. Any real property and buildings held under lease by the Company
are held by them under valid, subsisting and enforceable leases with such
exceptions as are not material and do not interfere with the use made and
proposed to be made of such property and buildings by the Company, in each case
except as described in the Prospectus. The Company does not own any real
property.
(w) Except as described in the Prospectus, the Company owns or possesses,
or can acquire on reasonable terms, all patents, patent rights, licenses,
inventions, copyrights, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks and trade names ("intellectual property")
currently employed by it in connection with the business now operated by it
except where the failure to own or possess or otherwise be able to acquire such
intellectual property would not, singly or in the aggregate, have a Material
Adverse Effect. The Company has not received any notice of infringement of or
conflict with asserted rights of others with respect to, any of such
intellectual property which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would have a Material Adverse Effect.
(x) The Company, or to the knowledge of the Company, any of its respective
officers, directors, partners, employees, agents or affiliates or any other
person acting on behalf of the Company has not, directly or indirectly, given or
agreed to give any money, gift or similar benefit (other than legal price
concessions to customers in the ordinary course of business) to any customer,
supplier, employee or agent of a customer or supplier, official or employee of
any governmental agency (domestic or foreign), instrumentality of any government
(domestic or foreign) or other person who was, is or may be in a position to
help or hinder the business of the Company (or assist the Company in connection
with any actual or proposed transaction) which (a) would reasonably be expected
to subject the Company or any other individual or entity to any damage or
penalty in any civil, criminal or governmental litigation or proceeding
(domestic or foreign), (b) if not given in the past, would reasonably be
expected to have had a Material Adverse Effect or (c) if not continued in the
future, would reasonably be expected to have a Material Adverse Effect.
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(y) All material tax returns required to be filed by the Company in all
jurisdictions have been so filed. All taxes, including withholding taxes,
penalties and interest, assessments, fees and other charges due pursuant to such
returns or pursuant to any assessment received by the Company have been paid,
other than those being contested in good faith and for which adequate reserves
have been provided. To the knowledge of the Company, there are no material
proposed additional tax assessments against the Company or the assets or
property of the Company. The Company has made adequate charges, accruals and
reserves in the applicable financial statements included in the Prospectus in
respect of all federal, state and foreign income and franchise taxes for all
periods as to which the tax liability of the Company has not been finally
determined.
(z) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that: (i) transactions are executed
in accordance with management's general or specific authorizations; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(aa) The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the business in which it is engaged; and the Company (i) has
not received notice from any insurer or agent of such insurer that substantial
capital improvements or other material expenditures will have to be made in
order to continue such issuance or (ii) has no reason to believe that it will
not be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers at a cost that would
not have a Material Adverse Effect.
(bb) No relationship, direct or indirect, exists between or among the
Company on the one hand, and the directors, officers, stockholders, customers or
suppliers of the Company, on the other hand, which is required by the Act to be
described in the Registration Statement or the Prospectus and which is not so
described.
(cc) The Company has not (i) taken, directly or indirectly, any action
designed to, or that might reasonably be expected to, cause or result in
stabilization or manipulation of the price of any security of the Company to
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facilitate the sale or resale of the Shares or (ii) since the date of the
Preliminary Prospectus (1) sold, bid for, purchased or paid any person any
compensation for soliciting purchases of, the Shares or (2) paid or agreed to
pay to any person any compensation for soliciting another to purchase any other
securities of the Company.
(dd) Except pursuant to this Agreement, there are no contracts, agreements
or understandings between the Company and any other person that would give rise
to a valid claim against the Company or either of the Underwriters for a
brokerage commission, finder's fee or like payment in connection with the
issuance, purchase and sale of the Shares.
(ee) Each certificate signed by any officer of the Company and delivered to
the Underwriters or counsel for the Underwriters shall be deemed to be a
representation and warranty by the Company to the Underwriters as to the matters
covered thereby.
SECTION 7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each Underwriter, its
directors, its officers and each person, if any, who controls any Underwriter
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act
from and against any and all losses, claims, damages, expenses, liabilities and
judgments (including, without limitation, any legal or other expenses incurred
in connection with investigating or defending any matter, including any action,
that could give rise to any such losses, claims, damages, expenses, liabilities
or judgments) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement (or any amendment
thereto), the Prospectus (or any amendment or supplement thereto) or any
preliminary prospectus, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages, expenses, liabilities or judgments are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information relating to any Underwriter furnished in writing to the Company by
such Underwriter through you expressly for use therein; provided, however, that
the foregoing indemnity agreement with respect to any preliminary prospectus
shall not inure to the benefit of any Underwriter who failed to deliver a
Prospectus, as then amended or supplemented (so long as the Prospectus and any
amendments or supplements thereto was provided by the Company to the several
Underwriters in the requisite quantity and on a timely basis to permit proper
delivery on or prior to
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the Closing Date), to the person asserting any losses, claims, damages,
expenses, liabilities or judgments caused by any untrue statement or alleged
untrue statement of a material fact contained in such preliminary prospectus, or
caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, if such material misstatement or omission or alleged material
misstatement or omission was cured in the Prospectus, as so amended or
supplemented, and such Prospectus was required by law to be delivered at or
prior to the written confirmation of sale to such person.
(b) Each Underwriter agrees, severally and not jointly, to indemnify and
hold harmless the Company, its directors, its officers who sign the Registration
Statement and each person, if any, who controls the Company within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act, to the same extent
as the foregoing indemnity from the Company to such Underwriter but only with
reference to information relating to such Underwriter furnished in writing to
the Company by such Underwriter through you expressly for use in the
Registration Statement (or any amendment thereto), the Prospectus (or any
amendment or supplement thereto) or any preliminary prospectus; provided,
however, that in no case shall any Underwriter be liable or responsible for any
amount in excess of the underwriting discount applicable to the Shares purchased
by such Underwriter hereunder.
(c) In case any action shall be commenced involving any person in respect
of which indemnity may be sought pursuant to Section 7(a) or 7(b) (the
"indemnified party"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying party") in writing
(but the failure so to notify an indemnifying party shall not relieve the
indemnifying party from any liability which it may have under this Section 7,
except to the extent that the indemnifying party has been prejudiced in any
material respect by such failure or from any liability that it may have
otherwise) and the indemnifying party shall assume the defense of such action,
including the employment of counsel reasonably satisfactory to the indemnified
party and the payment of all fees and expenses of such counsel, as incurred
(except that in the case of any action in respect of which indemnity may be
sought pursuant to both Sections 7(a) and 7(b), the Underwriter shall not be
required to assume the defense of such action pursuant to this Section 7(c), but
may employ separate counsel and participate in the defense thereof, but the fees
and expenses of such counsel, except as provided below, shall be at the expense
of such Underwriter). Any indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such
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counsel shall be at the expense of the indemnified party unless (i) the
employment of such counsel shall have been specifically authorized in writing by
the indemnifying party, (ii) the indemnifying party shall have failed to assume
the defense of such action or employ counsel reasonably satisfactory to the
indemnified party or (iii) the named parties to any such action (including any
impleaded parties) include both the indemnified party and the indemnifying
party, and the indemnified party shall have been advised by such counsel that
there may be one or more legal defenses available to it which are different from
or additional to those available to the indemnifying party (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the indemnified party). In any such case, the indemnifying party
shall not, in connection with any one action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) for
all indemnified parties and all such fees and expenses shall be reimbursed as
they are incurred. Such firm shall be designated in writing by Donaldson, Lufkin
& Jenrette Securities Corporation, in the case of parties indemnified pursuant
to Section 7(a), and by the Company, in the case of parties indemnified pursuant
to Section 7(b). The indemnifying party shall indemnify and hold harmless the
indemnified party from and against any and all losses, claims, damages,
expenses, liabilities and judgments by reason of any settlement of any action
(i) effected with its written consent or (ii) effected without its written
consent if the settlement is entered into more than twenty business days after
the indemnifying party shall have received a request from the indemnified party
for reimbursement for the fees and expenses of counsel (in any case where such
fees and expenses are at the expense of the indemnifying party) and, prior to
the date of such settlement, the indemnifying party shall have failed to comply
with such reimbursement request. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement or compromise
of, or consent to the entry of judgment with respect to, any pending or
threatened action in respect of which the indemnified party is or could have
been a party and indemnity or contribution may be or could have been sought
hereunder by the indemnified party, unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability on claims that are or could have been the subject matter of such
action and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of the indemnified party.
(d) To the extent the indemnification provided for in this Section 7 is
unavailable to an indemnified party or insufficient in respect of any losses,
claims, damages, expenses, liabilities or judgments referred to therein, then
each
18
<PAGE>
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, expenses, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Underwriters on the other hand from the offering
of the Shares or (ii) if the allocation provided by clause 7(d)(i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause 7(d)(i) above but also the
relative fault of the Company on the one hand and the Underwriters on the other
hand in connection with the statements or omissions which resulted in such
losses, claims, damages, expenses, liabilities or judgments, as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters on the other hand shall be deemed
to be in the same proportion as the total net proceeds from the offering (after
deducting underwriting discounts and commissions, but before deducting expenses)
received by the Company, and the total underwriting discounts and commissions
received by the Underwriters, bear to the total price to the public of the
Shares, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault of the Company on the one hand and the
Underwriters on the other hand shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, expenses, damages, liabilities or judgments referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses incurred by such
indemnified party in connection with investigating or defending any matter,
including any action, that could have given rise to such losses, claims,
expenses, damages, liabilities or judgments. Notwithstanding the provisions of
this Section 7, no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Shares underwritten
by it and distributed to the public were offered to the public exceeds the
amount of any damages which such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue
19
<PAGE>
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute pursuant to this
Section 7(d) are several in proportion to the respective number of Shares
purchased by each of the Underwriters hereunder and not joint.
(e) The remedies provided for in this Section 7 are not exclusive and shall
not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
SECTION 8. Conditions of Underwriters' Obligations. The several obligations
of the Underwriters to purchase the Firm Shares under this Agreement are subject
to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company contained in this
Agreement shall be true and correct on the Closing Date with the same force and
effect as if made on and as of the Closing Date.
(b) If the Company is required to file a Rule 462(b) Registration Statement
after the effectiveness of this Agreement, such Rule 462(b) Registration
Statement shall have become effective by 10:00 P.M., New York City time, on the
date of this Agreement; and no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been commenced or shall be pending before or contemplated by
the Commission.
(c) You shall have received on the Closing Date a certificate, dated the
Closing Date, signed by Jonathan P. Aust and Scott G. Yancey, Jr., in their
capacities as the President and Chief Executive Officer and the Chief Financial
Officer of the Company, confirming the matters set forth in Sections 6(t), 8(a)
and 8(b) and that the Company has complied with all of the agreements and
satisfied all of the conditions herein contained and required to be complied
with or satisfied by the Company on or prior to the Closing Date.
(d) Since the respective dates as of which information is given in the
Prospectus other than as set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement), (i)
there shall not have occurred any change or any development involving a
prospective change in the condition, financial or otherwise, or the earnings,
business, management or operations of the Company, (ii) there shall not have
been any
20
<PAGE>
change or any development involving a prospective change in the capital
stock or in the long-term debt of the Company or any of its subsidiaries and
(iii) neither the Company nor any of its subsidiaries shall have incurred any
liability or obligation, direct or contingent, the effect of which, in any such
case described in clause 8(d)(i), 8(d)(ii) or 8(d)(iii), in your judgment, is
material and adverse and, in your judgment, makes it impracticable to market the
Shares on the terms and in the manner contemplated in the Prospectus.
(e) You shall have received on the Closing Date an opinion (satisfactory to
you and counsel for the Underwriters), dated the Closing Date, of Piper &
Marbury L.L.P., counsel for the Company, to the effect that:
(i) the Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware and has the
corporate power and authority to carry on its business as described in the
Prospectus and to own, lease and operate its properties;
(ii) the Company is duly qualified and is in good standing as a
foreign corporation authorized to do business in each jurisdiction in which
the nature of its business or its ownership or leasing of property requires
such qualification, except where the failure to be so qualified would not
have a Material Adverse Effect;
(iii) all the outstanding shares of capital stock of the Company have
been duly authorized and validly issued and are fully paid, non-assessable
and not subject to any preemptive or similar rights;
(iv) the Shares have been duly authorized and, when issued and
delivered to the Underwriters against payment therefor as provided by this
Agreement, will be validly issued, fully paid and non-assessable, and the
issuance of such Shares will not be subject to any preemptive or similar
rights;
(v) this Agreement has been duly authorized, executed and delivered by
the Company;
(vi) the authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus;
(vii) the Registration Statement has become effective under the Act,
no stop order suspending its effectiveness has been issued and no
21
<PAGE>
proceedings for that purpose are, to the best of such counsel's knowledge
after due inquiry, pending before or threatened by the Commission;
(viii) the statements under the captions "Management - Employment
Agreements", "Management - 1998 Stock Incentive Plan", and "Description of
Capital Stock" and "Underwriting" in the Prospectus and Items 14 and 15 of
Part II of the Registration Statement, insofar as such statements
constitute a summary of the legal matters, documents or proceedings
referred to therein, fairly present the information called for with respect
to such legal matters, documents and proceedings;
(ix) the Company is not in violation of its charter or by-laws and, to
the best of such counsel's knowledge after due inquiry, the Company is not
in default in the performance of any obligation, agreement, covenant or
condition contained in any indenture, loan agreement, mortgage, lease or
other agreement or instrument that is material to the Company, to which the
Company is a party or by which the Company or any of its assets or
properties is bound;
(x) the execution, delivery and performance of this Agreement by the
Company, the compliance by the Company with all the provisions hereof and
the consummation of the transactions contemplated hereby will not (A)
require any consent, approval, authorization or other order of, or
qualification or filing with, any foreign or domestic court or governmental
body or agency (except such as may be required under the securities or Blue
Sky laws of the various states and except those that have already been
obtained or made), (B) conflict with or constitute a breach of any of the
terms or provisions of, or a default under, the charter or by-laws of the
Company or any indenture, loan agreement, mortgage, lease or other
agreement or instrument that is material to the Company, to which the
Company is a party or by which the Company or any of its assets or
properties is bound, (C) violate or conflict with any applicable law,
statute, ordinance or any rule, regulation, judgment, order, decision, writ
or decree of any foreign or domestic court or any governmental body or
agency having jurisdiction over the Company or any of its assets or
properties or (D) result in the suspension, termination, revocation or
adverse modification of any Authorization of the Company or any other
impairment of the rights of the holder of any such Authorization;
(xi) after due inquiry, such counsel does not know of any legal or
governmental proceedings pending or threatened to which the Company is
22
<PAGE>
or could be a party or to which any of its assets or properties or or could
be a party or to which any of its assets or properties or Authorizations is
or could be subject that are required to be described in the Registration
Statement or the Prospectus and are not so described, or of any domestic or
foreign statutes, laws, ordinances, rules, regulations, contracts or other
documents that are required to be described in the Registration Statement
or the Prospectus or to be filed as exhibits to the Registration Statement
that are not so described or filed as required;
(xii) to the best of such counsel's knowledge after due inquiry, the
Company has not violated any Environmental Law, any provisions of the
Employee Retirement Income Security Act of 1974, as amended, or any
provisions of the Foreign Corrupt Practices Act, or the rules and
regulations promulgated thereunder, except for such violations which,
singly or in the aggregate, would not have a Material Adverse Effect;
(xiii) to the best of such counsel's knowledge, the Company has such
Authorizations of, and has made all filings with and notices to, all
governmental or regulatory authorities and self-regulatory organizations
and all courts and other tribunals, including, without limitation, under
any applicable Environmental Laws, as are necessary or required to own,
lease, license and operate its properties and to conduct its business. Each
such Authorization is valid and in full force and effect and the Company is
in compliance with all the terms and conditions thereof and with the rules
and regulations of the authorities and governing bodies having jurisdiction
with respect thereto, except where such failure to be valid and in full
force and effect or to be in compliance, the occurrence of any such event
or the presence of any such restriction would not, singly or in the
aggregate, have a Material Adverse Effect. To the best of such counsel's
knowledge, no event has occurred (including, without limitation, the
receipt of any notice from any authority or governing body) which allows
or, after notice or lapse of time or both, would allow, revocation,
suspension, adverse modification or termination of any such Authorization
or results or, after notice or lapse of time or both, would result in any
other impairment of the rights of the holder of any such Authorization; and
such Authorizations contain no restrictions that are burdensome to the
Company (provided that Piper & Marbury L.L.P. shall not be required to give
any opinion regarding FCC or state regulatory or intellectual property
matters);
(xiv) the Company is not and, after giving effect to the offering and
sale of the Shares and the application of the proceeds thereof as
23
<PAGE>
described in the Prospectus, will not be, an "investment company" as such
term is defined in the Investment Company Act of 1940, as amended;
(xv) to the best of such counsel's knowledge after due inquiry, there
are no contracts, agreements or understandings between the Company and any
person granting such person the right to require the Company to file a
registration statement under the Act with respect to any securities of the
Company except as described in the Registration Statement, and no person
has the right to require the Company to include any securities with the
Shares registered pursuant to the Registration Statement; and
(xvi) (A) the Registration Statement and the Prospectus and any
supplement or amendment thereto (except for the financial statements and
other financial data, FCC and state regulatory and intellectual property
matters included therein as to which no opinion need be expressed) comply
as to form with the Act, (B) such counsel has no reason to believe that at
the time the Registration Statement became effective or on the date of this
Agreement, the Registration Statement and the prospectus included therein
(except for the financial statements and other financial data, FCC and
state regulatory and intellectual property matters as to which such counsel
need not express any belief) contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (C) such
counsel has no reason to believe that the Prospectus, as amended or
supplemented, if applicable (except for the financial statements and other
financial data, FCC and state regulatory and intellectual property matters,
as aforesaid) contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
The opinion of Piper & Marbury L.L.P. described in Section 8(e) above shall
be rendered to you at the request of the Company and shall so state therein.
(f) You shall have received on the Closing Date an opinion, dated the
Closing Date, of Shook, Hardy & Bacon, LLP, with respect to FCC and state
telecommunications regulatory matters and in the form and substance set forth in
Exhibit A.
24
<PAGE>
(g) You shall have received on the Closing Date an opinion, dated the
Closing Date, of Paul, Hastings, Janofsky & Walker LLP, counsel for the
Underwriters, as to the matters referred to in Sections 8(e)(iv), 8(e)(vi),
8(e)(ix) (but only with respect to the statements under the caption "Description
of Capital Stock" and "Underwriting") and 8(e)(xvii).
In giving such opinions with respect to the matters covered by Section
8(e)(xvi) counsel for the Company and counsel for the Underwriters may state
that their opinion and belief are based upon their participation in the
preparation of the Registration Statement and Prospectus and any amendments or
supplements thereto and review and discussion of the contents thereof, but are
without independent check or verification except as specified.
(h) You shall have received, on each of the date hereof and the Closing
Date, a letter dated the date hereof or the Closing Date, as the case may be, in
form and substance satisfactory to you, from PricewaterhouseCoopers LLP,
independent public accountants, containing the information and statements of the
type ordinarily included in accountants' "comfort letters" to Underwriters with
respect to the financial statements and certain financial information contained
in the Registration Statement and the Prospectus, including, without limitation,
an examination of "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in accordance with Statement on Standards for
Attestation Engagements No. 8.
(i) The Company shall have delivered to you the agreements specified in
Section 2 hereof which agreements shall be in full force and effect on the
Closing Date.
(j) The Shares shall have been duly listed for quotation on the Nasdaq
National Market.
(k) The Company shall not have failed on or prior to the Closing Date to
perform or comply with any of the agreements herein contained and required to be
performed or complied with by the Company on or prior to the Closing Date.
The several obligations of the Underwriters to purchase any Additional
Shares hereunder are subject to the delivery to you on the applicable Option
Closing Date of such documents as you may reasonably request with respect to the
good standing of the Company, the due authorization and issuance of such
Additional Shares and other matters related to the issuance of such Additional
Shares.
25
<PAGE>
SECTION 9. Effectiveness of Agreement and Termination. This Agreement shall
become effective upon the execution and delivery of this Agreement by the
parties hereto.
This Agreement may be terminated at any time on or prior to the Closing
Date by you by written notice to the Company if any of the following has
occurred: (i) any outbreak or escalation of hostilities or other national or
international calamity or crisis or change in economic conditions or in the
financial markets of the United States or elsewhere that, in your judgment, is
material and adverse and, in your judgment, makes it impracticable to market the
Shares on the terms and in the manner contemplated in the Prospectus, (ii) the
suspension or material limitation of trading in securities or other instruments
on the New York Stock Exchange, the American Stock Exchange, the Chicago Board
of Options Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade
or the Nasdaq National Market or limitation on prices for securities or other
instruments on any such exchange or the Nasdaq National Market, (iii) the
suspension of trading of any securities of the Company on any exchange or in the
over-the-counter market, (iv) the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of any
court or other governmental authority which in your opinion materially and
adversely affects, or will materially and adversely affect, the business,
prospects, financial condition or results of operations of the Company, (v) the
declaration of a banking moratorium by either federal or New York State
authorities or (vi) the taking of any action by any federal, state or local
government or agency in respect of its monetary or fiscal affairs which in your
opinion has a material adverse effect on the financial markets in the United
States.
If on the Closing Date or on an Option Closing Date, as the case may be,
any one or more of the Underwriters shall fail or refuse to purchase the Firm
Shares or Additional Shares, as the case may be, which it has or they have
agreed to purchase hereunder on such date and the aggregate number of Firm
Shares or Additional Shares, as the case may be, which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase is not more
than one-tenth of the total number of Firm Shares or Additional Shares, as the
case may be, to be purchased on such date by all Underwriters, each
non-defaulting Underwriter shall be obligated severally, in the proportion which
the number of Firm Shares set forth opposite its name in Schedule I bears to the
total number of Firm Shares which all the non-defaulting Underwriters have
agreed to purchase, or in such other proportion as you may specify, to purchase
the Firm Shares or Additional Shares, as the case may be, which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase on such
date; provided that in no event
26
<PAGE>
shall the number of Firm Shares or Additional Shares, as the case may be, which
any Underwriter has agreed to purchase pursuant to Section 2 hereof be increased
pursuant to this Section 9 by an amount in excess of one-ninth of such number of
Firm Shares or Additional Shares, as the case may be, without the written
consent of such Underwriter. If on the Closing Date any Underwriter or
Underwriters shall fail or refuse to purchase Firm Shares and the aggregate
number of Firm Shares with respect to which such default occurs is more than
one-tenth of the aggregate number of Firm Shares to be purchased by all
Underwriters and arrangements satisfactory to you and the Company for purchase
of such Firm Shares are not made within 48 hours after such default, this
Agreement will terminate without liability on the part of any non-defaulting
Underwriter and the Company. In any such case which does not result in
termination of this Agreement, either you or the Company shall have the right to
postpone the Closing Date, but in no event for longer than seven days, in order
that the required changes, if any, in the Registration Statement and the
Prospectus or any other documents or arrangements may be effected. If, on an
Option Closing Date, any Underwriter or Underwriters shall fail or refuse to
purchase Additional Shares and the aggregate number of Additional Shares with
respect to which such default occurs is more than one-tenth of the aggregate
number of Additional Shares to be purchased on such date, the non-defaulting
Underwriters shall have the option to (i) terminate their obligation hereunder
to purchase such Additional Shares or (ii) purchase not less than the number of
Additional Shares that such non-defaulting Underwriters would have been
obligated to purchase on such date in the absence of such default. Any action
taken under this paragraph shall not relieve any defaulting Underwriter from
liability in respect of any default of any such Underwriter under this
Agreement.
SECTION 10. Miscellaneous. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (i) if to the Company, to Network
Access Solutions Corporation, 100 Carpenter Drive, Suite 206, Sterling, Virginia
20164 and (ii) if to any Underwriter or to you, to you c/o Donaldson, Lufkin &
Jenrette Securities Corporation, 277 Park Avenue, New York, New York 10172,
Attention: Syndicate Department, or in any case to such other address as the
person to be notified may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company and the several Underwriters set
forth in or made pursuant to this Agreement shall remain operative and in full
force and effect, and will survive delivery of and payment for the Shares,
regardless of (i) any investigation, or statement as to the results thereof,
made by or on behalf of any Underwriter, the officers or directors of any
Underwriter, any
27
<PAGE>
person controlling any Underwriter, the Company, the officers or directors of
the Company or any person controlling the Company, (ii) acceptance of the Shares
and payment for them hereunder and (iii) termination of this Agreement.
If for any reason the Shares are not delivered by or on behalf of the
Company as provided herein (other than as a result of any termination of this
Agreement pursuant to Section 9), the Company agrees to reimburse the several
Underwriters for all out-of-pocket expenses (including the fees and
disbursements of counsel) incurred by them. Notwithstanding any termination of
this Agreement, the Company shall be liable for all expenses which it has agreed
to pay pursuant to Section 5(i) hereof. The Company also agrees to reimburse the
several Underwriters, their directors and officers and any persons controlling
any of the Underwriters for any and all fees and expenses (including, without
limitation, the fees and disbursements of counsel) incurred by them in
connection with enforcing their rights hereunder (including, without limitation,
pursuant to Section 7 hereof).
Except as otherwise provided, this Agreement has been and is made solely
for the benefit of and shall be binding upon the Company, the Underwriters, the
Underwriters' directors and officers, any controlling persons referred to
herein, the Company's directors and the Company's officers who sign the
Registration Statement and their respective successors and assigns, all as and
to the extent provided in this Agreement, and no other person shall acquire or
have any right under or by virtue of this Agreement. The term "successors and
assigns" shall not include a purchaser of any of the Shares from any of the
several Underwriters merely because of such purchase.
This Agreement shall be governed and construed in accordance with the laws
of the State of New York.
This Agreement may be signed in various counterparts which together shall
constitute one and the same instrument.
28
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the several Underwriters.
Very truly yours,
NETWORK ACCESS SOLUTIONS CORPORATION
By:_____________________________
Name:
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BEAR, STEARNS & CO. INC.
J.P. MORGAN & CO.
Acting severally on behalf of
themselves and the several
Underwriters named in
Schedule I hereto
By DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By __________________________
29
<PAGE>
SCHEDULE I
__________
Underwriters Number of Firm Shares
to be Purchased
Donaldson, Lufkin & Jenrette Securities
Corporation
Bear, Stearns & Co. Inc.
J.P. Morgan & Co.
Total
<PAGE>
Annex I
[To be determined]
<PAGE>
Exhibit A
_________
[FORM OF FCC AND STATE REGULATORY OPINION]
____________, 1999
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BEAR, STEARNS & CO. INC.
J.P. MORGAN & CO.
As representatives of the
several Underwriters
named in Schedule 1 hereto
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
Ladies and Gentlemen:
We are special regulatory counsel to Network Access Solutions Corporation,
a Delaware corporation, a _________ corporation (collectively, the "Company").
This opinion is being provided at the request of the Company pursuant to Section
__ of the Underwriting Agreement dated ___________ (the "Underwriting
Agreement") entered into by the Company, Donaldson, Lufkin & Jenrette Securities
Corporation, Bear, Stearns & Co. Inc., and J.P. Morgan & Co. as representatives
of the several Underwriters named in Schedule 1 hereto (collectively, the
"Underwriters"). Our opinion is limited to certain telecommunications regulatory
matters involving the Communications Act of 1934, as amended (including
amendments made by the Telecommunications Act of 1996), 47 U.S.C. ss. 151 et
seq., as well as the regulations, rules, policies and published decisions of the
Federal Communications Commission ("FCC"), and any court's interpretation of
same (collectively, the "Communications Act") and
<PAGE>
_______________, 1999
Page 2
the statutory laws, regulations, rules, policies and published decisions of the
[State] Public Utilities Commission ("PUC"), and any court's interpretation of
same (collectively the "State Laws"). Capitalized terms not otherwise defined
herein are defined as set forth in the Underwriting Agreement.
Based upon and subject to the foregoing, it is our opinion as of the date
hereof that:
1. Schedule __ hereto accurately and completely lists all of the licenses,
permits, certificates, and authorizations issued by the FCC and the [State]
PUC(s) (collectively, the "Authorizations") necessary or required for the
Company to carry on its business as described in the Registration Statement and
the Prospectus. Schedule __ hereto accurately and completely lists all pending
applications filed by the Company with the FCC and/or the [State] PUC(s). The
Company has all Authorizations, consents, approvals and orders required under
the Communications Act and the State Laws that are necessary or required for the
Company to carry on its existing business as described in the Registration
Statement and the Prospectus.
2. To the best of our knowledge, (i) the Authorizations are validly issued;
(ii) the Authorizations are in full force and effect and are not subject to
conditions outside the ordinary course; and (iii) all express conditions in the
Authorizations have been satisfied.
3. No consent, approval, or authorization, license or order of, or filing
with, the FCC or [State] PUC(s), or qualification with the [State] PUC(s), is
necessary or required for either the execution and delivery of the Underwriting
Agreement,
<PAGE>
_______________, 1999
Page 3
the Registration Statement or the Prospectus, or for the performance
by the Company of its obligations under the Underwriting Agreement, the
Registration Statement or the Prospectus, or the transactions contemplated by
the Underwriting Agreement or of the Registration Statement or the Prospectus.
4. Neither the execution and delivery of the Underwriting Agreement or the
performance by the Company of its obligations under the Underwriting Agreement,
the Registration Statement or the Prospectus, including the issuance of stock,
will violate the Communications Act or State Laws, or result in a breach or
violation of any of the terms or provisions of, or constitute a default under,
or cause any forfeiture or impairment of, any of the Authorizations.
5. Nothing has come to the attention of those attorneys in the Firm who
regularly render service on behalf of the Company to cause us to believe, and we
have no reason to believe that, both as of the Effective Date and as of the
Closing Date, the statements in the Registration Statement and the Prospectus
under the captions "Risk Factors -- Competition," "Risk Factors -- Government
Regulation," "Business -- Competition," and "Business -- Government Regulation,"
that pertain to the Communications Act or State Laws or constitute a summary of
the legal matters, documents or proceedings referred to therein, contained or
contains any untrue statement of a material fact or omitted or omits to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading.
6. All descriptions in the Registration Statement and the Prospectus under the
headings "Risk Factors -- Competition," "Risk Factors -- Government
<PAGE>
_______________, 1999
Page 4
Regulation," "Business -- Competition," and "Business -- Government
Regulation" of the Communications Act and State Laws or legal or governmental
proceedings of the FCC or [State] PUC(s) with respect to telecommunications
regulatory matters are accurate and complete summaries of matters therein
described.
7. The Company has (a) operated in compliance with the Communications Act and
State Laws, and (b) filed with the FCC, [State] PUC(s), or other designated
entities all applications, statements, reports, tariffs, information, forms, or
any other document required under the Communications Act or State Laws, except
where the failure to so file would not have a material adverse effect on the
Company's ability to provide its services as described in the Registration
Statement and the Prospectus and, to the best of our knowledge, such filings or
submissions were in compliance with applicable laws or regulations when filed or
submitted and no deficiencies have been asserted by the FCC, the [State] PUC(s),
or any other designated entity with respect to such filings or submissions
except where the deficiency is of such a nature that failure to cure any such
deficiency would not have a material adverse effect on the Company's ability to
provide its services as described in the Registration Statement and the
Prospectus, and, to our knowledge, the information contained in such filings or
submissions was and continues to be in all material respects, accurate, complete
and up-to-date at the time the filings or submissions were made.
8. All regulatory tariffs applicable to the Company's services, if any, in
[States] (the "State Tariffs"), and the Company's interexchange, and
international operations (the "FCC Tariffs") (the State Tariffs and FCC Tariffs
hereinafter collectively referred to as the "Tariffs") are in full force and
effect in accordance
<PAGE>
_______________, 1999
Page 5
with their terms, and there is no outstanding notice of suspension, cancellation
or termination or any threatened suspension, cancellation or termination with
respect to any of the Company's Tariffs. The Company is not subject to any
restrictions or conditions applicable to its Tariffs that limit or would limit
the operations of the Company (other than restrictions or conditions generally
applicable to tariffs of that type). Each such Tariff has been duly and validly
accepted by the FCC and/or [State] PUC(s). The Company is not in violation under
the terms and conditions of any such Tariff, and there is no basis for any claim
of violation by the Company under any such Tariff.
9. Based upon a review of public files of the FCC and [State] PUC(s),
appropriate files of this firm and an inquiry of lawyers in this firm who have
substantial responsibility for the Company's legal matters handled by this firm,
we confirm that, except as disclosed at Schedule ____:
(a) there is no unsatisfied adverse FCC or [State] PUC(s) order,
decree or ruling outstanding against the Company or any of the
Authorizations;
(b) there is no proceeding, complaint or investigation against the
Company or in respect of any of the Authorizations pending or
threatened before the FCC or [State] PUC(s) (including any pending
judicial review of such an action by the FCC or [State] PUC(s)) except
for proceedings affecting the competitive local exchange, exchange
access, prepaid intrastate, interstate and international telephone
services, operator services or interexchange or international
industries generally to which the Company is not a specific party;
<PAGE>
_______________, 1999
Page 6
(c) the Company is not a party to any complaint, action or other
proceeding at the FCC or [State] PUC(s), including complaints against
other licensees or applicants;
(d) the Company has not been the subject of any final adverse order
decree or ruling of the FCC or [State] PUC(s) (including any notice of
forfeiture which has been paid); and
(e) no action, suit, proceeding or investigation is pending or
threatened, and no judgment, order, decree or ruling has been entered,
against the Company in any court or before or by any governmental
authority (other than the FCC and [State] PUC(s)) that gives us reason
to believe that any of the Authorizations will be revoked or will not
be renewed in the ordinary course or would have any material adverse
affect on the Authorizations.
_________________________________________
[FIRM NAME]
<PAGE>
MASTER EQUIPMENT EXHIBIT 10.1
LEASE AGREEMENT
MASTER LEASE AGREEMENT NO. P98-24481
Master Lease Agreement ("Lease") made this 17th day of November 1998 between
----
Paradyne Credit Corp. ("Lessor") with its principal place of business located at
8545 126th Avenue N. Largo, FL 33773 and Network Access Solutions (NAS)
("Lessee") having its principal place of business located at 100 Carpenter Drive
Suite 206 Sterling, Va. 22170.
1. LEASE AGREEMENT
Lessor hereby leases to Lessee and Lessee hereby leases from Lessor all of
the personal property ("Equipment") described in Equipment Lease
Schedule(s), which are or may from time to time be executed by Lessor and
Lessee and attached hereto or which incorporate this Lease by reference
("Schedules"), upon the terms and conditions set forth in this Lease, as
supplemented by the terms and conditions set forth in the appropriate
Schedule(s) identifying such items of Equipment. All terms and conditions of
this Lease shall govern the rights and obligations of Lessor and Lessee
except as specifically modified In writing and signed by the parties hereto.
Each Schedule shall constitute a separate lease and a distinct and
independent obligation of the Lessee which shall incorporate by reference
the terms and conditions of this Lease. In the event of a conflict between
the terms and conditions of this Lease and the Schedule(s) hereto, those of
the Schedule(s) shall prevail. All Equipment leased hereunder shall be
leased for a term of forty-eight (48) months, with a one dollar ($1)
purchase option at lease expiration.
2. SELECTION OF EQUIPMENT; ACCEPTANCE
Lessee will select the type, quantity, and supplier of each item of
Equipment designated in the appropriate Schedule, and in reliance thereon
such Equipment will then be ordered by Lessor from such supplier or Lessor
will accept an assignment of any existing purchase order therefore. Lessor
will have no liability for any delivery or failure by the supplier to fill
the purchase order or to meet the conditions thereof. Lessee acknowledges
that Lessor has not participated and will not participate in any way in
Lessee's selection of the Equipment or the supplier. Within sixty (60) days
from date of shipment of the Equipment, Lessee agrees to inspect the
Equipment and to execute an Acknowledgment and Acceptance of Equipment by
Lessee notice, as provided by Lessor, after the Equipment has been delivered
and after Lessee is satisfied that the Equipment is satisfactory in every
respect. In the event that Lessee fails to execute an Acknowledgment and
Acceptance of Equipment within such sixty (60) day period or fails to notify
Lessor in writing that the Equipment is not acceptable, Lessee shall be
deemed to have irrevocably accepted the Equipment. This Lease and all
Schedules are non-cancelable and Lessee agrees to pay the total rent for the
term indicated in each Schedule, plus any other sums provided for herein.
Lessee hereby authorizes Lessor to insert in this Lease and Schedules serial
numbers or other identifying data with respect to the Equipment.
3. DISCLAIMER OF WARRANTIES AND CLAIMS; LIMITATION OF REMEDIES LESSOR IS
NEITHER THE MANUFACTURER OF THE EQUIPMENT NOR THE MANUFACTURER'S AGENT, AND
MAKES NO EXPRESS OR IMPLIED WARRANTY OF ANY KIND WHATSOEVER WITH RESPECT TO
THE EQUIPMENT, INCLUDING BUT NOT LIMITED TO, THE MERCHANTABILITY OF THE
EQUIPMENT OR ITS FITNESS FOR ANY PARTICULAR PURPOSE; THE DESIGN OR CONDITION
OF THE EQUIPMENT; THE QUALITY OR CAPACITY OF THE EQUIPMENT; THE WORKMANSHIP
IN THE EQUIPMENT; COMPLIANCE OF THE EQUIPMENT WITH THE REQUIREMENT OF ANY
LAW, RULE, SPECIFICATION OR CONTRACT PERTAINING THERETO; PATENT
INFRINGEMENT; OR LATENT DEFECTS. LESSEE LEASES THE EQUIPMENT "AS IS" AND
WITH ALL FAULTS. Lessee accordingly agrees not to assert any claim
whatsoever against Lessor for loss of anticipatory profits or consequential
damages. Lessor shall have no obligation to install, erect, test, service,
or maintain the Equipment. Lessee shall look to the manufacturer and/or
seller for any claims related to the Equipment.
If the Equipment is not properly installed, does not operate as represented
or warranted by the supplier or manufacturer, or is unsatisfactory for any
reason, regardless of cause or consequence, Lessee's only remedy, if any,
shall be against the supplier or manufacturer of the Equipment and not
against Lessor.
<PAGE>
Lessor hereby acknowledges that any manufacturer's and/ or sellers
warranties are for the benefit of both Lessor and Lessee. NOTWITHSTANDING
THE FOREGOING, LESSEE'S OBLIGATIONS TO PAY THE RENTALS OR OTHERWISE UNDER
THIS LEASE SHALL BE AND ARE ABSOLUTE AND UNCONDITIONAL. To the extent
permitted by the manufacturer or seller, provided Lessee is not in default
under this Lease, Lessor shall make available to Lessee all manufacturer
and/or seller warranties with respect to Equipment.
Lessee specifically acknowledges that the Equipment is leased to Lessee
solely for lawful commercial or business purposes.
4. STATUTORY FINANCE LEASE
Lessee agrees and acknowledges that it Is the Intent of both parties to this
Lease that it qualify as a statutory finance lease under Article 2A of the
Uniform Commercial Code. Lessee acknowledges and agrees that Lessee has
selected both: (1) the Equipment; and (2) the supplier from whom Lessor is
to purchase of the Equipment. Lessee acknowledges that Lessor has not
participated in any way in Lessee's selection of the Equipment or the
supplier, and Lessor has not selected, manufactured, or supplied the
Equipment.
LESSEE IS ADVISED THAT IT MAY HAVE RIGHTS UNDER THE CONTRACT EVIDENCING THE
LESSOR'S PURCHASE OF THE EQUIPMENT FROM THE SUPPLIER CHOSEN BY LESSEE AND
THAT LESSEE SHOULD CONTACT THE SUPPLIER OF THE EQUIPMENT FOR A DESCRIPTION
OF ANY SUCH RIGHTS.
5. ASSIGNMENT BY LESSEE PROHIBITED.
LESSEE SHALL NOT ASSIGN, TRANSFER, PLEDGE, HYPOTHECATE, OR OTHERWISE DISPOSE
OF, ENCUMBER OR PERMIT A LIEN UPON OR AGAINST ANY INTERESTS IN THE LEASE,
ANY SCHEDULE OR THE EQUIPMENT OR PERMIT THE EQUIPMENT TO BE USED BY ANYONE
OTHER THAN LESSEE OR LESSEE'S EMPLOYEES OR SUBLEASE THE EQUIPMENT COVERED
HEREBY WITHOUT LESSOR'S PRIOR WRITTEN CONSENT.
6. COMMENCEMENT; RENTAL PAYMENTS; INTERIM RENTALS
This Lease shall commence upon the written acceptance hereof by Lessor and
shall end upon full performance and observance by Lessee of each and every
term, condition, and covenant set forth in this Lease, any Schedules hereto
and any extensions hereof. Rental payments shall be in the amounts and
frequency as set forth on the face of this Lease or any Schedules hereto. In
addition to the rental payments set forth herein and in any Schedules
hereto, and provided that Lessee accepts the Equipment on any day of the
month other than the first day of the month, then, with respect to each
Schedule, Lessee shall pay to Lessor interim rent for the use of the
Equipment from the date on which such acceptance occurs through the last day
of that month. Interim rent shall be in an amount equal to 1/30th of the
monthly rental amount, multiplied by the number of days elapsing between the
date on which the Equipment is accepted by Lessee and the last day of the
month in which acceptance occurs. The payment of interim rent shall be due
and payable upon Lessee's receipt of invoices from Lessor therefor. The
rental period under the Lease shall terminate following the last day of the
term stated on the face hereof or in any Schedule hereto unless such Lease
or Schedule has been extended or otherwise modified. The rental payments for
each and all Schedules hereto shall be calculated and fixed at an interest
rate of two hundred (200) basis points above the prime interest rate as
published in The Wall Street Journal on the first Business Day of the
calendar quarter in which Lessor receives a request from Lessee to prepare a
new Schedule hereto. All rental payments shall be calculated In arrears.
Lessee shall not be required to pay to Lessor a security deposit for any
Schedule hereto. Lessor agrees to provide Lessee with one single monthly
invoice inclusive of all Equipment leased hereunder. Lessor shall have no
obligation to Lessee under this Lease if the Equipment, for whatever reason,
is not delivered to Lessee in form satisfactory to Lessor, within ninety
(90) days from the date Lessee orders the Equipment.
<PAGE>
7. LIMITED PREARRANGED AMENDMENTS. SPECIFIC POWER OF ATTORNEY;
In the event it is necessary to amend the terms of this Lease, or the terms of
any Schedule to reflect a change in one or more of the following conditions:
7.1. Lessor's actual cost of procuring the Equipment; or
7.2. Lessor's actual cost of providing Equipment to Lessee; or
7.3. A change in the Lease payments as a result of (1) and/or (2) above; or
7.4. Description of the leased Equipment
Lessee agrees that any such amendment shall be described in a letter from
Lessor to Lessee. Lessee shall respond to such amendment request within ten
(10) business days with its acceptance or rejection of the proposed
amendment. Should Lessee fail to respond, this Lease and any affected
Schedules shall be deemed amended and such amendments shall be incorporated
herein/therein as if originally set forth herein/therein.
Lessee grants to Lessor a specific power of attorney for Lessor to use as
follows: (1) Lessor may sign and file on Lessee's behalf any document Lessor
deems necessary to perfect or protect Lessors Interest in the Equipment or
pursuant to the Uniform Commercial Code; and (2) Lessor may sign, endorse, or
negotiate for Lessor's benefit any instrument representing proceeds from any
policy of insurance covering the Equipment.
8. LOCATION
The equipment shall be kept at the location specified in each Schedule or,
if none is specified, at Lessee's address as set forth above, and shall not
be removed therefrom without Lessor's prior written consent, which shall not
be unreasonably withheld.
9. USE
Lessee shall use the Equipment in a careful manner, shall make all necessary
repairs at Lessee's expense, and shall comply with all laws relating to its
possession, use or maintenance and shall not make any alterations,
additions, or improvements to the Equipment without Lessor's prior written
consent, which shall not be unreasonably withheld. All additions, repairs,
or improvements made to the Equipment shall belong to Lessor.
10. MAINTENANCE SERVICES
At its own expense, Lessee shall maintain the Equipment in the same
condition as when delivered, subject only to ordinary wear and tear. Upon
request, Lessor, or any party designated by Lessor, shall have the right to
inspect the Equipment and Lessee's applicable maintenance records at any
reasonable upon written notification. Should any such inspection reveal that
the Equipment is not being appropriately maintained, The Lessor may, in it's
discretion and at the Lessee's expense, enter into a maintenance agreement
for such Equipment.
If Lessee has specified the inclusion of maintenance services on any
Schedule, Lessor may in it's discretion arrange for the provision of
maintenance service for the products for which the Lessee has ordered
maintenance services. This service will be in accordance with the option
Lessee has selected and with the vendor selected. Lessee acknowledges that
it has read and understands the terms and conditions of the maintenance
service provider's service offerings which Lessee has selected.
11. LESSEE WARRANTIES
11.1. Lessee represents, warrants and covenants to Lessor that:
11.2. Lessee is duly organized, validly existing and in good standing under
the laws of the Jurisdiction in which activities of Lessee require such
qualification.
11.3. Lessee and/or the party that has executed this Lease, Schedules and
Acknowledgment and Acceptance of Equipment has the power and authority to
enter into this Lease and each Schedule.
11.4. This Lease is enforceable against Lessee in accordance with its terms
and conditions and does not create a default under any instrument or
agreement binding on Lessee or its properties.
11.5. There are no pending or threatened actions before any court or
administrative agency that could have a material adverse effect on the
Lessee or this Lease.
11.6. The financial and other information provided to Lessor was and will
be true and correct as of the date made.
11.7. Lessee agrees to deliver to Lessor, at Lessor's request, annual
financial statements, which shall be prepared in accordance with generally
accepted accounting principles, and quarterly unaudited management-prepared
financial statements.
<PAGE>
12. OWNERSHIP; PERSONALITY
The Equipment is, and shall remain, the property of Lessor, and Lessee shall
have no right, title or interest therein or thereto except as expressly set
forth In this Lease. The Equipment shall remain personal property even
though installed in or attached to real property. Lessee hereby agrees to
hold Lessor harmless from and indemnify Lessor with regard to any and all
claims, actions, damages, costs and attorneys fees asserted by any landlord
or mortgagee against Lessor or the Equipment herein.
13. SURRENDER
Upon the expiration or termination of any Schedule or this Lease and
provided that Lessee has not exercised its options as per Section 14, or in
the Event of Default pursuant to Section 21 hereof, Lessee at its expense,
shall return all of the Equipment per each Schedule in good repair, ordinary
wear and tear resulting from proper use thereof alone excepted, by
delivering it, packed and ready for shipment, to such place or carrier as
Lessor may specify within the continental United States. If Lessee fails to
return the Equipment as provided herein, Lessee shall pay Lessor, in
addition to all rent and other purchase option amounts due under this Lease
and the Schedules, a sum equal to six (6) months rent for such Equipment as
liquidated damages to compensate Lessor for the economic loss suffered by
Lessor as a result of its inability to realize the residual value of the
Equipment when anticipated. Lessee agrees to pay Lessor a processing fee for
he return of the Equipment, which shall not exceed ten (10) percent of the
Equipment value as of the date the Lessee executed the Acknowledgment and
Acceptance of the Equipment. Nothing contained herein is intended to relieve
Lessee of its obligations to return the Equipment to Lessor as provided
herein or restrict Lessor's right to recover the Equipment in the event of
the failure of Lessee to so return the Equipment or pay the additional rent
at the expiration or termination of the applicable Schedule.
14. PURCHASE CONVERSION
14.1. Lessee shall have the fight at the end of the initial lease
term to purchase the Equipment on each Schedule for One Dollar ($1.00).
Lessee shall be deemed to have elected the One Dollar ($1) buy out option at
the end of lease term unless the Lessee notifies Lessor in writing not less
than ninety (90) days prior to the end of the lease term of its intent not
to purchase such Equipment.
14.2. Prior to the expiration of the lease term set forth in each Schedule,
Lessee shall have the option to terminate the Lease Agreement, with respect
to each Schedule, through the purchase of the leased Equipment. The purchase
price shall be as indicated on the Purchase Conversion/Buyout Table provided
for each Equipment Schedule
14.3. In the event that Lessee does not purchase the Equipment at the end
of the initial lease term as provided herein, this Lease shall continue in
full force and effect on a month-to-month basis, under the same terms,
conditions and pricing, until such time as Lessee purchases or returns the
Equipment.
15. LOSS AND DAMAGE
Lessee shall bear the entire risk of loss, theft, damage or destruction of
the Equipment from any cause whatsoever, and no loss, theft, damage or
destruction of the Equipment shall relieve Lessee of its obligation to pay
rent or to comply with any other obligation under this Lease.
In the event of damage to any item of Equipment, Lessee shall immediately
place the same in good repair at Lessee's expense. If Lessor determines that
any item of Equipment is lost, stolen, destroyed or damaged beyond repair,
Lessee shall at Lessee's option do one of the two following options:
15.1 Replace the same with like Equipment in good repair, acceptable to
Lessor; or
15.2 Pay Lessor in cash the following: (i) all amounts due by Lessee to
Lessor with respect to all affected Schedules up to the date of the loss;
(ii) the unpaid balance of the total rent for the remaining term of the
affected Schedules attributable to said item, reduced to present value at a
discount rate of 5% as of the date of the loss; and (iii) the Lessor's
estimate as of the time this Lease was entered into of Lessors residual
Interest, if any, in the Equipment, discounted to present value at a
discount rate of 5% as of the date of the loss.
Upon Lessor's receipt of payment as set forth above, Lessee shall be
entitled to the affected Equipment, without any warranties from Lessor. If
insurance proceeds are used to fully comply with this subparagraph, any
balance of such proceeds shall go to Lessee as compensation for loss of use
of the Equipment for the remaining term of the Lease.
<PAGE>
16. LIENS; TAXES
Lessee shall keep the Equipment free and clear of all levies, liens and
encumbrances. Lessee shall pay all charges and taxes (local, state and
federal) which may now or hereafter be imposed upon the ownership, leasing,
rental, sale, purchase, possession or use of the Equipment excluding,
however, all taxes on or measured by Lessor's net income.
17. INSURANCE
At its own expense, Lessee shall provide and maintain the following
insurance:
17.1.1. Insurance against the loss or theft of or damage to the Equipment
for the full replacement value thereof, naming Lessor and its assigns as a
loss payee.
17.1.2. General liability insurance naming Lessor and its assigns as an
additional insured.
Such insurance shall be in a form amount, and with companies satisfactory to
Lessor and shall include the agreement to give Lessor thirty (30) days prior
written notification of cancellation or material change, and shall be
payable to Lessor regardless of any act, omission, or breach by Lessee.
Lessee shall furnish to Lessor from the insurer a certificate of Insurance,
insurance policies or copies thereof or evidence that Lessee is self-insured
on or before the date the Acknowledgment and Acceptance of the Equipment is
executed.
If Lessee fails to procure or maintain said Insurance or to pay said
charges, or taxes, Lessor shall have the right, but shall not be obligated
to effect such insurance, or pay such charges or taxes. In that event,
Lessor shall notify Lessee of such payment and Lessee shall repay to Lessor
the cost thereof within 15 days after such notice is mailed to Lessee.
18. INDEMNITY
Lessee shall indemnify and hold Lessor, its agents, employees, successors
and assigns, harmless from and against any and all claims, actions, suits,
proceedings, costs, expenses, damages or liabilities, including all attorney
fees, arising out of or connected with, or resulting from the Equipment, a
Schedule or this Lease without limitation, the manufacture, selection,
delivery, possession, use, lease, operation, removal or return of the
Equipment. Such indemnification shall survive the expiration, cancellation
or termination of the Lease. Lessee waives any immunity Lessee may have
under any industrial insurance act with regard to indemnification of Lessor.
19. ASSIGNMENT BY LESSOR
LESSOR MAY, WITHOUT CONSENT OR NOTICE TO LESSEE, ASSIGN OR TRANSFER THIS
LEASE OR ANY SCHEDULE OR GRANT A SECURITY INTEREST IN ANY EQUIPMENT, ANY
RENTAL PAYMENTS, OR ANY OTHER SUMS DUE OR TO BECOME DUE HEREUNDER, AND IN
SUCH EVENT ANY ASSIGNEE OF LESSOR SHALL HAVE ALL OF THE RIGHTS, POWERS,
PRIVILEGES, AND REMEDIES BUT NONE OF THE OBLIGATIONS OF LESSOR UNDER THIS
LEASE. LESSEE SHALL RECOGNIZE AND HEREBY CONSENTS TO ANY ASSIGNMENT OF THIS
LEASE BY LESSOR, AND LESSEE SHALL NOT ASSERT AGAINST THE ASSIGNEE ANY
DEFENSE, COUNTERCLAIM, OR OFFSET TO ANY ACTION THAT LESSEE MAY HAVE AGAINST
LESSOR. Lessee agrees that, following its receipt of notice of any
assignment by Lessor of this Lease, any Schedule or the rental payments
payable hereunder, it will pay the rental payments due hereunder directly to
the assignee (or whomever the assignee shall designate). Upon Lessor's
request, Lessee will execute a consent and acknowledgment of Lessor's
assignment to its assignee. Subject to the foregoing, this Lease inures to
the benefit of and is binding upon the heirs, devisees, personal
representatives, survivors, successors in interest and assigns of the
parties hereto.
20. SERVICE CHARGES; INTEREST
If Lessee shall fail to make any payment required by this Lease within 15
days of the due date thereof, Lessee shall pay to Lessor interest on any
delinquent payment or amount due under this Lease from the due date thereof
until paid, at the lesser of the maximum rate of interest allowed by law or
18% per annum.
21. DEFAULT
Lessee shall be in default (Event of Default) of this Lease if:
21.1. Lessee shall fail to make any rental payment or any other amount when
due under the terms of this Lease for a period of 30 days from the due date
thereof; or
21.2. Lessee shall fail to observe, keep or perform any other provision of
this Lease, and such failure shall continue for a period of 30 days from
notification by Lessor, or
<PAGE>
21.3 Lessee has made any misleading or false statement in connection with
Section 11 of this lease; or
21.4. The Equipment or any part thereof shall be subject to any lien, levy,
seizure, assignment, transfer, bulk transfer, encumbrance, application,
attachment, execution, sublease, or sale without prior written consent of
Lessor, or if Lessee shall abandon the Equipment or permit any other entity
or person to use the Equipment other than Equipment utilized at the customer
premise (CPE) without prior written consent of Lessor; or
21.5. Lessee, without the prior written approval of Lessor, which shall not
be unreasonably withheld, sells substantially all of its assets out of the
ordinary course of business, merges or consolidates with any other person,
or sustains a change in the ownership of more than fifty percent (50%) of
its equity to a party that had no ownership interest in Lessee at the
commencement of this Agreement; or if Lessee dies or ceases to exist; or
21.6. Lessee defaults on any other agreement it has with Lessor; or
21.7. Lessee becomes insolvent or makes an assignment for the benefit of
creditors; or a receiver, trustee, conservator or liquidator of Lessee or of
all or a substantial part of its assets is appointed with or without the
application or consent of Lessee; or a petition is filed by or against
Lessee under the Bankruptcy Code or any amendment thereto, or under any
other insolvency law or laws, providing for the relief to debtors, which is
not discharged within thirty (30) days of commencement; or
21.8. Any guarantor of this Lease defaults on any obligation to Lessor, or
any of the above-listed events of default occur with respect to any
guarantor, or any such guarantor files a petition or a petition is filed
against guarantor under the Bankruptcy Code or any amendment thereto, or
under any other insolvency law or laws, providing for the relief to debtors.
22. REMEDIES
If Lessee is in default Lessor, with or without notice to Lessee, shall have
the right to exercise any one or more of the following remedies,
concurrently or separately and without any election of remedies being deemed
to have been made. Lessor may enter upon Lessee's premises and without any
court order or other process of law may repossess and remove the Equipment,
or render the Equipment unusable without removal, either with or without
notice to Lessee. Lessee hereby waives any trespass or right of action for
damages by reason of such entry, removal, or disabling. Any such
repossession shall not constitute a termination of this Lease;
Lessor may require Lessee, at its expense, to return the Equipment in good
repair, ordinary wear and tear resulting from proper use thereof alone
excepted, by delivering it, packed and ready for shipment, to such place or
carrier as Lessor may specify;
Lessor may cancel or terminate this Lease and may retain any and all prior
payments paid by Lessee:
Lessor may declare all sums due and to become due under this Lease
immediately due and payable, including as to any or all items of Equipment,
without notice or demand to Lessee; Lessor may re-lease the Equipment to any
third party, without notice to Lessee, upon such terms and conditions as
Lessor alone shall determine, or may sell the Equipment without notice to
Lessee, at private or public sale, at which sale Lessor may be the
purchaser;
Lessor may sue for and recover from Lessee the sum of all unpaid rents and
other payments due under this Lease then accrued, plus all accelerated
future payments due under this Lease, reduced to their present value using a
discount rate of 5%, as of the date of default, plus Lessor's estimate at
the time this Lease was entered into of the Lessor's residual Interest in
the Equipment, reduced to present value at a discount rate of 5% as of the
date of default, less the net proceeds of disposition if any, of the
Equipment;
To pursue any other remedy available at law, by statute or in equity.
No fight or remedy conferred upon or reserved to Lessor is exclusive of any
other fight or remedy herein, or by law or by equity provided or permitted,
but each shall be cumulative of every other fight or remedy given herein or
now or hereafter existing by law or equity or by statute or otherwise and
may be enforced concurrently therewith or from time to time. No single or
partial exercise by Lessor of any fight or remedy hereunder shall preclude
any other or further exercise of any other fight or remedy.
23. FORCE MAJEURE
Lessor shall have no liability for its delay or failure in performance or
for damages due to fire, explosion, lightning, pest damage, power surges or
failures, strikes or labor disputes, water, acts of God, the elements, war,
civil disturbances, acts of civil or military authorities or the public
enemy, inability to secure raw materials, transportation facilities, fuel or
energy shortages, acts or omissions of communication carriers, or other
causes beyond Lessor's control whether or not similar to the foregoing.
Nothing herein shall obligate Lessor to settle any strike or labor dispute.
<PAGE>
24. SURVIVAL, QUIET ENJOYMENT
All representations, warranties and covenants made by the Lessee hereunder
shall survive the termination of this Lease and shall remain in full force
and effect. All of Lessor's rights and privileges, to the extent that they
are fairly attributable to events or conditions occurring on or prior to the
termination of this Lease, shall survive such termination and be enforceable
by Lessor. So long as no Event of Default exists, Lessor will not interfere
with Lessee's quiet enjoyment of the Equipment.
25. MULTIPLE LESSEES
Lessee and each of them are jointly and severally responsible and liable to
Lessor under the Lease. Lessor may, and with the consent of any one of the
Lessees hereunder, modify, extend or change any of the terms hereof without
consent or knowledge of the others, without in any way releasing, waiving or
impairing any fight granted to Lessor against the others.
26. EXPENSE OF ENFORCEMENT
In the event of any legal action with respect to this Lease, the prevailing
party in any such action shall be entitled to reasonable attorneys fees,
including reasonable attorneys fees incurred at the trial level, including
action in bankruptcy court, on appeal, or review, or incurred without
action, suits or proceedings, together with all reasonable costs and
expenses incurred in pursuit thereof.
27. MISCELLANEOUS
27.1. LESSEE HEREBY ACKNOWLEDGES THAT THIS LEASE IS NONCANCELABLE FOR THE
ORIGINAL RENTAL TERM SET FORTH IN EACH SCHEDULE.
27.2. LESSEE UNDERSTANDS AND ACKNOWLEDGES THAT NO BROKER OR SUPPLIER NOR
ANY SALESMAN, BROKER OR AGENT OF ANY BROKER OR SUPPLER IS AUTHORIZED TO
WAIVE OR ALTER ANY TERM OR CONDITION OF THIS LEASE, AND NO REPRESENTATION AS
TO THE EQUIPMENT OR ANY OTHER MATTER BY A BROKER OR SUPPLIER OR ANY
SALESMAN, BROKER OR AGENT OF ANY BROKER OR SUPPLIER SHALL IN ANY WAY AFFECT
LESSEE'S DUTY TO PAY THE RENTALS AND TO PERFORM LESSEE'S OBLIGATIONS SET
FORTH IN THIS LEASE.
27.3. ONLY THE COPY MARKED "ORIGINAL" SHALL CONSTITUTE CHATTEL PAPER FOR
PURPOSES OF PERFECTING A SECURITY INTEREST UNDER THE UNIFORM COMMERCIAL
CODE.
28. SEVERABILITY
This lease is intended to constitute a valid enforceable legal instrument.
In the event any provision hereof is declared invalid, such provision will
be deemed severable from the remaining provisions of this Lease, all of
which will remain in full force and effect.
29. ENTIRE AGREEMENT; WAIVER
This instrument and the Schedules executed by Lessor and Lessee constitute
the entire agreement between Lessor and Lessee with respect to the Equipment
and the subject matter of the Lease. No provision of this Lease shall be
modified unless in writing signed by an authorized representative of Lessor.
Waiver by Lessor of any provision hereof in one instance shall not
constitute a waiver of any other instance.
30. CHOICE OF LAW; JURISDICTION
This Lease shall not be effective until signed by Lessor at its principal
place of business listed above. This Lease shall be considered to have been
made in the state of Lessor's principal place of business and shall be
interpreted in accordance with the laws and regulations of that state.
<PAGE>
Lessee agrees to jurisdiction in the state of Lessee's principal place of
business in any action, suit, or proceeding arising out of this Lease, and
concedes that it, and each of them transacted business in the said state may be
entering into this Lease. In the event of legal action to enforce this Lease,
Lessee agrees that venue may be laid in the county of Lessor's principal place
of business.
Lessee initials: /s/ SY
------------------------------
LESSEE: NETWORK ACCESS SOLUTIONS, INC. PARADYNE CREDIT CORP., LESSOR:
/s/ Scott Yancey
- -------------------------------- --------------------------------
Scott Yancey Date: 11/17/98 Date:
- -------------------------------- -------------------- -------
printed name printed name
CFO
- -------------------------------- --------------------------------
title title
<PAGE>
Paradyne
Schedule to Master Lease Agreement No. P98-24481
Dated Nov. 17, 1998
Schedule No. 1211-01
Lessee Name Lessor Name
Network Access Solutions Paradyne Credit Corporation
100 Carpenter Drive, Suite 206 8454 126th Ave. N.
Sterling, VA 20164 Largo, FL 33773
This Schedule covers the following described property ("equipment"):
***
- --------------------
*** Confidential Information has been omitted and filed separately with the
Securities and Exchange Commission.
<PAGE>
Paradyne
Schedule to Master Lease Agreement No. P98-24481
Dated Nov. 23, 1998
Schedule No. 1211-02
Lessee Name Lessor Name
Network Access Solutions Paradyne Credit Corporation
100 Carpenter Drive, Suite 206 8454 126th Ave. N.
Sterling, VA 20164 Largo, FL 33773
This Schedule covers the following described property ("equipment"):
***
- ----------------------
*** Confidential Information has been omitted and filed separately with the
Securities and Exchange Commission.
<PAGE>
Exhibit 10.2
PURCHASE AND SALE AGREEMENT
---------------------------
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is made and entered into as
of the 16th day of October, 1998 by and between Ascend Communications, Inc., a
----
California corporation, having its principal office at 1701 Harbor Bay Parkway,
Alameda, California, 94502 ("Seller") and Network Access Solutions, Inc., a
Delaware corporation having its principal office at 100 Carpenter Drive, Suite
206, Sterling, Virginia 20164 ("Buyer").
WITNESSETH
----------
WHEREAS, Seller manufactures and owns all of the rights, title and interest in
and to the telecommunications network equipment described and identified on
Exhibit A hereto (individually and collectively such items of equipment being
- ---------
referred to as the "Equipment"); and
WHEREAS, Seller and Buyer have reached an understanding whereby Seller has
agreed to cause its affiliate, Ascend Credit Corporation ("Ascend Credit"), to
purchase from Seller and lease to Buyer the items of Equipment ordered from
Seller by the Buyer from time to time, with an option for Buyer to purchase the
leased Equipment from Ascend Credit at the termination of such lease.
NOW, THEREFORE, in consideration of the premises and mutual covenants contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Sale and Purchase of Equipment.
------------------------------
(a) Subject to the terms and conditions set forth herein, Seller hereby
irrevocably agrees to sell to Buyer from time to time during the term
of this Agreement and to cause Ascend Credit to purchase from Seller
and lease to Buyer up to $30,000,000 worth of Equipment, as may be
selected by Buyer from the list of available Equipment set forth in
Exhibit A and detailed in a purchase order. Such Equipment shall be
---------
leased and sold on the terms and conditions of that certain Master
Lease Agreement No. 9314 between Buyer and Ascend Credit dated for
reference October 9, 1998, a copy of which is attached hereto as
Exhibit B (the "Lease Agreement").
---------
(b) In consideration for the Equipment, Buyer agrees to pay to Seller
***.
- --------------------
*** Confidential Information has been omitted and filed separately with the
Securities and Exchange Commission.
<PAGE>
2. Term of Agreement.
-----------------
The term of this Agreement shall be 18 months from the date hereof.
3. Seller's Representations, Warranties and Covenants.
--------------------------------------------------
Seller hereby represents, warrants and covenants to Buyer that:
(a) Seller is a corporation duly organized, validly existing and in good
standing under the laws of California and has all requisite corporate
power and authority to enter into and perform this Agreement and the
transactions contemplated hereby.
(b) All requisite corporate action has been authorized for the execution
and delivery to Buyer of this Agreement and the agreements
contemplated hereunder and for the performance of Seller's obligations
hereunder. This Agreement is a valid and binding obligation of
Seller, enforceable against Seller in accordance with its terms.
(c) There are no actions, suits or proceedings pending or, to the best of
the knowledge of Seller, threatened against or affecting Seller or of
which the Equipment is the subject matter or any proceedings with
respect to Seller or any of the Equipment before any federal, state or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign that would in any way adversely
affect the transactions contemplated herein.
(d) Seller possesses valid legal rights in and title to all of the
Equipment, free from all pledges, liens, security interests,
encumbrances or charges.
(e) All necessary approvals and authority to enter into this Agreement and
bind Seller have been obtained, the person executing this Agreement on
behalf of Seller has express authority to do so and, in doing, to bind
Seller hereto and the execution of this Agreement by Seller does not
violate any provision of any by-law, charter, regulation or any other
governing authority of Seller.
(f) At such time as Buyer exercises its right to purchase the Equipment
under the Lease Agreement, Seller will transfer to Buyer all of its
right, title and interest in and to the Equipment, free and clear of
any Third Party (as defined herein below) rights or other
encumbrances, and Buyer shall have the right to sell, license, assign
or otherwise convey the Equipment to any Third Party. Seller shall
agree to execute any and all instruments and agreements to effect the
conveyance and assignment of the Equipment as Buyer may deem
necessary. The term "Third
-2-
<PAGE>
Party" as used herein means any person or entity that is not a party
to this Agreement.
(g) The Equipment delivered to Buyer shall materially conform with and
perform the functions set forth in the specifications attached hereto
as Exhibit A (the "Specifications") as are applicable to the Equipment
---------
and shall be free from defects in material or workmanship that impair
Buyer's use of the Equipment. If notified by Buyer of any such
defects in material or workmanship or nonconformity with the
Specifications, Seller shall, at its election and expense, repair or
replace any such defective Equipment. Any Equipment repaired or
replaced under this Section [3(g)] shall be subject to the provisions
of this Section [3(g)].
4. Buyer's Representations, Warranties and Covenants.
-------------------------------------------------
Buyer hereby represents, warrants and covenants to Seller that:
(a) Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite
corporate power and authority to enter into and perform this Agreement
and the transactions contemplated hereby.
(b) All requisite corporate action has been authorized for the execution
and delivery to Seller of this Agreement and the agreements
contemplated hereunder and for the performance of Buyer's obligations
hereunder. This Agreement is a valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms.
(c) There are no actions, suits or proceedings pending or, to the best of
the knowledge of Buyer, threatened against or affecting Buyer or any
proceedings with respect to Buyer before any federal, state or other
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign that would in any way adversely
affect the transactions contemplated herein.
(d) All necessary approvals and authority to enter into this Agreement and
bind Buyer have been obtained, the person executing this Agreement on
behalf of Buyer has express authority to do so and, in doing, to bind
Buyer hereto and the execution of this Agreement by Buyer does not
violate any provision of any by-law, charter, regulation or any other
governing authority of Buyer.
-3-
<PAGE>
5. Seller Financing.
----------------
Seller acknowledges that, as an inducement to Buyer to enter into this Agreement
and to commit a substantial portion of its network technology to Seller, Buyer
is relying on Seller, or its affiliate, to provide financing for all Equipment
purchases hereunder as well as operating capital financing in the manner
described in that certain Letter of Intent dated September 24, 1998, (the
"LOI"), a copy of which is attached hereto as Exhibit C as evidenced by
---------
Promissory Notes made by Buyer in favor of Seller, or its affiliate,
substantially in the form attached hereto as Exhibit D.
---------
***.
6. Indemnification.
---------------
***
7. Limitation of Liability.
-----------------------
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT, IN NO
EVENT, WHETHER AS A RESULT OF BREACH OF CONTRACT, WARRANTY, TORT (INCLUDING BUT
NOT LIMITED TO NEGLIGENCE OR INFRINGEMENT), SHALL SELLER OR BUYER BE LIABLE
UNDER THIS AGREEMENT FOR ANY CONSEQUENTIAL OR INCIDENTAL DAMAGES OF ANY NATURE
WHATSOEVER, INCLUDING LOST PROFITS OF THE OTHER PARTY, BEFORE OR AFTER
ACCEPTANCE, WHETHER OR NOT SUCH DAMAGES ARE FORESEEABLE OR WHETHER A PARTY HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
8. Indemnity for Product Liability.
-------------------------------
Notwithstanding anything contained herein to the contrary, Seller agrees to
defend and indemnify Buyer, its officers, agents and employees, from and against
any damages, claims, demands, liabilities and expenses (including reasonable
attorneys' fees) that arise out of or result from the death or bodily injury to,
or damage to property of any third party resulting solely from a defect in the
Equipment delivered by Seller to Buyer. Seller shall pay all costs, damages and
reasonable attorneys' fees that a court awards as a result of such claim
provided that: (i) Seller has sole control of the defense and related settlement
negotiations; (ii) Buyer provides Seller with assistance, information and
authority reasonably necessary for Seller to perform its obligations under this
Section [8] and (iii) Buyer notifies Seller in writing within thirty (30) days
of the discovery of the claim.
9. Termination and Default.
-----------------------
- -----------------------
*** Confidential Information has been omitted and filed separately with the
Securities and Exchange Commission.
-4-
<PAGE>
(a) Each of Seller and Buyer shall be entitled to terminate this Agreement
in whole or in part:
(i) if either party fails to observe, keep or perform any material
term or condition of this Agreement or repeatedly fails to
observe, keep or perform any non-material term or condition of
this Agreement, which repeated breaches collectively constitute a
material breach;
(ii) if a voluntary or involuntary petition is commenced by or against
either party under any laws relating to bankruptcy, insolvency,
reorganization, moratorium and creditors' rights and remedies
generally, and such voluntary or involuntary petition is not
withdrawn or dismissed, as applicable, within 30 days of filing;
or
(iii) if a party becomes insolvent because they are unable to pay
their debts in the ordinary course of business as they become
due, any substantial part of either party's property becomes
subject to any levy, seizure, assignment, application or sale for
or by any creditor or governmental agency or if a receiver shall
be appointed for either party.
(b) The party seeking to terminate this Agreement shall give the other
party written notice of any of the foregoing claimed to be a basis for
termination and the date of termination. The Agreement shall
terminate no less than fifteen 15 days after receipt of such notice in
the event of the occurrence under Section [9](a)(iii) above. In the
event of an occurrence of an event under Section [9](a)(i), a party in
breach shall have 30 days to cure, if curable, any such breach. In the
event that a party does not cure such breach within that cure period,
the non-breaching party may terminate this Agreement immediately upon
notice to the breaching party.
(c) Any and all provisions of this Agreement which by their nature or
terms contemplate survival beyond the expiration of this Agreement or
which are reasonably necessary to survive termination in order to
achieve their respective fundamental purposes, including, without
limitation, any provisions of this Agreement relating to and
specifically the Sections entitled Indemnification, Limitation of
--------------- -------------
Liability, Indemnity for Product Liability, the provision contained in
--------- -------------------------------
Section [3(g)] and Sections [10 through 18] relating to miscellaneous
matters, as applicable, shall survive and continue to bind the parties
following any termination of this Agreement.
10. Dispute Resolution.
------------------
Any dispute arising out of or in connection with this Agreement shall be settled
by arbitration in Alameda, California under the Rules of the American
Arbitration Association ("Rules"), as
-5-
<PAGE>
modified by this Section [10]. The number of arbitrators shall be one (1). The
arbitrator shall be appointed by the parties, if both parties agree on an
arbitrator. If the parties are unable to agree on an arbitrator within fifteen
(15) days of the date of a request for arbitration made by any party hereto,
then the arbitrator shall be appointed in accordance with the Rules. The
decision of the arbitrator shall be delivered in writing to, and shall be
binding upon, the parties and judgment may be entered upon such award in any
court of competent jurisdiction.
11. Governing Law.
-------------
This Agreement shall be governed by and construed in accordance with the laws of
the State of California, not including the conflicts of laws principles of that
jurisdiction.
12. Letter of Intent.
----------------
The terms and conditions contained in Sections 1 through 8 and 10 through 11 of
the LOI that are not specifically addressed in the body of this Agreement are
incorporated herein by reference and made a part of this Agreement with the same
force and effect as though set forth in their entirety herein and the parties
hereto agree that they shall be bound by all such terms and conditions. In the
event of any conflict or inconsistency among the provisions of this Agreement
and the LOI, such conflict or inconsistency shall be resolved by giving
precedence to this Agreement and thereafter to the LOI.
13. Severability.
------------
In the event any provision of this Agreement shall be held invalid, illegal or
unenforceable by a court of competent jurisdiction, the validity, legality and
enforceability of the remaining provisions of this Agreement shall not in any
way be affected or impaired thereby.
14. Headings.
--------
The headings of the sections of this Agreement are for convenience of reference
only and are not to be considered in construing this Agreement.
15. 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.
16. Waivers and Amendments.
----------------------
Except as otherwise expressly provided herein, this Agreement or any provision
hereof may be amended, waived, discharged or terminated only by a statement in
writing signed by the parties hereto.
-6-
<PAGE>
17. Notices.
-------
Except as otherwise expressly provided herein, any notice required or permitted
hereunder shall be given in writing and shall be deemed to have been duly given
upon receipted personal delivery (professional courier permissible), receipted
certified delivery or registered mail delivery to the last address either party
(with respect to itself) furnishes to the other party in writing, or electronic
transmission, with a confirmation copy sent in the manner previously described.
Any notice or communication required or desired to be served, given or delivered
hereunder shall be in the form and manner specified below, and shall be
addressed to the party to be notified as follows:
If to Lender: Ascend Communications, Inc.
1701 Harbor Bay Parkway
Alameda, California 94502
Attention: Fran Jewels, Esq.
Telecopier: (510) 747-2638
If to Borrower: Networks Access Solutions, Inc.
100 Carpenter Dr.
Sterling, VA 20164
Attention: Scott Yancey, CFO
Telecopier: (703) 742-7706
18. Effective Date.
--------------
This Agreement shall become effective on the date first written above.
19. Entire Agreement.
----------------
This document and the attached Exhibits represent the entire Agreement of the
parties with respect to its subject matter.
IN WITNESS WHEREOF the parties hereto have authorized their respective
representatives to execute this Agreement as of the day and year first herein
before written.
Seller:
- ------
ASCEND COMMUNICATIONS , INC.
-7-
<PAGE>
By: /s/ Bernard V. Schnader
-----------------------
Name: Bernard V. Schander
------------------------
Title: Treasurer
--------------
Buyer:
- ------
NETWORK ACCESS SOLUTIONS, INC.
By: /s/ Scott G. Yancey
--------------------
Name: Scott G. Yancey
---------------------
Title: Chief Financial Officer
-----------------------------
-8-
<PAGE>
EXHIBIT A
---------
LIST OF AVAILABLE EQUIPMENT,
----------------------------
SPECIFICATIONS (including Core Systems Publications Library, dated 2/98),
-------------------------------------------------------------------------
ASCEND/NAS-CuNet SERVICE MARKETING PROGRAM PROPOSAL,
----------------------------------------------------
AND PRICING
-----------
<PAGE>
Ascend's xDSL
Proposal for Network Access Solutions
For CopperNet Service
&
Financial Term Sheet
August 25, 1998
***
- ------------------------
*** Confidential Information has been omitted and filed separately with the
Securities and Exchange Commission.
<PAGE>
EXHIBIT B
---------------
LEASE AGREEMENT
------------------------
(Filed as Exhibit 10.3)
<PAGE>
EXHIBIT C
---------
LETTER OF INTENT
----------------
<PAGE>
To: Network Access Solutions, Inc.
From: Ascend Communications, Inc.
Date: 9/24/98
Re: NAS-CUNET SERVICE OFFERING Financing Proposal
Ascend offers the following to Network Access Solutions, Inc. herein referred to
as (NAS):
Credit Line
1. Equipment Financing: Ascend will provide equipment financing totaling
$30MM. The facility will be used for the purchase and subsequent lease
financing of Ascend equipment by NAS. The facility will be available for 18
months following the initial draws of moneys from the facility. After NAS
has drawn $15MM from the facility, Ascend will have the right to verify
that a significant portion (approximately 70%) of the Ascend equipment is
being used by NAS to generate revenue. The on-site dedicated Ascend
technician assigned to NAS shall certify this condition. If NAS meets the
revenue generating condition set forth above, Ascend will continue to
provide financing of the remaining $15MM facility. If NAS fails to meet the
stated goals, Ascend reserves the right to suspend or withdraw further
financing. If for any reason Ascend shall not make the remaining facility
available to NAS, then NAS has no further purchase commitment to Ascend.
There will no commitment fee or other fixed fees charged to NAS (other than
the lease payments themselves) outside of the lease financing under
agreement, for the use of the facility or reserve of unused capacity under
the facility.
Financing terms: ***
2. Working capital: Ascend will provide a working capital line of credit of
$10MM to be used at the sole discretion of NAS for the purchase of other
vendor's equipment in the event that Ascend cannot provide like equipment,
or to pay for operating expenses. This line will be available in two
segments of $5MM each. The draws against these segments will be set at a
minimum of $1MM each. The first draw will be available upon submission of
NAS' initial forecast and purchase order. The second segment will be
available by Ascend based solely upon (1) NAS meeting the conditions set
forth in the first paragraph above and (2) NAS placing orders with Ascend
which exceed $15MM in equipment purchases. There will be no commitment or
fixed fees charged to NAS for the use of the facility or reserve of unused
capacity under the working capital facility other than the interest
financing under agreement per the terms of the promissory note.
. Financing terms: Ascend will extend financing for working capital in the
form of a secured promissory note. The note will be as follows: Each
Draw will be 42 months in duration beginning with the date of each draw.
Principal payments will be made on the basis of a 60 month linear
amortization starting with the 10th month. The interest rate will be at
8.5% per annum for the first 27 months' payments. The first 9 months'
- ----------------------------------
*** Confidential Information has been omitted and filed separately with the
Securities and Exchange Commission.
<PAGE>
payments will be at interest only. The next 18 months' payments will be
at the stated amortized rate. The remaining 15 months' payments will be
at an interest rate consistent with the prevailing "high-yield" bond
index and at the stated amortized rate. All accrued interest and
principal will be immediately due and payable at the end of the 42nd
month. There will be no penalty for prepayment in the working capital
financing. Monthly payments will be due on the 30th day of each month.
Payment to reflect the monthly aggregate amount due for all draws.
3. Security Interest: The Ascend equipment will secure the note.
4. Review of financial performance: Ascend will require NAS to provide
audited financials within 90 days of the close of each fiscal year end and
informal unaudited balance sheets and income statements within 60 days of
the close of each quarter. This requirement will be in effect after the
acceptance of the sales agreement, execution of related financing
agreements, and NAS's utilization of any financing under the Equipment
Financing Credit Line or the Working Capital Credit Line.
5. Mandatory prepayment: The principal indebtedness and all accrued but
unpaid interest in respect to the promissory note will become immediately
due and payable in the event of and upon the date of an IPO, or significant
debt offering of $40MM in proceeds to the company, or a change of control,
defined as acquisition of more than 50% of the voting common equivalent
shares of NAS by any entity or person other than NAS' existing
shareholders.
6. ***
7. ***
8. ***
9. ***
10. Shipping is FOB-ORIGIN-Alameda, CA (DSL technology) and Westford, MA (Core
Products)
11. Public Communication: Both parties agree that no public disclosure of terms
relating to this agreement will take place without mutual consent as to the
content and timing of such disclosure.
Both sides recognize that this term sheet is not the definitive agreement. The
terms of this proposal will be set forth in a purchase agreement, a master lease
agreement, and secured promissory note; both parties will mutually agree upon
the terms and provisions of which; however, both parties represent that they are
not aware of any other substantive terms and conditions which would represent
material conditions precedent to Ascend
- ----------------------------
*** Confidential Information has been omitted and filed separately with the
Securities and Exchange Commission.
<PAGE>
making the equipment financing facility and working capital line of credit
available to NAS.
Signed and accepted:
/s/ Scott G. Yancey 9/24/98 CFO
- -----------------------------------
NAS, Inc. Date:
/s/ Illegible 9/25/98
- --------------------------
Ascend Communications, Inc. Date:
<PAGE>
EXHIBIT D
---------
PROMISSORY NOTES FOR VENDOR FINANCING
-------------------------------------
AND OPERATING CAPITAL FINANCING
-------------------------------
(Filed as Exhibit 10.4)
<PAGE>
Exhibit 10.3
MASTER LEASE AGREEMENT
No. 9314
-----
This Master Lease Agreement (the "MLA") is entered into by and between
Ascend Credit Corporation ("Lessor"), having its principal place of business at
1701 Harbor Bay Parkway, Alameda, CA 94502 and Network Access Solutions, Inc.
("Lessee"), having its principal place of business at 100 Carpenter Drive,
Sterling, VA 20164.
1. LEASE AGREEMENT. Lessor agrees to lease to Lessee, and Lessee agrees
to lease from Lessor, the equipment (the "Equipment") referenced in each of the
Schedules (the "Schedule" or "Schedules") which incorporate this MLA therein
(the "Lease").
2. TERM. Each Lease shall be effective upon the execution of the MLA and
the related Schedule by the Lessor and the Lessee. The lease term (the "Lease
Term") of the Equipment referenced in each of the Schedules shall commence on
the rent commencement date specified in each Schedule (the "Rent Commencement
Date"). The Rent Commencement Date shall be the date 30 days from the date that
the Equipment is shipped by the supplier (the "Ship Date") as evidenced by a
shipping document provided by the supplier related to the Equipment (the
"Shipping Document"). Lessor will provide Lessee with a copy of the Shipping
Document evidencing the Ship Date.
3. RENT. The rent (the "Rent") for the Equipment referenced in any
Schedule shall be as stated in such Schedule and shall be payable according to
the provisions of such Schedule. If any amount payable under a Schedule is not
received by Lessor within 10 days of the due date, Lessee agrees to pay an
Overdue Charge, as defined herein, with respect to such amount.
4. SELECTION AND ASSIGNMENT. Lessee will select the type, quantity and
Supplier of each item of Equipment designated in a Schedule, and Lessee hereby
assigns to Lessor all of its right, title and interest in and to the related
equipment purchase agreement, a copy of which has been provided to Lessor by
Lessee (the "Agreement"). The Agreement may be amended with the consent of
Lessor. Any such assignment with respect to Equipment shall become binding upon
Lessor when Lessor and Lessee have entered into a Lease with respect to such
Equipment and as the Rent Commencement Date referenced in such Lease. Upon such
an assignment becoming effective, Lessor shall be obligated to purchase the
Equipment from the Supplier in accordance with the provisions of the Agreement.
It is expressly agreed that Lessee shall at all times remain liable to Supplier
under the Agreement to perform all duties and obligations of Lessee thereunder,
except for the obligation to purchase the Equipment to the extent expressly
assumed by the Lessor hereunder, and that the Lessee shall be entitled to the
same rights of the purchaser of the Equipment under the Agreement, except such
right, title and interest in the Equipment retained exclusively by the Lessor as
owner of the Equipment. Lessor shall have no liability for a Supplier's failure
to meet the items and conditions of the Agreement.
-1-
<PAGE>
5. DELIVERY AND INSTALLATION. Lessee shall be responsible for payment of
all transportation, packing, installation, testing and other charges associated
with the delivery, installation or use of any Equipment which are not included
in the Agreement with respect to such Equipment.
6. WARRANTIES. LESSOR MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND,
EXPRESS OR IMPLIED, WITH RESPECT TO ANY OF THE EQUIPMENT, ITS MERCHANTABILITY,
OR ITS FITNESS FOR A PARTICULAR PURPOSE. LESSOR SHALL NOT BE LIABLE TO LESSEE
OR ANY OTHER PERSON FOR DIRECT, INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL
DAMAGES ARISING FROM LESSEE'S USE OF THE EQUIPMENT, OR FOR DAMAGES BASED ON
STRICT OR ABSOLUTE TORT LIABILITY OR LESSOR'S PASSIVE NEGLIGENCE. LESSEE HEREBY
ACKNOWLEDGES THAT ANY MANUFACTURER'S OR SUPPLIER'S WARRANTIES WITH RESPECT TO
THE EQUIPMENT ARE FOR THE BENEFIT OF BOTH LESSOR AND LESSEE. NOTWITHSTANDING
THE FOREGOING, LESSEE'S OBLIGATIONS TO PAY EACH RENT PAYMENT DUE, OR OTHERWISE
PERFORM ITS OBLIGATIONS, UNDER THIS LEASE ARE ABSOLUTE AND UNCONDITIONAL.
7. TITLE TO AND LOCATION OF EQUIPMENT. Lessor shall retain title to each
item of Equipment. Lessee, at its expense, shall protect Lessor's title and
keep the Equipment free from all claims, liens, encumbrances and legal
processes. The Equipment is personal property and is not to be regarded as part
of the real estate on which it may be situated. If requested by Lessor, Lessee
will, at Lessee's expense, furnish a landlord or mortgagee waiver with respect
to the Equipment. The Equipment shall not be removed from the location
specified in the Schedule without the written consent of Lessor. Lessee shall,
upon Lessor's request, affix and maintain plates, tags or other identifying
labels, showing Lessor's ownership of the Equipment in a prominent position on
the Equipment.
8. USE OF EQUIPMENT, INSPECTION AND REPORTS. The use of the Equipment by
Lessee shall conform with all applicable laws, insurance policies, and
warranties of the manufacturer or Supplier of the Equipment. Lessor shall have
the right to inspect the Equipment at the premises where the Equipment is
located. Lessee shall notify Lessor promptly of any claims, liens, encumbrances
or legal processes with respect to the Equipment.
9. FURTHER ASSURANCES. Lessee shall execute and deliver to Lessor such
instruments as Lessor deems necessary for the confirmation of this Lease and
Lessor's rights hereunder. Lessor is authorized to file financing statements
signed by the lessor in accordance with the Uniform Commercial Code, or
financing statements signed by Lessor as lessee's attorney-in-fact. Any such
filing with respect to the Equipment leased pursuant to a true lease shall not
be deemed evidence of any intent to create a security interest under the Uniform
Commercial Code.
10. MAINTENANCE AND REPAIRS. Lessee shall, at its expense, maintain each
item of Equipment in good condition, normal wear and tear excepted. Lessee
shall not make any addition, alteration, or attachment to the Equipment without
Lessor's prior written consent.
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<PAGE>
Lessee shall make no repair, addition, alteration or attachment to the Equipment
which interferes with the normal operation or maintenance thereof, creates a
safety hazard, or might result in the creation of a mechanic's or materialman's
lien.
11. LESSOR'S PERFORMANCE OF LESSEE'S OBLIGATIONS. If Lessee fails to
perform any of its obligations under a Lease, Lessor may perform any act or make
any payment which Lessor deems necessary for the maintenance and preservation of
the Equipment subject thereto and Lessor's title thereto. All sums so paid by
Lessor (together with all related Overdue Charges), and reasonable attorneys'
fees incurred by Lessor in connection therewith, shall be additional rent
payable to Lessor on demand. The performance of any such act or the making of
any such payment by lessor shall not be deemed a waiver or release of any
obligation or default on the part of Lessee.
12. INDEMNIFICATION. Lessee assumes liability for, and hereby agrees to
indemnify, protect and hold harmless, Lessor, and its agents, employees,
officers, directors, partners and successors and assigns, from and against, all
liabilities, obligations, losses, damages, injuries, claims, demands, penalties,
actions, costs and expenses, including, without limitation, reasonable
attorneys' fees, of whatever kind and nature, in contract or in tort, arising
out of the use, condition, operation, ownership, selection, delivery, leasing or
return of any item of Equipment, regardless of when, how and by whom operated,
or any failure on the part of Lessee to perform or comply with any of its
obligations under a Lease, excluding, however, any of the foregoing which result
from the gross negligence or willful misconduct of Lessor. Such indemnities and
assumptions of liabilities and obligations shall continue in full force and
effect, notwithstanding the expiration or other termination of such Lease.
Nothing contained in any Lease shall authorize Lessee to operate the Equipment
subject thereto so as to incur or impose any liability on, or obligation for or
on behalf of, Lessor.
13. NO OFF-SET. All Rents shall be paid by Lessee irrespective of any
off-set, counterclaim, recoupment, defense or other right which Lessee may have
against Lessor, the manufacturer or Supplier of the Equipment or any other
party.
14. ASSIGNMENT BY LESSEE. Lessee shall not, without Lessor's prior
written consent, (a) sell, assign, transfer, pledge, hypothecate, or otherwise
dispose of, encumber or suffer to exist a lien upon or against, any of the
Equipment or any Lease or any interest therein, by operation of law or
otherwise, or (b) sublease or lend any of the Equipment or permit any of the
Equipment to be used by anyone other than Lessee.
15. ASSIGNMENT BY LESSOR. Lessor may assign, sell or encumber its
interest in any of the Equipment and any Lease. THE RIGHTS OF ANY SUCH ASSIGNEE
SHALL NOT BE SUBJECT TO ANY ABATEMENT, DEDUCTION, OFF-SET, COUNTERCLAIM,
RECOUPMENT, DEFENSE OR OTHER RIGHT WHICH LESSEE MAY HAVE AGAINST LESSOR OR ANY
OTHER PERSON OR ENTITY. Notwithstanding the foregoing, any such assignment (a)
shall be subject to Lessee's right to possess and use the Equipment subject to a
Lease so long as Lessee is not in default thereunder, and (b) shall not release
any of Lessor's obligations hereunder.
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<PAGE>
16. RETURN OF EQUIPMENT. Unless Lessee has exercised its option, if any,
to renew a lease or purchase the Equipment subject thereto, upon expiration of
the then current Lease Term of such Lease, Lessee shall, at its expense, cause
such Equipment to be removed, disassembled, and placed in the same condition as
when delivered to Lessee (reasonable wear and tear excepted) and properly crate
such Equipment for shipment and deliver it to a common carrier designated by
Lessor. Lessee will ship such Equipment, F.O.B. destination, to any address
specified in writing by Lessor within the continental United States. All
additions, attachments, alterations and repairs made or placed upon any of the
Equipment shall become part of such Equipment and shall be the property of
Lessor.
17. EVENTS OF DEFAULT. The occurrence of any of the following shall be
deemed to constitute an Event of Default hereunder: (a) Lessee fails to pay
Rent, any other amount it is obligated to pay under a Lease or any other amount
it is obligated to pay to Lessor and does not cure such failure within 10 days
of such amount becoming due; (b) Lessee fails to perform or observe any
obligation or covenant to be performed or observed by Lessee hereunder or under
any Schedule, including, without limitation, supplying all requested
documentation, and does not cure such failure within 10 days of receiving
written notice thereof from Lessor; (c) any warranty, representation or
statement made or furnished to Lessor by or on behalf of Lessee is proven to
have been false in any material respect when made or furnished; (d) the
attempted sale or encumbrance by Lessee of the Equipment, or the making of any
levy, seizure or attachment thereof or thereon; or (e) the dissolution,
termination of existence, discontinuance of business, insolvency, or appointment
of a received of any part of the property of Lessee, assignment by Lessee for
the benefit of creditors, the commencement of proceedings under any bankruptcy,
reorganization or arrangement laws by or against Lessee, or any other act of
bankruptcy on the part of Lessee.
18. REMEDIES OF LESSOR. At any time after the occurrence of any Event of
Default, Lessor may exercise one or more of the following remedies: (a) Lessor
may terminate any or all of the Leases with respect to any or all items of
Equipment subject thereto; (b) Lessor may recover from Lessee all Rent and other
amounts then due and to become due under any or all of the Leases; (c) Lessor
may take possession of any or all items of Equipment, whenever the same may be
located, without demand or notice, without any court order or other process of
law and without liability to Lessee for any damages occasioned by such taking of
possession, and any such taking of possession shall not constitute a termination
of any Lease; (d) Lessor may demand that Lessee return any or all items of
Equipment to Lessor in accordance with Paragraph 16; and (e) Lessor may pursue
any other remedy available at law or in equity, including, without limitation,
seeking damages, specific performance or an injunction.
Upon repossession or return of any item of the Equipment, Lessor shall
sell, lease or otherwise dispose of such item in a commercially reasonable
manner, with or without notice and on public or private bid, and apply the net
proceeds thereof (after deducting the estimated fair market value of such item
at the expiration of the term of the applicable Lease, in the case of a sale, or
the rents due for any period beyond the scheduled expiration of such Lease, in
the case of any subsequent lease of such item, and all expenses, including,
without limitation, reasonable
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<PAGE>
attorneys' fees, incurred in connection therewith) towards the Rent and other
amounts due under such Lease, with any excess net proceeds to be retained by
Lessor.
Each of the remedies under this Lease shall be cumulative, and not
exclusive, and in addition to any other remedy referred to herein or otherwise
available to Lessor in law or in equity. Any repossession or subsequent sale or
lease by Lessor of any item of Equipment shall not bar an action for a
deficiency as herein provided, and the brining of an action or the entry of
judgment against Lessee shall not bar Lessor's right to repossess any or all
items of Equipment.
19. CREDIT AND FINANCIAL INFORMATION. Within 90 days of the close of each
of Lessee's fiscal years, Lessee shall deliver to Lessor a copy of Lessee's
annual report, if any, and an audited balance sheet and profit and loss
statement with respect to such year. If audited financial statements of Lessee
for such year are not prepared, Lessee may provide financial statements
certified by an officer of Lessee. At Lessor's request, Lessee shall deliver to
Lessor a balance sheet and profit and loss statement for any of its fiscal
quarters, certified by an officer of Lessee.
20. INSURANCE. As of the date that risk of loss for the Equipment passes
from the Supplier to the Lessee under the terms of the Agreement, Lessee shall
obtain and maintain through the end of the Lease Term of each Lease (and any
renewal or extension thereof), at its own expense, property damage and personal
liability insurance and insurance against loss or damage to the Equipment,
including, without limitation, loss by fire (with extended coverage), theft and
such other risks of loss as are customarily insured against with respect to the
types of Equipment leased hereunder and by the types of businesses in which such
Equipment will be used by Lessee. Such insurance shall be in such amounts, with
such deductibles, in such form and with such insurers as shall be satisfactory
to Lessor; provided, however, that the amount of the insurance against loss or
damage to the Equipment shall not be less than the greater of the replacement
value of the Equipment, from time to time, or the original purchase price of the
Equipment. Each insurance policy shall name Lessee as an insured and Lessor as
an additional insured or loss payee, and shall contain a clause requiring the
insurer to give Lessor at least 30 days prior written notice of any alteration
in the terms of such policy or the cancellation thereof. Lessee shall furnish
to Lessor a certificate of insurance or other evidence satisfactory to Lessor
that such insurance coverage is in effect; provided, however, that Lessor shall
be under no duty either to ascertain the existence of or to examine such
insurance policy or to advise Lessee in the event such insurance coverage shall
not comply with the requirements hereof. Lessee shall give Lessor prompt notice
of any damage to, or less of, any of the Equipment, or any part thereof, or any
personal injury or property damage occasioned by the use of any of the
Equipment.
21. TAXES. Lessee hereby assumed liability for, and shall pay when due,
and, on a net after-tax basis, shall indemnify, protect and hold harmless Lessor
against all fees, taxes and governmental charges (including, without limitation,
interest and penalties) of any nature imposed on or in any way relating to
Lessor, Lessee, any item of Equipment or any Lease, except state and local taxes
on or measured by Lessor's net income (other than any such tax which is in
substitution for or relieves Lessee from the payment of taxes it would otherwise
be obligated to pay or reimburse to Lessor as herein provided) and federal taxes
on Lessor's net income. Lessee
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<PAGE>
shall, at its expense, file when due with the appropriate authorities any and
all tax and similar returns, and reports required to be filed with respect
thereto, for which it has indemnified Lessor hereunder or, if requested by
Lessor, notify Lessor of all such requirements and furnish Lessor with all
information required for Lessor to effect such filings. Any fees, taxes or other
charges paid by Lessor upon failure of Lessee to make such payments shall, at
Lessor's option, become immediately due from Lessee to Lessor and shall be
subject to the Overdue Charge from the date paid by Lessor until the date
reimbursed by Lessee.
22. SEVERABILITY. If any provision of any Lease is held to be invalid by
a court of competent jurisdiction, such invalidity shall not affect the other
provisions of such Lease or any provision of any other Lease.
23. NOTICES. All notices hereunder shall be in writing and shall be
deemed given when sent by certified mail, postage prepaid, return receipt
requested, addressed to the party to which it is being sent at its address set
forth herein or to such other address as such party may designate in writing to
the other party.
24. AMENDMENTS, WAIVERS AND EXTENSIONS. This MLA and each Schedule
constitute the entire agreement between Lessor and Lessee with respect to the
lease of the Equipment subject to such Schedule, and supersede all previous
communications, understandings, and agreements, whether oral or written, between
the parties with respect to such subject matter. No provision of any Lease may
be charged, waived, amended or terminated except by a written agreement,
specifying such change, waiver, amendment or termination, signed by both Lessee
and Lessor, except that Lessor may insert, on the appropriate schedule, the
serial number of Equipment, after delivery of such Equipment, and the Rent
Commencement Date for the Equipment. No waiver by Lessor of any Event of
Default shall be construed as a waiver of any future Event of Default or any
other Event of Default. At the expiration of the Lease Term with respect to a
Lease, upon notice given by Lessee at least ninety (90) days prior thereto, (a)
such Lease shall be renewed or the Equipment subject thereto shall be purchased
under the terms and conditions set forth herein for a term and rent amount or
purchase price, as the case may be, to be agreed upon, or (b) if no such
agreement is reached prior to the expiration of such Lease Term or such notice
specifies that Lessee intends to return the Equipment, then Lessee shall return
the Equipment to Lessor in the manner prescribed in Paragraph 16 of this MLA. In
the absence of Lessor's timely receipt of the notice contemplated by the
preceding sentence, the Lease shall be automatically extended, on a month-to-
month basis, until terminated (upon notice by either party given at least ninety
(90) days prior to the end of the month on which the termination is to be
effective) or until renewed or the Equipment subject thereto is purchased by
agreement of the parties. Unless otherwise agreed, Lessee shall continue to pay
Rent for each month following such Lease Term until the Equipment subject to
such Lease is returned pursuant to Paragraph 16 of this MLA.
25. CONSTRUCTION. This MLA shall be governed by and construed in
accordance with the internal laws, but not the choice of laws provisions, of the
State of California. The titles of the sections of this MLA are for convenience
only and shall not define or limit any of the terms or provisions hereof. Time
is of the essence in each of the provisions hereof.
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<PAGE>
26. PARTIES. This MLA shall be binding upon, and inure to the benefit of,
the permitted assigns, representatives and successors of the lessor and Lessee.
If there is more than one Lessee named in this MLA, the liability of each shall
be joint and several.
27. COUNTERPARTS. Each Lease may be executed in two or more counterparts,
each of which shall be deemed an original and all of which together shall
constitute but one and the same instrument.
28. OVERDUE CHARGE. Overdue Charge shall mean an amount equal to 2% per
month of any payment under a Lease which is past due, including, without
limitation, any amounts not included in any payment of Rent hereunder, or the
highest charge permitted by law, whichever is lower.
The person executing this MLA on behalf of Lessee hereby certifies that he or
she has read, and is duly authorized to execute, this MLA.
Accepted by: LESSEE: Network Access Solutions, Inc.
Ascend Credit Corporation
BY: BY: /s/ Scott G. Yancey
---------------------------- -------------------------------
NAME: NAME: Scott G. Yancey
------------------------- -----------------------------
TITLE: TITLE: Chief Financial Officer
------------------------- ----------------------------
DATE: DATE: 10/8/98
-------------------------- ----------------------------
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<PAGE>
Exhibit 10.4
PROMISSORY NOTE
$10,000,000 October 16 1998
FOR VALUE RECEIVED, the undersigned, Network Access Solutions, Inc.
("Borrower"), hereby promises to pay to ASCEND COMMUNICATIONS, INC. ("Lender"),
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or order, the principal sum or so much of the principal sum of Ten Million
Dollars ($10,000,000) as may from time to time have been advanced and be
outstanding, together with accrued interest as provided herein.
A. Principal.
---------
1. Advances. Borrower may from time to time request advances from
--------
Lender (individually an "Advance" and collectively the "Advances") by giving
------- --------
written notice to Lender in accordance with the terms hereof, which notice shall
indicate the amount of the Advance requested and the proposed use of the Advance
proceeds.
With respect to the first one-half of the principal sum, or Five Million
Dollars ($5,000,000), Advances shall be available to Borrower as follows: upon
written notice as specified above, and in minimum amounts of One Million Dollars
($1,000,000) each.
With respect to the second one-half of the principal sum, or Five Million
Dollars ($5,000,000), Advances shall be available to Borrower as follows: (a)
Borrower shall have drawn at least Fifteen Million Dollars ($15,000,000) in
equipment purchase and/or lease financing from Lender; (b) Lender's on-site
technician dedicated to Borrower shall have certified that at least 70% of such
equipment is being used by Borrower to generate revenue; and (c) Borrower shall
have placed additional purchase orders in excess of Fifteen Million Dollars
($15,000,000) with Lender. These Advances shall be in minimum amounts of One
Million Dollars ($1,000,000) each.
Provided that no Event of Default is in existence and that the requested
Advance would not cause an Event of Default to occur, Lender shall make the
Advance to Borrower within five (5) days of receipt of Borrower's notice.
Lender shall not be obligated to make an Advance to the extent that such
Advance, when aggregated with all prior Advances, would exceed Ten Million
Dollars ($10,00,000). Borrower shall not have the right to re-borrow any
Advance to the extent that it has been repaid.
<PAGE>
2. Use of Proceeds. The proceeds of Advances shall be used at the sole
---------------
discretion of NAS for (i) the purchase of other vendor's equipment in the event
that Ascend cannot provide like equipment, or (ii) operating capital purposes.
B. Interest.
--------
Each Advance shall be for Forty-two (42) months in duration, beginning with the
date upon which sums are advanced. Each Advance shall be repaid on the basis of
a Sixty (60) month linear amortization schedule repayment period. During the
first nine months following any Advance, payments shall be of interest only and
at the per annum rate of 8.25%. During the next Eighteen (18) months, interest
shall accrue at the per annum rate of 8.25 %, and payments shall be made
according to the amortization schedule described above. During the remaining
Fifteen (15) months of the Fortytwo duration of any Advance, interest shall be
paid according to the prevailing "high-yield" bond index, and principal shall be
paid according to the amortization schedule described above. All accrued
principal and interest shall be immediately due and payable at the end of the
Forty-second (42nd) month following any Advance.
If an Event of Default, as defined herein, occurs, then interest shall accrue at
the rate per annum equal to two percent (2%) plus the rate that would otherwise
be in effect (the "Default Rate"). Interest payable hereunder shall be
------------
calculated on the basis of a three hundred sixty (360) day year for actual days
elapsed. Interest shall be due and payable in arrears on the first day of each
calendar month, commencing with the first month after the date hereof.
C. Payment.
--------
1. Scheduled Payment. Monthly payments shall be due on the Thirtieth
-----------------
(30th) day of each month, and as set forth in paragraph B. above
("Interest"). Monthly payments shall reflect the aggregate amount owing on all
Advances
2. Mandatory Prepayment. The principal indebtedness and all accrued but
--------------------
unpaid interest shall become immediately due and payable, without demand or any
notice by Lender, on the date of the first to occur of (i) the effective date of
the IPO or (ii) the date of a Change of Control or (iii) a debt offering by
Borrower of at least Forty Million Dollars ($40,000,000).
3. Optional Prepayment. Borrower shall have the right at any time and
-------------------
from time to time to prepay, in whole or in part, the principal of this Note,
without payment of any premium or penalty. Any principal prepayment shall be
accompanied by a payment of all interest accrued on the amount prepaid through
the date of such prepayment.
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<PAGE>
4. Form of Payment. Principal and interest and all other amounts due
---------------
hereunder are to be paid in lawful money of the United States of America in
federal or other immediately available funds.
D. Covenants.
---------
1. Insurance. Borrower, at its expense and with such companies as are
---------
reasonably acceptable to Lender, shall maintain business interruption and
liability insurance and fire, theft and other hazard insurance, which insurance
shall be in such amounts as are ordinarily carried by other owners in similar
businesses conducted in the locations where Borrower's business is conducted on
the date hereof. All such liability insurance policies shall show Lender as an
additional insured or loss payee, as applicable, and shall specify that the
insurer must give at least thirty (30) days' notice to Lender before canceling
its policy for any reason. Borrower, upon Lender's request, shall deliver to
Lender certified copies of such policies of insurance and evidence of the
payments of all premiums therefor.
2. Financial Information. Borrower shall deliver to Lender:
---------------------
(a) as soon as practicable after the end of each calendar
quarter, and in any event within sixty (60) days thereafter, an unaudited
balance sheet of Borrower as of the end of such quarter and an unaudited income
statement of Borrower for the portion of the Fiscal Year ended with such quarter
prepared and certified by the chief financial officer of Borrower, subject,
however, to the exclusion of footnotes and to normal year-end audit adjustments;
(b) as soon as practicable after the end of each Fiscal Year, and
in any event within ninety (90) days thereafter, a copy of its audited financial
statements accompanied by a report thereon by a firm of independent certified
public accountants selected by Borrower, which report shall state that such
financial statements fairly present Borrower's financial position at the end of
such Fiscal Year;
(c) on a quarterly basis, Borrower and Lender shall meet for the
purposes of discussing issues between the parties.
(d) with reasonable promptness, such other information as from
time to time may be reasonably requested by Lender.
E. Events of Default.
-----------------
1. Definition of Event of Default. The occurrence of any one or more of
------------------------------
the following events shall constitute an "Event of Default" hereunder:
----------------
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<PAGE>
(i) Borrower's breach of the obligation to pay any amount payable
hereunder on the date that it is due and payable;
(ii) Borrower's failure to perform, keep or observe any of its
covenants, conditions, promises, agreements or obligations under any other
agreement with any person or entity if such failure may have a material adverse
effect on Borrower's assets, operations or condition, financial or otherwise;
(iii) Borrower's institution of proceedings against it, or
Borrower's filing of a petition or answer or consent seeking reorganization or
release, under the federal Bankruptcy Code, or any other applicable federal or
state law relating to creditor rights and remedies, or Borrower's consent to the
filing of any such petition or the appointment of a receiver, liquidator,
assignee, trustee or other similar official of Borrower or of any substantial
part of its property, or Borrower's making of an assignment for the benefit of
creditors, or the taking of corporate action in furtherance of such action;
(iv) the entry of any judgment or order against Borrower which
remains unsatisfied or undischarged and in effect for thirty (30) days after
such entry without a stay of enforcement or execution.
2. Rights and Remedies on Event of Default.
---------------------------------------
Upon the occurrence and during the continuance of an Event of Default and
such event of default continuing for a period of 10 days from Notice to borrower
of such event of default, Lender may declare all Advances and interest accrued
thereon to be immediately due and payable and may proceed to protect and enforce
its rights in equity or by action at law, or both, whether for specific
performance of any provision of this Note or in aid of the exercise of any
power(s) granted to Lender under this note.
F. Other Provisions.
----------------
1. Definitions. As used herein, the following terms shall have the
-----------
following meanings:
"Change of Control" means an event or series of events as a result of which
-----------------
(i) any person or group (other than a stockholder of Borrower as of the date
hereof) becomes the beneficial owner of shares representing more than fifty
percent (50%) of the combined voting power of the then outstanding securities
entitled to vote generally in elections of Borrower's directors (the "Voting
------
Stock"), (ii) Borrower consolidates with or merges into any other corporation,
- -----
or conveys, transfers or leases all or substantially all of its assets to any
person, or any other corporation merges into Borrower, and, in the case of any
such transaction, Borrower's outstanding common stock is changed or exchanged as
a result, unless the Borrower's
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<PAGE>
shareholders immediately before such transaction own, directly or indirectly,
immediately following such transaction, at least fifty-one percent (51%) of the
combined voting power of the outstanding voting securities of the corporation
resulting from such transaction in substantially the same proportion as their
ownership of the Voting Stock immediately before such transaction, or (iii)
Continuing Directors do not constitute a majority of the Board of Directors of
Borrower (or, if applicable, Borrower's successor).
"Continuing Directors" means at any date a member of Borrower's Board
--------------------
of Directors (i) who was a member of the Board as of the date hereof, or (ii)
who was nominated or elected by at least a majority of the directors who were
Continuing Directors at the time of such nomination or election or whose
election to the Board was recommended or endorsed by at least a majority of the
directors who were Continuing Directors at the time of such nomination or
election.
"Fiscal Year" means the fiscal year of Borrower.
-----------
"IPO" means the first sale of Borrower's securities to the public pursuant
---
to a registration statement under the Securities Act of 1933, as amended, in
which the gross proceeds to Borrower, without reduction for selling commissions
or expenses of the sale equals or exceeds Forty Million Dollars ($40,000,000).
"UCC" means the Uniform Commercial Code in effect from time to time in the
---
relevant jurisdiction.
2. Governing Law; Venue. This Note shall be governed by the laws of the
--------------------
State of California, without giving effect to conflicts of law principles.
Borrower and Lender agree that all actions or proceedings arising in connection
with this Note shall be tried and litigated only in the state and federal courts
located in the County of Alameda, State of California or, at Lender's option,
any court in which Lender determines it is necessary or appropriate to initiate
legal or equitable proceedings in order to exercise, preserve, protect or defend
any of its rights and remedies under this Note. Borrower waives any right it
may have to assert the doctrine of forum non conveniens or to object to such
venue, and consents to any court ordered relief. Borrower waives personal
service of process and agrees that a summons and complaint commencing an action
or proceeding in any such court shall be promptly served and shall confer
personal jurisdiction if served by registered or certified mail to Borrower. If
Borrower fails to appear or answer any summons, complaint, process or papers so
served within thirty (30) days after the
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<PAGE>
mailing or other service thereof, it shall be deemed in default and an order of
judgment may be entered against it as demanded or prayed for in such summons,
complaint, process or papers. The choice of forum set forth herein shall not be
deemed to preclude the enforcement of any judgment obtained in such forum, or
the taking of any action under this Note to enforce the same, in any appropriate
jurisdiction.
3. Notices. Any notice or communication required or desired to be
-------
served, given or delivered hereunder shall be in the form and manner specified
below, and shall be addressed to the party to be notified as follows:
If to Lender: Ascend Communications, Inc.
1701 Harbor Bay Parkway
Alameda, California 94502
Attention: Fran Jewels, Esq.
Telecopier: (510) 747-2638
If to Borrower: Networks Access Solutions, Inc.
100 Carpenter Dr.
Sterling, VA 20164
Attention: Scott Yancey, CFO
Telecopier: (703) 742-7706
or to such other address as each party designates to the other by notice in the
manner herein prescribed. Notice shall be deemed given hereunder if (i)
delivered personally or otherwise actually received, (ii) sent by overnight
delivery service, (iii) mailed by first-class United States mail, postage
prepaid, registered or certified, with return receipt requested, or (iv) sent
via telecopy machine with a duplicate signed copy sent on the same day as
provided in clause (ii) above. Notice mailed as provided in clause (iii) above
shall be effective upon the expiration of three (3) business days after its
deposit in the United States mail, and notice telecopied as provided in clause
(iv) above shall be effective upon receipt of such telecopy if the duplicate
signed copy is sent under clause (iv) above. Notice given in any other manner
described in this section shall be effective upon receipt by the addressee
thereof; provided, however, that if any notice is tendered to an addressee and
-------- -------
delivery thereof is refused by such addressee, such notice shall be effective
upon such tender unless expressly set forth in such notice.
4. Lender's Rights; Borrower Waivers. Lender's acceptance of partial or
---------------------------------
delinquent payment from Borrower hereunder, or Lender's failure to exercise any
right hereunder, shall not constitute a waiver of any obligation of Borrower
hereunder, or any right of Lender hereunder, and shall not affect in any way the
right to require full performance at any time thereafter. Except as otherwise
specifically provided herein, Borrower waives presentment, diligence, demand of
payment, notice, protest and all other demands and notices in connection with
the delivery, acceptance, performance, default or enforcement of this Note. In
any action on this
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<PAGE>
Note, Lender need not produce or file the original of this Note, but need only
file a photocopy of this Note certified by Lender be a true and correct copy of
this Note in all material respects.
5. Lender's Rights; Borrower Waivers. Lender's acceptance of partial or
---------------------------------
delinquent payment from Borrower hereunder, or Lender's failure to exercise any
right hereunder, shall not constitute a waiver of any obligation of Borrower
hereunder, or any right of Lender hereunder, and shall not affect in any way the
right to require full performance at any time thereafter. Except as otherwise
specifically provided herein, Borrower waives presentment, diligence, demand of
payment, notice, protest and all other demands and notices in connection with
the delivery, acceptance, performance, default or enforcement of this Note. In
any action on this Note, Lender need not produce or file the original of this
Note, but need only file a photocopy of this Note certified by Lender be a true
and correct copy of this Note in all material respects.
6. Enforcement Costs. Borrower shall pay all costs and expenses,
-----------------
including, without limitation, reasonable attorneys' fees and expenses Lender
expends or incurs in connection with the enforcement of this Note, the
collection of any sums due hereunder, any actions for declaratory relief in any
way related to this Note, or the protection or preservation of any rights of the
holder hereunder.
7. Severability. Whenever possible each provision of this Note shall be
------------
interpreted in such manner as to be effective and valid under applicable law,
but if any provision is prohibited by or invalid under applicable law, it shall
be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of the provision or the remaining provisions of this
Note.
8. Amendment Provisions. This Note may not be amended or modified, nor
--------------------
may any of its terms be waived, except by written instruments signed by Borrower
and Lender.
9. Binding Effect. This Note shall be binding upon, and shall inure to
--------------
the benefit of, Borrower and the holder hereof and their respective successors
and assigns; provided, however, that Borrower's rights and obligations shall not
-------- -------
be assigned or delegated without
-7-
<PAGE>
Lender's prior written consent, given in its sole discretion, and any purported
assignment or delegation without such consent shall be void ab initio.
-- ------
10. Time of Essence. Time is of the essence of each and every provision
---------------
of this Note.
11. Headings. Section headings used in this Note have been set forth
--------
herein for convenience of reference only. Unless the contrary is compelled by
the context, everything contained in each section hereof applies equally to this
entire Note.
12. Public Communications. There will be no public disclosure of the
---------------------
terms of this Note (or any related agreement) except by the mutual consent of
Lender and Borrower as to the content and timing of the disclosure.
-8-
<PAGE>
IN WITNESS WHEREOF the parties hereto have authorized their respective
representatives to execute this Agreement as of the day and year first herein
before written.
Seller:
- ------
ASCEND COMMUNICATIONS , INC.
By: /s/ Bernard V. Schnader
___________________________
Name: Bernard V. Schnader
___________________________
Title: Treasurer
___________________________
Buyer:
- ------
NETWORK ACCESS SOLUTIONS, INC.
By: /s/ Scott G. Yancey
___________________________
Name: Scott G. Yancey
___________________________
Title: Chief Financial Officer
___________________________
-9-
